Medicarried Away? (LIVE)

Note: This transcript has been created with a combination of machine ears and human eyes. There may be small differences between this document and the audio version.

Dan Gorenstein: Kate, can you start by just explaining the system you are exploring in this paper?

Kate Baicker: What we’re really trying to highlight is the rising cost of having a generous insurance plan like Medicare that delivers the same health insurance benefit to everyone it covers. What we point to in our paper is that in a world where there is increasingly expensive medical technology, where tax rates are going up, where there’s growing income inequality, it is increasingly costly to have a one Medicare fits all program for the people who are covered by Medicare. We propose an alternative where you have a more basic insurance plan with great financial protections for patients, that pays doctors adequately, but only covers services that are of sufficiently high value in terms of the health that they produce. That more basic plan could free up a lot of money to spend on other things and give higher income people the option to “top up” that insurance with an insurance plan that covered those things the public plan didn’t. If you had that more basic Medicare plan, you could then extend it to the rest of the population if you wanted to in a way that didn’t cost as much as expanding the current Medicare program we have today.

DG: Ultimately, Kate, the difference between the Medicare program that we have today versus this alternative, more basic Medicare program you are proposing is that you would strip out reimbursements for what some people call low-value care.

KB: The alternative basic Medicare program that we are proposing just wouldn’t cover care that didn’t produce enough health benefit. People could go purchase that care on their own if they wanted to. They’d be free to do that. That means that higher income people would get probably more health care than lower income people. And that’s something that we have to decide whether we’re comfortable with as a nation, as a body politic. But it would mean that our public program dollars could be stretched further. You could cover more people with the same amount of money if you were providing a more basic benefit than the current Medicare program provides.

DG: What is something that our current Medicare program covers that would not be covered under the Kate Baicker Medicare plan? 

KB: Well, I’m not sure I’m ready to have this plan named after me. Let’s be clear. But it’s important to distinguish between care that is of high value and care that’s expensive. There is expensive care that’s really high value and expensive care that’s virtually wasted. And there’s low cost care that’s extremely high value and low cost care that’s virtually wasted. So we want to cover everything that produces a lot of health for every dollar spent. So, for example, statins to lower cholesterol. For some patients, like diabetic patients, they are extremely effective and they ought to be covered. But for some patients who have elevated cholesterol, but no other risk factors, there is no evidence that these are effective in reducing heart attacks or extending life, and they probably shouldn’t be covered by the public program. I don’t want to pretend that all of the care we’re suggesting not covering through Medicare is of zero value. It’s of lower value than covered services, but that doesn’t mean it’s of no value. So a natural consequence of this is that higher income people are going to get more care, and we ought to be sure that that’s a consequence we’re willing to live with.

DG: So, Kate, you and I have known each other for a long time, and something that I’ve heard you talk a lot about is your concern over how much we spend. And the more we spend on health care, the less there is for education, public safety, food or housing assistance and effectively some sort of like crowding out. At the end of the day, is that what’s sort of driving this idea here? 

KB: That’s a really important issue you’re raising. But I want to put a fine point on the question of how much we spend on health care. That’s not actually the problem in my view. We could spend 20% of how of GDP on health care, and if we were then living to age 200 in fine health, I would think that was money extremely well spent. But that’s not the outcome we’re getting. I think there’s ample evidence that we spend a lot of our health care dollars on things that are not high enough value, that don’t improve our health and longevity enough when there are these other pressing needs. When people don’t have enough food, don’t have access to education, don’t have housing. There are a lot of uses that those public dollars could be put towards, and we need to evaluate whether that extra dollar spent on health care is really worth it when there are lots of other things we could do with that money. 

DG: You talk about in the paper a “Medicare dividend.” If we were to move to this system, not in a universal system where everybody has this, but just a reform of Medicare itself, ballpark, Kate, how much money are we talking about saving?

KB: Well, of course, it depends crucially on what we decide to cover in this basic Medicare program, and that’s something that warrants serious public debate. But you could easily imagine spending 30% less per person in public dollars on a Medicare program. 

DG: And so if we talk about 30% less per person, you know, I’m not the mathematician here. You are more so than me at least. How much money are we talking about? 

