The Huge Advantage and Real Value of Medicare for All (The 15 Percent Solution)
March 31, 2018
Some people believe that we are at a point in our history where we should provide Medicare Coverage to every American.
Medicare for All.
That idea has significant merit at several levels — but it would not do as many good things for us as a country and as consumers of health care services as we would receive if we went one step beyond Medicare for All and offered Medicare Advantage for All.
Medicare Advantage has better benefits, better care coordination, better quality controls, higher levels of performance accountability, and gives us a much better cash flow model for implementing continuously improving models of care than traditional Medicare.
Medicare Advantage gives us the ability to insist on team care, care coordination, care alignment, care linkages, and care improvement approaches that we will never be able to achieve or receive with the standard Medicare program.
Traditional Medicare buys care by the piece.
Piecework is one of the worst ways to buy care.
Standard Medicare pays for each piece of care and does it in a way that rewards bad care outcomes, rewards care delivery screw-ups, and pays providers more when patients are in bad health and when their health gets worse.
Instead of rewarding care teams for preventing heart crises, strokes, and asthma attacks — standard Medicare pays massive amounts when each of those care related crises happen — and pays either nothing or almost nothing to caregivers for keeping those crises from happening.
Health care is a business. Like every other business, it does what it is paid to do. Health care is paid more when people are diabetic, and is not paid much at all to keep people from getting diabetes.
Many important, valuable, and effective care delivery process enhancements and tools are crippled or prevented by that piecework payment approach. Patients would like e-Visits and e-Consults, and prefer electronic support for their care, as one example, and standard Medicare sometimes criminalizes providers for filing a claim to be paid for those kinds of services.
Some Medicare Advantage plans do millions of e-Visits now because those plans are all paid by the month for each enrollee, instead of being paid by the piece for each piece of care. Caregivers in settings that depend on standard Medicare coverage for their cash flow often refuse to provide that electronic linkage and connectivity support to their patients because the Medicare fee schedule defines care, and that definition of care is not on the Medicare fee schedule.
Medicare advantage plans have much more flexibility in being able to meet patient needs — and we will not have many levels of care needs met for too many patients in the settings where fee schedules define care.
So simply extending Medicare to everyone would fail us in creating many needed improvements in both care delivery and care connectivity.
If we moved beyond Medicare for All, and if we actually put in place Medicare Advantage for All for everyone, we would have a golden age of care connectivity and care improvement, because the Medicare Advantage payment approaches both allow and encourage those levels of service to patients.
If we had Medicare Advantage for All, plans and care sites would work as a team to reduce the number of strokes, asthma attacks, and diabetic cases.
If we had Medicare Advantage for All in place we would have extensive data reporting on the quality of care and service levels, and we could insist that every patient be given full electronic access in real time to important data about their care.
None of those care improvements will happen if we just extend standard Medicare to everyone.
Medicare for All would cover everyone. That is absolutely the right thing to do.
It would be a wonderful thing if we had coverage for everyone. That is long overdue.
Covering everyone is long overdue because we now spend $3 trillion a year as a nation on care — far more than any other country — and it is a mark of gross purchasing incompetence that we spend all of that money on care and still have thirty million people who don’t have health insurance, and twenty million more who might be underinsured.
Everyone else does a better job of buying care.
Every other industrialized country pays less than we do for care, and every other country gets better health outcomes and covers all of their people.
If we put Medicare Advantage for All in place for everyone in our country, we would not only cover everyone, we would do it with a care system that would very quickly be better than any other care system in the world.
We would have better care data, better care teamwork, and more creative use of patient friendly care tools than any other country on the planet, because we would use the best science and the best tools when we buy and sell care as a package, instead of buying and selling it only by the piece, because most other countries are not doing good things now to improve care in those ways.
American creativity would flourish and blossom and we would be the world leader in every major category of care if we decided to buy our care with the right expectations and the right flow of cash and put the expectations in place that would support and reward creativity in those areas.
We need to buy care well. We need to make buying care well a core competency for us as a nation.
The Missing Link in Care is a Competent Buyer
The missing link for us in health care today is a competent and enlightened buyer.
We have a vast array of pieces of care being delivered, but we don’t pay anyone to put those pieces into a package that will result in great care, and those packages will not come into existence until they are both supported and required by the way we buy care.
Medicare Advantage can give us the template and the tool we can use to buy care well.
If we decide to change our purchasing model for care and decide to use Medicare Advantage in a carefully structured way for all of our people, we will spend less than we would than just using the Medicare For All approach, and we will have much better care.
In the spirit of Medicare for All, we need to strengthen Medicaid, buy Medicare coverage more effectively, and then extend Medicare Advantage coverage to every other person in the country and fund it with a dedicated flow of cash.
The ideal package for us going forward in a practical, achievable, and affordable way to universal coverage and to better care should continue, supplement our current Medicaid program, and then buy care well for everyone else using the template given to us in our Medicare Advantage tool kit and structure.
We need to be very clear about our expectations for team care, best care, high quality care, and continuously improving care — and we need to create a cash flow to our caregivers that will give us the very best care, and do it in a way that spends as much or less money than we are spending in total today for care.
We don’t need new money to put universal coverage in place for all Americans. We spend more than $3 trillion on care now. That is more than enough money to buy great care for everyone.
We should be able to spend the amount we are spending now in total on care, and we should be able to use that money to cover every single American by becoming a much better purchaser of both coverage and care. If we become a highly competent purchaser of care, we should be able to use that money to put in place continuously improving processes of care that provide the best science, the best service, the best connectivity, and the best data for patients about their own care and about the science of care.
That would be a far better place to be than where we are now.
We should not be happy with the care we are receiving as a country today.
We have great inconsistencies in the delivery of care and they are not based on patient needs.
We have too many strokes, too many diabetic complications, too many kidney failures, too many asthma crises, too many congestive heart failure crises, and far too many people with both preventable and badly treated chronic conditions and diseases.
We do not use our possible care tools very well.
Today, we have badly connected care for far too many, and we have deep and dysfunctional data silos in care that far too often keep caregivers from having the information needed to provide care at the optimum time and place.
Horror stories about badly coordinated care abound should all disappear when we stop paying only for pieces of care, and decide to pay instead for care teams, care coordination, patient focused care, and shared data about care.
When we spend $3 trillion a year on care, we should be getting great patient-focused care that meets our hopes, aspirations., and expectations. We should not be getting inadequate care, and we should not have large numbers of the uninsured and underinsured being damaged economically by the cost of care.
How can we do a better job of buying care?
To make care better and more affordable, we need to stop buying care by the piece.
The piecework purchase of care is a very poor purchasing model.
We have thousands of billing codes for pieces of care — and we only pay for units of care, rather than results. Results are irrelevant to the prices paid for each piece of care. Better health is also not incented in any way by the standard financial cash flow of our caregivers.
We need to put payment processes in place that reward better health, better outcomes, and better connectivity between caregivers. We need to trigger the creativity of our caregivers for both better care and better patient health.
The current payment approach often penalizes team care.
That is the wrong way to buy care.
We need to incent and require team care where team care is needed, and we need our care teams to have the most current science, the most complete data, and the most responsive care approaches for our patients.
That is possible to do.
We can create better care in all of those areas if we just make those outcomes and expectations part of the specifications we use to buy care.
Standard Medicare has no way of creating those specifications for improving care in any way that has any high likelihood of success.
The standard Medicare program has a fairly weak benefit package with some major coverage holes in it.
We can fix the existing holes in the standard Medicare benefit coverage by getting rid of the co-pays and the current benefit caps, but we can’t get higher quality and more connected care from that program as long as Medicare continues to buy care at the most basic level by the piece.
We need to make the decision to buy patient-focused care rather than caregiver-focused care, and we need to use the best purchasing tools we have available to specify what we want, and then set up a process to buy and deliver that better care.
Medicare Advantage has the basic tools in place that will let us achieve those goals if we use it as our template, channel, and process for buying care.
If we look at Medicare Advantage as the cash-flow tool for care and become very clear in the buying process about our expectations for team care, high quality care, care connectivity, and continuously improving models of care, then the cash flow of care can be fairly easily channeled down those paths, because those improvements in care are all relatively easy to do when we decide to pay our caregivers to do them.
Those improvements will not happen if we just continue to randomly buy care by the piece. Care will not get better in any of those ways if we just wish that it would get better as our strategy for improving care. Those improvements will not happen if we penalize caregivers financially for making care better because their patients need fewer billable care events.
Follow the money.
Care does what it is paid to do — and we now pay very poorly for what care should be doing for us.
We can fix that — and we can do that using a tool that we are beginning to learn how to use, and use it even better than we have used it up to now. Medicare Advantage gives us the basic component parts to achieve each of those goals, if we choose to be very clear about our expectations for the use of those parts.
About a third of the people on Medicare in this country have already voluntarily moved to the current version of the Medicare Advantage program. Both loyalty and satisfaction levels are high.
The primary reason why that strategy and tool kit works for the patients it serves is that Medicare Advantage is not paid by the piece. Medicare Advantage plans are paid by the month to provide total packages of care. Medicare Advantage plans are not paid more for delivering any pieces of care whose primary function is to increase provider cash flow and not improve the health of patients.
The government gives each Medicare Advantage Plan a fixed amount each month for each enrollee, and the plans use that money to provide the basic package of needed care for their enrollees.
The plans can use that money in much more flexible ways than standard Medicare care sites to help their patients. Medicare Advantage plans already have done things like cut the number of broken bones by half by creating individualized care plans for each high-risk patient, and placing nurses in the home of patients to reduce the likelihood of falls.
Seniors who break bones are more than 25 percent more likely to die in the next four years than seniors of the same age who do not break bones. It is a very good thing at many levels when the number of broken bones for our senior patients is reduced.
Most of the steps involved in that set of team care supports given to those patients by Medicare Advantage caregivers to reduce the number of broken bones is completely rejected for payment by the standard Medicare Fee for Service fee schedule — and a care site could be accused of fraud for sending a bill to Medicare for the support given by a nurse to a patient in the patient’s home to reduce the number of broken bones.
There is no fraud when a Medicare Advantage care team provides those services — and that approach is better for both the patient and the caregivers, because the caregivers who are not limited by the Medicare fee schedule can figure out the right thing to do based on the needs of the patient, and then do it without being accused of a crime.
We could get better care for our Medicare patients if they were all enrolled in Medicare Advantage plans required by their contracts to provide team care and empowered by the availability of cash flow to do the things needed to provide patients with the full sets of benefits for prevention and early intervention in both acute and chronic disease.
We could also get better care for people of all ages across the entire country if non-Medicare patients could also join those Medicare Advantage plans as members, and if everyone else in the country who is not on Medicaid could have their coverage to join a local Medicare Advantage plan paid for by the government.
We could cover everyone in the country for about as much as we spend now, if we keep our current Medicare eligibility and coverage in place, and also keep the current Medicaid plans in place for all of our Medicaid covered people, and then simply extended Medicare Advantage Plan Coverage paid for by a new government care purchasing pool to everyone else in the country.
The purchasing pool fund that would be needed to buy care for everyone else could be the same amount we use now to provide insured care in this country.
We Could Cover Everyone Spending the Same Amount We Spend Now
We already have enough money flowing through our insured care funding streams to buy coverage for everyone. In addition to the money we spend now to pay for Medicaid and Medicare, we currently spend $1.1 trillion to buy care through health insurance coverage today.
That $1 trillion we spend now on insured care is about 14 percent of the average cost of payrolls in America today. That is a massive amount and much of it is badly spent now. We could improve the situation for us as a country significantly if we turned that same amount into a purchasing pool, and then used that $1.1 trillion to buy coverage and care for everyone.
Channeling that money into the purchase of care for everyone would keep the total amount spent on care at about the same level we are spending now. Most of that money comes from employer-linked health care. The average cost of coverage in those companies that offer health coverage to their employees is about 14 percent of payroll, and most employers pick up about 70 percent of that expense for their employees.
If we moved away from buying and funding care from that diverse channel of insurance related money sources, and instead created a shared pool of health care money that could be used to buy coverage from Medicare Advantage plans for each person who chooses to enroll in the plans, that same $1.1 trillion would be enough to cover everyone.
We would need a process to collect that $1.1 trillion. Ideally, that collection process should be unobtrusive, clearly visible, easy to implement, easy to explain, and easy to justify.
We have a tool that fits those criteria.
The funding mechanism we could use to create that pool of money that would buy care for everyone can be to use the same kind of payroll tax we use now for funding both Social Security and traditional Medicare. We already do payroll deductions for health insurance coverage in most employment settings, and we already do payroll deductions for Social Security in every single payroll setting.
We could make the payroll deduction for health care funding a tax instead of a voluntary insurance deduction, and that would give us a process in place everywhere and immediately to collect what we need to pay for everyone’s care.
Europe has faced the problem of how to pay for their universal coverage — and the European countries find that using payroll deductions is an easy, visible, and effective way of collecting that money. We could do the same thing that almost all of the countries of Europe do, and we could set up a payroll deduction from each paycheck to fund a pool to pay for care.
Most people in this country who have heard that Europe has managed to achieve universal coverage believe those countries use a single-payer system. That belief is wrong. Canada actually does use a single-payer model, but most of the countries of Europe do not actually use a single-payer system to buy their health care.
Most European counties use a single buyer system instead of a single-payer system.
They each create a pool of money for each country from payroll deductions, and they actually pay that out to multiple competing health plans on a monthly basis for each person for the coverage and care of their insured.
The countries of Europe function as buyers (not payers) for health coverage, and each country makes structured buying decisions that very directly use competing health plans to provide the actual coverage for their citizens. That model works or consumers because individual providers of care in a fee-based cash-flow system who have an inherent local market dominance do not have much incentive to be flexible and responsive to consumers, but health plans do need to be responsive to consumers because if their consumers are not happy with what they are getting from their plan, they can switch easily to another plan. Just like Medicare Advantage choice options for seniors in our country.
The health plans of Europe compete fiercely with one another. The competing health plans of Switzerland, Germany, and The Netherlands each know that they need to meet the needs and desires of their customers in order to survive as businesses in those settings.
Germany has over a hundred competing health plans, and many of them are over a hundred years old. All Germans pay a payroll tax to create the fund that the government uses to buy care from the health plans — and then each German gets to decide which plan will receive their monthly payment from the government to pay for their coverage and care.
