The 5 largest conglomerates combining health insurance and pharmacy benefits are on track this year to be bigger than the 5 preeminent tech companies.
The big picture: Anthem, Cigna, CVS Health, Humana and UnitedHealth Group cumulatively expect to collect almost $787 billion in 2019, compared with $783 billion of projected revenue for Facebook, Amazon, Apple, Netflix and Google.
Centene, the nation’s largest Medicaid managed care provider, wants Congress to change the eligibility requirements around Medicaid, the government-sponsored safety net program that covers one in five low-income Americans.
Its proposal would ultimately push more people onto the Affordable Care Act exchanges by allowing states to adopt a partial Medicaid expansion, an idea typically embraced by red states.
CEO Michael Neidorff told Healthcare Dive the company has been quietly talking to lawmakers on both sides of the aisle on Capitol Hill about the plan, though he emphasized nothing of substance will happen until after the 2020 election.
Centene says its proposal is an attempt to strengthen the ACA markets by increasing the pool of people while enticing holdout states to partially expand their Medicaid programs.
“I think there’s a way to get it done,” Neidorff told Healthcare Dive. “We have a very powerful Washington office and they’ve been working with leadership and their staff.”
Centene filed lobbying forms totaling about $2 million in spending in the congressional lobbying database for 2019, as of Dec. 11. In 2018, the payer reported spending roughly $2.5 million.
However, policy experts caution that it would result in increased spending for the federal government and fewer protections for those enrolled in Medicaid who are then pushed into the exchanges.
It’s unclear how receptive Congress will be, but experts were skeptical of any consensus on the polarizing health law.
“It would be a very major change. I certainly don’t see that happening. It’s opening up the ACA and as we know from past history, it’s a battle royale when you go into the ACA,” Joan Alker, executive director and co-founder of the Center for Children and Families at Georgetown University, told Healthcare Dive.
Under the ACA, states can expand their Medicaid programs to cover all adults whose annual incomes does not exceed 138% of the federal poverty level, or $17,236 for an individual.
Centene’s proposal calls for lowering that income ceiling from 138% to 100%, or $12,490 for an individual.
That would shrink the pool of who is eligible for Medicaid and push those people into the exchanges. Neidorff said the move would grow the exchange pool and ultimately drive down prices. High costs have attracted criticism as they play a role in forcing those who are not subsidized to leave the market.
For Centene, it would be a notable shift because its core business has long been in Medicaid. The insurance exchanges only became a viable business beginning in 2013 with the advent of the ACA. It’s a nod to how important the exchange business has become for the payer.
Centene arguably stands to benefit the most as the nation’s largest insurer on the exchanges in terms of enrollment, plus the exchanges generate higher profit margins than its Medicaid book of business.
“You move those lives into exchange and your profitability is higher,” David Windley, an analyst with Jefferies, told Healthcare Dive.
In the states that have not expanded Medicaid, there are about 2 million people with incomes between 100% and 138% of the federal poverty level, according to the Kaiser Family Foundation.
Hospitals and providers are likely to favor the proposal because Medicaid plans tend to pay less than commercial ones. The idea could garner support from states with tight budgets as some, even Massachusetts, have already expressed a desire to adopt a partial expansion. (Both the Trump and Obama’s administrations have denied providing the enhanced match rate for states seeking partial expansions).
Still, there are potential drawbacks, according to analysts and policy experts. For example, the plan could potentially cost taxpayers more if there is a greater shift to the exchanges away from Medicaid coverage.
“Medicaid is broadly accepted as the cheapest coverage vehicle in the country,” Windley said, noting that the exchanges are typically a more expensive insurance product than Medicaid coverage.
Plus, because of the way the ACA was written, the federal government would be forced to pick up the entire tab of the subsidies for those between 100% and 138% of FPL.
“As a result, the states save money for every beneficiary whom they can move from Medicaid into their exchanges,” according to a previous paper in the New England Journal of Medicine.
However, policy experts warn the proposal may not be in the best interest of Medicaid members who would migrate to the exchanges.
These members are better off with Medicaid, Alker said.
“From a beneficiary perspective it’s problematic because there are no premiums in Medicaid for that group, 100-138 [FPL]. The cost sharing is very limited,” she said.
Plus, there are benefits in Medicaid members would no longer have access to if they move to the exchanges, Adrianna McIntyre, a health policy researcher at Harvard University, told Healthcare Dive, including non-emergency transportation and retroactive eligibility.
