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Collapsing the silos: Structural challenges pose greatest obstacle to proposed California single payer system

June 23rd, 2017 No comments

Update: The Sacramento Bee reports today SB 562, the single payer measure discussed this post, has been designated a two-year bill to allow lawmakers more time to work out the details into 2018.


California is considering legislation that if enacted, would make the largest state the first in the nation to implement a single payer system for all medical care rendered to Golden State residents. It faces enormous obstacles.

The first is the deeply entrenched (since at least the 1940s) scheme of paying for medical care for most working age families though employee benefit programs. Both employers and employees complain about the rising cost of these programs. But they are heavily tax advantaged for employers, particularly larger ones who offer them to attract and retain employees despite the cost.

The second and related major challenge is America’s fractured medical care finance system with its numerous silos, each with separate eligibility, payment and reimbursement rules. The proposed Healthy California program is inherently radical in that it would have to somehow collapse all of those silos into a single one.

Easier said than done. When it comes to the federal Medicare program that covers those age 65 and older, that could require a change in federal statute to accommodate what would effectively be a state opt-out while retaining the federal program funding. It’s not clear the federal government would be inclined to allow states to do so since this is a federal – and not state – entitlement program. Medicaid is a different story. It’s a joint federal-state entitlement program. As such, the feds have historically accorded states substantial leeway on how they administer their Medicaid programs and set eligibility standards. Then there are program silos for veterans, active and retired military families and interstate employer and union plans.

Reshaping this fragmented landscape into a unitary scheme would require an enormous amount of shared political will both within California and the federal government in order to make single payer a reality. It’s far from clear that it exists. California policymakers may have to reduce the scope of the single payer legislation to cover those under age 65 who are:

  • Not offered employer group benefit plan (possibly with employer or employee option to select instead of employer plan)
  • Medicaid only eligible
  • Self employed.
 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Study: Single-payer plan would save California $37 billion per year

June 1st, 2017 No comments

The new study estimates it would cost California $331 billion to provide health care to everyone living in the state — less than the $368.5 billion spent today in a system that leaves millions without coverage. To pay for it, they say, the state needs to find $106 billion in annual tax revenue — far less than the Senate committee’s estimate of $200 billion. The figures are probably on the optimistic side, said Laurence Baker, a professor of health research and policy at Stanford, because they hinge upon California’s ability to negotiate lower costs with the powerful pharmaceutical industry and other key players, such as hospitals and doctors. “It may be that they could do that,” Baker said, “but getting from where we are now to there would be a tricky, difficult proposition.”

Source: Study: Single-payer plan would save California $37 billion per year

California’s proposed single payer legislation would create a state monopsony that could flex considerable market power with providers of medical services as Baker suggests. But in order to obtain the potential savings it could bargain, the Golden State would have to blow up the current payment pie (illustrated in this post) that carves out slices for different populations and bake a whole new one covering everyone. That’s nothing short of reshaping the entire payer side of the state’s medical care system — a heavy lift considering most people are happy with their slice of the pie with the possible exception of those in the non-group market ineligible for meaningful premium subsidies under the Affordable Care Act.

Then as others have pointed out, there’s the obstacle of getting the Trump administration to approve federal waivers allowing California to redirect those subsidies and Medicare and Medicaid funding to the proposed Healthy California program. The administration is quite favorable to states devising their own schemes for covering those not eligible for group plans and Medicare. But it’s not clear if would go so far as to approve combining all federal medical dollars into a single pot in one state.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Why medical care payment reform is a wicked problem

May 29th, 2017 Comments off

“You can have a picture of what the final system would look like,” says Katharine London of the University of Massachusetts, coauthor of a series of studies of a Vermont single-payer plan that eventually was abandoned. “But the biggest hurdle for single-payer is how you get from here to there.” That journey involves persuading voters that the system they’re so enthusiastic about in the abstract will function to their advantage in reality. That’s a hard task. “People by and large like the health insurance they have,” in part because most people have limited or infrequent interactions with the healthcare system, Gruber says. “They’re not willing to give up something they like enough for something unknown.”

Source: The challenges in setting up a California single-payer system are daunting — but not insurmountable – LA Times

Jonathan Gruber –who consulted on the drafting of the Patient Protection and Affordable Care Act — is right on the money in his analysis. The pie chart below showing all forms of medical coverage in the nation’s largest state illustrates why medical care payment reform is such a wicked problem. Yes, it’s byzantine with all those slices of the pie covering different groups of people. But the people covered within each slice are generally satisfied with their coverage and thus not inclined to give up their slice in order to put everyone into one big pie of single payer where a governmental entity would pay all medical bills. That especially applies to employer group medical benefit plans that provide the bulk of private sector coverage to those under age 65.

