Ranbaxy Tarnishes India's Image

In US medical care the system and the laws are manipulated to allow providers to get away with outrageous prices.  "The $2.7 Trillion Medical Bill" of June 1, '13 in the NY Times by Elizabeth Rosenthal is the latest in a stream of recent articles exposing such overpayments in comparison with other countries.  As at the end of my last post I've frequently made favorable references to India, where high quality medical care can be available at a fraction of the cost.

But India remains a developing country where a lot can go wrong.  Even giant corporations here can engage in illegal and damaging practices because of a culture of cutting corners and unscrupulous business leaders thinking they can get away with it.  Some do even worse.

The poster case for such shenanigans is Ranbaxy, which is India's largest pharmaceutical company.  "Dirty Medicine" on May 15, '13 in Fortune details the long-term criminal fraud at Ranbaxy which makes generic Lipitor for millions of Americans, not just products for third world countries.  As the article said:

"On May 13, Ranbaxy pleaded guilty to seven federal criminal counts of selling adulterated drugs with intent to defraud, failing to report that its drugs didn't meet specifications, and making intentionally false statements to the government. Ranbaxy agreed to pay $500 million in fines, forfeitures, and penalties -- the most ever levied against a generic-drug company.  ...

 "It is not a tale of cutting corners or lax manufacturing practices but one of outright fraud, in which the company knowingly sold substandard drugs around the world -- including in the U.S. -- while working to deceive regulators. The impact on patients will likely never be known. But it is clear that millions of people worldwide got medicine of dubious quality from Ranbaxy." 

Ranbaxy's misdeeds occurred with the knowledge and complicity of its top management including then chief and owner Malvinder Singh.  As consequences like actions by USA's FDA were catching up with them, Malvinder Singh and his brother Shivinder Singh sold the company in 2008.  The hapless buyer was Japan's Daiichi Sankyo that paid $4.6 billion, including $2 billion for the Singh brothers' 34% stake.  Daiichi Sankyo seemed unaware of the real extent of Ranbaxy's wrongful practices and its resultant troubles (despite Malvinder's indignant assertions to the contrary) and is seeking legal remedies. 

Ranbaxy itself may repair its image quickly with its unscrupulous former owners gone and succeeded by a more ethical Japanese owner, but the damage to the Indian generics industry may last longer.  Lax domestic oversight should take much of the blame.  Notably, all the wrongdoing was detected and exposed only by foreign agencies, and none all these years by the Indian authorities.  The Indian government could have done a lot to ensure quality control that would not only have protected India's international reputation but more importantly the health of its own people.  It can even now make amends by acknowledging past problems and promising vigorous remedial measures, but sadly is showing little signs of doing so.  Instead in a knee jerk reaction, as I had seen too often during my own tenure in government, it is vehemently and unconditionally defending all Indian generic drug makers. 

In its June 3 statement release the Government of India "hit back" at the "reports of malpractices of pharma manufacturing in India."  It asserts that the Pharma sector "is highly regulated" and that "vested interests are raking up isolated issues reported regarding technical deficiencies on manufacturing".  It says "Government has strong reason to believe that some of the spurious drugs detected in the international markets, alleged to be exported from India, are desperate attempts by other countries getting affected by the strength of Indian pharma industry."  It also cites figures showing the size of the industry (so what?) and talks of the many tests and certifications.  The problem with the latter is that they mean little if they're based on falsified or invented data.  

I'd hope for a more enlightened approach.  Given endemic corruption drug inspectors may give advance warning of "unannounced" site inspections and accept doctored samples for testing as described in the Fortune story.  The Indian authorities should be devising systems that ensure frequent and random testing of drug samples (perhaps simultaneously by two unconnected laboratories) and genuine surprise visits.  Done right, this will protect Indians and far from harming the "good" pharmaceutical companies, it will instead more quickly restore the credibility of the Indian drug industry.  There's also the matter of pursuing strong penalties against wrong-doers.  Alleged sample fraud and data falsification as described in the Fortune story should be thoroughly investigated and the full force of criminal law applied to anyone found guilty.

What about Ranbaxy's future prospects?  Under its new owners and management it already seems to be cleaning up its act. A so-called public interest litigation (PIL) case is pending in the Indian Supreme Court to cancel Ranbaxy's license and issue broader court directives to Indian regulators for better oversight.  The former looks unlikely to happen, and skittish Indian customer pharmacies that had been wary of Ranbaxy following its US troubles now seem to have had their fears allayed.  