Centene argues many states have avoided expanding Medicaid because of cost concerns, which then leaves some residents without access to affordable care, particularly those in the coverage gap, or those with incomes below 100% of FPL.
If a partial option convinces some holdout states to expand “that’s a tradeoff some may be willing to make,” McIntyre said.
Some states that did expand are looking for ways to curb costs and have decided to implement work requirements, Neidorff noted. He believes the proposal is the answer to both these problems for states.
Centene’s plan comes as a slate of Democratic presidential contenders are calling for “Medicare for All,” a single-payer or public-option healthcare system.
Not surprisingly as such a plan would at a minimum sideline private plans and at the extreme eliminate private payers, Neidorff dismissed the idea.
He estimates his plan would cost $6 billion a year, which he characterized as “very affordable” when compared to a Medicare for All plan, which some studies estimate could cost as much as $32 trillion over 10 years.
Still, some policy experts say the change being proposed by Centene is a tall order.
Though the changes may seem small, the consequences of adopting a partial expansion are large, researchers wrote in a NEJM report: “The damage to Medicaid beneficiaries, the exchange population, and the federal budget could be serious.”
https://www.healthcaredive.com/news/health-insurers-stable-ma-seen-diminishing-in-2020-fitch/568859/
Even anticipating an increase in the growth of U.S. health expenditures, Fitch expects insurers to deliver solid operating results, including improved medical loss ratios, for 2020.
There is even a chance for insurers to garner positive ratings outlooks as many look to continue to execute on merger integration and deleveraging, according to Fitch.
Thanks in part to the return of the health insurance fee, Fitch expects medical loss ratios to drop to 82.5% in 2020. A decrease from the expected 83.9% for the full year of 2019 for the nation’s eight largest publicly traded insurers, which cover about 165 million people, according to Fitch.
MLR is an important measure, showing the amount an insurer spends on medical claims as a percentage of premiums. Lower MLRs leave more room for covering administration costs and garnering profit.
Even an upcoming election year and a slate of Democratic presidential hopefuls touting support to expand Medicare, the agency does not expect seismic changes to the system.
“Healthcare will certainly continue to be one of the most prevalent discussion topics among candidates for the U.S. presidency in 2020, but Fitch does not anticipate significant change in the structure of the U.S. healthcare system over the next couple of years,” the report said.
The agency also said it expects major mergers to slow significantly in 2020. The insurance sector has experienced significant M&A activity over the last few years, including CVS Health’s buy of Aetna and Cigna’s acquisition of Express Scripts. Centene is near closing on its purchase of rival WellCare.
Fitch expects consolidation activity next year to focus more on “modest build-out of care delivery opportunities in various regions or care management and technology initiatives.”
https://www.healthcarefinancenews.com/node/139468
Changes in insurance benefit design that shift greater financial responsibility to the patient, rising healthcare costs and confusing medical bills will continue to drive growth in bad debt — often faster than net patient revenue, according to a new report from Moody’s.
Legislative proposals to simplify billing have the potential to reduce bad debt, but the downside for hospitals is that they’ll likely introduce additional complexity to billing processes and complicate relationships with contracted physician groups. A recent accounting change will reduce transparency around reporting bad debt.
Higher cost sharing and rising deductibles are the main contributors to the trend of patients assuming greater financial responsibility, a trend that’s been occurring for more than a decade, and that will further increase the amount of uncollected payments. Hospitals and providers are responsible for collecting copays and deductibles from patients, which may not always be possible at the time of service; the longer the delay between providing service and collecting payment, the less likely a hospital is to collect payment.
On top of that, the higher an individual’s deductible is, the greater the share of reimbursement that a hospital has to collect. The prevalence of general deductibles increased to 85% of covered workers in 2018, up from 55% in 2006, and the amount of the annual deductible almost tripled in that time to an average of $1,573.
Multiple factors are driving the trend toward higher cost sharing, including a desire among employees and employers for stable premium growth despite steadily rising healthcare costs and the growing popularity of high deductible health plans.
WHAT’S THE IMPACT
Hospitals face an uphill battle when it comes to reducing bad debt. Strategies include point-of-service collections, enhanced technology to better estimate a patient’s responsibility for a medical bill, and offering low-cost financing or payment plans.
A common feature of these approaches is educating patients about what portion of a medical bill is their responsibility, after taking into account the specifics of their insurance plan. But hospitals often find it hard to provide reliable cost estimates for a given service, which can thwart efforts to provide patients with an accurate estimate of their financial responsibility.
