McCanne Health Justice Monitor

Summary: Dr. Glaucomflecken and John Stewart offer a master class on how to concisely convey what’s wrong with US health insurance and why. A dozen 2-minute videos.

Dr. Glaucomflecken
30 Days of US Healthcare
September 2023
videos (2 min each)

Job Benefits

Deductibles
Co-insurance
Surprise Billing
Pharmacy Benefit Managers
Insurance Kickbacks [to PBMs]
DIR Fees [PBM fees on pharmacies]
Out of Pocket Maximum

Hospital Price Transparency
Payment Processing Fees
Family Medicine Negotiates with UHC

And … An American Gets Health Care Abroad
2022

Medicare and Corporate Lobbyists in Congress [600 lobbyists: no drug price negotiations part D]
The Problem With Jon Stewart
August 30, 2023

Comment by: Jim Kahn

Health policy discussion is often laden with technical jargon. Dr. Glaucomflecken’s amusing skits (in which he plays all roles), and John Stewart’s interviews provide an excellent antidote – they distill fundamentals into biting 2-minute snippets.

Here’s a quick tour of the story they tell, progressing through the videos …

1) Problems with current insurance:
The health insurance “job benefit” actually lowers salary (the worker is paying!).
The insurance seems barely worth it … First comes the deductible … thousands of dollars before coverage kicks in. Followed by co-insurance and surprise billing (incompletely resolved with recent legislation, eg ambulances omitted). Pharmacy benefit managers (owned by insurers) manipulate the drug formulary and payment process to extract profits, including dropping generic drugs in favor of brand name (and overcharging for generics). Finally, you hit the out-of-pocket maximum – but beware non-network and excluded services. No wonder medical debt is sky high.

Hospital price transparency is a farce: ignored and incomprehensible for consumers.
Electronic billing (efficient, right?) is an excuse to impose a 5% processing fee on providers.
And, the insurers are buying up the doctors.

2) There’s a better way abroad.
In all other wealthy nations, everyone is covered with little or no cost-sharing. Pick your phrase: not rocket science, known technology, best practices.

3) Why, then?
Because, as Stewart says, health industry lobbyists and the donors who hire them control Congress. See the PBM video too – if you earn enough money, you make the laws. Is the Inflation Reduction Act, which the drug companies so hate, a harbinger of real reform?

It’s time for the people to dismantle the fragmented and dysfunctional system in favor of a simple approach that works for patients – single payer.

Summary: Private for-profit ownership of health care is undermining the health care mission, diverting care resources to shareholder bank accounts. Single payer financing is not enough … we need to resist the corporate takeover. Two important webinars are coming up NEXT WEEK. Listen in, and get involved.

Medicare for All Is Not Enough
The Nation
March 31, 2022
By David U. Himmelstein, Steffie Woolhandler, Adam Gaffney, Don McCanne, John Geyman
covered in HJM here

Dr. Glaucomflecken videos (2 min each)
30 Days of US Healthcare: United Healthcare For All
September 20, 2023

30 Days of US Healthcare: Private Equity Visits Rural Medicine
September 19, 2023

30 Days of US Healthcare: Physician Owned Hospitals
September 9, 2023

Comment by: Don McCanne

Single payer financing meets the goal of insuring everyone, funded equitably through progressive taxation. However, it is incapable of controlling the dictates of private ownership with a primary mission of increasing private wealth as opposed to providing the public service of health care for all. Private equity is acquiring not only facilities but also the health care professional groups staffing these facilities. Our article in The Nation summarizes these terrible trends, and Dr. Glaucomflecken distills the problems with his astringent humor. The public service model of single payer cannot work in a system designed to pump up the coffers of billionaires.

Two zoom webinars NEXT WEEK address the hazards of private ownership in health care:

1) The Lancet Webinars: Public policy and health in the USA miniseries: should investors own healthcare?
Tuesday September 26, 2023 2 pm EDT / 11 am PDT
Register here

Four US experts will examine the implications of growing investor ownership of physicians’ practices, hospitals, and other health services in the US, and their consolidation into giant corporate enterprises that dominate insurance and care delivery in many regions of the US. Panelists are luminaries Don Berwick, Rosemary Batt, Steffie Woolhandler, and Claudia Fegan.