But with Malvinder Singh and his clan I'd still have misgivings.  They're no longer in pharmaceuticals but have huge ongoing holdings in health care, including the Fortis group of hospitals, where given their past conduct they can do a lot of damage.  For example, in pursuit of profits they can pressure their doctors and employees to perform unnecessary but lucrative surgeries and treatments.  Whether by government directives, investor pressure or bad publicity in the media, I'd like to see this Singh family relinquish all control over sensitive health care institutions.  It will also be fair if Daiichi Sankyo can claw back a lot of what they paid to acquire Ranbaxy.  Whether or not this happens is an open question.  Knowing they were selling a lemon the Singh brothers would have tried inserting protective clauses in the sale agreement that the unsuspecting Japanese may have signed on to as "routine."

The bottom line is that India promises much in health care products and services, but customers should be wary and choose carefully, to sift the good from the bad.

Write and Wrong

There are - finally - more articles in the popular media exposing price gouging as the root cause of high US health costs.  But two big concerns remain.

First, such writings are still too few and far between to sufficiently penetrate public consciousness to create the political climate and pressure for reforms that align health prices with other countries.  Besides, the message continues to be drowned out by the flood of red herrings and misinformation put out by pundits funded by the health industry, and naively accepted by the media.

For example, type something like "why are US health prices so high" into Google search and you'll get a stream of articles and quotes blaming unnecessary care or treatment for high costs.  This "quantity" argument is quite false since Americans in aggregate get far less care than Europeans in terms of doctor visits (40% less) and hospitalization (20% less) according to OECD health data. This dwarfs any "excess" care Americans receive in the likes of MRIs, heart bypasses and knee replacements. There are also the many sins of omission - you'll see very few articles in health journals on US pricing anomalies, and none that honestly analyze the reasons for them, or how they can be addressed.

Second, and a bigger concern is that even articles sounding the alert on prices contain serious mistakes about root causes and where the money goes, which derail the quest for best solutions.  Why does this happen? One reason is that the authors have spent so much time unearthing and exposing the fact of overpricing that they've little left over to go into tedious research about the reasons.  Most or all authors happen to be "outsiders" getting little help (or even deliberate misinformation) in quest of answers from health experts and academics beholden to their industry.

There's also a psychological mindset as we tend to ascribe the best motives to our doctors who typically care deeply about their patients.  We (wrongly) transfer this trust in doctors to their powerful associations like the AMA that seek to maximize their members' benefits.  To achieve such objectives these bodies manipulate the political system to the extent it lets them, even at heavy cost to the overall economy or societal welfare.  Writers who don't see this are giving a free pass to our doctors while blaming greedy management, bureaucrats, insurers, drug companies and trial lawyers with less benign personae.  While all these players contribute to higher prices the maximum benefit goes to doctors, so the most needed reforms  will cause their earnings to drop.  And conversely, avoiding reforms opposed by doctor groups almost guarantees continuance of overpricing. 

 Here to my mind are five examples of some welcome facts mixed with misstatements and oversight that can lead away from good solutions:

1) Steven Brill in his famous Mar. 4 / Feb. 20, '13 "Bitter Pill" Time article admirably exposed outrageous charging by US health providers.  He further drove home this message in various media interviews, including on Jon Stewart's Daily Show on Feb. 21.  His biggest mistake lay in ignoring his own dictum of "following the money" to declare that "Everyone in health care makes money (from overpricing) except for doctors."  He says most of the excess money goes to the hospitals' top executives, citing hospital CEO salaries even in "non-profit" University hospitals that are multiples of those of their university presidents.  Actually, under 1% of large hospital revenues typically go towards C-Suite (including CEO) salaries.   Also, administrative heads of departments in hospitals are not bureaucrats but invariably senior doctors in a dual role.

So where do most of hospital excess revenues (i.e., those over and above what their European counterparts would take in for equivalent services) go?  A lot of it goes to doctors either in the form of salaries or perks hidden (for PR and tax purposes) as expenses. About the latter, think of lavish family vacations passed off as conferences, luxury cars expended as work vehicles, and payments on large homes treated as home offices.  Hospitals zealously guard their books which is why Brill who spent most of his energies digging into details of overpricing may not have grasped how the money is really spent.  Other than excess compensation there are of course other big buckets of unnecessary expenses or inefficiency as well.  These include bottlenecks due to regulations or union contracts, administrative costs due to a complex insurance system and fear of litigation, and sheer ineptness in a system devoid of market competition.

2)  Bill Keller, former executive editor of The New York Times and as well informed a person as any, acknowledged how even he was led to believe that high US health costs were due to too much care.  As he wrote in the Times' "Carrots for Doctors" on Jan. 27, '13 he finally learned the true culprit was prices.  His main point was that pay-for-performance (P4P) will do little to improve "our absurdly priced, underperforming health care system" and he did well to highlight the role of pricing. 

But Keller remains mistaken about the true cause of overpricing (which is managed scarcity of doctor supply and the market power of hospitals) and ways to correct this.  He is duped by the doctors' propaganda of "the high price of malpractice insurance being a favorite, and genuine culprit."  (It actually averages just 3.2% of doctors' revenue according to this site.)  He also over-emphasizes the role of single payer systems in keeping prices down, suggesting a damaging converse that in its absence (as it's "politically unpalatable") we must live with high prices.  See examples in the point below to debunk this.

