I could blog on healthcare all day.
Category Archives: Healthcare
Public Plans: Pro and Con
I’ve just about beaten this subject to death, but it’s worth responding to the tissue of lies being thrown up in defense of a public plan. The WSJ had editorials today — con by John Calfree and pro by the Smuggest Little Marxist in Washington, Robert Reich. Just to tackle a few of Reich’s deceptions (most are addressed in Calfree’s piece).
No other issue in the current health-care debate is as fiercely opposed by the medical establishment and their lobbies now swarming over Capitol Hill. Of course, they don’t want it. A public option would squeeze their profits and force them to undertake major reforms. That’s the whole point.
Yes, just as public universities have made higher education so efficient and cheap. Just as the public option for seniors made their insurance so efficient and cheap — oh wait, there isn’t any private insurance for seniors anymore — except that created for government employees. Carry on.
Can anyone name for me an industry that has benefited from having a “public option”? I’m genuinely curious about this.
Critics say the public option is really a Trojan horse for a government takeover of all of health insurance. But nothing could be further from the truth. It’s an option. No one has to choose it. Individuals and families will merely be invited to compare costs and outcomes. Presumably they will choose the public plan only if it offers them and their families the best deal — more and better health care for less.
As I noted yesterday, this is the Big Lie. People don’t choose their insurance — their employer does, thanks to a nonsensical tax code that makes employer-provided insurance tax deductible, but not self-insurance.
But, say the critics, the public plan starts off with an unfair advantage because it’s likely to have lower administrative costs. That may be true — Medicare’s administrative costs per enrollee are a small fraction of typical private insurance costs — but here again, why exactly is this unfair?
Because Medicare doesn’t administer Medicare. It farms out that job to the eeevil insurance companies. Because, as we’ve seen with the Post Office and Amtrak and Fannie Mae, government-created corporations are often exempted from the regulations and taxes that private corporations are saddled with.
Critics charge that the public plan will be subsidized by the government. Here they have their facts wrong. Under every plan that’s being discussed on Capitol Hill, subsidies go to individuals and families who need them in order to afford health care, not to a public plan. Individuals and families use the subsidies to shop for the best care they can find. They’re free to choose the public plan, but that’s only one option. They could take their subsidy and buy a private plan just as easily. Legislation should also make crystal clear that the public plan, for its part, may not dip into general revenues to cover its costs. It must pay for itself. And any government entity that oversees the health-insurance pool or acts as referee in setting ground rules for all plans must not favor the public plan.
There’s more than one way to subsidize a trojan horse. Will these public plans be subject to the exact same rules and regulations and taxes that private plans are? Will they have to create their own infrastructure or be able, like Medicare, to borrow someone else’s? And perhaps the greatest subsidy of all would be Ted Kennedy’s plan to make participation mandatory. There is no greater subsidy than forcing doctors to participate in the plan.
Finally, critics say that because of its breadth and national reach, the public plan will be able to collect and analyze patient information on a large scale to discover the best ways to improve care. The public plan might even allow clinicians who form accountable-care organizations to keep a portion of the savings they generate. Those opposed to a public option ask how private plans can ever compete with all this. The answer is they can and should. It’s the only way we have a prayer of taming health-care costs. But here’s some good news for the private plans. The information gleaned by the public plan about best practices will be made available to the private plans as they try to achieve the same or better outputs.
We’re not even finished with the article and we already have the first subsidy of the public plan. Ever heard of HIPAA?
Robert Reich is not in favor of healthcare competition. He doesn’t really believe most of the shit he’s peddling in this article. As I pointed out at the other site, many on the Left are openly acknowledging the slow poison that is the public plan. This is nothing but window dressing to lull us into thinking everything’s going to be OK.
But pay no attention to that. Look at the shiny watch. You are growing sleepy. Very sleepy. Did you hear Michael Jackson died? Don’t pay attention to the Marxist behind the curtain.
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Healthcare Myths: IV. Competitiveness
The Myth: Rising health care costs are crippling American industry and making us less competitive.
