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Archives for Health Care

The Primary Care Conundrum


Ask any health care wonk and they’ll tell you that within the larger health care crisis is a primary care crisis. There is more and more demand for primary care physicians – the person you probably call your “family doctor” – but America’s medical schools are producing fewer of them.

Why? Well in a word, money.

It’s not actually medical school that’s the problem. It’s what happens next. A newly graduated physician, carrying a big chunk of debt used to pay for medical school tuition, gets to chose their residency and, as such, decides what type of doctor to become.

In the U.S. we let medical students choose what to do. Not being dummies, most of them notice that diagnostic radiologists and orthopedic surgeons make three times what primary care doctors make, and choose their career path accordingly. Why the vast difference in compensation? Doing something to a patient – fixing a broken hip, reading an x-ray – has always been better rewarded more than talking to them about their high blood pressure or their son’s excema.

And while the taxpayer has subsidised teaching hospital residency slots to the tune of a more than $100 billion over the last two decades, the government doesn’t limit the number of those slots by specialty type. Most sensible countries do because they know that the more specialists there are the more specialty care gets done. And specialty care is very expensive. Which is the main reason we spend so much more on health care here than in other countries. In 1965, primary care doctors made up 50 percent of physcians; the other half were specialists. Today, about 70 per cent of America’s doctors have become specialists. Most other countries have the reverse ratio.

There were two major attempts to redress the imbalance in the 1990s. First, managed care plans like HMOs started paying primary care physicians a global fee to provide all care to their patients. In some cases this meant that primary care groups started acting as general contractors and ended up reducing the specialty and hospital care their patients received — and keeping more money into the bargain. In some markets, notably southern California, specialists saw their incomes drop dramatically. Politically this resulted in the ‘managed care backlash’. Patients and specialists complained, politicians and judges threatened, and insurers and employers who were paying for the HMOs backed off. Worse the insurers started cutting payments to the primary care groups and many doctors ended up bankrupt — having taken on insurance-type risks that they couldn’t manage: getting paid to treat a group with a range of illnesses and problems and incomes rather than one or two not-so-sick people with fat wallets.

The other attempt to improve the lot of the primary care doctor was the introduction of a physician payment scheme by Medicare called the Resource-based Relative Value Scale (RBRVS). The name underlined the intention. Payments to doctors were meant to be based on the relative value of resources used. So a unit of time spent managing patients and talking to them about exercise for high blood pressure, for instance, would be close in value to a unit of time cutting them open.

Unfortunately, America’s specialty societies hijacked the process and they now control the somewhat secretive RBRVS Update Committee, which advises Medicare on those payments. So specialty care and procedures remain much much better rewarded than primary care. In the nearly three decades after this problem was first recognized, it’s becoming harder and harder to find primary care doctors. It’s going to get worse; last year the number of medical students opting for primary care fell to an all time low.

So what’s the likely outcome? Medicare clearly will take a hack at redressing the imbalance in payments as part of whatever reform happens in 2009. But unless the specialists and the hospitals that live in symbiosis with them are ready to significantly and voluntarily cut their incomes and reallocate that money to primary care, there will not be enough money for primary care to solve the current shortfall. And the U.S. is not seriously going to tackle – let along address – this problem as a matter of public policy until the whole system breaks so severely that more people demand massive reform. Such a time is still at least a decade or so away.

In the meantime, the market will have a go at addressing the primary care shortage. but it won’t do it in ways that primary care doctors will like. You’ll continue to see an expansion in nurse practitioners in retail clinics in supermarkets and drugstores. And more and more people will become frustrated by the lack of availability of primary care docs in their neighborhood and will go online where they’ll find plenty of entrepreneurial companies offering Internet consults. Of course if an online consult is good enough – and it probably is in many if not most cases – why does that doctor need to be in the same town, or even the same country? Or if it’s a diagnosis that requires extensive medical knowledge, why can’t a computer do it as well? Why not indeed? You’ll see all this happening in the next few years as well.

In fact, the result of the primary care crisis may not be inspired reform. it may instead just end up causing globalization and technology outsourcing to come into physicians’ lives. Just like it has to auto workers, steel workers and call center clerks.

