Facts & Research

Tough questions: hard answers

By Samuel Metz, MD

Tort Reform.

Tort reform and health care reform are independent issues deserving independent solutions.

Providers spend $60 billion on malpractice premiums and defensive medicine.

  1. Health Affairs, 29, no.9 (2010):1569-1577. “National Costs Of The Medical Liability System.” Michelle M. Mello, Amitabh Chandra, Atul A. Gawande and David M. Studdert.

Americans lose $350 billion in private health insurance administrative costs (about 40% of the $875 billion paid in premiums). Changing our financing to a single payer system will save $320 billion.

  1. “Costs of Health Care Administration in the United States and Canada.” Steffie Woolhandler, M.D., M.P.H., Terry Campbell, M.H.A., and David U. Himmelstein, M.D. N Engl J Med 2003; 349:768-775, August 21, 2003DOI: 10.1056/NEJMsa022033.

Instituting all proposed tort reforms (liability caps, statute of limitations, joint and several liability, etc.) might maximally reduce premiums $1 billion with no effect on defensive medicine.

  1. Congressional Budget Office, Douglas W. Elmendorf, Director. “Letter to Senator Orrin G. Hatch,” October 9, 2009. http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/106xx/doc10641/10-09-tort_reform.pdf

Ultimately, we must separate malpractice goals: (1) Compensate injured patients regardless of cause and (2) improve clinical care using outcome analysis. Neither should involve attorneys.

Vermont’s system may potentially reduce lawsuits. First, no patient needs to sue for medical care from an injury because everyone gets health care. Without need for medical riders, insurance rates for medical malpractice, automobile, and business go down. Workers Compensation premiums go down as well. Second, a compensation board awards payment for medical injuries. Negligence plays no role.

Healthy Lifestyles.

Americans may lead the world in obesity, but we are among the lowest in smoking and alcohol consumption. When we correct life expectancy for obesity, tobacco, alcohol, homicides, and traffic accidents, our world ranking does not improve. Bad habits do not account for our first place health care costs.

  1. Muenning PA, Glied S.” What changes in survival rates tell us about US health care”. Health Affairs 2010;29(11):1-9. http://content.healthaffairs.org/cgi/content/full/hlthaff.2010.0073v1.


Adult smokers and overeaters cannot quit their addictions. However, we can dramatically reduce the number of teenagers who start. States with higher tobacco taxes have lower rates of new smokers. There’s nothing like taxes to stifle an economic activity.

  1. Health Policy. 2004 Jun; 68(3):321-32. “Public policy and smoking cessation among young adults in the United States”. Tauras JA. http://www.ncbi.nlm.nih.gov/pubmed/15113643

Self-abusive life styles. Addictive life-style habits such as overeating, tobacco, alcohol, and drugs of abuse cost our health care system many billions of dollars.

The amount the US spends on all alcohol-related disease is $96 billion; on obesity, $144 billion; on tobacco, $168 billion. We are unlikely to reduce any of these expenses to zero. In contrast, we save over twice as much as the cost of any of them by adopting a single payer system.

  1. Simon CJ, Wolcott J, Hogan P, The Lewin Group. “Can we reduce health care spending? Searching for low-hanging fruit in the garden of health system reform,” October 26, 2009. http://www.lewin.com/~/media/Lewin/Site_Sections/Publications/LewinReport-CostDrivers.pdf

Administrative costs saved by using single payer. Remember the added cost of providing comprehensive health care to everyone in the US (i.e., no uninsured or underinsured) requires an additional $250 billion. Estimates vary considerably. I use $350 billion as it has the best peer-reviewed data support.

How much would a single payer system save in recovered administrative costs?

Savings                                        Source

$204 billion            Institute for Health and Socio-Economic Policy. Single               Payer/Medicare for All: An economic stimulus plan for the nation. 2009.

$320 billion            Woolhandler S, et al. Costs of health care administration in the United States and Canada. N Engl J Med. 2003; 349:768-775

$350 billion             Upgrading To National Health Insurance (Medicare 2.0). Leonard Rodberg & Don McCanne. CommonDreams.org July 13, 2007

$360 billion            Sheils JF, Haight RA: The Healthcare For All Californians Act: Cost & economic impacts analysis. Lewin Group, April 30 2004.*

$400 billion                ‘”Health law upheld, but health needs still unmet’”: National doctors group. PNHP Press Release, June 28, 2012

$400-500 billion         Robert Kuttner. Market-Based Failure - “Second Opinion on U.S. Health Care Costs.” NEJM 2008; 358;6:549-51

$570 billion                   Gerald Friedman. Funding a National Single-Payer System. Dollars & Sense March/April 2012, p 24-5

$572 billion                 Kahn JG et al. The cost of health insurance administration in California. Health Affairs 2005;24(6):1629-39 *

* = State percentages projected to national figures

Competition among insurance companies

Competition could be argued as the only proven and effective method of reducing costs for any product or service… but not in health care financing.

  1. http://www.ama-assn.org/amednews/2010/03/08/bil20308.htm

    Health plans extend their market dominance,” By Emily Berry. American Medical News, American Medical Association. March 8, 2010.

The AMA's most recent look at the health insurance market -- "Competition in health insurance: A comprehensive study of U.S. markets," released Feb. 23 and based on 2009 data -- finds that 99% of 313 metropolitan areas tracked would be considered to have "highly concentrated" insurance markets under guidelines used by the U.S. Dept. of Justice and the Federal Trade Commission. In its 2009 version of the study, the AMA found that 94% of metropolitan areas were ranked "highly concentrated."

  1. http://www.nytimes.com/2005/04/22/opinion/22krugman.html

Krugman P. “Passing the buck.” New York Times, April 22, 2005. Competition for insurance companies means avoiding the most expensive enrollees and denying the most care.

