Cost increases are offset by optimizing opportunities for savings – also rallies political support

4. Healthcare Expenditures under CHA: Potential for Increased Costs Offset by Multiple Opportunities for Savings

Medicare for All and CHA would be likely to cost less overall than the current system. Yet cost predictions vary from more to less depending on what assumptions are used.Reference Cai, Runte, Ostrer, Berry, Ponce, Rodriguez, Bertozzi, White and Kahn47 The expected impact of CHA on overall healthcare expenditures is the projected difference between increased costs and increased savings (as for Medicare for All plans).

Sources of Potential Increased Expenditures

•CHA is likely to increase the consumption of health products and services. The number of people insured (namely, all residents except for opt-outs) will be expanded, and all evidenced-based care will be covered. The elimination of copayments and deductibles is likely — as in the classic RAND experiment48 — to increase unneeded as well as needed care. The analyses by Gaffney and colleagues of the impact of health coverage expansion here and abroad, however, find little net increases in healthcare use.Reference Gaffney, Woolhandler and Himmelstein49

•Further short-term expenses will include the costs of planning and implementation and the subsidies to help private insurance employees as they transition.

•In addition, unlike in the Medicare for All bills, payments to physicians and other providers will not be reduced to (or close to) Medicare rates.

Opportunities for Savings

•The greatest savings, for both CHA and Medicare for All, will come from the reduction in administrative and other insurance-related costsReference Sahni, Carrus and Cutler50 — i.e., the monies spent by insurers (including the profits of for-profit insurers) and by providers related to billing, to coding and risk adjustment, to collecting copayments, and to utilization management.Reference Tseng, Kaplan, Richman, Shah and Schulman51 Woolhandler and Himmelstein reported in 2019 that insurance overhead was projected to cost $301.4 billion, including $252 billion for private insurers — about 12% of their premiums — in contrast to overhead of 1.6% in Canada’s single payer system and 2.2% in traditional Medicare.52 Even if all contracts for private insurers were, somehow, standardized and simplified and thereby — as modeled by Scheinker and colleaguesReference Scheinker, Richman, Milstein and Schulman53 — reduced billing-related administrative costs as much as, or more than single payer, the multiplicity of insurances would continue to impose other costs and hassles, such as different drug formularies and utilization processes.

•The costs of pharmaceuticals and devices will be lowered — or at least prevented from soaring (as is happening now) — as a result of central bargaining power, along the lines suggested by Gaffney and Lexchin (as in other countries).Reference Kang, Polsky, Segal and Anderson54 Furthermore, the CHA central fund will not pay for expensive medications and procedures that are not justified by evidence (such as Biogen’s aducanumabReference Alexander, Knopman, Emerson, Ovbiagele, Kryscio, Perlmutter and Kesselheim55), thereby restraining the increase in their consumption and use. The standardized cost measurement facilitated by a unified health system will permit more accurate cost-effectiveness calculations, when permitted (as discussed in Section 7), and a further decrease in waste.56

•Healthcare will no longer be a growing field of for-profit investment. The excessive prices negotiated by some hospitals (among others) with different insurance companies, including for physician-administered drugs, will be reduced and standardized.Reference Feldman, Rome, Brown and Kesselheim57 The increase in purchases of not-for-profit hospitals, group practices, individual physician practices, and even hospices by private equity firms and other for-profit companies — which can lead to higher charges, increased volume of services, and greater provision of low value services — will likely be reversed.Reference Billig, Kotsis and Chung58 Private entities acting as profit-making intermediaries — including private insurance companies, direct contracting agencies or ACO REACH, and pharmacy benefit managers — will no longer be needed.59 Academic leaders will be less likely to become involved with the for-profit industry.Reference Becker60

•The different “quality” programs imposed by Medicare and private insurers — which currently are burdensome to clinicians and, in the case of programs like the Merit-based Incentive Payment System and Accountable Care Organizations (ACOs), have had minimal impact on quality or on cost to insurersReference Ouayogodé, Mainor, Meara, Bynum and Colla61 even though CMS claims moderate success for ACOs (although not assessing their impact on clinicians)62 — can also be simplified and standardized.

•Individual patients — especially those who are poor or live in underserved areas — will be less inclined, or forced, to postpone needed careReference Yelorda, Rose, Bundorf, Muhammad and Morris63 or to resort to expensive health care sites (in particular, emergency departments and hospitals) because they will have increased access to primary and outpatient care without the disincentives of copayments or deductibles.

The overall healthcare savings might be slightly less after CHA is instituted than for Medicare for All because of payments for people’s institutional long-term care and the continuation of private insurance plans for those — likely only a small percentage (as argued below) — who opt out. The healthcare costs of opt-outs would not, however, count as part of CHA itself. As in Medicare for All, payments would shift from administrative-related tasks to the actual care of patients.

5. Overcoming the Political Barriers to CHCA

The political barriers facing CHA — like those facing Medicare for All — are clearly huge:

•It will be opposed by groups benefiting financially from the current system, including for-profit insurance companies, pharmaceutical and medical device companies, private investors in healthcare, and for-profit hospitals and health systems. These groups were already at least partly responsible for Biden’s abandonment of his initial plan to create a public option and allow Medicare to negotiate drug prices.64

•It will also be opposed, whether on ideological grounds or for political gain, by opponents of “big government” and “socialism,” i.e., of any interference in the “free market.”

•Moreover, it will be difficult to overcome people’s fear of and resistance to change, their opposition to any increased taxes, their attachment to their current insurance plans, and their distrust of big government and Washington politicians — and thereby to get them to vote for politicians who support CHA.

