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Prior Authorization: Less Care, More Illness, Higher Profits

Aetna creates new obstacle to care for seniors, highlighting need for prior authorization reform
California Medical Association
August 10, 2021

One of the nation’s largest health insurance companies has created new bureaucratic hurdles for patients that could prevent many from receiving cataract surgery – part of a trend of insurance companies creating new “prior authorization” requirements that create hurdles for patients and physicians, reduce availability of health care services, and increase insurance company profits at the expense of patient care.

It has become common practice for health insurance companies to create new obstacles for patients, in hopes of not having to provide essential health care to those who need it. The reason for these types of obstacles is simple: Fewer surgeries performed translates to larger insurance company profits.

Like other insurance companies, Aetna has enjoyed record profits through the COVID-19 pandemic. The company, which was acquired by CVS Health in 2018, saw its operating income increase from $1.06 billion in 2019 to $3.07 billion in 2020.

Prior authorization requirements can be challenging for patients, creating  barriers to care and increasing administrative burdens for physicians who must spend time and resources to get approvals as insurance companies design and administer increasingly complex prior authorization systems.

The time delays and administrative burdens also continue to undermine health care outcomes. Most startlingly, in a 2020 American Medical Association survey, 30% of physicians reported that prior authorization led to a serious adverse event for a patient in their care such as hospitalization, medical intervention to prevent permanent impairment, or even disability or death.

Comment by: Don McCanne

Creating barriers to care in order to increase profits is a prime function of private insurers. To them, it is more important than taking measures to be sure that patients receive the care that they need. Prior authorization is a method designed to prevent patients from receiving the care that has been recommended.

How would a public insurance program, such as single payer Medicare for All, differ? Such programs are structured to enable everyone to obtain the care that they need, whereas insurer profits don’t even exist.

Why do our national policies continue to support private insurers through ACA insurance exchanges, Medicare Advantage plans, tax preferences for private employer-sponsored plans, and other government support of private insurance entities?

Health care justice for all is a primary goal of a universal public insurance program. That has to be preferred to the more expensive, inequitable, profit-driven system that we now have that leaves so many without the care they need while driving others into medical debt, not to mention the potential for disability or even death. Doesn’t our government care about us, the people?

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The Financial & Health Hazards of Medicare Advantage

Medicare Advantage Boom Times
Axios
August 11, 2021
By Bob Herman

“Medicare Advantage continued to grow during the pandemic, and it’s increasingly likely a majority of all Medicare enrollees will be in private plans in a few years despite Medicare Advantage’s deep, longstanding problems…

The federal government paid almost $350 billion to MA insurers for this year, a 10% increase from 2020. Every year since 2015, annual spending growth on MA plans has outpaced annual enrollment growth…

Medicare Advantage is consuming more membership and more of the Medicare trust fund, but many enrollees are not sticking with their plans until the end.”

***

Comment by: Isabel Ostrer

Enrollment in Medicare Advantage (MA) is soaring. Why is this a problem? For starters, the program is costly (for both patients and the government). But perhaps more importantly, access to care is severely restricted.

Upfront, it appears that MA plans offer a better financial deal to seniors than traditional Medicare does. Because there are no limits on out-of-pocket spending in traditional Medicare, beneficiaries often buy Medigap policies to the tune of about $2000 per year to buffer against unforeseen costs. MA plans appear to offer a financially viable alternative with low monthly fees and annual limits. But the reality is quite different. The out-of-pocket maximum in 2021 is a whopping $7550. And, according to a recent KFF report, over half of MA enrollees would be on the hook for more money than their traditional Medicare counterparts for a 6-day hospital stay. As we pointed out recently in HJM, this means sick enrollees face major financial barriers.

It’s not just patients who pay big prices for MA – the federal government does too. As Herman points out in his Axios piece, the federal government is seeing large year over year increases in the amount they owe MA insurers. This is a lucrative business for insurers. With annual gross margins that are nearly double the margins in individual and group markets, it’s no wonder new MA insurers are popping up left and right.