2) Health Affairs:  Briefing: How the Ownership and Structure of Health Care Entities Affect Clinicians & Patients
Wednesday September 27, 2023 2 pm EDT / 11 am PDT
Register here

WATCH THE ZOOM MEETINGS AND THEN WORK TOGETHER TO FIGHT THIS PROCESS. WE HAVE TO DO IT. SINGLE PAYER WILL GO NOWHERE IF WE DO NOT ADDRESS THE OWNERSHIP HARM CAUSED BY THE BILLIONAIRES. WE HAVE TO REBUILD THE SYSTEM!

In solidarity and with love,

Don

Summary: John Stewart nails it in a vivid one-minute video: Our government-funded health care benefits private for-profit corporations, especially insurers, at our expense.

America’s F*cked Up Tax System
The Problem With John Stewart
August 29, 2023
Video (1 min)

Here’s how the system works. You pay taxes to the government, the government pools that money and uses it to provide the people with essential goods and services that they need.

In this country, we’ve got a different system for getting the things we need.

Take health care. We pay taxes to the government and the government gives our money to a middleman: for-profit insurance companies or for-profit health providers. And the insurance companies provide health coverage in exchange for maybe some more money for us and a deductible, that covers not everything certainly not your teeth or your skin or your eyes. It’s a pretty good system if you own an insurance company. Companies like UnitedHealth and Aetna collect 70% of their health plan revenue from government programs. Humana – 90%. These health plan businesses would not exist without our tax money. And it’s not just health care. It’s pharma. …

Comment by Jim Kahn

What a pleasure to have this talented comedian-social commentator-activist on our side. John Stewart is a hero of mine.

The irresistible implication? We need single payer, government-financed and government-paid universal health insurance. Without profit extraction by private sector intermediaries. It’s systematized grift, and we need to end it.

Summary: A new book by mainstream health economists and policymakers argues that we should expand and tinker with Medicare Advantage to save Medicare. But why double down on the part of Medicare that is extracting massive profits and limiting access to care?

A New Prescription For What Ails Medicare
Health Affairs Forefront
August 25, 2023
By Alain C. Enthoven

Modernizing Medicare, edited by Robert Moffit and Marie Fishpaw (Johns Hopkins Press), is a “must read” for all those concerned with public finances and health policy — though not an easy read because of the great complexity of the Medicare program.

This book, with chapters by leading authorities, explains how and why a new model, based on informed cost-conscious consumer choice among competing private health plans is the most promising — indeed the only practical — solution to the problem of soaring health care costs.

In his introduction, Robert Moffit traces the evolution of thinking by policy makers from the 1965 defined benefit fee-for-service program covering hospital and physicians’ services to the present thinking favoring the defined contribution model and consumer choice among competing health plans. The idea has gained bipartisan support. The latter model, now called Medicare Advantage, is the choice of half of all Medicare beneficiaries.

All of the chapters are worth reading, but in the interest of brevity, let me focus on three that merit particular attention.

Charles Blahous concludes persuasively that “Medicare as we know it cannot be preserved unless it is significantly changed,” while more American seniors are deciding that “Medicare Advantage meet their needs more effectively than does traditional Medicare.”

John Goodman explains some of the many ways even Medicare Advantage could be improved. Goodman notes that some practices offer “direct primary care” or 24/7 access to a primary care physician for a telemedicine consultation for a fixed monthly fee. Also, Goodman reports success with “reference pricing.”

Edmund Haislmaier proposes an idea that would be new to the health insurance market but imported from successful application elsewhere: risk transfer pools. Government would start by paying plans on the basis of the populations and counties they serve. Then all participating plans would participate in a self-governing pool in which the participants would negotiate an agreed upon equitable sharing of payments for the costs of high-cost patients.

An important read, Modernizing Medicare will become the guidebook for the inevitable changes that must be made in Medicare.

Comment (Health Affairs):  dmccanne

If there is to be competition, it seems that it should be between the health care professionals and institutions based on the services they provide.

The primary mission of the private financial administrators, that is the private insurers, is to maximize profits for their investors thereby creating more billionaires; thusly they compete for the public and private health care dollars. In contrast, the primary mission of public financial administrators, such as those managing the traditional Medicare program, is to deliver health care to those who need it, for the public good rather than for the purpose of wealth building.

Traditional Medicare does need some improvement in its benefits, but we need to abolish the private entities that are drawing billions of dollars out of our health care system through private equity and, in the meantime, assuming ownership of physician groups and other professionals.