The model they use in those countries looks a lot like a simpler version of the Insurance Exchanges that we have set up in our states.
The model used now in most of those universal coverage countries definitely looks very much like Medicare Advantage for All. They have some actuarial adjustments that they use when people change health plans that reflect at least the age and gender of the enrollee, but they do not create any barriers to consumers deciding to change plans.
We could achieve universal coverage here using that model.
If we did the same thing here, and if we used a payroll tax to set up a health plan funding pool for everyone who is not now on Medicaid or a current Medicare enrollee — we could simply use a payroll tax to raise that money to cover all of those people, and we could allow our consumers to choose which health plans will provide their care, rather than getting their care from a government system of any kind.
It is useful and interesting that the 15 percent tax level they use in several European countries to create universal coverage seems to be the same funding number that can create universal coverage for us as a country if we use that money to replace the portion of our health care cash flow paid by insurers to buy care today.
We know that to be true because the 12.4 percent tax that we use now to fund Social Security raises $900 billion for Social Security funding. That process is in place for Social Security and it works well — and we know exactly how much money each percent of payroll tax raises. To create a fund for health care purchases that would equal the $1.1 trillion we spend on insured care today, we would need a payroll tax of 15 percent to generate the money needed to buy care.
We should use the same income caps for the health care tax we use now for the Social Security tax — or the new tax would become the most progressive tax in the country by a significant margin.
Capping the revenue at $136,000 per paycheck is functionally progressive because more money would be collected from the top of that pay level than from the bottom.
We could take that money collected in an exact parallel with the Social Security tax — put it into a national care and coverage purchasing fund pool — and then pay it out to competing Medicare Advantage Plans on a per capita monthly basis, based on the age and sex of those who join each plan.
The tools for that coverage and for collecting that money are in place now. Medicare Advantage plans now get a monthly payment per senior enrollee based on age and gender, so that part of the process is working.
Changing things is often difficult — and building new programs and infrastructure in community settings can be difficult — but we could actually create and fund universal coverage in our country using pieces and processes we already use, and that slightly modified use of our current approaches and tools would reduce both our implementation risks and our set up costs significantly.
To make this approach and universal coverage strategy work with the highest likelihood of success and the lowest functional risk, we can simply use parts and pieces of our system that are already in place to do all of the heavy lifting.
We already collect money from payrolls for Social Security from every working person, so that collection infrastructure and process already exists.
The Medicare Advantage program also already exists. We would want to improve that program in several key ways, but those improvements and expectations are all easy to do.
The plans now receive a monthly payment from Medicare for their current senior patients based on the age, sex, and geography of the enrollee — and that same kind of calculation can simply be done for the new sets of enrollees to cover everyone.
We would cover everyone in the country without increasing the amount we are spending now on care if we used Medicare Advantage for everyone not on Medicaid, and then kept Medicaid in place for our lowest income Americans.
Medicaid should and would continue to cover all of the Medicaid enrollees, and would continue to use the richer Medicaid benefit package we use for Medicaid now. We can cover everyone else in the country with a competitive consumer centered choice model where health plans compete with each other for patients, and where patients have the fully informed choice of care teams and health plans.
We can set up that market for consumers to create optimal levels of consumer choice information and purchasing leverage, and we can use specifications and market realities to put the plans in a position to meet consumer wants, needs, and expectations in order to survive and thrive.
We can go from wasting money on badly coordinated and poorly linked care with almost no quality monitoring or service level tracking, to having care teams focused on meeting patient needs and using the right tools to meet those needs without being banned and penalized relative to the use of those tools by the Medicare fee-based payment rules.
We can use that approach of buying care through the Plans to go from being a very weak and inept purchaser of inconsistent and often incomplete care, to being a highly skilled and very intentional buyer for health care services using those health plans as our mechanism and vehicle for delivering complete and continuously-improving care.
The basic rules of purchasing competence should involve having us decide exactly what we want from our care delivery and caregivers and then set up purchasing mechanisms that will deliver those expectations to us and will reward and incent caregivers for meeting our collective and individual needs.
Universal coverage is possible and affordable.
Everyone employed in the U.S. would be eligible for that Medicare Advantage coverage — and every employer would pay that 15 percent deduction from each paycheck into the fund, collecting enough money to buy coverage for everyone.
People with multiple employers would have each employer as a source of that money.
The proportionate split between employer and employee of the 15 percent payroll tax payment could be worked out separately at each place of employment. Most employers already have a 14 percent average expense for their health care benefits, so whatever approach is being used now to pay that 14 percent could be used initially to figure out payment of the 15 percent tax for each setting.
Payments would need to be tax-deductible expenses for the employer, as well as non-taxed income for the employee — regardless of the contribution percentages used in each setting.
The flexibility of the payroll process to handle that payroll tax number already exists in most settings. We have a very long history of using payroll deductions to buy health insurance. Setting up the first year of that process as we move to this approach would be an adjustment, but the truth is that we have a very long history of using payroll deductions based on insurance premiums to pay for care, and we have seen those deductions drastically increase from year to year.
Companies have had decades of experience reacting to annual health insurance premium increases, and employers have done that for decades without disruptions to the survival of their businesses and minimal disruption to employment.
We have a long history of increases for those expenses and millions of employers have managed to adjust to those numbers every year, so we have reason to expect that employers would absorb this particular payroll deduction in the first year with minimal damage.
That same ability that we have shown in the past to be flexible for past health insurance premium increases gives us some comfort that this new set of payroll deduction numbers for health care expenses will be absorbable in flexible ways by both employers and employees, and that we will simply incorporate those payroll deduction numbers into the run rate of business expenses fairly quickly and well.
In some ways, this approach is significantly better than the old approach of receiving annual health insurance rate increases because the fixed 15 percent payroll tax funding the care purchasing tool will not increase each year.
The historic volatility for both employer and employee health care costs would disappear with this new funding approach because the 15 percent would be locked as an expense at the same level each year.
This approach works for all levels of employees and offers several advantages for the lowest income employees. Arithmetic is relevant in making that judgment that this approach is good for both lower income employees and their employers. For the lowest income employees, insurance-based health care expenses have been a higher percentage of their paycheck than those same expenses are for higher paid employees. That will change with this approach — and that will make it easier for employers of low-income workers to pay health care expenses, because there will be more certainty about what those numbers will be, and the number will not be a higher percentage of a low-income worker paycheck.
This approach helps significantly with the challenges and problems for a growing number of workers with multiple employers refusing to offer health benefits.
This approach will collect money from each employer and pool it for the employee so they have coverage. This approach gives us a steady stream of funding from part-time employment — and gives each part-time employee security about having health coverage independent of their work site.
Part-time employees would easily be covered through this approach, and the process would need to set up rules for how much part-time employees would need to pay to get the amount needed for the coverage.
People who only have a minimal income and fall below a standard based on hours worked should be able to pay the difference between their full-time 15 percent number and the average per capita payment made to health plans in their coverage area from the government purchasing pool.
The very lowest-income workers will remain on Medicaid — and those with higher incomes will be in the newly focused Medicare Advantage plans. Health plans of all sizes participate in Medicare Advantage program for seniors today, so the likelihood of consumers being able to select their current plan under this approach would be extremely high. It is hard to imagine many settings where that would not be true.
That aspect of the transition would be almost painless for both consumers and plans.
We will be using basic insurance risk pooling principles, so we do not need the partially employed to have a payment target set on their own age and gender. We can create an adequate pool of cash by having those people pay the difference between the amount raised through their payroll deductions and that areas average monthly payment amount.
Low-income workers should all be on Medicaid. We should make sure that all of our low-income individuals are on that program, which would ensure they have the necessary coverage.
The Medicaid programs have improved significantly and have become more patient focused over the years. We should expect that those plans would meet the same basic kinds of connectivity and reporting standards that we will put in place for the new Medicare Advantage Plans.
Veterans Administration programs should be expected to meet those same kinds of data connectivity standards, which would give them the ability to link with the rest of the care system.
The Basic Benefit Package Should Be a $1,000 Dollar Deductible
The basic benefit package that should be extended to all Americans and purchased by the fund for everyone except the people who would have richer benefits because they are already on Medicare Advantage for Seniors or on Medicaid would be a $1,000 deductible plan.
That benefit package is slightly better than the average $1,400 deductible used this year in American work sites, so most people converting to that coverage will have a benefit improvement and will be able to continue to use their current health plan to administer that benefit.
We need to allow individual employers and work sites to offer richer benefits and additional services to their employees that could include health support or other types and levels of benefits. Plans could also compete with one another by offering richer benefits, as they do now in the existing Medicare Advantage program.
Dental benefits should continue to be an optional coverage enhancement in each work setting. Various kinds of long-term care insurance could be offered at the employer level in settings where that makes sense as part of the benefit package for the employer.
The key to making this approach work to create universal coverage will be to use the basic pool of money we will be collecting to function as a much better purchaser of care than the purchasing power and steerage that same amount created when it flowed down a thousand channels to the providers of care.
In order to make the change as a nation from paying through a thousand channels for our care to a more structured and focused purchasing model, we will need people to clearly see why more focused purchasing is a good idea.
When we are spending $3 trillion each year as a nation on care, we can and should be on the cusp of a golden age for health care delivery, but we need all Americans to recognize that that golden age will not happen if we continue to buy care by the piece.
The reality is that medical science has never been better, and the technology of health care diagnosis and health care delivery is continuously improving.
We can now use computers and the best science to create patient-focused care delivery with care teams working together effectively, efficiently, and in truly patient-centered approaches to give us all both the best health and the best care.
We are not benefiting from care being as good as it could and should be, because we do not pay in any way for those improvements to happen. Care does what it is paid to do, and it is paid to do things in unconnected pieces.
We are in a situation today where the science of care is inconsistently applied, and where far too many patients are damaged by care delivery mistakes and incomplete and badly connected resources.
We have too many infections, too many medical errors, and far too many patients with serious medical problems who have to create their own information sharing connectivity links with their various caregivers. We have very poor and highly inconsistent information sharing tools in place for both our caregivers and our patients today.
At a time and in a situation where patient care should be better and more affordable than it has ever been, we have patients who avoid needed care because they can’t afford it, and we have patients with complications and serious and damaging medical difficulties that should and could have been prevented or avoided, if only their care systems and care givers had made better care a priority or a capability in those areas.
Experts agree that we have huge opportunities to bring down the cost of care by improving patient health and significantly reducing the wasteful administrative costs that we have imposed on our care delivery settings. That is all very possible to do — but it will not happen as long as we keep buying care by the piece, and as long as our caregivers have no tools for improvement, and then actually face financial injury when they do improve care.
We Buy Care Badly in Five Ways
We all need to understand that the health care delivery system in this country is paid in a primitive, dysfunctional, and too often dangerous piecework anchored cash-flow approach that creates significant adverse consequences for far too many patients.
It is extremely limiting and often dysfunctional to buy care almost entirely by the piece in this country. We pay for pieces of care rather than for care processes or care outcomes.
There are actually more than 10,000 billing codes for pieces of care — and not one single billing code for a better outcome or for a cure.
Every industry produces what it is paid for producing. We buy care only by the piece, so the care delivery infrastructure is built around producing and selling pieces of care, and our care delivery infrastructure is not built around patients or around any kinds of care packages that help improve the delivery or outcomes of care.
The unfortunate, but undisputed reality is that the cash flow of care actually benefits from bad care outcomes, because bad outcomes tend to create more pieces of care.
The cash flow and the business model of care that we use in this country today are also, very perversely, far too often rewarded financially by complications of care.
In fact, the piecework based financial mechanisms we use to buy care generally penalize our caregivers who figure out more efficient processes for the delivery of care, and who implement those improvements in care for their patients.
The core flaws in the current payment model are crippling. We want care to get better, and we want care tools and care connectivity to improve, which will not happen in any effective or consistent way until we change the way we buy care.
We can wish that was not true, but wishful thinking will not make care better. Good hearts, good luck, and good intentions will not get us to consistent and continuously improving better care.
The only way we will get to the outcomes we want is if we understand each of those flaws and deficiencies in the way we pay for care, and then make the clear and intentional choice to use a purchasing approach for care that lets us overcome all five flaws in the current model.
We need to start that change process by understanding the basic deficiencies inherent in the way we now buy care.
Volume incentives are the first deficiency.
Deficiency 1) Volume Incentives
When we buy care only by the piece, and when we pay fees for each piece — we directly encourage, incent, and reward piecework volume, but we do not pay for or reward quality, or effectiveness, or care outcomes. So we get expensive and sometimes inappropriate volume in a number of areas of care that are driven heavily by that set of incentives, and not by the patient need for those services.
Deficiency 2) Perverse Care Outcome Incentives
Our purchase model for care actually benefits from bad patient health. That perverse and unintended link between bad health and provider cash flow is clear and direct. Cash flow for care is higher when patients are sicker and cash flow for our caregivers increases when patients have more health problems.
Deficiency 3) Adverse Event Incentives
Our care purchase model actually benefits directly for many care providers from adverse care outcomes and from care delivery mistakes with our patients. Providers often make more money when patients have complications and infections, and there are no direct financial incentives for caregivers to either correct or avoid mistakes.
Imagine the incentives and the thought processes in the automobile industry that would exist if the manufacturers of our cars made more money when the cars crashed. Ethics and basic human decency would keep those companies from designing cars to crash, but the best minds in the automobile industry might not be focused on reducing or preventing crashes.
Deficiency 4) Negates and Undermines Price Related Market Force Influences
The specific piecework payment approach and process that we use to buy care appears to use market forces, but it actually does not trigger relevant and effective market forces because the process we use to buy care disguises and hides the actual fees for each piece of care from the patients.
The highly dysfunctional reality and the obviously damaging and expensive economic consequence of that approach is that price increases by individual providers generally face no market pressure, and our unit fees for each piece of care are now two or three times higher than the fees in other industrialized countries for the same procedures, because there are no countervailing market impacts or penalties that affect patient purchasing decisions when prices increase.