  1. http://associationpublications.com/flipbooks/oma/summer-11/pubData/source/OMA_Summer2011.pdf. A Conversation with David Lawrence, MD, MPH, By Jim Kronenberg, “History of Medicine Project. Medicine in Oregon,” Summer 2011, page 18. Portland native David Lawrence, well known for his role as Medical Director and CEO of Kaiser Northwest, discussion with Dr. Ian MacMillan of Kaiser, and Dr. George Waldmann, chairman of the History of Medicine in Oregon Project, OMEF. Health Insurance Companies: “(There is) no call whatsoever for a for-profit insurance industry in the United States. It makes no sense. The health insurance system in the United States adds no value to medical care delivery… It's a fragmenting, destructive system, and we're the only country in the world that has it…. I've never understood why there needs to be as many options as there are in health insurance, or as much competition…. The competition needs to be on the delivery system side, not on the financing side.”

History of Single payer health care.

It was created by an American industrialist, Henry J. Kaiser. His health care plans pre-date World War II and thrive to this very day. He had three very capitalist assumptions. (1) If he kept his construction workers healthy, they would be more productive, (2) If he paid providers directly rather than through private insurance companies he would save money, and (3) if he kept their families healthy as well, he could attract and keep productive workers. All assumptions proved true. He made millions and never looked back. Brief and fascinating histories can be found at:



How often do Americans change insurance companies?

Every time we change, we become vulnerable to denial of coverage, increased rates, or decreased benefits. American workers change employers so often (every six years on average; new workers change 11 times before they are 40 years old).

  1. Ian Urbina. “In the treatment of diabetes.” New York Times, January 11, 2006, p.1. http://www.nytimes.com/2006/01/11/nyregion/nyregionspecial5/11diabetes.html?pagewanted=all&_r=0. Average worker carries the same insurance policy for six years before changing.

  2. Weisberg J. “We are what we treat.” Newsweek July 18, 2009. http://www.newsweek.com/2009/07/17/we-are-what-we-treat.html. Average new worker will change jobs 11 times before the age of 40.

American private health insurance companies generate higher administrative costs than any single payer health program in the US or any universal health care plan in the industrialized world. For the 40% administrative costs of private health insurance, please see my calculation at: http://www.samuelmetz.com/reference/121206-40percent.htm

  1. http://aging.senate.gov/events/hr215mp.pdf

Mark Pearson, Head Health Division, OECD, Written statement to Senate Special Committee on Aging, 30 September 2009. Disparities in health expenditures across OECD countries: Why does the United States spend so much more than other countries? This reference documents higher administrative costs in the US versus other OECD countries.

  1. http://www.princeton.edu/~reinhard/pdfs/MILKEN%20REVIEW%20CANADA%20vs%20US.pdf

The Milliken Institute Review, second quarter, 2007, page 36. Uwe Reinhardt, “Keeping health care afloat: the United States versus Canada.” administrative costs of Taiwan SP program are under 2%.

  1. http://www.annals.org/content/148/1/55.full.

“Achieving a High-Performance Health Care System with Universal Access: What the United States Can Learn from Other Countries.” American College of Physicians Annals of Internal Medicine January 1, 2008 vol. 148 no. 1 55-75. Quotes CMS data: administrative overhead for private U.S. health insurance was 14.3% in 2005, administrative costs of Medicare Part A were less than 1.6%, were under 2.1% for Medicare Part B, and combined state and federal administrative costs for Medicaid were less than 1% of disbursements.

  1. http://dpc.senate.gov/docs/states-fs-111-1-87/or.pdf.

Insurance administrative costs are 10% (big businesses) - 25% (small businesses) of funds paid by employer-sponsored health care policies

  1. https://www.cms.gov/ReportsTrustFunds/downloads/tr2011.pdf

2011 Annual report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds: 2010 Medicare expenditures. Administrative expenses $7 billion (1.3%)

  1. http://www.gao.gov/new.items/d08827r.pdf

Government Accountability Office, June 24, 2008. Letter to Hon. Pete Stark, Chairman Subcommittee on Health Committee on Ways and Means House of Representatives

Subject: Medicare Advantage Organizations: Actual Expenses and Profits Compared to Projections for 2005. Medicare administrative expenses 4% versus Medicare Advantage of 14%

  1. http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/downloads/tables.pdf

CMS, “Annual Reports of the Boards of Trustees,” 2009 and 2010, www.cms.gov; CMS, “National Health Expenditures by Type of Service and Source of Funds,” calendar years 2008 to 1960. Administrative costs for Medicare were 1.4 percent in 2008, excluding overhead in private Medicare Advantage and Part D pharmaceutical plans, Including the overhead from private plans in Medicare's overhead raises it to 5.3 percent”.

  1. http://content.healthaffairs.org/content/31/7/1600.full.

National Health Expenditure Projections: “Modest Annual Growth Until Coverage Expands And Economic Growth Accelerates.” Sean P. Keehan1, Gigi A. Cuckler, Andrea M. Sisko, Andrew J. Madison, Sheila D. Smith, Joseph M. Lizonitz, John A. Poisal, Christian J. Wolfe. Health Aff July 2012 vol. 31 no. 71600-1612

Government administration = $34 Billion (2.5%), PHI adm = $152 billion (17.6%) reducing PHI administration to government levels would save $130 billion.

  1. http://content.healthaffairs.org/content/24/6/1629.full.pdf+html


James G. Kahn, Richard Kronick, Mary Kreger and David N. Gans. “The Cost Of Health Insurance Administration In California: Estimates For Insurers, Physicians, And Hospitals.” Health Affairs November 2005 vol. 24 no. 6 1629-1639

Private insurers spend 9.9 percent of revenue on administration and 8 percent on billing and insurance-related (BIR) functions. Physician offices spend 27 percent and 14 percent, and hospitals, 21 percent and 7–11 percent, respectively. Overall, BIR represents 20–22 percent of privately insured spending in California acute care settings. Including health plan profits, we estimated that 19.7–21.8 percent of spending on physician and hospital services in California that are paid for through privately insured arrangements is used for billing and insurance-related functions.