Bad Policy Based on the Myth: I’m not really sure. This is repeated often as a motivation for healthcare reform. But most health care proposals won’t address this issue at all. Employer mandates will only make small businesses less competitive, not more. Without the forcible reduction of healthcare use, this a red herring.
The Reality: First, as Sally Pipes points out, healthcare spending is not exactly like flushing money down the toilet. It supports an entire industry.
Health care certainly plays a major role in the U.S. economy, and by almost any objective account a highly positive role. It employs 13 million Americans and accounts for one out of 10 jobs.
If you cut healthcare costs, those jobs will diminish. An economic argument can be made for that — healthcare costs are, in some ways, a broken window cost. Perhaps if that money were being used to boost exports, we’d be better off in terms of jobs and GDP.
But do we really want our government decreeing where Americans can work and what industries do and do not contribute to our economy and in what proportion?
But there’s more. It’s highly unlikely that controlling health care costs will make our businesses competitive at all for reasons Greg Mankiw notes:
Ultimately, what matters to firms is the compensation they pay workers. The composition of compensation between cash wages and fringe benefits like healthcare does not matter for the firms’ costs of production. In short run when cash wages are sticky, the cost of healthcare may affect competitiveness: Lower costs of fringe benefits would reduce compensation and thus reduce firms’ cost of production. But in the long run, compensation is set by supply and demand in labor markets. If more compensation is paid in the form of fringe benefits like healthcare, less is paid in the form of cash. And if less is paid in fringes, more is paid in wages.*
Let me put the point in the context of General Motors: If, for example, the U.S. taxpayer were to assume all the workers’ healthcare costs through a policy of national health insurance, GM would immediately become more competitive. Because cash wages would not be immediately renegotiated, compensation paid by the firm would fall, so costs would fall. But in the longer run, the workers via their union would most likely not be satisfied seeing GM pay lower compensation, so cash wages would start rising. (Those higher wages would help workers pay the higher taxes that would be needed to finance the national health insurance). GM would lose the competitive advantage it temporarily enjoyed.
Precisely. Again, you can make an argument here. Reducing healthcare costs might put more money into consumer pockets. But if these “savings” come with an overall reduction in healthcare results, that might not be a trade people are wiling to make. And even if it did make our economy more efficient to increase wages at the cost of healthcare, why should the government be making that decision? Has it shown the infinite wisdom to carefully balance the value of pocket money against healthcare?
The thing of it is, this argument — that businesses can’t compete because of healthcare costs — is usually used to justify socialized medicine. But socialized medicine has not made France or Germany more competitive (sustained double-digit unemployment rates). Why is this? Because, ultimately, those “free benefits” industry is getting for their employees will have to paid for by taxes.
I would add one more point. The rising cost of healthcare for private industry is creating one of the few negative pressures against healthcare costs. Firms that need to control expenses will push back in a myriad of inventive ways. Paying bonuses to employees for living healthy, purchasing insurance plans with high deductibles, finding better healthcare management, moving to HSAs — all these options are on the table.
If, on the other hand, government steps in, we will have a one size fits all solution imposed, not for financial reasons, but political ones. Having your healthcare controlled by your boss might be bad … but why is having it controlled by government better?
Healthcare Myths: III. Bankruptcy
I was going to take a few days off the healthcare beat — yesterday’s post was exhausting. But then a must-read crossed my desk:
President Obama’s kicking off his health care reform today in the worst possible way: with a mischaracterization of the data.
“The cost of health care now causes a bankruptcy in America every thirty seconds,” Obama said at the opening of his White House forum on health care reform. The problem: That claim, based on a 2001 survey, is simply unsupportable.
The figure comes from a 2005 Harvard University study saying that 54 percent of bankruptcies in 2001 were caused by health expenses. We reviewed it internally and knocked it down at the time; an academic reviewer did the same in 2006. Recalculating Harvard’s own data, he came up with a far lower figure — 17 percent.
A more recent study by another group, approaching it another way, indicates that in 2007 about eight-tenths of one precent of Americans lived in families that filed for bankruptcy as a result of medical costs.
Hope you have your floaties. The BS is about to get really deep.
