The Looting of Medicare

Those who advocate using the federal Medicare program as a model for “universal health care” in America claim that it only spends two percent of its budget on administrative functions.

But that pales in comparison to what Harvard professor Malcolm Sparrow believes may be the 20 percent eaten up in fraud and mismanagement. This Sunday’s Parade magazine reported that Sparrow sees $70 billion of Medicare’s 400 billion dollar budget going toward false claims and mischarges.

So the next time someone tells you that Medicare is an efficient model for a single-payer system, tell them they’d better find another payer.


Steve Buckstein is Senior Policy Analyst and founder of Cascade Policy Institute, a Portland-based think tank.

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  • David from Eugene

    Steve

    The current estimates for administrative overhead with private health insurance run between 25-30%. So even if the level of fraud and mismanagement rises to the level Professor Sparrow believes MAY be present Medicare still has a lower overhead then private health insurance.

    Besides we do not know either what the level of fraud and mismanagement that may be present in private health insurance, nor do we know what the administrative costs associated with preventing or reducing the fraud would be.

    • Steve Buckstein

      David, I’m not arguing that our current private insurance model is ideal either. But the 20% fraud and mismanagement that Prof. Sparrow finds in Medicare is not all the bad news for that government program.

      There are also other unreported expenditures. For example, “a pair of studies of Medicare administrative costs that included unreported expenditures on the program made by numerous government agencies concluded that Medicare administrative expenditures were at least three times the amount reported in the federal budget in 2003—$15.0 billion vs. $5.2 billion.2,3 Another administrative cost analysis—possibly the most comprehensive and methodologically rigorous to date—examined a wide array of costs borne by insurers, health care providers, and patients in the United States and Canada, paying particular attention to indirect costs of carrying out basic administrative functions. The study calculated costs, net of associated benefits, of explicit and implicit methods of collecting revenues, curbing use of services and paying providers.”

      Source: “Administrative costs of health care coverage,” American Medical Association, 2007, https://www.ama-assn.org/ama1/pub/upload/mm/478/admincosts.pdf

      Also, “roughly speaking, the administrative (overhead) costs associated with private insurers are more than offset by hidden costs of public insurers. “

      Source: “Twenty Myths About Single-Payer Health Insurance,” NCPA, 2002, https://www.debate-central.org/topics/2002/book2.pdf

      All of this is on top of the Medicare fraud and mismanagement that Sparrow points out.

    • Step

      I am no fan of private carriers but teeing up the argument as 25-30% vs. 2 % (Medicare) is a significant abuse of statistics to support a preconceived belief. The private insurer number likely includes the costs of funding premium reserves (circa 15%) which Medicare or large self funded employers avoid. The Medicare number probably includes little else other than the cost of processing a claim and not the costs of GAO audits, Wyden’s administrative costs, incremental provider overhead , etc. etc. As I recall my days in the “self funded” market, employers could contract with claims administrators (TPAs) for about 3-4% to process claims. Blue Cross will suggest its admin costs are less than 10%. To me it would be a far better argument to suggest that if we are going to cover everyone one way or another then the funding mechanism should be organized around regional self funding models and not the classic insurance model. Immaterial to me whether the risk pool is government run or private sector. Would then want these regional entities to provide competitive alternatives for administrative and clinical support services elected by the individual. Even the Medicare program offers a significant array of private sector choices by the very private organizations you seem to condemn. Then at the end of the day, we also will need to discuss the very large public sector cost shifting to the private sector that confuses all this even further. The total costs of Medicaid shown on the books perhaps understates real costs at par by half. Medicare of course is a “financial chain letter” that has no reserves and is universally recognized as a financial disaster that exceeds Social Security downstream.

  • dean

    Steve….I’m curious. According to Sparrow, who is committing the fraud? Is it the doctors and hospitals padding their billing, the drug companies over charging, or the individuals who recieve the care?

    And…in the absence of Medicare and Medicaid, who would provide health insurance to the elderly and the poor?