One difficulty is that medical bills partly depend on the complexity of service and amount of resources consumed — which may not be known ahead of time. There’s also the need to incorporate specific benefits of the patient’s own insurance plan. A certain amount of bad debt is likely to arise from patients accessing emergency care given the insufficient time to determine insurance coverage.
Another difficulty in billing is surprise medical bills, received by insured patients who inadvertently receive care from providers outside their insurance networks, usually in emergency situations. While the term “surprise medical bills” refers to a specific, narrow slice of healthcare costs, they have become part of the broader debate about the affordability and accessibility of U.S. healthcare.
THE LARGER TREND
To minimize surprise bills, Congress is considering proposals to essentially “bundle” all of the services a patient receives in an emergency room into a single bill. Under a bundled billing approach, the hospital would negotiate a set charges for a single or “bundled” episode of care in the emergency room. The hospital would then allocate payments to the providers involved.
This approach, which major hospital and physician trade groups oppose, has the potential to significantly affect hospitals and disrupt the business models of physician staffing companies, according to Moody’s. Many hospitals outsource the operations and billing of their emergency rooms or other departments to staffing companies. Bundling services would require a change in the contractual relationship between hospitals and staffing companies.
Another recent proposal in Congress would require in-network hospitals to guarantee that all providers operating at their facilities are also in network. This approach adds significant complexity because many physicians and ancillary service providers are not employed or controlled by the hospitals where they work. Some hospitals would likely seek to employ more physicians, leading to increases in salaries, benefits and wages expense.
The report also shows a growing income gap in cost-related delays. In 2016, for instance, one-fourth of U.S. households earning less than $40,000 a year reported cost-related delays, vs. 13 percent for households making more than $100,000. In 2019, the rate of cost-related delays among poorer households shot up to 36 percent, while the rate for the richer group remained at 13 percent.
Gallup cautions that the Trump presidency may be influencing these numbers on a partisan level: From 2018 to 2019, the share of Democrats reporting cost-related delays for serious conditions jumped from 22 percent to 34 percent. Among Republicans, the year-over-year increase was more subdued, from 12 percent to 15 percent.
Gallup data also show Democrats (31 percent) self-report higher rates of preexisting conditions than Republicans (22 percent).
“Whether these gaps are indicative of real differences in the severity of medical and financial problems faced by Democrats compared with Republicans or Democrats’ greater propensity to perceive problems in these areas isn’t entirely clear,” according to Gallup’s Lydia Saad. “But it’s notable that the partisan gap on putting off care for serious medical treatment is currently the widest it’s been in two decades.”
Data from the Kaiser Family Foundation’s Employer Health Survey underscores the severity of the health-care spending problem. In 2019, 82 percent of covered workers must meet a deductible before health-care coverage kicks in, up from 63 percent a decade ago. “The average single deductible now stands at $1,655 for workers who have one,” according to KFF, “similar to last year’s $1,573 average but up sharply from the $826 average of a decade ago.”
Deductibles have surged 162 percent since 2009, data show — more than six times the 26 percent climb in earnings over the same period.
There are many factors driving up the cost of care for most American families. Administrative costs are a big part of the issue: Health insurance is largely a for-profit industry, meaning insurance companies and their shareholders are reaping a percentage of your deductibles and co-pays as profit.
Many hospitals, too, are raking in profits. In recent years, surprise billing practices and outrageous markups for simple drugs and services have drawn the ire of lawmakers looking for ways to reduce health-care spending.
Physician pay is another significant expense. The Commonwealth Fund, a health-care research group, estimates American doctors earn “nearly double the average salary” of doctors in other wealthy nations. The American Medical Association, a trade group representing doctors, has a long history of opposing efforts to implement European-style single-payer health-care systems in the United States.
The American health-care system, in other words, works pretty well for the powerful players in the health-care industry. Hospitals and insurance companies are reaping significant profits. Doctors are earning high salaries. But what are the rest of us getting in return for our ever-growing co-pays and deductibles?
The national Centers for Disease Control and Prevention has an answer, and it’s an indictment of our health-care system: The United States is in the midst of the longest sustained drop in life expectancy in at least 100 years. Relative to other wealthy countries, lives in America are short and getting shorter.