  1. http://democrats.energycommerce.house.gov/Press_111/20091209/MedicareAdvantageReport120909.pdf December 2009. “Profits, marketing, and corporate expenses in the Medicare Advantage market.”

Medicare Advantage insurers spent $1,450 per beneficiary on corporate expenses, nearly ten times as much as traditional Medicare spent on administrative expenses.

  1. http://www.fas.org/sgp/crs/misc/R40834.pdf

Austin DA, Hungerford TL. “The market structure of the health insurance industry.” Washington DC. Congressional Research Service, November 17, 2009.

Concentrated health insurance markets lead to higher prices. “The exercise of market power by firms in concentrated markets generally leads to higher prices and reduced output—high premiums and limited access to health insurance—combined with high profits…Policies focused only on health insurance sector reform may yield some results, but are unlikely to solve larger cost growth and limited access problems.”

See also Table 5. Medical Loss Ratios for Major Publicly Traded Health Insurers, 2000-2008

“The practice of medical underwriting, which consists of offering better prices and conditions to the healthy, rearranges the cost burden of health care but has little or no effect on overall costs. Although an individual insurer earns higher profits by attracting a healthier risk pool via medical underwriting, total costs to society are not reduced. Because underwriting consumes real resources, a system with extensive medical underwriting may have higher administrative costs, which provide little social benefit.” Page 52

  1. http://content.healthaffairs.org/content/30/8/1443.full.pdf+html

“US Physician Practices Versus Canadians: Spending Nearly Four Times As Much Money Interacting With Payers.” Dante Morra, Sean Nicholson, Wendy Levinson, David N. Gans,Terry Hammons, Lawrence P. Casalino. Health Affairs August 2011 30:1443-1450; 

"Having multiple payers clearly generates more administrative costs than a single payer system."

  1. http://www.nejm.org/doi/full/10.1056/NEJMe030091

Henry J. Aaron. “The Costs of Health Care Administration in the United States and Canada — Questionable Answers to a Questionable Question.” N Engl J Med 2003; 349:801-803 August 21, 2003

  1. http://democrats.energycommerce.house.gov/Press_111/20091209/MedicareAdvantageReport120909.pdf

United States House of Representatives, Committee on Energy and Commerce, Majority Staff, December 2009. “Profits, marketing, and corporate expenses in the Medicare Advantage market.”

  1. Relman A. “Second opinion: Rescuing America’s health care.” Public Affairs, New York NY, 2007, p.91-2. Medicare and VA administrative expenses estimated at 3%.

When comparing similar populations, single payer systems around the world provide better health outcomes at lower cost than American private health insurance companies. A summary with references appears on my website: http://www.samuelmetz.com/reference/121206-40percent.htm

  1. http://www.oecd.org/health/healthpoliciesanddata/33820355.pdf

Organization for Economic Cooperation and Development (OECD) policy brief. “Private health insurance in OECD countries.” September 2004.

Around the world, private health care funding is regressive, bars access to care, and may encourage cost inflation

  1. http://www.oecd.org/document/11/0,3343,en_2649_33929_16502667_1_1_1_1,00.html

Organisation for Economic Co-operation and Development.

Factors that contribute to the discrepancy between health outcomes and health expenditures in the United States: inequitable access to medical services and subsidized private insurance policies; and inefficiencies in public health insurance.

  1. http://content.healthaffairs.org/content/25/6/w457.full.pdf+html

Schoen C, Davis K, How SKH, Schoenbaum SC. “US health system performance: A national scorecard.” Health Affairs Web exclusive, November/December 2006; 25(6): w457-w475,

US ranked last among developed nations in providing universal access to health care

US ranked last among developed nations in “avoidable mortality” from treatable disease. 2006: “The US Health System is not the best on quality of care, nor is it a leader in health information technology… despite spending more per capita than other nations, the United States lags behind lower-spending nations on several metrics, including life expectancy and infant mortality. … compared with other industrialized countries, the United States also had higher mortality rates for conditions that are considered amenable to medical care.”

  1. Preker AS. “The introduction of universal access to health care in the OECD: lessons for developing countries.” In: Achieving Universal Coverage of Health Care. Nitagyarumphong ES, Mills A (editors). Ministry of public health, Bangkok, 1998, p.103 Quoted in: http://content.healthaffairs.org/content/22/3/77.long#xref-ref-26-1

Universal programs in other countries contain costs better than us without restricting access to essential health care.

  1. http://www.commonwealthfund.org/Publications/Fund-Reports/2007/May/Mirror--Mirror-on-the-Wall--An-International-Update-on-the-Comparative-Performance-of-American-Healt.aspx

K. Davis, C. Schoen, S. C. Schoenbaum, M. M. Doty, A. L. Holmgren, J. L. Kriss, and K. K. Shea, “Mirror, Mirror on the Wall: An International Update on the Comparative Performance of American Health Care,” The Commonwealth Fund, May 2007

  1. http://www.oecd.org/dataoecd/5/53/22364122.pdf

Elizabeth Docteur and Howard Oxley. “Health-Care Systems: Lessons from the Reform Experience.” OECD Health Working Papers. December 5, 2003.

Universal access to health care appears essential to improving health and lowering cost.

