Category Archives: Health Care

Revisiting Health Care

David Brooks wrote an excellent summary of all the reasons the recently passed health care bill is inevitably going to fail to achieve its purported goals. He highlights the need for both parties in congress to provide realistic plans for addressing the out of control cost escalation in the health care system and thus in government entitlements and budgets.

The formula for reform promoted a year and a half ago by Whole Foods CEO John Mackey is still the most reasonable approach I have seen proposed.

The early failures of the new health care policy that Brooks points out, as well as the skyrocketing cost of the similar Massachusetts health care system, should be enough for any responsible politicians to want to seriously revisit the issue in a credible manner. Unfortunately politics always trumps good policy in Washington. So it will be a couple years before anything effective is done about health care costs. Meanwhile our new law will continue to make matters worse than they were in regards to costs, government budget impacts and distorting business decisions.

For anyone paying attention, there is a general rule that can be observed in the functioning of government. The longer, more complex, more ambitious and hard to understand a law or regulation is, the more likely its unintended consequences will lead to the opposite net impacts that its sponsors purported to achieve.

It is not clear that responsible grownups will rule in Washington any time soon. But the current symbolic efforts to repeal the health care fiasco passed last year are a good sign that at least some people in Congress are starting to realize that citizens expect realistic and responsible solutions from our government.

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Filed under Economic Policy, Health Care, Politics

A Politician That Can Count

It’s refreshing to see a politician in Washington from either party that appears both able and willing to do basic arithmetic. Watch this video from the Blair House Health Care Summit.

As Investors Business Daily points out, neither President Obama or any Democrat offered any rebuttal to Paul Ryan’s facts and math.

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Filed under Economic Policy, Health Care, Politics

Responsible Adults Needed On Health Care

David Brooks is on a roll lately. His editorial “The Baucus Conundrum” succinctly summarizes the harsh realities of the health care debate – both the fundamental kinds of reform needed to the system and the clear reality that Congress is moving in exactly the wrong direction in their fundamental approach to the issue.

Brooks is absolutely right when he suggest that:

[the health care] system needs fundamental reform. We need to transition away from a fee-for-service system to one that directs incentives toward better care, not more procedures. We need to move away from the employer-based system, which is eroding year by year. We need to move toward a more transparent system, in which people see the consequences of their choices.

After summarizing good ways the country could get to fundamental reform that encourages transparency, innovation, consumer responsibility and free choice. He also summarizes the fundamental problems with the emerging congressional legislation well:

The real health care choice now is between the status quo and the bill primarily authored by Senator Max Baucus, Democrat of Montana, that is emerging from the Senate Finance Committee.

The Baucus bill centralizes power, in contrast to the free choice approach, which decentralizes it. ……..

It entrenches a flawed system. It creates greater uniformity and rigidity. It redistributes income from the politically disorganized young to the politically organized old. It squeezes people into a Rube Goldberg complex of bureaucracies based on their income level. It will impose huge costs on people as they rise up the income ladder, distorting the whole economy.

The biggest problem is that it will retard innovation. Top-down systems just don’t innovate well, no matter how many Innovation Centers you put in the Department of Health and Human Services. The bill will retard innovation by using monopoly power to squeeze costs. It will also retard innovation by directing resources toward current care (and current voters) and away from future technologies and future beneficiaries.

In the end, Brooks suggests that we do not have a realistic political option of anything rational and sensible, like the bill proposed by Senator Wyden or the kind of real solutions proposed by Whole Foods CEO John Mackey, Harvard Medical School Dean Jeffrey Flier or Atlantic Monthly contributor David Goldhill. He suggests:

At this point people like me could throw up our hands and oppose everything. But that’s not what adulthood is about. In the real world, you often don’t get to choose what your options will be. You have to choose from a few bad options.

He concludes his essay suggesting:

If I were in Congress, I’d figure there’s an 80 percent chance of something like this passing anyway. I might as well get engaged as a provisional supporter to fight to make it better, or at least to fight off the coming onslaught to make it worse.

With that kind of “realistic adult attitude” dominating the political debate in support of policies moving in exactly the wrong direction and doomed to inevitable wasteful failure on major issues like health care and energy,  I am reminded of the “realistic adults” in the Kremlin debating Soviet five year plans in 1988.

It would actually be far more responsible for American citizens to get realistic about the complete failure of our congressional “leaders” from both parties. Its well past time to start throwing them all out if these are the best kinds of solutions that they are able to come up with.

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Jail Time For A Lack of Health Insurance

Politico reports that under the proposed health care plan:

Americans who fail to pay the penalty for not buying insurance would face legal action from the Internal Revenue Service, according to the Joint Committee on Taxation.

