Medicare More Efficient Than Private Insurance

Why are administrative costs so much lower for Medicare, a single payer system for the elderly, than they are for private insurance companies?

Not because claims are large per beneficiary in Medicare.

The Heritage Foundation claims that private insurance companies spend $56 dollars less per beneficiary on administrative costs than Medicare ($453 v. $509), but that is a tiny difference considering how many more health care transactions Medicare must approve and pay for per beneficiary than a private insurance company handling a pool of basically healthy non-elderly children and adults.

Medicare Advantage plans are private insurance serving the elderly population. So this is a case of different systems serving similar populations. (Medicare Advantage clients are probably somewhat healthier than the average senior, but the average cost of their health care is still very high.) If costs depended mainly on number of people, these plans should have low administrative costs as a percentage of spending. They don’t — their numbers look like those of private insurance in general.

Meanwhile, other countries have Medicare-like systems that cover low-cost as well as high-cost individuals. Canada’s system is actually called Medicare. So this is a similar system covering a different, lower-cost population. If costs depended on the number of people, Canada should have high administrative costs; in fact, its numbers look like those of American Medicare (actually even better.)

Specifically:

[T]he Congressional Budget Office (CBO) has found that administrative costs under the public Medicare plan are less than 2 percent of expenditures, compared with approximately 11 percent of spending by private plans under Medicare Advantage. This is a near perfect “apples to apples” comparison of administrative costs, because the public Medicare plan and Medicare Advantage plans are operating under similar rules and treating the same population.

(And even these numbers may unduly favor private plans: A recent General Accounting Office report found that in 2006 Medicare Advantage plans spent 83.3 percent of their revenue on medical expenses, with 10.1 percent going to non-medical expenses and 6.6 percent to profits—a 16.7 percent administrative share.)

The CBO study suggests that even in the context of basic insurance reforms, such as guaranteed issue and renewability, private plans’ administrative costs are higher than the administrative costs of public insurance. The experience of private plans within FEHBP carries the same conclusion. Under FEHBP, the administrative costs of Preferred Provider Organizations (PPOs) average 7 percent, not counting the costs of federal agencies to administer enrollment of employees. Health Maintenance Organizations (HMOs) participating in FEHBP have administrative costs of 10 to 12 percent.

In international perspective, the United States spends nearly six times as much per capita on health care administration as the average for Organization for Economic Cooperation and Development (OECD) nations. Nearly all of this discrepancy is due to the sales, marketing, and underwriting activities of our highly fragmented framework of private insurance, with its diverse billing and review practices.

The flip side of this analysis is that administrative cost savings from going to something like a single payer plan are on the order of 5-9% of the total on a one time basis. Another big chunk of savings could result from an end to cost shifting to "able to pay patients" from "unable to pay patients."

These savings are significant, but the final sentence quoted above (in italics) is mostly wrong. Much of the difference from the OECD has to do with the fact that OECD countries are paying its providers less for the same services, using more cost effective providers (clinics and primary care physicians, instead of emergency rooms), and offering prevention instead of cure to low income people. The lower provider cost has something to do with the improved bargaining position of a single payer system vis-a-vis providers compared to a fractured set of insurers vis-a-vis providers.

Two systems that work better than the American model are the French and Dutch systems.

Prevention Programs Work

The Nurse-Family Partnership program . . . has been very successful both in preventing child abuse and neglect and serving the needs of parents and children. In this program, a public health nurse visits a low-income, first-time parent during pregnancy and for the first two years of a child’s life.43 The nurse works closely with the mother to improve prenatal health, help parents provide more competent care to the child, and address the family’s economic stability by helping parents develop and accomplish goals relating to staying in school and finding work, as well as helping parents plan subsequent pregnancies. The program specifically addresses poverty-related problems, such as substance abuse. The results of the program are striking. Families receiving this kind of support have a 79 percent lower incidence rate of child abuse and neglect than similarly situated families,46 as well as numerous other benefits.47 Moreover, it appears to be cost-effective.48 The program costs approximately $8,700 per family[.] . . .

43 U.S. DEP’T JUSTICE, OFFICE OF JUVENILE JUSTICE & DELINQUENCY PREVENTION, OJJDP MODEL PROGRAMS GUIDE, Nurse-Family Partnership 1 (2006) . . .