Posted by Matt Holt at 5:42 AM | Permalink

The Two Ted Kennedys


Well, lookee there: Congressional Democrats actually won one. That’s right. After 14 years of ignoring core liberal principles – including the last 18 months when they actually had a majority – they took on the Republicans and won.

How did this happen? Well, it’s an election year, and by forcing an issue that Congress has been putting off for years–automatic cuts in Medicare physician payments–Democrats seized the chance to score a few points.

Essentially, the Democrats decided that, instead of agreeing to another fudged compromise to put off the decision to cut payments, they’d set the insurers against the doctors. So they found the money to put off those automatic cuts by taking some away from private Medicare insurers. Now, it was a bit of a surprise that so many House Republicans joined them and drop-kicked the insurers with whom they’ve been aligned for so long, although of course they’re all up for re-election. But once there was a veto-proof majority in the House, the Senate Democrats realized that they could force the issue and score a political win.

First time ’round on the roll-call vote, not enough Senate Republicans voted with the Democrats to create a veto-proof majority. But the Democrats hung tough and sent the Republicans home to the 4th of July festivities as the party that wanted to cut doctors’ fees so rich insurance companies could stay just that.

When the Senate returned seven Republicans, including three up for-re-election this November, caved. And to call attention to the issue, Sen. Ted Kennedy, back from brain tumor surgery, made a dramatic entry on to the Senate floor, where he cast the filibuster-overriding vote. The cuts in Medicare physician payments were suspended and the money will instead to be taken from private Medicare insurers.

The New York Times’ Paul Krugman speculates that this – as well as the expected Congressional over-ride of President Bush’s veto – means that the Democrats have found their spines and may get enough Republicans on their side to pass Obama’s full health care program, should he become President.

But there’s a little problem here, and it’s not Ted Kennedy the Senator, it’s Ted Kennedy the patient.

Kennedy’s illness sparked a lot of vitriolic discussion about whether he would have received emergency surgery if he’d lived in Canada. He didn’t even stay home in Boston, home of five major teaching hospitals, but went to a super-specialist at Duke University in North Carolina. And while rich politicians in any nation will always get the medical care they desire, there is an honest discussion to be had about whether it is appropriate for society to be paying for the type of care Kennedy received.

That conversation often gets railroaded by the crowd who say that health care by government means rationing. Now in fact that’s a laughable accusation in the U.S. as the taxpayer, via Medicare, pays for just about any new treatment that the medical care system can dream up. That’s a major reason why we spend so much on health care in the U.S. But it is unquestionably true that other countries spend less on health care in part because they do fewer more aggressive procedures, including fewer more aggressive procedures on very ill elderly people. Like Kennedy.

This generates two arguments. The first is very controversial. How much is it worth spending to keep an elderly and very sick person alive for a few more months? After all resources spent on the elderly and ill are then not available for other needs. This isn’t just theoretical. Right now we spend $100,000 on a cancer drug that may extend life for three months, when there’s no pre-natal care program for 15% of America’s pregnant women

The second argument is less well known. The types and amount of treatment all patients receive, including the very, very sick, vary tremendously in different parts of the country. More importantly, perhaps, the data is pretty clear that less care results in better outcomes. So potentially we could provide all the effective medical care that’s needed while providing less actual care.

Regardless of your reasoning, providing less care means spending less money. This could and should be good for society overall and may improve health. But it also means that the debate about how to treat patients like Ted Kennedy–and those even older and sicker–and also the debate about what the appropriate level of care is for everyone, translates into an argument about putting less money into the system overall.

Any wonk knows that we need to deal with the problem of un-contained and unjustifiable health care spending growth. But every rational politician knows that significant cuts to the Medicare budget will cause a vigorous reaction from those currently receiving money for providing that “unjustifiable” care. And when that someone is a doctor or a hospital, it’s easy for them to rally support for their cause, as the Republicans found out this week.

Eventually we’ll have to do something about how we agree to finance, and provide, care to the next generation of Ted Kennedys. By then there may not be some greedy evil insurers to play off against the good guys. Instead there’ll be a massive change in what and how Medicare pays the health care system. And then the real hardball will begin.

Posted by Matt Holt at 5:00 AM | Permalink

An Expert Dilemma


I want to ask your help. I have to make a financial decision regarding my health insurance and given the confusion of the system – one I’m supposedly expert in – I need advice.

Now realistically you’re not likely to be much good to me. Why do I say this? Well, the data says you’re dummies.

