After a presentation this week, a senior physician from the audience of our member health systems reached out to discuss a well-trod topic, the future of health reform legislation. But his question led to a more forward-looking concern:
“You talked very little about politics, even though we have an election coming up next year. Are you anticipating that Medicare for All will come up again? And what would the impact be on doctors?”
As we’ve discussed before, we think it’s unlikely that sweeping health reform legislation like Medicare for All (M4A) would make its way through Congress, even if Democrats sweep the 2024 elections—and it’s far too early for health systems to dedicate energy to a M4A strategy.
Healthcare is not shaping up to be a campaign priority for either party, and given the levels of partisan division and expectations that slim majorities will continue, passing significant reform would be highly unlikely.
Although there is bipartisan consensus around a limited set of issues like increasing transparency and limiting the power of PBMs, greater impact in the near term will come from regulatory, rather than legislative, action.
For instance, health systems are much more exposed by the push toward site-neutral payments. How large is the potential hit? One mid-sized regional health system we work with estimated they stand to lose nearly $80M of annual revenue if site-neutral payments are fully implemented—catastrophic to their already slim system margins.
Preparing for this inevitable payment change or the long-term possibility of M4A both require the same strategy: serious and relentless focus on cost reduction.
This still leaves a giant elephant in the room: the long-term impact on the physician enterprise.
As referral-based economics continue to erode, health systems will find it increasingly difficult to maintain current physician salaries, further driving the need to move beyond fee-for-service toward a health system economic model based on total cost of care and consumer value, while building physician compensation around those shared goals.
The Democratic presidential primary might feel like a lifetime ago, but one important storyline in that race was health care — specifically single-payer health care, or the policy that the government should offer universal health insurance to everyone in the country. The nomination of now-President Biden, who opposed single-payer health care during the primary, has put single-payer health care on the backburner nationally. But that hasn’t stopped the issue from impacting state legislators, who have introduced more single-payer health care bills in the last few years than ever before.
Health care policy researchers Erin C. Fuse Brown and Elizabeth McCuskey tracked the number of unique single-payer bills introduced in state legislatures across the country from 2010 to 2019, finding a sharp uptick in bills introduced since 2017. During each of those three years, at least 10 single-payer proposals were introduced, according to Brown and McCuskey’s research, for the first time since 2013. In total, state legislators proposed more single-payer bills from 2017 to 2019 than in the previous seven years combined. And for 2021, we’ve identified 10 single-payer bills that legislators introduced across the country, from liberal states like California and Massachusetts to more conservative ones including Iowa and Ohio.1
What do all these proposals have in common? They’ve all universally failed. In fact, Vermont, the only state that managed to pass single-payer health care in 2011, ended up shelving its plan three years later.
It makes sense why single-payer advocates have tried to take these fights to the states. States have traditionally been seen as the “laboratories of democracy,” and some advocates of single-payer health care have argued that liberal states could provide unique opportunities to advance single-payer health care. But as I’ll explain, passing single-payer health care at the state level is next to impossible, as states are particularly limited in how they can allocate federal and private health care funds. There is, however, evidence that Americans may have an appetite for a public option, or government-run health insurance that people can opt into at the state level. Three states (Colorado, Nevada and Washington) have already passed a public option. It’s not single-payer health care reform, but it’s possible that we might see more states adopt their own public-option reforms.
One big reason single-payer proposals haven’t caught on at the state level is because finding a reliable way to pay for such a program is challenging. Single-payer advocates originally envisioned a federal proposal that would cover all Americans under a more generous version of a preexisting program — that is, Medicare, but now for all. Doing this state-by-state would require each state to apply for waivers to divert federal funds used for Medicare, Medicaid and Affordable Care Act exchanges to be used for their own single-payer plans. And that’s tricky because the Department of Health and Human Services has wide discretion to approve or deny states’ requests, which makes any proposal highly dependent on the national political climate.
