Wednesday, January 9, 2008

Nice`Little Surprise In Hillary's Health Plan

You may miss it unless you look closely. And I'm not surprised Hillary doesn't talk about it as it can turn off an important Democratic constituency. I'm talking about that last little point tucked away in Hillary Clinton's 7 step strategy for controlling healthcare costs. This point relates to putting in place "common-sense" medical malpractice reforms.

Although her plan does not elaborate very much on this, it is remarkable that a Democratic candidate had put this on the table in early Primaries season, in May 2007. To my knowledge there is nothing equivalent put forth by Obama or former trial lawyer John Edwards. The American Bar Association and its subset of trial lawyers wield disproportionate influence on Democratic hopefuls. Anything smacking of malpractice caps, however necessary, has been the exclusive domain of Republicans, even if it is vital to controlling runaway US healthcare costs. This may signal Hillary's determination to address healthcare reforms in a sincere and non-partisan manner.

Of course, medical malpractice insurance or payouts are a miniscule part of healthcare expenses - less than 2%. The most damage is done because of the modifications induced in the behavior of providers because of this fear of expensive lawsuits. This includes both stultifying procedures and bureaucracy meant to reduce legal exposure that creates inefficiencies adding about 10% to treatment expenses, plus another 9% because of unnecessary tests and treatments through so-called defensive medicine. Malpractice reforms will not eliminate these wastages by any means, but can considerably reduce them, and so should be part of any bipartisan healthcare reforms.

How this all plays out if a Democrat is elected President remains to be seen but I see the very mention of malpractice reforms in Hillary's plan as an encouraging first step.


kenrod said...

Thanks for that analysis, Sandip. The 7 step strategy for controlling costs are all great, except she still relies on the archaic employer based system. The basic structure of the American workforce is changing.

Labor is far more mobile. They change jobs frequently. They change careers every decade.

The GOP is more inclined to use the tax code to change social behavior. Guiliani's plan does just that. It gives the tax break to the individual rather than the corporation exclusively. I'd rather have something done right than done ubitquitously. Guiliani doesn't achieve universal coverage, but it does bring costs down, and is fairer in underwriting standards.

Sandip Madan said...

I fully agree, Kenrod, on how the employer based insurance is an undesirable concession on the part of Democrats. A government funded basic healthcare plan that is unrelated to employment (like in Europe) would afford better coverage and encourage more optimal (economy and employment friendly) behavior by businesses. But to be fair, it's probably all the Democrats could do under the circumstances, and their plans (especially Hillary's) is far better than anything the Republicans have proposed.

That brings me to the Giuliani plan you mention, which sadly is hardly a plan. Tax breaks favor the rich who pay a lot of the taxes, and probably have healthcare coverage anyway (or can afford care out of pocket when they need it.) The people most likely to not have healthcare are the ones wh pay little or no taxes, so what use are tax incentives to them?

Besides, unless you mandate health coverage you'll inevitably have people willing to roll the dice (especially in low risk groups) by avoiding paying premiums for their coverage, and then have a subset of them in trouble when they unexpectedly fall sick.

kenrod said...

I disagree that the tax break will not work in Guiliani's plan. That's because he proposes a tax credit, not just a tax deduction. That mean's this number that the person spends will appear as a dollar for dollar offset to the person's tax regardless of their bracket.

Let's face it. We don't have all the resources to solve all the problems. We can only allocate them. But if you allocate it with a universal system everything gets broken. My friend in Canada just had to wait 1.5 years for a back surgery. She was considering coming to the US when she discovered a string she could pull. Which means if we have that system we would be subject to all sorts of corruption and nepotism.

If health bills are the largest cause of bankruptcy in the US, we can solve it very easily. Just tell Blue Shield/Blue Cross to issue a $5000 deductible plan for every citizen in the country. That way there are no catastropic losses. That way the govt doesn't have to play nanny by mandating this or that. If people are going to look after themselves they will. You should not tell them not to drink, gamble, smoke, or buy insurance. Otherwise, you ruin it for those who are playing by the rules.