KB: Well we spend, what, about $750 billion on Medicare a year? I’m going to pause, and I’m actually going to look up how much we spend on Medicare right now. I’m just pulling it up. Huh, in 2018, it looks like we spent $750.2 billion on Medicare, so we could spend a third less, $500 billion. So it’s not like I’m saying we as a nation could spend 30% less on health care. I’m saying our public program could cover 30% less. High income people would then go buy it back so, in essence, the same amount would be spent on their health care as is spent now. But for lower income people, they would have 30% less spent on their health care. But that would leave that money to be potentially, depending on what the policy and political decisions were, it would leave that pool of money to spend on other things that might be higher value to those families. The thing to realize is that our current system sounds generous. We are covering all sorts of care for everyone. And it sounds like that must be to the advantage of lower income households. But really, if they had a choice about how those resources would be spent, many would choose to have less spent on health care and more available to spend on food and housing and education for their kids and all sorts of other things. 

DG: Kate, what makes you say lower income people would rather have the federal government invest in food, supports housing supports, job development supports?

KB: So there’s this really valid question: How do I know? The answer, of course, is that we can only try to infer based on what people choose for themselves when they have flexibility.  So do I know for sure that every low income household would rather have a smaller share of federal resources devoted to health care than currently are? Of course, I can’t say that with certainty. But our best guess, based on bodies of evidence about how people choose to allocate their resources and what their preferences seem to be, is that we are currently spending too great a share of public dollars on health care for low income households based on their preferences and their income constraints.

DG: In the paper, you and your co-authors acknowledge that there’s no guarantee how this money would be spent. You acknowledge that the savings you mention — this Medicare dividend — could go from being progressive if it’s used to fund other social safety net programs, to punitive if it’s used to fund some massive tax cut that would largely benefit high income earners. How comfortable are you proposing an idea that could lead to low income people ending up with less health care and no additional social safety net services? 

KB: This is a crucial point. I think we have highlighted a real cost of our current system and proposed a stylized alternative that has the potential to make everyone better off. But the devil is in the details in this and so much else. And of course, I am concerned about to what use the Medicare dividend would be put. We’re proposing spending substantially less on public health insurance programs. Where those savings go is a matter of the political process, so I think we want to think really carefully about how we envision the whole social safety net as well as how we envision the health insurance system functioning.

DG: What excites you the most about this idea?

KB: Getting our Medicare program operating more efficiently could have system wide ramifications for improving the health that we all get from the health care system while freeing up resources for lots of other important things. I would love to see Medicare being a more active force towards a high performance, high value health care system.

DG: In in this political climate, you’ll hear a lot of people arguing over the question, “Is health care a right?” But when I read your paper, it doesn’t really seem like that’s the question you think we should be asking.

KB: I don’t think that’s the right question. The question we ought to be asking is, “How much health care is a right?” Right now, in essence, we’re saying for people who aren’t covered by public health insurance, no health care is a right. And for people who are covered by Medicare, pretty much everything is included. I think we ought to be deciding what’s the floor, what’s the basic health care to which everyone is entitled? The floor could be very high. That’s what we have to have a public debate about. And it has consequences in terms of how much money we spend on health care, and just as importantly, how much money that leaves for everything else. By asking the question, is health care a right, we kind of box out that crucial debate we ought to be having.

DG: Kate, thank you very much for joining us. 

KB: Thanks, Dan.

Note: This transcript has been created with a combination of machine ears and human eyes. There may be small differences between this document and the audio version, which is one of many reasons we encourage you to listen to the episode!

Dan Gorenstein: I’m Dan Gorenstein and this is Tradeoffs.

We’ve got a little something different on tap today. We recently recorded an episode in front of a live audience at a conference hosted by the Leonard Davis Institute of Health Economics here at the University of Pennsylvania.

We’re gonna kick things off today with a little play set in a hypothetical future where the U.S. has adopted a universal health care system. Everyone gets a less generous version of Medicare but can buy extra coverage if they can afford it.  The federal government ends up saving billions of dollars, investing it in social service programs including free community college for all. Our play opens with two women with similar conditions visiting their doctors.