    • Steve Buckstein

      Dean, you may be happy to learn that Sparrow believes much of the fraud is committed by private providers and companies that sell medical supplies and equipment. Other fraud is committed by patients.

      I don’t know if Sparrow makes a case for providing health insurance to the elderly and poor through a different system. His specialty seems to be uncovering mismanagement and fraud generally.

      My opinion is that government systems are more prone to such problems than private ones. Not that private systems are immune, but the feedback mechanisms in private systems are less likely to allow such massive problems to go on year after year. Playing with other people’s money, as Medicare does, is a formula for waste and abuse, even if all the individuals working in the agency are honest.

      • David from Eugene

        According to the bio on Harvard’s web site:

        Malcolm K. Sparrow is Professor of the Practice of Public Management, Faculty Chair of the MPP Program, and Faculty Chair of the Executive Program on Strategic Management of Regulatory and Enforcement Agencies. He served 10 years with the British Police Service, rising to the rank of Detective Chief Inspector. He has conducted internal affairs investigations, commanded a tactical firearms unit, and has had extensive experience with criminal investigation. Recent publications include: The Regulatory Craft: Controlling Risks, Solving Problems, and Managing Compliance; and License to Steal: How Fraud Bleeds America’s Health Care System. His research interests include regulatory and enforcement strategy, fraud control, and risk management and analysis. He is also a patent-holding inventor in the area of computerized fingerprint analysis and is dead serious at tennis. He holds an MA in mathematics from Cambridge University, an MPA from the Kennedy School, and a PhD in applied mathematics.

        From Amazon.com

        Regulatory Craft was copyrighted in 2000 by the Bookings Institution
        License to Steal was copyrighted in 2000 by Westview Press

      • David from Eugene

        Steve

        Regarding you statement: “Playing with other people’s money, as Medicare does, is a formula for waste and abuse, even if all the individuals working in the agency are honest.”

        Most workers public and private “play” with other people’s money, so why exactly do you believe that this is a problem for government agencies and not private corporations? I have seen much more counter productive efforts coming from mid-level management in the private sector then I saw in the military and have observed in local government. Things like bringing people in on overtime on the last weekend of an accounting period to ship out items, scheduled for shipment on the first day of the next to make the bottom line look good. Oh, by the way the shipper didn’t pick them up till Monday.

        The biggest question regarding the suppression of fraud and mismanagement is how much the organization is willing to expend in money and less efficient operations to suppress them. And is that cost less then the cost of the fraud?

    • Stephen Gregg

      Dean, my impression is that the fraud is “all over the place” and varies considerably in its egregiousness. Ranges from “stealing pencils at the office” to big time stuff. Perhaps you are familiar with the ethicist, Cohen who has a column in the Sunday NYTimes Magazine. I remember a column where he suggested to a doctor it was perfectly o.k. to render a prescription that would be covered vs. an over the counter alternative which the doctor viewed as equally effective at far less cost. Some have concluded that “gaming the system” is perfectly fine because “the system is so mean” I refer to this as “vigilante medicine”.

      As for what to do with Medicare and Medicaid, both are legislated entitlements albeit underfunded. I would prefer to see these programs gradually disappear and migrate to whatever the “universal” game plan becomes. Too much gaming around and between public and private sectors such that facts cannot be accurately concluded. As long as Medicare and Medicaid stand outside of private sector reform, we will just be chasing our tails. Kitzhaber speaks to all this.

      • dean

        Steve B…it doesn’t make me happy or sad. I was just curious.

        Steve G…I’m curious as to whether you saw the T.R. Reid Frontline piece on health care systems abroad last week on PBS. And if you did, what you thought of his findings.