But Medicare Advantage isn’t just costly, it’s also deadly. A recent Government Accountability Office report found that MA beneficiaries in the last year of life disproportionately disenrolled to join traditional Medicare. As Eagan Kemp wrote in a recent HJM piece, “Medicare Advantage plans — as they also do with other high-cost patients in poor health — are finding ways to avoid paying the high costs of end-of-life care. They often do this through limiting access to specialized care through narrow networks or other unscrupulous means.”

Private insurers should not exist in Medicare, plain and simple.

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Private Equity Is Buying Up Health Care: Patients (and Doctors) Beware

REPORT TO THE CONGRESS: Medicare and the Health Care Delivery System – Chapter 3 – Congressional request: Private equity and Medicare. MedPAC.
June 21, 2021.

We examined PE business models in three key sectors: hospitals, nursing homes, and physician practices. PE firms have made investments in each sector but have a limited presence: We found that PE firms own about 4 percent of hospitals and 11 percent of nursing homes. We do not have a comparable figure for physician practices. At least 2 percent of practices were acquired by PE firms from 2013 to 2016, but that figure does not account for previous PE acquisitions and appears to have grown since then.

Because there is no single comprehensive source of ownership information, researchers compile data about PE ownership from proprietary datasets and public announcements. As a result, the estimated numbers of health care providers with PE backing are likely too low.

Global Healthcare Private Equity & M&A Report 2021.
Bain & Co.
2021.

At a Glance:

  • Healthcare private equity deal volume increased by 21% to a total of 380 deals in 2020, compared with 313 the year earlier, despite a 14% decline in total global PE activity.
  • The healthcare provider and biopharma sectors were the most active, despite Covid-19’s damage to patient volumes and provider margins, with nearly 150 deals in each sector.

Comment by: David Himmelstein and Steffie Woolhandler

Private equity firms pool outside investors’ funds and a small amount of their own money to buy assets (e.g. hospitals, nursing homes, doctors’ practices or Toys“R”Us), which they hold “privately”, i.e. their stock is not for sale to the public. That private ownership excuses them from the disclosure requirements applicable to publicly-traded firms.

Private equity purchases are usually funded mostly by loans that amplify the investors’ money, with the acquired asset – not the private equity firm or investors – liable for the debt. So when a private equity firm buys a nursing home, the nursing home is on the hook for repayment, not the investors. The private equity firm usually collects large annual “management fees”, assuring that it takes home profits, and aims to sell off the asset in 3-5 years. In the meantime it seeks to gin up profitability in order to drive up the eventual sale price.        

The COVID-19 pandemic has apparently fueled an increase in private equity purchases of physician practices that were struggling because of decreased patient volumes. But exactly how many doctors they own is a mystery, because private equity operates behind a veil of secrecy. Indeed, even MedPAC, Congress’ official Medicare advisory body, couldn’t penetrate that veil.

What is clear is that private equity owns tens of thousands of emergency physicians, a major chunk of dermatologists, and an increasing number of primary care doctors.

The galloping private equity takeover of medical assets should ring alarm bells. These corporate raiders’ only interest is in short term profits. Dentists they own have been pressured to drill healthy teeth in children, dermatologists have been pushed to amp up lucrative procedures, and private equity-owned ED staffing firms are largely responsible for “surprise bills” for ED care. The private equity firm that purchased Hahnemann Hospital – a vital safety net provider in inner city Philadelphia – ran the hospital into the ground, but made a killing by selling off the hospital’s real estate before it crashed into bankruptcy.

In the short term, Congress should lift the veil of secrecy around private equity ownership of medical assets, e.g. by requiring full disclosure of the ownership structure of firms that bill Medicare. (California already requires pharmacies to publicly report the names of individuals and  organizations with any share of ownership, as well as the property owner, management company, and administrator). In the longer term, investor ownership of health care facilities and practices should be banned.      

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The Rice Family Health Reform Legacy

Health Insurance Systems: An International Comparison
Academic Press

2021
By Thomas Rice

Chapter 16, Some Insights

Health outcomes

How much a country invests in its health care system does not have a strong influence on the outcome measures examined here. That is further exemplified by the fact that the United States spends by far the most, but performed among the worst in avoidable mortality, and was the poorest in measures of safe care.

Satisfaction

The most glaring finding regards the US system, which was far more unpopular than any of the others. There are many likely reasons for this. One centers on the economic insecurity people face not only by the lack of comprehensive benefits, but also by the prospect of being without coverage if they lose their jobs.