Applause 

Gina (on phone): Oh, you’re going to do great, sweetie. You’ve been working all semester on this. Look, I just got to the doctor’s my appointment for my checkup, so I gotta go. I love you, too.

Tina: How are you? It’s been so long. We missed you at the diabetes meeting.

Gina: I’ve just been so busy. You know how the bookstore gets this time of year. And then Amy’s mom moved in with us. And then I’ve had to take on extra tutoring shifts just to make ends meet.

Tina: You poor thing. Say, how’s Tommy doing in his first year of school? What’s the name of that school he’s at?

Gina: He’s doing great. He’s a little nervous about finals, but he’s gonna do fine. He’s been doing so well in his classes. He’s just up the street at Fitzwilliam Community College. I’m so thrilled that he can get in there because I don’t think we could have afforded college otherwise. And how’s Alison doing? Isn’t she at Yale?

Tina: Oh, she is loving it. We went up to see her a few weeks ago. It was so fun going back to all the old haunt Bob and I used to go to when we were there.

Gina: Yeah, that’s great. Oh, look, you know what? It’s top of the hour. Can I stream the news from my phone?

Tina: No problemo!

Gina: OK. Thanks.

Newscaster: Democrats and Republicans are duking it out in negotiations over the year end spending bill. The debate centers on the projected savings from the country’s new basic health care program. Democrats are pushing to renew the popular federal program that has provided free community college to all Americans, while Republicans argue that money could help more people in the form of across the board tax cuts.

Support for the news comes from EasyReader, the latest in glucose monitor technology. An implantable sensor lasts all year and gives people with diabetes the most accurate, up-to-date readings. Ask your doctor about EasyReader today.

Dr. Johnson: Hi there, Gina. I’m ready for you.

Dr. Town: Come on back, Tina.

Tina: You have a good checkup. Let’s have coffee sometime.

Gina: I’d love that.

Dr. Johnson: So, Gina, how are you doing?

Gina: OK, I’m a little stressed, but good.

Dr. Town: How are you feeling today, Tina?

Tina: I’m feeling really pretty good. I just heard an ad about a new glucose monitor.

Gina: It’s called Easy Reader. Do you think I could try it, doc?

Dr. Johnson: We’ve had a lot of people ask me about that lately.

Dr. Town: They’ve become big public radio sponsors, so everyone’s been coming and asking about it.

Tina: It sounded pretty good. More accurate implantable sensor.

Gina: And a removable transmitter? That would be incredible. Just last week I was in the bookstore moving boxes around and I ripped this thing out of my arm…

Tina: Ripped right out while I was moving stuff from my parents garage. It was awful. And of course, I can never back up.

Gina: And I’ve been so busy that I forgot to take an extra. And then I didn’t have one. I had to wait till I got home, and then my numbers were all over the place. This EasyReader sounds like would be incredible. Do you think I could try it, doc?

Tina: Do you think I could get one of these?

Dr. Town: I should tell you that they’re still pretty new, and we’re not sure how much better it is than what you already have.

Dr. Johnson: And because they’re so new, they haven’t been tested as much yet, so the government isn’t covering it.

Dr. Town: Do you have supplemental private insurance?

Tina: Oh, I do. I’ve got Green Shield. Do you know if it covers it?

Dr. Town: They do. It costs you just a $10 co-pay.

Tina: Oh, no problem. I can manage that.

Dr. Johnson: Do you have supplemental private insurance?

Gina: No, I just have the government stuff. How much would it cost without that private insurance?

Dr. Johnson: They do have a discount program. I think you’d qualify for it. In the first year, it’d cost you about $300.

Gina: I can’t afford that. I just can’t.

Music and applause

DG: Wow let’s give it up one more time for our actors. That was amazing!

So what you just saw is our version of a doctor’s office visit under a universal health care plan, but a plan that is actually quite different than what’s been talked about on the 2020 campaign trail. This is not the Sen. Sanders or Sen. Warren Medicare for All plan that we’ve been hearing about. What our little play was based on actually was a recent paper written by Kate Baicker, Mark Shephard and Jonathan Skinner. And the reason they wrote this paper is because they wanted to reimagine Medicare, and they wanted to inject this idea of a reformed Medicare into this larger conversation that we’re all having on health reform. Unfortunately, and I’m really sad to say this, we’re not able to get any of the authors here.

