Recent cost estimates of a U.S. single-payer system at either the federal or state level vary widely in their assumptions, predicting at most 18.8% savings (Friedman 2019)1. Other countries with universal health care systems, both single-payer and regulated multi-payer, spend 40-60% of what we do on healthcare as a percentage of gross domestic product, so clearly U.S. single-payer cost estimates do not capture all the policy features enabling lower cost in other countries.
Current healthcare reforms in the U.S. are founded on the belief that excessive utilization, driven by incentives in fee-for-service payment, is the major driver of excessive cost in U.S. health care2. The proposed solution is to shift insurance risk onto doctors and hospitals in the form of capitation and bundled payments, so that they make more money by providing fewer services, and hopefully only services that have “value.” The experience of other countries that pay for health care with fee-for-service and spend half what we do per capita certainly should raise questions about the assumptions driving “value-based” payment.
Organisation for Economic Co-operation and Development data show the U.S. is toward the low end of the range of utilization in other countries, so over-utilization does not explain our high expenditures. Instead, the difference is in administrative complexity and lack of effective price controls, driving higher prices3. “Administrative complexity” includes widespread profiteering by layer upon layer of middle-men exploiting the extreme complexity of U.S. health care: insurance companies, Medicare Advantage plans, Medicaid managed care organizations, Health Maintenance Organizations, Accountable Care Organizations, hospital-physician chains taking on insurance risk, pharmacy benefits managers, revenue-cycle managers, and all their contractors and sub-contractors.
Although there are pockets of over-utilization driven by fee-for service, most notably in the hospital sector and with some procedural specialists, there has never been any evidence of over-utilization of primary care services when paid with fee-for-service. However, efforts to shift from fee-for-service to capitation, led by Centers for Medicare and Medicaid Services (CMS), have been focused largely on primary care. The result so far is widespread demoralization and a worsening shortage of primary care physicians nation-wide.
Value-based payment (shifting insurance risk onto providers of care) introduces unwanted incentives to skimp on care and avoid care of sicker, more complex, and socially disadvantaged patients and populations (“cherry picking”). The “value-based” solutions are pay-for-quality or outcomes and risk adjustment, but both are far too complex to do accurately, and they are failing to deter skimping on care and “cherry picking” by health systems, hospitals, and doctors4.
Furthermore, both pay-for-performance and risk adjustment require much more detailed documentation and data reporting than is required by fee-for-service, raising administrative cost and burdens. So far, Medicare’s ACO program is costing as much or more to administer than the very modest savings achieved from reduced utilization, and administrative cost is also driving many early participants in the ACO program to drop out5. The cost and burdens of increased documentation and data reporting are the main cause of widespread physician “burnout” and the destruction of independent primary care.
This brings us back to the question, “What design features of a U.S. single-payer system would reduce our per capita healthcare cost to the range found in other advanced countries?” Desirable features of such a system should include public accountability, transparency, and meaningful public participation. We propose the following principles, based on what has been shown to work in other countries and in the U.S.
- Assure access to high quality care for everyone equally and strive to eliminate disparities in access to care. Finance health care with progressive funding sources and eliminate or severely minimize patient cost-sharing. However, achieving universal coverage and eliminating disparities cannot be achieved without cost containment.
- Cost containment should be achieved primarily by reducing administrative costs, not by interfering in the doctor-patient relationship. Reducing administrative costs will allow lower fees. Monopsony power must be used to more effectively control prices of prescription drugs and medical equipment.
- Standardized payment and price controls are the key to administrative simplification and savings, not competition, profit incentives, micromanagement of care by health plans, or use of financial "carrots and sticks" to manipulate doctors and hospitals in the name of "improving" health care.
- Collective negotiation of salaries and fees. Standardized payment of doctors and other healthcare professionals requires a mechanism to keep payment in proportion to the training and expertise required for each profession, and this is best accomplished with collective negotiation between the single-payer and organizations representing each profession. Likewise, prices for pharmaceuticals and durable medical equipment must be standardized and negotiated between the single-payer and manufacturers of drugs and DME.
- Single risk-pool. Manage insurance risk by maximizing risk pooling, not competition among plans that each have their own risk pool, or by shifting insurance risk onto networks of doctors and hospitals. Risk-shifting creates perverse incentives to skimp on care and avoid care of sicker, poorer, and more complex patients and populations, aggravating disparities in access to care.
- Health care must be a public good, not a commodity purchased according to ability to pay, or a "feeding trough" for those seeking to extract profit from health care, and it should not be owned or organized or managed by corporations with business motives and ethics, whether technically for-profit or non-profit.
- Establish and maintain a robust public health system, including programs for prevention of disease, responding to environmental disasters and pandemics, and addressing linkages between health care and social determinants of health.
- Promote professional ethics and intrinsic motivation for doctors and other health professionals. Quality improvement should not be based on “paying-for-performance,” which undermines intrinsic motivation and encourages gaming, but should instead be based on the desire to improve care.
- Incentive-neutral payment. Keeping payment for health care as incentive neutral as possible will free up professional ethics and intrinsic motivation, and it will reduce incentives for unnecessary treatment and opportunities for fraud and abuse. The incentive-neutrality principle prohibits capitation, shared savings payments, and pay-for-performance because they require accurate risk adjustment, which is not possible and drives up administrative costs. There are simpler and more incentive-neutral ways to pay doctors and hospitals than either the U.S. version of fee-for-service or “value-based” payment.
- Medical documentation should be focused on information necessary for patient care and quality improvement, not “pay-for-documentation.” Payment for both doctors and hospitals must be disconnected from the details of documentation. Payment of doctors should be based on their time and expertise, not on counting “elements” in their notes. The administrative burdens of inappropriately detailed documentation and data reporting now required for pay-for-performance and risk adjustment are the root cause of widespread physician demoralization and “burnout."
None of these principles are characteristic of current U.S. healthcare policies.
- Friedman G. Yes, We Can Have Improved Medicare for All. The Hopbrook Institute. March 2019. (https://docs.wixstatic.com/ugd/698411_9144a6d2d0374ec1a183b30e8369738b.pdf)
- Schroeder SA, Frist W. Phasing Out Fee-for-Service Payment. N Engl J Med 2013;369:2029-2032. (doi:10.1056/NEJMsb1302322)
- Papanicolas I, Woskie LR, Jha AK. Health Care Spending in the United States and Other High-Income Countries. JAMA 2018;319(10):1024–1039. (doi:10.1001/jama.2018.1150)
- Rubin R. How Value-Based Medicare Payments Exacerbate Health Care Disparities. JAMA 2018;319(10):968–970.(doi:10.1001/jama.2018.0240)
- Chernew ME, de Loera-Brust A, Rathi V, et.al. MSSP Participation Following Recent Rule Changes: What Does It Tell Us? Health Affairs Blog. Nov. 22, 2019 (10.1377/hblog20191120.903566)