Proceedings of the 25th National Conference – Thought Provocateur #1(McCanne) "What to Expect: the PPACA's Promises Unkept"

Last Updated on April 16, 2022 by Lee Burnett, DO, FAAFP

We gratefully acknowledge the sponsorship of the Penn State University Hershey Medical Center Department of Family Medicine for funding the transcription and editing of this section of the Proceedings of the Twenty-Fifth National Conference:

This section follows: Proceedings of the 25th National Conference Stephens Tribute (Pugno, Mills Questions and Comments).


Mark E. Clasen, MD, Ph.D. Wright State University, Dayton, Ohio (Moderator):

Our next presenter is Dr. Don McCanne from San Juan Capistrano, California who represents the Physicians for National Health Program.

Don McCanne, MD; Physicians for a National Health Program, San Clemente, California
Don McCanne, MD; Physicians for a National Health Program, San Clemente, California

Don McCanne, MD [Dr McCanne is a Fellow of the National Conferences]: It’s nice to see you again. That’s a tough act to follow, but I think that Gayle Stephens would have said that the show must go on; so I’ll give it a trial.

I will speak to why the Affordable Care Act is not enough. We know that’s our reform for the time being and that we’re going to have to live with it for a little while.

But when people find out what’s in the Affordable Care Act, and what it’s going to do to our health care system I think there will be major changes in it.

What are the goals of healthcare reform?

1) We want to include everyone; 2) we want to slow spending to sustainable levels, 3) we want to improve quality, 4) we want to make it comprehensive, including all essential benefits 5) we want to remove barriers to access, especially the financial barriers to care; 6) improve resource allocation through health planning, and 7) reduce administrative waste.

Comparing Health Care Reform Models

The table below is from the California Healthcare Options’ project, and was requested by the California State Legislature to study different models of reform. Each of the top six models, all of which are built in the current system, falls short of the goals stated above and they all increase healthcare spending.

California Legislature Report Estimating Policy Alternative Costs
California Legislature Report Estimating Policy Alternative Costs

The bottom three are single payer health service models. These three options all meet the goals, and they all reduce healthcare costs.

I want to point out too, that the Healthy California Program Stage II, written by the late Rick Brown of the University of California, Los Angeles and Rick Kronick of the University of California, San Diego. (Dr Kronick is now head of the Agency for Healthcare Research and Quality’s (AHRQ).

The Health California Program is basically the Affordable Care Act. Not only did it fall short of the stated goals but it proved to be the most expensive of all the models. The most expensive!

Down at the bottom of the chart, the middle single-payer model listed was developed by Dr James Kahn at UCSD. His group included Doctors Kevin Grumbach and Tom Bodenheimer of the University of California, San Francisco. I was a part of the group that wrote this plan. It meets all the goals, and it was the least expensive model of reform.

I think that’s the most important thing I’m going to say in this presentation.

Expanding a dysfunctional system

The deficiences of the ACA
The deficiencies of the ACA

The Affordable Care Act merely expands our dysfunctional system. It’s not universal, Its cost containment elements are inadequate.

ACA perpetuates the role of private insurers who operate under a business model rather than a patient service model.

Administrative waste – one of the biggest problems in our system- is increased.

Perpetuation of the “stigma” of Medicaid

Medicaid perpetuates the underfunded Medicaid program, whose stigma of being a welfare program remains. A large percentage of referral specialists won’t see patients on Medicaid. It’s really not a very good program.

Canadian and U. S. Data Compared
Canadian and U. S. Data Compared

Bending the Cost Curve

You all know about healthcare costs compared to Canada. Both nations were following the same trajectory until Canada enacted their National Health Program.

Since then our costs have continued upwards, but Canada has bent the cost curve.

All the politicians keep talking about the fact we need to bend the cost curve. Canada did it!

If you don’t like information published by the government, then let’s go to Wall Street.

An “Improved Medicare For All”

Standard and Poors' trend lines comparing Medicare with commercial and composite indices
Comparing trend lines for Medicare and commercial indices

The S & P Healthcare Economic Indexes, the commercial index, the private insurance plans result in the highest increases in healthcare cost; whereas Medicare index is bending the cost curve.

We’re doing far better with Medicare in controlling healthcare costs than the private insurance industry is able to do.

If we look only at Medicare, we see that the United States is still a lot higher than Canada’s, because Canada has done a better job in slowing the increase in healthcare cost.

Comparison of U. S. Medicare with Canadian Equivalent over 3 Decades
Comparison of U. S. Medicare with Canadian Equivalent over 3 Decades

For the American Medicare program, 95% of people need some kind of supplemental program.