A good part of the problem is definitional. The Harvard report claims to measure the extent to which medical costs are “the cause” of bankruptcies. In reality its survey asked if these costs were “a reason” — potentially one of many — for such bankruptcies.
Beyond those who gave medical costs as “a reason”, the Harvard research chose to add in any bankruptcy filers who had at least $1,000 in unreimbursed medical expenses in the previous two years. Given deductibles and copays, that’s a heck of a lot of people.
If our gamble with taking two houses in two states had bankrupted us, we would have counted as being bankrupted by medical expenses, as the out-of-pocket costs of my daughter’s complicated birth were nearly $2500 and we’ve also paid over $1000 over the last few years to cover my wife’s periodic MRI’s. That’s with the good insurance that generally comes with academia, incidentally. We’ve had some big expenses.
Moreover, Harvard’s definition of “medical” expense includes situations that aren’t necessarily medical in common parlance, e.g., a gambling problem, or the death of a family member. If your main wage-earning spouse gets hits by a bus and dies, and you have to file, that’s included as a “medical bankruptcy.”
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A last problem was sampling: The Harvard researchers surveyed bankruptcy filers in five federal districts accounting for 14 percent of bankruptcies nationally; projecting this to the other 86 percent is sketchy.
The lead author is — in a strange coincidence — the co-founder of a group campaigning for socialized medicine.
This really looks like garbage. This looks like someone ran the data, found it didn’t produce the number they wanted and massaged the results until it did.
I’m well aware — as the article notes — that healthcare expenses can be financially crippling for the uninsured. My mom is digging into her savings to take care of my uninsured sister. But when you include gambling problems and deaths as “health events”, that’s not exactly ringing the bell for healthcare reform.
(I also have a severe distaste for people who speak of bankruptcy as though it were a suffering on par with cancer. The thought of bankruptcy terrifies me — and our job/house situation would have me close if I didn’t have savings and relatives. But I ever, God forbid, get seriously ill and the doctors save my life at the cost of bankruptcy, I won’t be screaming for reform. I’ll be counting my blessings that I live in a country which such great healthcare.)
The dissection of the Harvard study doesn’t surprise me at all. A while back, McArdle noted a study which claimed:
According to Zhu, having a serious medical condition makes you 50% more likely to file for bankruptcy, but not because of medical bills; medical bills are only a very small percentage of the overall debt of bankrupts, and are not significantly correlated with higher credit card debt, which one would expect if people were keeping down their medical bills by charging them to Visa. Presumably it’s the income effect of disability or caretaking responsibilities.
Job loss may precipitate bankruptcy, but bankrupts don’t report being laid off at a significantly higher rate than the control group. The difference is, the control group had savings to cover its financial emergency.
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It’s also worth noting that it’s harder to save on $25,000 a year than $75,000, and bankrupts as a group tend to be poorer, which means they have little shield from adverse events. On the other hand, the bankrupts were consuming at levels comparable to the wealthy controls. Spending as much money as those who are much richer than you is pretty much definitionally a recipe for disaster.
In other words, a health event — like a job loss or death — puts a strain on the finances. If you’ve been responsible, the strain won’t break you. But if you haven’t been (or can’t because you earn too little), it might.
Again, I’m not saying the healthcare system is perfect. One of the reforms I would like to see is to make it easier for people to buy cheap insurance (or HSA’s), which will have big deductibles but provide coverage in case of a healthcare catastrophe. Breaking down the laws that forbid people from shopping for insurance in other states would help that. But Obama — and most of the Congress — are opposed.
Healthcare Myths: II. This Place Stinks
Here is the second post in my series debunking healthcare myths. I’ve put it below the fold because it’s really long. I’ll also, at some point, put up some addenda my dad came up with to the first post.
Healthcare Myths: I. The Cost Shift
This is part of a series of posts I’m writing, partially here and partially at Right-Thinking, busting Left wing myths about healthcare reform.
Before we start, a caveat. I am not a professional policy wonk nor a consumer advocate. Doubtless there are aspects of these issues about which I am, at best, ignorant. I’m coming from the point of view of someone from a family of medical workers who was in medical management for 13 years.
