We Must STOP Single-Payer Health Care in Delaware (or else) (Part 2)

And now for a look at the enthusiastic but inaccurate claims that Mr. McDowell and the backers of single-payer health care in Delaware make on behalf of Canada, Europe, and Medicare/Medicaid.

Please note that all quotations are taken from Single Payer Delaware Health Security Act Information by Floyd McDowell.

First amazing claim:

“ This Act will provide every Delaware citizen comprehensive health care coverage from conception until ones last breath is taken without a cent from out-of-pocket expense for extra health insurance, co-payments or deductibles.”

Really? Well, consider the view of the Munich-based CESifo, which is best described in its own words:

The CESifo Group, consisting of the Center for Economic Studies (CES), the Ifo Institute for Economic Research and the CESifo GmbH (Munich Society for the Promotion of Economic Research) is a research group unique in Europe in the area of economic research. It combines the theoretically oriented economic research of the university with the empirical work of a leading Economic research institute and places this combination in an international environment. The services of the CESifo Group range from internationally established service products, such as the Ifo Business Climate Index, to internationally acclaimed research, the promotion of junior researchers and the numerous, widely publicised contributions to policy debate at the national and European levels.

CESifo is also the core of a research network consisting of former visiting researchers at CES, which now numbers over 500 economists from many countries. CESifo is also the trade name under which the international activities of Ifo, CES and CESifo GmbH are bundled.

The CESifo group arose in 1999, when Prof. Hans-Werner Sinn was appointed president of the Ifo Institute jointly by the Ludwig Maximilian University (LMU) and the Ifo Institute and CESifo GmbH was established as a subsidiary by the LMU and the Ifo Institute. By grouping its joint resources, an international orientation and an aspiration to excellence in all fields of activity, the CESifo Group has achieved its initial goal: to make Munich a centre of economic research and policy discussion in Europe.

(Note also the CESifo actually lists both its staff, the awards they have received, and the articles they have published in refereed journals, unlike the Physicians for a National Health Program, which I discussed in the previous post.)

CESifo investigated how much was left of total health expenditures (THE) to be covered by private health insurance (PHI) in European countries, Australia, New Zealand, Canada, Japan, and the United States AFTER all benefits had been paid by state-run health care programs, as well as the percentage of people in the population who found it necessary to purchase either substitute, complementary, duplicate, or supplementary private health insurance. The results are like smelling salts for those who boldly assert that single-payer systems will eliminate out-of-pocket expenses:

Austria: PHI is 7.2% of THE; 31.8% purchase private insurance

Belgium: PHI is not reported; 57.5% purchase private insurance

Denmark: PHI is 1.6% of THE; 28.0% purchase private insurance

Finland: PHI is 2.6% of THE; 10.0% purchase private insurance

France: PHI is 12.7% of THE; 86.0% purchase private insurance

Germany: PHI is 12.6% of THE; 18.2% purchase private insurance

Ireland: PHI is 7.6 % of THE; 43.8% purchase private insurance

Italy: PHI is 0.9% of THE; 15.6% purchase private insurance

Netherlands: PHI is 15.2% of THE; 92.0% purchase private insurance

Spain: PHI is 3.9% of THE; 13.0% purchase private insurance

UK: PHI is 3.3% of THE; 10.0% purchase private insurance

Switzerland: PHI is 10.5 % of THE; 80.0% purchase private insurance

Australia: PHI is 7.3% of THE; 85.2% purchase private insurance

Canada: PHI is 11.4% of THE; 65.0% purchase private insurance

Japan: PHI is 0.3% of THE; negligible % purchase private insurance

New Zealand: PHI is 6.3 % of THE; 35.0% purchase private insurance

United States: PHI is 35.1% of THE; 71.9% purchase private insurance

Source

Your take-away: Single-payer health plans DO NOT eliminate the need for out-of-pocket expenditures!

The next claim is that single-payer health care systems will, like Medicare/Medicaid, dramatically reduce administrative costs:

The overhead/administrative cost in the Medicare program is 1.5% compared to 33% wasted by controlling insurance company brokers our Act will eliminate. An important difference in our state's single payer program is that we will save more than enough funds to properly compensate health care providers whereas Medicare/Medicaid funds are not adequate. Our Act will eliminate the tons of unnecessary paperwork continually flowing into providers' offices. This flood of paperwork from totally unnecessary health insurance company controlling brokers with all of their fine print protection of bottom line profits will be eliminated from providers' lives. This will also eliminate the many costly hours that physicians and other health care professionals have to continuously waste helping office staff try to interpret the small print billing requirements of insurance companies. Simply ask one profound, revealing question. What does a health insurance company contribute to a physician's office, hospital, long-term care facility or any part of our health care system? Absolutely nothing. Not even a band-aid!