3) Ezra Klein has been key in mainstream coverage of pricing issues as in his Mar. 3, '12 "Why an MRI Costs $1,080 in America and $280 in France".  However, his views like in his Feb. 25, '13 Wonktalk with Sarah Kliff discussing Brill's Time article overemphasizes the need and role of "rate-setting" as the answer.  Rate-setting is where the government, typically in a single payer system according to Klein, lays down the rates that hospitals can charge for various services and procedures.  This implies that prices can only be brought down significantly if we bring about a single payer system, which is a non-starter with Republicans.  While I'm all for single payer which can solve a lot of problems it is by no means the only viable option.

A parallel route can achieve similar or better results while being acceptable (at least in theory) to Republicans and free market thinkers.  This includes introducing real competition through trade, allowing new hospitals with disruptive business and operational models be set up and letting the supply of doctors rise.  Take the example of top Indian and Thai hospitals with prices that are a third of European hospitals (or a sixth of what US hospitals typically get) that are magnets for medical tourism.  Their prices are not determined by any kind of rate-setting but by market forces, and unlike US hospitals they disclose their "real" prices for various procedures and services up front.

4) Scott Gottlieb in his "The Doctor Won't See You Now..." March 14 Op-Ed in the WSJ lambasts Obamacare for "making the local doctor-owned medical practice a relic."  He says this happens because Obamacare (a) favors hospital owned accountable care organizations (ACOs), (b) replaces fee-for-service with flat pricing, and (c) is "mandating all medical offices install expensive IT systems."

 Dr. Gottlieb rightly questions the savings potential of ACOs, and the long standing anomaly of Medicare paying higher rates for services by doctors as hospital employees than those in private practice.  But most of his remaining narrative is flawed.

Rates paid to US doctors in private practice are multiples of those paid to their European counterparts - it's just that prices for doctor services in hospitals is more egregious.  So it isn't a case of hapless doctors being so squeezed as to throw up their hands in private practice, but of being lured into hospitals with even more lavish pay packages and shorter hours.

Flat pricing is what takes away the incentive for wasteful and unneeded care, not to talk of stopping to reward bad care and medical mistakes with more fees for additional services.  World class hospitals abroad that attract medical tourists have flat pricing. This enables them to quote up front for surgical packages, in contrast to the hideously opaque US pricing system.

The government is right to use the carrot (subsidies for conversion) and stick (lower payments for holdouts) policy to get medical establishment to migrate to electronic health record keeping (EHR).  It improves efficiency, makes prior patient history easily accessible and exchangeable for better treatment, lowers costs long term and reduces medical mistakes.  Thanks partly at least to the government push over half of doctors and 80% of hospitals have switched to EHRs, up from 17% and 9% respectively in 2008.

5) Lisa Krieger in her Feb. 5, '12 "Cost of Dying" in Mercury News exposed overpricing without even realizing it as she was focused instead on unnecessary end of life care for her 88 year-old father. She doesn't question the $323,000 charges at Stanford Hospital for 10 days of stay with mostly standard tests and care.  Just the stay in their intensive care unit (ICU) was billed at $25,000 per day.  Ms. Krieger sympathizes with the hospital for receiving "only" $67,800 from Medicare ($6,780 per day!) so that, according to her, they'd need to make up their losses by overcharging private insurers. 

In contrast my 94 year-old father-in-law was taken to one of Pune's (India) best hospitals - Ruby Hall Clinic - this past month.  He was there for eight days receiving essentially the same treatment and tests as described by Ms. Krieger for her father.  It included MRI's, CT Scans, pathology tests, feeding tube, oxygen mask, round the clock nursing care, etc.  He too was in the ICU, in the cardiac care section (CCU) with a deluxe private room.  He passed away after eight days despite all efforts.  There isn't a more upright, decent and engaging person than he was, but that's another story.  His total bill as a private and cash paying patient was about $3,000, or $400 per day, that too at the most upscale and priciest hospital by Pune standards.  That's 6% of the rate at which "stingy" Medicare paid Stanford Hospital, or 1% of what Stanford would have charged an uninsured patient.

Our sky-high health care prices and resultant financial and budgetary morass is an offshoot of a corrupt legislative environment influenced by powerful medical interests.  While the popular media articles drawing long overdue attention to such prices are welcome, the above examples show the need for much more in-depth reporting of the true reasons and fixes for this.  Only then can public awareness and outrage rise enough to force politicians to act.

Rally For A (Price) Cure

Democratic Presidential and Senate election victories have saved ACA (Obamacare) from repeal. It has also survived threats from the fiscal cliff and - for now - the sequester.  If Republicans have their way this reprieve to Obamacare and some other elements of the social safety net may be short-lived. Starting with truth about the need to control public spending, Republicans push the fallacy that this is only possible by cutting benefits and raising the age of eligibility for Social Security and Medicare.