        • Stephen Gregg

          Yes, I did see it and thought it was a pretty good summation, and “proof” that an alternative future is possible. A good number of people have interest in picking the “best of the lot” and perhaps replicate one of these other systems. Intellectually, that could represent a sound judgment from my perspective. As this broadcast made reference to, the transcending characteristic of “success” seems to be deploying methods that control costs. Not sure the substance of that came through to the viewing audience. If we want to “replicate” the performance of another system, we can’t pay the participants in our country twice what they make in this other system. I had a friend of mine who has a son just finishing his orthopedic residency. While this is perhaps extreme, he has been offered the opportunity to move to a “second tier” community in Texas with the prospects of making $1Million a year. The debate in this country elects to focus on administration which undoubtedly could be streamlined, but the “savings” potential compared to the apples to apples comparison of what a nurse, doctor, physical therapist makes here vs. these other countries is where most of the economics rests. Don’t think we are very honest about that, nor do I see the political will to challenge this very overtly. My problem is that our debate in this country is profoundly loaded with bogus economic arguments (prevention, electronic medical records, etc.). So if we vastly change the system irrespective of its merits, the nation will “rest”; and if we so obviously fail (again) with the cost component to be locked into a progressively tightened set of options with less reversibility, I consider that a problem.

      • David from Eugene

        Stephen

        Anyone who believes that a system will not be gamed does not understand Americans. “Gaming the system” is just one of the factors to be considered when putting a system together. Ideally, if the system is put together right the optimum gaming approach should get the desired result.

        As to Cohen ethical comment, he is right if you believe that the Doctor’s first duty is to his patient and that the patient could not afford the over the counter medication. One of problem with the American medical system is the artificial divisions that do not include drugs, eye, dental and mental health care in medical care.

        • Stephen Gregg

          David, I agree “gaming” is a part of any “system”, particularly when the funding is from “other peoples money”. My intention was to respond to the “fraud” question and the view that it is endemic and at no one’s doorstep in particular. One of the purposes of “reform” is to dramatically disrupt the “game” by electing leverage points that cannot be easily sabotaged. There are no saints among the players and each is playing a role in destabilizing what we have, and largely convincing most that what we have is unsustainable. “Gaming” is a close cousin to “fraud” and clearly we are entering the zone where “rules” are becoming immaterial.

          In my estimation a large part of the argument of “govt” vs. “private” contained in this dialog is almost pointless as those with thoughtful passion on either side of the argument will not accept the terms of the other side. My global concept referred to above by Steve Buckstein is to provide a “solution” that allows people to elect the ideology they say they want, and move on. For those who want a “public” system, let’s have one they can elect with all of its benefits and warts. Same on the private sector side. If I were the “king” of either of these two alternatives, my life would be a lot easier if my “crowd” came to my village by election related to the fundamentals. As “king”, I would feel confident in my prospects of success on either side of that divide, given a level playing field.

          Given the state of national and local rhetoric, I am 70% certain we will do something and about 30% confident it will be the right thing.

  • Rupert in Springfield

    I look at it this way, Medicare costs are now something like ten times what they were projected to be at this time when the program was created. The prescription drug benefit, which is only a few years old is now way more expensive than projected. Social Security, a system that now takes enough from average workers that, were it invested privately would make them millionaires, gives younger workers a negative rate of return.

    Anyone who thinks the government is going to somehow miraculously lurch into the realm of efficiency, lowered costs and better care should they run the entire health care system is forecasting based upon pure hope and not experience. Simple fetishism over all things European and Canadian is a basis for cheese, wine or bread selection. It is not a valid reason for thinking the US government will suddenly behave in a way it never has.

  • John Fairplay

    Perhaps more importantly, Medicare has other costs to beneficiaries that are not included in these figures. These costs include the extra costs of having to search for a health care provider who will accept assignment and the poor quality of care that is received among other things. In essence, Medicare shifts a significant portion of its administrative costs onto beneficiaries, so the 2 percent figure is a bit misleading.

    • Rupert in Springfield

      Plus, lets not forget that Medicare doesn’t have to worry about the administrative costs of accounting for tax purposes. Oh and gee, I guess they also don’t have to worry about paying those taxes either.

