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Sunday, October 23, 2011

A Vision for Healthcare - Part VI

What would be some of the savings from a single-payer health care system?  Well, first of all, it is estimated by the Physicians for a National Health Program (PNHP) that “the reason we spend more and get less than the rest of the world is because we have a patchwork system of for-profit payers. Private insurers necessarily waste health dollars on things that have nothing to do with care: overhead, underwriting, billing, sales and marketing departments as well as huge profits and exorbitant executive pay. Doctors and hospitals must maintain costly administrative staffs to deal with the bureaucracy. Combined, this needless administration consumes one-third (31 percent) of Americans’ health dollars.  Single-payer financing is the only way to recapture this wasted money. The potential savings on paperwork, more than $400 billion per year, are enough to provide comprehensive coverage to everyone without paying any more than we already do.”

Second, PNHP intends that National Health Insurance (NHI) would pay each hospital a monthly lump sum -a global budget - to cover operating expenses.  This amount would be negotiated yearly based on past expenditures, fiscal and clinical performance, projected changes in levels of services, wages and input costs, and proposed innovations.  Hospitals would not be allowed to bill for services covered by NHI, but equally important could not use any of their operating budget for expansion, profit, excessive executive incomes, marketing, or major capital purposes.  The latter would come from NHI funds and would be appropriated separately based on community needs.  Privately-owned hospitals would be converted to non-profits and their owners would be compensated for past investment.  These methods of payments to hospitals would shift the focus of administrators from the bottom line of profit and thus of lucrative services, and hopefully toward providing optimal care and services to meet patient needs.  This “global budgeting” would virtually eliminate billing, freeing substantial savings for enhanced clinical care.  Prohibiting use of operating funds for capital improvements would eliminate the primary financial incentive for excess interventions and services as well as its opposite (skimping on care) since neither strategy could result in institutional gain.

Third, the PHNP says NHI would include three payment options for physicians and other practitioners:  fee-for-service; salaried positions in institutions; salaried positions within group practices or HMOs.  Privately-funded HMOs and group practices would also be converted to non-profits.  Only institutions that actually deliver care could receive NHI payments, thus excluding many HMOs and groups that currently sub-contract services but don’t maintain clinical facilities.

Fee-for-service would include a negotiated binding fee schedule.  Payments would include only physicians and their support staff, but not reimbursement for costly office capital expenditures like MRI scanners. 

Institutions like hospitals, health centers, group practices, clinics, and home care agencies could elect to receive a “global budget” for delivery of care, as well as for education and preventative programs.

HMOs and other institutions could elect to be paid capitation premiums to cover all outpatient, physician, and medical home care.  Regulation of payments for capital expenditures would be similar to that for hospitals.

The three proposed payment options uncouple physician payment and other operating costs from capital purchases.  According to PNHP, this is necessary to minimize entrepreneurial enterprises, contain costs, and facilitate health planning.  The fee-for-service option would greatly reduce physician office overhead by simplifying billing to one payer.  It is also possible that there might need to be a cap on spending for program administration and reimbursement bureaucracy - perhaps 3% of total costs.  Global negotiated budgets for institutional providers would eliminate billing costs; at the same time providing a stable and predictable financial support.  It could also stimulate development of community prevention programs (e.g. smoking cessation). 

Fourth, NHI will cover disabled Americans of all ages for all necessary nursing home and home care.  According to PNHP, a “local public agency in each community would determine eligibility and coordinate care.  Each agency would receive a single budgetary allotment to cover the full array of long term care services in its district.  The agency would contract with long-term care (not-for-profit) providers for the full range of needed services, eliminating the perverse incentives in the current system that often pays for expensive institutional care but not the home-based services that most patients would prefer.”  The program would encourage home and community-based services by supporting the 7 million unpaid caregivers that provide 70% of the care, and by supporting the expanded training of geriatric physicians, nurses and social workers who would assume leadership of this system.

Finally, NHI would pay for all medically necessary prescription drugs and medical supplies, based on a national formulary, established and updated by an expert panel.  The most important provision of this would be the negotiation by NHI with the drug and equipment manufacturers, based on costs (excluding extras like advertising and lobbying costs).  Suppliers would bill the NHI directly for any item in the formulary that is prescribed by a licensed practitioner.  Because of its single payer status, the NHI could exert substantial pressure on pharmaceutical companies and equipment manufacturers to lower prices, resulting in very substantial savings which is not happening under the current multiple private-payer system.

Of course, this single-payer system will have start-up and transition problems.  Surely it will not solve all problems; i.e. improvements in environmental and occupational health will not automatically follow; need for improvements in quality will remain; medical school problems of high tuition and lack of minority representation will continue; some physicians will still succumb to temptations to enhance their earnings by encouraging unneeded services.  However, a framework for addressing such problems will be in place. 

And, it’s better than the alternatives, including:  the current multiple-payer debacle; defined contribution schemes with lower-paid employees forced into skimpy plans; tax subsidies and vouchers; turning Medicaid over to states.

An article under the heading of the PNHP concludes:  “Incremental changes cannot solve these problems; further reliance on market-based strategies will exacerbate them.  What needs to be changed is the system itself.”

This change to a new system of health care insurance and delivery is still one of the most important steps we could take to save money and thus affect the national budget, to give relief to businesses, to cover all citizens with health insurance, and to literally bring relief to the pocket-books of millions thereby restoring confidence in our healthcare system and increasing the likelihood of better research and innovation than we have seen in a long time.