A second reason for the US system’s unpopularity is likely to be its expense, which requires not only considerable patient cost sharing but also high premiums from employers and employees, and considerable taxes to support Medicare and Medicaid.

A third and more general reason is that the American people do not share a common view on issues such as health care being a right.

Final thoughts

There is little agreement about what aspects of health insurance systems are the highest priority for reform. Different researchers reach entirely different conclusions about what are the overall best health care systems. Nine of the ten countries have, at least broadly speaking, reached similar conclusions about the necessary and desirable underpinnings of their health insurance systems. These include (1) building systems based on the ethic of affordable, equitable access to care, (2) having a single, publicly mandated insurance system to promote fairness and efficiency, (3) using government for health care planning activities involving the supply of resources and constraining prices, and (4) employing economic tools to determine covered benefits and prices, especially for pharmaceutical products. There is a great deal of variety in how each country implements each of these; nevertheless, it would be hard to deny that there is strong international agreement in such critical areas. The United States is a notable exception.

Dorothy Rice, Pioneering Economist Who Made Case for Medicare, Dies at 94
The New York Times

March 4, 2017

Dorothy Rice, a pioneering government economist and statistician whose research about the need of the aged for health insurance helped make the case for the passage of Medicare in 1965, died on Feb. 25 in Oakland, Calif. She was 94.

Health Law Kickoff May Be More Challenging Than Medicare’s Start
capradio
September 30, 2013

Dorothy Rice says California’s implementation of the law (Affordable Care Act) may go more smoothly, because of the state’s rigorous efforts. But she hopes eventually the national health care system will look more like Medicare.

Comment by: Don McCanne

Years ago, our California chapter of Physicians for a National Health Program had the honor of a visit from a most distinguished guest: Dorothy Rice, who had laid the foundations leading to the Medicare program. She really admired what we were doing. We hit it off so well that she had us over to her home for a garden party where we celebrated the prospect of providing Medicare to everyone. As documented above, she hoped that we would have a national health care system that looked like Medicare.

Dorothy’s son, Tom, a respected UCLA health policy professor, recently published a book seeking policy insights from the United States and several other countries. Although many of the lessons drawn would logically lead to advocacy for a single payer Medicare for All system, Tom maintains that all successful systems have lessons for us. He does not recommend single payer; he sees building on the ACA.

We do have one lesson for Tom: Listen to your Mom. She understood the need for Medicare, and, more recently, the need for Medicare for All. We are pleased that you have provided us with the policy science that supports Medicare for All. We invite you to avidly echo your mother’s advocacy for health justice for all via single payer.

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U.S. Health System Implosion / Tipping Point

U.S. longevity down to 78.5 years, other nations 81-84.
U.S. pervasive race disparities in private insurance and health.
U.S. health spending twice the wealthy country average.
U.S. uninsured = 33 million pre-COVID; underinsured = 1/3 of insured.
U.S. healthcare access & outcomes the worst among wealthy countries.
U.S. financial barriers to care for sick high in Medicare Advantage.
U.S. medical debt skyrocketing, impoverishing and imperiling lives.
U.S. insurer profits skyrocketing for years and during COVID
U.S. ambulance services separate, costly, & unreliable.
U.S. doctors burning out from billing-laden EHR.

Comment: by Jim Kahn

Our “system” is no system.
Thousands of health plans, summing to premature death and massive profits.
By no useful metric is it succeeding.
Unbridled corporate greed prevails.
It’s imploding in front of us.

Is it sustainable?
It can’t be.
When is the tipping point?
To a simple, logical, efficient & generous, equitable, humane solution.
Single payer.
Now.

(thanks to Eli Marx-Kahn for input)

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U.S. Health System a Pitiful Last Among Wealthy Nations

Mirror, Mirror 2021: Reflecting Poorly
Health Care in the U.S. Compared to Other High-Income Countries
The Commonwealth Fund
August 4, 2021
By Eric C. Schneider et al.

Issue: No two countries are alike when it comes to organizing and delivering health care for their people, creating an opportunity to learn about alternative approaches.

Goal: To compare the performance of health care systems of 11 high-income countries.