The disparities domestically are perhaps even more shocking: In the nation’s wealthiest places, where the high cost of modern health care remains within relatively easy reach, life expectancies are literally decades longer than in America’s poorest places.
As health care becomes more expensive and economywide inequalities more pronounced, these disparities in life span are likely to get worse — and the share of Americans skipping out on much-needed medical care only likely to grow.
Fixing U.S. Healthcare blog’s two-year anniversary is a good time to take stock of what has changed in our approach to fixing U.S. healthcare. And a good time to review highlights of the last year.
Elevator Pitch for Fixing U.S. Healthcare
Let’s start with an “elevator pitch” summary:
The U.S. healthcare system has outgrown itself, now comprising almost 20% of the gross domestic product and still rising. It delivers ever more treatments that have diminishing “marginal benefit.” It does so at a cost far beyond the treatments’ true value to either individuals or to society, in all too many cases. And at prices double those in other developed countries. Now these costs are biting into the average family’s wallets. In 1994, the Oregon Health Plan took control of healthcare and managed its costs for 8 years by combining cost-benefit analysis with well-cultivated public engagement. This would be a good starting place for fixing U.S. healthcare. But 25 years later, this approach alone would not be sufficient. Powerful interests have now rigged the healthcare system for profits, not health. I conclude that only a grassroots movement to harness the full political, social, legal, economic and ethical weight of the federal government can encircle these entrenched interests and rein them in. There are several models for U.S. healthcare reform that could fall squarely within American tradition and pragmatism.
Changes in this Blog’s Approach
Let’s look at how this blog’s messages have evolved this year.
Updated message: Relentless increases in U.S. spending on healthcare do indeed reduce individual households’ disposable income, especially as households pay ever more of the share of healthcare costs. Healthcare costs also do eat into corporate profits, and blunt international competitiveness. However, healthcare spending is not necessarily a drag on the economy. Rather, it is now a major component of our national economy, accounting for 18.3% of total gross domestic product. This is because the U.S. has evolved into a post-industrial services-oriented economy. There is nothing inherently problematic about healthcare services in this kind of economy. The problem, however, is that excessive healthcare spending is diverting human and financial resources away from other priorities, such as education, research, infrastructure, housing. Furthermore, the marginal benefit of more healthcare spending is dwindling, while the unrealized value of deferred investment in these other priorities is growing – mounting opportunity costs.
Updated message: Economist Larry Summers dismisses the idea of an impending fiscal calamity. He explains that the “real” interest rate (nominal minus inflation) has been at historic low levels for the last two decades, resulting in no increase on the actual proportionate amount paid to service the debt. Nevertheless, he cautions federal budgeters not to deepen the debt any further, but rather pay as we go for any new programs. Thus, the reasons to fix U.S. healthcare are not to avoid national disaster, but rather to improve worker productivity, rebalance fiscal priorities, and promote societal cohesion and business climate.
Updated message: Excessive healthcare spending is indeed driven by administrative complexity (estimated at $265.6 billion annually) and to a lesser degree by low-marginal-benefit treatments (estimated at $75.7 billion to $101.2 billion) (2012-2019 data). Other elements of non-costworthy, wasted spending are:
But the other big driver of over-spending is pricing failure in imperfect markets, amounting to $230.7 billion to $240.5 billion.
Updated message: Given the prominence of market and pricing failures, this blog concludes that healthcare business interests, and their professional and political allies, have knowingly and willfully coopted healthcare for the purpose of profits. These interests have superseded the health of the public, often undermine patient-centered care, and, at times, result in actual harm.
Updated message: Since the system is rigged by powerful, well-financed interests, it can be fixed only by the full faith and clout of the federal government responding to an informed grassroots movement. The most likely format for healthcare reform would be gradual but deliberate transition to a single-payer system. This would then be followed by systematic remedies to the 6 categories of unjustified “wasteful” spending, including technology assessment using cost-benefit analysis.
Americans rarely switch to new health plans when the annual insurance-shopping season comes around, even if they could have gotten a better deal, Axios’ Bob Herman reports.
The bottom line: People loathe shopping for health plans, and many are bad at it, for one major reason: “It’s just too hard,” Tricia Neuman, a Medicare expert at the Kaiser Family Foundation, told Bob last year.
Reality check: During any insurance program’s annual enrollment period, most people end up staying with the status quo, if it’s an option, instead of picking a new plan.
Between the lines: Buying health insurance — a $20,000 decision for the average family — is more complicated than buying furniture.