Last week Trizetto, a private tech company, put out a survey that said as much. While 80% of consumers surveyed were concerned about health care costs, less than a third knew how much their family spent.

It gets worse. Around 60% of Americans, including the vast majority of those under 65, get their insurance from their employer. How much are employers paying each year? Well according to Joe Public, not that much. Most don’t know or think it’s less than $5,000 per family. In reality it’s around $9,000.

But I’m not one of the blissfully ignorant who gets his insurance at the company trough. Well, not quite. And hence my cry for help.

As a solo consultant I buy my insurance in the gong-show that is the individual insurance market. It’s an convoluted process in which you attempt to persuade an insurance company that you are healthy and worthy of their lowest premium rate. About four years ago I succeeded in this endeavor and Healthnet issued me a high deductible policy at the low price of $99 a month. I’m paying nearly $200 a month now because of premium increases, but that’s still way less than I would have paid if HealthNet had decided that I wasn’t a good risk.

Now California, where I live, doesn’t do much to protect individuals entering the insurance market but once you’ve bought an individual policy, the insurer can only increase the rates with everyone in your age group. But if you let the policy lapse and then try to buy another — usually because you went back into the corporate world and then left again — they’ll re-examine your medical history. If anything has gone wrong – surgery, illness, funny blood work – you might see your rates increase by a factor of 4 or 5. More likely, you won’t get insurance at all.

That’s not currently my problem. This is: I got married.

My wife has a job and health care benefits. She put me on her company plan for an extra $50 a month.

This year my individual premium is heading to $250 a month. Now most of you are saying, why is he continuing to pay $250 a month when his wife is paying $50 to cover him on her plan? The obvious thing is to cancel my HealthNet plan.

But what happens if my wife comes to her senses and stops being my wife? If that happens I’d be better off keeping my plan at $3,000 a year because if I have to buy insurance again in a year or two, and they decide I’m not a good risk, it might cost me $12,000 a year!

It gets more complicated. If my wife stops working, we could buy into her company’s plan under something called COBRA for another three years. But if we decide not to do that we might have to re-apply in in the individual market as a family which means being underwritten again – and running the risk of being a bad risk. So, perhaps we wouldn’t be able to buy insurance, and we’d both be in deep trouble!

And like the rest of the dummies in the survey I don’t know how much my wife’s employer plan actually costs. When you pay for COBRA you pay the whole fee: the employer does not chip in. So I need to find out, and work out the possible future costs. And if you figure into that the relative chance of my not being married and therefore not being able to buy into my wife’s plan my $3,000 in “extra” insurance starts to make a kind of odd sense.

But this all begs a question: Why? The current health insurance system has so many complex wrinkles that an alleged expert (me!) is not sure what to do. There aren’t any good choices, and the decision analysis requires PhD-level economic forecasting. Which makes Republican nominee John McCain’s plan to force these decisions on more people, by giving tax incentives for people to drop their employer’s plan, a mite puzzling.

If this keeps going long enough, the political revolt may create a stable universal insurance plan that will cover me. OK now I’m really kidding.

So can someone tell this dummy what to do?

Posted by Matt Holt at 9:36 AM | Permalink

Obama’s Rx for Change


Clinton has quit, Obama has three times McCain’s resources, and the country is fed up with the Republicans’ war, corruption and toadying to corporations. Democrats have won three “safe” Republican house seats in recent months. It’s their election to lose, and assuming that the fences between rivals really are mended, it might be a landslide.

I’ve written previously that I don’t think Obama is serious about pursuing health care reform. But this week in at a Health Care Town Hall held immediately after he clinched the nomination, he repeated that by the end of his first term, there would be universal healthcare.

In an Obama administration, we’ll lower premiums by up to $2,500 for a typical family per year. And we’ll do it by ….covering every single American and making sure that they can take their health care with them if they lose their job…..We’ll do it by the end of my first term as President of the United States……

Coming from someone who had relatively little to say about health care until goaded into it by former rivals John Edwards and Hillary Clinton this counts as a turning up of the rhetoric. So let’s imagine that there is a solid Democratic majority in the House and Senate with a strong Democratic President.

What type of health care reform might actually pass into law?