Deficiency 5) Piecework Payments Cripple, Hinder, and Perversely Penalize Re-engineering Processes
Because we pay for care by the piece and not by the package, our caregivers are financially penalized when they reorganize care to make it more efficient and more effective. Providers avoid improving care that will reduce their payment stream because no businesses in any industry will penalize itself financially.
The people who run all of the major care systems in America can explain clearly the frustration of not being able to re-engineer care in a number of areas because of the financial penalties and the direct and immediate damage to their cash flow that can result from doing anything to impede the basic current flow of fees.
We tend not to understand or appreciate how big a flaw that set of realities about economically hindering re-engineering by caregivers is for care. That is actually the biggest single danger and the most damaging consequence of paying for care entirely by the piece. Not using re-engineering processes to improve care is the primary damage factor, and the most dysfunctional and perverse outcome for care delivery in this country created by the way we buy care.
All other industries make re-engineering their basic processes a foundational strategy and the well-run companies in other industries make process improvement and re-engineering a highly valued organizational strength and capability.
Health care does not do that.
In a world and time where all other industries constantly re-engineer their processes, make process improvement skills a top management priority, and work hard to build and enhance key tools and implement core process improvement strategies for their organizations — because their organizations are more likely to succeed financially when they do that process related work well — health care is actually hurt financially by most care engineering approaches that make processes work better, so health care avoids using many of the basic process-design tools that make other industries stronger and more effective.
Those are crippling flaws in our payment model.
We see a tiny fraction of the care improvements that are possible to create now, because our business model does not incent or reward the creation of those improvements.
It is possible to reduce the number of asthma crises in children by half or more — but we pay our caregivers a lot of money when those attacks happen, and in general we pay nothing for preventing the attack.
A patient who has a stroke can generate hundreds of thousands of dollars in care expenses that all become part of the $3 trillion we spend each year on care — and our care system is not rewarded in any way for doing basic things that could cut the incidence of stroke by half or more.
More than 70 percent of the health care costs in America come from chronic conditions. There are important and effective things we can do to both reduce the number of chronic conditions and to avoid the complications and physical damage that those conditions cause to large numbers of our people. We could reduce the percentages of chronic condition suffering patients by half or more by focusing the right care and the right health agendas on all of our high-risk patients.
We know that to be true, but we do not reflect that reality in any way by the approach we use to buy care. When our providers are paid entirely by the service, we do not reward our caregivers in any way for keeping people from having those conditions or from minimizing their negative impact.
We need to recognize that reality, and we should now collectively refuse to allow it to continue to define our future delivery of care, because we can’t afford to be spending all of that money on chronic care, and because our patients do not deserve to be impaired, damaged, or have their lives shortened by those conditions.
We pay our hospitals and our medical specialists the highest prices in the world when hearts fail and when strokes create brain damage — but we don’t reward the basic and effective processes that prevent strokes and strengthen and protect hearts. We need to use a financial model for buying care that gives organizations and care teams both the incentives and the cash flow to do that work.
Changing the way we buy care is actually entirely possible to do, but it will need to be done as a clear objective for the country, or it will not happen.
There is no way for us to somehow get lucky and have that $3 trillion care infrastructure (currently enriched by a massive flow of cash) magically and spontaneously begin to optimize care. A lot of people hope that might happen, and because we spend so much on care now, they feel it should somehow get better on its own.
That is clearly not going to happen until we change the way we buy care.
Wishful thinking is not the best health care policy strategy at a point in our history when real change is not only possible, but achievable — if we just decide what we really want our care infrastructure to do, and then actually pay that infrastructure to do it.
We need to “bite the bullet” and understand the problems and the opportunity, and then use a purchasing strategy and tool to turn all of that money into the care we want. Medicare Advantage can be re-engineered a bit, and repurposed to be that tool.
We can use the Medicare Advantage tool kit to buy care in a better way because it already has the structure and model of buying care by the month and not by the piece — and because it involves a purchasing model with specifications and requirements built into it that can not exist so long as we keep buying care entirely by the piece.
The Potential to Improve Care has Never Been Greater, but is Not Being Realized
This should be a golden age for patient care.
Tools that can improve care are being created every day. Computer science and computer connectivity has never been better for every industry in the country. People and businesses are now connected at multiple levels.
Except in health care.
Health care lives in an electronic connectivity ineptness wilderness. No one is connected to anyone else for most elements of care. We have vast and growing amounts of data about patients in care sites, but that information lives in electronic and paper silos. It is isolated (not connected).
We don’t have the technology in place in our care sites to have the information that exists for each patient flow in any effective way to each caregiver to support patient care. Care delivery is an information-based process and science, but the U.S. generally does a horrible job of getting major pieces of needed information about their patients to our caregivers in a useful and timely way.
There are a few notable and easy-to-see care team exceptions to those massive care delivery flaws, and those care systems that are exceptions now to those dysfunctional realities prove and demonstrate every day that all of our best computer connectivity aspirations for health care are possible — but those flaws and dysfunctional realities exist for most patients and care settings in America today, and care is both more expensive and less adequate because those flaws exist.
We need to increase our expectations of what we deserve for what we are spending.
We should never forget or fail to understand that we actually spend over $3 trillion a year on care — equaling 18 percent of our total GDP — and we waste large portions of that money because we have far more congestive heart failures, far more strokes, far more asthma attacks, and far more cases of diabetic complications than we would if we had patient-focused care for every patient, and if we used the best science and the best connectivity tools for all Americans.
Our death rates from cancer vary by multiples of two or three — depending on the care sites we use — and patients do not have the data-flow needed to figure out which cancer team to use when cancer is the reality that they personally face.
We also have, by far, the highest level of administrative cost burden for our caregivers of any country in the world, and we have not done basic things with our administrative systems that are needed to make most of those fundamentally unnecessary expenses disappear.
Some estimates are that more than a third of the total health care dollars in a high percentage of care settings is spent on administration expenses, and the reality is that a very high percentage of those expenses in those settings tend to be directly related to the complex processes we use for government programs and private health plans and administrators to pay for each piece of care in each setting.
Having more than 10,000 billing codes for the purchase of care is part of that problem, and massive regulations about care delivery are another. Medicare, alone, has over 100,000 pages of provider care delivery regulations, and every insurance company sets up its own regulatory requirements for the billing processes that will trigger fee payments.
Providers must comply with each of those process requirements from all of those payers to get their money, so we have care sites that spend far too many resources in the administratively expensive pursuit of that cash, and we are spending significant amounts of care dollars on high cost and wasteful activities that have nothing to do with care.
We obviously need to do better. We need continuously improving care with great patient-focused care data connectivity, and we need programs in place that very directly improve the health for the people of our country. We also need to mandate computerized information flow for payment processes that make it easy for care sites to get their money after delivering care.
Simply Extending Medicare to Everyone Will Not Fix Those Deficiencies or Achieve Those Goals
We need people who want to extend Medicare to everyone to understand and accept the functional reality that standard Medicare does not buy care well, and to use that energy aimed at creating universal coverage to have both universal coverage and better care by extending Medicare Advantage to everyone instead.
There is no way to deny that Standard Medicare buys care almost entirely by the piece, and that the care that results is not as good as the care that should exist for far too many of the people with that coverage.
There are some new well-intentioned and appropriately-focused pilot programs within Medicare intended to improve care coordination and delivery, but those pilots and new payment approaches have had relatively disappointing impact in most sites, and the reality is that basic current Medicare payment functionality not only hinders many aspects of innovation — but actually criminalizes some care redesign approaches that can significantly improve patient care.
Medicare has very strict rules embedded in their 100,000 pages of regulations about the roles of caregivers relative to what they can do and what they can charge for. Those Medicare billing rules for their basic sets of benefits were built by actuaries, and the equivalent insurance company fee schedules and payment rules that parallel and echo the Medicare approaches were often built by actuaries and administrative staff from traditional legacy care delivery approach payment lists. The reality is that those fee schedules and billing rules for all those payers were not built by people involved with the functional design or delivery of care.
Every economic system gets what it pays for. Bakeries produce bread because people buy bread. George Bernard Shaw eloquently pointed out those incentive issues for caregivers over a century ago in the preface to “The Doctors Dilemma.”
It is important to understand the functional reality that standard Medicare billing rules determine what caregivers produce for Medicare patients, and that reality will not change until we eliminate those rules or change the way we buy care.
People who are not in the business of delivering care have a hard time understanding or believing how much impact the Fee Schedule that is blessed by the Medicare actuaries and administrative staff has to functionally dictate and define care delivery In America. Medicare patients and Medicare caregivers are both subjected to the tyranny of the Medicare fee schedule — and care that is not included on that list is not delivered in most sites.
Medicare actually has more than 110,000 pages of provider regulations, and the Medicare administrators take their regulations and regulatory enforcement roles very seriously.
Medicare even has a reward system that can pay patients cash if they successfully report their physician or their hospital for submitting a fraudulent bill. The goal of creating that patient reward process for providing Medicare administrators with information about incorrect billing instances is admirable at one level, but it can create significant unintended consequences at several other levels.
Covering everyone in the country with Medicare Advantage can very quickly eliminate all of those problems, because the Medicare Advantage plans are paid a lump sum each month for each enrollee, and they are not paid a separate fee for each piece of care.
When the plan is paid a lump sum for each enrollee for each month, it has the solid and direct incentive to avoid and eliminate care crises and complications, rather than profit from them.
Plans have the incentive to prevent the onset and complications of diabetes. Plans paid monthly have the incentive to help people maintain healthy hearts, and the very strong incentive to keep patients from heart failure crises and trauma — because that trauma is unpleasant, frightening, and expensive.
Instead of just paying for vast streams of individual and often unlinked care pieces through standard Medicare, using Medicare Advantage plans allows us to change our approach for buying care to one that is anchored on care purchasing models that encourage, enable, and reward the best and most effective care, and that support both well connected and continuously improving care.
Continuous improvement is a management commitment in most other industries and is rarely used in health care settings. We need to change that reality and use specifications built into the purchasing model for the Medicare Advantage plans to make continuous improvement a goal and expectation for the way we buy care.
Health care does a terrible job of using connectivity tools today.
People who see they can use computer connectivity to make purchases and easily share relevant and useful information in every other area of their lives are increasingly unhappy about the total failure of most elements of care delivery to offer similar capabilities, electronically supported levels of service, and functionality for care.
That lack of connectivity damages many people who have multiple medical conditions.
Horror stories abound about people with multiple medical conditions who need to invent their own care information connectivity tools.
People who have serious medical conditions and comorbidities who go through the misery and frustration of trying to share their own relevant medical information between multiple caregivers almost always find themselves in a setting where they have almost no relevant information about their own care costs or care option. The people who need care from multiple care givers and find that the caregivers do not have the capability of sharing their care data tend to be unhappy, frustrated, and often even angry about that situation and that reality.
We need to mandate that Medicare Advantage plans create team-care data-sharing between caregivers and patients, patient-focused care plans, and care support. All of that is possible to do, but it is not happening for far too many patients because Medicare and some insurers do not pay for those services.
We Need to Have Clear Expectations for What We Buy
Being an intelligent and competent buyer should be the next step in care reform for America.
We need to be very clear about our expectations for the care that will be delivered by the Medicare Advantage plans. We need to effectively and intentionally use our leverage as a purchaser of care to be specific and explicit about the level of care coordination, care data availability, and care improvement that will happen in the care networks that are set up by each of the plans.
We need to use Medicare Advantage plans to channel our money to caregivers in ways that enhance care, improve care connectivity, support population health initiatives, create a more complete and accessible data base for each patient, and do that work of creating cash flow that will let providers invest in continuous improvement instead of volume sub optimization if we choose to use that program to make those improvements.
That will require a source of money. The people promoting Medicare for All as a total replacement plan for the country have proposed ways of paying for that program. Raising money through taxes will be difficult, but if the political will is there — to build the tax base that is being proposed to fund Medicare For All — we could actually use that same money to good advantage to buy even better coverage and even better care with Medicare Advantage for all as our strategy and our tool.
We could put that money that would be raised from increasing the various taxes outlined in the Medicare for All proposals into the same health care purchasing fund, and we could use it to pay it out to Medicare Advantage programs and plans on a per capita monthly basis that would actually buy all care for all Americans by the package (not by the piece) — and give us better care at the same time we achieve universal coverage. Those taxes all have people who either support or oppose them — and it will probably take a super majority in the Senate to turn them into law.
That will not be easy to do — and we know for a fact that it will not happen this year. That does not mean we should give up on either better care or universal coverage.
We don’t actually need to pass all of those specific taxes to cover everyone. We just need to set up a payroll tax that is very close to the average amount spent now on health care coverage, and use that payroll tax to buy care and better coverage from Medicare Advantage plans that will be an easy transition.
Instead of Being a Single-Payer, We Should be a Single-Buyer
Instead of our government being a single-payer to create that universal coverage, it would and should be a single buyer. We would not be the first Single Buyer country in the world. Most countries in Europe with universal coverage have managed to achieve that goal by using a government role, and they actually function now as a single buyer rather than a single-payer.
We would need people in this country to understand why it would be a very good thing for us all to have a competent and well-directed buyer as a key component for health care for us as a nation. We do not have a functional and intentional buyer for care today, and we buy care very badly because that is true. We have millions of individual consumers who are all functioning as micro-buyers at the point of care, but most of the care for most consumers is paid by either their insurer or a government program, so that individual consumer component of the buying process today is both incomplete and very weakly leveraged.
Health plans do some purchasing in important ways as a buyer, but our government programs now tend to function more as payers rather than buyers.
We should collectively come to understand that the primary missing link in health care delivery today that keeps us from getting full value for the money we are spending is the lack of an enlightened and competent buyer.
The Idea of Buying Care by the Package has Growing Support
The idea of buying care by the package has a lot of support from many health care policy makers and from a number of care providers. People in health policy settings have been criticizing and even attacking the piecework purchasing model for years — but those who want to change the way we buy care have had relatively little impact on actually changing the model in effective ways, because they have not created cash-flow models that pay for the care they claim to want to buy.
Some work is being done in that area in a number of settings. That has been very good and educational work to do, and it is good that we have done it. Many sites have started down that road to selling packages of care, and we now have enough experience with those incomplete and flawed attempts to change the purchasing model in the past couple of years to recognize the harsh but clear reality that going part-way to the new care cash flow model is not enough for that particular set of problems and issues for most care settings.