They're wrong because costs can be controlled without reducing benefits and diluting the social safety net.  And as I said on Nov. 14, 2011 we could've had effective solutions in place decades ago if it weren't for silence and inaction by the media and key decision makers.  CBO 2012 projections (Fig. 1.1 on p.10) clearly show that our main problem is high and ever-rising health care expenses.  CBO predicts (Table 1.2 at p.12) that social security payments rise from 5% of GDP in 2012 to 5.4% in 2022 and 6.2% in 2037.  But federal health expenses leap from 5.4% of GDP in 2012 to 7.2% in 2022 and 9.6% in 2037. 

It's tragic and no accident that most Americans aren't even aware of the dominant cause by far of our uncontrollable health care costs - high prices that are multiples of those in other countries. Only a handful of articles in publications or popular media even mention the role of prices and why they're so high.  And almost none seriously delve into how our prices can be brought down close to those in other advanced economies.  (An exception is Steven Brill's "Bitter Pill: Why Medical Bills Are Killing US" in Time on Feb. 20, 2013 where I agree with many though not all the findings.) Why is this?   

The sea of excess revenue generated by this overpricing has sustained and solidified an ecosystem of beneficiaries.  They include providers, insurers, health experts on industry payroll or grants, pharma, medical device manufacturers, malpractice attorneys, and contribution hungry politicians.  They are sometimes at odds with each other but mindful of not rocking the boat too much.  Many of them contribute to high prices and all of them benefit in some way from the vastly expanded pie.  So they avoid exposing each other and inviting retaliation in kind. 

Amidst this conspiracy of silence and collusion the biggest victims are payers (employers, taxpayers, individuals) with collateral damage to US business, worker earnings and employment.  High US worker health care expenses slash worker pay checks and incentives for employers to hire them, as David Goldhill lays out in the NY Times on Feb. 17.  
        
I've often said (as in this Mar. 28, 2011 post) that cutting US health care expenses, especially the exorbitant prices is fairly straightforward if we're free of special interest influence.  It can be done by increasing provider supply and competition that curbs their market power, and easing legal exposure and procedural / regulatory burdens that throttle productivity and create waste. 

At the moment though, we still lack general public awareness about prices as the villain behind our high costs, leave alone pressure to take the measures needed to lower these.  Who can bell the powerful health care industry cat that has so far prevented this from happening? 

We've had just such a group since 1974 that can easily do all this, but hasn't.  It's the National Business Group on Health (NBGH) "devoted exclusively to representing large employers' perspectives on national health policy issues" according to their website.  Its 362 members as of Jan. 2013 are primarily Fortune 500 companies and large public sector employers providing health coverage for more than 55 million US workers, retirees and their families.  I estimate (per footnotes) the cost of this coverage in 2013 at $380 billion of which the members pay nearly $270 billion with their workers bearing the rest.  This is a significant chunk out of the health expenditure of $2.92 trillion for all 316 million Americans.

Through NBGH its members collectively can easily neutralize health industry influence that has allowed inefficiencies and price-gouging to flourish.  The resultant reforms will enormously benefit them and the country as a whole.  Instead, this group has been frittering away its energies and potential by completely ignoring the dominant issue of over-pricing.

Again according to its website it focuses on:
"...exchanging ideas for controlling health care costs, improving patient safety and quality of care and sharing best practices in health benefits management with senior benefits, HR professionals, and medical directors from leading corporations." 

Even in "controlling health care costs" above they're just talking about reducing the quantity of health services needed through wellness, comparative effectiveness research or evidence based medicine.  They're essentially duplicating (or if you want to be more charitable, reinforcing) the work and message of public health agencies like NIH and CDC, and some consumer advocacy groups.  In this and "sharing best practices" among themselves NBGH is probably happy saving their members "billions of dollars" annually.  Considering their annual budget in the tens of millions of dollars that sounds like a very impressive return on members' investment.

That is, until you compare it with what's achievable if NBGH concentrated on what they've completely ignored so far - the dominant issue of over-pricing.  They can outbid the health industry in winning over politicians to enact reforms that (finally) rationalize prices.  Unlike public agencies or consumer think tanks, NBGH's giant members almost uniquely have the financial and political clout for such successful counter-lobbying.

Such efforts would enable the systemic yet fairly straightforward changes that lower overall prices from about twice as high as in West Europe at present, to "only" thirty percent higher.