Einav and Finkelstein in “We’ve Got You Covered,” have shown that we can have automatic coverage for everyone that is free at the point of service and that everyone can afford by funding it with a progressive income tax. Unfortunately, Moffit, Fishpaw and their conservative authors in “Modernizing Medicare,” direct their reform to “harnessing the power of market competition” by giving our health care dollars to the entrepreneurs to satisfy their own mercenary priorities. Wrong solution.

Comment by Don McCanne

This book review by professor Alain Enthoven of Stanford purports to be a prescription for what ails Medicare. Unfortunately, the book’s contributors – many widely known in health economics – are driven by their belief that remedies must be based on market competition, rather than health policy that primarily benefits patients. Market competition as practiced in the United States is designed primarily to build wealth for investors. That is hardly the prescription we want to see for our egregiously expensive health care.

There are now extensive reports about how our public and private health care dollars are being misspent on the Medicare Advantage program. Yet it has been so successfully marketed that it has become, quite inappropriately, the choice of over half of the Medicare beneficiaries. The conservative, market-oriented authors of this book are advocating the “modernization” of Medicare by further advancing the unfortunate Medicare Advantage model.

So what prescription do we need for what ails Medicare? We can improve its benefits (vision, hearing, long term care, etc.), eliminate cost sharing, expand it to cover everyone, and fund it equitably through a progressive income tax; in other words by converting it to a single payer, Medicare for All program.

It would be nice if Health Affairs would publish an article describing the moral imperative and beneficial efficiency of the single payer model.

Summary: The man who as a federal policy official drove the privatization of Medicare then jumped to the private sector and profited massively from the changes. Others follow the same pattern. Clever investors make billions of dollars. The rest of us suffer the consequences in higher costs and lower access to care.

Patient Zero
Tom Scully is as responsible as anyone for the way health care in America works today.
The American Prospect
August 1, 2023
By David Dayen

It was late 2002, and Tom Scully, administrator of the Centers for Medicare & Medicaid Services (CMS), was at a U.S. News and World Report forum, relating a tale of hospital skullduggery. Under CMS rules, Medicare reserved 5.1 percent of its budget to compensate hospitals that treated “outlier” high-cost patients. Scully, a youthful-looking man with a pile of slightly graying hair who talked a mile a minute, explained that Tenet and several other hospital systems, without the regulators knowing, had for years randomly jacked up prices on individual patients to access the set-aside. This deprived other hospitals that actually had sick patients from getting a higher share of the funds; the dishonest actors were costing the honest ones money.

Scully didn’t blame hospital deception, but the policy framework he was hired to manage. “I love Medicare, it’s a great program, but as an insurance model, it’s a joke,” he said, explaining that his regulators were outgunned and slow to react. The hospitals falsified patient costs and that was unethical, he conceded, but they were just responding to incentives. “People follow the money,” Scully said, “and they’ll find the little niches in the program and they’ll game it, and that’s what happened here.”

One reading of the history of health care over the past half-century, as the profit motive was gradually introduced into insurance and delivery systems, is that little niches have sprung up, and people with capital have taken advantage. That would include Tom Scully.

At the Office of Management and Budget (OMB) in the first Bush administration and CMS under Bush II, Scully played a major role in many of the defining features of health care today, from Medicare Advantage and the privatized Part D prescription drug benefit to risk adjustment and the physician payment schedule. He wasn’t responsible for Obamacare, but the program closely follows his desire to solve problems through the private sector.

When Scully left CMS in late 2003, he joined Welsh, Carson, Anderson & Stowe, perhaps the leading health care–focused private equity firm, where he used his knowledge and contacts to invest in companies that were poised to capitalize on the incentives the government offered. Welsh Carson helped pave the way for what is now an investor gold rush into the medical system.

The 1992 Bush health plan at least rhymes with what passed 18 years later as Obamacare.

I’ve watched and listened to virtually every scrap of tape of Scully over the last 35 years, and I conducted a long interview with him in June. I think his beliefs are sincere. He thinks government price-setting doesn’t work, and that empowering private insurers that put their own money at risk leads to better and more efficient care. He believes poor people should be covered generously, but all other patients exposed to cost to reduce overutilization. And he wants the best hospitals and nursing homes and clinics to be paid more than the worst, to force advances in quality.

In practice, this set of philosophies has created the monster that is America’s health care system, where most of the money is public, but most of the entities dishing out and getting that money are private. Commercialization has crowded out what was a thriving nonprofit impulse; intensifying mergers and acquisitions have concentrated every aspect of the system; and a plague of middlemen each take their cut. Scully’s fear of big-government price-fixers has led to the triumph of big private profit-takers, at the cost of doctors, nurses, and patient care.