Having a care site get only part-way to the new payment approach has created conflicted incentives and internally contradictory processes in many sites. The functional reality is that getting part-way to a different purchasing model for some care sites is a little like trying to cross a major chasm with two leaps — with one leap that ends in the middle of the chasm. We might try it — but we have discovered that we are generally not happy with the result.
Medicare does now have an array of very well-intentioned programs that are working hard to buy various kinds of care packages. Medicare has recently been supporting care sites and teams in setting up a number of very well intentioned and directionally correct Accountable Care Organizations whose goal is to do a better job coordinating and delivering care for the subset of their patients included in the ACO designation.
That work has been very difficult to do in a mixed payment approach in many sites.
Some very well-intentioned care sites in our country now are semi-paralyzed and are doing unintentionally wasteful and frustrating things because we have gone part-way down the path to buying some care by the package instead of buying it all by the piece, but we have only gone far enough down that road in many sites to make the situation they face in delivering care more difficult and complicated, instead of making it better.
Profits based on sheer volumes of care units (whether or not the patients need the pieces of care) pushes the care sites in one direction, and paying those same sites for reducing care costs by improving care outcomes, increasing care effectiveness, and improving patient awareness of health and of care pushes them in another direction.
Today, too many care sites are either purely incented by volumes, or now have a mixed, confusing, and sometimes contradictory set of incentives that keep them from being as good as they could be in accomplishing either set of care strategies.
We need to clean up that mess and make the right set of incentives, care support tools, and care information flows available to all caregivers so that each site can focus on patient-centered and continuously-improving care.
Follow the money.
Medicare Advantage can be used to improve care in all of those ways.
We can make those areas of performance and functionality significantly more effective by insisting on them as part of the specifications we create as a buyer for the Medicare Advantage Plans, and we can require those plans to create those levels of functionality with their care teams as a condition of existing and of getting patients as plans.
We can create a marketplace of transparency and accountability for consumers, and we can do it in the context of understanding what we want care delivery to do for us, and then actually buying and paying for those outcomes.
As a single buyer for care, we can use the power of that role to insist on the performance levels we expect from the care systems and Medicare Advantage plans.
We can require patient-focused team care with extensive reporting requirements for multiple levels of both quality and service if we go down that path and have everyone making their free choice of plan for their enrollment, and then having the plans compete with each other.
Market forces tend to be absent from most health care decision making today. Most people today do not get to choose between caregivers with any level of data about their performance.
People choosing plans often don’t have good information about their plans, and most patients in plans generally do not have good information that facilitates choices between caregivers. Those market forces can be used to serve patients very directly if we go down that path to having universal coverage with free choice of plans, and if we create clear expectations about the kinds of information that plans need to provide to their members about caregivers and care.
If we create a consumer-focused marketplace where consumers have great transparency about the performance of their possible choices for enrollment — and if the plans have very clear expectations and requirements about what they will be delivering to the patients, then plans will compete for patients and care decisions can be both local and patient specific in a well-structured and easy to use way.
We Can Spend the Same Amount and Improve Care
We can do that without spending more than we are now in total to buy care.
We could keep our current Medicaid programs in place — expand Medicare coverage to Medicare Advantage coverage — and then use the money we are spending now to buy insured care, and convert that current insurance money into a pool of cash that can give Medicare Advantage coverage as the universal coverage template for every other American.
We currently spend $3 trillion in total on care in this country, and $1.1 trillion goes through insured programs to buy care almost entirely by the piece for the insured.
It we collect that same $1.1 trillion with the payroll tax, and if we put it into a macro-fund for the purchase of care, we can use that money on a per capita basis to buy care through Medicare Advantage next generation plants for all the insured in the country, and for the uninsured not covered by Medicare or Medicaid.
That tax would not be a major change from the way we pay for most care now. We already have a practice in this country of using payroll deductions to buy coverage. We can convert the payroll deduction into something similar to the Social Security payroll tax, and use that money to buy universal coverage.
We are very fortunate that the payroll deduction percentage that would give us sufficient money to create that pool is a reasonable number that runs very close to the payroll deduction percentage most employers use now for funding health care coverage.
A 15 percent payroll tax would give us that pool of money, and it would be collected in a payroll deduction process that would look and feel very much like the process most companies now use to pay for health coverage.
Medicare Advantage plans who meet the criteria set up by our single buyer for plan capabilities and financial stability would be made available in each market to everyone who is not on Medicaid or in a private employer self-insured pool.
To maintain market flexibility and encourage funding creativity, we should allow large self-insured companies who choose to cover all of their employees, but do not want to use the payroll-tax-created funding pool, to continue to offer self-insured health benefits to their employees.
That funding process and benefit delivery approach has been one of the anchors of offering coverage to Americans, and we should allow those companies to continue down that path so long as they meet the basic standards of benefit levels.
Most self-insured companies will probably convert to the payroll-tax-funded pool, but some will not, and their employees will be part of the universal-coverage agenda and strategy for America, because their employees will have coverage.
Most of the administrators of those self-insured plans who do that work today will also participate as Medicare Advantage plans, so they will also find this approach relatively easy to work with going forward to pay for care for everyone.
Cap Total Costs by Capping the Monthly Amount Spent
This single buyer approach can give us much better control over the total costs of care that we will expend as a country. There is so much waste and bad care today because of the piecework approach we use, that the plans paid a guaranteed monthly amount per enrollee will be able to provide both higher benefits and universal coverage using that amount.
We will see a golden age of care improvement, and care enhancement tools will blossom and fill the marketplace and care settings.
Setting the care expense to 15 percent of our total income for at least several years will bring down the percentage of the GDP we spend on care.
We could move to a total spend of 17 percent of the GDP in a carefully choreographed and damage-free way for the rest of the economy by using those tools.
Moving to 17 percent or less of the GDP as a total health care expense by moderating the increase in the total amount we spend on care would not cripple care delivery businesses in any way. We would still spend more than $3 trillion each year on care. That is a huge amount, and it is more than enough to buy all the care we need if we make improvements in both care effectiveness and population health.
We actually want our care delivery businesses to thrive. Care delivery creates great jobs and our care sites anchor many local communities. We want to maintain the right set of care jobs — and we want to make sure that we use our care resources in the ways that offer the most benefit and value to our citizens and patients.
We can do that because there are so many inefficiencies and there is so much badly spent money in health care delivery now that we will be able to save billions relatively easily once the cash flow of care makes those kinds of changes safe for care systems to do.
There is so much money in health care now and there is so much money wasted on bad health, bad care outcomes, weak interventions, weak and ineffective population health agendas, and sheer administrative cost inefficiency and bureaucratic waste that the care systems that will work with the plans will have a relatively easy time achieving those cost goals as soon as they are free from the financial schizophrenia of having to trigger and generate volumes of fees, and having to do it all with a crippling administrative cost burden.
We need the plans to make care re-engineering a priority, and we need plans to partner with caregivers to design and achieve those goals. We need creativity to flourish in the context of the new cash flow, and we need the plans committed to sharing best practices and support tools freely and widely for all of those agendas.
We need plans to work in the context of patient centered medical homes and electronic connectivity with patients to make care better and less costly.
We know that the Medicare Advantage plans can achieve those kinds of goals because many of those care improvements are happening now in a number of Medicare Advantage care sites.
Medicare Advantage Plans Have Richer Benefits and Better Care
The Medicare Advantage Plans that exist today have more complete benefit packages than standard Medicare.
The uncontested and unfortunate reality that some Medicare for All advocates might not understand is that our Standard Medicare program benefit design has significant cost sharing expenses that put a financial burden directly on Medicare enrollees.
Medicare is one of the most popular programs in the country, but the reality is that the out of pocket expenses for current Medicare beneficiaries now consume more than 34 percent of the average Social Security income for the younger Medicare population, and the patient expenses for our standard Medicare program currently consume more than 70 percent of Social Security income for people over the age of 85. The actual benefit package built into our standard Medicare program is not very strong.
Medicare Advantage Plans have much richer benefits for senior enrollees now, and that will continue to be true as we extend those plans to more people.
Medicare Advantage Plans already provide several levels of care quality and care delivery service-level reporting that do not exist for standard Medicare enrollees.
The Medicare Advantage Plans have nearly sixty measures of quality and service available now through the standardized and mandated NCQA reporting processes — and that quality oversight program already has an easy template to use for adding additional measures that consumers and patients might decide to want if we extend that program to everyone.
Standard Medicare has been trying to improve the amount of quality care available to patients, which is a major step in the right direction. But it is inherently incomplete because it only reflects some of the activities of the care sites, and it does not include information about either connectivity or care outcomes.
We need to build a rich and robust set of reporting and consumer feedback tools for each of the Medicare Advantage plans and care sites that echo the best kinds of tools used now in other parts of the economy by consumers, and have that newer and richer set of information flow become the expectations of all patients relative to their care.
Some people who propose taking our country into universal coverage propose that we should blend Medicare and Medicaid into a single program and run them together.
Running them as one program might have some advantages relative to long-term efficiency and program clarity, but the reality is that going through the vast array of changes necessary to make that blending happen in each of the states and for each of the care sites would add years of complexity and administrative expense and activity for relatively small gain, and the total positive impact would probably not be worth the effort required.
Also, there are a number of reasons why it makes sense to run the Medicaid programs as their own agendas. One reason to keep them separate at this point in time is that we currently have plans in place in every state for future Medicaid funding, and it will be much easier for us to get to universal coverage and pay for it if we can assume that the planned Medicaid funding will simply continue forward.
The two programs have very different benefit packages — and that is a good thing to have for several reasons. Medicaid currently has very rich and complete benefits because the Medicaid beneficiaries are very low income, and it is important not to have financial barriers to care for Medicaid patients.
The Medicare Advantage program for non-seniors — and the Medicare Advantage program for some seniors who choose that approach — will have a $1,000 deductible plan.
A $1,000 deductible plan would be a constant barrier to needed care for very low-income workers, but having a deductible makes sense at several levels for higher earners, because it creates an important sense that care is not free, and it can be channeled as a way of encouraging some levels of caregiver competition.
Most deductible plans do not actually trigger provider price competition today because people with the deductibles tend not to have any needed information about care prices in making their care decisions. That should be changed as part of the Medicare Advantage benefit design support requirements.
The thousand-dollar deductible plan needs to be administered in a way that facilitates patient choice of caregivers for the care received before the deductible is met.
Medicaid also has very good reasons for needing programs that deal with social support issues that are less relevant to the higher-income people who will have Medicare Advantage new levels of coverage.
Births need to be a Medicaid area of great competence. Over half of the births in America this year will be to Medicaid Mothers, so we need to do a very good job of both setting up the most effective prenatal programs, and setting up the very best programs for encouraging early brain development support for all families in the weeks, months, and years immediately after birth
The Medicaid programs have been working hard to get better at team care and to build and implement proactive approaches to care delivery, and we need to build on all of those programs going forward.
As we look at the funding issues we will need to deal with to create universal coverage, if we do not change the Medicaid program, then we will not need new money for those enrollees, and we can simply assume that the overall Medicaid funding issues will be exactly what they are now.
As we look at funding our universal coverage strategy, we can also assume that the funding for those currently eligible for Medicare will also stay on the track it is on now, and that we will make Medicare Advantage available to those covered in the same cost flow that we have in our funding plans now.
We Need a Funding Source for Covering Everyone Not Currently on Medicare or Medicaid
Using a payroll tax to cover everyone else gives us a revenue source that is dependable, adequate, and that can both feel right and be right as a way of buying care for all Americans not currently on Medicaid or senior Medicare.
We would not be unique in making that decision to fund universal coverage.
The European countries who have all also wrestled with the need to raise enough money to pay for their universal-coverage purchasing-pools have almost all decided to do it with a payroll deduction model.
They all link health coverage to their employers and use a payroll deduction from the employee that is usually matched by the employer.
Fifteen percent of each paycheck is about what they tend to use in each of those countries to create that pool of money.
There are several good reasons for us to go down that same path to build our own single buyer care payment fund.
We already use that same exact model to collect money from everyone who is employed to fund our Social Security program. People in our country know that model now and like it for Social Security.
We don’t need to build anything new or invent any kind of tax infrastructure. We already have a very workable and well-functioning process and program in place to collect that Social Security fund money from each paycheck.
We currently fund Social Security with a payroll tax on all paychecks. The Social Security tax we use now charges 6.2 percent to the worker, and the employer then matches that amount.
Taking 12.4 percent out of every paycheck creates an annual pool of $900 billion in revenue collected for Social Security.
If we decide to create a health care funding pool for each community, and if we decide to fund it with enough to have that fund pay each Medicare Advantage Plan a fixed monthly amount for every enrollee that matches the total we spend now on insured care as a country, we would need to raise enough to make those payments.
We know that health insurance currently pays about 34 percent of the total health care payments in this country — and we know that payment for insured care this year will be estimated to be $1.1 trillion in total expense.
If we decide to match the amount spent each year in the U.S. on insured care so we can use it to change the way we buy care, and pay a fixed amount each month for every Medicare Advantage enrollee, then we would need to charge a 15 percent payroll tax per employee to raise enough to create that purchasing pool.
It is interesting and hard to understand why that 15 percent from our paychecks would be the same percentage they use now in both Germany and The Netherlands.
When we raise that money and create that health care funding pool, we can use basic actuarial tables to apportion it to each Medicare Advantage plan by person based on age and sex factors just like the ones used now with Medicare to create the monthly payment levels now used to determine the monthly payment for current Medicare Advantage senior enrollees.
That 15 percent fits in well with the amount we spend today for employer related health care expenses. We know the average employer spends about 14 percent of their payroll on employee health care expenses.
We also know that most employees spend about 30 percent of their paycheck on health care related issues.
So if we put in place a fund collection process that would give health care coverage to everyone, and if we funded it with a 15 percent payroll tax, that would be very close to what we currently spend for a high percentage of our people, and it would give us both better care and better coverage than most people currently have.
That should be enough.
If we assume even basic low-hanging fruit harvesting from care improvement for our patients, and if we assume very basic low-hanging fruit harvesting from the 30 percent or more of the care dollars we spend now on wasteful and unnecessary administrative expenses, then we should be able to extend a $1,000 deductible plan to everyone, and extend this coverage to the 30 million who do not have coverage now, and pay for it all with the $1.1 trillion that could be paid out in per capita amounts to the health plans — if we collect a 15 percent tax from every paycheck.