This isn’t just a theoretical debate either: Trump’s administrator for the Centers for Medicare & Medicaid Services Seema Verma said in 2018 that she would deny waivers from states to create single-payer systems, while Biden’s Health and Human Services Secretary Xavier Becerra has expressed more favorable sentiments. Almost all single-payer proposals depend on these waivers and states don’t often have fallback plans for if this federal funding gets denied.
Employer-sponsored health insurance plans, which cover 54 percent of Americans, are another hurdle for states trying to pass single-payer health care. Federal law largely prevents states from regulating employer-provided health insurance, so states can’t just stop employers from offering their own health care benefits. The exact scope of this law has been litigated for decades, but suffice it to say that it’s successfully put the kibosh on many statewide health care reforms. Single-payer health insurance is particularly tricky as there’s no way to get everyone onto the plan without first changing how private insurance works. States have tried to address this through measures like increasing payroll taxes or restricting providers’ ability to accept reimbursement from private insurance plans. But the more elaborate these mechanisms get, the more complicated it becomes to implement — and the more people that could slip through the cracks.
Finally, another big financial barrier is that state governments have far less leeway than the federal government to increase budgetary spending. That means tax increases, which come with their own political challenges, are often necessary for states to secure the funding they need.
Take California’s single-payer proposal, which failed in late January. It would have required two-thirds of voters to pass a separate constitutional amendment to implement the necessary tax increases to pay for it. Concerns over tax increases also contributed to the demise of single-payer proposals in Colorado and Vermont. It’s true that a recent analysis of New York’s single-payer health care plan found that it would lower overall health care spending by 3 percent by 2031, but it would also require additional state tax revenue of $139 billion in 2022 — over 150 percent of the current state budget. Politicians facing the next election cycle may be leery of proposing short-term tax increases, even if the end result is long-term savings.
All of this creates a daunting picture for statewide single-payer health care. But the failures of single-payer doesn’t entirely close the door on health care reform, especially if these reforms are supplementing the existing system instead of entirely replacing it. Colorado and Nevada, for instance, successfully passed a public option in 2021, joining Washington, which passed one in 2019. Colorado’s success in advancing a public option is particularly striking, given that almost 80 percent of people voted against its single-payer proposal in 2016.
To be sure, though, efforts to implement a public option aren’t without their own challenges. In 2021, during its first year of implementation, Washington state’s public option struggled to enroll people and get health care providers to agree to lower payment rates. State lawmakers have tried to fix this problem by introducing legislation that would require more providers to participate and bring down premiums by increasing subsidies. Proponents have also cautioned that it might take years before the public option really gains a foothold with Washington state residents.
It’s not clear yet how successful these state-run public option plans will be, but it is possible that a public option may prove more popular than single-payer. For starters, while single-payer health care is popular among Democrats, the public option still polls much better among Republicans and independents. According to a Morning Consult/Politico poll from March 2021, the public option was roughly as popular as Medicare for All among Democrats — about 80 percent said they supported each. But support for the public option was much higher than support for Medicare for All among both Republicans and independents. Just 28 percent of Republicans and 50 percent of independents supported Medicare for All versus 56 percent of Republicans and 63 percent of independents who supported a public option.
Ultimately, any health care reforms would be easier to implement on a federal level than a patchwork, state-by-state approach. But Washington, Colorado and Nevada remain important tests of state governments’ ability to implement a public option in lieu of action by the federal government. It’s not single-payer, but it’s still some of the most consequential health care reforms in decades — and a potential sign of where the debates over health care are heading.
A recent New Yorker article details the history of the American Medical Association’s (AMA) opposition to single-payer healthcare, and the grassroots movement that nearly changed its position in 2019.