The remarks Thursday from the committee’s chief of staff, Thomas Barthold, seems to further weaken President Barack Obama’s contention last week that the individual mandate penalty, which could go as high as $1,900, is not a tax increase.

Under questioning from Sen. John Ensign (R-Nev.), Barthold said the IRS would “take you to court and undertake normal collection proceedings.”

Ensign pursued the line of questioning because he said a lot of Americans don’t believe the Constitution allows the government to mandate the purchase of insurance.

“We could be subjecting those very people who conscientiously, because they believe in the U.S. Constitution, we could be subjecting them to fines or the interpretation of a judge, all the way up to imprisonment,” Ensign said. “That seems to me to be a problem.”

In a follow up posting Politico reports:

Sen. John Ensign (R-Nev.) received a handwritten note Thursday from Joint Committee on Taxation Chief of Staff Tom Barthold confirming the penalty for failing to pay the up to $1,900 fee for not buying health insurance.

Violators could be charged with a misdemeanor and could face up to a year in jail or a $25,000 penalty, Barthold wrote on JCT letterhead.

Jail time for the failure to purchase health insurance. Yeah, that’s the answer. Let’s fill our prison system with people whose only crime is they can’t afford government mandated health insurance.

And the folks in Washington wonder why people are getting angry in America.

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Dean of Harvard Medical School Weighs In

In “Health care reform: without a correct diagnosis, there is no cure”, Jeffrey Flier correctly diagnoses the fundamental causes of the symptoms of our systemic health care problems:

1. Poorly conceived tax advantages for employer funded medical care that distort the medical industry and the economy.

2. Over-regulation that prevents innovations in care and delivery of services.

3. Broken and out of control Medicare and Medicaid programs.

While he goes into detail on how to address each one of these problems, Flier’s fundamental prescription is: “Reducing rather than increasing the role of politics in health care decisions.”

Not surprisingly, with a proper diagnosis, the cure for fixing the medical system is almost precisely the opposite of what is generally being discussed in Washington. It would be helpful if we could get a similarly clear analysis of the underlying causes of our completely dysfunctional political system.

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Filed under Fundamental Perspectives, Health Care

Health Care – Exploring The Real Problems

In a comprehensive Atlantic article, “How American Health Care Killed My Father”,  businessman David Goldhill analyzes what is really wrong with heath care that none of the reformers are talking about. And he proposes  real solutions – exactly the opposite of what is being discussed in Congress.

The story starts with his father walking into the hospital after work with a mild case of pneumonia, and dying in the hospital five weeks later from infections contracted in the hospital itself. It concludes questioning the $636,687.75  that the hospital billed medicare and his mother for such bad quality service. Along the way, Goldhill explores how medical care has come to be paid for so completely differently than every other service our modern society provides. He makes a strong case that the morel hazard embedded in the third party payment system is the fundamental cause of the skyrocketing costs of questionable quality of the system.

He includes some shocking facts: roughly “one hundred thousand deaths [are caused or influenced by infections picked up in hospitals]: more than double the number of people killed in car crashes, five times the number killed in homicides, 20 times the total number of our armed forces killed in Iraq and Afghanistan.” And more shocking, most hospitals don’t have strict rules requiring basic sanitation. He points out that many doctors and hospitals reject the policy of implementing of a “simple checklist of ICU protocols governing physician hand-washing and other basic sterilization procedures”, which has been shown to  reduce  “hospital-infection rates by two-thirds within the first three months of its adoption.” Goldhill goes on to point out that “blood clots following surgery or illness, the leading cause of preventable hospital deaths in the U.S., may kill nearly 200,000 patients per year.” He asks the critical question: “How did Americans learn to accept hundreds of thousands of deaths from minor medical mistakes as an inevitability?”

Goldhill explains that providing more third party payment in the health care system is not the solution, but rather the fundamental cause of all the problems people decry. As a businessman he explores how “America has built a health-care system with incentives that inexorably generate terrible and perverse results. Incentives that emphasize health care over any other aspect of health and well-being. That emphasize treatment over prevention. That disguise true costs. That favor complexity, and discourage transparent competition based on price or quality. That result in a generational pyramid scheme rather than sustainable financing. And that—most important—remove consumers from our irreplaceable role as the ultimate ensurer of value.”

He clarifies that: “I’m a Democrat, and have long been concerned about America’s lack of a health safety net. But based on my own work experience, I also believe that unless we fix the problems at the foundation of our health system—largely problems of incentives—our reforms won’t do much good, and may do harm. To achieve maximum coverage at acceptable cost with acceptable quality, health care will need to become subject to the same forces that have boosted efficiency and value throughout the economy. We will need to reduce, rather than expand, the role of insurance; focus the government’s role exclusively on things that only government can do (protect the poor, cover us against true catastrophe, enforce safety standards, and ensure provider competition); overcome our addiction to Ponzi-scheme financing, hidden subsidies, manipulated prices, and undisclosed results; and rely more on ourselves, the consumers, as the ultimate guarantors of good service, reasonable prices, and sensible trade-offs between health-care spending and spending on all the other good things money can buy.”