Obama’s proposed plan is complicated so the plan’s trip through Congress will be tortuous. And some details are still not aligned. Although Obama says most employers would have to provide insurance, he doesn’t mandate that individuals to buy insurance. But then he says we’d get to universal coverage by having people buy insurance, rather than having the government provide it for free.

The Obama theory is that if insurance becomes cheaper, more people will buy it, and those that truly can’t afford it will be subsidized. But that’s not realistic. Ten percent of people account for more than 50 percent of health care costs and the current game in insurance is to avoid covering that 10 percent.

It looks fairly inevitable that the worst excesses of current insurance practices – avoiding people with chronic conditions – will be banned. But the next step, which is spreading that uneven cost of health care across wider populations, means healthy folks who are not paying their “fair share” will have to pay more. That’s necessary if those paying the most – or in reality, currently unable to get insurance – get to pay less. And those who will have to pay more will likely outnumber those getting a better deal right now. So the Obama plan will look like a cost increase to many. This has largely been the experience in the new Massachusetts “universal insurance” plan.

Obama’s way around this is to have the U.S. government subsidize some of the most expensive cases. That’s the source of his $2,500 a family savings. He’ll also allow people to buy into an equivalent of the Medicare system. Both of these safeguard proposals mean big increases in government subsidies that will require more taxes. But this is all likely to be proposed during a recession. The Federal budget is already heading for another record deficit. Add in the opposition from much of the health insurance industry to these reforms (as they will put some of its members out of business), and you can see how hard this will be to pass Congress.

There is one place Obama can go for the money to pay for his plans. The Medicare program continues to run more or less as it did in the 1960s, incenting doctors and hospitals to provide more and more services, at a total cost of some $460 billion in 2008. Remember that Obama says he needs less than $100 billion to cover everybody.

For the past two decades Medicare “reform” has meant paying private plans to take on more of the Medicare population. But more than 80% of Medicare recipients are still in the traditional program, and worse, it’s turned out that it costs Medicare more overall to send a senior into a private plan. So serious reforms of the mainstream Medicare program are going to be necessary.

Any such reforms will have winners and losers. Losers will presumably be those making money providing “too much” acute care now. You can imagine the ability of those “loser” hospitals and doctors to rally political support. So although there be reallocation of funds within Medicare and for the rest of Obama’s plan to work there’ll need also to be an overall reduction in Medicare spending to help pay for the expansion of subsidies to cover more of the uninsured.

So my quick forecast, regardless of who wins in November: We’ll see cuts in Medicare as part of a series of necessary and positive changes in how we pay for health care services. If Obama wins, we’ll also see greater regulation of insurers to prevent the bad behavior we’ve seen in the last few years.

Whether we’ll see real efforts to “cover every single American” is much less likely.

Posted by Matt Holt at 8:22 AM | Permalink

Half a Plan Isn’t Half a Loaf


Given that he’s the presumptive Republican nominee, it’s time to look at what would happen if Sen. John McCain won the election and the Republicans took Congress and they passed the plan that he’s proposed. Of course, the good news is that what I’m about to describe is purely theoretical. As we stand this fall, Democrats should win back the White House and will pick up enough Senate and House seats to prevent any GOP-backed proposals making it into law.

Nevertheless, this contemplation is spurred on by my recent visit with the Washington Policy Institute, a right wing think-tank in rainy Seattle, not cherry-blossom filled D.C. where McCain’s proposal got serious attention.

His basic idea is to phase out the tax exemption for employer-based health care and replace it with an individual tax credit of $2,500 per individual and $5,000 per family, to buy insurance. In addition, state laws governing health insurance would be overridden – so low cost plans from one state could be sold in another.

The result of this would be that many – if not most employers – would get out of the business of providing health benefits, and people would take the tax credit to the individual insurance market. Where many, if not most, would buy high deductible individual plans. The problem is that these plans don’t insure people who are sick, ever have been sick or know anyone who may ever be sick, and make very big profits by doing so. I’ve ranted about one company, Mega Life and Health which sells dodgy plans to individuals, and has what’s known as a “medical loss ratio” that’s woefully low – around 30% – so only $3 in $10 paid in premiums gets spent on actual care. Another little known segment of the insurance marketplace, plans for college students, have just been exposed in BusinessWeek as having a medical loss ratios as low as 10%! But honestly, this isn’t all that unusual: the idea of keeping costs low by excluding sick people is what makes the insurance market a profitable business.