Since its founding in the 1840s, the largest association of the nation’s doctors has wielded significant influence over healthcare policy, and has been the most effective opponent of several waves of progressive healthcare reform proposals across the last century. More recent changes in the demographic makeup of its physician constituents have begun to mirror the US population. A quarter of today’s practicing physicians graduated from foreign medical schools, and gender and racial gaps in medical schools have been reduced. Today, half of medical students are female, and half are people of color.
The Gist: The perspectives, needs, and politics of the physician community are changing. Younger physicians tend to be more left-leaning, and more are employees, rather than entrepreneurial business owners. While physician pocketbook issues historically dominated the AMA’s policy positions, today’s younger physicians are increasingly motivated by social justice concerns, leading to advocacy positions that would have been unimaginable a few decades ago.
Physician societies continue to move closer to endorsing more extensive healthcare reform policies, over trying to ensure economic protection for the profession—and in the long run, this shift in physician support could prove a key driver in increasing public approval of “Medicare for All” and other coverage reforms.
Medicare for All, which would extend health coverage to all Americans, has been a hot topic of debate in recent years. Researchers have looked into the many ways that a switch to Medicare for All might change our lives, and one of those areas of change might be wages. Employer provided healthcare is baked into our current system of healthcare, and there are a lot of studies that look at how employer paid premiums can depress wages, and how our paychecks might shift in a M4A-type situation.
Medicare helps to reduce racial and ethnic disparities and close gaps in insurance coverage, a new study in JAMA Network shows.
Why it matters: This raises the possibility that expanding the program could further reduce health disparities — a timely idea, as Senate Democrats debate lowering the Medicare eligibility age and broadening its benefits, Axios’ Marisa Fernandez reports.
What they found: Medicare access at age 65 sharply reduced the share of Black and Hispanic people reporting poor health and poor access to care, but not mortality, the study notes.
Respondents were “significantly more likely” to be insured immediately after age 65 compared to before turning 65, and coverage increased more for Black and Hispanic adults than white adults.
Medicare eligibility alone doesn’t completely eliminate disparities among the elderly, suggesting other social determinants of health need to be addressed.
State of play:Senate Democrats have signaled that they’ll attempt to expand Medicare to include dental, hearing and vision coverage in the coming months.
Although lowering the Medicare eligibility age from 65 to 60 wasn’t included in their original proposal, Axios has reported it’s still possible that the measure gets included.
An estimate from the Partnership for America’s Healthcare Future predicts that nearly four out of five 60- to 64-year-olds would enroll in Medicare, with two-thirds transitioning from existing commercial plans, if “Medicare at 60” becomes a reality.
In the graphic above, we’ve modeled the financial impact this shift would have on a “typical” five-hospital health system, with $1B in revenue and an industry-average two percent operating margin.
If just over half of commercially insured 60- to 64-year-olds switch to Medicare, the health system would see a $61M loss in commercial revenue.
There would be some revenue gains, especially from patients who switch from Medicaid, but the net result of the payer mix shift among the 60 to 64 population would be a loss of $30M, or three percent of annual revenue, large enough to push operating margin into the red, assuming no changes in cost structure. (Our analysis assumed a conservative estimate for commercial payment rates at 240 percent of Medicare—systems with more generous commercial payment would take a larger hit.)
Coming out of the pandemic, hospitals face rising labor costs and unpredictable volume in a more competitive marketplace. While “Medicare at 60” could provide access to lower-cost coverage for a large segment of consumers, it would force a financial reckoning for many hospitals, especially standalone hospitals and smaller systems.
Administrative costs in the US healthcare system are known to be higher than those in any other country, even than other countries with private health insurance systems. There also is widespread agreement the excessive US costs generate little, if any, value, and that they impose a tremendous burden on physicians. With administrative costs even for primary care services approaching $100,000 per year per physician, there is a growing recognition that reducing healthcare-related administrative costs is a policy priority.
Despite the longstanding concerns about these escalating costs, there is little understanding of what generates them and how we can reduce them. To the degree there has been any academic inquiry into administrative costs imposed on US providers, it has compared them to the much lower costs in other countries with nationalized systems. These comparisons are unflattering to the US system and are designed to encourage wholesale healthcare reform.
