John Oliver has a fantastic piece on the rising cost of delivery in our health care system. He focuses exclusively on dialysis-which happens to be the only outpatient procedure fully covered by Medicaid. As he jokes in the segment, we have single payer for exactly one organ: the kidney. He goes on to show how funding for this procedure has already taken over 1% of the total federal budget. Half of the Department of Education’s entire budget goes to covering exactly one outpatient procedure. How did costs spiral out of control for dialysis? And what does this mean for expanding single payer to cover the rest of the human body?
The answer shows a serious gap in our health care reform debate. All of the reforms we are debating whether they are ACA, public option, or single payer are payment mechanisms that modify the payment for care. These are not mechanisms that control the cost of delivery for care. And that gap could pose a big problem for reforms going forward.
So let’s look at dialysis. Why is it so expensive? Well, 70% of the market share for this procedure is controlled by Davita-a private corporation run by an eccentric billionaire that has settled hundreds of millions of dollars in Medicaid fraud cases. Some of the abuses they uncovered include overbilling for blood coagulates and failure to properly educate patients on how to obtain a kidney transplant. This latter example is particular egregious since patients would literally live longer and healthier lives off dialysis with a kidney transplant, but it would reduce the client pool for Davita. This is a clear example of how the current delivery system prioritizes private profits over public health.The millions of dollars in fines accrued are simply the cost of doing business and barely dent the billions of dollars this single payee bilks from the Medicaid system.
As Charley noted in his post last week, single payer advocates are going to have to contend with examples like this one if we want to actually implement our policy. Simply switching to single payer without controlling the costs from the web of third party providers like Davita is a recipe for disaster. We have to break up hospital monopolies and institute regulated pricing if we want it to succeed. Fortunately, Maryland has already done this and provides a good model for Massachusetts to follow.
Maryland implemented an all rate payer system over 40 years ago to control these rising costs. While single payer converts the government into the sole payer of provider services, an all rate payer system allows the government to actually set the prices for providers to control costs. In Maryland this system is estimated to save their state $100-300 million a year. By strictly dictating what hospitals and third party providers can charge, the government is able to drive costs down.
Setting caps on provider market share is another reform my former boss Evan Falchuk proposed during his 2014 campaign for governor which could also work in tandem with an all rate payer system like Maryland’s and eventually a public option or single payer system. We should strongly consider such a reform here either as part of a broader transition to single payer or as a means of addressing our existing budget shortfalls in MassHealth. Doing so will help make the fiscal case for expanding public coverage.