Kate Baicker: Is this on? Can he hear me?

DG: Kate?

KB: Dan!

DG: Kate Baicker?

KB: Dan Gorenstein!

DG: Oh, my gosh, this is amazing. I bet many of you know Kate Baicker. She is the dean at the University of Chicago Harris School of Public Policy. She is also a professor there. Kate, we actually just did a little bit of a play based on your Medicare paper.

KB: Oh, a whole play based on our paper, how’d it go?

DG: It went pretty well. I mean, our actors really rocked it. So that was fantastic. But, you know, a simple scene is a poor imitation of the real thing. And since you’re here, sort of, it would be great for you to explain to us why you all decide to write this paper in the first place.

KB: What we’re really trying to highlight is the rising cost of having a generous insurance plan like Medicare that delivers the same health insurance benefit to everyone it covers. We propose an alternative where you have a more basic insurance plan with great financial protections for patients, that pays doctors adequately, but only covers services that are of sufficiently high value in terms of the health that they produce. That more basic plan could free up a lot of money to spend on other things and give higher income people the option to “top up” that insurance with an insurance plan that covered those things the public plan didn’t.

DG: Okay, quick question: What is it that Medicare covers to day that you would not cover under the Kate Baker Medicare plan?

KB: Well, I’m not sure I’m ready to have this plan named after me. Let’s be clear. But for example, statins to lower cholesterol. For some patients like diabetic patients, they are extremely effective and they ought to be covered. But for some patients who have elevated cholesterol and no other risk factors, there’s no evidence that these are effective in reducing heart attacks or extending life, and they probably shouldn’t be covered by the public program. 

DG: Is the point of this, Kate, for you to figure out a way to have the government spend less money?

KB: We could spend 20% of GDP on health care, and if we were then living to age 200 in fine health, I would think that was money extremely well spent. But that’s not the outcome we’re getting. I think there’s ample evidence that we spend a lot of our health care dollars on things that are not high enough value, that don’t improve our health and longevity enough when there are these other pressing needs. When people don’t have enough food, don’t have access to education, don’t have housing. There are a lot of uses that those public dollars could be put towards, and we need to evaluate whether that extra dollar spent on health care is really worth it when there are lots of other things we could do with that money.

DG: In this political climate, lots of us in this room have heard this phrase, Kate, the idea of health care is a right. But when I read your paper, it doesn’t really seem like that’s the idea you think we should all be focused on.

KB: The question we ought to be asking is, “How much health care is a right?” Right now, in essence, we’re saying for people who aren’t covered by public health insurance, no health care is a right. And for people who are covered by Medicare, pretty much everything is included. I think we ought to be deciding what’s the floor, what’s the basic health care to which everyone is entitled? The floor could be very high. That’s a public question. We can make that decision. That’s what we have to have a public debate about. And it has consequences in terms of how much money we spend on health care. And just as importantly, how much money that leaves for everything else. By asking the question, is health care a right, we kind of box out that crucial debate we ought to be having.

DG: Thanks, Kate. As always, it’s wonderful to have a conversation with you. Kate Baicker.

KB: Thanks, Dan.

Applause and music

DG: When we come back, the second half of our live show where we consider what it would look like if the country adopted Kate’s Medicare proposal.

Music

DG: To get into the meat of what Kate Baicker’s paper could look like in the real world, we sat down with University of Pennsylvania political scientist Julia Lynch and Harvard economist Amitabh Chandra. Here’s our conversation. 

Applause

DG: So Amitabh, Kate proposes reforming Medicare, but obviously this concept of shrinking what’s covered could apply to a universal system. You and Kate actually wrote an op-ed in the Globe talking about this, supporting this. At a high level, what are two top reasons you prefer this sort of approach to the Medicare for All plan that Sen. Sanders has been pushing?

Amitabh Chandra: I’m gonna be the skunk at the garden party, is that what you’re asking me to be? 

DG: It’s it’s on brand, sir. 