46 See David L. Olds, Prenatal and Infancy Home Visiting by Nurses: From Randomized Trials to Community Replication, 3 PREVENTION SCI. 153, 161-63 (2002) (discussing this finding in greater detail, including evidence that reductions in child abuse and neglect persisted over a fifteen year period, despite an initial up-tick following the end of the program, but that the participating families who did not experience lower rates of child abuse or neglect were those where domestic violence was present); U.S. DEP’T JUSTICE, OJJDPMODEL PROGRAMS GUIDE, Nurse-Family Partnership, supra note 43, at 5.

47 Studies documenting the positive benefits of the program for both parents and children abound, but to give just one example, children in the visited homes had lower rates of involvement in the criminal justice system. See David Olds et al., Long-term Effects of Nurse Home Visitation on Children’s Criminal and Antisocial Behavior: 15-Year Follow-up of a Randomized Controlled Trial, 280 JAMA 1238, 1241 (1998).

48 I am not arguing definitively that a preventive approach will save the state money, although there are good reasons to think it will. See, e.g., Glazner et al., Final Report, supra note 44, at 11 (documenting that during the fifteen-year period following intervention, the average visited family used, in 2001 dollars, $56,600 less in government services and paid $8,300 more in taxes than a control group, resulting in a 393% recovery over the fifteen year period on the amount invested). My intention is to point out the economic and non-economic costs of the current system and suggest that it may save money, and certainly reduce human harm, to take a preventive approach to child welfare.

From here (some citations omitted; emphasis added).

Some other highly effective prevention programs noted in the same, University of Colorado professor written, source include:

(1) the Children's Sentinel Nutrition Assessment Program: "'food insecurity is associated with a greater likelihood of illnesses severe enough to warrant
hospitalization for infants and toddlers,' that infants and toddlers in food insecure households are 30 percent more likely to have a history of hospitalization, and that one pediatric hospitalization costs an average of $11,300, whereas that same amount of money would buy food stamps for a family for almost five years."

(2) Housing First programs: "in which the state provides housing to the chronically homeless—individuals who are often struggling with multiple problems, such as substance abuse and mental illness—without imposing any conditions on the recipient, cost far less than the 'system of shelters, hospitals, mental hospitals, and incarceration that marks the cycle of life on the streets' and . . . [produces] positive outcomes for clients in the areas of mental health and substance abuse[.]"

More generally, childhood experiences matter:

SARA MCLANAHAN & GARY SANDEFUR, GROWING UP WITH A SINGLE PARENT:WHAT HURTS,WHAT HELPS 1-2, 89-91 (1994) (“Compared with teenagers of similar background who grow up with both parents at home, adolescents who have lived apart from one of their parents during some period of childhood are twice as likely to drop out of high school, twice as likely to have a child before age twenty, and one and a half times as likely to be ‘idle’—out of school and out of work—in their late teens and early twenties”; further noting that only about half of this effect can be attributed to the effects of lower income);

THE NAT’L CTR. ON ADDICTION AND SUBSTANCE ABUSE AT COLUMBIA UNIV., FAMILY MATTERS: SUBSTANCE ABUSE AND THE AMERICAN FAMILY 27 (2005) . . . (. . . teens who have an “excellent relationship” with one or both parents are at a lower risk for substance use and that parental praise, affection, and family bonding are also associated with a lower risk of teen substance use);

KRISTIN ANDERSON MOORE & JONATHAN F. ZAFF, CHILD TRENDS, BUILDING A BETTER TEENAGER: A SUMMARY OF “WHAT WORKS” IN ADOLESCENT DEVELOPMENT 2 (2002) . . . (“Teens who have warm, involved and satisfying relationships with their parents are more likely to do well in school, be academically motivated and engaged, have better social skills, and have lower rates of risky behavior than their peers”; “Teens whose parents demonstrate positive behaviors on a number of fronts are more likely to engage in those behaviors themselves and teens whose parents take part in risky behaviors are more likely to do the same”; Parents who monitor their children “in age-appropriate ways have teens with lower rates of risky physical and sexual behaviors, as well as lower rates of drug, alcohol, and tobacco use”);

CATHY S.WIDOM & MICHAEL G.MAXFIELD, NAT’L INST. OF JUSTICE, RESEARCH IN BRIEF: AN UPDATE ON THE “CYCLE OF VIOLENCE” 1 (2001) . . . (“[B]eing abused or neglected as a child increases the likelihood of arrest as a juvenile by 59 percent, as an adult by 28 percent, and for a violent crime by 30 percent.”);

COUNCIL OF ECONOMIC ADVISORS, TEENS AND THEIR PARENTS IN THE 21ST CENTURY: AN EXAMINATION OF TRENDS IN TEEN BEHAVIOR AND THE ROLE OF PARENTAL INVOLVEMENT 2-3 (2000) . . . (. . . teens who spend more time with their parents—regularly eating dinner with the family, for example—do better in school and suffer less from various forms of risk-prone conduct, such as the use of drugs and alcohol, violence, and suicidal behavior, even holding constant poverty, family structure, race, and other such factors.)