  1. CIA. The World Factbook. www.cia.gov/library/publications/the-world-factbook/

US life expectancy at birth is #47

  1. http://content.healthaffairs.org/content/21/3/19.full?sid=4c673a90-92dc-422d-a6c1-25ae4d3d33b6 Steven Katz, et al. “Phantoms in the snow: Canadians’ use of health care services in the US.” Health Affairs, May/June 2002, p.19 Health Aff May 2002 vol. 21 no. 319-31

“Few Canadians use US instead of waiting... Relative to the large volume of these procedures provided to Canadians within adjacent provinces, the numbers are almost indetectable. … only 0.11 percent (20 of 18,000 respondents) said that they had gone there for the purpose of obtaining any type of health care, whether or not covered by the public plans …”

  1. http://content.healthaffairs.org/content/27/1/58.abstract

Nolte E, McKee CM. “Measuring the health of nations: updating an earlier analysis.” Health Affairs, Jan/Feb 2008, p. 71

US mortality from curable disease is twice that of best countries (France, Japan, Spain), US ranked last of 23 in “healthy life expectancy at 60 years old”, US ranked last of 23 in infant mortality

  1. http://www.globalhealthfacts.org/bytopic.jsp

Kaiser Family Foundation data on world health

  1. http://www.cdc.gov/nchs/ppt/nchs2010/44_MacDorman.pdf Behind International Rankings of “Infant Mortality: How the United States Compares with Europe.” Marian MacDorman and T.J. Mathews “International Health Rankings: A Look Behind the Numbers. National Conference on Health Statistics.” August 16-18, 2010, and http://www.cdc.gov/nchs/data/databriefs/db23.pdf “Behind International Rankings of Infant Mortality: How the United States Compares with Europe.” Marian MacDorman and T.J. Mathews. National Center for Health Statistics Data Brief, No. 23, November 2009. (US Department of Health and Human Services, Centers for Disease Control and Prevention)

“The main cause of the US’ high infant mortality rate when compared to Europe is the very high percentage of preterm births in the US, the period when infant mortality is greatest… In 2005, the latest year that the international ranking is available for, the United States ranked 30th in the world in infant mortality, behind most European countries, Canada, Australia, New Zealand, Hong Kong, Singapore, Japan, and Israel (5)…The United States international ranking in infant mortality fell from 12th in the world in 1960, to 23rd in 1990 to 29th in 2004 and 30th in 2005 (5). After decades of decline, the United States infant mortality rate did not decline significantly from 2000 to 2005 (6)…The U.S. infant mortality rate was still higher than for most European countries when births at less than 22 weeks of gestation were excluded. [Hungary, Poland, Slovakia]… The United States compares favorably with European countries in infant mortality rates for preterm, but not for term infants… The percentage of births that were born preterm was much higher in the United States than in Europe.

  1. http://www.kff.org/insurance/upload/7670-03.pdf

“Health Care Costs. A Primer.” Kaiser Family Foundation, May 2012

As a share of GDP, health care spending in the US also exceeds spending by other industrialized nations by at least 5 percentage. Despite this relatively high level of spending, the United States does not appear to achieve substantially better health benchmarks compared to other developed countries

  1. http://www.oecd-ilibrary.org/sites/health_glance-2009-en/05/02/02/index.html?contentType=&itemId=/content/chapter/health_glance-2009-49-en&containerItemId=/content/serial/19991312&accessItemIds=/content/book/health_glance-2009-en&mimeType=text/html

Health at a Glance 2009: OECD Indicator.

Foot amputations per 100,000 diabetics in the US is more than twice the average of OECD

  1. http://dx.doi.org/10.1787/5k95xd6stnxt-en

Devaux, M. and M. de Looper (2012), “Income-Related Inequalities in Health Service Utilisation in 19 OECD Countries, 2008-2009”, OECD Health Working Papers, No. 58, OECD Publishing. See figures 1-3.

US residents have fewer physician visits than any other of the 19 OECD citizens, with greater disparity in access to physicians based on income. “private funding is often regressive and negatively impacts on the uptake of needed services, in particular for vulnerable people at risk of social exclusion.”

  1. http://www.openmedicine.ca/article/view/8/1

Guyatt GH, et al. Open Medicine,  Vol 1, No 1 (2007), A systematic review of studies comparing health outcomes in Canada and the United States.

Available studies suggest that health outcomes may be superior in patients cared for in Canada versus the United States, but differences are not consistent…Canadian outcomes appear superior in head and neck cancer, and possibly for low-income patients with a variety of cancers; American women with breast cancer appear to have better survival rates than Canadian women…evidence strongly suggests that Canadian end-stage renal patients truly have higher survival than those in the US.

  1. http://content.healthaffairs.org/content/22/3/77.full

“Does Universal Health Insurance Make Health Care Unaffordable? Lessons From Taiwan.” Jui-Fen Rachel Lu and William C. Hsiao. Health Affairs May 2003 vol. 22 no. 377-88

Taiwan’s single-payer NHI system enabled Taiwan to manage health spending inflation and that the resulting savings largely offset the incremental cost of covering the previously uninsured. Under the NHI, the Taiwanese have more equal access to health care, greater financial risk protection, and equity in health care financing.

  1. http://content.healthaffairs.org/content/early/2005/11/28/hlthaff.w5.509/suppl/DC1

“Taking The Pulse Of Health Care Systems: Experiences Of Patients With Health Problems In Six Countries.” Cathy Schoen, Robin Osborn, Phuong Trang Huynh, Michelle Doty, Kinga Zapert, Jordon Peugh, and Karen Davis. Health Affairs, November 2005

“In past patient surveys among the five English-speaking countries, the United States has stood out for having relatively short waiting times for specialized care… Our findings also indicate that insurance and delivery systems affect patients’ experiences beyond basic access and waiting times. Symptoms of inadequate insurance coverage and more fragmented care in the United States emerged throughout the survey… the United States often ranks last or tied for last for safety, efficiency, and access.”