Such a goal may be all too easy.  After all, as travelers to West European countries know that the cost of living there is much higher than in the US.  Why shouldn't it be the same way with US medical services being cheaper in a service to service comparison, instead of being twice as costly?  And remember, Europe itself is no paragon of economical health delivery - its hospitals can be thrice as pricey as leading Asian hospitals of equivalent or better quality that attract Western medical tourists.  Why then take the US price goal to be 30% higher than in West Europe?  It's to be ultra realistic by factoring in "legacy" effects.  That is, assuming Americans have had their pockets picked for so long as to accept paying a 30% premium above justifiable health care prices for the foreseeable future.

If you do the math per footnote below, this price drop of 35% saves NBGH members $96 billion annually, and their employees $38 billion.  The resources needed to get the laws and regulations passed to achieve this are miniscule in comparison.  Illustratively, the NBGH needs an attack budget for lobbying and influence buying of about $3 billion a year for an initial 3 - 5 years to overpower the legislative lock of various health industry special interests.  Once changes are in place a "maintenance lobbying budget" of say, half to a billion dollars a year should be enough to protect the gains from again being undermined by an opposing health lobby.  For NBGH members on average, it'd mean chipping in about $10 million for 4 years and then $2 million thereafter to reap $300 million in yearly savings (and profits) thereafter.  It's hard to think of a better return on investment from even their narrow financial perspective.

So why haven't NBGH and its members made such moves all this while?  One reason I believe is a corporate bystander effect or Kitty Genovese syndrome among their top management. The CEOs and CFOs who should be leading the charge are so fixated on competing with and outperforming their business counterparts that they invest scant reflection and effort to collective benefit.  This is in spite of the enormous benefit that even a little thought by a tiny section of the leadership can achieve.  And in the specific case of health care their blind spot is worsened by views of health experts with dubious allegiance leading away rather than towards the right answers.  For this reason most CEOs and CFOs who are interviewed about the problems of rising health care costs seem almost as clueless about the role of prices as the common man.

In the process large employers have chosen the wrong type of people to lead NBGH and sit on its board, as well as to guide its mission.  The NBGH Board directors are all HR or employee benefits executives (or in the case of Walt Disney, the Chief Medical Officer) appointed by their member companies.  Given their roles in their organization and their limited mindset of working with health providers and insurers they are likely incapable of grasping NBGH's much broader potential for pricing reforms.  I wouldn't be surprised if they (like the CEOs and CFOs) are oblivious of the overpricing problem or at least have placidly accepted it as a given that can't be changed.  They may also lack the standing to get their own companies to drastically increase contributions - in spite of a 1,000% ROI - to NBGH for the new political initiative.

If the appointees to its Board of Directors are not well suited for NBGH to come anywhere near realizing its true potential, the current CEO Helen Darling seems to be even less so.  She's done nothing so far to tackle over-pricing or even raise awareness about it through the media. In her prolific tweets on Twitter there isn't a single mention yet of prices.

NBGH has recently done the unthinkable.  In my April 21, 2011 post I noted that one of NBGH's key strengths was that it didn't include health providers or insurers (unlike the US Chamber of Commerce) that might create internal dissensions.  Since then NBGH admitted as members the very health industry players who benefit from high health costs and prices.  Out of NBGH's 362 members these health service sellers number 74.  They include 23 health care providers like hospitals and doctor groups, 7 pharmacies and the like, 24 health insurers, 7 medical scientific product (device) makers, and 20 pharma and biotech manufacturers.  There are another 38 classified as "health care services" with dubious overlap of interests with the pure payer (buyer) category who are the logical constituents of this Group. 

NBGH may argue they wanted to "work with" their health providers by admitting them as members.  While cooperative consultations with suppliers is one thing, just think about it.  Do Wal-Mart or Dell (both on the NBGH Board) include their Chinese vendors in their own buyer teams focused on reducing the cost of goods purchased from these vendors?  NBGH members now include Sutter Health hospital and doctor system in California that faced many accusations and enquiries for price-gouging.  NBGH's crowning act is admitting HCA, the largest for-profit hospital chain in the US just this month as a member.  Without a trace of irony the NBGH March 5 newsletter trumpets this development and CEO Helen Darling welcomes CHA in her March 8 tweet.  NBGH as the most potent body to alter medical pricing dynamics to help payers has simply emasculated itself.  Health providers admitted into its fold may not believe their good luck. They didn't even need any Trojan Horse to infiltrate the ranks of their hapless customers whose representative body threw its gates wide open to their plunderers.

NBGH should have used common sense criteria like only admitting members who spend more on health services than they make by selling them.   NBGH failure to do this as well as address prices underscores the need for member companies to question the suitability of NBGH's leadership as well as their own representatives on its Board.

I'll assume that NBGH can reverse or at least mitigate most of the damage.  Ideally they can turn the clock back by using the above criteria to drop all members who are net sellers rather than buyers of health services.  If that isn't feasible they may at least restrict constitution of important committees dealing with lobbying and health price issues as well as the NBGH Board to only the "net payer" companies.  In other words the health care players who have managed to become part of NBGH are given observer status or made non-voting members.  They can only participate in "win-win" deliberations where there's little or no conflict of interest - like EHR, automation, wellness and the like.  Then the core "health buying" members can tackle the important issue of pricing without being tripped up from within. 

