Friday, March 01, 2019

Making Single Payer Sustainable

Perhaps the only question guaranteed, in whatever form it is posed, to be asked at every Democratic presidential debate is: do you support a single payer health care system?

If it were not certain, it is now that Representative Pramila Jayapal, a Democrat from Washington State, has introduced a bill which would

- create a single-payer, government-funded health-care program within two years, eliminating the age 65 threshold for Medicare eligibility.

- not charge beneficiaries copays, premiums or deductibles.

- cover prescription drugs, vision, dental, mental health, substance abuse and maternal care. It would - also provide universal coverage for long-term care for people with disabilities.

- not include methods to pay for the health-care overhaul. Jayapal mentioned higher taxes on the wealthy or contributions from employers as potential ways to fund it.

As to the latter, "Ay, there's the rub," remarked Shakespeare's Hamlet, concisely and eloquently, albeit with a misplaced apostrophe.

Phillip Longman of the Open Markets Institute in late 2017 examined some of the benefits and pitfalls of Medicare for All, first promulgated by Senator Bernie Sanders, at least with such strategically savvy branding.

Fundamental to his analysis is that Medicare "doesn't produce health care. Rather, it pays bills submitted by private health care providers" and thus MFA "would remain almost entirely in the hands of private enterprise. Meanwhile, its financing would become exclusively a burden borne by government."

Longman explains "starting in the 1980s and continuing through the '90s" most health care providers

found themselves at the mercy of increasingly monopolistic health insurance companies. Doctors and hospitals were put on the defensive as insurers merged with one another and forced providers to make price concessions if they wanted to keep their insured patients. Insurers used their increasing "monopsony" power to put the screws on drug companies and everyone else in the medical supply chain. This explains why, for a brief moment in the 1990s, the nation’s overall health care bill actually declined.

But then came a counterrevolution that has proven far more consequential. Not only did sixty drug companies combine into ten, but hospitals, outpatient facilities, physician practices, labs, and other health care providers began merging vertically and horizontally into giant, integrated, corporate health care platforms that increasingly dominated the supply side of medicine in most of the country. Like Amazon or Google, these platforms extend their power by controlling the very marketplace in which customers and suppliers have to do business. Even nominally independent surgeons, for example, can’t stay in business if the only hospital in town won’t grant them admitting privileges, or if it grants “affiliated” surgical teams better terms. Many of these platforms became part of large chains operating in multiple regions; others achieved dominance in a single city, which still gave them extraordinary market power.

Therefore, "in a local market that’s been cornered, even the largest purchasers of health care, including insurance companies and large national employers, become price takers, not price makers."  A recently published study, Longman notes, "found that hospital ownership in 90 percent of metro areas is so concentrated that it exceeds what antitrust regulators have historically regarded as the threshold for when action is needed to avoid inefficiency and collusion." Prices have soared because

As hospitals combine into local and regional monopolies, they can leverage their power by buying out local physician practices. Consider the anticompetitive effects of these deals. Doctors play a large role in steering patients to different hospitals, and anti-kickback laws prevent hospitals from paying doctors for these referrals. Yet those laws become inoperative when a hospital simply buys a doctor’s practice and puts him or her on its payroll. Such a deal not only allows a hospital to effectively buy referrals, it also forecloses future competition. To win the business of these referred patients, a rival hospital would generally first need to convince them to change doctors.

It is likely, therefore, that although under Medicare for All some cost savings would accrue from the federal government's monopolistic power as a purchaser, it would be negotiating with a single provider. Longman wants us to

think about how well our “single-payer” Pentagon procurement system does when it comes to bargaining with sole-source defense contractors. Not a pretty picture. In theory, the government could just set the price it’s willing to pay for the next generation of fighter jets or aircraft carriers and refuse to budge. But in practice, a highly consolidated military-industrial complex has enough economic and political muscle to ensure not only that it is paid well, but also that Congress appropriates money for weapons systems the Pentagon doesn’t even want.

The dynamic would be much the same if a single-payer system started negotiating with the monopolies that control America’s health care delivery systems. Think about how members of Congress representing, say, western Pennsylvania would be likely to respond if Medicare-for-all dared to reject the terms demanded by the University of Pittsburgh Medical Center, the region’s dominant health care provider. Notwithstanding its academic name and origins, UPMC is a Goliath that controls nearly 60 percent of the inpatient medical-surgical market in the greater Pittsburgh area.

This problem would have been mitigated if the Affordable Care Act had produced the revolutionary health care reform, insuring tens of millions of additional Americans with reduced costs and bureaucracy, that President Obama and his supporters intimated it would. Alas, those hopes were dashed even before the Trump Administration and its allies started to decimate "Obamacare." Longman reminds us

Big Pharma made sure that the Affordable Care Act contained language forbidding the federal government from engaging in cost-benefit analysis of drugs, and has dissuaded Congress from allowing Medicare to bargain over drug prices. Similarly, hospital supply cartels have fought off government regulation despite the demonstrably high prices they were extracting from the system. It is frankly naive to expect that health care regulators won’t become even more captured than they already are if the industry they are supposed to regulate gains even more concentrated economic, and therefore political, power.

Jayapal has laid down a marker by proposing a health care framework more ambitious than "Medicare for All" and less complicated and easier to navigate than Obamacare. Writing before introduction of the congresswoman's bill, Longman acknowledged

socialized medicine might work to contain prices and make the U.S. health care system sustainable. But short of flat-out nationalizing America’s health care delivery system, the only other option is to make sure that the market power of hospitals and other providers is sufficiently dispersed that it remains politically possible to regulate them.

Single-payer is therefore doomed to fail unless supporters fuse it with another reform: the aggressive use of antitrust and other competition policies not just to lower drug prices but, even more crucially, to bust up the monopolies that dominate the American health care delivery system.

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