Methods: Analysis of 71 performance measures across five domains — access to care, care process, administrative efficiency, equity, and health care outcomes — drawn from Commonwealth Fund international surveys conducted in each country and administrative data from the Organisation for Economic Co-operation and Development and the World Health Organization.

Key Findings: The top-performing countries overall are Norway, the Netherlands, and Australia. The United States ranks last overall, despite spending far more of its gross domestic product on health care. The U.S. ranks last on access to care, administrative efficiency, equity, and health care outcomes, but second on measures of care process.

Conclusion: Four features distinguish top performing countries from the United States: 1) they provide for universal coverage and remove cost barriers; 2) they invest in primary care systems to ensure that high-value services are equitably available in all communities to all people; 3) they reduce administrative burdens that divert time, efforts, and spending from health improvement efforts; and 4) they invest in social services, especially for children and working-age adults.

***

Comment by: Isabel Ostrer

The Commonwealth Fund compared health systems in 11 high-income countries to identify what policies and practices are associated with better performance. The countries were Australia, Canada, France, Germany, the Netherlands, New Zealand, Norway, Sweden, Switzerland, the United Kingdom, and the United States.

The overall health care system ranking is striking: the U.S. ranks last in every domain except care process. (This includes preventive care, e.g., rates of mammography and influenza vaccination.)

In access to care, which includes affordability and timeliness, we’re last because individuals here are most likely to experience insurance denials, high out of pocket costs, difficulty paying medical bills, and delays in seeing a provider.

To add insult to injury, health care spending in the U.S is uniquely high. In 2019, the U.S. spent 16.8% of its GDP on health care. The next highest spender, Germany, clocked in at 11.7% .

What do we get for all this spending? The U.S. is dead last in health care outcomes. We have the highest infant mortality rate, the highest rate of maternal mortality, and the highest rate of preventable mortality.

So what can we learn from our peer countries? For starters, they all have universal health coverage and no cost barriers. The U.S. has 30 million uninsured … and 40 million underinsured.

The evidence speaks loudly. Sinking more money into a multi-payer health care system serves only to inflate U.S. health care costs without improving access or outcomes. A truly patient-centered system is one that provides universal coverage and shields patients from unnecessary cost-sharing.

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Why Antitrust Enforcement Can Only Go So Far in Health Care

Executive Order on Promoting Competition in the American Economy
The White House
July 9, 2021

Stop Playing Health Care Antitrust Whack-A-Mole
Bill of Health
May 17, 2021
By Jaime S. King

The Sleeper Health Cost Policy
KFF
July 22, 2021
By Drew Altman

Comment by: Allison K. Hoffman and Hannah Leibson

In early July, the Biden Administration issued this high-level executive order focused on promoting competition in the American economy. The order urged the FTC and DOJ to significantly ramp up antitrust enforcement to prohibit future mergers and divest existing anti-competitive arrangements.

The order states in part, “whereas decades of industry consolidation have often led to excessive market concentration, this order reaffirms that the United States retains the authority to challenge transactions” in violation of the antitrust laws.

The problem is that it’s likely too little too late for health care.  For the past few decades, health care consolidation has been on the rise. 

Jaime S. King points out that the rate of consolidation has increased so dramatically that up to 95 percent of metropolitan areas have highly concentrated hospital markets. Private equity investment has driven much of this trend.

As Drew Altman explains, consolidation is negatively impacting quality of care and significantly driving up health care costs for consumers—as much as 50 percent in some hospital systems. When one or two large hospital systems are running the show in a city or region, insurers don’t have any leverage to negotiate lower prices. Consumers have no choice but to pay the higher prices or travel far distances to seek care.

Things like choices of insurance plans or transparency, both mentioned in the Biden Executive Order, will not solve these structural problems on their own. In the months ahead, the impact of COVID-19 will likely accelerate consolidation in many economically disadvantaged regions where hospitals are already deep in the red.

Amped up antitrust enforcement will only go so far in health care, especially considering thin government resources. It could prevent further consolidation. More aggressively, the administration could review merged entities and unravel those that have proven anticompetitive.

