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Carole R. Myers

The Elephant in the Room

By Carole R. Myers

July 13, 2017

Photocredit: Andrew Griggith


What’s next? The Affordable Care Act (ACA) has not remedied the cost problem in the United States.  Americans balked at Congressional plans to save the federal government money by raising consumer costs while dramatically cutting coverage and imposing unsustainable funding reductions on the states.   We need a better plan!  Have we reached a breaking point where Congressional leaders will actually work across party lines, put aside self-interests, and look for long-term, sustainable changes?  The verdict is still out.   The next few weeks will be critical.


Meaningful change requires dealing with the metaphorical elephant in the room.   The term elephant in the room connotes a big problem or issue that is avoided or minimized and for which there is little real dialogue, discussion, or debate.  The big problem that Congress and all Americans need to address with inclusive and deep dialogue is unsustainable healthcare costs in the United States.


It is hard to separate what we call the big three: cost, quality, and access.  We have learned that you cannot address access problems, as the ACA did, without addressing cost problems.  Years of research have shown that you can increase value in healthcare, which means that healthcare is concurrently cost-effective, appropriate, and efficiently delivered.  Simply said: better healthcare does not have to cost the exorbitant prices we currently pay.  A quick look at the Commonwealth Fund’s comparison of international health systems reveals a sad tale about the United States.  In the report, eleven democratic countries with advanced economies are compared to one another on a complement of measures related to health system performance.  The U.S. has the highest per capital cost, 51% more than the second most expensive country, Switzerland, and 169% more expensive than the country with the lowest per capital costs, New Zealand.  Paying more does not get you more.  The U.S. ranks last on a measures related to Healthy Lives.   The U.S. scores last on Access: Cost-Related Problems.   According to the Kaiser Family Foundation, the U.S. has the lowest life expectancy at birth when compared to similar countries.   In 1980 life expectancy in the U.S. was similar to comparator countries.   However in the ensuing time the U.S.  has gained five years while other countries have gained seven.


Why is the cost of healthcare so high in the United States?  One reason is distorted supply, demand, and pricing.  Competition does not reduce prices in healthcare.  Pricing of healthcare services is illogical.  Prices are not based on material and labor cost and prices varies depending on who is paying.  Medicare prices tend to be lower because the purchaser, the federal government, has exercised their bargaining power, with the exception of Medicare Part D.  With private insurers we sometimes see just the opposite.  Provider consolidation tips the balance of power in providers’ favor in negotiations with private insurers.  The biggest losers are the uninsured who have no one bargaining on their behalf and are at the mercy of hospitals, physicians, and other healthcare providers.


Prices in healthcare will rise to whatever the market will bear.  The cost of drugs is in a class of its own.  The U.S. spends more on drugs than any other country.  U.S. per capita spending on drugs exceeds that of other countries.  The U.S. spends $858 per person while the average for 19 other industrialized countries is $400.  One way to change this is to do what other countries do and allow the federal government to negotiate with the pharmaceutical companies.   Currently the provisions of Medicare Part D prohibit this.


The U.S. has a market-based economy.   This works well for most consumer goods and services, but not healthcare.  Market-based solutions in healthcare are harmful to Americans.  At best healthcare is an imperfect market.  A major concern is that the ACA repeal and replace strategies currently being considered by the Congress are based on market principles.


Buying a car is much different than receiving open heart surgery.   When you were buying a car you make the decision.  However in healthcare, the services you need are generally determined by the person and/or institution that provides the service.   This can set-up perverse incentives.  If you are facing open heart surgery, you are generally ill-equipped and often restricted in your decision to buy the service.  This is because the supply and demand dynamics we see when purchasing a car are distorted.  The healthcare market does not offer free, unrestricted competition based on price and quality.  Patients usually do not have the time or information needed about the appropriateness or value of the surgery.  In general, patients are unable to amass the most important information and determine how it applies to them to ascertain if they truly need the surgery, what the options are, where to have the surgery, and who should perform the surgery.  Another complicating factor is that is a patient you are shielded from the full cost of the service if you have insurance and because it is near impossible to compare prices.


The second reason healthcare costs are so high is because the mix of services that Americans receive.  More care is not better care.  By some estimates, a third of what the U.S. spends on healthcare may be wasteful.   More treatments may benefit providers’ bottom line but not necessarily patients.  In the United States we love high-tech care and too many resources are expended on tertiary and futile care to the detriment of prevention and primary care.  This makes no sense when investments and prevention in primary care pay much greater dividends and result in better outcomes.