The big picture: Shopping for insurance is difficult enough for most people. Shopping for actual doctors, tests and services is even more difficult and less widespread, and likely won’t change if prices are unlocked.
Many 2020 Democrats’ health care proposals feature aggressive price regulations, either as a feature or a byproduct — a sign the party has largely given up on the idea that competition alone can keep costs in check.
Between the lines: It’s not just Democrats. As public outrage has grown over prescription drug prices and surprise medical bills, there’s been bipartisan congressional interest in regulating prices.
“The two big trends are increasing out-of-pocket costs to consumers and increasing disparity between public and commercial rates — and therefore consumer and employer pushback on those dynamics — and policymakers are now attempting to respond.”
— Chris Jennings, a Democratic health care consultant
The big picture: “Medicare for All” brings all provider and drug reimbursements under the federal government’s control.
Even the more moderate candidates’ public-option plans would enroll more Americans in government health care plans that set rates. And some have pitched ideas like limiting how much providers can charge for out-of-network care.
All of the leading 2020 candidates have proposed drug policies, ranging from limiting how much drug companies can increase their prices to allowing the federal government to strip the patent from drugs that are deemed too expensive.
The other side: The industry hates all of these ideas.
It’s Thanksgiving Eve. Which for Health 202 begs this question: What is everyone thankful for this year when it comes to health policy?
We suspect that maybe – just maybe –you’d get vastly different answers from doctors versus insurers versus drugmakers versus consumers versus any other stakeholder in the $3.6 trillion U.S. health-care industry complex. Everyone has competing interests, which is a prime reason why the country’s besetting problems of ever-rising costs and subpar medical outcomes never quite seem to get solved.
So before you tune out the news cycle for Turkey Day, here’s our best guess at what’s giving each health-care stakeholder an attitude of gratitude.
—The White House and Republicans: Democrats are fixated on Medicare-for-all.
The GOP could hardly be more eager to focus on Medicare-for-all proposals from the Democratic presidential candidates. They view it as a way to veer the political conversation away from their own, unpopular actions on health-care policy and to depict Democrats as out-of-touch with voters.
President Trump and his top health officials have repeatedly decried Medicare-for-all, including during an October speech where the president announced an executive order boosting the role of private plans in the Medicare program.
“Every major Democrat in Washington has backed a massive government health care takeover that would totally obliterate Medicare,” the president said during that address. “These Democratic policy proposals … may go by different names, whether it’s single payer or the so-called public option, but they’re all based on the totally same terrible idea: They want to raid Medicare to fund a thing called socialism.”
—Democrats: The Trump administration is refusing to defend the Affordable Care Act.
Democrats are well aware that the refusal by Trump’s Justice Department to defend the Affordable Care Act from a challenge by GOP-led states is a political gift. They spent the 2018 election castigating the administration for not standing by the health-care law’s protections for patients with preexisting conditions – and it helped them win the House majority.
They plan to hammer that message again in 2020, as they seek the White House.
—The Department of Health and Human Services: Obamacare hasn’t been struck down (yet).
A federal appeals court is expected to rule any time now on the challenge to the ACA, which was upheld by a lower court last year. As The Health 202 has written, the decision against defending the law was a deeply controversial one inside the administration.
HHS Secretary Alex Azar and Seema Verma, administrator of the Centers for Medicare and Medicaid Services, tried to persuade the White House to defend the law. If the courts ultimately strike down the ACA, the administration will be on the hook to propose a replacement that would preserve health coverage for millions of Americans who gained it under the health-care law.
—Health-care advocates: Marketplace premiums are somewhat more affordable.
After several rough years for the ACA’s individual marketplaces, they got some good news this year. Average premiums for mid-level “silver” plans fell four percent for 2020 – a marked shift from the double-digit increases shoppers have typically seen.
That doesn’t mean plans are suddenly affordable for consumers ineligible for government subsidies. But it does mean insurers have found a sustainable way to keep participating in the marketplaces – and the marketplaces are here to stay for people without access to employer-sponsored coverage.
—Drugmakers: Chances for a major, bipartisan drug pricing deal this year are fading.
One of the pharmaceutical industry’s biggest fears is that Congress passes legislation allowing the federal government to directly negotiate lower prices in the Medicare program – a move the industry describes as government “price-fixing.”
Trump used to support allowing direct negotiations, and his staff was even in discussions with House Speaker Nancy Pelosi’s (D-Calif.) office earlier this fall over the potential for a bipartisan effort along these lines.