More than anything, the system has become maddeningly complex, with armies of functionaries working every angle, straddling every ethical line, to unlock a big safe full of money. Scully is America’s safecracker-in-chief. He designed so many aspects of this system, with its intricate nooks and crannies, that he’s practically the only person who understands it. That makes him an extremely valuable commodity. It’s almost as if he invented his career outside of government when he was transforming it on the inside.

… [read on for details on the misguided history of privatization of Medicare through Part D and Medicare Advantage, fostering a private equity explosion, and how this financially benefited Scully and other investors]

Comment by: Jim Kahn

Again, The American Prospect series on health care displays for depressing scrutiny the utter failure of our 21^st century health insurance morass to work for patients, instead favoring inside-game investors like Tom Scully and legions of others. Medicare Advantage plans game the CMS-created system to overcharge by more than $75 billion per year, and private equity companies reap many billions more.

How can this unsavory reality not lead us to complete disgust with decades of rising privatization of health coverage, especially publicly funded? Our fragmented and exploited system utterly fails, driving up costs and profits while depriving patients of access and financial protection.

That Scully fostered and then prospered from ill-conceived free market theories is galling.

The solution? Place our faith in a universal public health insurance system. Remove profit incentives and opportunities from the task of paying for health care, and rein it in for care provision. As do dozens of other wealthy countries. Single payer.

Summary: This summer The American Prospect ran 8 terrific health policy articles, which HJM covers starting today. First up: a blow-by-blow account of the rise of the enormous, enormously diversified, and enormously profitable UnitedHealth Group (and on the origins of corporate managed care).

Health Care’s Intertwined Colossus
How decades of policy failures led to the ever-powerful UnitedHealth Group
The American Prospect
August 2, 2023
By Krista Brown, Sara Sirota

Today, United is the fifth-largest public company in the U.S., bigger than JPMorgan Chase. Its insurance products serve 50 million members, more than the population of Spain, and its $186 billion health services division, Optum, has 103 million patients, more than Vietnam’s population. Earnings came to $28.4 billion last year, putting it in the top 30 of companies worldwide.

We think of United as an insurance company, but it has never really been exactly that. It began as a health management company, and it is now also the largest employer of physicians in the country, with 70,000 doctors across 2,200 locations. Underneath its corporate umbrella are pharmacies, primary care clinics, surgical centers, urgent care centers, home health agencies, hospice agencies, mental health agencies, a pharmacy benefit manager, an IT division, and plenty more. United has so many subsidiaries that 25 percent of its total revenues come from itself. …

[Founder Richard] Burke epitomized “the shift in the HMO movement away from its modest origins as a fledgling alternative to conventional insurance, and into an era of big-budget marketing, Wall Street financing and hefty rewards for professional managers in a field once dominated by doctors.” …

In 2003, Congress established what today is known as Medicare Advantage, reversing the lower payments from 1997 and creating a strong foothold for managed-care plans in Medicare. Today, UnitedHealth is the largest supplier of Medicare Advantage plans in the country, with 26 percent market share as of 2020, when the government spent $317 billion on the program.

In the same law, McGuire saw another opportunity. Congress green-lit tax-advantaged “health savings accounts” (HSAs), so patients could use pre-tax money to pay medical expenses in high-deductible health plans. United created an internal bank to offer HSAs. The idea was that patients would be incentivized to shop around for the cheapest care, if not avoid doctors altogether. But United and other insurers also used managed-care techniques like limited physician networks in these plans to keep their own costs down once deductibles were hit. Today, United’s bank is the second-biggest provider of health savings accounts, with $20 billion under management and millions of users. …

By the time Obamacare passed, a wave of mergers proliferated among providers. They were trying to get leverage over negotiations with insurers, using the new rules to maximize billing for services. But United’s simultaneous motivation to game the MLR by scooping up physician practices was facilitated by this provider consolidation, giving the company easy targets to choose from. …

Doctors may find kinship with independent pharmacists, who are being forced out of business thanks to the practices of United and other insurers that have copied it. PBMs like United’s OptumRx consistently under-reimburse stand-alone drugstores and dictate which medications their patients can take. ….