I also come at it as a libertarian who is fundamentally suspicious of grand government plans for running the Universe. I believe that markets will always trump central planning, although I believe we can and should help those who can’t help themselves.
Those are my biases and faults. But I still feel more qualified to talk about this subject than Michael Moore.
I was going to put up a post addressing the “our system stinks” myth. But an announcement today made this subject more urgent.
The Myth: Medicare does a better job than the private sector in controlling healthcare costs. Over the last 35 years, Medicare costs have grown 1-2% more slowly than private care costs.
Bad Policy Based On The Myth: Barack Obama wants to expand Medicare coverage to millions more Americans, including making it optional for anyone over 55 (which means, in the contest between private and “free” health insurance, it will be effectively mandatory). Obama is further proposing a “down payment” on health care reform financed by reducing provider fees that Medicare provides.
The Reality: It’s notable that no one who promulgates this myth can tell you precisely how Medicare controls costs. It’s not managed care and it’s not cost-benefit analysis. So what is it?
First off, the very idea that the government is better than the private sector at controlling costs should fail the smell test. In addition to the known and demonstrated inefficiency of government, there’s the demographic reality. Medicare covers the old and the disabled, who incur a huge fraction of medical care costs and are the most rapidly growing demographic in the nation. It would make little sense for those costs to be rising more slowly than the general population.
So how do I explain the above figures?
Imagine, if you will, that Obama gave a speech on the spiraling cost of education (federal spending doubled in the last Administration and the stimulus doubles it again). But, he claims, he has a solution. We will freeze teacher salaries … for the next 30 years.
You can imagine the uproar. And you can imagine the effect. All the good people would leave teaching and, eventually, your math teacher would be the guy who couldn’t get a job at 7/11.
But this precisely what Medicare has done. They have essentially frozen provider fees. The fee schedule has been frozen, slashed and reconfigured so dramatically that many procedures pay no more than they did a generation ago. In essence, every time a doctor or hospital treats a Medicare patient, they lose money.
Providers have only been able to make ends meet by (1) increasing volume; i.e. providing more healthcare than strictly necessary; (2) cost-shifting; i.e, charging non-Medicare patients more (which is why private insurance spending outpaces Medicare); (3) gaming the system.
The last is particularly noteworthy. By discharging patients before they are fully healed, then re-admitting them for later procedures, doctors and hospitals can make up the revenue loss. Obama’s proposal is supposed to crack down on this practice. But providers wouldn’t be engaging in the practice in the first place if they didn’t have to. Contrary to popular belief, health care providers are not, generally speaking, unethical.
Concrete example? Breast cancer. It is possible, in this country and this country alone, to biopsy a lump in a woman’s breast, have it evaluated the lab and, if necessary, do a mastectomy in one surgical setting. For years, Medicare refused to pay for the biopsy, arguing that since you removed the entire breast, they shouldn’t pay you for removing a small part of it. This encouraged doctors to do the biopsy, send the patient home and then later do the mastectomy, with concordant increased risk to the patient. I fought a battle against Medicare for years on this subject. They changed it after I left medical management.
If (and it’s a big if) Medicare closes off the system gaming, that will leave volume. But providers are near their limit and Congress restricts volume.
So that leaves us with cost-shifting. Doctors simply raise the fees on non-Medicare patients to keep their practices going. So if it costs $100 to do a procedure and Medicare only reimburse $75, you bill your non-Medicare patients $125.
This is Medicare as a pyramid scheme — even beyond the payroll tax pyramid. Providers raise medical fees on young people so the government can finance the care of old people.
But like all pyramid schemes, it collapses if you run out of suckers. And the current proposals dramatically increase the pressure on the sucker pool. Every patient going into the Medicare system increases the costs of those not in the system.
And of course, if, as many Democrats want, we shift the entire population to something like Medicare, there’s no one left to cost-shift to. All the options for making up Medicare fees are lost. Doctors will make dramatically less money and, pretty soon, your doctor will be, at best, a medical student hoping to get his education in the United States before practing somewhere — like wherever our politicans get their care — that pays a decent wage.
