More Pushback from VT Providers

We've seen the "good cop" side of Vermont care providers' response to Single Payer, here comes the "bad cop."  The good doctor gives a litany of ways providers will react to the cost control regime, none of them good.  This kind of reaction is predictable and inevitable, it is why single payer advocates who focus solely on the evils of private insurance are not setting themselves up for success.  But two points are worth bearing in mind:

• The fact that doctors practicing under the current system are unwilling to practice under a system affordable to the public doesn't mean that reform is unworkable.  It just means that different doctors will be needed.  Med Schools starting at the application stage need to reconsider what it means for someone to be a good candidate to become a doctor.  Why does someone want to practice medicine?  Is it to help people, or to get automatic entry into the top 0.1% of the economy?  Such questions need to be given priority, especially when you consider how trivial admissions processes are (is it relevant in any meaningful sense whether someone got an "A" or a "B" in a weed-out OChem class?)
• Despite all the threats and complaints, the reality is that doctors in countries with single payer plans tend to be happier with their work then doctors now in the U.S. Again, see the point that maybe we need different people with different priorities and motivations practicing medicine.

Ratemaking vs. Negotiating in Vermont

Doctors in Vermont have apparently picked up on the concept that they will be providing most of the savings under Single Payer.  Unsurprisingly, they're forming bargaining units to "inform the process."

Here is a philosophical question:  Does it make sense to pay doctor groups differentially based on how effectively they negotiate?  Should the Vermont Medical Society get paid more then HealthFirst because of the skill of their lobbyist?

That question points out a politically incorrect truth.  The process of establishing provider payments isn't really a negotiation at all, it is an exercise in rate setting by the state.  That rates will likely be influenced by "negotiators" does not contravene this, it will just indicate a clumsy and poorly thought out ratemaking process.

Notes from Vermont

The Vermont Legislative Joint Fiscal Office released a report estimating the savings made possible by Single Payer. They estimate it will save between 0.8 and 3.5 billion between 2014 and 2019. To put those numbers in perspective, at the high end it would save more in six years on a per person basis then the much ballyhooed “super committee” is trying to cut in ten.

There’s also plenty of grist to back up my suspicions that people who advocate for Single Payer don’t really know what they’re talking about. The most common narrative advocating Single Payer runs along the line of “If we just get rid of the insurers, there will be tons of money and everyone will be happy.” Helpfully, Vermont breaks out their savings into some detail:

The low estimate shows about a third of savings coming from admin including both the payer (insurance) and provider (doctor) sides. More then half the savings come from clinical reform, which addresses how much doctors get paid, in what manner (capitation vs. fee for service), and improvements to public health and reduced utilization. The location of the "fat" is even more apparent in the high estimate:

So if Single Payer works the way people want it to, more then 75% of savings come from medical reform, not admin. And unsurprisingly, this is really hard. The paper discusses some of the issues confronted just to construct credible estimates. For example,

Each of these [payment reforms] has its own set of difficulties. For example, what is the right price to pay for a medical service? Is it the amount it costs to produce? Is it the amount at which an adequate provider supply is available? Is it the amount someone without insurance would be willing to pay for it (and who – Bill Gates or someone working at a minimum wage job)? Finally, is it the amount we as a society can afford to pay?

Implementing Single Payer involves all kinds of questions about what care should be delivered and what should be paid for it. In my view to answer those questions is to sell the program. How likely are people to buy into single payer if they don't know what they are getting? Instead advocates rely on a false narrative that reinforces a mythical conception of cost-free healthcare, one that ensures that even if the public does buy into single payer they will be unwilling to accept the compromises necessary for it to actually work.

Vermont Single Payer

That Vermont is on the cusp of adopting a Single Payer health care system is getting notice across the nation. What gets less notice is the structure of that particular arrangement.

At heart, what has been agreed to is a grand bargain between people and providers. Providers will provide necessary care and people will pay for it, under a mutually agreed rate structure and limitations. That is the key hurdle single payer plans must climb, getting providers to accept pricing regulation. Other aspects of single payer have been done before, taxes and government health care are not new but the provider pricing regulation is unprecedented.

In Oregon proponents of Single Payer generally brush aside cost control with hand-waiving about “negotiating”. They ignore the reality that providers have choices, either to not participate and effectively create a second, smaller and much more expensive private market or to even move out of state. Buy-in from providers is critical, as it is from people with respect to limits (i.e. no “death panel” drama). Without the cost control mechanism single payer is nothing but a new tax plan.

I expect Oregon will learn a lot from Vermont, I hope we learn the right lessons.

Correction: Provider pricing regulation isn't totally unprecedented, but Vermont's plan is significantly tougher and broader.