Medicare pays only about 51% of healthcare cost for seniors, whereas in Canada, it’s much higher.

That is why, when we talk about “Medicare for all”, we should always say “an improved Medicare for all”, because Medicare needs a lot done to it to make it the model of reform.

 Healthcare Expenditures in the United States

Percent of Elderly Health Care Covered bu Medicare - U. S. vs Camada
Percent of Elderly Health Care Covered by Medicare – U. S. vs Camada

How much we’re spending on healthcare in the United States?

We spend more through the public system, through our taxes than all other nations pay in public and private spending combined.

Plus we have this huge amount of additional private spending, so our healthcare costs are outrageous.

The new norm under the Affordable Care Act is unaffordable underinsurance.

Comparison of U. S. per capita healthcare expenditures with Europe, Canada and Japan
Comparison of U. S. per capita healthcare expenditures with other industrial nations

The premiums are too high and the patient cost sharing is too great, because, as a result of inadequate subsidies, the actuarial value of the insurance is set too low.

Additionally, we’re dealing with this problem of narrow and ultra-narrow networks which deny patients choice of providers.

The Milliman Medical Index shows how much it costs a typical family of four to pay for healthcare – not insurance, but healthcare.

25PHCA - MCCANNE Slide13The healthcare costs of a typical family of four insured by an employer sponsored PPO is $22,000. The median household income $is 51,000.

Those numbers obviously don’t work and obviously overstate the out-of-pocket costs to a low income family,

Why is that? It is because the government portion of our healthcare spending is largely -although not completely – progressively funded – meaning that the people at the top help pay for the care of the rest of us.

Healthcare Expenditures by Income Level Exacerbate National Income Inequality

At this point, I’ll mention the elephant in the room. Thomas Piketty in his new book Capital in the Twenty-First Century that was just released this month is already a classic in economics charts both income and wealth inequality in the United States.

Piketty shows that most of the gains in productivity have all gone to the top income levels. For persons in the upper middle, middle income, and lower income ranges, their gains are flat, while costs continue to increase.

The costs of college educations retirement, and healthcare are all getting further and further out of reach for the typical American family.

However, were we to address the problem of healthcare financing through truly progressive financing – much more so than we have now – we would be taking a major step to help correct this major deficiency.

You all should read Piketty’s book. I think he should receive the Nobel Prize.

Counting the Uninsured: the Politics of Numbers

Success or Disgrace?
Success or Disgrace?

The number of uninsured when Bill Clinton was elected president was 38 million and, of course, that was labeled by his administration as “A National Disgrace”.

When the Affordable Care Act is fully implemented, that number will only decrease to 31 million, but that’s celebrated as “Successful Reform”..

The “Hardship Exemption”

There are 24 million people under the Affordable Care Act who qualify for a “hardship exemption”.

"The Hardship Exemption"
“The Hardship Exemption”

Basically, this means that they don’t have enough money to pay their share of the premium or the out-of-pocket expenses.

However, the hardship exemption also means that this group has the right to remain uninsured without being fined for it, To me, this is an admission that the system has failed our most vulnerable. That’s not what healthcare reform should have been about.

Underinsurance as the New Standard

Underinsurance is the new standard. The federal employees’ health benefits program used to have an actuarial value of about 87%, meaning that the patients had to pay about 13% of the cost.

The benchmark “silver plan” which is what most people are buying has only 70% of actuarial value, so they have to pay 30% of the cost. The subsidies under the program are inadequate.

Another big problem is the reason ACA was designed as it was, was to protect employer sponsored coverage because that’s what was working well. Well it’s deteriorating as there with declining actuarial value, especially higher deductibles, narrower networks. Well, I’ll mention that later.

Unnderinsurance concerns in Massachusetts
Failings of Massachusetts’ Plan

Underinsurance has proven to be a problem in Massachusetts, even though their health plan have better coverage than ACA provides, covering more out-of-pocket expenses than is called for in the Affordable Care Act,

Yet in Massachusetts 54% of middle-income adults and 32% of higher income adults have financial problems or access problems with healthcare. So this model is just not working well.

The Financial Burden of Increasing Deductibles

Percent of Costs: Required Deductibles for Employer Plans 2006-2012
Percent of Costs: Required Deductibles for Employer Plans 2006-2012

The deductibles in employer-sponsored plans are shooting up, erecting financial barriers to care for their employees.

People don’t have the assets, those first three columns on the left are people with incomes under 300% the poverty level. They can’t pay their share of costs, even with the subsidies they receive.