      Huh, aint that strange? Medicare costs way more than it was ever predicted to and they don’t have nearly the expenses of private companies. Medicare’s prescription drug plan costs way more than predicted and its only been in place a few years.

      But gee, we should pitch that all over board, throw out our entire collective experience with the DMV, the IRS, the Post Office ( have you noticed the great efficiency there? take a look at the card swipe machines. Have you seen one working lately? Think someone at the efficient government bought an efficient new computer system with efficient card readers that don’t work for some reason in every single post office I have been in in Eugene and Springfield and yet every crappy 7-11 sure seems to have their card swipe machines working) Yes, we should all just suddenly think government will be really efficient because ……. France……Canada……..

      Are you there God? Its me Margret – God, could you please make it so anyone who thinks government will run health care efficiently winds up on government health care? Let Darwin’s magic do its work, please oh please God.

      • Steve Buckstein

        Rupert, you’re in luck. Steve Gregg has proposed a system where those who think government will run health care efficiently can buy into what he calls a civic sector. Others can choose an HMO sector or a fee for service sector. This way, not just the poor are relegated to government health care. You can read a summary of his proposal at:

        “Bridging the Ideological Divide in Health Care Reform: An Actionable Plan for Oregon”
        http://www.cascadepolicy.org/pdf/health_ss/200610_bridging_the_ideological_divide.pdf

        • dean

          Steve B….while I admire what Steve G has proposed, Rupert is not “in luck” unless that proposal has some political legs, which I have not seen evidence of yet.

          Steve G (above), I for one definitely got the message from the Frontline piece about the way costs are controlled overseas. What is interesting to me is that government cost control, which we arfe taught cannot work, seems to be working pretty well in this case.

          • Stephen Gregg

            Dean, I am not sure all these systems are considered “government controlled”, and are often hybrids. Many of the “public” systems are seeking to involve “free market” characteristics. I accept the possibility that government could vigorously control costs, as I accept the possibility that a properly motivated consumer could demand price accountability from providers. Both are very speculative assumptions which is hardly nuclear science thinking. I would not bet the ranch on any untested (in the USA) model which is one reason why I am an unqualified advocate of experimentation and “proof of concept” before full scale roll out. “Proof of concept” (experimentation) is the fourth step in the Scientific Method that I first learned in grade school. Funny how it does not appear anywhere in the policy landscape.

            As for my model and its lack of legs, this is a fairly common problem, as I am not aware of any model having such legs. Ironically, my plan requires the least legislative reform, the least capital costs for development, can be executed experimentally on a regional basis, is “voluntary” at the outset, is reversible, provides a realistic and salable method of financing the safety net, and welcomes individual choice and providing what people say they want. The only burden is that the pro government and pro private sector crowds have to deliver the goods or perish. The model with broad acceptance could be in initial operation within one year of a “go”. Only thing I can suggest is for you to make a judgment for yourself and defer less to others. As another suggestion I have recommended that Oregon impanel a “sharp” group of “judges”, distribute an RFP for reform proposals to the brightest prospects, evaluate, make a decision on the broad framework. If you think the Swiss system is the best alternative, make your case to the panel. This is all pretty easy stuff if we really wanted to engage the subject. Not sure that interest really exists in Oregon, despite all the “process for show”.

            I have no idea how to put all this debate on the right track.

          • David from Eugene

            Stephen

            There are several factors that are coloring the healthcare debate in America, and making hard for a reasoned discussion to take place. One, is the “you die” factor. To explain, as a practical matter it is not economically possible to provide full heroic medical care to everyone, some form of rationing is necessary. This rationing takes several forms, money, time, and treatment lists to name the more common. To put it in a very simplistic form; in the case of the money, if you have it (either out of your pocket or from an insurance plan) you get treatment otherwise you die. In the case of time if you survive till your appointment you get treatment other wise you die. In the case of a treatment list (like the Oregon Health plan was supposed to have) if your illness is on the list you get treatment otherwise you die.