This naïve estimate of Medicare’s efficiency fails to note huge wastage through fraud and improper payments. According to the National Bureau of Economic Research:

Reliable estimates of the magnitude of the problem are difficult to obtain, but the Department of Health and Human Services has estimated improper Medicare fee-for-service payments at $12 to $23 Billion, or roughly 7 to 14 percent of all reimbursements.

Moreover, as Healthcare Economist points out, the Mr. McDowell’s essay grossly OVERSTATES the administrative costs of private health insurance:

A common justification for Medicare is that the public health insurance system has an overhead cost which is about 2% of claims, while the private sector has administrative costs between 20%-25% of claims. This tells us that Medicare is the best system for America…right?

Merrill Mathew’s of the Council for Affordable Health Insurance (CAFI) summarizes the findings of Mark Litow’s paper “Medicare’s Hidden Administrative Costs.” Litow finds that taking into account extra legal costs from Medicare adjudication and CMS salaries, the administrative cost ratio increases to 5.2%.

Private Insurance on average has administrative costs of 16.7% (varying between 30% for individual policies to 12.5% for large group policies).

[Truth in advertising: despite these statistics, Healthcare Economist still believes that “Medicare seems like a better deal.”]

But take a look at the relative cost structures. Private health insurance averages 16.7% administrative costs, whereas Medicare averages 2% administrative costs which rise to 5.2% if you include additional legal costs, and then if you ad 7-14% fraud, what you’re left with is a dead heat. The so-called “administrative savings” of a single-payer system is an illusion.

As for Mr. McDowell’s last point, that administration contributes “absolutely nothing” to care, Healthcare Economist also notes:

Finally, we need to realize that administrative costs are like people: some are good, and some are bad. What if a private insurance company raised its administrative costs by 1% , but was able to reduce fraudulent claims by 10% and reduce the premium charged to customers by 8%. This is an example of how an increase in the administrative cost ratio can add value. It is likely that private companies try to avoid paying for unnecessary medical treatment and are more vigilant to detect fraudulent claims then Medicare.

Advocates of the Delaware single-payer plan insist, however, that they will eliminate fraud and waste:

Important information to know is how our Act will be funded. The first understanding is that by eliminating the totally unnecessary health insurance industry (as Michael Moore explains in his excellent documentary film "Sicko"), we will save at least 30% of our Delaware health care funds. At least another 10% will be saved by implementing the 7-step proven plan to stop fraud explained in our nation's recognized authority (Dr. Malcolm Sparrow of the Harvard University School of Government) on health care fraud's must read publication "License to Steal." This will reduce the huge loss of funds from our taxes, citizen out of pocket expenses and private businesses.

I will let pass the absurdity of using Michael Moore’s “Sicko” as a legitimate source reference for the idea that a single-payer plan in Delaware would magically reduce our health care costs by 30%. Even critics sympathetic to Mr. Moore’s case have pointed out numerous errors in his “facts” and “statistics,” and the absence of any better source for this figure suggests … the absence of any real source.

What about the 10% off the top by the seven-step program? I’ll give you two things to think about here: (1) the fact that this “proven” program has not currently ended fraud and abuse in Medicare; and (2) this is after all Delaware: think about how much fraud and abuse exists at all levels of our current state government, and you tell me if the bland assurance that a single-payer system for the First State will be run more efficiently than anything else here is comforting.

Again the single-payer advocates assert that “No extra health care insurance or out of pocket expenses for health care services and neither co-payments nor deductibles will ever be encountered.” We’ve already pretty thoroughly debunked that one.

But if you need more food for thought, consider this: will this new system pay for all forms of cosmetic and/or elective surgery? Will you be able to get breast augmentation, sex-change operations, liposuction, or unlimited attempts at in-vitro fertilization? Will absolutely ALL medications be covered, or will your doctor have to follow a state-approved formulary that might not let you have free access to Nexxium because it is still under patent and not available as a generic? Will all decisions about length and termination of care for individuals in comas or vegetative states remain with the next-of-kin, or will the state assert (as the financially responsible entity) that it has a fiduciary responsibility to apply cost/benefit analysis to how long we keep someone on life support? Who determines the amount of money that the state will spend on high-cost, low-success-rate strategies in critical neo-natal care for extremely premature babies?

The answer is that at some point the state will have to impose limits on care that either (A) make us pay out of pocket; or (B) prevent us from receiving that care under any conditions, because of the following economic reality:

HUMAN BEINGS (AND HUMAN SOCIETIES) HAVE UNLIMITED WANTS AND LIMITED RESOURCES WITH WHICH TO SATISFY THEM.

Who decides? Money talks, and under a single-payer system the entity paying the bills eventually calls the shots.
Another claim by the advocates of single-payer health care is that it

Will prevent all future health care debt, which causes over half the personal bankruptcies and is a major reason many citizens can't buy homes, automobiles or other needed property;

Please see my previous post on this issue: the article cited by PHNP, which underlies this contention, DOES NOT SAY THIS AT ALL.