Though NBGH could and should have acted on prices long ago the timing for its doing so now couldn't be better.  With health prices far outstripping normal inflation rates for decades, soaring health costs are becoming unbearable. They severely burden employers as well as the employees who face rising out of pocket costs, and threaten the international competitiveness of US labor.  Medical bills are behind 60 percent of all US personal bankruptcies.  Escalating health costs are the prime driver of our Congressional budgetary gridlock, pitting Republicans opposed to raising taxes against Democrats committed to preserving health benefits and the social safety net.

NBGH catalyzing that 35% health price drop enormously rewards its members' bottom lines with almost $100 billion annually of course as described above, but there's more.  They become national heroes, as it saves the US $1 trillion annually, of which almost half is taxpayer's money.  It makes laughably trivial all the budgetary battles around the need to raise taxes versus restraining benefits, the sequester, and the past threats of the fiscal cliff.  That's because the disputed amounts in Congress of about a trillion or two in a decade is just a fraction of these savings.  With savings of this magnitude you don't need to cut any benefits or raise taxes, and yet can see our budgetary deficits converted into surpluses.  It should delight Democrats and Republicans alike.

 What is needed now is for no less than CEOs or CFOs of NBGH member companies, especially the 17 that are on its Board to sit up and get involved.  Only on their orders can NBGH be reoriented towards spearheading a political push for reforms that correct prices.  Only they have the heft to substantially increase their companies' contributions to NBGH for this new effort without lengthy justification and delays, and to sway their fellow members to do likewise.

The CFOs should be the directors on NBGH's Board, instead of their aides on the benefits side or HR representatives.  The present directors don't have the mindset and perspective for guiding NBGH in this new role, and they may not even have the appetite to go up against health lobbies due to divided loyalties.  That's because they may identify themselves with health industry players with whom they interact closely as much as with their own employers.  Their recently admitting health industry players as members and the under-utilization of NBGH potential all these years may be explained by this dynamic.  In any case it is unlikely they'll suddenly veer to throw their full energies and commitment to NBGH's new direction that they've overlooked for so long.

Similarly a change in NBGH leadership will also be needed.  The new CEO should have the conviction to address health pricing as well as the knowledge and stature to gain traction.  An excellent fit I can think of is Donald Berwick who was Administrator of CMS under President Obama.  He resigned in December 2011 because Republicans opposed his confirmation at the behest of the health lobby.  And why did the health lobby hate him?  Because in spite of being a medical doctor he looked to cost-savings solutions like the UK medical system that would end a lot of overcharges and hit their pocket book.  I take it as putting his public conscience about industry loyalties. He has the credibility and domain knowledge to hone in on changes in laws and regulations that are most effective in addressing over-pricing.  Will Republican opprobrium not hobble his effectiveness?  I don't think so, as in Mob parlance their opposition to him was "just business" because their financial backers in the health lobby wanted it so.  If through NBGH he becomes their financial contributor and his proposals include many supply side solutions (e.g., more doctors and hospitals) that fit their ideology they should be willing to listen to him.

Another option to lead NBGH could be someone competent and widely respected in business (and political) circles and closely identify with big employer needs, like ex-CEO of Xerox Anne Mulcahy.  I'm just throwing a couple of examples.

Two more questions: First, should NBGH seek alliance or support of other business groups like the US Chamber of Commerce in pushing for reforms targeting health prices?  I see limited gain given the diffuse nature of that body.  Its members include health industry players and presently two pharmaceutical companies (Pfizer and Sanofi USA) sit on its large and unwieldy Board.  But then NBGH itself has thrown away its advantage of being a body consisting purely of health service buyers.  So there's no harm and perhaps some good from NBGH trying to broaden its political base of support.

Second, should NBGH go full sail in this new direction and shelve all or most of its existing activities?  Since they're already set up I see little harm in NBGH continuing with these along with the staff that's currently in place.  There seems little in these that will interfere with the fresh political objective aimed at health prices.  As I remarked in April 2012 it's as if NBGH has been happily mining for silver while ignoring even larger quantities of gold lying about untapped.  As NBGH finally gears for its much more important role it can handle both operations running side by side as they're "profitable", even if the scale is vastly different.

What's vital is for the C-Suite of NBGH members to realize what they've been missing all this while and appreciate that there isn't a better time to act to get health prices more in line with other countries.  They'll reap huge rewards for themselves and incidentally, ten times more for the country.