            As few people want to die, when the question of healthcare rationing comes up people choose the form of rationing that they believe they will least likely to end up on the “you die” side with. For example if you have good health insurance and you believe that you will be able to keep it, changing from the money based ration system that is currently used in the United States to either of the others is not a good choice assuming you can retain your coverage. If it turns out you do not it is a very bad choice.

            A second factor is the fear of paying for someone else with its corollary; the fear that somebody is getting a free ride. The interesting part of this is that many of the people yelling the loudest are already paying for the uninsured through higher hospital and doctor costs.

            A third is the fear that some faceless government bureaucrat will have the final say on their treatment. The interesting part with this fear is that in many cases it is a faceless insurance company bureaucrat who has the final say and who’s employer benefits from him saying no.

            As to getting this debate on track, I think the legislature by putting forward the amendment to the state constitution making access to health care a right is a good start. Once the voters answer the question as to whether they want Oregon to join the civilized nations or to continue the descent into third world status, the direction of the debate will be set. And yes I loaded the wording for I believe that a civilized society does not let any of its members go without health care anymore then it lets them live under bridges, or eat out of garbage cans. Please note that I said Society and not government, there are many ways for a society to see that the needs of its members is met, having government do it is just one of the ways and many times it is not the best way.

          • Stephen Gregg

            While I believe Kitzhaber has many thoughtful contributions to make to the debate, I believe the logic you represent here is fatally inadequate. The presumption is that we can get to sustainability by a finely tuned rationing strategy…effectively highly regulating access, while offering virtually no strategy to control resource availability and tepid control on the income earned. Much of the debate is centered around a lack of resolution as to whether it is “my money” or “our money” that pays for my health care which is not likely to ever get resolved. What stands in the way of achieving a broad civic commitment to universal coverage or access, is our inability to control costs after literally decades of trying in various forms. Today, out of growing tensions, we are considering that we actually require people to buy a service which has no forecast of being able control its downstream expense. This reality places all other spending at risk and should bring more caution to how we go about this. While I share the aspiration of universal coverage, I would not elect to lead with this issue as it will be construed as most anyone would wish to define it and we do not have the makeup to withstand the anecdotal pain. The mere debate sucks all the oxygen out of the room, and provides zero expression on the cost component. As I understand it, the legislature did consider the Greenlick proposal of a “right” to be referred for a vote of the people, and it failed.

            On the positive front, the debate is finally achieving more balance between the uninsured and cost management. The next achievement will be to recognize that different people embrace contrasting strategies to controlling costs, which is fine with me as long as each of us lives with the consequences of the path chosen. If there is just one monolithic solution (like all of us shall be in Kaiser), not sure we could hold the troops together.

          • David from Eugene

            I am not saying that the route to sustainability is to establish a finely tuned rationing strategy. Nor am I saying that this is the issue to lead with. I am saying that at the root of any health care system is a rationing system, that the form that system that takes is not consumer neutral and most of the people involved in the health care debate are aware of it. And in the long term we cannot leave it as the elephant in the middle of the room.

            As to cost containment, I am not sure that it is currently politically possible. I can provide a list of a half dozen cost containment strategies. They all have two things in common, they would reduce cost and there is at least one major vested interest with money who would oppose them. Whether they would prevail depends on the public mood at the time.

            As the current system is in an ever steeper death spiral we do need to do something, which in my mind is to start with the most basic question and then build a system from there. The basic question to ask the American people is whether it is acceptable to have people die on the street because of a lack of health care? Or to put it another way is access to health care a right or a privilege reserved for the rich and pseudo-rich. One of the most interesting parts of the Frontline piece was the response of the major public official to the question of people being forced into bankruptcy over medical costs. He stated that for that to happen would be a major public scandal. I wish that was the case here

            As Switzerland has demonstrated, all it takes is time and the initial approval of 50.0001% of the voters to establish a health care system the bulk of the public would embrace.