But look at the people with over 300% of poverty typically have about $5700 dollars. One major medical event, their entire liquid assets are gone and you know they have to tap into the retirement or whatever else, their 401(k)s and so forth.

Percentage of Fully Insured, Underinsured, Uninsured, Skipping Care, Struggling with Bills
% Fully Insured, Underinsured, Uninsured, Skipping Care, Struggling with Bills

On measures (skipping needed care and having problems paying a medical bill) in which the fully insured, underinsured and uninsured are compared, the percentage of underinsured reporting problems approaches that of the uninsured.

This is not the kind of a system we should have. Underinsurance is a real problem.

Narrow and Ultra-Narrow Systems Disrupting Health Care 

ACA permits the participation of “narrow” and “ultra-narrow” networks. These are often disruptive to quality primary care.

Potential disruptions of "narrow" networks
Potential disruptions of “narrow” networks

Stable long term coverage under these plans is the exception; so that most people are going to continue to have disruption in their healthcare.

Health Care Discontinuities Through “Churning” and Employer-Sponsored Health Plans

“Churning” ua a big problem. A new study released just this month estimated in the first 12 months one-fourth of the people here in California will leave Medi-Cal and almost one-half will leave “Covered California”.

Shifting costs from employers ro employees
Shifting costs from employers ro employees

Nor is healthcare coverage stable through employer sponsored plans, which always cease when you change jobs, but can also result in changes in providers if the employer changes insurance companies.

But increasing numbers of employers are turning to private exchanges. It’s a new idea, but a study by AON predicted that within three to five years one-third of employers will be using private exchanges.

Private exchanges are like the government exchanges under the Affordable Care Act. But it’s a voucher system that is designed to help control employer healthcare costs by shifting costs from a “defined benefit” (risk lying with the employer) to a “defined contribution” (risk lying with the employee).

Through this process, a substantial proportion of healthcare costs is shifted from the employer to the employee.

 Healthcare Costs in the United States

Why are healthcare costs so high in the United States? Here are some of the reasons usually given.

Suggested reasons for high costs of U. S. healthcare
Suggested reasons for high costs of U. S. healthcare

Is there administrative waste? Yes, it’s gigantic. Are prices too high? Emphatically, yes;. Is high tech used in excess? Yes, all of us here agree with that.

Is there over-utilization of healthcare services? Of some such services, yes! Doctor John Wennberg of the Dartmouth Institute has demonstrated that we simultaneously have problems with underutilization of some services and overutilization of others.

Wennberg’s studies suggest that we have excess capacity in such services as cardiac surgery, yet have deficient capacity in many other areas. Until this is solved we will not save any money there. Nor will there be savings in the system until the giant problem of medical liability is resolved.

Comparing growth of physician with administrative positions in American healthcare
Comparing growth of physician with administrative positions in American healthcare

Let’s consider the issue of administrative costs of American healthcare, What was the ratio of administrators to physicians in 1970 and what is it today? Look at the narrow yellow line at the base of the graph. is the increase in physicians’ percent and the light blue is the increase in administrative positions.

Now, with the Affordable Care Act this disparity will increase once again because of additional administrators in our system. The exchanges add another level of administrative complexity to a system that already is wasting too much money on administration.

Let’s examine the issue of Insurance overhead in this chart from the Organization of Economic Cooperation and Development (OECD) and compare Canada (second bar from the left) with the United States (yellow bar, left). This is a big area for savings.

OECD Calculations of Costs of Insurance Overhead in Selected Nations
OECD Calculations of Costs of Insurance Overhead in Selected Nations

The four countries on the graph’s right (Holland, Germany, Australia and New Zealand)  all use private health insurance plans that are very heavily regulated to make them rather like a single payer system.

But they don’t quite get their prices down to what a single payer system, like Canada, could do.

Consider the administrative costs of the Medicare Advantage program is in the United States, The chart (below, left) displays the Medicare advantage overhead,

Comparison of adminitrative costs: Traditional Medicare vs Medicare Advantage
Comparison of administrative costs: Traditional Medicare vs Medicare Advantage

Note that these are not medical expenses, only administrative.

The Medicare Advantage administrative costs are much higher than in the traditional Medicare program.

And yet Congress keeps fighting to save this very wasteful system for which taxpayers are footing.

The physicians billing offices expenses to the hospital chart looks just like tha. But, over all, we’re spending over $3000 per person on administration.

