Is All Payer Ready for a Comeback?

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 Donald 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?

Well, they could do nothing, leaving enough uncertainty laying 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 past time, 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 health care 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.

One idea that fits that bill is an all payer system. To oversimplify, under this arrangement 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 percent 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. 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 their 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).

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 health care. 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 health care 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. Given 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?

2 thoughts on “Is All Payer Ready for a Comeback?

  1. Alan,

    So, if everyone is paid the same (relatively), where is the incentive for a job well done? Do we continue to encourage pay for performance in some way?

    Very good fodder for conversation. You have me talking to myself.

    Paula

  2. I would like to see something like Medicare Part D – everyone pays into it via a small payroll tax, like the Medicare tax, than everyone gets to choose their insurance from the plans competing for their coverage, or pay a steep penalty for not taking it. The premiums would be greatly reduced by the tax, so it is really just a trade-off, not an additional tax, but one that lowers cost. Employers who already provide coverage could pay both halves of the tax for their employees. Add to that your all-payer transparency, and that would provide healthcare for all. Why isn’t anyone considering that? Does Part D not work? It seems to be a success with lots of competition.

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