 

Public sources account for 71% of healthcare revenues in California, including 60% from federal progSource: UCLA Center for Health Policy Research. Public Funds Account for Over 70 Percent of Health Care Spending In California. August 31, 2016.
 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Proposal: taxpayer funded primary care

May 11th, 2017 Comments off

In the United States, community health centers could be funded directly by the government based on population, not fee for service. They would provide a broad, well-defined range of services, including primary care, with weekend and evening hours, telemedicine, basic pharmaceuticals and education for management of chronic illness. Mental health care would be provided, including management of drug addiction. And they could serve as a base for managing crises such as epidemics and bioterrorism events. Anyone could use a community health center without income verification, free. People could still use private primary care providers, but they would have to pay for them, directly. Insurance would be reserved for emergencies, through inexpensive catastrophic coverage. Even Medicaid and Medicare could eventually be moved into a catastrophic-only model.

Source: What Spain Gets Right on Health Care – The New York Times

A couple of likely criticisms come to mind. First, would

Second, proposal is likely to face the major obstacle confronting proponents of single payer coverage, wherein the government covers both primary and catastrophic care: the entrenched employer-sponsored medical insurance benefit model that has been in place since the 1940s. Given

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

California single payer could include “24-hour care”

April 21st, 2017 Comments off

Lara and Atkins said they are working to address concerns that have killed past single-payer proposals. A wide-ranging financial analysis is under way.Atkins has floated an idea to offset steep costs by dissolving workers’ compensation insurance. Under that change, people with work-related illness or injuries could use their regular doctors, eliminating those costs for employers.“In the past I’ve said it wasn’t possible,” Atkins said. “What makes us different now is the experience with the Affordable Care Act…I’m hearing and seeing an appetite to do more.”

Source: Single-payer health care up for debate in California | The Sacramento Bee

This adds a new wrinkle to California’s consideration of single payer medical care that could help overcome opposition due to the entrenched dominance of employer-sponsored group health coverage for the majority of working age people. The apparent idea here is make a payroll tax to finance single payer more politically palatable to business and employer organizations by eliminating the medical treatment component of state mandated workers’ compensation insurance.

This isn’t the first time the idea of providing medical coverage for both vocational and non-vocational injuries and illnesses through an integrated care system has come up in California. In the 1980s and 1990s, the idea was termed “24-hour care.” California Congressman John Garamendi, who served as the state’s first elected insurance commissioner in the 1990s, was a big proponent of the concept, saying it was wasteful to pay for separate forms of insurance for medical care. Garamendi served on Hillary Clinton’s health care reform task force and influenced it to include 24-hour care in the Clinton administration’s health care reform proposal.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Employer group coverage stumbling block for single payer

April 7th, 2017 Comments off

The bill’s authors haven’t announced how the program would be funded. And that’s where the biggest obstacle lies, said Oberlander: It would largely uproot California’s present system, in which roughly half of coverage is sponsored by employers. If “you’re going to take health insurance largely out of the market, you’re going to disconnect it from employers,” he said. “Then you have to make up all the financing that you’re going to lose.”There’s no way to make up for those lost employer contributions other than to introduce “very visible taxes,” Oberlander said. And that’s not the only reason why a single payer plan would be controversial. “A lot of people are satisfied with what they have,” he said.

Source: While Washington Fiddles, California Leaders Forge Ideas For Universal Health Care | California Healthline

As this article points out, the largest obstacle to creating a single payer health care financing system is the seven decade history of employer group health coverage covering the majority of American adults and their families. The fundamental conflict boils down to how health care is paid for: as an employee benefit or as a government service.

Even though large states like California might have the fiscal and political economies of scale to make single payer pencil out — particularly if it is able to negotiate better value for health care dollars spent — rethinking the financing scheme requires a big conceptual, out of the box leap that makes U.S. health care reform a wicked problem.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

California single payer bill would amalgamate federal, state health program funding

March 30th, 2017 Comments off

A California state lawmaker this week fleshed out proposed legislation that would create a single payer scheme of medical care financing in the Golden State named Healthy California. The proposed legislation would create Healthy California Trust Fund to fund medical care for all Californians and combine federal funding for health programs (Medicare, Medicaid, Children’s Health Insurance Program, Patient Protection and Affordable Care Act) as well as state funds. Waivers would be sought from the federal government as needed to redirect funding from the federal programs to the Healthy California Trust Fund.

A key part of the funding under the measure is federal approval of a waiver under Section 1332 of the Affordable Care Act that allows states to set up their own medical care financing schemes using federal dollars that would otherwise be available under the ACA such as subsidies for health plan premiums and out of pocket costs in the non-group market and expanded Medicaid eligibility. Vermont took a similar tack with a single payer plan but ultimately concluded it would require substantial state funding to an extent the program would not be politically feasible.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

November elections increase likelihood of California revisiting single payer

December 21st, 2016 Comments off

Various media accounts report that California of all states stands to lose the most federal funding for health care coverage under the Patient Protection and Affordable Care Act – 20 to 25 billion dollars annually – if the law’s health insurance reforms are repealed as expected next year. The large majority of that sum comes from enhanced federal cost sharing under the law’s Medicaid eligibility expansion, representing more than $18 billion this year, according to this issue brief by the State Health Reform Assistance Network. Accounting for the balance are advance premium tax credits and cost sharing subsidies to offset the cost of qualified health plans purchased on the state’s health benefit exchange, Covered California.