McCain has advisors who understand this. One, Galen Institute’s Grace-Marie Turner thinks giving sick people access to a combination of subsidies and government provided health plans of last resort can solve this problem. The idea is to help plans take on risker clients – by giving the consumer more money so the plan can charge them a little more – and then having states sponsor plans for those who fall between the cracks.

That may pass the theoretical smell test but in real life we’re talking about increasing taxes on the average to pay specifically for targeted groups that are likely to be poor, sick and expensive. As Sick author Jon Cohn often says, programs for poor people get treated poorly. If rich and poor are not in programs together – Social Security is the leading example – it’s easy for them to be ignored and de-funded. That’s happened with some states’ children’s insurance plans, and existing state-based high risk health insurance pools like those Turner proposes supporting.

The real solution, she says, is a new Federal program with more Federal dollars for people in high-risk groups, channeled through the state plans. The Libertarian sitting next to me called this yet another complicated government program. But the real issue is that it wouldn’t survive long. As soon as state budgets get tight, support for insurance for those on the margins will be cut, and the sickies will be left on the shelf. And since the employer-based market will be decaying even faster – it wouldn’t be tax exempt, remember – there’ll be more sick folks with no insurance.

The problem underlying all of these plans is that the care of sick people costs money. And somehow we have to redistribute money to pay for it. Simply suggesting that it ought to happen isn’t going to make it happen, no matter whether there’s an R or D after the politician’s name. Particularly if there isn’t a real, high demand for a solution. And I don’t think we’re seeing enough of that demand for Congress to come up with a plan that’s more than just window dressing.

So we’re going to spend the next few months going through the exercise of talking about health care reform. But it’s after all the talk, nothing’s going to happen. Which in the case of the McCain program is a good thing. His halfway solution is worse than no change.

Posted by Matt Holt at 3:39 AM | Permalink

Ghost in the Attack Machine


It’s almost full-on election season so I’m getting email from the Republican National Committee suggesting that there are problems with both the Sen. Hillary Clinton and Barrack Obama plans for health reform. Funny that – given my politics – but it gets better.

The RNC thoughtfully sent along a copy of a Wall Street Journal op-ed featuring an appearance by that blast from the health reform past, Betsy McCaughey who these days hangs her hat at the ultra-right wing Hudson Institute. In the 1990′s she was a brief star of the new right after writing, in early 1994, a magazine article in the then-quasi-liberal magazine The New Republic. Called No Exit, it contained a damning account of the Clinton Health Plan and got a fair amount of attention at the time. No Exit was a fair load of old tosh (you really keen health policy archaeologists can unearth the Clinton White House’s full rebuttal to see what I mean). The article’s impact on the demise of the Clinton health plan, which was already in substantial trouble by the time it came out, was in fact greatly overstated, not in the least by McCaughey herself.

Nonetheles, she somewhat improbably rode that wave to the New York Lieutenant Governor’s office under George Pataki, and to marriage to a multi-millionaire. Her relationship with Pataki, the millionaire and, some say, reality all fell apart in quick sequence. But now that health care politics are back so is she.

So what does she say in her new attack piece?

Well more of the same that’s been emanating from similar quarters, and has been smeared all over the WSJ op-ed pages for years. For example here’s McCaughey on:

The growing number of uninsured? The fault of those damn illegal immigrants! McCaughey seems to think there are reams of cancer patients swimming across the Rio Grande, even if a peer reviewed article in Health Affairs this very week shows that the increase in uninsurance has little to do with immigration and much to do with the decrease in insurance provided by employers.

Uninsured children? The fault of their parents who are too dumb, stupid or poor to sign them up for the wealth of public programs just desperate to enroll them. Not mentioned? Several states dis-enrolled “eligible” children from their programs in the last recession. And isn’t it funny that every other country seems to have much cleverer parents when it comes to ensuring their children have health coverage?

Mandates for universal coverage as Clinton’s current plan would impose? An unfair tax on cheap young people who are forced to transfer wealth to rich old people.

Health information technology – a part of Obama’s proposed plan? A pox on the super-efficient medical delivery system.

Regulation of the “politically unpopular” insurance industry? A sure path to collectivist Bolshevism!