          • Stephen Gregg

            Not sure I understand your views on rationing…seems like it is not your position, but it is at the root of the debate. Not all people are motivated by the same drivers. Nor do I think it is fair to say we have people dying in the streets as the right grounding. I could suggest at $1000 a month for a teacher’s health care benefits in Portland, we probably are missing a great number of teachers in the class room. The concept of “entitlement” and “right to health care” is a hot and divisive issue for many many people irrespective of the side you are on. If we chose this subject as the point of attack, my read is that we may further embed people in their own rigid positions to the result of achieving nothing. My preference would be to land on a “safety net” solution that does not require installing a culture of civic wide entitlement which just seems unmanageable. It is odd to me that many people feel that private insurance is at the center of our inefficiency and yet are willing to commit unequivocally the future system to that methodology as “political reality”. It reinforces my personal view that most folks are not yet serious about the cost component. Deal breaker for me to proceed with the uninsured and accept bogus or wishful cost efforts.

            Cost containment is politically possible when people like you and others are willing to personalize a commitment to same. This issue has been cooking for decades now, let it cook a little longer. Shame it has to work that way.

          • Stephen Gregg

            Dean, I am curious, do you think the political will exists within Oregon to firmly control professional compensation, capital spending, and the other components of costs?

        • Rupert in Springfield

          Well, if nothing else the plan does have merits on that level, the multi pronged approach. I think I have a basic fundamental issue with Greggs plan at the outset – it takes issue with incrementalism. While I don’t think this is a flaw with the plan itself, I think that it is a huge flaw with the nations thinking on this. The reason why I think this is twofold:

          1) Incrementalism has only been tried in the sense of adding another small program here and there. In other words it has always been additive to government rather than subtractive.

          2) Incrementalism is fairly simple to implement, the chances for huge unintended consequences ( which always seems to happen when “the best intentions crowd” gets involved) are minimal and can be reversed more quickly.

          So what sort of incrementalism would be good to try?

          1) Drop all barriers to insurance purchase immediately. No one would give a rip about the health care problem if insurance was so affordable that virtually everyone could buy it. Laws that prohibit people from pooling together, or prohibit interstate purchase of insurance are absurd.

          2) Put as much enforcement into tracking down dead beat patients as we do dead beat dads, do this at the federal level. I don’t want to hear about how poor these people are. Too bad. You know if they got a speeding ticket or owed taxes, the government will track them across state lines to collect.

          3) Find something for people in advocacy groups to do other than make life hard for the rest of us. Lets end this evil cycle of people who feel guilty because some weird need isn’t covered, then go on to become advocates, get an insurance mandate passed, raise the cost of insurance for everyone as a result so they can feel less guilty. I should be able to decide if my insurance should cover acupuncture or not.

          4) No taxes on medical expenses, period. You buy insurance? No taxes. You had an out of pocket health care expense? No taxes, and no having to meet some percentage of your income BS for the deduction.

          5) Figure out whatever the cost per person is on Medicare or the various government employee health plans. Allow anyone to buy into them. Pre existing conditions are not covered unless you can show you are switching insurance. This eliminates fraud of those who prefer to buy X box games and no insurance, then when they have something try and buy insurance to shift the cost onto the rest of us, and when that doesn’t work call an advocacy group.

          6) Allow military transport for all US citizens one way, one time, to the European country of their choice. We have military bases in a whole bunch of those countries so I know we are flying there. How much does some skinny vest wearing guy and a guitar weigh down a plane anyway? We would be rid of all our advocating deeply concerned working so hard on social justice making life hard on anyone who just simply works types in a jiffy.

          7) If six proves to be too unwieldy, allow the various government health care programs that private citizens could now buy in to to be named different names. Thus, Medicare would retain its name for old people, but for 30 something skinny vest guy, it would be called US French Medicare. For the poor, it would still be Medicaid, but if you want to buy in it is now the US British Medicaid. 30 something skinny vest guy will be all happy, think he is more civilized and effete than the rest of us schleps, and we would be done with the problem. Put a little French flag on his insurance card for the program as well.