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Footnotes:

1. How NBGH members' health expenses are estimated:
- Health care expenditures in 2013 are $2,916B for all 316 million Americans. 273 million of them are non-seniors. (CMS's NHE Table 1.) 
- People covered by NBGH members are assumed to be non-seniors (seniors would cost them more unless they're on Medicare)
- Seniors account for about 35% of all health expenditures (it was 32% in 2010 according to MEPS and 34% in 2004, per CME age tables) leaving $1,895B for the 273 million non-seniors.
- The 55 million covered by NBGH members proportionately incur $382B.
- Since large employers cover about 70% of the expenses, their share is $267B for 2013, with employees bearing the remaining $115B.

2) How NBGH members and overall US health savings are estimated, due to price corrections:
- If overall health services prices fall from a factor of 2 to "only" 30% higher than in West Europe, then the $382B incurred on NBGH members' covered populace declines to 382 X 130 / 200 = $248B, saving $134B. 
- Using a 70:30 split, the NBGH member companies save $96B pretax annually, and their employees $38B.
- Assuming the same price drop for all payers, the US as a whole incurs $2,916 X 130 / 200 = $1,900B, saving about $1,000B annually.  Of this the public funding (government or taxpayer's) share is almost half. 

NBGH members and employees are assumed to cover all or most health expenses for the stated 55 million people.  If some of these people are only covered for secondary benefits (like seniors on Medicare) then the burden and potential savings for NBGH members are proportionately reduced.  

3) The expenses and savings above are in constant 2013 dollars at current size of the economy.  In actual fact they will escalate with inflation, an expanding economy, as well as due to aging Baby Boomers needing more health resources for their remaining lifetime.  The national health expenditure in nominal dollars will not go down but increase in future years, only at a far smaller rate than is projected now by CBO and CMS.  For a realistic projection of health expenses and savings due to reforms see the bottom part of my June 28, 2012 post.

4) A streamlined single payer system can lower prices by reducing plan complexity, speeding payments, and above all using buyer power to counter provider cartels. But it's by no means the only approach, so Democrats frustrated by Republican opposition to "socialized medicine" needn't despair.  More choices, competition and transparency of pricing and quality can achieve similar results.  John Cochrane in his Feb. 6, 2013 "After the ACA" lays out a Republican approach in which he makes many good points, though some of his glib fallacies make my blood boil. (I'll deal separately with these as well as with Steven Brill's Time article since this post is already too long.)

Part Remedy Beats Poison

A rare  Sep. 25 Op-Ed in the conservative Wall Street Journal counters attacks on the Affordable Care Act (Obamacare) by Romney-Ryan, and demolishes their own alternative proposals.  The authors are Ezekiel (older brother of Chicago mayor Rahm) Emanuel, Neera Tanden and Donald Berwick, former administrator of Medicare (CMS) under President Obama.

They repudiate the key premise of Romney-Ryan that delivering Medicare benefits through competing private insurers will lower costs.  Adding a layer of middlemen while fragmenting buyer power will bump up costs instead, as logic and prior experience with private Medicare Plus indicate.  This is apart from other problems with "Vouchercare" as described by Paul Krugman in his Times Aug. 30 column. And on Oct. 4 in "Romney's Sick Joke" Krugman scathingly exposes Romney's false claims about covering pre-existing conditions and the uninsured under his plan.

Still, Obamacare has severe shortcomings, thanks mostly to a handful of Democratic lawmakers who joined Republicans in killing vital features like a strong public option.  Private insurers rightly saw the public option as threatening most of their business.  That's because of its greater efficiency through simplified choices and procedures, and centralized buying that would counter the market power of providers facing little competition.    In his Sep. 29 Times Op-Ed J.D. Kleinke describes Obamacare as essentially a brainchild of conservatives that they now hate because Obama embraced it.  It does nothing about exorbitant prices that are the (hidden) root cause of high US costs. 

Instead, savings are sought by reducing the amount of services consumed, hopefully by cutting down waste and unnecessary treatment so as not to compromise patient well-being.  What's wrong with that?  Well, nothing, so long as it is done in addition to lowering prices closer to European levels that achieves far more cost reductions without hurting patients.  But that's not the case - in an "instead of" approach, the "less care" advocates use their pitch to divert attention away from over-pricing.  This benefits the health industry (who are thus paid over double of what they "deserve") while imposing an enormous burden on payers, including taxpayers, employers and individuals.

Almost no health pundit or politician points out that Europeans already receive more treatment overall than Americans.  Americans do get more imaging tests (MRIs, PET and CAT scans) and heart bypasses and joint replacements, but this is more than offset by their getting less of other types of care.  OECD Health Data 2012 shows this.  Americans see their doctors 40% less often and are hospitalized 20% less than citizens in other advanced economies.  Yet US health expenses in 2010 were $8,233 per capita and 17.6% of GDP, as compared to the OECD average of $3,268 per capita and 9.5% of GDP. 