[During COVID, the US] Health and Human Services Department enlisted Optum Bank to distribute $150 billion to hospitals and doctors to help cover expenses. This massive role in delivering money to providers likely helped pave the way for Optum Pay Advance, the company’s payday loan “service” for doctors. The initial offer came with a 35 percent interest rate attached. … Payday lenders are viewed as immoral because of the high interest and fees they take from vulnerable customers. In United’s case, they’re not only doing that, but they’re generating the need among physician practices in the first place. …

Along the way, United has internalized a critical fact about health care: If you sit on every side of the transaction, from doctors to insurers, drug payers to drug prescribers, lifesavers to end-of-life carers, you not only grow as the system grows, but you have the ability to steer the entire system inside your gaping maw. Conflict of interest is really the business model.

Comment by: Jim Kahn

UnitedHealth Group is the leading example of an industry run amok. Profits over patients (and doctors and pharmacists). This is a sad story, well told.

The excerpts above focus on UHG’s aggressive if legal business strategies. Most notable are wide-ranging acquisitions that facilitate gaming of regulations, e.g., starting PBMs and hiring doctors to circumvent limits on medical loss ratios by shifting profits to subsidiaries. And providing high interest “payday loans” while being the cause of delayed and denied payments.

Also described in the article are equally aggressive and often illegal non-business strategies. These include fraudulent behaviors incurring hundreds of millions in fines, e.g., backdated executive stock options, grossly understated physician payment benchmarks to suppress out-of-network provider reimbursements, and diagnostic code manipulation. Add to that hardline control of the political environment: purchase of The Lewin Group (policy analysts) to fight off a public option in the ACA, and massive Congressional lobbying.

The article is wrong in saying that “United is essentially running a private single-payer system” that can be regulated like a public utility. Because that’s not what single payer is.

Here’s a reminder: single payer is a public funder of health care, covering everybody (not just UHG members) with the same comprehensive insurance for all necessary medical care, with little or no cost-sharing, and paying all providers the same fairly negotiated amount for that care. With public accountability. And without shareholders.

The contrast with UnitedHealth Group couldn’t be clearer. With for-profit insurers, it’s impossible to regulate your way to single payer. Remove them. Unify the system under public leadership.

Summary: Our favorite absurdity-revealing ophthalmologist comedian again sinks his teeth into our health insurance morass.

Glaucomflecken Explains: What’s So Special About Teeth?
Dr. Glaucomflecken
video, 2 minutes

The American Dental Association (ADA) successfully resisted participating in Medicare in the 1960s. Today, medical insurance has an out-of-pocket maximum for policyholders, whereas with dental insurance the maximum is for the insurer. Also, eye care insurance is separated from vision care. It doesn’t make any sense. That’s US healthcare in a nutshell. We make things way more complicated than they need to be.

Comment by: Jim Kahn

I adore Dr. Glaucomflecken … always brief, funny, and laser-like to the essence of an issue.

My experience as a patient, and discussions with my dentist, suggest that one major dental insurer (Delta) is steadily ratcheting down coverage. Fewer procedures covered, with higher copays, and annual benefit limits reached more quickly. Lower payments for providers, I’m told. It would be far cheaper to travel to another country and pay full out of pocket. I’m beginning to wonder about the value proposition of having dental insurance.

Guess what? Dental (and vision) care would be entirely covered under single payer. Full payment just like for medical care. That’s a version of “one size fits all” that everyone can endorse!

Summary: Reports from two leading foundations find that older adults – those insured privately and those in Medicare – face huge financial challenges to getting health care. Our system built on private insurance has failed. It’s time for public insurance administration: single payer.

Can Older Adults with Employer Coverage Afford Their Health Care?
The Commonwealth Fund
August 10, 2023
By Lauren A. Haynes & Sara R. Collins

Among older adults with employer coverage:

*  Nearly half of lower-income older adults, and more than one-third of those with moderate income, said it was very or somewhat difficult to afford their premiums.

*  Fifty-four percent of those with low income and nearly one-third with moderate income were underinsured, meaning that they had high out-of-pocket costs and/or deductibles relative to their income.

*  Nearly half of those with low income reported skipping or delaying needed care because of cost.

*  Difficulties paying medical bills and paying off medical debt loads affected 44 percent of older adults with low income and two of five of those with moderate income.

*  Sixty-three percent of those who struggled with medical bills and debt were not confident they have enough money to retire – more than double the rate for older adults without problems paying their medical bills.

The survey data in this brief indicate employer health insurance is failing many older adults, especially those with low and moderate incomes.