  1. http://content.healthaffairs.org/content/31/9/2114.full In Amenable Mortality—Deaths Avoidable “Through Health Care—Progress In The US Lags That Of Three European Countries.” Ellen Nolte and C. Martin McKee. Health Aff September 2012 vol. 31no. 9 2114-2122. Nolte E, McKee CM. Health Affairs 2012;31(9):2114-22

“In 2007 amenable mortality was highest in the United States, with rates almost twice those seen in France (Exhibit 1). [relative to France, Germany, UK]….[the US] also experienced smaller improvements in rates between 1999 and 2007 than the other three countries…Our analyses confirm our hypothesis that the relative impact of health care in the United States varies by age group as a result of age-dependent differences in access to health care. We show that the lagging progress of the United States compared to other countries, as measured by amenable mortality, is largely driven by elevated amenable mortality among those younger than age sixty-five.. Factors associated with receiving appropriate care in the United States included being treated within the Department of Veterans Affairs and having adequate insurance.”

  1. http://onlinelibrary.wiley.com/doi/10.1196/annals.1425.007/full

Annals of the New York Academy of Science. “Health Insurance and Access to Health Care in the United States.” Catherine Hoffman, Julia Paradise. Article first published online: 25 JUL 2008, DOI: 10.1196/annals.1425.007.

“Few people choose to go without health insurance; the primary reason for being uninsured is that coverage is not affordable. The health services research reviewed here shows a strong association between health insurance coverage and access to primary and preventive care, the treatment of acute and traumatic conditions, and the medical management of chronic illness. Moreover, the research connects being uninsured with adverse health outcomes, including declines in health and function, preventable health problems, severe disease at the time of diagnosis, and premature mortality.”

  1. http://www.washingtonmonthly.com/features/2005/0501.longman.html

Longman, P. “Best Care Anywhere; Why VA Health Care is better than Yours.” Polipoint Press, 2007. The VA cares for America’s sickest patients with the best results at the lowest cost with the highest patient satisfaction of any health care system in the country.

  1. General Accounting Office. “Medicare + Choice: Payments exceed costs of fee for service benefits, adding billions to spending.” GAO/HEHS-00-161, Washington DC Government Printing Office 2000. GAO and OIG say private Medicare plans are more expensive, less efficient, and threaten Medicare sustainability.

  2. http://www.nejm.org/doi/full/10.1056/NEJMsa1202099

“Mortality and Access to Care among Adults after State Medicaid Expansions”

Benjamin D. Sommers, M.D., Ph.D., Katherine Baicker, Ph.D., and Arnold M. Epstein, M.D. July 25, 2012 (10.1056/NEJMsa1202099) This article was published on July 25, 2012, at NEJM.org. N Engl J Med 2012. DOI: 10.1056/NEJMsa1202099

“State Medicaid expansions to cover low-income adults were significantly associated with reduced mortality as well as improved coverage, access to care, and self-reported health.”

  1. http://archinte.jamanetwork.com/article.aspx?articleid=1387588

“Cost Control in a Parallel Universe: Medicare Spending in the United States and Canada.” David U. Himmelstein, MD; Steffie Woolhandler, MD, MPH, Arch Intern Med. 2012;():1-2. doi:10.1001/2013.jamainternmed.272. Published online October 2012

“US Medicare spending per elderly enrollee rose from $1215 in 1980 to $9446 in 2009 (an inflation-adjusted 198.7% increase). The comparable increase for Canada was 73.0% (from $2141 to $9292). For the 1971-2009 period, US costs rose 374.1% vs 126.3% for Canada, and estimated foregone savings were $2.9024 trillion…Life expectancy at age 65 years is longer and has grown faster in Canada than in the United States since 1980 (and 1971), offering reassurance that cost control has not compromised quality. A meta-analysis suggests that clinical outcomes are, if anything, better for Canadians than for insured Americans.”

Every industrialized country including those in Europe provides better care to more people for less money than we do. All use the three principles of universal enrollment with no discrimination against the sick, few hurdles to primary care, and publicly accountable transparent not-for-profit financing. Some are single payer. None use our unique American business model of private health insurance.

  1. Reid, TR. The Healing of America, Penguin Press, New York, 2009 The best introduction to how American health care contrasts with that of other nations.

  2. Preker AS. “The introduction of universal access to health care in the OECD: lessons for developing countries.” In: Achieving Universal Coverage of Health Care. Nitagyarumphong ES, Mills A (editors). Ministry of public health, Bangkok, 1998, p.103 Quoted in: http://content.healthaffairs.org/content/22/3/77.long#xref-ref-26-1

Universal programs in other countries contain costs better than us without restricting access to essential health care. “One notable result that should interest Americans is that Taiwan’s universal insurance single-payer system greatly reduced transaction costs and also offered the information and tools to manage health care costs. Alex Preker, a leading health economist at the World Bank, came to a similar conclusion from his research of OECD countries. He concluded that universal health care led to cost containment, not cost explosion.”

  1. http://www.oecd.org/dataoecd/5/53/22364122.pdf

Elizabeth Docteur and Howard Oxley. “Health-Care Systems: Lessons from the Reform Experience.” OECD Health Working Papers. December 5, 2003.

Universal access to health care appears essential to improving health and lowering cost.

  1. http://aging.senate.gov/events/hr215mp.pdf

Mark Pearson, Head Health Division, OECD, Written statement to Senate Special Committee on Aging, 30 September 2009. Disparities in health expenditures across OECD countries: “Why does the United States spend so much more than other countries?”