          • Stephen Gregg

            Accepting some of this is tongue in cheek, let me clarify my posture on “incrementalism”. I simply view “incrementalism” as tactics related to execution which is absolutely necessary. That said we should not accept incrementalism in the absence of a more broadly stated vision, game plan, or concept that we are “executing” toward. I differ from some in that I do not think we should be attempting to solve the uninsured issue, without a commensurate commitment to the cost component. The former is really not all that difficult conceptually; the latter is highly problematical and loaded with BS and wishful thinking that needs far more credibility than what we have now. Particularly share the view that all of us should have access to anything that is available to anyone else.

          • dean

            Stephen…in answer to your question above about “political will” in Oregon to control costs, I think it depends on the context. First, I don’t think the basic problem of making health insurance universally accessible and affordable can be solved at the state level, except perhaps by a very large state (California). Second, I think we are proably too divided politically (in Oregon). A serious legislative or initiative attempt at cost control (combined with universal access) would be opposed by big money from doctors, insurance companies and hospitals, and would be doomed (see the ciggarrete tax results).

            I’m becoming more intrigued by the Swiss system, which seems compatable with American values (innate distrust of government).

            I also tend to agree with David G that incrementalism is probably the only way we are going to get anywhere, but I agree with you that the incementalist path we choose should have an end state in mind. And I agree with you that part of that incrementalism has to include cost control/management of some sort.

            The Obama and Clinton plans are both incrementalist. They increase public spending in order to widen insurance availability, they open Medicare (or an equivlent) to younger people to buy in (as Rupert advocates,) they retain the option of private insurance through employment most Americans already have, but they eliminate the ability of private insurance companies to cherry pick clients by foisting those with pre-existing conditions off onto the public sector. They do not sufficiently control costs, as you have pointed out, though they do address the drug cost issue that the Bush Administration punted on.

            I think either is a big step forward from where we are, and they seem to aim towards the Swiss system. I prefer France, with or without Rupert’s free transport included.

          • Stephen Gregg

            Oregon has approximately 3.5M people which far exceeds the population threshold needed to operate a credible system efficiently. Without a doubt, the Feds would need to cooperate with any Oregon conceived initiative, but it is cooperation similar to what they did to enable and nurture HMO development. In my estimation, Oregon is very guilty of chronically shifting the blame whenever the heat gets turned up, but of course very ready to brag about its ground breaking “leadership”. If anything, most of us would hold a pretty pessimistic view of escalating the policy making to the politics of the federal level, vs. doing the heavy lifting at the level of intimacy possible in Oregon. In my view, the proposal either has credible prospects (not guarantees) of controlling costs or it doesn’t; if we are willing to defer and engage in self deceit in this regard, I can’t see it as constructive.

            Quite frankly, I cannot keep track of all the different designs of other countries. I thought the Swiss system was a set of reforms only recently introduced and thus not completely vetted. American thought leaders, Reinhardt and Enthoven claim some influence on its design. Singapore is another hot choice. The monster in the room, is whether our surviving provider base and other industry elements can be put “back in the barn” after tasting the dough that has not been experienced by their counterparts in other countries. If that cash flow is not controlled, costs will not be controlled, and if costs are not controlled we will not have implemented a sustainable system….just a system of greater complexity and intractability.

            Have a good day and let’s keep trying.

          • dean

            Stephen…a brief analysis of the Swiss system is available at: https://scienceweek.com/2004/sb041008-4.htm

            Some salient points:
            1) It is a mixed public and private provider system, not single payer as in Canada and France
            2) Competition is strictly regulated, not truly free market
            3) There are some experimental methods at cost control, including using “consumer choice” and “price transparency”
            4) By objective cost, health outcome, and patient satisfaction measures, the Swiss system delivers better performance than the US
            5) The Swiss system is similar in structure (managed competition) to that proposed by the Clinton’s in the 90s.
            6) The tight regulation of the Swiss method is felt to be a major factor in its success.
            7) There is a basic health care provision and a suplimental insurance system. In other words people have to buy into at least the lower level but can opt for more and better services/covereage.