Medicare Households Spend More on Health Care Than Other Households
KFF
July 19, 2023
By Nancy Ochieng, Juliette Cubanski, & Anthony Damico

The health care spending burden was twice as large for Medicare households than for non-Medicare households in 2021, measured by average health care spending as a share of total household spending, and one in three Medicare households spend at least 20% of their household budgets on health care.

With health care use increasing with age and income falling as people retire, it’s not unexpected that health care is a bigger cost burden for Medicare households.

Comment by: Don McCanne

It is hardly a wonder why we have problems with health care financing in the United States when these studies show that two of our best programs – employer-sponsored health plans for employees and their families, and Medicare for the retired and long-term disabled – fail to provide adequate financial protection for the medical needs of older Americans. Since these are amongst our best insurance, how can we possibly expect the rest of the system to work well for us?

We are already spending enough money to provide all reasonable, beneficial health care for everyone without inducing financial hardship on anyone. Obviously we are doing something very wrong. Economists Liran Einav and Amy Finkelstein recently pointed us in the right direction by proposing that we cover everyone automatically with care that is free – no premiums, no deductibles, no copays. Instead, the system should be financing equitably by progressive taxation. That way it is affordable for everyone. The universal “basic” insurance needs to cover all reasonable, beneficial health care, though defining “basic” is fraught.

This situation reflects a serious conundrum with health care financing in the US. Even though two-thirds of health care dollars come from the government, we rely mainly on private health insurance administrators. This includes Medicare Advantage, Medicaid managed care, and private insurance including for government workers. The insurers’ mission is to move a large slice of our health care dollars to CEO salaries and shareholders. This aligns with the American ideology of wealth building, creating more billionaires than our international competitors.

Come now. Should that be the primary mission of our health care administrators? Of course not! Their primary mission should be to move health care to the people, the patients, all of the patients, and they need to use our health care dollars to do that. Our current system has demonstrated beyond any doubt whatsoever that private administrators have been and always will be on the wrong mission, and we need to replace them with public administrators who will always pursue a mission for the public good.

It will be our public administrators who will have the mission to cover care that is reasonable, beneficial, and at the right prices. Single payer!

It’s the public administrators that I want running the program that will take care of financing the health of me and my family, thank you!

Summary: When CMS tried to enforce a 15-year-old rule that insurers cannot charge providers for electronic payments, a former CMS staffer working for a payment intermediary cajoled and intimidated them to back down. This is quintessential regulatory capture, enabling another layer of massive profit extraction in our fragmented health insurance system.

The Hidden Fee Costing Doctors Millions Every Year
ProPublica Health Care
August 14, 2023
by Cezary Podkul

A powerful lobbyist convinced a federal agency that doctors can be forced to pay fees on money that health insurers owe them. Big companies rake in profits while doctors are saddled with yet another cost in a burdensome health care system.

It was a multibillion-dollar strike, so stealthy and precise that the only visible sign was a notice that suddenly vanished from a government website.

In August 2017, a federal agency with sweeping powers over the health care industry posted a notice informing insurance companies that they weren’t allowed to charge physicians a fee when the companies paid the doctors for their work. Six months later, that statement disappeared without explanation.

The vanishing notice was the result of a behind-the-scenes campaign by the insurance industry and its middlemen that has largely escaped public notice — but that has had massive financial consequences that have rippled through the health care universe. The insurers’ invisible victory has tightened the financial vise on doctors and hospitals, nurtured a thriving industry of middlemen and allowed health insurers to do something no other industry does: Take one last cut even as it pays its bills.

Insurers now routinely require doctors to kick back as much as 5% if they want to be paid electronically. Even when physicians ask to be paid by check, doctors say, insurers often resume the electronic payments — and the fees — against their wishes. Despite protests from doctors and hospitals, the insurers and their middlemen refuse to back down.

There are plenty of reasons doctors are furious with the insurance industry. Insurers have slashed their reimbursement rates, cost them patients by excluding them from their provider networks, and forced them to spend extra time seeking pre-authorizations for ever more procedures and battling denials of coverage.

Paying fees to get paid is the final blow for some. “All these additional fees are the reason why you see small practices folding up on a regular basis, or at least contributing to it,” said Dr. Terence Gray, an anesthesiologist in Scarborough, Maine. Some medical clinics told ProPublica they are seeking ways to raise their rates in response to the fees, which would pass the costs on to patients.

“It’s ridiculous,” said Karen Jackson, who until her retirement in March was a veteran senior official at the Centers for Medicare & Medicaid Services, the federal agency that posted, then unposted, the fee notice. Doctors, she said, shouldn’t have to pay fees to get paid.

