Wednesday, February 11, 2009

Acting Now On Health Reforms

The state of the US economy and the Congress' struggle to pass a fiscal stimulus package seems to have crowded out the Obama Administration's mind share on other vital initiatives.

So I was glad to see Paul Krugman drawing attention to this issue in his Jan 29 Times OpEd "Health Care Now." Krugman argues that (a) The economic crisis and resultant swelling of the ranks of the unemployed uninsured adds to the urgency of reforming the health care safety net; (b) The cost of healthcare reforms are far less than the fiscal stimulus package, and hence not "too expensive"; (c) many of the health and health reform expenditures will of themselves stimulate the economy and should be part of the stimulus package; and (d) the time to act and seize the moment is short and we shouldn't let the momentum built from the current "serious crisis go to waste."

I agree with Krugman on all these points. If anything I'd like Krugman (and the Obama administration) to expand advocacy of health care reforms from universal coverage, single payer system and drug purchase coverage to also include other important measures. These are, addressing the doctor shortage and ensuring increase in long and short term supply of health care workers; malpractice and tort reforms that will immensely ease overall health costs; and allowing more international trade in health care services (importing doctors and exporting patients) that improves services and lowers costs. All these measures carry huge benefits, but are opposed by some influential lobbies.

Still, the main point of Krugman's article shouldn't be lost sight of. Congress has struck its compromise on a $789B package. Sadly, some needed health expenditures have been cut out, but a separate health care focused bill can address this. Obama's administration should keep sweeping health care reforms on the front burner and act before the window of opportunity narrows.


Anonymous said...

We're all for more people having coverage but Obama is off to the wrong start. He says he wants to get rid of Medicare Advantage. In other words the big bureacracy of Medicare is still there but he doesn't want private companies to have any stake in it.

Private companies are far more innovative in allocating the resources than govt agencies. Besides, it creates competition. I see United Healthcare, Aetna, Humana, Blue Cross, Cigna... all telling the consumer they can do better. I think that's better than everyone trying to get a DMV or postoffice style treatment.

Right now Medicare Part A is scheduled to go bankrupt in 2014. The govt can't handle it's own piece of the pie. And they want to tell private companies they can't have any?


Sandip Madan said...

I'm not aware of any plans to discontinue Medicare Advantage. What you may be referring to is the criticism that these private insurers are getting reimbursed 12%-17% more from the government than what the government spends on its own Medicare beneficiaries.

There is a move to end or phase out these subsidies to put the private and government plans on an even footing. That's in the spirit of open private-public competition and saves taxpayer dollars. The private insurers say that their plans won't be viable if this happens.

Anonymous said...

This Obama gov't, in its omniscience and good intentions, has passed a stimulus package. While trying to put more money in the consumers' pockets it has force employers to fund the COBRA benefits of departing employees. In the past, ex-employees paid for 100% of the COBRA bill. However,this package states that the Federal gov't will pay for 65% while the ex-employee pays for 35% but the employer has to foot the bill until December 2009. Moreover, the refund comes in the form of a tax credit, not as an actual check from the gov't. In this business environment, the reason the employee has probably been laid of is that the company is losing money. So it's probably not paying taxes. So why would it need a tax credit?

Here are the unintended consequences of these mandates:

1. Employers will cut workers' to 30 hours a week to avoid COBRA regulations.

2. While the company has to fund these expenses temporarily, it has reduced cash flow for operations.

3. Companies will be dropping health plans as they become too cumbersome to administer.


Sandip Madan said...

Yes, this process does sound very convoluted and bureacratic. I haven't yet looked at it closely like you have, but I suspect a part of the problem is that they're trying to deliver help by tweaking the existing systems and governance infrastructure. And rushing it isn't helping.

Anonymous said...

Come on Sandip, by the time the next election comes around, my goal is to:
1. Make you pull all your hair out.
2. Jump out the window with the guilt that you have supported excess gov't legislation all your life.
3. Vote GOP:))

I mean this is not a stimulus package! This is a business strangling package. Can you imagine small business choking and praying it won't break the hundreds of nonsense laws thrown its way?