  1. http://content.healthaffairs.org/content/26/4/1078.full

Health Affairs July 2007 vol. 26 no. 41078-1087. “Measuring And Reducing Waiting Times: A Cross-National Comparison Of Strategies.” Sharon Willcox,  Mary Seddon, Stephen Dunn, Rhiannon Tudor Edwards, Jim Pearse, Jack V. Tu

“…in the United States, … uninsured and underinsured populations experience rationing through financial inability to access care, medical debt, and use of inappropriate services such as hospital emergency departments.”

  1. http://www.annals.org/content/148/1/55.full

“Achieving a High-Performance Health Care System with Universal Access: What the United States Can Learn from Other Countries.” American College of Physicians Annals of Internal Medicine January 1, 2008 vol. 148 no. 1 55-75.

“Analysis by the ACP of health care in 12 other industrialized countries illustrates various approaches to assuring universal access to high-quality health care. Each system has provided comparable or better health care at less cost than in the United States.”

“ Single-payer systems generally have the advantage of being more equitable, with lower administrative costs than systems using private health insurance, lower per capita health care expenditures, high levels of consumer and patient satisfaction, and high performance on measures of quality and access.”

There is no requirement that American single payer systems be government run.

  1. http://waysandmeans.house.gov/Hearings/Testimony.aspx?TID=8162,

Letter by Mark H. Ayers, chairman of the National Coordinating Committee for Multiemployer Plans, to the U.S. House of Representatives Committee on Ways and Means for the June 24, 2009 Health Reform in the 21st Century: Proposals to Reform the Health System.

“…26 million American workers and families who depend on joint labor-management, multiemployer health and welfare trust funds for their medical and other health benefits… over 90% of whom employ fewer than 20 workers and more than half who employ fewer than 10…”

  1. http://www.hreonline.com/HRE/story.jsp?storyId=533342239

“To Self-Insure ... Or Not?” By Maura C. Ciccarelli, Human Resource Executive Online.

“More than 59 percent of American workers are covered by self-funded plans, according to a 2010 report by the Oakland, Calif.-based Henry J. Kaiser Family Foundation and the Health Research and Educational Trust. The percentage of covered workers in self-funded plans increases as the number of employees in a firm goes up… and 93 percent of covered workers in firms with 5,000 or more workers were in self-funded plans, according to the Kaiser/HRET report.”

  1. David Goldstein, President & CEO, Intelligent Health (732)735.2974, private communication, November 11, 2012. “… between 73-100 million American workers and their dependants are covered by a self-insured health plan—that is, one in which the employer assumes the financial risk for providing health care benefits to its employees, rather than buying insurance.”

Are “vouchers” an option for financing health care?

For the record, “vouchers” are a variation on “premium support.” While premium supports limit government risk and spending, economists are not optimistic about consequences to patients. There are no examples of vouchers reducing costs or improving health. This does not mean health care vouchers couldn’t work, only that they should be regarded as experimental.

  1. Song Z, Cutler DM, Chernew ME. “Potential Consequences of reforming Medicare into a Competitive Bidding System.” JAMA, August 1, 2012—Vol 308, No. 5 459-60

“Premium support, based on competitive bidding, may offer a fiscal solution if ACA reforms fail, but at the cost of making Medicare beneficiaries responsible for solving Medicare’s fiscal crisis.”

  1. Fuchs B, Potetz L. “The nuts and bolts of Medicare premium support proposals.” June 2011.” Program on Medicare Policy, Henry J. Kaiser Family Foundation.

“Under premium support, insurers have an incentive to avoid enrolling those individuals who are higher than average in terms of their potential for using covered services, that is, the older and sicker beneficiaries. Insurers will be more likely to engage in risk selection behaviors… most premium support proposals, including the Ryan 2012 budget plan, would require participating plans to accept any beneficiary who applied, regardless of their health status… Opponents question, however, whether such rules and risk mitigation mechanisms can fully offset the economic incentives for plans to engage in such risk selection behaviors.”

Do financial obstacles to primary care keep people healthier at lower cost?

The RAND organization conducted two studies, decades apart, giving two health insurance options to employees of large companies: A low-priced policy with high deductibles, or high-priced policy with low deductibles. The results in both studies were similar: the group motivated to avoid medical care spent modestly less and enjoyed equivalent health outcomes compared to the other group. Note: the second study followed patients only for one year.

Conclusion? When insured employees have money to pay either high deductibles or high policy prices, those with high deductibles spent less with no apparent medical harm. This seems to validate the premise that “skin in the game” produces financial and health benefits. Here are the RAND studies.

  1. http://www.rand.org/pubs/reports/2006/R3055.pdf . Brook RH, Ware JE, Rogers WH, Keeler EB, Davies AR, Sherbourne CA, et al. “The effect of co-insurance on the health of adults.” Results from the RAND Health Insurance Experiment. Santa Monica, CA: RAND Corporation, 1984. Report R-3055-HHS. ISBN 0-8330-0614-2. [An earlier version appeared in the December 8, 1983, issue of The New England Journal of Medicine (Vol. 309, pp. 1426-1434).]

  2. http://content.healthaffairs.org/content/23/6/107.abstract?maxtoshow=&HITS=10&hits=10&RESULTFORMAT=&fulltext=consumer+directed+health+&andorexactfulltext=and&searchid=1&FIRSTINDEX=0&resourcetype=HWCIT . Newhouse JP. “Consumer-directed health plans and the RAND health insurance experiment.” Health Affairs 2004; 23(6):107-13

These studies of well-compensated employees should not be applied to people who can afford neither high deductibles nor high policy prices. In this latter population (the old, the poor, the unemployed, the underemployed, the uninsured, those on fixed incomes), results are different. The number of people in this category is increasing.

  1. Collins SR, et al. “Squeezed: Why rising exposure to health care costs threatens the health and financial well being of American families.” Commonwealth Fund, September, 2006. 58% of individuals shopping for insurance could not afford what was available

Studies of patients lacking money to pay either high premiums or high deductibles unanimously conclude cost-sharing increases long term costs and reduces health.