But the president and his aides have increasingly distanced themselves from Pelosi’s bill to allow direct negotiations. Now it looks like House Democrats will pass that measure as a messaging tactic, only to see it blocked in the GOP-led Senate. A bipartisan Senate bill capping how much drugmakers can annually raise prices has somewhat better prospects, but even that measure has made many Republicans suspicious.
In the end, only minor and less-controversial drug pricing measures may end up being attached to a longer-term spending bill.
—Doctors and hospitals: Any legislation protecting patients from “surprise” medical bills will almost certainly include arbitration – an approach that means higher payments for them.
Virtually every member of Congress agrees American patients should be protected from the surprise bills that can result when they visit an emergency department outside their health plan’s provider network or get care from an out-of-network provider at an in-network hospital.
But how to solve that has turned into an insurers-versus-doctors food fight.
Insurers and the Trump administration want to use a benchmarking approach to resolve out-of-network bills, in which the payments are tied to average prices in the same geographic area. That approach would save the government money, the Congressional Budget Office has said.
But doctors – and some dark-money groups that represent their interests – have been spending millions of dollars to push Congress toward adopting an approach called arbitration. In arbitration, which CBO has said would cost the government more money, the medical provider and the insurer each submit a bid to a third party arbiter, who then make a final decision.
Doctors believe arbitration would translate to beefier payments for them – and outcomes from New York’s arbitration system supports that notion. So if Congress passes surprise billing legislation, it will likely include some element of arbitration given the heavy influence by the doctor lobby.
—Regular Americans: Not much.
We hate to say it, readers, but there’s little for you to be thankful for this year when it comes to health-care policy. Costs for employer-sponsored coverage are going up and coverage plans are getting less generous. Congress appears unable to pass major reforms on the biggest consumer concerns. And the next election is likely to result in a government severely split over how to improve health-care – making it likely the status quo will prevail for some time.
But Happy Thanksgiving, anyway!
The big Democratic talking point has a big political weakness: It could wipe out thousands of jobs in places like Pittsburgh that have built their new economies on health care.
Deanna Mazur, the daughter of a retired steel mill worker who works as a medical billing manager, finds some things to like about the “Medicare for All” policy that she’s been hearing politicians talk about. She likes the notion that all Americans would have health insurance. And it would simplify her own job quite a bit if there were only one place to send medical bills, instead of the web of private companies and government programs that she deals with now. “It would definitely be easier,” Mazur says.
Then again, if it were that easy, her job might not exist at all.
Mazur’s job and those of millions of others have helped turn health care into the largest sector of the nation’s economy, a multitrillion-dollar industry consisting in part of a huge network of payers, processers, and specialists in the complex world of making sure everything in the system gets paid for. If the health care system were actually restructured to eliminate private insurance, the way Medicare for All’s advocates ultimately envision it, a lot of people with steady, good-paying jobs right now might find themselves out of work.
“What if my job doesn’t exist anymore?” she asked in a recent interview.
This question has particular resonance in this part of Pennsylvania, a must-win swing state in the presidential race, which has already seen massive job dislocation from the decline of manufacturing. As Pittsburgh’s iconic steel industry has been gutted, the city’s economy has been hugely buoyed by health care, which has grown into the region’s largest industry — employing about 140,000 people, or 20 percent of the regional workforce. The city’s former U.S. Steel complex is now, appropriately enough, the headquarters of a mammoth hospital system, one of two health care companies deeply entrenched in the city’s economy.
There are lots of health reform ideas that wrap themselves in the “Medicare for All” label, ranging from a single government-run system to plans that maintain a role for private insurance companies. But under the most ambitious schemes, millions of health care workers would be at least displaced if not laid off, as the insurance industry disappears or is restructured and policymakers work to bring down the costs of the system by reducing high overhead and labor costs. The reform proposals being promoted by Democratic presidential candidates have barely grappled with this problem.
Initial research from University of Massachusetts economists who have consulted with multiple 2020 campaigns has estimated that 1.8 million health care jobs nationwide would no longer be needed if Medicare for All became law, upending health insurance companies and thousands of middle class workers whose jobs largely deal with them, including insurance brokers, medical billing workers and other administrative employees. One widely cited study published in the New England Journal of Medicine estimated that administration accounted for nearly a third of the U.S.’ health care expenses.
