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A priceless answer to the question of physician pay reduction under Medicare for All

May 24, 2019

Topics: Quote of the Day

If you think the fight with insurance companies is tough, just wait until single-payer advocates have to go head-to-head with doctors.

By Mike Konczal
The Nation, May 13, 2019

The debate over expanding Medicare is at the center of the fight for the Democratic presidential nomination. Yet for such a crucial topic, there are still two questions that advocates—especially those championing Medicare for All—have yet to properly answer.

The first is how to take on the medical establishment and pay doctors less. Medicare for All would eliminate greedy and needless insurance companies, which will fight to the bitter end to keep making their fat profits. But even that battle pales in comparison with taking on the doctors, hospitals, and providers who charge private insurance higher prices for medical services. To understand this, consider where Medicare for All would get its savings. Proponents argue that Medicare for All would increase government spending but reduce overall spending on health care. That’s true; over the course of 10 years, Medicare for All could save $2 trillion. But only about 20 percent of those savings would come from eliminating insurance companies, while another 10 percent would come from cost controls on prescription drugs. The remaining 70 percent would come from cutting rates for medical providers. Without those cuts, health-care spending could increase more than $3 trillion under Medicare for All. That’s a $5 trillion swing, all determined by the question of how to tackle the medical establishment.

During a campaign, there’s good reason to focus on the insurance industry first; it’s the thing that most people absolutely hate about our broken health-care system. But if the campaign fails to make the case that the prices charged by medical providers are too high, then the politics could shift against Medicare for All once the doctors start complaining. The medical establishment will insist that hospitals will close, especially in poorer areas, and without a set of responses in place, that argument could imperil the push for health-care reform.

The political instinct will be to buy off the medical establishment, even as that increases the cost of the proposal. When Aneurin Bevan, the architect of Britain’s National Health Service, was asked how he overcame the initial resistance of doctors, he replied that he “stuffed their mouths with gold.” Today, that would involve maintaining the current high rates seen in private-insurance payments. And even then, when President Harry Truman tried to emphasize how much better off American doctors would be under his universal plan in 1945, they waged what was then the most expensive lobbying campaign in history to defeat it.

(The second question – who will bear the taxes – will not be addressed in this Quote of the Day, though the correct answer is that the taxes would be progressive and thus equitable for all. – DMc)

Mike Konczal is a contributor to The Nation and a fellow at the Roosevelt Institute.


A Priceless Answer

The Nation, Letters, May 17, 2019

To justify sounding a false alarm that doctors’ opposition will torpedo single-payer health-care reform, Mike Konczal turns to a Koch-brothers-funded analysis that claims Medicare for All would either slash doctors’ income and hospital funding or break the bank [“The Score: $5 Trillion Questions,” May 13].

Konczal credulously adopts the Koch study’s underestimate of single-payer savings on insurance overhead. But more important, he (like that study) ignores overwhelming evidence that single-payer would save doctors and hospitals vast amounts on billing, insurance paperwork, and other wasteful tasks that are required by the current byzantine payment system but would be eliminated under single-payer. For instance, a recent Harvard Business School and Duke University study published in the Journal of the American Medical Association found that the average primary-care doctor at an efficient group practice spent $99,581 (and 243 hours) annually on billing. That’s four times what Canadian doctors spend interacting with insurers.

The $75,000 savings in per-doctor billing costs means doctors’ take-home pay could be stable even if their per-patient revenue goes down. It also means they could use the time they currently spend jousting with insurers to deliver (and bill for) more care.

A similar calculus applies to hospitals. At a six-hospital system in Toronto, the equivalent of just 5.5 full-time employees handle all insurance billing and patient collections. A comparable hospital system in the US employs more than 200 people for those tasks. US hospitals spend one-quarter of their budgets on administration, versus 12 percent in Canada. Streamlining hospital administration by paying hospitals global budgets (the way we currently pay fire departments and Canada pays hospitals) would produce major savings, freeing up vast resources for care. Indiscriminately slashing hospital budgets, by contrast, would be neither necessary nor desirable under Medicare for All reform—and the House and Senate bills propose no such thing.

All told, single-payer could save doctors and hospitals about $225 billion annually on billing and bureaucratic costs (in addition to about $220 billion saved on insurance overhead and tens of billions more from streamlining the billing for nursing homes, home-care agencies, etc., and by lowering drug prices), offsetting the costs of providing first-dollar comprehensive coverage to everyone in the nation. Even though Konczal doesn’t understand that, most doctors do. That (and altruism) explains why single-payer is now doctors’ favorite health-care-reform option and 23,000 have joined Physicians for a National Health Program.

David U. Himmelstein, MD
Physicians for a National Health Program
New York City

Steffie Woolhandler, MD, MPH
Physicians for a National Health Program
New York City

Adam Gaffney, MD, MPH
Physicians for a National Health Program



By Don McCanne, M.D.

Since prices have played an outsized role in driving up health care spending, it is widely assumed that price reductions under a single payer Medicare for All system would first have to come from the take-home income of physicians, thus likely provoking a rebellion by physicians against single payer reform. Having not completed his homework, Mike Konczal seems to have accepted this invalid conclusion, as have many others, including the media.

What is left out is that the single payer model would result in a tremendous reduction of administrative costs within the physicians’ practices. The overhead savings could very well be more than enough to offset potential fee reductions, thereby avoiding any reduction in take-home pay. Also physicians would be paid for care that is now provided as charity and for unavoidable care that the uninsured and underinsured currently may be unable to cover and thus is written off as bad debt. Plus they would no longer have to absorb the losses with Medicaid patients since they would transferred into the universal single payer program. There could also be some increase in the volume of services, increasing marginal income, because those who currently forgo care because of financial barriers would no longer have to since they would have access to guaranteed, prepaid health care.

Under this scenario, it is possible that physicians could see increases in net income, though we would assume that our public stewards would negotiate rates that are both fair for the health care delivery system and fair for the taxpayers. This goal is certainly achievable if we had our own public monopsony negotiating prices and global budgets for health care products and services serving the greater public good. That would be in sharp contrast to the dysfunctional health care market that we now have. Physicians could dump much of their administrative burden and devote more of their efforts to their altruistic pursuit of taking care of patients, and isn’t that what it’s all about?

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About the Commentator, Don McCanne

Don McCanne is a retired family practitioner who dedicated the 2nd phase of his career to speaking and writing extensively on single payer and related issues. He served as Physicians for a National Health Program president in 2002 and 2003, then as Senior Health Policy Fellow. For two decades, Don wrote "Quote of the Day", a daily health policy update which inspired HJM.

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