American Political Parties Undisciplined

Few House members seeking re-election next year will be as vigorously targeted for defeat by the opposing party as freshman Reps. Walt Minnick of Idaho and Anh “Joseph” Cao of Louisiana.

Minnick is a Democrat who represents a rural and strongly conservative district that gave Barack Obama just 36 percent of the vote in the 2008 presidential election. Cao is a Republican from a heavily black district in and around New Orleans that gave just one in four of its votes to GOP presidential nominee John McCain . . . .

On the 255 roll call votes that pitted most House Democrats against most Republicans — which CQ brands as “party unity” votes — Minnick backed the consensus Democratic position just 40 percent of the time. Cao agreed with the position held by most fellow Republicans 63 percent of the time.

The study shows that Democrats overall are highly unified, with a median party unity score of 98 percent. But party unity scores below the Democratic norm are common among junior members, such as Minnick, who face difficult challenges stemming from their districts’ usual partisan orientation.

Of the 20 lowest-scoring Democrats in the party unity study, 16 are serving either their first or second terms, and . . . [16] represent districts that voted for McCain over Obama for president in 2008. . . .

[F]reshman Alabama Rep. Bobby Bright is the next Democrat least likely to vote with his party’s majority, with a party unity score of 52 percent. Bright is a former Montgomery mayor who won an open-seat race in 2008 with just more than 50 percent of the vote in a district that gave McCain 63 percent for president. . . .

Other Democrats with the low party unity scores include Travis W. Childers of Mississippi (61 percent); Harry E. Mitchell of Arizona (63 percent); Heath Shuler of North Carolina (68 percent); Ann Kirkpatrick of Arizona (75 percent); and Glenn Nye of Virginia (75 percent). All five Democrats defeated or otherwise succeeded a Republican when they were first elected in either 2006 or 2008. . . .

Betsy Markey of Colorado, who represents a sprawling part of eastern and northern Colorado that has a mild Republican lean, has a 92 percent score — much higher than Minnick or Bright, but still lower than the Democratic median. . . .

New York Democratic Rep. Eric Massa , elected last year to represent the state’s conservative-leaning Southern Tier, has a 91 percent score. Tom Reed, the Republican mayor of Corning, on Wednesday announced a 2010 challenge to Massa. . . .

Of the 20 lowest-scoring Republicans, only Cao and fellow freshman New Jersey Rep. Leonard Lance are serving either their first or second terms.

Because of his district’s strongly Democratic-leaning demographics, Cao is the most vulnerable House member in either party. . . .

Several contrarian Republicans are thinking about seeking statewide office: Mark Steven Kirk of Illinois (76 percent), who is weighing a run for senator or governor; Michael N. Castle of Delaware (75 percent), who’s thinking about running for the Senate; and Jim Gerlach of Pennsylvania (72 percent), who’s considering a bid for governor. . . .

An independent-minded voting record has enabled Republican Dave Reichert , who represents Seattle suburbs, to narrowly win three elections in a district that is trending Democratic. Reichert’s 66 percent party unity score is the fifth-lowest among House Republicans. He’s expected to face a competitive race again in 2010.

Lance (74 percent), one of the eight Republicans who voted for the climate change bill, is one of three Republican freshmen from districts that Obama won in 2008. The others are Cao, the leading House GOP dissenter, and Erik Paulsen of Minnesota, who has a 91 percent unity score that aligns him much more closely with his party peers.

From CQ Politics (hat tip to Colorado Pols; raw data here).

Colorado

The Colorado delegation pans out as follows:

Only 39 of the 178 House Republicans are as loyal to their party in party unity votes as the median House Democrat (i.e. 98%). The median Republican U.S. Senator is 95% loyal to his party. The median Democratic U.S. Senator is 92% loyal.

Name District Presidential support Party unity
Diana Degette CO1 99 97
Jared Polis CO2 87 98
John Salazar CO3 88 95
Betsy Markey CO4 88 92
Doug Lamborn CO5 15 99
Mike Coffman CO6 38 96
Ed Perlmutter CO7 96 96
Mark Udall CO 97 94
Michael Bennet CO 97 91

John Salazar, despite having an independent reputation as a Blue Dog, is more loyal to the President and to the Democratic party in his voting than I would have expected.