Even if a bigger government expansion into health care left doctors, nurses, and other medical professionals’ jobs intact, it would still cause a restructuring of a sprawling system that employs millions of middle-class Americans.
Claire Cohen, a Pittsburgh-based child psychiatrist, voted for Bernie Sanders, the architect of the most sweeping version of Medicare for All, in the 2016 Democratic presidential primary. She says the national discussion about single payer and its overwhelming focus on paying higher taxes or losing private insurance misses the point ― she argues individuals would see greater benefit from a health care system without premiums, copays and other costs that increasingly make health care out of reach. But the question about jobs, she says, is a “legitimate” issue ― one she says people haven’t completely thought through.
“You don’t want to leave all these people in the lurch without jobs,” Cohen said.
The idea of one national health plan covering all Americans has steadily grown more popular in public opinion polls over time, a sea change that coincides with Medicare for All becoming near orthodoxy for progressive Democrats. Prior to 2016, when Sanders made it the linchpin of his insurgent run for president, less than half of Americans supported setting up a such a system, according to Kaiser Family Foundation polling. Now, just over half of the public backs it.
When it comes to the costs of reform, taxes are the headline issue, and the movement’s advocates on the national stage ― Sanders and fellow Democratic presidential contender Elizabeth Warren, among others ― have largely had to defend Medicare for All against charges that middle-class taxes would have to go up to finance a new government-run system. But the question of what single-payer health care would do to jobs and the economy has largely been overlooked. In the past, Sanders has answered questions about the economic ramifications with vague claims about transitioning to other jobs in the health sector.
“When we provide insurance to 29 million people who today don’t have it, when we deal with the problems of high deductibles and copayments and more people get the health care that they want and they need, weʼre going to have all kinds of jobs opened up in health care,” Sanders claimed during a 2016 CNN town hall when asked by a retired health insurance worker what would happen to jobs in the industry. “And the first people in line should be those people who are currently in the private health insurance industry.”
Economists dispute the extent to which this would occur. Robert Pollin, co-director of the Political Economy Research Institute at the University of Massachusetts-Amherst who has consulted with Sanders’ and Warren’s teams over Medicare for All, says that while people could be retrained for different jobs, there are no guarantees they’d work in the newly created government health care system, since one of the goals is to cut down on administrative overhead. “You can’t have it both ways. You can’t have savings through administrative simplicity and more jobs. The government won’t need these people,” Pollin said.
Health care workers are interwoven throughout the economy, employed by large institutions like hospitals, health insurance companies and nursing homes but also in places like small accounting firms that help clinicians get reimbursed for care, and as independent brokers who help sell insurance products to customers.
Mazur handles medical billing for physicians through Medicare, Medicaid and private insurance, the last of which is the most complicated. Under Medicare for All, “They don’t have to worry about, am I going to get paid for this service based on what insurance the patient has? It would be the same rules for everybody.”
In Pittsburgh, workers in the health care economy interviewed for this article weren’t necessarily against a single-payer system, even if it meant their work would be personally affected. But they did consistently say that Democratic candidates for president need to make the employment implications clearer.
Marc Schermer, a Pittsburgh-based insurance broker who sells health plans to individual customers as well as small businesses, says he’d likely experience a temporary setback but believes he’d manage since he sells other kinds of insurance, too. He even thinks single payer is an idea “he could get behind” because removing private insurance companies from the system would simplify things.
“I’m pretty well diversified so that if suddenly the ‘Medicare for All’ thing happened, and companies like United and Highmark and UPMC and Aetna were brushed aside, I would still have something to do,” Schermer said. “But there are a lot of people who are employed directly by those companies who would be up a creek.”
Medicare for All isn’t predicted to disrupt all job types and could even potentially benefit certain types of health care workers ― for example, by expanding the need for caregivers because of a proposed expansion of long-term care benefits. And Medicare for All would provide health benefits to tens of millions who are still uninsured, creating additional demand for doctors and other providers. Still, others are likely to be lost in the short term.
“We vilify the health care industry, but it provides jobs to a lot of people, and not just jobs for wealthy people but jobs for everyday people,” said Janette Dill, a researcher at the University of Minnesota who has studied the rise of health care-related employment among the working class. “That’s one thing it’s really good at.”
Health care jobs in Allegheny County, the region surrounding Pittsburgh, grew from roughly 90,000 in 1990 to around 140,000 this year, according to the Pennsylvania Department of Labor and Industry. Another 9,500 people work directly for health insurance companies and about 3,200 work for insurance agencies or brokerages, which includes people who sell health insurance policies.