  1. http://jama.ama-assn.org/content/298/1/61.abstract.

    Goldman DP, et al. “Prescription drug cost sharing: Associations with medication and medical utilization and spending and health.” JAMA 2007;298:61-88.

Deductibles and co-pays worsen clinical outcomes

  1. http://www.ncbi.nlm.nih.gov/pubmed/1891009.

    Soumerai SB et al. “Effects of Medicaid drug payment limits on admission to hospitals and nursing homes.” N Engl J Med 2004;325:1072-7.

Consumer-driven health care leads to worse outcomes and higher costs

  1. http://www.commonwealthfund.org/Publications/In-the-Literature/2005/Jun/Insured-But-Not-Protected--How-Many-Adults-Are-Underinsured.aspx. Schoen C, Doty MM, Collins SR, Holmgren AL. “Insured but not protected: How many adults are underinsured?” Health Affairs Web Exclusive, June 14, 2005 W5-289–W5-302

Increased cost-sharing reduces health

  1. http://www.annals.org/content/146/8/602.full.pdf.

    Braithwaite RS, Rosen AB. “Linking Cost “Sharing to Value: An Unrivaled Yet Unrealized Public Health Opportunity.Ann Intern Med April 17, 2007 146:602-605

  2. http://content.nejm.org/cgi/reprint/362/4/320.pdf.

    Trivedi AN, Moloo H, Mor V. “Increased ambulatory care copayments and hospitalizations among the elderly.” N Engl J Med 2010; 362:320-8.

Higher co-pays decrease primary care and outpatient visits, increase hospitalizations and overall health care costs in Medicare patients. This is amplified among the poor, uneducated, and those with chronic diseases (hypertension, diabetes, and coronary artery disease).

Do people make wise insurance choices?

People make poor choices when confronted by insurance options. This may reflect poor medical understanding, illiteracy, focus on immediate rather than long term costs, inability to guess which future diseases or conditions they might suffer, or stupidity,.

  1. http://content.healthaffairs.org/content/31/8/1847.full.

    Chan S, Elbel B. “Low Cognitive Ability And Poor Skill With Numbers May Prevent Many From Enrolling In Medicare Supplemental Coverage.” Health Affairs August 2012; vol. 31 no. 8: 1847-1854

“…people in the lower third of the cognitive ability and numeracy distributions were at least eleven percentage points less likely than those in the upper third to enroll in a supplemental Medicare insurance plan.” Complexity of Medicaid prevents many from making the appropriate selection.

  1.  http://www.nber.org/digest/oct12/w18166.html.

    Heiss F, Leive A, McFadden D, Winter J. “Plan Selection in Medicare Part D: Evidence from Administrative Data.” The National Bureau of Economic Research, June 2012.

"Our results then do not support the proposition that consumers can make and benefit from good choices in private health insurance markets, and direct health care resources to their best use." Plan Selection in Medicare Part D: “…fewer than 10 percent of individuals enroll in what for them would be the most cost-effective plans. This is apparently because seniors pay more attention to their out-of-pocket premiums than to the overall benefits… indicative of how consumers behave in real-world decision situations with a complex, ambiguous structure and high stakes.”

  1. http://content.healthaffairs.org/content/31/10/2259.abstract?etoc

Chao Zhou, Yuting Zhang. “The Vast Majority of Medicare Part D Beneficiaries Still Don’t Choose the Cheapest Plans That Meet Their Medication Needs.” Health Affairs 31(10): 2259-2265

“Using 2009 Part D data, we found that only 5.2 percent of beneficiaries chose the cheapest plan. Nationwide, beneficiaries on average spent $368 more annually than they would have spent had they purchased the cheapest plan available in their region, given their medication needs.”

Who should assume the financial risk of large unexpected medical expenses? Placing the financial risks of bad outcomes onto providers fails to reduce costs or improve outcome.

  1. http://www.update-software.com/BCP/WileyPDF/EN/CD009255.pdf

Flodgren G, Eccles MP, Shepperd S, Scott A, Parmelli E, Beyer FR. “An overview of reviews evaluating the effectiveness of financial incentives in changing healthcare professional behaviours and patient outcomes” (Review). The Cochrane Library, 2011, Issue 7

“We found no evidence that financial incentives can improve patient outcomes.”

  1. http://content.healthaffairs.org/content/31/1/93.abstract?etoc. Ray-E. Chang, Shih-Pi Lin, David Clark Aron.

    “A Pay-For-Performance Program In Taiwan Improved Care For Some Diabetes Patients, But Doctors May Have Excluded Sicker Ones.” Health Affairs (Millwood) 2012;31:93-102

Pay for performance program in Taiwan resulted in physicians avoiding sicker patients.

  1. http://www.cbo.gov/publication/42925. Lessons from Medicare's Demonstration Projects on “Value-Based Payment,” Lyle Nelson, Health and Human Resources Division, Congressional Budget office. January 18, 2012.

20 years of value-based payment failed to reduce costs.

  1. http://www.cbo.gov/publication/42860.

    Congressional Budget Office. “Lessons from Medicare's Demonstration Projects on Disease Management, Care Coordination, and Value-Based Payment.” January 18, 2012.  http://www.cbo.gov/ftpdocs/126xx/doc12663/01-18-12-MedicareDemoBrief.pdf .

Summarized by Stephen Kemble, MD: “…all 34 pilot care coordination projects funded by CMS either failed to save any Medicare spending at all, or if they did save on health care spending, they cost more in administrative expenses than they saved, for a net increase in total cost for all of them. Three of four payment reform demonstration projects that relied on pay-for-quality incentives failed to save money, and the only successful one negotiated a discounted, bundled fee for coronary bypass surgeries and did not use pay-for-performance incentives.”