AC: OK. One reason, there are many reasons. There’s really good things about the Sanders plan, just to be clear. But you asked me for two reasons, and the big reason is cost. To Kate’s point, if you end up covering everything for everybody all of the time, it will be expensive because Medicare has no cost effectiveness built into it. So the problem is not universal coverage. The problem is expanding a system that has no breaks in it. If you look at every dubious oncology treatment, Medicare by law has to cover it. If you expand the ability to cover every American with every dubious cancer treatment, I don’t think spending falls. I think spending goes up. Now it has a variety of good things about it: the coverage expansion, getting rid of out-of-pocket. And so I think what folks like Kate and I want to think about is can we keep the good parts of the Medicare for All — the “for all,” the universal coverage, the simplicity — without exporting the tremendous waste and inefficiency that’s also baked into Medicare.  

DG: Julia, with lots of enthusiasm for a very generous Sanders Medicare for All plan, is it your impression that there’s an appetite from voters in the U.S. for a more scaled back approach?

Julia Lynch: So we know from previous research, 5-10 years old now, that when the public is surveyed specifically about the question of tiering,  about is it fair for people who pay more for their insurance to get more, there is widespread support for that in the American public. That seems to be a pretty basic element of people’s fairness beliefs around health care. Things have changed, though, in the last 10 years, in case you hadn’t noticed. And so I think the question that we have before us now is in the presence of what certainly looks like a sort of politically viable proposal for a more generous Medicare for All program, what do we know about what public support for that looks like versus what public support for for a Baicker plan looks like?

DG: She’s going to love that.

JL: So what we know is that actually a majority of Americans, even including Republicans, actually do support Medicare for All, but significantly larger majorities support a plan with a public option. And what that says to me is that, you know, there is broader public support for a plan that combines a basic public universal insurance with some sort of private insurance element in the marketplace. 

DG: Very good. And what about the special interests? And when we say special interests we’re talking about industry, really ultimately insurers, health systems, drugmakers.

J: Yeah. I mean, I think we can start with insurers. For insurers, the benefit of of a Baicker plan as compared to Medicare for All are obvious. I mean, they get to continue to exist, right? And in addition to that, the public tier, whatever that basic tier would look like, would in fact be absorbing most of the lower income and hence sicker patients out of the insurance pool. So from the insurers standpoint, this looks great, particularly compared to Medicare for All. I think doctors and doctors who are used to operating in a fee for service kind of paradigm I think are also likely to support a plan that allows them to continue to do that. Finally, hospitals, you know, how hospitals might respond is a little harder to predict because I think that really depends a lot on how the basic tier is setup. But I think it’s likely that any realistic system in the U.S., any system that that has a chance to pass would continue to rely on private and nonprofit providers, including hospitals, even if the main payer is public. So in any scenario where the main payer is a single public payer, there’s going to be downward pressure on profits for hospitals. And those downward pressures, I think in the Baicker system could be partially offset by contracting with private insurers. So I think if you look at the three major sort of sets of providers — insurers, hospitals and insurers — I think they would all certainly prefer a Baicker plan to a Medicare for All.

DG: Amitabh, what do you think industry’s biggest beef with the Baicker plan would be? Because obviously I think many of us know and understand, right, the medical industry is not excited and not enthusiastic about a Bernie Sanders style Medicare for All plan. But what what if this were actually on the table in Washington? What would those lobbyists be coming and complaining about?

AC: So, first of all, I think the the Medicare for All plan without private insurers would actually be extremely lucrative to industries that are heavily dependent on lobbyists. Lobbyists will shine in a world where you can lobby Congress because I think the hospitals come out doing just fine under Medicare for All because, you know, the hospital lobbyists will go to Congress and say, “You know, if you’re an academic medical center in Philadelphia and Boston, you’ve got to be paid 20% more because you’re 40% better.” And that will resonate with Congress. That does not resonate with United, Aetna, Cigna and Humana. It absolutely does not. The private insurers will be quick to build a narrow network and bring the large hospitals to their knees. So I would be careful to say industry likes the Baicker plan. Parts of industry will hate the Baicker plan. And in particular, I think, you know, notice when Sen. Sanders or Sen. Warren talk about Medicare for All, they never, ever criticize the hospital industry. That’s 33% of health care spending. Their anger is focused on pharma, which is about 17%, on physicians, you know, depending on how you cut somebody in 30% to 40%. And that’s all fine. But remember, 33%, the modal spend is on hospitals. And I think hospitals do quite well under Medicare for All because of this ability to lobby.