Medicare is not the model we want to build a healthcare system on. I can outline numerous problems but this is the biggest and the most relevant. The proposals to expand Medicare — and shrink payments to providers — are merely going to hasten the toppling of the pyramid.
And we’re all in the shadow of this one.
Medco Healthco
Just to show that stupid ideas about healthcare come from the private sector too, the head of Medco wants cookbook medicine for everyone:
Dave Snow, CEO of the big pharmacy-benefits manager Medco, is making the rounds to tout his ideas on health reform, the topic of the day with Barack Obama about to take to oath of office. Snow stopped by Health Blog HQ and told us he likes an idea that HHS nominee Tom Daschle has been kicking around: a Federal Reserve for the health-care system.
Snow said the time has come for doctors to follow set protocols on how to treat patients, and to be paid based on whether they do it. Basically, ‘If X, then do Y,’ and ‘If Y, then do Z,’ sort of stuff. Snow concedes the public doesn’t trust the private sector to come up with these kinds of rules.
As opposed to how we trust our government.
So he wants some smart folks to get together in an “apolitical” body like the Fed, and do it themselves.
Apolitical? Apolitical? In Washington? And I thought I was naive. I wonder if this apolitical body will be throwing lots of money at Medco.
What is it about certain people that they think of government as some sort of benign, objective, infinitely fair entity? Does no one appreciate that when buying and selling are controlled by politics, the first things to be bought and sold are politicians? Does no one appreciate that even when our overlords’ intention are benign, they can still get it wrong?
I mean, really. Saying healthcare should be run like the Federal Reserve Board? Has this idiot not been paying attention to the mortgage collapse?! Did he miss the double-digit inflation of the 70’s? What the hell?
“I’m fine with this big, national board creating this standard,” Snow says.
Well, I’m not. Snow is buying into the biggest misconception kicking around healthcare reform circles — that doctors diagnose patients by taking symptoms, looking them in a great big book and giving a prescribed course of medicine.
But as I’ve noted about a million times, symptoms are not always clear. And a course of medicine can not be set in stone. Some patients tolerate certain courses of treatment better than others. But Dave Snow — and many politicians — apparently think that course of treatment are best prescribed out of a Washington office in a one-size-fits-all fashion. So you can look forward to uniform treatment. Also more complications, more needless deaths, more “medical errors”, more expense and less freedom.
Jesus, is this the quality of CEO we have these days? No wonder our economy is collapsing.
Of course, with his background, arrogance and ignorance, he’ll be the perfect person to be tapped for a health care reform committee to show Obama’s support in private industry. The press will laud his appointment as showing “bipartisanship” and “listening to every voice” (except that of the doctors and patients). Apparently, having industry insiders set public policy is good when it’s liberal public policy.
And everyone will miss that he’s dumber than a bag of hammers.
Actually, I don’t think he’s dumb. I think he’s scum. Critics of the free market never seem to grasp that big business hates the free market. Dave Snow does not want doctors making their own decisions and deciding to prescribe cheap medication or no medications to their patients. Under the guise of “reform”, he wants to politicize every diagnosis in America so that a medical company — his medical company — can make sure that the money flows their way.
Alarming Stat Of the Day
I turn 37 in May. That’s older than the average male life span in Zimbabwe these days.
Christ, was has Mugabe done to that country?
Monday Night Linkorama
Tooting My Own Horn
Everyone is debating the appropriateness of Sanjay Gupta as Surgeon General and his spat with Michael Moore is in the headlines. I defended Gupta over at Moorewatch, but he was debating minutia with Michael Moore rather than going after the bigger lie, which was claiming that healthcare in Cuba was as good as that in the US.
Over at Moorewatch, I wrote a long post using Moore’s own data to show that this was garbage. The number he used was a “bang for buck” number which ranked the US and Cuba nearly equal because Cuba’s horrid healthcare is cheap and our good healthcare is very expensive. In terms of healthcare quality, we ranked #1 in the WHO survey while Cuba ranked #115.