The power of the health care industry in southwestern Pennsylvania is inescapable. Hospitals and clinics controlled by two competing health care behemoths, the University of Pittsburgh Medical Center and Highmark Blue Cross Blue Shield, dot Pittsburgh’s streets. The two companies have slowly moved in on the other’s territory and saturated Pittsburgh’s health care market, with the iconic UPMC brand operating a health insurance arm, and Highmark BCBS running the Allegheny Health Network system of hospitals and clinics.
Both companies declined to comment on the potential impact of Medicare for All on their workforces.
University of Massachusetts researchers who analyzed the 2017 version of Sanders’ Medicare for All bill estimated that nationwide more than 800,000 people who work for private health insurance companies and a further 1 million who handle administrative work for health care providers would see their jobs evaporate.
The workers generally earn middle-class wages, according to the November 2018 study forecasting the economic ramifications of Sanders’ plan. The median annual income of a worker employed in the health insurance industry is nearly $55,000; for office and administrative jobs at health care service sites, it’s about $35,000, researchers said.
“The savings don’t come out of the sky,” said Pollin. “The main way we save money is through administrative simplicity. That means layoffs. There’s just no way around it.”
Of course, the larger problem behind the question of job losses is just how much of the U.S. economy should be devoted to health care.
Economists say there isn’t a magic number for how large or small the health care sector should be. But they often express concern that the U.S. gets too little benefit for the amount of money it spends, with spending levels twice that of many other developed nations and actual health outcomes significantly lower. Much of that money goes to overhead, in the form of middlemen like insurers and the surrounding industries.
“The problem is you’re spending extra dollars right now, and it’s not at all clear you’re getting extra life for it,” said Katherine Baicker, a health care economist and dean of the University of Chicago’s Harris School of Public Policy.
Cutting those excess costs has appeal to economists, who prioritize efficiency and value for money. But politically it can be a challenge when what looks like an “excess cost” from a distance looks like a good-paying job to the person who holds it. Nationally, the growing health care sector was an economic bright spot even during the Great Recession, continuing to add jobs while others shed millions of workers, according to an analysis from the Bureau of Labor Statistics.
Medicare for All also wouldn’t be the first, nor likely the last, initiative that would cause economic upheaval for a major jobs engine. Baicker argues that the jobs piece isn’t a metric that people should use to judge whether single payer is worth it, because in a dynamic economy different sectors grow while others shrink.
“What you need is transition help for those people whose sectors are shrinking,” Baicker said. We may all be better off in the long run when we can produce all the food we need with many fewer people working in agriculture … that doesn’t mean that you can instantaneously turn a farmer into a software engineer or a nurse into a financial expert.”
There’s some precedent for federal programs that help individuals whose jobs have been upended because of broader economic policy decisions, including the Trade Adjustment Assistance program that helps workers displaced by global trade.
The latest Medicare for All bills in the House and Senate, championed by members in Democrats’ most liberal wing, include provisions addressing assistance for displaced workers. The House version spearheaded by Rep. Pramila Jayapal, a Democrat from Washington state, mandates that for up to five years at least 1 percent of the new health care program’s budget will be spent on efforts to prevent dislocation for health insurance administrative workers or individuals who perform related work at health care organizations.
“This happens every time there’s innovation,” said Jayapal, who co-chairs the House’s Progressive Caucus. “It happens with Lyft and Uber. It happens with movie cameras instead of still photographs. This is part of what happens as you make things better.”
Sanders’ legislation appears to be more limited. The bill allows — but doesn’t require ― that such assistance be provided to workers and caps the amount at 1 percent.
Even in Pittsburgh, not everyone is worried that a national health care law would gut the area’s leading industry yet again. When manufacturing declined in the 1980s in the region, “nobody really cared” and workers were just told to “suck it up” in response to job loss, said Ed Grystar, a longtime union organizer and chair of the Western PA Coalition for Single-Payer Healthcare.
Grystar, who says he spent most of his life negotiating contracts for nurses, says Medicare for All represents a “monumental shift for social justice” to help people access something they deserve. The current system, with its out of control prices and dysfunction, “can’t go on.”
As for the insurance jobs?
“Who cares if [insurance companies] go out of business?’’ Grystar said in an interview. “This is a net positive for society as a whole.”
HENRY KOTULA 