In the bizzarro world of Betsy McCaughey and the far right, there are no problems with the American health care system and if there are, that’s entirely because of the system’s socialized nature. And they’ll insist that their version of reform is all about bringing market forces to health care. But that’s just not true.

There’s a basic mathematical concept at work here that just seems to escape these people. Care of a few people costs a lot of money. Somehow we have to figure out how to cross-subsidize the expensive care of those who are ill.

But logic and mathematics aren’t part of McCaughey’s argument. This type of attack is really about is stopping any real health care reform. Why? There are plenty of players in the current health care system who make a very nice living today and do not want to change that. They include insurers, pharmaceutical and device companies, most hospitals, many doctors and virtually anyone involved in the current system. The long-term logical outcome of the reform in the Clinton and Obama plans reduces the over-use of devices, drugs, procedures, and services that’s rampant in the current system. The plans also halt the games insurers play to boost profits.

So when you see these attack pieces – and you’re going to see a lot more – remember what this is about. It’s about maintaing the the appalling status quo in American health care today. And Betsy is no doubt ready for the next round.

Posted by Matt Holt at 1:17 AM | Permalink

Last of the Old Solutions?


This week, with lots of hoopla, California sort of passed a health reform bill. In the tangled world of California politics, that means less than you might think. For a start, it passed the state Assembly as a result of a deal between the speaker Democrat Fabian Nunez and Republican Governor Arnold Schwarzenegger. But it didn’t get a single Republican vote.

Senate president Don Perata, a Democrat, has essentially said the legislation is dead on arrival in that chamber. And the thorny issue of whether the bill’s employer mandate – provide insurance or pay an alternative payroll tax – requires a 2/3 majority approval. This being California, the whole thing has to go to the voters in November.

Even assuming that this proposal becomes law, it’s not clear that what’s been approved gets California very far. If the goal is universal coverage, the pay-or-play system in which employers have to offer coverage sounds good – as well as familiar – but it doesn’t really get us there. Hawaii passed something similar in the 1970s and several other states have tried some variant and still no one’s really got close to universal coverage.

Why? The nature of American economy means that most low-wage employers can’t afford to provide decent health insurance benefits, and – surprise, surprise – their employees are the very people who can’t afford to buy the health insurance. To really make the system work – and insure those who can’t afford it – subsidies are needed. So really California, like Hawaii, is depending on employers to do the right thing and for the taxpayer to magically produce subsidies to allow the working poor to buy into the health care system. But in the end, programs for the poor are treated poorly, and those promised subsidies may not amount to much.

Which brings us to California’s other problem: it’s massive budget deficit. There may be an agreement on health care but there’s also a housing slump and no Google public offering to boost tax revenues–providing Perata with his mortality report. Deficits tend to mean cuts in programs like Medicaid for the poor.

And the California proposal doesn’t hold down the costs of care which, in theory, could benefit those normally in opposition. In fact, once the covers are really pulled back many private health plans and providers will probably benefit from this deal. They’ll get more business from those who aren’t hugely wealthy but who are well enough to have jobs where the cost of care can be covered. The health plans and some of the unions have been salivating over something similar at the national level.

But that doesn’t mean everyone, let alone everyone in the health care industry, will accept the proposal the California Assembly has approved. An odd coalition of the single-payer advocates at the California Nurses Association and the mercantilist capitalists at Wellpoint, the big for-profit insurer, look like they’re the major opposition. Stir in some small business angst (which is what happened with the similar Proposition 72 which appeared on the ballot in 2004) and the chances of this new bill getting anywhere in November are not as great as some might believe.

This is all a pity. California (and the nation) needs serious health care reform which puts everyone in a genuine single pool. Of course how that’s structured is matter for serious debate amongst policy wonks. But no one realistically can expect to get to universal coverage, and use its associated levers for cost control, by glomming more people and tax dollars onto the employer-based system that’s the root cause of all our trouble. It’s a system that lets those who often need coverage the most run up the largest bills while providing those who need coverage the least with expensive, sometimes lavish, care.

The majority of people and the vast majority of voters are still experiencing and preferring the devil they know – getting health care from their employer and having no idea what it costs – to any kind of serious change. Politicians are loathe to mess too much with that system because of its familiarity. That’s why the Century Foundation’s Maggie Mahar now agrees with me: We can’t realistically have major reform soon, and it’s also why most of the Democratic presidential candidates are trying to build off the employment-based health care system we currently have.