But that’s precisely what’s happening. Almost 60% of medical practices said they were compelled to pay fees for electronic payment at least some of the time, according to a 2021 survey. And the frequency has increased since then, according to medical clinics. With more than $2 trillion in medical claims being paid electronically each year, these fees likely add up to billions of dollars annually.

Huge sums that could be spent on care are instead being siphoned off to insurers and middlemen. The fees can cost larger medical practices $1 million a year, according to an April poll by the Medical Group Management Association, which represents private medical practices. The figure sometimes runs even higher, according to a 2020 complaint to CMS from a senior executive of AdventHealth, which has 53 hospitals in nine states: “I have to pay $1.8M in expenses that I could use on PPE for our employees, or setting up testing sites, or providing charity care, or covering other community benefits.” Most clinics are smaller, and they estimated annual losses of $100,000 or less. Even that figure is more than enough to cover the salary of a registered nurse.

Comment by: Jim Kahn

I was stunned to read this. I’m no longer stunned easily about health insurance, having seen and written about so many manipulations, abuses, dysfunctions, inefficiencies, and harms in our horrendously fragmented and profit-oriented insurance non-system.

However, this one caught me off guard in its audaciousness and illogic. Electronic payments from insurers to providers is a no-brainer in our modern computerized world, and has been advocated (including by the Affordable Care Act) as a way to save the system money by eliminating the labor intensiveness of paper-based payments.

And, yet, the insurers found a way to profit. A rule from 2000 prohibited insurers charging doctors fees for electronic payment. So instead, an intermediary business model popped up, performing payment services, including up to 5% in fees for electronic transfer. CMS in 2017 clarified that these entities could not charge the prohibited fees. Yet a former CMS staffer – who helped write the 2017 rule – working for a payment company, cajoled and intimidated CMS into dropping the clarification. You can read the details in the ProPublica article.

Here are the five lessons I take away from this story:

1. This is a perfect example of regulatory capture. CMS is controlled by the private insurers which they are supposed to regulate. We saw it recently in the battle over Medicare Advantage payment levels. Note the specific version in this instance – the revolving door of agency officials becoming industry executives, who then informally lobby their former colleagues.

2. CMS folding to the pressure is likely influenced by inquiries from Congressional offices, though I’m speculating in this instance.

3. There’s a fundamental structural problem: fragmentation of billing and payment creates needless complexity. This creates niches for powerful actors pursuing their own interests. Specifically, it puts power into the hands of insurers and associated businesses they foster (eg payment entities and pharmaceutical benefit managers). The interests of these actors diverge profoundly from the purpose of health insurance – to efficiently and equitably pay for health care.

4. Our system accepts profits over patients. There is no evidence the electronic payment fees are warranted. Money for patient care is shorted.

5. The entire episodes is ironic & corrupt to the extreme. An ACA push for efficiency savings becomes a lever for insurer profit-making.

Our fragmented, profit-driven system does not work for patients … instead serving the interests of corporate executives and shareholders. That’s why we need single payer.

Summary: The new book “We’ve Got You Covered” offers a laudable prescription for the US: universal free insurance for primary, specialty, and hospital care. However, its vision for basic (“bare bones”) coverage unnecessarily undermines the potential for high quality care for all.

We’ve Got You Covered: Rebooting American Health Care
Portfolio
2023
By Liran Einav and Amy Finkelstein

How can we fix the US health-care system?

Requiring coverage did not get us to universal coverage. We must therefore provide it. Automatically. Only then will we achieve universal coverage. This is why basic coverage must be taxpayer financed. Charging premiums for basic coverage is at odds with providing that coverage automatically.

Any medical care that is included in basic coverage must be completely free to the patient. If not, the lesson is clear: we’ll end up back in the same mess of trying – and not fully succeeding – to come to the aid of patients who cannot afford the required payments for that basic coverage. We’ve described what basic coverage must do – it must be provided automatically, with no patient payments for covered services.

Basic coverage must systematically cover all essential medical care for the critically ill. For all conditions. Basic coverage must also include primary and preventive care for patients who are not yet critically ill.

The big picture is clear. Basic coverage should include primary and preventive care, specialist, outpatient, emergency room, and hospital care. Once we go beyond that high-level description, there will inevitably be a multitude of gray areas. There are many aspects of medical care that can be excluded from basic coverage while still fulfilling our social contract: infertility treatment, dental care, vision care, physiotherapy, various forms of long-term care, and the list goes on and on. These are hard choices, But they are just that – choices.

