Audacity of Incrementalism?

I see signs of a sellout by the Obama folks and Democratic "centrists" on the public healthcare option. If this doesn't happen a lot of thanks should go to Paul Krugman whose forceful reasoning and barbs may give President Obama the spine to make a stand.

In his Times' June 22 column, "Health Care Showdown" Krugman exposes the "centrist" Democrats led by Senators Ben Nelson and Kent Conrad. Both of these men oppose or undermine the public option for apparently ulterior motives, be it campaign contributions, outright corruption, or aspirations to become power brokers. Their group as well as the Republicans have to know that the public option will vastly lower prices and benefit payers and patients. Proponents of this option are emphasizing that it will compete with private plans that patients are free to opt for, or retain. So any switch to the public plan will be purely voluntary, because it is a cheaper and/or better choice.

Opinion polls show wide support for this option by a 72% to 20% margin according to the most recent survey. Still, Nelson and Conrad can afford to ignore voter sentiment (often misplaced, but not this time) because neither is up for re-election till 2012, and Nelson enjoys high ratings in his Nebraska state. Whatever their reasons, or that of other Democratic "centrists" and the Republicans, we can be sure they are knowingly refusing to act in the public interest.

However, Obama can push through effective reforms if he really wants to. He doesn't need to keep seeking bipartisan support that dilutes reforms to the point of making them trivial. Thanks to the Congress reconciliation process he doesn't need a 60 vote filibuster-proof support in the Senate, but just a simple 50 vote majority that Democrats can easily manage.

This is where Krugman's other Op-Ed of yesterday titled "Not Enough Audacity" comes in. It makes effective arguments for Obama to not settle for half-measures, as he shows some signs of doing. It's worth reading both of Krugman's articles to really get it, but here are key excerpts:

"The point is that if you’re making big policy changes, the final form of the policy has to be good enough to do the job. You might think that half a loaf is always better than none — but it isn’t if the failure of half-measures ends up discrediting your whole policy approach.
Which brings us back to health care. It would be a crushing blow to progressive hopes if Mr. Obama doesn’t succeed in getting some form of universal care through Congress. But even so, reform isn’t worth having if you can only get it on terms so compromised that it’s doomed to fail.

"And that’s why the public plan is an important part of reform: it would help keep costs down through a combination of low overhead and bargaining power. That’s not an abstract hypothesis, it’s a conclusion based on solid experience. Currently, Medicare has much lower administrative costs than private insurance companies, while federal health care programs other than Medicare (which isn’t allowed to bargain over drug prices) pay much less for prescription drugs than non-federal buyers. There’s every reason to believe that a public option could achieve similar savings...

"Indeed, the prospects for such savings are precisely what have the opponents of a public plan so terrified. Mr. Obama was right: if they really believed their own rhetoric about government waste and inefficiency, they wouldn’t be so worried that the public option would put private insurers out of business. Behind the boilerplate about big government, rationing and all that lies the real concern: fear that the public plan would succeed..."

Excellent Article About the Rhetoric of Rationed Care

This isn't from my favorite New York Times writers Tom Friedman or Paul Krugman. Yet it is one of the best articles on an important health care topic (or any other subject) I've seen in a long time.

I'm referring to "Health Care Rationing Rhetoric Overlooks Reality" by David Leonhardt appearing today in the NYT. It makes the case that health care rationing is occuring in reality in the US already, just in a worse way overall than other developed countries that have universal coverage supported by public funding.

I hope President Obama and the public spirited policy makers (who haven't been entirely bought over by industry interests) get to read this and pay serious attention to it.

Overseas, Truth Under The Knife

Expert opinion under the guise of objectivity can be highly persuasive. Three US doctors on June 10 wrote in The New York Times to rather subtly undermine the push towards medical tourism.

In their Op-Ed "Overseas, Under The Knife" Drs. Arnold Milstein, Mark Smith and Jerome Kassirer begin by praising medical tourism's "allure of good care at half the price." They also say "total fees at well-regarded hospitals like Apollo and Wockhardt in India are 60 percent to 90 percent lower than those of the average American hospital."

Then they change tack to slant some statistics, and play on patient fears and insecurities about medical tourism. Those in the industry should know better but the average reader will likely buy their story.

Interestingly, Nicholas Kristof has an Op-Ed of June 11 in the NYT cautioning against the scare tactics of health insurers against a public plan. It applies to many admonitions by Dr. Milstein et al. They denigrate medical travel by saying: (a) it won't save much money overall; (b) it poses risks and difficulties for patients; and (c) too little is known about quality of care and we should first set up protocols and collect extensive data before seriously considering this option.

Towards the end of the article they do suggest useful steps like Medicare prescribing uniform reporting and tracking of treatment information by US hospitals, and inviting foreign hospitals to participate. The data includes surgical outcomes, risk factors, complications rates and comparable measurements of long term success. Still, this doesn't allay my concerns about other parts of the article.