Getting Majorities

Democratic party power in Congress is strong, but not absolute. While Democrats have large majorities in both houses of Congress, many moderates in Congress from both parties, in response to the concerns of their constituencies, often do not vote the party line.

Democrats have 257 out of 435 seats in the House of Representative (218 is a majority and there are no filibusters in the House). Thus, Democrats in the House can lose 39 votes from their own ranks, without gaining any, and still pass legislation. Ranked by party loyalty, the Democrat needed to cast the 218th vote on a measure votes with the party on party unity votes about 90% of the time. Democrats do not have the two-thirds majority in the House necessary to expel members from the House, override a veto, or propose constitutional amendments without bipartisan support.

In the U.S. Senate, Democrats have 60 out of 100 seats including two independents who caucus with the Democrats, one is socialist Bernie Sanders and the other conservative leaning independent Joe Lieberman (51 seats is a majority and 60 voters are needed to break a filibuster). But, both Olympia Snowe (44% loyalty) and Susan Collins (49% loyalty), the Republican Senators from Maine, both vote with the Democrats more often than they do with the Republicans on party unity votes and support the President more often than some members of the Colorado Democratic Party delegation.

Democrats in the Senate need all hands on deck to pass legislation facing a filibuster (and marginal Democrat Arlen Specter votes with the Democrats just 49% of the time), but can lose 9 votes on a bill that is not filibustered. Ranked by party loyalty, the Democrat needed to cast the 51st vote on a measure votes with the party on party unity votes about 86% of the time. Democrats do have the two-thirds majority in the Senate needed to pass impeachments, expel members from the Senate, override a veto, propose constitutional amendments, adopt treaties or change Senate rules without bipartisan support.

A Democratic Party President means that few vetoes are expected that need to be overridden.

Republicans, of course, need bipartisan support to do anything.

Mid-Year Big Law Layoff Recap

In the first six months of 2009:

125 major law firms have announced or had confirmed layoffs. The combined total is 10,723 people, 4,015 of which are attorneys and the balance, 6,708, are staff.

From Above The Law.

The numbers are global, although the cuts are predominantly from the American and British firms that dominate the ranks of large law firms globally.

This is considerably better for lawyers than the Great Depression, when something like 40% of the lawyers in the Bronx were on welfare.

But, it is shaping up to be a huge blow to law school graduates unfortunate enough to have graduated in 2009, plus or minus a couple of years. In recent years, about 25% of new law school graduates have started working for big law firms, historically at rich salaries. Now, most large firms are highing fewer new associates, pay is down, and many new hires are finding their start dates deferred by as much as two and a half years.

There are about 800,000 lawyers in the United States, and considerably less than 200,000 of them practice in large law firms. No one is seriously predicting the demise of large law firms or the legal industry, although a business model shakeup in large firms is widely expected.

Four Years Of Blog

July 3 was the fourth anniversary of this blog, in which time, I made 3918 posts, a rate of 2.68 posts per day. It excludes 292 posts I made at Colorado Confidential (although about a dozen were cross-posts), 35 posts of a half written novel at Wash Park Poet, and several dozen diaries of Daily Kos, in the same time period. I've also posts diaries (mostly, cross-posts, at Colorado Pols and Square State). Before Wash Park Prophet, I was blogging at the now largely defunct Political State Report and as a Daily Kos diarist (the source of the Poltical State Report gig).

I made more posts in June this year than in any month since July 2006, and also featured "New Orleans Doomed", the most heavily commented upon post in the history of this blog, as I write, 55 comments, although some of my Daily Kos diaries have received far more comments in that more highly trafficed and more interactive forum. Four other posts at this blog have drawn thirty or more comments.

Traffic (currently a little less than two hundred unique visitors a day), and links to posts on this blog, are down considerably from their peak, but I've never really done it for the traffic or links, not primarily anyway, so that isn't a big deal.

Before I started blogging or keeping a journal, I clipped newspaper stories and wrote down ideas on loose sheets of paper and I still have several bankers boxes worth of those in my home office, and a couple of storage rooms in my home. Now, I generate very little of that clutter in the physical world. Committing ideas to writing also mitigates, although it doesn't entirely prevent, my pre-blogging habit of writing the same idea over and over and over after I have an idea, almost as much as a mnemonic as a way of producing new ideas. This frees up more mental space for new ideas, and makes it possible to better track how ideas evolve.

I am well aware that my copy editing leaves much to be desired, but lack the time and the disposition to fix my older posts. Amazingly, I still haven't managed to earn the fringe benefit of a copy editor for my blog with any of my day jobs.

Lately, I've done more law blogging and less military and science blogging.