For the thirty million Americans without formal insurance, basic coverage would be an improvement. It would provide reliable coverage of major medical needs without any costs to the patient – or attempts to collect costs from them. For the seventy million low-income Americans with Medicaid, basic coverage would be similar to the coverage they already have.

For the remaining two-thirds of Americans, basic coverage would likely be worse on many – although not all – dimensions. We suspect that many of them would purchase supplementary insurance. This includes the one hundred fifty million Americans who have private health insurance and the sixty-five million elderly and disabled Americans with Medicare. For them, basic coverage would mean longer wait times, for example – along the lines of what those covered by Medicaid or the Veterans Affairs experience – and less well-apportioned waiting areas and hospital rooms.

The coverage we do have is a universal mess. The only option is to tear down the current “system” and rebuild it from the ground up.

Comment by: Don McCanne

In their book, “We’ve Got You Covered,” Liran Einav and Amy Finkelstein have provided a very valuable contribution to the dialogue on healthcare reform in the United States. They have described many of the defects in our very expensive yet highly dysfunctional financing system that result in financial hardship for so many while leaving tens of millions without adequate coverage for care.

In their proposal for reform, they do advocate for a few policies that would be essential in a system of healthcare justice for all. They would include absolutely everyone automatically without the necessity of requiring an insurance premium but rather funding the covered system with a progressive income tax. They would eliminate deductibles and co-payments to make healthcare free on access. They would include primary and preventive care for everyone.

In their policy proposals, they do make one profoundly deficient recommendation. They would propose a basic set of benefits for everyone that would be similar to the current coverage under Medicaid, but, for two-thirds of Americans, coverage would be worse than people now receive under private insurance or Medicare. Basically this would be much worse than the proposed single payer Medicare for All model because it would be Medicaid for All (though the authors reject this label because individuals could purchase upgrades in coverage).

What would be wrong with this? Their intent is to make healthcare affordable for everyone by eliminating premiums, deductibles, and copayments, yet most individuals would be faced with the potential for large out-of-pocket costs unless they did buy a major upgrade in coverage, but then they would have to pay for that. This means that the private insurance industry would continue in its role of diverting billions of our healthcare dollars to its own pecuniary interests with the inevitable high costs and consequent impaired outcomes that we are seeing today.

Also, the healthcare delivery system would likely continue to try to avoid providing care to the sector that was structured like the underfunded Medicaid beneficiaries, and would cater to the more affluent sector that was insured with these supplementary plans, creating a two-tiered or multi-tiered delivery system: basement ward with budget drugs for the basic plan and penthouse medical suite with the million dollar miracle drugs for the affluent. Besides, how many physicians would decline to see patients covered only by the basic plan, accepting only patients with comprehensive supplemental coverage, just as they now decline Medicaid patients?

I’d like to go back a few decades and give a different definition of what basic care is. My brother, Monte, and I practiced primary care in South Orange County. (In 1995, the Los Angeles Times published a human interest story on our practice. We saw routine illnesses, minor trauma, employment physicals, family planning, uncomplicated obstetrics, and other routine problems you would expect, referring more serious problems to the specialists, or to specialized centers. We were paid by private insurance, Medicaid, Medicare, cash, and often not at all, but we basically just provided care as it was needed, even to the undocumented, largely ignoring the payment side of the practice. Primary care with interaction with the rest of the healthcare delivery system is what I would suggest is basic care and is what should be covered by a single payer Medicare for All system. This approach really worked well for our patients. Rather than being care that is stripped down, like the authors suggest, it is just reasonable routine care that we should be giving, rejecting extravagances such as the building of luxurious penthouse medical suites, or the production of new drugs designed to sell for a million dollars.

You might wonder what happened to our practice. Employer sponsored plans converted to managed care and were not interested in including solo practitioners like my brother and me in their panels. MediCal, a very large part of our practice, was privatized and our patients were sent to contracting groups, including our fairly large obstetrical (midwifery) practice. Eventually, Medicare privatization, especially Medicare Advantage plans, also excluded our practice from their panels, though that was about the time we retired. Based on this, I would say that we do not want to look for the insurance industry to provide us with coverage for basic care, as I have defined it.

We just need to reinforce the delivery system, staff it, provide the care that people need, and use public funding to finance the system. We are spending enough now to do that. Truly comprehensive basic care for everyone! Medicare for All!