All of these measures could be beneficial, but ultimately, comprehensive price regulation is the only way to control the rising health care costs associated with provider consolidation. As Altman highlights, drugs comprise just 10% of health care spending while hospitals represent a whopping 34%. More and more, physician groups are also merging or are affiliating with hospitals and will benefit from their hefty negotiating power to command higher prices.

One option is a federal all-payer system to set price caps or limits on total hospital spending. It could eliminate the large gap between Medicare rates and those commercial insurers are forced to accept in highly consolidated hospital markets. Medicare for All is another means to set rates federally, in one fell swoop, and it would also eliminate the administrative costs associated with having many different payors.

Another option is rate setting at the state level, but this approach would be more difficult to enact and less coordinated. The state of Maryland already has such a model in place, and has seen positive outcomes since it was launched by CMS as a pilot program in 2014. From 2014 to 2019, Medicare spending in Maryland fell 2.8 percent and the state has seen a 4.1 percent decrease in total health care costs. Alongside these cost savings, quality benchmarks across several dimensions have surpassed expectations. This model could inform policy design at the federal level, just as Massachusetts’s reform informed the design of the Affordable Care Act.

Antitrust enforcement is but one piece of the puzzle of controlling health care price inflation, and, unless the FTC and DOJ aggressively unwind the consolidation of the past decades, it is only a very small piece.

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If the policy is right & the politics are wrong, change the politics!

Newsletter Opinion
The New York Times
August 3, 2021
By Paul Krugman

When you’re a wonk trying to be a pundit — or for that matter any kind of technocrat who wants to have real-world influence — it’s usually not helpful to push for policies that you believe would be right in principle but have no political chance of becoming reality.

The prime example for me has been health insurance. If our goal is to make sure that everyone has adequate, affordable health care, why not just pay for everyone’s care? On policy grounds, I’ve never disagreed with the proposition that we should have Medicare for all; there’s even a pretty good case for direct provision of medical care along the lines of Britain’s National Health Service. Why bother with a Rube Goldberg device like Obamacare, which uses regulations and subsidies to nudge private insurers into covering most people?

But the politics are impossible, and not just because of special interests: You’d have to persuade the 170 million Americans with private insurance to accept something completely different. Even though most of them would probably be better off, that’s too heavy a lift. So incremental reform, possibly evolving over time into single-payer, is how it’s going to have to be.

Virchow at 200 and Lown at 100 — Physicians as Activists
By Salvatore Mangione, M.D., and Mark L. Tykocinski, M.D.
New England Journal of Medicine
July 22, 2021

Current Surgeon General Vivek Murthy wrote in 2019 about the need for physicians to be guardians of integrity: “People will accuse us of being political, but if people accuse you of being political because you’re standing up for people who can’t stand up for themselves, then you should do it anyway, because that is at the heart of our profession.”

Comment by: Don McCanne

Anyone who has studied the subject realizes that a well-designed single payer system would provide equitable, high quality health care for everyone at a price that each of us could afford, paid for with progressive taxes. In principle, the concept is the moral imperative, but it does not mesh with the politics.

So what do we do? Like Paul Krugman, who represents the intellectuals who do understand, do we say that it is too heavy a lift? And then do we move on to insufficient and unsatisfactory tinkering? No, that is not right. The only right course is the one that accomplishes our goal of health care justice for all.

If the policy is right and the politics are wrong, you change the politics, not the policy. That would move us into the realm of politics, but, as Vivek Murthy said, since we’ll be standing up for people who can’t stand up for themselves, we should do it anyway. It’s simply the right thing to do.

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Dental Care Access for the Elderly: A Gaping Shortfall

Medicare and Dental Coverage
KFF
July 28, 2021
By Meredith Freed et al

Key Findings:

  • Nearly half of Medicare beneficiaries (47%), or 24 million people, do not have dental coverage, as of 2019.
  •  Almost half of all Medicare beneficiaries did not have a dental visit within the past year (47%), with higher rates among those who are Black (68%) or Hispanic (61%), have low incomes (73%), or who are in fair or poor health (63%), as of 2018.
  • Average out-of-pocket spending on dental services among Medicare beneficiaries who had any dental service was $874 in 2018. One in five Medicare beneficiaries (20%) who used dental services spent more than $1,000 out-of-pocket on dental care.