            What I remember from the Frontline piece is that the Swiss system is higher cost than the single payer systems of other countries, and comparable in quality. Its advantagous in comparison with the US is its lower cost, higher quality, and universal access, plus it seems politically possible for the US since it can be done within our existing mixed framework. The key resistance would probably come from for profit insurance companies, who initially fought its implementation in Switzerland but lost in a national refferendum. They were not put out of business, but had to adjust to a not for profit business structure.

            It seems to accomplish a lot of what your proposal calls for. Choice of public or private delivery, universality, & cost control through transparency. It does not seem to have a high deductable “catastrophic only” option, which you favor if I remember right. But I don’t see any reason a US version could not include that as an option.

            From the article:
            “on the metric of potential life years lost per 100 000 population (due to premature death that could have been avoided through timely and appropriate health care, public health measures, and less risky behavior), the US was estimated by the Organization for Economic Cooperation and Development (OECD) to have lost 5120 lives per 100 000 in 2000, while the comparable numbers were 3888 in the United Kingdom, 3806 in Germany, 3571 in Canada, and 3400 in Switzerland”

          • Stephen Gregg

            That is my understanding of their model as well. I am not anxious to concede to the politics of the private carriers out of pure necessity if it represents a fatal flaw in the downstream economics. Personally, unlike the Swiss, I believe we have to migrate to the efficiencies of a “self funded” financing mechanism as opposed to a premium based insurance product. Almost all large employers engage self funding with stop loss insurance….because it is almost universally viewed as more cost effective. I also tried to convey that we cannot replicate the performance of the Swiss system (or any other system) and compensate our players twice as much money.

          • Stephen Gregg

            Another wrinkle to the Swiss system which you refer to above, is a structure of a “basic” plan for all, with elective supplements. What I have run into with some force in this country is a definition of “basic” as being pretty much what I have now, plus some fashionable preventative benefits. If “basic” could be defined more consistence with the meaning of the term, I would be more amenable to this kind of structure. However it is my impression of the politics will prohibit it. I was told in the early days of the Clinton efforts, they float a national “catastrophic” type plan, and it was roundly and summarily defeated by unions and others with generally richer benefits out of fear these skinny benefits would become a national benchmark of reasonable coverage. As a second point, in my situation, the premium costs of “qualified” HSA benefit that I can acquire is 2.5 times as expensive as a catastrophic policy from the same carrier. Obviously that is because of government regulation, which is likely a result of insurance lobbying. I understand this choice is not a responsible one for all, which goes to the point that not all of us are the same and fit into someone’s view of a “good average benefit”. Obviously the extremely poor would be inadequately served by almost any definition of “basic”, as well.

          • dean

            Yep….to the extent universal access represents a step backward in existing coverage for many or most working Americans it would be DOA, which is why Clinton and Obama start every speech on their health care proposal with “if you like what you already have we don’t change that a bit.”

            But Harry and Louise or their offspring will be there to scare us away from universal access no matter what, and I don’t know how to get around this frankly. Maybe smarter people than me can figure it out.

            Wouldn’t it be nice if we could simply “work the problem” based on metrics instead of having to navigate the interests? It would be so easy, but life in a messy democracy just does not work that way.

          • Stephen Gregg

            Another reason why my preference would be to “solve the problem” at the Oregon level and insist on Federal cooperation.

          • cc

            Wouldn’t it be nice if we could simply “work the problem” based on metrics instead of having to navigate the interests? It would be so easy, but life in a messy democracy just does not work that way.

            That’s dean – wistful for a plutocracy.

            Beware!

          • dean

            Yes…I am right in tune with William Buckley as a fan of Francisco Franco.

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