Obama is the resurrection of the book "The Picture of Dorian Gray," by Oscar Wilde. In that book, as you may know, Dorian is a model who goes to an artist and gets his portrait painted. But he is vain and wishes he looks young forever, and wants all his transgressions reflect in the portrait rather than on him. After several years the picture is old and devilish looking while Dorian looks perfect. Suddenly, he wants to end it all and takes a knife and slashes the evil looking painting. But when the police comes in they find an old ugly man dead on the floor and a painting of a handsome man next to him.

Well, Obama is trying to do the same. While he is trying to look good, he is putting all his evil in a hideaway portrait hoping to conceal it all. But one day it'll all come back to haunt him.


Sandip Madan said...

I know about Dorian Gray. It's just that I think the GOP and their health ideas fit that profile a lot more than Obama. :-)

While I agree with the GOP on several issues (e.g., crime, unions, malpractice and tort reform)their broad approach on health care coverage and delivery is not one of them.

Anonymous said...

Kenrod said:

I don't think the GOP has preconceived notions about any low cost universal coverage give-away program. I think their positions are pretty clear. Universal access, not universal coverage. Get off your lazy duffs, people, and apply for a plan. If you're too poor, apply for Medicaid. If you're disabled or a senior apply for Medicare.

I find it shocking that so many poor people run to the hospital on an emergency and say they don't have coverage. Likewise, I find it appalling that so many people say they have Medicare Parts A and B and think they have full coverage. They know full well that Medicare is full of gaps and the department tells them so. They could get a free Medicare Advantage plan to cover them fully but don't bother. There are so many high deductible plans for young people that cost less than $50 a month. But they would rather spend it on a frothy latte, or a BMW.

What I also find appalling is that Medicaid recepients are that they expect a PPO approach to their treatment. Talk about Dorian Gray approach that the liberal crowd has bestowed on these people. I see so many of them go to their cardiologist for a cold. When I ask them why they don't use a primary care doctor instead of a specialist for minor ailments, they tell me "because I can do so." When asked to sign up for an HMO they say their freedom is being impaired.

Now wait a second. These people who make no contribution to society want a total indemnity plan. Working stiffs who are trying to make a living are just given HMO to contain costs. I think all medicaid recepients should be forced into an HMO and have to navigate the referral system.

I think Bill Clinton had a more appealing approach to welfare and medicaid than Obama does. This present administration has overturned the containment approach that Clinton tried to take by doing a U turn on block grants to the states. Whereas Clinton told states that there was a finite amount for all welfare programs, Obama has told them, the more you spend the more you get. So now, states are busy recruiting more welfare and medicaid patients. I never voted for Clinton but I thought his approach to welfare was a good start. The ghosts of the present admin's philosophy will come to haunt us years down the road.

Sandip, I'm sure you're a nice guy. So I apologize for harping on your site.

Sandip Madan said...

Well, the bottom line is that the French / European style of universal healthcare costs half as much per capita as the US and has better end results. There has to be systemic change.

Profit-driven private insurers waste resources in screening out unhealthy applicants, denying or resisting claims, and adding complexity. Still, I'm all for letting them compete on a level playing field with a government plan and earn their customers. Of course, that's just a small part of the problem. Btw, I'm all for "rationing of healthcare" that's provided at taxpayer expense that acts as a minimal safety net. Those wanting better coverage and able to afford it should be free to choose private plans.

Right now only deeply entrenched special interests are benefitting from the status quo.

Anonymous said...

Kenrod said:

I'm coming around to your view point that there has to be some kind of rationing of healthcare, though I'd like the market place to do it. We currently spend 16% of GDP on it, and I remember when we spent 3% decades ago. We have to ration Mediaid receipients. We have to ration exotic high price drugs, like Humira, used for osteoporosis. Patients report that they spend $1500 a month on it.

I find formularies for the Medicaid patients sometimes exceed other plans. And its only been a few months since Viagra has been removed from Medicare Part D.

I think too much fraud is present in enrolling in gov't programs. I know people who regularly lie about their income to get on Medicaid program. The S-chip is another one where people take a vacation, then take the reduced paycheck to the enroller and put their kids on for a year.

Sandip Madan said...

Great. We agree on the need to ration publicly funded healthcare, to avoid outrageously "inefficient" treatments.

On SCHIP I'd like the age limit for children to be increased to 67 years (when Medicare kicks in) and the income ceiling to be extended to a million dollars. That'll prevent all this cheating to get into the program and cut overall health care costs... :-)

Anonymous said...