***

Comment by Isabel Ostrer

The Medicare website explicitly reads, “Medicare doesn’t cover most dental care, dental procedures, or supplies, like cleanings, fillings, tooth extractions, dentures, dental plates, or other dental devices,” so it’s no wonder that a recent analysis by the Kaiser Family Foundation (KFF) found that 24 million Medicare beneficiaries lacked dental coverage in 2019. These disparities in access to dental care are even greater for non-white and low-income Medicare beneficiaries.

As Dr. Sanjeev Sriram said during a rally on July 30th marking the 56th anniversary of the Medicare program, “Your eyes, your ears, and your teeth are connected to your body… These things are not luxury items. Your teeth are not luxury items.” Why, then, in the richest country in the world, do we separate dental care from health care?

The simple answer boils down to an historical anomaly: dentistry has its roots in the barber profession – until the 1800s barbers routinely pulled painful teeth after they finished trimming a patron’s hair – and was consequently shunned by the medical profession. When the first medical schools were created dentistry was not recognized. Subsequently, when Medicare was enacted in 1965 dental services were not covered.

This history ignores that oral health is intimately tied to overall health and well-being. Dental pain is a leading reason for emergency department visits. Poor oral health is associated with numerous medical conditions, including cardiovascular disease and rheumatoid arthritis.

As Congress works towards passing a trillion dollar infrastructure bill that includes Medicare reform, adding vision, hearing, and dental benefits should be a top priority. But while we’re at it, we should push for sweeping health reform. Medicare for All would ensure that all Americans – not just seniors – have access to comprehensive benefits including dental coverage.

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Physicians are unsuited as bill collectors

The Increasing Role of Physician Practices as Bill Collectors Destined for Failure
JAMA
July 30, 2021
By A. Jay Holmgren et al

Through increasing deductibles, coinsurance, and co-payments, the privately insured population in the US is responsible for a larger share of health care out-of-pocket costs. Although many studies have examined the effects on patients, the implications for physicians have received less attention. The increase in cost sharing is forcing many physicians and health systems to take on the role of bill collectors. It is a task for which physician practices are unsuited. The result is a system with substantial administrative burden, frustrated patients struggling with confusing bills, and physicians receiving less compensation.

Moving away from deductibles and toward fixed-dollar co-payments as a cost-sharing mechanism could simplify the billing experience for patients and the collection process for physicians while retaining the ability of payers to steer patients to lower-cost care with financial incentives.

Conclusion

The growth of cost sharing and HDHPs has resulted in patients’ taking on more of the cost of their own care and in physicians’ holding the risk and responsibility of collecting large dollar amounts. Physician offices are poorly suited to the task, exacerbating a complex and confusing system for patients and clinicians alike. New private firms have developed products to simplify, consolidate, and improve billing. However, these private-sector solutions may help ameliorate the problem but will not solve it. Only larger shifts in how out-of-pocket costs are envisioned will meaningfully address the burden of high out-of-pocket spending on both patients and physicians.

Comment by Don McCanne

This JAMA Viewpoint article explains the burden of out-of-pocket cost sharing on both the patient and the physician – financial barriers for the patient, and a costly administrative burden for the physician.

Cost sharing can interfere with the delivery of care. High cost sharing may cause individuals to forgo beneficial health care. Even modest cost sharing can cause individuals with limited resources to forgo essential care. Also cost sharing has been a significant contributor to the expansion of medical debt with its associated bankruptcies. Cost sharing is detrimental to the goal of health care justice for all.

The purported reason is that the financial disincentives of cost sharing steer patients to lower-cost care. But do patients really shop cost-sharing prices? And would any modest differences have a significant impact on the total cost of care?

If we are trying to control health care spending, wouldn’t it be much more effective and efficient to institute administered pricing with a public plan? We should be able to get pricing right when the public administrators take into consideration both the legitimate costs and fair compensation for physicians, and the interests of the potential patients subjected to progressive taxes.

The authors acknowledge that physician offices are “poorly suited” to the task of collecting cost sharing payments, but the solution is not more of the same by moving from deductibles to co-payments. The solution is to dispense with patient cost sharing and move to universal, first dollar coverage, which would also eliminate the scourge of medical debt and save lives.