My guess is that all the rhetoric and premature celebrating in Sacramento this week will one day be remembered as the last of the failed efforts to try it the “old way”, changing a failing system at the margins, instead of enacting true reform. In a few years we’ll be forced into really totally restructuring health insurance. But between now and then, we’re in for a whole lot of continued pain.

Posted by Matt Holt at 5:50 AM | Permalink

President Obama’s Health Care Head-Fake


It’s a perplexing time to be a liberal. A Martian arriving on earth, having seen the Republicans pandering hard to their base in the primaries would assume the Democratic base would be rallying behind the candidate who held the correct positions in 2004, and be apologizing for ignoring him last time.

Sadly, Rep. Dennis Kucinich – despite the addition of an unfeasibly hot young wife – is still stuck in the low single digits. Meanwhile, John Edwards, has changed his tune and gone to the populist left, repudiating his 2002 pro-war vote and suggested a health care plan that has some elements moving towards single payer. Something that around 30% of the country and there a majority of the Democratic base say they want. And front-runner Sen. Hillary Clinton is still playing to the undecided voters of 2004 election by trying to be tough on Iraq, Iran and terrorists.

But the candidate who’d really confuse the Martian is the one who has the advantage of being fresh, looking different and not being in the Senate when that war vote was taken. While Sen. Barack Obama was correctly (like Kucinich) opposed to invading Iraq, until recently he hasn’t really pressed that advantage over Clinton. Now, Obama has a health care plan, and his defense of it makes him sound more like a liberal Republican than a Democrat.

As I said, it’s now very perplexing to be a liberal.

First let’s consider the obvious: There are only two rational ways to provide universal health coverage. Have the government do it (Canadians, Brits or Americans over the age of 65), or create a quasi-private coverage structure that essentially puts everyone in the same regulated pool (Japanese, Dutch, Germans and French).

Our Martian friend would certainly note that the American system linking health insurance to employment is just daft. But since 60% of Americans get their coverage that way, it’s an easy place to start for politicians who want to pretend to fix things by tinkering at the margins. So Clinton and Edwards have come up with an “individual mandate” – a government edict that if your employer doesn’t buy you health insurance the government will tell you to do so.

You’d think that new arrival, and foreign policy lefty, Obama would be jumping all over that mandate position of Clinton’s. And he is. Just not from the side you’d think.

Instead Obama is proposing reforms that he claims will reduce the cost of insurance, make it easier to buy, and is scoffing at the ability of the government to enforce a mandate – with his proxies in the New York Times and the apparently “non-partisan” American Enterprise Institute comparing it to auto insurance which all drivers should have but 15% don’t. This has lead to much ridiculous mudslinging in the primary debates, with lots of liberals from the left of Clinton defending her to Obama’s attacks.

Like the free-marketeers at AEI, I’m glad that under President Obama’s forthcoming regime all mandates will be voluntary. I will no longer consider myself in need of having to pay tax, drive on the right side of the road, or stop drinking in bars after 2 a.m.

It seems that Obama’s advisers don’t understand the economics of health care. If you allow an industry to choose between serving everyone at an affordable price, or serving those who can afford it and have a virtually inelastic demand for that service, it’s by definition true that they’ll cherry-pick as it’s way more profitable. The only way to stop this is put everyone in the system which requires some kind of compulsion (tax or mandate with subsidies for the poor) while at the same time restraining the costs of the system. Getting to voluntary universal coverage by trying to encourage lower costs and hoping everyone will join in will not work, and even Obama’s main health care adviser admits it.

But this irrationality has got me thinking. Why is Obama trying to promote something he knows won’t work? Political strategy. He’s done a quick assessment of the 2009 landscape and realizes that health care reform won’t pass anyway. After all, job #1 for the new President will be Iraq, job #2 will be solving the likely recession created by the housing market collapse so there’ll be no political oxygen left for job #3, health care reform.

Obama has decided that he doesn’t want to set up a nasty fight with the health care industry that he thinks he’ll lose. So his plan for universal coverage isn’t a plan, it’s a head fake to get through the primaries, to be ignored once the real political fight of 2008 gets underway.