We need to decide what percentage of that 15 percent the employee should pay, and what percentage the employer should pay.
We could determine now, at the national level, what percentage of that amount the employer should pay, and what percentage the employee should pay — or we could let each worksite, and maybe each state, determine that proportionality of contribution on their own.
This proposal is to allow each worksite to determine what portion of the 15 percent the employee would pay and what portion the employer should pay.
Taxes are always very hard to swallow, but those are not shocking, painful, or disruptive numbers.
The average cost of health care to employers now runs about 14 percent of payroll. The average family income in America is now $81,000 a year, and the average American family now spends $14,000 on health care. That equates to about 17 percent of income for each family. A 15 percent tax would be well within the normal spending experiences for most American families.
Those costs for employers and for health insurance coverage have been increasing by roughly 5 percent a year for a decade or more. Some people are predicting that those rates of increase are about to go up significantly for the next several years.
Designating 15 percent of one’s paycheck for health care at a fixed rate —instead of increasing the rate every year by 5 percent or more — would be a significant financial benefit to both employers and employees.
Too many people in our country today have painfully high deductible plans. In some cases, they are almost the functional equivalent of being uninsured.
We should do better than that as a component of universal coverage.
Eighty percent of insured people today have an average deductible of $1,400. We could move the deductible used for everyone down to $1,000 — and that would be a benefit increase for most Americans.
To significantly improve patient buying power in the context of that deductible, we should definitely and effectively give patients much more information about the costs of relevant care. We should put very explicit requirements in place for the plans, such that they must give patients electronically available information about costs and prices for each piece of care paid before the deductible is met.
Market forces do not work well in health care now relative to deductible benefit plans, because most consumers with deductible insurance plans do not have pricing information about each piece of care. That process deficit is easy to fix when we become a more competent purchaser of care. Providing pricing information to patients should be an expectation and a requirement for each health plan.
We would offer better benefits, guaranteed coverage, and better information to use in making care decisions.
The politics of getting Congress aligned with any funding approach for covering us all are unclear at this point, but if we were to make that decision as a country to move in this direction, and if we set up that flow of cash to buy universal care, the time needed to achieve positive benefits in our care delivery infrastructure from that decision point could be very brief.
Creating the New Reality is Easy Once We Start
Health care is ready and even eager to respond to that opportunity. Much of health care management and organizational planning is in a state of limbo right now, waiting for the next financing reality for the industry to become real — and the ability of the people who run care sites to adjust in creative and productive ways to the new payment approach will be fairly high and immediate.
We have very intelligent people working hard in those organizations on those sets of issues now who are very frustrated. It is not an easy job to run the finances of a care delivery site in this country today — and many managing the financial functions of our care sites will find this Medicare Advantage created cash flow approach easier than their current cash management job.
The plans should need no more than a couple of years of transition to be ready to accept that payment level and to provide the required level of coverage and care for each covered person in the context of that cash flow.
The $1,000 deductible benefit package would be significantly better than the benefits that most people have today. Most Americans with private insurance have deductible levels that exceed that level now, so offering everyone a $1,000 deductible would be understood as a richer set of benefits for most Americans.
We need to have some flexibility on benefits by employer, but that flexibility has to be limited to making benefits better and not decreasing them.
Creating that mandatory consumer access to pricing information will trigger some useful and productive market forces with individual consumers relative to care unit pricing. If caregivers know that their price for an office visit for a sick child will be visible to each patient, then caregivers will factor fee levels into their financial strategies, and price competition will result in a number of settings.
Some caregivers currently charging $200 for an office visit, for example, might decide to reconsider, and offer a $150 visit — or even a $100 visit to generate patient volume.
That price related competition does not exist now for those pieces of care because prices currently do not steer care for those services. Competition will exist when price information anchors care purchasing for some services.
Electronic Care Will Blossom and Flourish
An important area of service and care that will generate additional volume and trigger significant and important care delivery innovation will relate to electronic visits and the electronic delivery of care. Standard Medicare and most private plans avoid paying for electronic visits today, even though many patients prefer them to the logistical challenges of face-to-face provider visits, because Medicare and most payers fear electronic volumes in a fee-based payment model are too easy for providers to increase, which will simply trigger additional fees.
Patients would appreciate the choice of both prices and virtual care sites. A patient with a $1,000 deductible benefit plan might prefer to use a $30 electronic visit for care instead of triggering a $200 face-to-face visit with their provider of care.
When care systems are paid for the total package of care, there are very high levels of electronic encounters messages, connections, and linkages because they are used by the provider to improve care outcomes, and they are much more convenient for the patients.
There are now several specialized Medicare Advantage Plans for people with chronic illnesses or who are institutionalized. Those plans already focus even more intently on creating the right benefits and care incentives for groups with high medical needs. We need to figure out whether to continue those plans or include them in the overall package. When those plans are paid for overall care, they have done some very creative things to deliver that care.
The people who regulate licenses in each state will continue to have a role in setting the standards that fit their needs for determining who is allowed to sell in each setting. Those regulators should support and facilitate extensive creativity and continuous improvements in the delivery of care, and should require that plans report regularly on their progress.
The government should not design and mandate the actual connectivity pieces for care sites, but the information flow from the health plans should be required to be very clear about the types and levels of connections that exist for their patients.
The best sites will continuously improve, but explicit connection rules imposed by government agencies can cripple positive change. Relevant regulators should mandate connectivity, and then get reports from the care sites and plans that explain what the current versions of that creativity are.
As a buyer, the purchasing pool should expect the plans to meet high standards for quality, service, information sharing, team care, and patient support. Complete patient information available to both the care team and the patient should be an expectation for every plan. Purchasing by the package gives us the opportunity set requirements for both care information and care information sharing by caregivers that create more patient focused care deliver.
The current Medicare Advantage plans already have extensive reporting about their care linkages and care quality, which does not exist for standard Medicare patients with those exact same conditions. We need to build on those reporting requirements, expand them, and create very user-friendly electronic feedback mechanisms from patients, similar to those that exist in other industries today.
Health care provides those levels of feedback badly today, and it will be important to set up good processes in the future that are best practices in those areas because care delivery is so important to us.
Care will also improve in a wide range of areas — and we know that to be true because we have seen it happen for plans today when they are free from the tyranny of the Medicare fee schedule. Each plan can expand benefits by using more effective care team approaches for their patients, and not be limited by the actuary created traditional Medicare fee schedule rules and definitions in the process.
Some plans have significantly reduced the number of broken bones in their patients by using nurses to do coaching, and by using home preparation approaches that make homes safer for seniors.
None of those patient support services would be allowed by standard Medicare fee schedules, so standard Medicare patients do not receive those services. And standard Medicare patients today have more broken bones than the plans that do that work to keep bones from breaking.
Medicare Advantage plans can actually expand services in ways that enhance care delivery because they are not paid by the fee, and because they are not limited to the rule set of the standard Medicare fee schedule in putting together caregiver support teams or care delivery approaches.
That creates a very different and very patient centered financial model. Medicare Advantage plans have strong and direct financial incentives to work to reduce the level of diabetic complications for their patients because, unlike fee-based Medicare sites and approaches, the plans are not rewarded financially for care failures and for care related complications for diabetic patients. The clear financial incentive for the Medicare Advantage care teams and care networks is to help patients be healthy enough to avoid physical failures and to reduce care complications.
We Need Extensive and Continuously Improving Quality Reporting
That care for Medicare Advantage members and plans takes place now in a context of extensive quality measurement. NCQA reporting processes and systems currently track care inside the Medicare Advantage plans for diabetes, stroke, heart failure, and for fifty other care measures.
That is the same NCQA reporting, credentialing, and tracking model used today by the largest private employers for providing quality oversight to their own health plan purchases — and it is very different from standard Medicare program patient care where those levels of care quality and care service level tracking do not exist.
We need to get much better at quality measurement and consumer feedback, and all of that is much more likely to succeed in a single buyer world where plans are accountable for total care than they are likely to succeed in a piecework payment world when each caregiver is a silo, and no one is responsible for any part of aligning or improving care.
We Can and Should Create Financial Incentives to Improve Care and Make it More Affordable
To attract consumer support for this move, we need to explain to Americans that paying each Medicare Advantage Plan a fixed monthly amount for each patient, gives each plan the direct incentive to reduce chronic disease levels, increase access to care for patients, and minimize both care mistakes and bad patient outcomes.
Traditional health care providers make more money when hearts fail and when asthma attacks hospitalize children and adults. We need to understand that the Medicare Advantage plans benefit financially from not having either those diseases or either sets of crises happening.
Care Givers who will be working with Medicare Advantage plans instead of working with a confusing and internally contradictory set of cash flow realities, will be able to improve care in ways that can achieve those goals.
As we look at the best ways of applying incentives to health care delivery, it is clear that a number of very well-intentioned approaches have failed, and some have done well. Failure has happened with a high degree of consistency when the caregivers have conflicting incentives and can’t respond to one set of incentives without somehow damaging their other flows of cash.
Cutting asthma crises in half is good, but when a hospital is paid well for each crisis, and not paid at all for preventing them — and when hospitals need their revenue every day in order to pay their staff — the number of prevention programs for those crises that are created are not high.
However, when hospitals have a clear incentive to reduce crises — proactivity flourishes with improving and more affordable care.
Capitation for some kinds of care can make sense as an incentive for making care improvement processes happen, but it is extremely important to never create a level of functional actuarial risk for an individual caregiver that creates excessive financial incentives for the caregiver to avoid needed care, or that creates undue cost burden for individual caregivers when patients have high medical needs. Incentives can both enhance and damage care, and provider incentives need to be designed and implemented with both of those realities in mind.
That means, structurally, that it makes sense in terms of incentives to have someone or some organization in the stream of cash going to a set of patients who benefits financially from making care better — and it is also true that the relevant party does not need to be either the physician or the hospital. It can be a care team or some organization that is a key part of the cash flow and has the ability and incentive to help the care team in each setting do the right thing for their patients.
We Need Incentives at the Right Level
Incentives should exist for every patient — but they do not need to exist for each patient at the physician level. Many of the best care settings in this country have their entire medical team only on salary, and those care organizations very intentionally divorce their individual physicians from anything relative to either actuarial risk or care procedure based financial incentives. Those care sites all tend to have very high quality of care ratings.
We need care teams and overall care organizations to be at risk — not individual doctors at risk — and we need organizations with the right skill sets and resources to be supporting the organization and reorganization of care in each setting with those incentives in place at the macro level.
That is why channeling the funding stream to the care teams in the context of a Medicare Advantage approach that clearly restricts inappropriate or challenging financial arrangements can both improve and bring down the total cost of care without having individual caregivers facing conflicted incentives and dueling compensation realities.
Each Medicare Advantage plan needs to build a care network that meets patient needs and has all the parts and pieces needed to provide and continuously improve care. We need both accountability and creativity as part of the process, and we need enough visibility, relative to what the care teams and health plans are doing, so that they can learn from each other and continuously improve.
That approach would not cut the total amount we spend now on care. We don’t necessarily want to reduce the total amount spent on care to lower levels than the total amount we spend now, because health care actually does create great jobs and is very good for local economies, and we will earn significantly more value from those care dollars if we put patient-focused and continuously-improving care models in place through our purchasing approach and incentives.
If the US is Ready, We Could Convert Everyone Relatively Rapidly to Universal Coverage with MA and Do It Well
Care would improve immediately.
Electronic patient connectivity would blossom. Caregivers and patients both appreciate the high levels of electronic connectivity that are possible but now outlawed by the Medicare fee schedules. Patient contacts could be built around patient needs instead of the need to trigger a patient encounter fee.
More than a third of direct face-to-face provider contacts could be done electronically in ways that patients and caregivers prefer when both the fee schedule limitations of the payers, and the cash flow needs of the care sites are no longer keeping those electronic contacts from happening.
Care teams can form and begin to function immediately. The information flow needed to support their work will exist because when people enroll in a plan, the plan automatically sets up data processes for each enrollee, and can be used to support care, instead of simply triggering a claims payment.
Medicare Advantage for all leverages the advantage of pieces in place that can be used to take on an infinite number of people, and do that in a way that improves performance, rather than threaten it.
At this point in time, it is a matter of political will — not functional capabilities — for making that conversion. The functions needed to go down this path and fund it all exist. We need to decide whether we collectively want to use them.
The people proposing a standard Medicare For All model currently intend to fund their proposal with a mixture of capital gain tax increases, increased progressivity for income taxes, macro wealth taxes, and both a 4 percent income tax and a 7 percent employer tax.
Medicare, Medicaid, Large Employers, and Catastrophic Coverage for a Lonely Few
To minimize market disruption and reduce political resistance to the new agenda, we should encourage and allow large private employers to continue to self-fund their health benefits for their employees.
Their employees already have coverage and we want that to continue. We don’t want to lose either the creativity or the cash flow that can come from the self-funded employers who would continue to sponsor plans. Those plans have the potential to help improve care, and they already cover millions of Americans today. We don’t need to end those plans to make this strategy work, so we should allow them to continue to operate as long as their benefits are not lower than a $1,000 deductible.
Keeping Medicaid as part of the solution set makes sense at multiple levels. Medicaid already covers millions of Americans who really need that coverage. The Medicaid benefit package is much richer than the thousand-dollar deductible that will be used by most other Americans, and the Medicaid providers are in communities with Medicaid beneficiaries.
Medicaid has been increasingly effective as both a purchaser and provider of care, and we need to link the best aspects of what those new Medicaid plans do with our care improvement agenda and processes through the Medicare Advantage plans.
We need to do more than just retain Medicaid. We actually need to expand our use of Medicaid in several important ways. We need all low-income people to have Medicaid coverage.
Medicaid is already a massive program and covers more than 25 percent of our population today. We would simply continue to use the Medicaid funding streams in place now for Medicaid — so that approach will not add anything to the cost of care.
Medicaid now covers more than half the births in America.
Medicaid also now covers more than 70 percent of our nursing home expenses.
Those are extremely important components of our health care delivery reality. We need to understand how important it will be to do those programs well.