Our paper published in Health Services Research begins at the retail level, focusing on the specific administrative costs inflicted by our payment system on providers. We examine the complex contractual arrangements between insurers and physicians and measure the efforts that physicians must endure to get paid. It then offers a simulation model to estimate how certain policy reforms would result in nationwide administrative savings.
Currently, each health plan and each physician or physician group (and each hospital) negotiates over a contract for services on a periodic basis. Our analysis examines three separate costs that result from this type of market structure: architectural costs (the enormous number of contracts that are generated annually to provide services to patients), contractual complexity (the difficulty of following all of the requirements of each agreement to receive payment), and compliance costs (the costs of not following the rules in submitting a bill).
Based on this framework, we ask two questions: First, what if physicians entered into simpler contracts with insurers? And second, what if physicians (who accept patients with many kinds of insurance) agreed to a single boilerplate contract with all insurers rather than individualized contracts with each insurer? Put more simply, what if contracts were simpler and standardized?
Our simulation predicts that simplifying contracts would reduce billing costs by nearly 50%, standardizing contracts would reduce those costs by about 30%, and both simplifying and standardizing contracts would reduce those costs by over 60% percent.
We then used the model to estimate administrative cost savings from a single payer “Medicare-for-All” model. Consistent with claims made by advocates for nationalized health insurance, we estimate that a Medicare-for-All plan would reduce administrative costs between 33-53%, largely by standardizing contracts. But these cost savings are less than those generated from standardizing and simplifying contracts within our current system of private health insurance because we modeled that a Medicare-For-All plan would retain Medicare’s complex payment models and have increased compliance costs compared to private payers.
We think this is good news. Though we find that a single-payer system will reduce certain administrative costs, we also find that reforms to our current multi-payer system could generate at least as great a reduction.
There might be benefits to pursuing national health reform, but we can reduce burdensome administrative costs through much simple and less disruptive paths. The even better news from this study is that we can now have a more precise understanding of where administrative costs arise in our health system, and we have the means to evaluate the effects of other kinds of reforms. Understanding is the prerequisite to reforming.
In what has become something of a Washington tradition, the Supreme Court again upheld the Affordable Care Act on Thursday, in the third major case from Republican challengers to reach the high court.
The margin this time was larger, 7-2, as the High Court appears less and less interested in revisiting the health care law through the judiciary.
Democrats hailed the ruling as a boost to their signature law, and Republicans were left to figure out a path forward on health care amid another defeat.
Here are five takeaways:
This could be the last gasp of repeal efforts
It is impossible to ever fully rule out another lawsuit challenging the health law or another repeal push if Republicans win back Congress.
But after more than 10 years of fighting the Affordable Care Act, GOP efforts at fighting the law are seriously deflated, as many Republicans themselves acknowledge.
“It’s been my public view for some time that the Affordable Care Act is largely baked into the health care system in a way that it’s unlikely to change or be eliminated,” said Sen. Roy Blunt (Mo.), a member of Senate GOP leadership.
Asked if he still wanted to repeal and replace the law, which was the GOP rallying cry for years, Sen. Chuck Grassley (R-Iowa) said instead, “I think I want to make sure it works,” before attacking former President Obama’s promises about the law’s benefits.
Even Sen. Josh Hawley (R-Mo.), who helped bring the lawsuit against the health law as attorney general of Missouri, said Thursday that the Supreme Court had made clear “they’re not going to entertain a constitutional challenge to the ACA.”
Supporters of the law said it is now even more entrenched, despite years of GOP attacks.
“The war appears to be over and the Affordable Care Act has won,” said Stan Dorn, senior fellow at the health care advocacy group Families USA.
Still, not all Republicans are throwing in the towel on at least verbally attacking the law.