Including both private systems and public systems like medicare, Goldhill suggests “insurance is probably the most complex, costly, and distortional method of financing any activity; that’s why it is otherwise used to fund only rare, unexpected, and large costs. Imagine sending your weekly grocery bill to an insurance clerk for review, and having the grocer reimbursed by the insurer to whom you’ve paid your share. An expensive and wasteful absurdity, no?”

He decries the “moral hazard” build into our system of third party payments for health care, “the tendency we all have to change our behavior, becoming spendthrifts and otherwise taking less care with our decisions, when someone else is covering the costs.”  “Moral hazard has fostered an accidental collusion between providers benefiting from higher costs and patients who don’t fully bear them”

He points out: “Certainly, Medicare wasn’t paying for the quality of service during my dad’s hospital stay. And it wasn’t really paying for the quality of his care, either; indeed, because my dad got sepsis in the hospital, and had to spend weeks there before his death, the hospital was able to charge a lot more for his care than if it had successfully treated his pneumonia and sent him home in days.”

The quibbling in Congress is about whether to add somewhere between $900 billion and $1.5 trillion we don’t have to spending on health care, while “already, the federal government spends eight times as much on health care as it does on education, 12 times what it spends on food aid to children and families, 30 times what it spends on law enforcement, 78 times what it spends on land management and conservation, 87 times the spending on water supply, and 830 times the spending on energy conservation.”

Goldhill suggests that all the current proposals for  “comprehensive reform will not address the underlying issues, any more than previous efforts did. Instead it will put yet more patches on the walls of an edifice that is fundamentally unsound—and then build that edifice higher.” And he suggests that the “most important single step we can take toward truly reforming our system is to move away from comprehensive health insurance as the single model for financing care. And a guiding principle of any reform should be to put the consumer, not the insurer or the government, at the center of the system.”

Goldman exposes the hugely expensive scheme that makes health care seem and feel low cost or even free to consumers while inefficiently stealing vast amounts that would otherwise go to their personal income and transferring it into the medical system. He calculates that if health care costs were restrained to raise only at the rate of general inflation, employees of a 22 year old person entering the work force would total  $1.77 million throughout his career and over $4 million if health care continues to rise the way it has over the last decade. ” He describes the very real quality and cost reduction benefits of shifting the entire medical payment system, putting the cost and responsibility for health care directly on the consumers by putting those dollars back in salaries and wages while making individuals responsible for wise purchasing in the routine aspects of their health care, with insurance reserved for catastrophic costs.

The general direction that Goldhill prescribes matches the recommendations from John Mackey, many of which he has tested in his own business, Whole Foods Markets, and which is described in his recent Wall Street Journal op-ed.

As Goldhill points out, unfortunately “these ideas stand well outside the emerging political consensus about reform.”

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Filed under Economic Policy, Health Care

Exploring The Polarized Health Care Debate

In “When Planners Decide Life”, Michael Gerson calmly outlines the real issues that politicians have avoided discussing in the health care debate. These issues need to be resolved if  health care reform is hoped to be anything other than divisive and polarizing.

The inevitability of health care rationing in any plan that makes free or extremely low cost health insurance coverage universally available has to be addressed honestly. So far, while vilifying insurance companies, proponents of the administration’s favored solutions are pretending that government bureaucrats rooting out waste will create vast new resources enabling essentially unlimited coverage for all.

Virtually everyone  agrees escalating health care costs  need to be dealt with and we do need to address the challenge of access to care for the uninsured. But there is good reason most people are skeptical of government taking over a health care system that is generally providing good service for the majority of Americans.

Supposition of  well planned super efficient government management of vast swaths of the economy is simply not credible to anyone who has ever watched the costs escalate on a highway project like Boston’s Big Dig or who watched the government make two major revisions in a matter of weeks to the  recent “Cash for Clunkers” fiasco, throwing three times as much money as planned into the program at the same time  they scaled back the time schedule for eligibility by more than half. Government economic planning just doesn’t have a credible track record.

Giving away vast amounts of free money, whether for cars or for health care is going to balloon out of control. Anyone suggesting such generous largess can be done without rationing, especially with government deficits already in the trillions, is either very cynical or very naive.

Failing to address the inevitability of rationing honestly, especially as regards to emotional end of life issues, just builds on the natural and rational skepticism of those opposed to government management of the economy.

Polarizing the political debate makes workable solutions to the fundamental challenges of health care harder to reach, eroding  hope for respectful and productive policy dialog.

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Filed under Fundamental Perspectives, Health Care, Politics