Our children are our future and more than half the births that will create our future as a country are being paid for by Medicaid today.
The coverage of nursing home expenses by Medicaid tells us that patients who trigger those expenses would be well served by a care coordination link between our physicians, our hospitals, and our Medicaid eligible patients.
There are a number of things we should do to strengthen the public health agendas for our Medicaid patients — and we can do that work more effectively if we require coordination between those programs and the new Medicare Advantage plan that we would be using to cover all Americans of all ages.
The Biggest Single Source of Cash for Care Would be Medicare Advantage
Having everyone enrolled in Medicare Advantage plans could create a robust market that has plans working hard to meet consumer needs with new services, and products to attract and keep their customer base. We need a context for market forces to function in for health care issues. Creativity in systems design and new care tools would be welcomed by the plans and the patients, and would create new levels of thinking about the delivery of care.
Care teams could flourish and thrive.
If we made a $1,000 deductible plan our standard benefit package that the enhanced Medicare Advantage Plans provide to their members in exchange for a monthly payment — that would create multiple opportunities in a market context for plans to offer richer benefits for more money or as an enticement to enroll.
Employers who want to buy richer benefits for their employees could also do that if we create some flexibility in the market relative to product design for insurance products.
This approach would work well for people with multiple jobs. An increasing number work out of their home and do not have a link to employer-based health care and coverage today. This approach would reach into every home because it would be linked to every paycheck.
People who work part-time or serve two or more employers would automatically have provisions and funding for coverage, because 15 percent from each employer would be accumulated automatically on their behalf.
Labor unions used similar funding accumulation approaches when they had multiple employers hiring their workers. That ability to blend pay from multiple employers was a major benefit of being a union employee. We could echo that multiple employer trust model for part-time workers with this approach.
Part-time employers could use the availability of this coverage to compete for employees, and some could become favored employers with employee loyalty links by offering to pay a higher portion of the health payroll deduction for the people they employ.
The insurance exchanges that exist in the states now could continue to operate by accepting the payments into their cash flow, and by including both the Medicare Advantage Plans and the Managed Medicaid plans into their networks.
The cash flow to everyone with coverage from the central health care fund could also be channeled into health plans through the state exchanges that continue to operate.
Some states have created and implemented robust exchanges with highly desirable features, and it could make sense for those plans to continue to function in the cash flow created by the Medicare Advantage payroll deduction.
We need to make it easy for providers of care to both participate in Medicare Advantage programs and to create and run their own Medicare Advantage plans where that approach makes the most sense for the local care system.
We have a long history of some Medicare Advantage plans becoming increasingly good at supporting caregivers in the delivery of care and setting up care teams, and that skillset and package of behaviors will be even more useful when everyone is enrolled in a plan with the expectations of receiving team care.
We Need to Protect Providers of Care in Transition
We need to make sure that we protect and support care providers during the period of transition.
As part of the initial extension approach, we will need to provide caregivers the opportunity to participate in the Medicare Advantage plans as well as form their own. Each state should work out its own processes and schedules for their current programs to implement this broader agenda and support local caregivers.
The goal in each state will be to have all providers either in one or more Medicare Advantage plan, or to have the providers functioning as part of the Medicaid and Children’s Health Program for their states.
That particular approach of creating local care system-based plans would support existing care teams and it will give local care giving institutions in various communities both the choice and the opportunity to form their own Medicare Advantage plans.
Low-interest money should be made available to care systems that choose to start and run their own plans.
That support process for caregivers who want to function in those capacities is a market that is already rich in vendors and funding sources. There will be no shortage of qualified and competent vendors, potential partners, and computer support organizations available to help those caregivers enter into that capacity or create ACO like programs to work with the Medicare Advantage Plans.
The Medicare Advantage plan participation standards created by each state would expect those providers to meet some basic financial safeguards and create reasonable ways of coordinating their transition from their existing payer contracts in ways that do not impair current payment approaches for current plans.
Moving all of those Americans to Medicare Advantage plans would give us the opportunity to channel the cash flow for health care into a context where caregivers would work as teams on behalf of their patients. Knowing that particular cash flow would define the future cash flow for care in each setting would create a care context where significant care data-flow connectivity could be put in place for every patient, and where care teams have the support and tools needed for team care.
Patients will benefit very quickly, beginning with team care and better flow of information about their own care. The average patient today with co-morbidities averages more than five caregivers per patient — and the normal situation we face for each patient includes very weak or non-existent processes, and almost no tools for sharing information between the caregivers.
Caregivers today tend to function as information siloes with very little data sharing, even for the sickest patients. Enrolling patients in Medicare Advantage plans and Medicaid programs with extensive computer support tools and an automatic data channel for each patient will create automatic data flow that could be used by the caregivers to support fully informed care delivery.
Quality reporting will be strong and will continuously improve.
Medicare Advantage Plans are now required by law to have all the information for their patients, and to report on care quality and service levels in sixty reporting categories.
Patient centered medical homes that have been created in recent years have another two-dozen sets of information sharing and reporting requirements. All those quality and service requirements will be far better for patients than the complete lack of information sharing requirements that exist today.
Enrolling everyone in Plans would give us much needed access to care data and information for all patients. If all Americans were enrolled in Medicare Advantage Plans, with patient-focused data collection, we would have the ability to deal with issues of responding to possibly dangerous medical devices that might have been implanted in days instead of in months or years.
Likewise, if every American knows who their available care team members are, then data reporting on issues like hospital death rates and care team comparative survival rates for various types of cancer could be made easily available to patients.
Today, we have no mechanisms for doing that kind of follow-up reporting — and it would be relatively easy to do using the kinds of data-bases that are inherently set up when everyone is enrolled in Medicare Advantage plans.
New Electronic Care Support Tools Will Have an Exploding Market and Higher Levels of Success
We should be able to use the new levels of data processing and even artificial intelligence to help support patient care — and that will not happen at any significant level as long as traditional Medicare controls the health care database and sets up barriers to both information sharing and team care. Medicare Advantage plans can be required to create full data access for each patient, and to supply that data in ways that both care givers and various support tools can use to help people with their health and care.
When that data about all pieces of care that is used by each patient becomes available for each patient, care will be better within care teams, and patients will have a wonderful opportunity to expand their own knowledge about their own care using a wide and expanding variety of care tool options.
We need a patient focused marketplace for care support information flows and care delivery processes, and that will not happen until we mandate it as part of the purchase of care. It will not happen on its own. Someone needs to have that work as an assignment, or it will not happen.
The patients should be able to use their own data in any set of care support tools or processes that they might want to use. This approach of mandating Medicare Advantage plans to make that data available will be a powerful enabler for those new markets.
A number of organizations are trying to create products intended to help patients make better health care and general health decisions. Millions are wearing health monitors of various kinds already.
The problem today is that there is no good way of using that separate stream of data from those new electronic monitors to fully support and inform patients, because the systems and vendors for those products do not have access to the full set of data about each patient that would make that data most useful.
That will change if everyone enrolls in a Medicare Advantage Plan, and if the patients are entitled to their own data from the plan’s electronic files.
We will see a golden age of patient support tools when that data flow about each patient becomes available and usable by each patient.
That set of available electronic data can only happen with high levels of success if someone builds that file for each patient — and that file will not be built until someone has the functional need at the patient level to collect and use that data.
Plans will have both that need and that capability as a condition of being allowed to function in that market.
Providers Will Invest in Care Improvement When the Rewards for Those Investments are Put in Place in the Flow of Cash
Our single most important goal in moving to that level of coverage will be to get the full benefit for our country of providers functioning in team focused care. Caregivers who either create their own Medicare Advantage plans or know their future payment cash flow will come from that Medicare Advantage linked source, can work with those plans to create a dependable revenue flow that will allow both better planning and the creation of various levels of systematic care improvement that will never happen as long as we buy and sell care at the core level entirely by the piece.
Patient Centered Medical Homes for both primary care sites and medical specialists should be a required available payment approach and a delivery model option for the Medicare Advantage plans, and that should create an opportunity for private practice care sites and community clinics to join the Medicare Advantage cash flow.
This benefit funding approach can either replace the Health Care Exchanges over a few years, or we can use the Medicare Advantage approach as the next stage of development for the local health exchange marketplace. Individual states could and should make that choice in the context that works best for each state.
Medicaid Should be an Anchor Funding Mechanism for the New Health Care Marketplace
Some Medicare for All advocates propose either ending Medicaid or blending it into Medicare.
That would be unnecessary, complex, and very costly. We need to improve Medicaid — not end it.
Medicaid should continue to be a major care-purchasing program for the government and should be expanded to cover more low-income Americans as a voluntary enrollment choice for those who buy their own coverage. We should allow low-income people who prefer the local Medicaid plans over their local Medicare Advantage plans the opportunity to enroll in either.
The monthly payment to the plan for the people making that decision would be based on the average costs of providing Medicaid care in that setting, and not on the Medicare Advantage care cost number.
Medicaid is currently the most affordable care-purchasing tool for the government, and its fees are significantly lower than those paid by either Medicare or by our private insurers.
Medicaid has been doing increasingly effective and creative work in a number of states in both meeting patient needs and creating team care for both mothers and babies. The states that now buy care by the package for their Medicaid patients have seen an explosion in capability enhancements relative to both preventive and team care. Those programs are built around the populations they serve and have been increasingly patient focused in their care models.
We should keep the very best components of the current Medicaid program in place, and we should use that program and those capabilities to continue to meet the coverage needs of our lowest-income people.
More than half of all births in America today are to Medicaid Mothers. The care sites for those births are already included in the Medicaid care network. The community clinic network has full family care capabilities, and clinics will thrive when given more enrollees on a guaranteed enrollment and guaranteed payment basis.
Transitioning that Medicaid population to other sites would not be good for either patients or caregivers, and having other caregivers attempting to meet the needs of the Medicaid population is an effort that we don’t need to accomplish, because that care is already done well in a growing number of settings. We need to ensure those programs are achieving their quality of care and service level requirements, but that is an extension of our current practices rather than a new direction for that care.
We do need to make sure the Medicaid plans and programs coordinate data flow and relevant logistics with the Medicare Advantage plans, but that should be relatively easy when sharing information is a requirement. That will be particularly true for the nursing-home payment components of Medicaid coverage.
We could and should cover everyone.
Using a combination of employer-based plans and Medicare Advantage for our working and higher-income people and our employer groups — and utilizing our current Medicaid, CHIP, and community clinic approaches for our lowest-income people — can give us a path to universal coverage that we could implement without having to build major new government programs or infrastructure.
Medicaid has already begun to create team care, data-supported care, and better care-quality reporting for many of our lowest-income citizens. We need to continue those programs and link them with the Medicare Advantage patient populations and care infrastructure in carefully coordinated and entirely intentional ways.
Those three core funding approaches and cash flow realities will not be in functional or economic conflict with one another. Both Medicare Advantage and prepaid Medicaid will encourage and support provider relationships that focus on prevention and team care. The employer self-insured plans in each setting can work in creative ways with local caregivers to figure out effective ways of delivering care.
The advantages of having organized and accountable team care with extensive quality reporting mechanisms in place to deliver care for our low-income people, compared to a pure fee for service reimbursement model that we have historically used where low-income people have to somehow find care givers who will take care of them, is increasingly obvious to anyone looking at the various ways we now deliver care to our low-income patients.
The use of Medicaid for most births in America also gives the care delivery teams an opportunity to educate every parent about the biological reality that talking and interacting with each child in the first months and years of life strengthens brains.
Brain science is developing in important directions that are extremely relevant to Medicaid patients. Now that the great child-research programs at Harvard, Columbia, The University of Washington, and Berkeley have established the importance of those interactions with children in those time frames, we need to get that information to every parent. More than 90 percent of Medicaid parents in one study did not know they could exercise and strengthen their child’s brain in those first months and years.
The brain of each child starts a purging and pruning process at age four, and the new science tells us that much of the work done with children from all groups after that point in time has much lower impact.
The Center for The Developing Child at Harvard and other great research programs at The University of Washington, Columbia, and the University of California all now know that science extensively and well, but that knowledge has been completely invisible to Medicaid parents and only marginally visible to others.
Learning gaps exist in our schools in far too many communities because we have not shared that information with families and parents. That represents a massive public health failure for us as a country.
We need our Medicaid caregivers to help each parent understand those opportunities or we will not close the learning gaps in our schools. Efforts to close those learning gaps at 15 years have consistently failed, because the pure biological science now tells us clearly we need to close them at 15 months.
Many of the same insurers who will participate in Medicare Advantage will also participate in Medicaid managed care, so opportunities for continuity of care and coverage both exist as people become eligible for different programs in those states, and the people who change eligibility in those settings don’t have to switch into entirely different systems.
Even if the plans are different from one another, however, when we have created the requirements for team care and mandated certain components of data flows about patients for both Medicare and Medicaid, the transfer of data focused on the patients can simply be made a requirement that plans must meet in both programs.
The VA system can be asked to use the same data transfer processes and protocols, and that can obviously make care coordination between the VA and other systems more patient friendly and effective.
The VA Hospitals and care sites have some care capabilities that are highly useful to their communities, and they should be able to continue to meet those needs so long as they adapt their reporting and care support information flow systems to interact with the rest of the care infrastructure. This approach would not interfere with the funding approaches for the VA care sites, but it could enhance some levels of VA care, because the same requirements set up for data flow about patients inside the Medicare Advantage plans could also be met by the VA systems.
Some Will Remain Uninsured
This approach should result in very few uninsured. But no matter how well we set up those processes, we will still have a small number of uninsured.
We need a path to the functional equivalency of coverage and a process to pay for at least catastrophic care for those who will remain without coverage. We need to make policy-level choices about how we deal with those care expenses.
We need to create a fourth cash flow for care that provides catastrophic coverage in designated care settings for the otherwise uninsured as a safety net and financial mechanism for keeping local hospitals from having major unreimbursed costs.
As a cash-flow issue, we should create a catastrophic care insurance pool for uninsured Americans by channeling one-tenth of 1 percent raised by the payroll tax into that fund, and we should extend that catastrophic coverage payment approach to anyone who does not have insurance by having those people receive care when it is needed from designated subsets of the local care system.