“The ruling does not change the fact that Obamacare failed to meet its promises and is hurting hard-working American families,” said House GOP leaders Kevin McCarthy (Calif.), Steve Scalise (La.) and Elise Stefanik (N.Y.).
And there is at least one ACA-related lawsuit still working its way through the lower courts. Kelley v. Becerra challenges provisions of the health law around insurance plans covering preventive care including birth control.
The Supreme Court was fairly united
The margin of victory for the health law was fairly large, with even more conservative justices such as Clarence Thomas, Amy Coney Barrett, Brett Kavanaugh and John Roberts ruling to uphold the law, joining the opinion from liberal Justice Stephen Breyer.
The court’s other two liberals, Sonia Sotomayor and Elena Kagan, also joined the majority of seven. Two conservatives, Justices Samuel Alito and Neil Gorsuch, dissented and would have struck down the law.
Through the three major Supreme Court cases on ObamaCare, the margin of victory has risen from 5-4 to 6-3 to 7-2.
“There’s a real message there about the Supreme Court’s willingness to tolerate these kinds of lawsuits,” Andy Pincus, a visiting lecturer at Yale Law School, said of the growing margin of victory.
The case was decided on fairly technical grounds. The Court ruled that the challengers did not have standing to sue, given that the penalty for not having health insurance at the center of the case had been reduced to zero, so it was not causing any actual harm that could be the basis for a lawsuit.
Republicans did get some vindication in that Democrats had fiercely attacked Barrett during her confirmation hearings for being a vote to overturn the health law, when in fact she ended up voting to maintain the law.
The ACA is stabilizing
The early years of the Affordable Care Act were marked with the turbulence of a website that failed at launch, premium increases, and major insurers dropping out of the markets given financial losses.
Now, though, the markets are far more stable. For example, 78 percent of ACA enrollees now have the choice of three or more insurers, up from 57 percent in 2017, according to the Kaiser Family Foundation.
Democrats, now in control of the House, Senate and White House, were able to pass earlier this year expansions of the law’s financial assistance to help further bring down premium costs.
The Biden administration announced earlier this month that a record 31 million people were covered under the ACA, including both the private insurance marketplaces and the expansion of Medicaid.
“We are no longer in the Affordable Care Act, ‘How’s it going to go? Is it going to survive?’ mode,” said Frederick Isasi, executive director of Families USA. “We really are in a whole new phase. It really is: ‘How do we improve it?’”
Republicans face questions on their health care message
The Republican health care message for years was summed up with the simple slogan “repeal and replace.”
But now those efforts have failed in Congress, in 2017, and have failed for a third time in the courts.
That leaves uncertainty about what the Republican health care message is. The party has famously struggled to unite around an alternative to the ACA, so there is no consensus alternative for the party to turn to.
The statement from McCarthy, Scalise, and Stefanik calling the ACA “failed,” shows that party leaders are not fully ready to accept the law.
The leaders added that “House Republicans are committed to actually lowering health care costs,” which has been a possible area for the party to focus that is not simply about repealing the ACA.
But any discussion of health care costs is fraught with complications. Republicans, for example, overwhelmingly oppose House Democrats’ legislation to allow the government to negotiate lower drug prices, arguing it would harm innovation from the pharmaceutical industry.
Grassley reached a bipartisan deal on somewhat less sweeping drug pricing legislation with Sen. Ron Wyden (D-Ore.) in 2019, but that bill went too far for many Republicans as well.
Democrats want to go farther, but face an uphill climb
With the ACA further entrenched, and control of the House, Senate and White House, Democrats are looking at ways to build on the health law.
The main health care proposal from the presidential campaign, a government-run “public option” for health insurance, has faded from the conversation and is not expected to be a part of a major legislative package on infrastructure and other priorities Democrats are pushing for this year.
While the health care industry has largely made its peace with the ACA, pushing for a public option or lowering health care costs means taking on a fight with powerful industry groups.