Posted by Matt Holt at 12:04 PM | Permalink

Taking Out The Trash-Talk


I’m not too worried that a Republican will actually win the White House in 2008. But I am worried that efforts by what I confidently believe will be a Democratically controlled White House to reform the U.S. health care system will founder on the free-marketeers devotion to faulty statistics, unsound analysis and, well, lying.

It’s not a new problem. But it’s one that’s increasingly difficult to combat.

Want a good example of the high-minded nature of the debate? A few weeks ago, Republican presidential hopeful Rudy Giuliani started running commercials in New Hampshire claiming that British men who got prostate cancer were, metaphorically, being summarily shot by firing squads. The low survival rate of those Brits was proof that the evil that is socialized medicine – if brought to these fair shores by careless Democrats – would mean an equivalent end for us.

Now, Giuliani been roundly criticized for his data manipulation. Even the British government got involved this time, explaining that the data he was using was wrong. But the Canadian free-marketeer advising Giuliani – the guy who supplied the soundbite statistics, David Gratzer – is bravely not backing down!

Clearly, we haven’t heard the last of this sort of garbage.

Another example? While the Giuliani Data Debate was being waged, the Wall Street Journal ran perhaps the biggest piece of intellectual rubbish seen in some time based on a study by economist Benjamin Zycher who, like David Gratzer, also hangs his hat at the conservative Manhattan Institute.

The claim the WSJ advanced is that single payer health care (i.e. where the government pays all the bills as with Medicare or in Canada) would be more expensive overall than the current system.

Now of course there’s the actual evidence from both other countries and the recent reports from The Lewin Group (pdf) that show that single payer health care would be cheaper. You might note that Lewin is a consulting group in business – not dipping a random toe into politics – to give unbiased advice and counsel. By contrast – and this is where the trouble starts – Zycher just throws in random irrelevancies that muddy the debate, arguing that the savings from single payer are not enough to cover the uninsured, and that a difference of $21 billion would have to be found by the taxpayer to cover everyone – despite savings from lower administrative costs.


Posted by Matt Holt at 8:29 AM | Permalink

Guiliani v. Moore: Mixedup Matchup


Being a health care pundit has long been a quiet job. No more, thanks to the attention that the nation’s ailing health care system is getting from presidential candidates. The comments, ideas, suggestions and plans are coming from all sides. But not all ideas have equal merit.
George W. Bush decided that the way to save his presidency from irrelevancy was to threaten a veto of a bipartisan extension of the Childrens Health Insurance Program (SCHIP). SCHIP was a program developed in bipartisan fashion between a Republican Congress and a Democratic President back in the halcyon 1990s. It’s been a relatively ineffective program in that there are still 8 million American kids uninsured at any one time. But, as Spot-on Christopher Brauchli said, it’s clearly better for those kids than nothing. And nothing has been the alternative offered since 2000.
The threatened veto must be driving any Republican running for election in 2008 berserk. “Republicans hate children” is shaping up to be the 2008 equivalent of 1988 “Democrats love criminals.” You’d think that on health care, as with the rest of his disastrous policies, the Republican Presidential candidates would be running away from Bush as fast as they can.
Instead we’re seeing the Republican front-runner, Rudy Giuliani, announce that the Democrats want to join Michael Moore in offering Cuban health care to Americans.
Moore indeed pointed out that access to health care for Americans who had helped at Ground Zero in 2001 was better in Cuba than they could get in the US – provided they had a TV crew with them. But whatever Giuliani wants to say, none of the major Democratic contenders wants to create any type of socialized medicine delivery system.
Hillary Clinton hasn’t announced her financing scheme yet, but it’s likely to be less aggressive than those already outlined by her fellow Senator Barrack Obama or the other Democratic hopeful John Edwards. Both of those proposals keep employer-based health insurance in the mainstream, with a wrap around system of public programs to ensure (close to) universal coverage. Both are a relatively big difference to what we have now, but neither exactly takes us on a one way trip to Havana.
So Rudy Giuliani’s rush to judgment last week was relatively amusing. He started by lumping the Canadian, UK and French systems all together – a mistake Moore also made. Policy wonks like Jonathan Cohn (and myself) have been stressing how significantly different those systems are to each other, even if all do better in terms of both covering everyone and containing costs than the American one.


Posted by Matt Holt at 10:00 AM | Permalink

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