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March 20, 2017

Is U.S. Healthcare Ready for ‘All Payer’?

Summary:

Given that the American Health Care Act may crash and burn, it's time to start thinking about what could come next.

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Congress is debating the American Health Care Act, the first of three steps in Republicans’ march toward repealing and replacing the Affordable Care Act. Things are not going smoothly. GOP conservatives, which have considerable clout in the House of Representatives, want the bill to repeal more and replace less. More moderate Republican Senators, of which there are enough to block any legislation, argue the legislation goes too far in some respects. Attempts to mollify one side hardens opposition on the other. And so far, no real effort has been made to entice Democrats to do more than watch Republicans fight one another.

It’s possible President Trump, Speaker Paul Ryan and Senate Majority Leader Mitch McConnell can corral enough votes in each chamber to push the AHCA through Congress. It’s possible, but I’m skeptical. And what if they can’t?

See also: What Trump Wants to Do on ACA  

Well, they could do nothing, leaving enough uncertainty lying about that the individual market, at least, collapses. That could make 2018 a tough election year for Republicans. Or they could offer AHCA version 2.0 and hope for better results. Wishful thinking is a great pastime but hardly a vehicle for making public policy.

All of which argues for doing something outside the proverbial box. Maybe Congress could even address the core problem facing America’s healthcare system: the cost of medical care. What might that look like? One option would be to look at an idea that’s been around since the 1990s, if not longer: an all payer system. It would certainly be an interesting debate.

To oversimplify, under an all payer system, providers and payers (usually the government) establish a price for each medical treatment and service. Every provider accepts this rate as payment in full, and every payer (government, private insurance, self-funded plans and individuals) pays this rate.

As noted by The Hill, several states experimented with one version or another of all payer systems in the 1990s, although today only Maryland’s remains. As recently as 2014, academics at Dartmouth proposed using 125% of Medicare reimbursement rates for a national all payer program. Pricing transparency advocates like all payer systems because everyone knows the cost of care – the ultimate transparency. And this system eliminates the wide variance in pricing for identical treatment so prominent today.

A pure all payer system would be difficult to pass, however. Free market Republicans will not accept the government setting the price for all medical care payments. And pharmaceutical companies, doctors, hospitals and other providers are not going to take kindly to having anyone set a one-size-fits-all cost structure. But there are variations on the all payer theme that might make such a system more palatable — and allow for a healthy (and entertaining) debate..

For example, consider an all-payer system in which Medicare reimbursement rates are simply a starting point — the benchmark used by all providers in setting their costs and all payers in determining their reimbursement levels. No more Alice in Wonderland pricing by hospitals and other providers. Each service provider would describe its fees as a multiple of Medicare. Insurers would offer plans that cap reimbursements at different multiples of Medicare. If the doctor’s charges are at a lower or the same multiple as an insurance policy’s, that provider would be fully reimbursed by the carrier, and no charges beyond co-payments, deductibles and co-insurance (if any) would be required of the patient. If the practice has set a higher Medicare multiple than a patient’s policy covers then the patient is liable for the additional cost. The key, however, is that the consumer would know this before incurring the charge. (Which is why emergency care would be treated somewhat differently).

See also: Letter to Congress on Replacing ACA  

An all payer system requires higher cost providers to justify the extra expense. It eliminates the helter skelter of ever-changing networks. Health insurance premiums would reflect reimbursement rates and would correlate with the number of providers whose services would be covered in full.

Conservatives can’t claim all payer systems is a government takeover of healthcare. On the contrary, the only role Medicare plays is providing the baseline for reimbursement … a common language all providers and payers speak. What they do with that baseline is up to them. Liberals won’t like that insurance companies remain in the healthcare system and will object to limiting, as a practical matter, poorer Americans to low reimbursement policies.

Right now, all attention is on the American Health Care Act. That’s as it should be. After all, it’s not dead yet. But, given that there’s a good chance the legislation will crash and burn, there’s no harm in thinking about what could come next. I’m rooting for something that isn’t just a rehash of the 2009 debate, but rather something bolder. An all payer proposal is just one idea, and there are no doubt many better ones.

What’s your favorite?

This article first appeared at the Alan Katz Blog.

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About the Author

Alan Katz speaks and writes nationally on healthcare reform, technology, sales and business planning. He is author of the award-winning Alan Katz Blog and of Trailblazed: Proven Paths to Sales Success.

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