Another reason that healthcare costs are too high is because of system costs and profits.  The use of multiple payers and providers of care and lack of standardization and inter-operability, as well as the profit motive that has come to characterize U.S. healthcare delivery, results in excessive administrative costs.  Healthcare administrative costs in the United States (25.3%) are double Canada and Scotland (12%).  Furthermore, there is no link between higher administrative costs and better quality.


Since 2010 when the ACA became law, profits for managed care giants United Healthcare. Aetna, Anthem, Cigna, Humana, and Centene have risen at a rate far greater than the Standard and Poor’s Stock Index.  The index return was 135.6% while stocks for the named managed care companies returned in excess of 300% plus dividends.


Does competition have a role in healthcare? I think it can.  However strategic regulation and government oversight is needed to address the problems we currently face.  There are other options but the gap between where we are and the other options is far greater than what it will take to work with in the basic structure of the ACA.


For insurance to work, the risk pool must be large and diverse.  The individual mandate is a necessity if our goals are to extend healthcare coverage to all Americans and assure access to needed services at a cost we can sustain.  As we have seen, uncertainty is destabilizing.  We need to take the time as a country to debate ACA reform but in the meantime the federal government and state insurance commissioners need to support the ACA.


The federal government needs a larger role in negotiating and managing prices for healthcare.   We can start with the federal government negotiating prices for the Medicare Part D program.  As a country we should consider the reform approach Switzerland took in 1999 when they determined that insurance companies could not be for-profit entities.  The United States is alone in the dominance of largely unregulated, for-profit health insurance companies.


As a country, we need to pivot towards prevention and primary care.  Reimbursement is the best lever for changing behavior.  Reimbursement needs to be structured to reward value, including keeping people well, maximizing the functioning of individuals regardless of their health status, and paying only for needed services based on available evidence and in a system with price transparency and consistency.  We cannot cost-shift our way around the problem.  We must deal with the elephant in the room and address costs head-on.


Carole R. Myers, PhD, RN is an Associate Professor at the University of Tennessee with a joint appointment in the College of Nursing and the Department of Public Health.  She has recently been appointed as Senior Fellow for the George Washington University Center for Health Policy and Media Engagement.


Carole R. Myers

Carole R. Myers, PhD launches #NPR @WUOT TN health policy news segment “Health Connections”

By Carole R. Myers

June 21, 2017

Senior Fellow Carole R. Myers PhD brings her health policy expertise to the airwaves twice a month to NPR’s Morning News on 91.9 FM WUOT in Knoxville, TN. Here’s the program write up from WUOT’s website where you can listen to her the segment:



This week marks the launch of a new series, HealthConnections. The brainchild of University of Tennessee associate professor Dr. Carole Myers, HealthConnections will bring the often-abstract world of health care, coverage and policy to a human level. What is access? How do marketplaces work? What’s the future of health insurance?

Dr. Myers and WUOT’s Brandon Hollingsworth will sort through these issues and more, all to give you a toolbox for understanding what you hear on the news, or to separate fact from fiction in the health care debate.

In the premiere episode, Dr. Myers and Hollingsworth introduce the series and get up to speed on the American Health Care Act, the GOP’s possible replacement for the Affordable Care Act.

What’s on your mind? On Twitter, send your questions to @wuotfm, or send an email to newsroom [at] and use “HealthConnections” as your subject line.

Congratulations Carole! The entire team at the Center applaud you on this new platform where you will report on health policy.

Carole R. Myers

AHCA: Far-reaching and Substantial Negative Impact

By Carole R. Myers

June 2, 2017

PhotoCredit: CR Myers

There is plenty not to like about the American Health Care Act (AHCA), a center piece of President Trump’s legislative agenda.  The prospect of someone without health care coverage being penalized when they seek health coverage (the opposite of the Affordable Care Act) is all wrong.  Millions of Americans covered under the Affordable Care Act (ACA) will once again find health care coverage unaffordable if the AHCA is passed and federal tax subsidies for coverage and funds for Medicaid expansion are eliminated or people can once again be denied coverage because of pre-existing conditions.  How is this making health care more affordable and better as President Trump promised?  How is this making America great?