Those subsets of the care community that will provide care to those otherwise completely uninsured can be chosen by each community from the most logical and appropriate set of providers for each setting. Judgment by the local setting can determine what that system is in each location. States could tie that coverage and those local care delivery mechanisms to their Medicaid program, or purchase that catastrophic insurance from Medicare Advantage plans.
Or they could create an entirely new set of provider relationships just for that purpose.
Car insurance has one set of benefit components that protects the insured person’s own property and another set of components that provide protection to the other drivers who might be damaged in the event of a car accident. That second category of car coverage protects other people — not the person buying the insurance.
Our catastrophic health coverage would provide a somewhat similar role in keeping the caregivers who end up treating very ill and expensive uninsured people from having major financial losses as a result of that care. That combination of financing approaches will give our care providers the assurances they will need to redesign the delivery of care.
We Can Create Universal Coverage for America Without a Single-Payer System
The Medicare Advantage plans that will be paid a voucher-like amount each month for every patient will have both the incentive and the ability to deal with key functional and structural components of the cost of care. This approach of having both the government and the market buy care by the package will allow plans to work directly with the caregivers to help bring down the unit costs of care. It will also give plans the opportunity to compete with each other for patients in ways that will improve both products and service levels in ways that will not exist by simply deciding to expand standard Medicare and administer this expansion of coverage as an agency or as a government department, instead of as a marketplace for competing and accountable businesses.
We can cover everyone in the country without using a single-payer system by having the health care funding pool function as a buyer, not a payer.
We can achieve universal coverage without changing our payment approach to a Canada-like single-payer system.
We know that to be true, because achieving universal coverage without using a single-payer system is actually what most countries in Europe do to achieve that goal. A Medicare Advantage-like market-based multi-payer approach is what most countries in Europe actually use now to purchase care for their people.
European Countries are Single-Buyers — Not Single-Payers
Most European countries do not use a single-payer model to buy care. They use multiple plan purchasers of care, and they make the plans compete with each other so plans in those countries do not take their patients for granted.
Most American health care planners and health care policy people do not understand how the countries of Europe actually buy or finance care. The purchasing model they actually use in Europe is very different than the one most Americans believe they use.
Most people in our country who think about health care coverage and delivery in Europe think Europe is a clone of Canada. That is absolutely not true. No country in Europe uses the Canadian model.
They actually do not use single-payer systems as their payment mechanism in any country. The counties in Europe go down two very different paths and neither path duplicates Canada.
The Scandinavian countries basically own their entire care systems and they have no payments of any kind in those countries for care, because there are no fees charged for care. They don’t use a single-payer system in Sweden because the government owns the hospitals and hires the caregivers, so there is no one to pay.
The Scandinavian countries look very much like Kaiser Permanente in our country. They are entirely vertically integrated and actually purchase medical care from their caregivers by the month in salaries, instead of buying it by the piece in fees.
The rest of Europe, however, does use fees. They have private providers of care in each country, and they also use private and independent Medicare Advantage-like health plans to pay the providers, instead of using Canadian-like single-payer approaches to pay directly for each piece of care.
France uses a combination of a government program with wrap-around private insurance plans for 90 percent of their people, and the other countries in Europe do not have any government program at all.
The other countries use health plans exclusively as their care financing mechanism. Europe has successfully achieved universal coverage, and every country in Europe spends a much smaller percent of its GDP on health care than we do, while providing coverage to every resident in the country without using the Canadian single-payer approach.
They use Medicare Advantage-like competing health plans in all of those countries. They run their own versions of exchanges and require their people to select a plan. They mandate that every single person pick a health plan.
Europe invented health plans. They had them far before they existed in the U.S. Most countries in Europe actually have a long history of using competing health care plans, and they manage to cover everyone though those plans. Romney Care in Massachusetts looked a lot like the health plan exchange of Switzerland, except for the much stronger mandate to buy coverage in Switzerland.
Chancellor Bismarck of Germany invented the approach more than 130 years ago. Bismarck was opposed to a socialist system of government and did not want the government to insure care — but he wanted all Germans to have access to affordable health care and thought having access to care as a reality for all Germans would help create uniform support for the nation and help build a sense of identity for his country.
To achieve that goal, Bismarck invented competing Sickness Insurance Funds. There were hundreds of those sickness funds in Germany at one point in time, and more than a hundred remain in business today.
Those sickness fund health plans and a small number of health insurance companies all enroll members in their insurance products, and those plans compete directly with each other for customers every day.
The functional anchor to that market model allowing it to survive financially for more than a century is a mandate. Coverage is not optional in Germany. The Germans use the same mandate model for health coverage that we use for social security. Every German must join a fund. Payroll deductions for each employee create the cash flow that purchases care from the funds.
The percentage of each paycheck that is spent on health care has remained very close to 15 percent for a number of years, and that expense is split 50-50 between employer and employee.
Switzerland and The Netherlands use that same approach. Neither country uses a single-payer approach. There is not one single person in either country today with government health insurance. Competing health plans compete with each other for enrollees in each of those countries. People and their employers each pay a portion of the premium.
Television ads in Switzerland trying to persuade people to enroll in Swiss health plans look very much like the ads we see on television for our health plan sales efforts in America.
That model works financially because each of those countries mandate that every citizen join a plan and they have no free riders who get coverage but don’t pay part of the premium.
They Have Faster Access to Most Care
Health plans in those European countries provide very complete coverage. They spend about half as much per capita as we do. We need to understand that massive difference in cost as we go forward to build our own universal coverage strategy.
The cost difference in care between us and them is not created by rationing. Many believe care in Europe costs less because it is rationed. That is inaccurate.
They do not spend half as much on care in those countries because they are rationing care. That alleged care rationing approach by the countries of Europe is an urban legend in our country, and the caregivers and competing health plans in those countries are sometimes offended by our public statements about their supposed care rationing.
Their patients actually have faster access to both primary medical care and basic hospital care than we do in our country, and their access to specialty care in those countries is very similar to ours.
Many media articles in this country have pointed out with sorrow and envy that those countries actually achieve better health outcomes than we do. There are deep streams of evidence showing they have better health care outcomes for most diseases, and they tend to have lower levels of chronic health care complications.
That is partially true because they actually have significantly more primary care doctors than we do, and primary care does good work in preventing complications of diseases.
They all actually have higher levels of hospital use and much longer lengths of stay in their hospitals than we have in our country. People in our policy circles who say that Europe denies hospital care should look at actual hospital use, hospital bed numbers, and hospital capacity levels in those countries. They charge much less per day than we do, but they actually use many more hospital days than we use, both in total and by patient.
Using more days of hospital care for each patient in each of those nations is obviously not because they are rationing.
They pay for all of that care through competing health plans, and those countries absolutely do not use any government-run single-payer systems to buy care. There is not one person in Switzerland or in The Netherlands who has government administered single-payer coverage of any kind.
There is a high level of confusion in our country on that single-payer health plan point because our closest and most visible neighbor with universal coverage — Canada — actually does use a single-payer health insurance system, and we simply tend to believe that Europe somehow clones and duplicates Canada.
Great Britain does have a form of single-payer care-purchasing approach, but they don’t pay fees, and they also do not buy the overwhelming bulk of their care by the piece. They prepay most care in Great Britain using monthly per patient payments to the primary care doctors rather than piecework fees. They actually depend for their care delivery on a massive number of private practice primary care doctors who are each capitated monthly based on the number of patients who choose to be in their panel.
Those capitated primary care doctors in Great Britain work with government budgeted specialists and government hospitals when they need care that extends beyond basic primary medical care. Hospitals in Great Britain tend to be government owned, most specialists are on salary to the government, and the hospitals and government budget constraints put limits on how much money they spend on both hospitals and specialists.
Some of the horror stories we hear about treatment delays for specialty care under universal coverage and the single-payer payment model come from those two settings. Canada and Great Britain. Both Canada and Great Britain have had some care delay issues in some areas of care delivery where the single-payer, government-budget based approach to funding care has created limited access to some specialist resources.
Canada does have some care access issues for some areas. Their access to primary care is as good or better than ours, but they put some limits on how much they spend on hospital operations and specialty care.
Canadian provinces set the hospital budgets for each hospital and there are strong anti-tax forces with some of the voters in Canada with ebbing and waning levels of political support that keep budgets lean for many of those hospital settings. They have good hospital care in Canada — but when the hospital budget is lean because they have decided not to raise taxes to buy more care, there can be delays for some care in some of those settings.
As we look at our own health care financing options, and when we look at our own aspirations of universal coverage, we need to understand that those kinds of access problems to medical caregivers and limited access to hospitals do not exist in the countries of Europe that use competing health plans and private market competing caregivers instead of government insurance single-payer approaches to finance care. Each of those countries that use that competing health plan model literally and measurably actually has more extensive use of hospital care than we do.
They spend less money on care in each of those countries because they do a better job of creating access to primary care, and because they pay significantly less than we do for each piece of care. All the countries in Europe and Canada pay less than we do for each piece of care, and their total cost of care is lower as a result.
The arithmetic is clear. We have significantly less hospital care per capita than the European countries, but they charge much less for each day in the hospital so their total hospital costs are lower.
Prices for Units of Care Create the Major Differences in Care Costs
All of those countries spend significantly less than we spend for each piece of care for all areas of our health care economy other than Medicaid. A coronary bypass surgery that costs roughly $10,000 in Europe, costs anywhere from $30,000–$100,000 in our country.
A normal delivery of a baby that costs roughly $500 in Spain can cost $2,000–$5,000 in the U.S. Some U.S. sites charge $10,000 to deliver a baby.
The exception in our country to that practice of paying much more money for each piece of care than Europe and Canada is our Medicaid Program. Our government sets the prices for our Medicaid program, and prices set by each of our states look very much like the actual fees paid in Canada and Europe for most services.
The International Federation of Health Plans has a useful report that shows how much is spent on a wide range of health services in a number of other countries, and how much we spend here for both Medicaid and Medicare in addition to our private insurance plans and payers. That report shows clearly that we spend significantly less on each piece of care purchased by our traditional Medicaid payment approach.
Our fees for most areas of care are far higher than prices in those other countries for both our Medicare program, and our private insurance payment levels. Only our Medicaid programs use the European and Canadian model and price range to buy care. We use low fee schedules to buy care in every state for our Medicaid program.
Both of our own major government care purchasing programs use the approach used in Europe and Canada to set prices for each piece of care. The model that seems to happen whenever the government gets involved in care funding is that they are comfortable setting prices for pieces of care. Medicaid sets the lowest prices here and Medicare sets prices that are 20–30 percent higher than Medicaid prices.
Our private payers who buy care by the piece all pay more than either Medicaid or Medicare, and the people who have no insurance at all are charged extremely high prices for each piece of care. An emergency room fee that Medicaid might buy for $200 and Medicare might buy for $300, might cost private insurers $400, and might cost consumers with no insurance over $1,000.
Those prices are all known to people looking at how much we pay for care in this country.
Medicare and Medicaid both set fees that are lower than the community average payment levels for private payers in our care sites for the purchase of care. Medicare prices tend to fall into the middle, between the private market prices and our Medicaid prices.
For a number of reasons, the fees for Medicare tend to be significantly higher than the fees for Medicaid, but significantly lower than the fees paid by commercial insurance companies and health plans to pay for care in America.
That is an important set of cost differences to understand. Both Medicare and Medicaid have used their power as government entitlement programs to administratively determine what they will pay for each piece of care, and those prices are generally significantly lower than the commercial insurance and self-insured plan payments made to our doctors and hospitals for those services.
The Medicare and Medicaid allowable fees are also far lower than fees the hospitals in this country often charge to the uninsured who simply seek care directly and pay hospitals as individuals.
The horror stories about people with no insurance who are bankrupted by those fees have been a shame to us for years.
Prices are important and need to be understood.
As we look at the total amount spent by other countries to buy care, those actual price-level differences between us and them for each piece of care are important to know.
People often compare the percentage of the GDP we spend on care to the percentage of the GDP spent on care in Canada. We just hit 18 percent of our GDP as a care expense this year. The Canadian government currently projects they will spend 11.5 percent of their GDP on care this year. That is a very significant difference in the total relative cost of care in the two countries.
It is important to know when looking at those numbers that our Medicaid program currently has a fee schedule that is almost identical to that of Canada.
That is easy to verify. Both our government and the Canadian provinces make those fee schedules visible to the people who deliver care. Anyone looking at care purchasing fee schedules in both countries can see that the Canadian and U.S. government pay at about the same levels for each piece of care.
Anyone looking at our public records and payment patterns for fees can also easily see that Medicare pays more than Medicaid for just about every piece of care. Medicare fees tend to be significantly higher than our Medicaid fees.
That is not a secret. Every caregiver in America can easily recite those differences in fees because those fees are used every day in our country by Medicare and Medicaid to buy care.
For a number of reasons, our government has chosen to pay significantly more for each piece of care on our Medicare fee schedule than we pay for those same services for our Medicaid patients.
The political impact of our senior patients versus the political clout of our low-income patients might be part of that difference in price between the two programs.
It is important to recognize and understand that the two programs have different payment sources. Medicaid is basically a state program and spends state money in addition to spending Federal money to buy care. States run Medicaid and states set the Medicaid fee schedules.
The functional reality we face is that state budgets tend to be subject to laws that do not allow states fund deficits. That reality puts major pressure on state created fees to stay under the budget that is not as intense as the Federal government cost pressure for Medicare fees, because deficit spending is allowed for Federal budgets.
In any case, the undeniable and clear situation we face is that our Medicare fees are higher than our Medicaid fees. International cost level comparisons tell us that the Medicare fee schedule we use to buy care for our Medicare patients is much higher than the Canadian fee schedule.
Fees set by the Canadian government single-payer insurance system have great power in Canada. The government will impose significant penalties on any caregiver who charges more than those fees. Doctors in Canada are forbidden by law from adding even $1 to that government fee.
That fee schedule is the single biggest advantage for Canada of using a single-payer system to buy care. Because their government program is the only allowed payer for each piece of care in Canada, they can control costs by setting fees at levels that meet their current government cost-control goals in each province.
They are very open about that process. The facts about what they decide to pay for each piece of care are clearly visible to anyone looking at the Canadian care delivery situation.
