Category Archives: Health Reform Goals
We know that more than half of all medical cost is wasted, adding no value to the patient. We also know that the total costs of medical provider billing, collection, and payment consume as much as 30% of every health care dollar—about ten times the transaction costs in every other industry. If medical care were as efficient as, say, our economy’s food sector, it would provide higher quality for a third of today’s $2.6 trillion cost and free up $1.7 trillion every year for higher wages, lower federal deficits, and a major boost in job-creating private-sector investment.
Moreover, 75% of all medical spending now goes to treat preventable chronic diseases. If we could figure out how to get people to stop eating, drinking, and smoking themselves to death, and cut out the wasteful spending, our total medical bill would plummet to only 10-20% of today’s level.
About the same time I saw a picture of the man I voted for signing the new health reform bill, I received an email with a picture of George Bush (The Younger) waving at the camera with one of his goofier grins and the caption, “Miss me yet?” I’m hardly a Bush fan, but at the moment—God help me—I’m even missing Nixon.
One of the annoyances from having spent forty years inside the health care beast is having to endure the blatant half-truths and patent falsehoods coming from our President and his legions of economics-challenged health reform advisors and supporters. Particularly abrading are his statements about the “immediate benefits” of the new law, with no mention of the equally immediate costs that will accompany them.
Here are some of the more bothersome ones:
- Free preventive care. The journal Health Affairs and others have authoritatively concluded that preventive services almost always increase medical costs rather than reduce them. Thus, our premiums will go even higher with no net savings now or ever.
As we approach Thursday’s bipartisan health summit, no one has yet successfully challenged the comprehensive health reform proposal I describe in my book, speeches, media interviews, and this blog. It has withstood all technical, actuarial, financial, behavioral, and economic challenges to date. This would be gratifying if it weren’t for one annoying loose end—the political issue.
Almost everybody tells me that my approach’s lack of sound-bite simplicity renders it DOA as a workable legislative agenda. They have a point. As bad as our health care system is, it’s not yet bad enough to engender the kind of political will necessary to put American consumers fully in charge of buying their own health insurance and medical care. Until we get there, let me offer a simpler, interim proposal that will immediately offer relief from out-of-control medical costs: we should make everyone financially responsible for his own preventable illnesses.
As the Democrats and GOP leaders prepare to meet with the President at the February 25 health summit, the Republicans have a big problem. They don’t have a plan. While demanding a clean-slate do-over from the Democrats, all they have to offer in return is a grab-bag of simplistic, ineffective remedies that won’t fix the problems of our unsustainable health care system. They lack the vision thing. They need to recognize the market failure at the root of the system’s dysfunction and to propose the following actions to fix it. (Note: Hyperlinks provide additional discussion for those wanting to delve further.)
First, let’s agree on our ultimate goals. Neither party has done this. Here they are:
1. Access to affordable health insurance for all Americans
2. Sustainable medical care affordability and value
3. Free-rider prevention that allows universally available insurance to work
4. Voluntary participation with no individual or employer mandates
5. Financial protection against unaffordable, medically necessary care
6. Individual choice of insurers, providers, and treatments
7. Portability of coverage regardless of employment or government assistance
8. Effective prevention of chronic diseases that now consume 75% of total medical costs
Scott Brown won the Massachusetts senate race by promising to derail the Democrats’ congressional health reform locomotive, a victory that has also thrust his biggest supporter, Mitt Romney, back into the national spotlight. The irony is that, as state senator, Brown helped pass then-Governor Romney’s remarkably similar 2006 state health overhaul. Despite Mr. Romney’s statement at the time that “Every uninsured citizen in Massachusetts will soon have affordable health insurance and the costs of health care will be reduced,” his RomneyCare milestone threatens to become a politically costly millstone for his 2012 presidential prospects—or so says Kimberley Strassel of the Wall Street Journal.
The Massachusetts program has used the carrot of generous premium subsidies and the stick of mandated individual coverage to reduce its uninsured population from about 10% pre-reform to 5.1% (Census Bureau estimate) or 2.6% (Massachusetts estimate) last year. Unfortunately, it has failed to contain costs, with insurance premiums continuing to increase considerably faster than the CPI.