Some of their assertions I take issue with are below (in italics), along with my comments:

• Offshore surgery cannot substantially lower health care costs. Less than 2 percent of spending by American health insurers goes to the kind of non-urgent procedures that Americans seek overseas. --- Huh? In our May 27, 2008 Op-Ed in the WSJ we had identified 30 such procedures with a spending of $220 billion in 2005. For 2006 the figure is $270 billion. This is 13% of the $2.1 trillion total healthcare spending, or almost 42% of the $649 billion spent on hospital care. Of this, the spending on just the top six "exportable" surgeries (3 in cardiac - valve, bypass and angioplasty; and 3 in ortho - hip replacement, knee replacement and spinal fusion) is $100 billion. That alone is 4.7% of the total health bill, or 15% of the hospital bill. Another way of looking at it is that medical tourism potentially offers bigger savings than the $1.2 trillion dollars over the next decade promised by the health industry groups amidst much fanfare to the Obama administration.

• Compared with low-cost American hospitals, the offshore fees are 20 percent to 50 percent lower. --- This significantly understates the cost differential as well as the incentive to go abroad. Even compared to negotiated rates of cheap US hospitals (leave alone the atrociously high "list" prices) top Asian hospitals charge a lot less. A heart valve replacement costing over $100K in a typical US hospital may cost $50K in a cheap US hospital, but only $10K in Wockhardt or Apollo in India. For a heart bypass, the comaprable figures are $70K typically in the US, $40K in a cheap hospital, and $10K in India. That's offshore fees 75% - 80% lower, which is very different from a "mere" 20% - 50% differential.

• Other negatives are obvious: people having surgery done halfway around the world are far from their regular doctors as well as friends and family. Consider, also, what happens if an American abroad falls victim to negligent care. Arranging transfer to another hospital may be difficult. --- If the authors insist on playing this "fear" card they should at least mention that the patient is far less likely to have an adverse outcome in a top foreign hospital than in an average US hospital. Take heart bypass: the US overall mortality rate for this is over 2%. It is only about a third of that (0.6% - 0.8%) at Apollo or Asia Heart Institute in India with similar favorable comparisons for infection rates, other complications and other procedures like hip resurfacing. Also, most of these foreign hospitals are multi-specialty with good general care, and in any case located in the largest cities like Delhi, Mumbai or Singapore with a profusion of other hospitals. So in the rare event of a transfer being needed it's likely easier done abroad than in the patients' home place. It's only a matter of time as one can't keep beating the odds, but as of now I haven't heard of a single fatality of a US medical tourist in the top hospitals in India and Singapore. For all this the authors only say "There is reason to think the quality of care at some foreign hospitals may be comparable to quality in the United States."

At least there's one positive to this article - someone (other than Prof. Bhagwati and I) is discussing medical tourism as an option. So far the Obama administration and lawmakers in Congress have been totally quiet on the subject.

Omitted Trade Option Again Highlighted in FT

Today on June 1st the Financial Times published another letter by Prof. Jagdish Bhagwati that stresses our findings about the benefits of trade in lowering US health costs and improving access to providers. We had earlier written about this on December 23rd, 2008 as also reproduced in my post of that day.

The Obama Administration continues to ignore this option of importing doctors and exporting patients (medical tourism) despite its immense promise. The probable reasons? Expected opposition by a powerful lobby like the AMA, and misplaced protectionism. I call protectionism "misplaced" here because the scarcity of skilled health care personnel in the US is artificially jacking up prices and making it unlikely that medical tourism will contribute to greater unemployment. On the contrary, lower US health care costs as a result of trade may make broader US goods and services more competitive internationally.

Here is Prof. Bhagwati's published letter:

Sir, Krishna Guha’s excellent article (May 28) on Barack Obama’s plans for healthcare reform makes it clear that the president’s economic and medical advisers continue to ignore altogether the most important way in which comprehensive coverage could be facilitated by significant saving in costs and by easing the shortage of doctors and medical personnel: namely, a full-throated embrace of international transactions in medical services.

Sandeep (sic) Madan, of Global Healthnet, and I have argued extensively that costs (whose fiscal magnitude crippled the attempt to introduce comprehensive coverage in California) can be reduced massively with augmented measures to “export patients” and to outsource claims processing and customer service. These savings exceed those claimed with fanfare for the technocratic Obama proposal to computerise medical records.

Again, “importing doctors” and medical personnel represents an excellent way to alleviate shortages (such as those that have afflicted comprehensive coverage in Massachusetts). Independently, Fredrik Erixon of the European Centre for International Political Economy has long advanced similar proposals in the European context and recently extended his arguments to the Obama administration’s omissions in this regard to date.

Perhaps the administration’s de facto antipathy to trade lies at the bottom of this glaring omission; if so, it is costing the president’s major reform agenda!

But perhaps it is also because of the American Medical Association’s fear that international transactions in medical services will harm the earnings of their members. But, in that case, what happens to the president’s frequent claim that his administration will bring an end to the lobbying as we knew it?

Professor Jagdish Bhagwati,
Council on Foreign Relations,
New York, NY, US