Other media accounts portray California’s state policymakers as circling the wagons to fight this substantial loss of federal dollars given the potential for many low and moderate income households not covered by employer group plans to lose health coverage as well as extensive fiscal damage the state budget. But they are unlikely to prevail against the political will of Washington under the new administration and Congress and will have to consider alternatives. One likely candidate would be some form of single payer coverage, perhaps utilizing an all payer Accountable Care Organization (ACO) structure to hold down rising health care costs and financed by income, payroll and self-employment taxes.

In the previous two decades, single payer failed to gain voter approval when proposed as a ballot measure or as legislation. This time, however, with a supermajority vote margin gained in the November elections, legislative Democrats along with incumbent Democratic Gov. Jerry Brown could enact a single payer measure with — or without — support from Republican lawmakers. It would represent a far more radical reform than the Affordable Care Act. However, among the states, California has a sufficiently large population base and economy to go single payer if it chooses. The Golden State may well have to if it wants to carve out its own health reform destiny in the post Affordable Care Act era.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

One year after jettisoning single payer, Vermont now looks to control medical costs via expanded “all payer” ACO

January 28th, 2016 Comments off

One year after Vermont abandoned its plan to move to a single payer health finance framework amid concerns over the ability of tax revenues to cover rising medical utilization costs under that payment model, the state is rolling out an alternative aimed at reining in those costs. It would do so through a proposed “all payer model.” The model builds on the Patient Protection and Affordable Care Act’s Medicare Shared Savings Program Accountable Care Organizations (ACO) model in which providers share risk with reimbursements tied to the overall cost and quality of care provided rather than discrete medical procedures under the traditional fee for service model. Reflecting the pervasiveness of costly, chronic health conditions no longer largely confined to the Medicaid eligible population, the Vermont proposal would expand that model to all forms of reimbursement, including Medicaid and commercial plans:

The State would agree to coordinate with Medicaid and commercial insurers, and in return the federal government would allow Medicare to participate in the ACO value-based payment model. As is true today, health care providers’ participation in ACOs is voluntary; the ACO must be attractive to providers and offer an alternative health care delivery model that is appealing enough to join.

The goal of the proposed all payer model is to limit the annual growth of statewide medical spending to 3.5 percent with a maximum spending growth of 4.3 percent:

The goal of this financial target is to bring health care spending closer to economic growth. When health care costs grow faster than Vermont’s economy, Vermont families find their premiums rising faster than wages. This is also true in the state’s Medicaid budget, which grows faster than the revenue sources used to fund it.

The board’s authority to regulate reimbursement rates exists under current state law, according to a term sheet outlining the proposal. Vermont will seek any necessary waivers from the federal government to operate the all payer model, noting the state has jointly developed a policy framework and the needed waivers in consultation with the federal Health and Human Services Department’s Center for Medicare & Medicaid Services.

The fee for service reimbursement model is no longer suitable and is “antiquated” according to the Vermont proposal:

When the fee-for-service health care payment model was devised over 50 years ago, the average life expectancy of Americans was significantly shorter than it is today, and the burden of chronic disease was smaller. The Centers for Disease Control and Prevention (CDC) reports that treating people with chronic diseases accounts for 86 percent of our nation’s health care costs. Health care reimbursement was designed to pay for acute medical conditions that required a single visit to the doctor or a single hospitalization. By contrast, persons with chronic conditions require regular, ongoing care across the continuum of traditional medical services and community-based services and supports. Fee-for-service reimbursement makes it difficult for innovative health care providers to adapt to the changing needs of the population that they serve. The antiquated system provides clear financial incentives to order additional tests and procedures, yet it does not reward doctors and other health care professionals for providing individualized and coordinated care for complex chronic conditions. In the end, patients may receive care that is expensive, fragmented, and disorganized.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Colorado becomes second state to consider ACA Section 1332 waiver to fund single payer health insurance

December 3rd, 2015 Comments off

A recently approved ballot measure will give Coloradans the final say on whether to scrap the state exchange in favor of a single-payer system.

Source: Colorado voters set to decide the fate of health exchange – StateScoop

Colorado becomes the second state where the Patient Protection and Affordable Act’s Section 1332 waiver could be used to fund a single payer system starting in 2017. In this case, it would take the form of a proposed state-sponsored health insurance cooperative funded by a 6.67 percent employer payroll tax that’s up for voter ratification in November 2016.

According to the story, the tax would raise $25 billion per year. If the federal government approves the Section 1332 waiver — which allows states to opt out of public health benefit exchanges and the shared responsibility mandates on individuals and employers if the state can provide coverage that’s as accessible and affordable as under the Affordable Care Act — another $11.6 billion in federal funding could be provided annually to fund ColoradoCare.

Vermont was the first state that planned four years ago to transition from the exchange to a single payer system in 2017 under the 1332 waiver. That plan was abandoned early this year due to concerns over its financial viability and burden on the small New England state’s budget. In more populous Colorado and its larger tax base, it could be easier for the numbers to pencil out.

For a state-based single payer system, a key determinant of its actuarial viability is likely to be the health status of its residents. The numbers look propitious in the Rocky Mountain State, which has a strong outdoor exercise activities culture and ranks high on health status indicators nationally.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

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