•In addition, supporters of a pure single payer system will object to the loss of efficiency resulting from maintaining current financing mechanisms and, above all, to the risk that allowing patients and physicians to opt out will lead to an unequal, two-tier system (despite the measures, explained above, to prevent this).

Consequently, the task of convincing enough members of Congress, worried about reelection and dependent on donations, to pass such a fundamental reform seems daunting. The remedy is, as already explained, to rally the support of the public, of healthcare providers, and of employers by applying insights learned from behavioral economics.

CHA is designed to overcome the resistance to change of a public already inclined toward a universal healthcare system:65

•The transition will be quick and easy. People will be insured automatically. CHA will immediately become their default insurance option, their status quo. They will be able to obtain their insurance identification numbers the next time they need medical care.

•CHA will not raise taxes, instead keeping the financing mechanisms essentially unchanged.

•It will make minimal changes in how people get healthcare. People will see immediately that they will have no losses in terms of coverage and providers, only gains, i.e., that they may lose their insurer, but not their insurance, and that they can keep their doctors.

•People will quickly realize that they no longer face the increasing healthcare-related financial threats, namely the escalating drug prices, surprise billing, rising premiums and co-payments, high deductibles, and increase in other out-of-pocket costs.Reference Lee and Blanchfield66 Indeed, lowering drug prices was rated by Americans in January 2021 as their second highest priority for President Biden and the new Congress.67 People will no longer be dissuaded by these costs from taking their prescribed drugs and from seeking care for important problems or for prevention.Reference Wray, Khare and Keyhani68 While in June 2020, an estimated 17.8% of individuals had medical debt, at a mean amount of $429, under CHA they will no longer fall, or fear falling, into medical debt.Reference Kluender, Mahoney, Wong and Yin69

•CHA will reduce the current burden on patients of their own administrative tasks, such as interacting with their health benefits administrators, getting information from insurance companies, resolving billing issues, and coping with “phantom networks” when trying to access care.Reference Kyle and Frakt70

•It will allow people who want to keep their private insurance or who are opposed to what they see as government control to opt out of CHA or of any insurance.

The design will also rally physicians, who increasingly favor Medicare for All, even within the American Medical Association, but who often worry that a single payer system will negatively affect their professional autonomy, their workloads, and their incomes:Reference McCormick, Woolhandler, Bose-Kolanu, Germann, Bor and Himmelstein71

•It will be clear to physicians, other clinicians, and their staffs that CHA will simplify the rules and procedures and will reduce the distracting and costly burdens imposed by the multiplicity of payers. For example, surveys in 2006 in the US and Canada found that physician practices in the US spent $87, 975 per physician per year interacting with payers, in contrast to only $22,205 in Ontario, Canada.Reference Sorum72

•Clinicians, who are currently facing the threat of reduced reimbursements from Medicare,73 will also be assured that their net incomes will not be reduced.

•Their representatives will have a key role in managing the system (including, as experts, in deciding on coverage).

•They can expect a decrease in the burden of documentation in the electronic health record as its purpose shifts from justifying the level of billing to recording what is needed for patients.Reference Apathy, Hare, Fendrich and Cross74

•A central administration will be able to remedy the lack of interoperability of electronic health records that impairs clinicians’ ability to provide optimal care.Reference Blumenthal75

•Moreover, CHA will reverse the increasing for-profit orientation of American medical practice (especially with the intrusion of private equity firms).Reference Crowley, Atiq and Hilden76 It will stop the erosion of the patient-physician relationship that is at the heart of clinical care and will allow physicians to refocus on the ethic of service to patients.Reference Hoff77

Physicians are likely, therefore, to become outspoken advocates of CHA. As explained in Tenet 6, since people tend to trust their physicians, their endorsement will, in accordance with behavioral economics, have the important secondary effect of increasing public support.

Employers too will see the benefits of CHA.

•Although they will still need to send payroll deductions to CHA, they or their Human Resources departments will no longer have the burden of choosing what insurance plans to offer to their employees and signing them up.

•Individual employers and employer groups will not have to worry about the rising healthcare prices affecting their employees’ health and morale. Efforts of these groups to restrain these prices have been mostly unsuccessful.78

6. The Implementation Process

Once the political barriers have been overcome, the implementation of CHA will take lots of work — like any fundamental reform of a vast and complicated system — but it will not be as difficult as it might seem:

•The key parts of the healthcare system — the delivery of care by physicians and other healthcare professionals and by hospitals and other organizations — will be largely unaffected, except to become simpler and more seamless.

•The switch in insurance coverage will be automatic, and enrollment will require minimal effort by patients. Starting on the day of inauguration, signing up will be simple. All residents — though Congress may insist on restricting this to legal residents — will need only to show proof of identity at clinical sites (doctors’ offices, urgent care centers, emergency departments, hospitals) or at the CHA website or local offices to obtain their CHA identification numbers. These numbers will be needed when patients obtain care to ensure the integrity of the medical record, i.e., to make sure that each healthcare episode is connected to the correct patient record, providing current and future providers with accurate information. Congress may want to simplify the process by linking the new CHA numbers with the Social Security numbers that most people have already and that parents can request for their newborns before they leave the hospital.

•The financing of the system will change little, at least at first. As explained in Tenet #5, current payments for all types of insurance (other than the uniformed services and the Indian Health Service) will be redirected quite easily to the CHA central fund. Clearly this system, once established, will need to evolve quickly to make it as fair and equitable as possible.

•The basis of the central administration already exists in CMS and its advisory bodies. Their composition and roles would need to be altered and expanded, and the new committees of experts on coverage would need to be appointed and to decide on the goods and services to be reimbursed.