Comparison of Physician Office Billings per Capita: U. S. and Canada
Comparison of Physician Office Billings per Capita: U. S. and Canada

Merely enacting a single payer system, just doing that one thing would cut that tremendous waste in half immediately.

Reinhardt and Anderson: It’s the Prices, Stupid.

Uwe Reinhardt and Gerard Anderson wrote the famous health affairs article, on It’s the Prices, Stupid.

They compared the United States with the European Nations. And the title they chose for their article refers to all of the excess high tech gear when compared to the median OECD countries.

We have fewer physicians, nurses, hospital visits, doctor visits, and hospital days per capita, but we have by far the highest prices of all. The new drug for Hepatitis C at $1000 a pill for 84 pills, is, of course, an outlandish example. No other nation is going to pay $84,000 to treat Hepatitis C. No other nation would, but we will.

Trendline of United States Hospital Mergers between 2005 and 2011
Trendline of United States Hospital Mergers between 2005 and 2011

Hospital mergers are rising, which is an anti-competitive. Doctors are joining hospitals, which is anti-competitive. These trends are occurring in a nation that is already anti-competitive.

This bull about market competition controlling healthcare spending is just that. In fact, In fact, half of Americans live in a region of the country where the population is too low for competition between healthcare entities.

Attempts to Improve Healthcare Quality through “Pay for Performance (P4P)”

Doctor Donald Berwick has been quoted as saying that healthcare quality is not simply “teaching to the test” as in P4P programs

Dr Berwick said:   “I do not think it’s true that the way to get better doctoring and better nursing is to put money on the table in front of doctors and nurses. I think that’s a fundamental misunderstanding of human motivation. I think people respond to joy and work and love and achievement and learning and appreciation and gratitude – and a sense of a job well done.”

I regard P4P as insulting to health care professions, and yet this is the big quality movement in this country. The Cochrane Review after studying quality improvement programs reported in 2011 that it found no evidence that financial incentives can improve patient outcomes.

The Commonwealth Fund has demonstrated graphically that the United States spends by far the most on health care of seven industrialized nations (Australia, Canada, Germany, France, New Zealand, United Kingdom, United States), but  seve but is seventh in ranking based on several important health indices.

16 nations ranked by preventable deaths per 100,000 (lowest to highest)
16 nations ranked by preventable deaths per 100,000 (lowest to highest)

The United States ranks last of 16 nations (those listed above plus Italy, Japan, Sweden, Norway, Netherlands, Austria, Finland, Greece, Ireland and Denmark), according to the Commonwealth Fund, in mortality that is amenable to health care.

This measures the prevention of premature death from disorders that a good functioning healthcare system would prevent. We have the highest death rate of all 16 nations in preventable deaths.

Quality through Primary Care

The attributes of primary health care
Starfield’s attributes of primary health care

We all know Barbara Starfield. It was she who said that primary care everywhere in the world is most of the care for most of the people, most of the time,

Primary care is assessable, person-focused, continuous over time, comprehensive and coordinated; That’s where quality comes from.

Two decades ago our organization, the Physicians for a National Health Plan, wrote an article for the Journal of American Medical Association (JAMA).

JAMA Sept 14 1994 vol 272 No 10
JAMA Sept 14 1994 vol 272 No 10

That article, which is accessible on the PNHP website,  showed that we need a proper structure, not these games that they’re playing for quality.

Malpractice Reform


A fully-implemented, effective health care reform program would include an alternative dispute resolution system for malpractice claims that would replace the expensive, adversarial system existing now that diverts funds from the injured party.

Even if it were not to save money, it would spend it better and less painfully. And, the reforms designed to make the American system of health care more egalitarian, would be expected to reduce animosity, permitting us to move away from the adversarial system for treating malpractice.

How OECD and WHO rated the Swiss system

The argument has been made that we can provide health care through the mechanism of private insurance, but that we just need to regulate it better like the Swiss and Dutch do. I want to make a point with this slide, because a comprehensive study of the Swiss system of health care delivery was undertaken by the OECD and the World Health Organization, that studied the Swiss system.

Findings of OECD, WHO study of Swiss system of funding healthcare through private insurers
Findings of OECD, WHO study of Swiss system of funding healthcare through private insurers

What the study found is that the Swiss system of financing health care through private insurance companies was highly inefficient and fragmented, had profound administrative waste, was inequitably funded through regressive financing, with wide variations in premiums, high out of pocket costs, and increasing managed care intrusions into health care delivery, with abundant opportunities for insurers to game the system.

Do want more of this in the United States? I don’t think so.

The Canadians do it right, and this is how we can do it.

Thank you.


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