It is interesting to calculate and understand what would happen to health care costs in Canada, and to look at the percentage of the Canadian GDP that would be spent on care if they decided to abandon their current fee schedule, and if the Canadians directly replaced their current fee schedule with our current Medicare fee schedule.
If Canada Used Our Medicare Fees, Their Total Costs for Universal Coverage Would Jump 30 Percent Overnight
If Canada decided to follow our lead, and if they converted to our current Medicare fee schedule and used it to buy every piece of care — the Canadian government would need to raise taxes because they would immediately increase their spending to buy health care by more than a third.
The bulk of that fairly dramatic total cost difference that exists today between us and Canada for care would disappear in an instant if they made the decision to use our current Medicare fee schedule to pay all of their providers of care. They would be spending slightly over 16 percent of their GDP on care immediately if they just used our current Medicare Fees schedule.
They would spend even more of their GDP on care if they followed us entirely, and if the Canadians used our average fee levels for our private insurance market to pay for their care.
They would actually get very close to 18 percent of their GDP if they allowed their caregivers to raise prices to full private American levels and just used the average prices we spend for each piece of care in this country to buy each piece of care.
The caregivers in Canada might not object to those higher fees, but their provincial governments would all be in immediate and significant financial difficulty.
Our Premiums Would Drop by More Than 30 Percent if We Used Canadian Fees
Another useful way of looking at the relevance and the impact of those price differences between us and Canada for each piece of care is that if we went in the exact opposite direction and dropped our costs in this country by using the Canadian national fee schedule to pay for each test and for each piece of medical care and prescription drug, and used their average cost per day for hospital care — and if we delivered every single piece of care and every single test and every single prescription that we do today — our percentage of the GDP we spend on care would also drop from 18 percent to slightly over 12 percent — immediately.
Health insurance premiums would also be forced to drop by 30 percent or more almost immediately because our current health insurance loss ratio limit laws that govern our insurance industry pricing today would force premiums in our country down to match the 85 percent cost ratio limits that we now use to price insurance premium levels.
It is very useful to understand those categories of differences in the cost of care between the two countries. The differences in the unit prices paid in each country for each piece of care make up almost the entire difference in health care costs between the two countries.
No one who looks at the numbers paid for each piece of care in those countries can debate that conclusion.
The relevant care prices used today in each country to buy care are visible to the world, so the math involved is fairly obvious, simple, and clear.
It is also true that we spend significantly more than the Canadians to administer our health insurance companies, and to run our multi-payer payment model.
To understand the total cost difference between the two countries, we also need to look closely at the very measurable differences in administrative cost levels for health insurance expenses that exist.
Some people who talk in public and political settings about the differences in health care costs between our country and Canada have usually not looked at the actual spending in each country, and tend believe that costs related to health insurance expenses make up the bulk of difference between the total health care cost levels in the two countries. They say pure administrative savings that result from being “single-payer” is the reason Canada spends so much less than we do on health care.
It is true that our costs for insurance related expenses are higher than the Canadian costs for those areas. This is because we use multiple health plans and two different government agencies to buy care. Canada actually has a single-payer system to pay for care. Differences in costs do exist in administration expense areas because of those major differences in our payment models.
It is relatively easy to see what those particular administration expense cost differences actually are, and it is easy to see how much those differences cost us.
It is easy to see those numbers because insurance related expenses in our country have been limited by the recent loss ratio setting regulations and laws to be 15 percent or less of our insured care costs. Insurance companies in our country that charge more than 15 percent for administration and margins have to return the money to their customers or drop future prices.
That means that we can now know what the top percentage for those expenses is here, because the top levels of insurance expense relative to insurance costs are now set by law to be lower than 15 percent.
Those loss ratio laws only apply the portion of our health care costs paid by insurance plans.
To look at the total impact on our GDP from that number and from those administrative expenses, we need to look at the fact that insured care cash flow levels of roughly $1.1 trillion that trigger those specific sets of costs for us will total roughly 34 percent of the total care dollars spent in the U.S. this year.
Other payers pay for the rest of care. Insurers, however, pay 34 percent of the total cost of care in this country at this point in time, and the laws limiting administrative charges and profits apply to that 34 percent of our health care purchases.
Applying the 15 percent insurance cost cap number to the 34 percent of U.S., health care dollars that is paid by the private insurers gives us slightly over 5 percent of the total health care expense for the country that is currently spent on insurance company administration and profits in our country.
How does that number compare with similar categories of expense in Canada? It appears that the Canadian government equivalent expense level for administration of their program is roughly 10 percent of their total care expense.
So if we were to apply their 10 percent expense level here, recalculate our own GDP expense level, and substitute the 10 percent Canadian number for administering their single-payer administrative system for the worst-case insurance overhead and profits expense number of 15 percent that is written into our laws today for those expenses — that reduction would drop our total care expenses as a nation from 18 percent of the GDP to slightly over 17 percent of the GDP.
That would be a significant reduction — but it would be significantly smaller than the 12 percent of the GDP we could achieve by using current Canadian fees.
Fees for care clearly have a bigger impact on the relative total costs in each country than the differences in insurance system related administrative costs between the two countries.
Having said that, it is also true that we should mandate that the Medicare Advantage plans do everything needed to bring down the administrative burden on care givers here, using best practices and electronic linkages for the payment models. The right sets of information-flow linkages should reduce the burden on our care sites significantly.
We Should Improve Care and Reduce Costs
We are not likely to move to a Canadian fee schedule to buy care — but we can do a number of very basic things to improve care and bring down the cost of care here.
We have some major opportunities to bring down the total cost of care in this country — and we should definitely be taking very intentional advantage of those opportunities.
There is some very low hanging fruit for reducing costs.
If we focused on the 70 percent of the health care costs for this country that relate to chronic care by enrolled everyone in full service Medicare Advantage plans and managed care Medicaid health plans that worked directly on those issues, we could drop our costs for those patients by anywhere from 10–20 percent with relatively minimal effort once they are enrolled, and we would provide all those patients with better and more coordinated care in the process.
Likewise, if we simply split the difference between us and Europe on the prescription drug prices over time, and if we had the care systems who contract with each plan working within the per capita payment cash flow determine how to pay and fund their caregivers in the context of their cash flow, we could have a very large impact on those costs, and we could do it without having any negative impact on the quality of care.
Care can and will get much better in the context of a guaranteed cash flow per patient. That is true at a very practical and basic level because all care systems and care sites in this country who can’t afford to improve care in any way now for fear that reducing current volumes of billable events could re-engineer care delivery using the wonderful new care support tool kits that are possible now, and they could use those tools and approaches to make care more accessible and convenient in very patient-centered ways, if they knew they could depend on and use package payments for the care they deliver.
The basic economics that can be created by having Medicare Advantage plans directly incented to improve both costs and care are painfully clear and very powerful. Prepayment to caregiver teams actually allows for, supports, and enables capital investments by caregivers at levels and in ways that can’t possibly happen when patients and other payers only buy their care by the piece.
Medicare Advantage buys care monthly for each member, and that creates the cash flow context needed to improve and re-engineer care.
As part of this strategy and agenda, we need each Medicare Advantage Plan to demonstrate that it is buying care in ways that facilitate the cash flow needed to re-engineer care in patient-centered ways. Those approaches exist now, and need to be both improved and expanded.
Patient Centered Medical Home models for both primary care and specialty care exist, and we need to encourage, support, and fund those models, and we need to inform every patient and prospective patient about their availability.
We need patient feedback loops on care services and outcomes, and we need this data from and about patients to feed into well-designed quality assurance reporting on care services, results, and consequences.
That is all much easier to do as a nation and a care infrastructure when patients join care systems and report on their experiences and results.
Patients Need Better Price Information for Deductible Coverage
We can also make some significant improvements in the insurance products we use.
The basic benefit package for the Medicare Advantage plans that will be funded by the payroll tax will be a $1,000 deductible plan. We need to do a much better job than plans have done in the past making that deductible relevant.
We need to help patients make choices. We need to require that each of the plans make information available to each patient about fees. We can’t make market forces work in the context of deductible health plans unless consumers have both price information and the right and ability to use that information to negotiate with caregivers, and to choose between caregivers based on value and price.
Price competition can have a major positive impact on care prices, but that will happen only if the Plan system makes relevant price information available to consumers at the point where decisions are made about pieces of care. That is the missing link in the deductible market model. And we need to add it to make deductibles truly effective and functional as price drivers for care.
We Need Massive Reductions in Administrative Expenses
We also need to focus and take full advantage of the huge opportunity that is created by the fact that roughly a third of the health care costs in too many settings in this country are now created by administrative expenses in care settings driven by Medicare, Medicaid, and multiple private payer claims filing and verification processes. Hospitals have entire floors processing paper for payment purposes.
We can and should massively reduce those costs. If we both computerize our care settings and change our payment models to eliminate those claims filing administrative burdens and infrastructures, we should be able to cut those administrative cost levels in some care sites by half or more. Those savings, alone, would pay for covering the 20 million currently uninsured Americans.
We need to set specifications for the Medicare Advantage plans to cut administrative costs massively for the care sites by setting up electronic data flows for all payment processes and approaches.
We Need to Cover Everyone and Improve Care
We can make the Medicare Advantage team care model work in just about every community in this country. We can very intentionally implement quality reporting systems and consumer feedback mechanisms that will both empower our decisions, and protect us against caregivers who shortchange us in any way.
We need to implement, support, and continuously improve those systems.
We need interactive consumer-based communications tools that keep us all current on care delivery and caregiver performance. Those tools exist now — and we need to make them more consistent and better. We need connected care sites, and we need data that follows patients everywhere.
That goal should be clear.
We Should be the Country With the Best Care on Earth
We spend more than anyone else on care by a wide margin, and we can and should use that massive amount to lead the world in creativity and use of technological tools to do patient and customer-focused things with our care resources that create the very best care.
We need to put in place a Medicare Advantage care purchasing tool approach that uses clear and well-designed performance specifications to become a highly skilled and effective and purchaser of care as a nation — and then we need to use those plans to put all of those tools in place for all of our people.
We should cover everyone well.
If we put all of these tools and processes in place, we will have the best care in the world because the other countries that have universal coverage will not match us in key areas of connectivity, data use, and innovative tool building. Some of the other countries set up barriers to computer-supported care, and some actually render important care connectivity tools un-usable.
Because we are going to be using the full scope of knowledge and tools, our care will actually surpass theirs, and we will return very quickly to a time where the U.S. enjoys the best care in the world.
We should build on our traditions, history, massive care delivery expertise, and commitment to the best care by putting together a sane, balanced, well designed, and entirely affordable health care purchasing system and approach that covers everyone and does it extremely well — and we should build, deliver, and provide our people with the best care in the world in the process.
Medicare for All.
Let’s do it right. Let’s do it well. Let’s do it now.
The reports and the media articles shown below all contain information that is useful in helping to understand this Medicare Advantage for All proposal:
“NHE-Fact-Sheet.” CMS.gov Centers for Medicare & Medicaid Services. February 14, 2018. Accessed March 23, 2018. https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/nationalhealthexpenddata/nhe-fact-sheet.html.
“How Do Medicare Advantage Plans Work?” Medicare.gov – the Official U.S. Government Site for Medicare. Accessed March 23, 2018. https://www.medicare.gov/sign-up-change-plans/medicare-health-plans/medicare-advantage-plans/how-medicare-advantage-plans-work.html.
“Don’t Let Health Care Bankrupt America.” Institute for InterGroup Understanding. Accessed March 27, 2018. https://www.intergroupinstitute.org/books/don-t-let-health-care-bankrupt-america/chapters.
Halvorson, George. “The Way We Buy Care in This Country Is Flawed, Dysfunctional, and Often Perverse.” California Journal of Politics and Policy. January 09, 2015. Accessed March 27, 2018. https://escholarship.org/uc/item/0gp2v32t.
“Social Security.” How Is Social Security Financed? | Press Office | Social Security Administration. Accessed March 23, 2018. https://www.ssa.gov/news/press/factsheets/HowAreSocialSecurity.htm.
“How Does Health Spending in the U.S. Compare to Other Countries?” Peterson-Kaiser Health System Tracker. Accessed March 23, 2018. https://www.healthsystemtracker.org/chart-collection/health-spending-u-s-compare-countries/.
Squires, David, and Chloe Anderson. “U.S. Health Care from a Global Perspective.” Spending, Use of Services, Prices, and Health in 13 Countries – The Commonwealth Fund. October 08, 2015. Accessed March 23, 2018. http://www.commonwealthfund.org/publications/issue-briefs/2015/oct/us-health-care-from-a-global-perspective.
“Healthcare in the Netherlands.” Healthcare | Expatica the Netherlands. Accessed March 23, 2018. https://www.expatica.com/nl/healthcare/Healthcare-in-the-Netherlands_100057.html.
Knox, Richard. “Most Patients Happy With German Health Care.” NPR. July 03, 2008. Accessed March 23, 2018. https://www.npr.org/templates/story/story.php?storyId=91971406.
“Explaining Sluggish Savings under Accountable Care | NEJM.” New England Journal of Medicine. Accessed March 23, 2018. http://www.nejm.org/doi/full/10.1056/NEJMp1709197.
“2015-01-26-3.” CMS.gov Centers for Medicare & Medicaid Services. March 16, 2015. Accessed March 23, 2018. https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2015-Fact-sheets-items/2015-01-26-3.html.
Luthra, Shefali, and Kaiser Health News. “Medicaid Is Rural America’s Financial Midwife.” Kaiser Health News. March 12, 2018. Accessed March 23, 2018. https://khn.org/news/medicaid-is-rural-americas-financial-midwife/.
Guterman, Stuart, Laura Skopec, and Stephen Zuckerman. “Do Medicare Advantage Plans Respond to Payment Changes? A Look at the Data from 2009 to 2014.” Do Medicare Advantage Plans Respond to Payment Changes? – The Commonwealth Fund. March 14, 2018. Accessed March 23, 2018. http://www.commonwealthfund.org/publications/issue-briefs/2018/mar/do-medicare-advantage-plans-respond-to-payment-changes.
“Medicare Advantage.” The Henry J. Kaiser Family Foundation. February 01, 2018. Accessed March 27, 2018. https://www.kff.org/medicare/fact-sheet/medicare-advantage/.
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