Cable news is jammed with horrific stories of widespread destruction and disarray caused by an unpredictable calamity that struck with sudden, unstoppable force, thrusting many who were already sorely beleaguered into chaos and desperate disarray. Hurried rescue missions failed to prevent widespread pain and suffering. Such is life for the Democrats following the Massachusetts special election. Tip O’Neill was misquoted. All politics is loco. The big question now is whether the Mass. disaster presages a mass disaster for the Dems come November.
I buy collision and comprehensive insurance on my car, but after talking to my State Farm agent, it might as well be called collision and incomprehensible. With seven layers of coverage, most of it is as clear to me as the details of health insurance are to many others. But it has two aspects I do understand. First, it doesn’t cover gasoline, oil changes, or worn-out tires. Those are predictable, normally affordable consumer purchases. Even if I could buy such coverage, I wouldn’t. It’s not worth the added insurer overhead and profit—not to mention the cost inflation on gas and tires once sellers discover their customers no longer care about price. I’m better off shopping around for reliable service, low price, and credit card convenience.
The other part I understand is the deductible. If my car gets accident damage, I pay the first $2,000 to fix it. Insurance pays the rest. I could get a $100-deductible option, but that costs an extra $183 per year. I’d rather save the money and drive more carefully—even if the two gents who’ve run into me during the past 40 years didn’t. I’m still way ahead.
Health-reform bookmakers currently favor the Senate bill over the House version as bicameral, unipartisan, unconference-committee participants conspire in a C-Span-free White House to extrude their secret sausage. One of many unfortunate consequences of the Senate bill—according to a new report from the government’s own Center for Medicare and Medicaid Services (CMS)—is likely to be a significant shrinkage in the ranks of medical providers willing or able to treat Medicare patients. The Senate’s proposal to insure the uninsured would require Medicare benefit cuts of $541 billion to pay the lion’s share of health reform’s $882 billion ten-year cost. CMS projects that fully 20% of doctors and hospitals participating in Medicare’s Part A inpatient benefit program will become unprofitable as a result. According to CMS’ chief actuary Richard Foster, “Providers for whom Medicare constitutes a substantive portion of their business could find it difficult to remain profitable and, absent legislative intervention, might end their participation in the program (possibly jeopardizing access to care for beneficiaries).”
Death is an unavoidable theme this time of year. Having just celebrated a great religious martyr, we move on to witness last January’s swaddled babe transformed into an ancient, arthritic geezer doomed to die at Thursday’s midnight toll. We ponder the lives of those who’ve passed this past twelvemonth—whether near, dear, or merely famous. And stories like the New York Times’ “Hard Choice for a Comfortable Death: Sedation” challenge us to ponder the process of dying itself. Such is the end of the year and a troubled decade.
Hence comes to mind “Life-Line,” the great Robert A. Heinlein’s first published science-fiction story (1939). In it, the ingenious Professor Pinero invented an apparatus that accurately predicted the exact moment of any person’s death. Although many of Heinlein’s speculative musings later came to pass (waterbeds, rail guns, travel to the moon), this one, thankfully, did not. Such a device (doubtless following a hideously expensive and lengthy FDA-approval process) would cause no end of mischief, including cutting billions from medical costs by simply denying care to people about to die.
This week’s deal on abortion-funding between pro-life Nebraska Senator Ben Nelson and pro-reelection Senate Majority Leader Harry Reid got me thinking about its fundamental economics. You probably know that, to secure Nelson’s essential 60th vote for the Senate’s health reform bill, the other 59 Democratic and independent senators agreed to his Read-My-Lips-No-Federal-Funding-For-Abortions ultimatum (plus an incidental $100 million in extra Medicaid funding for his native Nebraska). According to the deal, the individual states will decide for themselves whether to allow abortion coverage in their respective health insurance exchanges. But any state that allows it must also require that any women who choose it and who receive federal insurance subsidies must buy the abortion coverage separately as an extra-cost insurance policy, or “rider.” Nelson was satisfied that this will force all such women to pay for their abortion coverage with their own—not the government’s—money.