Progressives like Sen. Bernie Sanders (I-Vt.) have instead poured their energy into expanding Medicare benefits to include dental, vision, and hearing coverage, and lowering the eligibility age to 60.
Allowing the government to negotiate lower drug prices also could make it into the package.
“Now, we’re going to try to make it bigger and better — establish, once and for all, affordable health care as a basic right of every American citizen,” said Senate Majority Leader Charles Schumer (N.Y.). “What a day.”
President Biden released his budget proposal for fiscal year 2022 on Friday, clocking in at a whopping $6T of federal spending on programs aimed at making sweeping investments in infrastructure, education, and social services, and banking on hefty government borrowing at low interest rates to fuel a major overhaul of the American economy.
The proposal includes big increases in discretionary spending, including raising funding for the Department of Health and Human Services (HHS) by 23.4 percent, to $133.7B, the largest increase in almost two decades. The budget bolsters funding for a variety of healthcare programs, but notably includes specifics on only two major increases in mandatory healthcare spending: making permanent the temporary subsidy increases for individual coverage that are part of the American Rescue Plan Act ($163B); and expanding home- and community-based services in Medicaid ($400B). Both of those proposals were announced earlier this year as part of Biden’s twin recovery packages for infrastructure and social programs.
Notably absent, apart from statements of general support, are any details for implementing a “public option” health plan, or for lowering the Medicare eligibility age to 60—two healthcare proposals that figured prominently in Biden’s campaign platform. Nor are there specifics on lowering spending on prescription drugs, another key area of interest among lawmakers. Like all presidential budgets, the Biden document is simply a statement of priorities, providing a starting point for negotiations in Congress.
But the relatively narrow scope of the healthcare proposals—as hefty as their price tags are—indicates that the White House is likely not willing to throw down over a major overhaul of coverage, at least while Congress is so closely divided. While there are bills afloat in both the House and Senate to more aggressively expand coverage, we’d expect this summer’s legislative horse-trading to result in something resembling what’s in the President’s budget—and not much more.
“Medicare at 60” and a national public option are likely on hold, at least until after the 2022 midterm elections.
In his first address to a joint session of Congress, delivered on the eve of his 100th day in office, President Biden laid out his vision for two major legislative proposals to follow the $1.9T stimulus package he signed into law last month.
The first, described as an “infrastructure” bill, focuses largely on investing in transportation-related improvements, building projects, and “green” upgrades to the nation’s energy grid, along with a $400B investment in home-based care for the elderly and people with disabilities—which amounts to over 17 percent of the package’s $2.3T price tag.
The second, which he unveiled in Wednesday’s speech, is a $1.8T “families” bill, is largely aimed at expanding childcare subsidies, early childhood education, paid family and medical leave, and educational investments. Included in that package is $200B to extend the temporary subsidies—approved as part of last month’s stimulus law—for those seeking health insurance coverage on the individual marketplaces created by the Affordable Care Act (ACA).
Notably absent from either proposal were two categories of healthcare reform that received much focus and airtime during last year’s election campaign: reducing the cost of prescription drugs and lowering the eligibility age for Medicare to 60 or below. Given the closely divided makeup of the new Congress, and the relatively moderate position staked out by the Biden administration on healthcare issues (with a bias toward bolstering the ACA rather than pursuing sweeping changes), we’re not surprised to see the Medicare expansion go unmentioned.
But the bipartisan popularity of lowering prescription drug costs seems like a missed opportunity for Biden, who encouraged the Congress to return to it separately, later in the year. We’ll see. For now, with even some Democrats expressing concern about the $4.1T price tag of Biden’s proposals, we would be surprised if all $600B of the healthcare-related spending makes it to the final legislation. In particular, our guess is that some portion of the home-care spending will get traded away in favor of other components of the package. Expect negotiations to be intense.
HENRY KOTULA 