You're nuts. No, you're bananas. While both of them are good to eat, they reflect poorly on your mental health. While I agree that some form of rationing is in order because we're using a hugh proportion of our GDP on healthcare I do not sign on to a greater expansion of the S-chip or Medicare programs because they have been distorting the marketplace for yrs.

Here's my point for point arguments:

1. The only tool Medicare and the gov't knows is the hammer. And if the only tool you have is a hammer than every problem looks like a nail. Therefore, Medicare has been hammering down the rates of doctors, drug companies, insurance companies, to the point that 10%, and increasing, of doctors do not want to treat Medicare patients. And those that do have to charge more to other groups to make up for the distortion Medicare has created.

2. Medicare is a one size fits all solution. It has one deductible, one drug package, one everything. What if I want to reduce my cost by only getting a generic drug package? Can't be done. What if I want to exclude maternity to reduce my cost? Can't be done.

3. Why do we want an egalitarian system? I sacrificed during my youth to go to college and grad school. I slept on a bean bag for a year to pay my tuition. Therefore I drive a better car and live in a better house than the dishwasher in my local restaurant. So what. Why should I, therefore, have the same healthplan as he does? This country is about sacrificing to get ahead.

My solutions to the problems of healthcare are as follows:

1. We must ration by limiting the amount we pay on procedures. For a knee replacement, for instance, they may charge anywhere from $25,000 tp 50,000. Now most can be done for 25K but with explainations, the doctor can charge 50K. He could say we are using a more complicated method to speed up recovery. And he will get paid. But the problem is that all doctors are putting explainatins and using complicated methods to enhance their charges. We must, therefore, put limits we will pay for certain procedures. If you want the more complicated method, you pay for it.

This is different from Medicare approach of saying you can only charge $15 for an office visit. Doctors will be forced to innovate to bring about lower costs and provide the patient with better results.


Sandip Madan said...

Kenrod, some of your views are shared by many others, including key decision makers and constituents. So they also warrant a separate post.

We sometimes agree and sometimes disagree, which is perfectly fine. Here's my take on your three arguments:
1) Going by payments and prices in other developed economies I don't think Medicare is underpaying doctors, hospitals and insurers at all. But we can and should reform the system including malpractice provisions and the legal/regulatory process that introduces needless frictions and costs in the practice of health care.
2) A uniform simple system as in Medicare is more cost-effective. Those wanting something better or different can go outside the system. But like Singapore we can perhaps allow Medicare recipients to pay more out of pocket for some better care.
3) Most reformers are not advocating an egalitarian system, but a base system (or a floor, or safety net) that's available to everyone. The better off are free to avail better treatment or insurance plans by paying more.

I agree with your ideas on broadly limiting Medicare payments to (and for) standard procedures. They've been increasingly moving in this direction and monitoring abuses of "outlier" payments.

Anonymous said...

Medicare is not underpaying by third world standards, but we live in the USA. What the problem is that there are so many disparate systems. Insurance pays on one level, Medicare on another, and Mediaid on another. That's why I propose a Relative Value System, which will pay one price for any one procedure. If you want to buy up from there, you can. But I oppose Medicare being the conduit because we're upto our eyeballs in entitlements. We have 75% of our budget already spent every year without any other contingencies. If we add healthcare, that would be the mother of all entitlements. We'll be spending 120% of our income every year on entitlements.


Sandip Madan said...

I talked of lower prices than Medicare rates in DEVELOPED countries. West Europe is not third world.

You have to pay for your healthcare no matter whether through taxes or through other means - insurance premium, via employer, out of pocket, whatever. And if the taxpayer funded option ultimately costs much less, then I don't understand this "anti-entitlement" logic.

Anonymous said...

Entitlements are the Achilles heel of the country. Come on,'ve been to business school. You wouldn't run a business or factory on fixed costs. There must be a degree of variable costs. The variable costs gives you flexibility to expand or contract depending on the orders coming in.

This is the difference between GM and Toyota. GM got strangled by giant fixed legacy cost; Toyota remained nimble. You know which one is history.

Already the budget is over 75% entitlement or fixed costs. You wouldn't run any factory like that. Now you want to add health care to that legacy cost????