DG: Julia, you study health care policies in other countries, many of which have similar policies to what Baicker and her co-authors have laid out. What country do you see as a good analog of how this could work?

JL: Well, there are many possible analogs. And I think part of the difficulty that I have in assessing the Baicker plan is that I don’t know what the what the public tier looks like. Right now, there are many, many different ways that you could set that up. One of the ways that I think, you know, we could think about as an analog to the U.K., which as most people in this room probably know, provides through the National Health Service comprehensive care free at the point of service but subject to some limitations based on the cost effectiveness of treatments, which we sort of saw in the opening skit. And this opens up room for voluntary health insurance, that sort of “top up” plan to play a supplementary role. So currently, roughly 11% of people in the U.K. have private voluntary health insurance that supplement their coverage that they get through the NHS and about three-quarters of them have that health insurance provided to them through their employers. And about a quarter of them purchase it privately. So this voluntary health insurance covers additional services that aren’t covered by the NHS. It also allows for a slightly greater choice about specialists and can reduce wait times. So I think in a sense, you know, the system that currently exists in the U.K., if we thought about modeling the basic tier on the NHS or, you know, on the VA or some sort of similar model, we could think about that opening up space for for a second tier.

AC: I very much agree with what you just said because the one thing that the U.K. has figured out is even in the basic tier, they’re very careful about doing rigorous cost effectiveness analysis, which means saying no to things, which is why the costs are low and why the benefits of a top up are quite high in the U.K. because the U.K. recently walked away from cystic fibrosis drugs because they weren’t worth the price. We don’t really have that. Even Medicaid by law has to cover every drug out there. I mean, that’s a far more generous scheme than the U.K. has. So it is entirely, I think, possible to think about the U.K. as a model where you have something that looks like Medicaid. Medicaid to me is more generous than what the British have. And then you can top it up in the U.K., you can top up the basic benefit with the private benefit, which gives you access to private hospitals, private doctors and different medical technologies and not just a private room.

DG: Did you wanna say something in response to that?

JL: Well, I just wanted to add that I think the the key issue here is that we cannot, Medicare for All can’t mean taking the current Medicare program and giving it to everybody, right. That’s just not on the table. 

DG: Because?

JL: It costs too much and there are no cost control and no cost effectiveness mechanisms in the system.

DG: And real quick, and this is very important, for people who might not understand what cost effectiveness means, can you break that down in layman’s terms?

JL: Sure. I mean, at a very basic level, cost effectiveness simply means that we assess whether the the benefit in terms of health that is provided by a treatment with a particular cost associated with it is worth it. And under current U.S. law, we’re not allowed to incorporate cost effectiveness research into any publicly provided benefits system. And under U.K. law, that is the bedrock on which decisions about what is covered in the NHS are made.

DG: Where this idea is sort of radical, right — and we saw this in the GOP attempt to repeal Obamacare — the Baicker idea would shrink the benefit that people expect today. That’s very tough to pull off. What is the best argument for why we collectively as a country should agree to reduce people’s benefits, people who rely on this, some people who are sick?

JL: Because it’s it’s more equitable. Because the people who need care are not going to be able to get it, if we don’t make the entire system cost effective.

DG: Amitabh?

AC: If you care about health, I think that spending more on education, spending more on public health, spending more on the diseases associated with climate change, will do more for our health than spending on dubious drugs and dubious devices. And that is a huge part of the cost increase in American health care.

DG: Let’s give it up for Julia and Amitabh. 

Applause and music

DG: That was Julia Lynch, political scientist at the University of Pennsylvania and Amitabh Chandra, health economist at Harvard University.

For more of our coverage on Medicare for All, check out our very first episode “The Town the Ballpark Is In,” where we look at the tradeoffs between a Medicare for All plan and a so-called public option. 

Find out about future live shows, special events and more by signing up for our newsletter at tradeoffs.org.

I’m Dan Gorenstein…

Crowd: This is Tradeoffs!