  1. http://www.nejm.org/doi/full/10.1056/NEJMsa1112351.

    Jha AK, Joynt KE, Orav EJ, Epstein AM. “The Long-Term Effect of Premier Pay for Performance on Patient Outcomes”. N Engl J Med 2012; 366:1606-1615, April 26, 2012

“We found no evidence that the largest hospital-based pay-for-performance program led to a decrease in 30-day mortality.”

  1. http://www.nber.org/papers/w14886.pdf?new_window=1.

    Mullen KJ, Frank RG, Rosenthal MB. “Can you get what your pay for? Pay-for-performance and the quality of healthcare providers.” National Bureau of Economic Research. April 2009 Working Paper 14886.

No evidence a large P4P [Pay for Performance] initiative produced major improvement in quality or notable disruption in care.

  1. http://content.healthaffairs.org/content/28/2/517.full.

    Damberg CL, Raube K, Teleki SS, de la Cruz E. “Taking Stock Of Pay-For-Performance: A Candid Assessment From The Front Lines.” Health Affairs March/April 2009 28:517-525;doi:10.1377/hlthaff.28.2.517

“… after three years of investment, these changes had not translated into breakthrough quality improvements… “

  1. http://onlinelibrary.wiley.com/doi/10.1111/j.1475-6773.2010.01224.x/abstract.

    Ryan AM, Blustein J. “The Effect of the MassHealth Hospital Pay-for-Performance Program on Quality.” Health Services Research, Volume 46, Issue 3, pages 712–728, June 2011

“Despite offering substantial financial incentives, the MassHealth P4P program did not improve quality in the first years of implementation.”

The Veterans Affairs system cares for America’s sickest patients with the best outcomes at the lowest cost with the highest satisfaction in the country. These physicians have no financial stake in patient outcome.

  1. http://content.nejm.org/cgi/content/abstract/348/22/2218.

    Jha AK, Perlin JB, Kizer KW, Dudley RA. “Effect of the transformation of the Veterans Affairs health care system on the quality of care.” New England Journal of Medicine 2003;348:2218-27

Quality of care at VA is superior to comparable patients with comparable conditions in fee for service Medicare.

  1. http://www.ncbi.nlm.gov/entrez/query.fcgi?cmd=Retrieve&db=pubmed&dopt=Abstract&list_uids=15313743.

    Kerr E, Gerzoff R, Krein S, Selby J, Piette J, et al. “A comparison of diabetes care quality in the Veterans health care system and commercial managed care.” Annals of Internal Medicine 2004;141(4):272-81

VA provides better quality of care for comparable patients than those in commercial managed care.

  1. http://www.annals.org/content/141/12/938.abstract.

    Asch SM, McGlynn EA, Hogan MM, Hayward RA, Shekelle P, Rubenstein L, Keesey J, Adams J, Kerr EA. “Comparison of quality of care for patients Veterans Health Administration and patients in a national sample.” Annals of Internal Medicine 2004;141(12):938-45.

RAND study shows VA superior to all other sectors of US health care in 294 measures of quality.

  1. http://www.ncbi.nlm.nih.gov/pubmed/16565637.

    Selim AJ, Kazis LE, Rogers W, Qian S, Rothendler JA, Lee A, Ren XS, Haffer SC, Mardon R, Miller D, Spiro A, Selim BJ, Fincke BG. “Risk-adjusted mortality as an indicator of outcomes: comparison of the Medicare Advantage Program with the Veterans Health Administration.” Medical Care 2006;44(4);359-65.

Mortality rates of elderly patients higher in Medicare Advantage than in VA system.

  1. www.ncqa.org/communications/somc/SONC2004.pdf.

    “The State of Health Care Quality 2004.” Washington DC: National Committee for Quality Assurance.

Perlin JB. “The Veterans Health Administration: quality, value, accountability, and information as transforming strategies for patient-centered care.” American Journal of Managed Care, November 2004, Table 2. http://www.ajmc.com/Article.cfm?ID=2767

In most measures of health care quality, VA outranks every other sector including Johns Hopkins, Mayo Clinic, and all other non-VA systems.

  1. http://www.theasci.org/government/govt-05.html.

    “ACSI Scores for the U. S.” Federal Government, American Customer Satisfaction Index I, December 15, 2005

VA tops all other health care sectors in customer satisfaction for six consecutive years.

  1. http://content.nejm.org/cgi/citmgr?gca+nejn;354/11/1147.

    Asch SM, et al. “Who is at greatest risk for receiving poor-quality health care?” NEJM 2006;354:1147-56.

VA patients in a previous study (above) received 67 percent of recommended care, a considerably better rate than the 55 percent observed in the current study

  1. http://www.allhealth.org/chcrep/919docs_bn/HosekLeveragingFedHealthSystems2007.pdf


Susan D. Hosek. “Leveraging Other Federal Health Systems.” In: Restoring Fiscal Sanity 2007: The Health Spending Challenge. Alice M. Rivlin, Joseph R. Antos, The Brookings Institution. 2007.

VA and Tricare compare favorably to commercial insurance in quality and cost.

“Over time the scope of benefits provided to veterans and military beneficiaries has grown, reaching a point today where these packages are significantly better than most private employer health plans. With these programs providing care that is of equal quality and lower cost, potential beneficiaries are increasingly switching out of private plans.”

  1. http://www.ncbi.nlm.nih.gov/pubmed/21422951.

    Trivedi AN, Grebla RC. “Quality and equity of care in the Veterans Affairs health-care system and in Medicare advantage health plans.“ Med Care, 2011 Jun;49(6):560-8.

Among persons aged 65 years or older, the VA health-care system significantly outperformed private-sector MA [Medicare Advantage] plans and delivered care that was less variable by site, geographic region, and socioeconomic status.