In point of fact, this document even extends the claim beyond that which PHNP actually made.

The single-care advocates also trot out a bizarre argument on automobile production to argue that their plan will save automobile manufacturing plants in Delaware! The argument goes like this:

Help Delaware businesses be more competitive in the global economy. For example, Canada and the other 28 industrialized, developed nations with single payer or modified single payer health care systems can build a motor vehicle for from $1,600 to $3,000 less PER VEHICLE than we can build one in Delaware. We will not only lose Chrysler and General Motors manufacturers but with continuing annual health care costs spiraling, we will lose more companies and attract less in the future.

This is a case of misleading you by telling you the truth. Yes, the American “Big 3” DO have a huge amount tied up in health insurance per vehicle, but the reality is much more complex than that. The best brief explanation to be easily found is at 3 Quarks Daily:

Oil crises, recessions, inflation, and the corporate inability to copy Japanese innovations in total quality control started the downward spiral in which General Motors, and to a lesser extent, Ford, find themselves caught up today. Toyota will surpass GM as the world’s largest car producer this year, while Toyota and Honda combined now out-produce GM in America. General Motors now loses $2300 per vehicle; Toyota makes $1500 per vehicle. Each GM vehicle carries $1500 in health care costs, $1300 more per vehicle than a US-made Toyota.

GM lost over $10 billion last year, and has offered to buy out 30,000 of its 113,000 blue-collar workers in the coming year. Thousands of white-collar workers are being severed without any generous terms attached. The firm is selling off a majority interest in its lucrative finance arm, General Motors Acceptance Corporation, as well as much of its holdings in several Japanese vehicle manufacturers.

There are two basic causes for decline. First, GM runs less efficient production lines, taking 34 hours to make a vehicle to Toyota’s 28. Instead of closing the gap, GM is falling further behind, as Toyota is making faster efficiency gains than GM. GM operates at 85% capacity, while Toyota is running at 107% capacity. Coupled with this management failing, secondly, is that while US Toyota’s hourly wages are only 13% lower than GM’s, Toyota’s labor force is smaller, younger, and healthier. Toyota, having only begun producing vehicles in the United States in 1986, also has but a handful of retirees – 1600 to be precise. In contrast, GM has 460,000 retirees whose needs along with those of their families raise the total hourly labor cost for a GM worker to $73, an amount 52% more than an hourly worker cost US Toyota.

The road to car hell for GM is no doubt paved with bad decisions like buying SAAB which continues to go its own way (down); investing in FIAT, and then having to bribe FIAT to avoid having to buy the all-but bankrupt firm; pushing gas guzzling SUVs right into the face of a predictable oil price rise; and missing the hybrid mini-boom. These are just the highlights.

In other words, health care costs are but one factor in a myriad of economic, managerial, and generational factors dragging down the US automobile industry. To simplify, as Mr. McDowell does, the whole issue into “Canada and the other 28 industrialized, developed nations with single payer or modified single payer health care systems can build a motor vehicle for from $1,600 to $3,000 less PER VEHICLE than we can build one in Delaware,” implies a causal relationship between single-payer health care and industrial efficiency THAT SIMPLY DOES NOT EXIST.

Now I have to point out here that (A) I do not work for, nor have I ever worked for an insurance company, medical or otherwise; (B) I hate Blue Cross/Blue Shield of Delaware with a passion; (C) if there is obscene profit coming out of the DE health insurance industry I’m not getting it. Why do I bother with this disclaimer? Because the advocates of single-payer health care in Delaware have, by a blanket ad-hominem attack labeled anybody who disagrees with them as an insurance company shil who only wants to bilk our citizenry:

Our current Delaware special health care interest driven nonsystem is one of the biggest cash cow rip-offs in our state's history and the take increases on an annual basis. Keep deeply in mind that approximately 90% of this cash flow comes from the pockets of hard-working Delaware citizens. The key dishonest, deceptive way these special profit-driven interests want to keep milking this ever-growing cash cow is by obsessively trying to wash and dry citizens' brains and belief systems by saturating us with claims our single payer Act and similar Acts in Canada and other nations are government run and controlled "socialized medicine and health care." These claims are total lies of the lowest possible order.

I could be wrong—all the evidence I’ve looked at thus far could be totally wrong. But I am not lying, I am attempting to convince you of my belief—based on considerable research—that as bad as our current health care system may be in Delaware, single-payer health care WILL BE A CATASTROPHE.

In my next several posts I will lay out that case that the costs of this program will spiral out of control from the outset, while the quality of medical care available to our citizens takes a nose-dive.

Stay tuned.

And if you have a favorite legislator (especially one co-sponsoring this bill), make sure he or she stays tuned as well.