By far the biggest negative is the threat of blowing-up Medicaid as we know it.  Medicaid is an entitlement program that provides health care to low-income Americans.  As an entitlement program, Medicaid guarantees certain benefits to groups of people who qualify.  If an eligible individual receives eligible health care services, they are covered.  The federal government’s funding is based on need and it is open-ended.  The AHCA ends Medicaid as an entitlement program and morphs it in to a block grant program.  The proposed Medicaid block grants fundamentally change how the federal government pays for the Medicaid program.  The implications of the proposed change are far-reaching and substantial.  With block grants, the level of federal funding is capped and details about administration of the program are largely deferred to the states (this is one mechanism for removing protections from being denied coverage if you have a pre-existing condition or eliminating what the ACA deems as “essential benefits”, including maternity and substance abuse care).  In general block grants are not responsive to increased needs such as an uptick in unemployment or erosion of benefits due to inflation.  The design of the Medicaid block grants in the AHCA is particularly ominous because the proposed funding is capped at levels significantly below current costs.  Federal funding is slated to decrease by 50% over 10 years culminating in an $880 billion loss of federal funds and a projected 14 million beneficiaries losing their coverage. 

States cannot bear this shifted burden. Currently the cost of Medicaid is split between the states and the federal government.  The federal government pays 50-83% of the cost of Medicaid depending on the state.  Medicaid represents the largest source of federal dollars that are transferred to states and major portion of state budget revenues.  States will be faced with reducing Medicaid benefits, eligibility, and/or payments for services if the AHCA becomes the law of the land. 

The challenges we face in Tennessee where I live will be exacerbated by enactment of Medicaid block grants.  Tennessee is already on the bleeding edge of harmful trends, in part because the state has not expanded Medicaid.  We are already losing ground.  This will only get worse if the AHCA is passed.  Tennessee is a relatively rural and poor state.  Too many Tennesseans are already burdened by worse health care and outcomes because of where they live and limited resources.  Approximately 36 percent of Tennesseans live in a rural county; 82.1 percent of Tennessee rural counties are classified as rural.  Seventeen of Tennessee counties, all rural, rank in the bottom 10 percent of counties across the country relative to unemployment, poverty rates, and per capita market income.  An additional 35 Tennessee counties rank in the bottom 25 percent nationally.   Eleven percent of all Tennesseans are currently uninsured, compared with six percent in neighboring state Kentucky which did expand Medicaid.  Rural residents across the country have higher rates of chronic diseases and higher rates of low birth weight infants, teen birth rates, overweight children, preventable hospital admissions, and incidence of Diabetes, along with lower life expectancies.  Tennessee has been hard hit by the opioid abuse epidemic.  It is estimated that one in six Tennesseans is abusing or misusing opioid drugs.  There has been a ten-fold increase in the incidence of babies born with Neonatal Abstinence Syndrome in Tennessee over the past decade.  Rural Tennessee residents are about twice as likely to overdose on prescription opioid drug as their urban counterparts.  The rate of use of prescribed opioid drugs among young adults in Tennessee (ages 18-25) is 30 percent higher than the national average.    There has been a 600 percent increase in hospital charges associated with opioid poisoning in Tennessee 1999-2011.  Passage of the AHCA, further loss of Medicaid funding, and an increase in the number of uninsured Tennesseans will result in further regression in the state.

Alarmingly Tennessee leads the country in rates of hospital closures.  Closure of a hospital, especially in a rural area can start a cascade of deleterious effects.  Tennessee had 9 rural hospital close since 2010, only Texas with 11 closures had more.  Seventy-seven percent of all rural hospital closures since 2010 when the ACA was enacted have occurred in states that have not expanded Medicaid.  The links between Medicaid expansion and hospital closures are in part an unintended consequence of the Supreme Court decision that wiped away mandatory Medicaid expansion in the ACA.  When the ACA was being drafted it was thought that payments to hospitals for uncompensated care accrued by uninsured individuals would no longer be needed because the number of uninsured individuals would steeply decline.   However, hospitals in non-expansion states are faced with the double whammy of reduced payments for uncompensated care and higher rates of uninsured individuals, an unsustainable combination.  Already burdened hospitals are too-frequently unable to withstand revenue deficits associated with uncompensated care.  Profit margins are just too thin.  Adding to the rash of hospital closures is the significant number of rural hospitals that have been identified as currently facing a high risk of closing.  In Tennessee, 32 hospitals are vulnerable to significant reductions in services, if not closure, because on average over a three-year period they have operated in the red.  The situation will only worsen if the AHCA becomes law.

It is incongruent to me that blocks of Americans, including a majority of Tennesseans who voted for President Trump based on the promise of better health care, will be the people who suffer most under the AHCA.  This is not great!  This is a dismal prospect and a potential burgeoning human tragedy.


Carole R. Myers, PhD, RN is an Associate Professor at the University of Tennessee with a joint appointment in the College of Nursing and the Department of Public Health.  She has recently been appointed as Senior Fellow for the George Washington University Center for Health Policy and Media Engagement.

Carole R. Myers