Sandip Madan said...

Kenrod, you keep citing Canada but the system that is being proposed is closer to that of France. Universal coverage done right can reduce instead of increase total costs, as in France and other European countries.

If we replicated their system we'd have universal public funded coverage almost without paying anything more than what's currently being spent by our government. That'll be much better than Giuliani's tax break proposals. Btw, though this is admittedly very anecdotal, a foreigner living in France has commented favorably on the French system in response to my September '07 post:

kenrod said...

Trying to contrast socialist systems like Canada and France is trying to differentiate between fast food chains like Mcdonalds and Burgerking. One might have better fries or bigger burgers, but it ain't gourmet food. And while I'm not saying everyone should have caviar and champagne, a patient must have better choices.

Let's see what France and the US have.

The US has higher per capita income. Wait, you say. France has universal medical coverage.

US has significantly higher home ownership. Wait, you say. France has tiny apartments for most citizens, and lower home ownership, but has universal medical coverage.

US has significantly lower unemployment. Wait, you say. But France has universal coverage.

The US has lower taxes and the consumer has more spending power. Wait, you say. France has universal coverage.

US has lower cancer rates. Wait, you say. France has universal coverage.

France has better cheese, poets and literature. Okay, Sandip, you finally win that one. But sadly, that has nothing to do with universal coverage.

In another of your blogs, Jadra used the term "limousine liberal." The French are like that. Pretenting to spread equality, the bureaucrats have seized consumers' choices and put it away under the government's Big Brother wing.

The point is that the universal coverage is stifling their economy. If medical insurance is that important, than let people buy it rather than mandate it. However, I must say that underwriting must be reformed so that those who want it can get it fairly.

Sandip Madan said...

Kenrod, here's the difference between Canadian and French healthcare:

In Canada you cannot buy private insurance or even pay out of pocket to jump the line. It has a single-tier system. In France (like in Germany and other countries) you can do both. It has a two-tier system where you CAN choose your caviar and champaign if you can afford it. The thing is that most French are so happy with their government plan that they don't go for a private one.

kenrod said...

You still haven't pointed out what so good about the French system. In the US I can buy two or three dozen plans with deductibles from $0 to $5000. Or, for that matter not buy a plan at all if I so choose. What makes the nanny govt think they know what's best for me? And if they want to give me medical insurance, do they want to intrude into my life in auto, homeowner's insurance etc.

The truth is somewhere in the middle, of course. In auto, most states will mandate that I have to carry liability at the very minimum. And that's good in case I hit someone, at least the other person is protected even though I don't give a damn about my car.

In medical, I have a myriad of govt plans, like Medicare, medi-cal, county hospitals etc. as my last resort fall back. Then from there I can choose a plan to buy up from.

The fact is that the French bureaucrats have seized the options from the public, imposed huge taxes to get this social benefit enacted, and limited choices to a few plans. Even Sarkozy says their system is broken and too expensive. And France doesn't have the numbers to prove they are any better.

They don't have more wealth, live less years, are less productive, .... Why imitate failure?

Sandip Madan said...

In France you CAN buy and use US style private insurance if you want. But if you don't they have the government funded coverage for everyone. And over 90% of the French prefer the public funded plan.

Let's next look at the efficiency of resources utilized. In France they spend 55%-60% per capita on healthcare of what is spent in the US. Yet they beat the US in all the metrics tracked by OECD and WHO, like life expectancy, infant mortality and doctor availability per 1000 population. They are also ranked No. 1 by the WHO while the US is ranked 37.

It's true that they're runing budgetary deficits in France, but that's so in the US, too. And you'll never hear Sarkozy saying that they want to replace the current system they have. I'm guessing he may propose some copayments or deductibles for people who can afford it, which is still in line with the US Democratic proposals on the table.