So just to be clear, imagine this: If we simply cut our prices to OECD levels without any changes to the amount of care we receive, our health expenses drop to less than half of what they are now.  Instead, our policy makers and pundits focus on "cutting waste" by reducing the amount of services rendered, pushing them further below OECD averages, while hardly touching our sky high prices.  Higher prices are partly due to private insurers with their complex offerings, payment bottlenecks and need for profits that introduce middleman inefficiencies.  But much more of the proceeds go to providers who simply get to charge more because of their market power, lack of competition and political clout in thwarting Medicare from cutting payments.

If neither Obamacare nor Romney-Ryan's "Vouchercare" directly address prices, is there a difference in controlling these under the two alternatives?  The answer is yes. 

That's because Obamacare like Medicare at present prevents providers from getting extra payments from patients.  At some point rising costs and the drain on public resources imposes constraints on healthcare prices through taxpayer resistance, especially if the defined benefits cannot be decreased.  In addition, Medicare is still by far the biggest buyer of health services, with corresponding leverage over providers. 

The Romney-Ryan plan in contrast does away with both these points of leverage.  Its intent to let private insurers compete to offer Medicare plans has the opposite effect of fragmenting buyer power in negotiations with providers.  Moreover, with the "better" and costlier plans that can be offered under their plan the insurers (and hence providers) get to realize additional payments from patients, in addition to Medicare vouchers.  Finally, insurers will naturally try to maximize profits by cherry picking the actuarially attractive patients, leaving the "money losers" in the traditional Medicare plan. Of course there is talk of risk adjustment to increase voucher payments for sicker patients, but to the extent these tricky adjustments are imperfect there will be scope for insurers to game the system.  So we end up with higher costs and less check on prices under Romney-Ryan proposals, with either the extra costs borne by Medicare recipients or by the government. The WSJ on Oct. 16 also confirms this as resulting in higher premiums, based on a study by the non-partisan Kaiser Family Foundation.

In sum, with all its flaws Obamacare in addition to its primary objective of extending health insurance to most Americans also has some secondary effects on curbing prices.  The Romney-Ryan plan rolls back the safety net while having fewer checks on prices, with the resultant higher costs met either by public funding, or (as Republicans prefer) by private payers.

A concluding side question: If prices are by far the main villain behind high US costs, why don't we hear much about this fact, leave alone have any serious proposals to lower them?  You don't see high prices mentioned in discussions in the media (it's just "costs"), including in recent Presidential or Vice Presidential debates. It's because the extra revenues generated by over-pricing has created enormous surpluses, a fraction of which goes to sustain an ecosystem of beneficiaries who  want to let the good times roll.  These include politicians, health experts, private insurers, trial attorneys, and even HHS / Medicare officials looking for subsequent industry fed opportunities through a revolving door.

So to the above question the short though dramatic answer is that there is a conspiracy of silence on the issue of over-pricing. The ones who suffer are mainly of course the payers.  Can payers or a body of them not exert counter leverage that can correct prices?  Not so far, but they certainly can and should.  I have talked about this in the past and will elaborate in my next post.

States Can Lower Prices If DC Won't

Mitt Romney's pick of Paul Ryan as his VP running mate ensures that the Medicare and health care debate takes center stage.  It should be a strong card for the Democrats though Republicans may succeed in confusing voters as to who really threatens Medicare.  Neither side calls out the prime cause of our unmanageable health care costs - the prices - nor surprisingly does most of the media.  For example the NY Times on Aug. 21 in its extensive and otherwise well written "Rationing Health Care More Fairly" makes no mention of this elephant in the room.

Actually, our problems disappear - with no need for rationing benefits or giving up on universal coverage - if our health prices are halved so as to approach those in "expensive" Europe.  The steps we need are listed in my March 28, '11 post, and none of these are administratively or legislatively hard if you strip out special interest politics.

It's the last that stands in the way of reforms that would lower tariffs, as health industry players either pay or intimidate most lawmakers, though a few may (still!) just be in the dark.  Ideology has little to do with it, since Republicans should favor increased competition and supply based economics.  Yet they are often complicit in protecting providers from market forces. 

President Obama missed a huge opportunity in 2009 to early 2010 when he faced Republican (and a sliver of Blue Dog Democratic) intransigence on key reform proposals like a strong public option.  Had he and his advisers been more astute they would have switched to simply pushing to lower the age for Medicare from 65 to 55 (or even 25).  This move towards "Medicare for All" would have been far simpler, easily understood and popular with the public.  And above all, it needed only 50 Senate votes to pass through "Reconciliation", instead of the 60 to break a filibuster.  This near-single payer model with more buying leverage could push down prices, with part of the public savings going to allow tax breaks for those receiving employer health coverage.  So it could make almost all payers and patients better off, and be a lot more difficult to demonize.

Instead, we've ended up with an inferior and far more complicated Affordable Care Act that commendably extends coverage but does little to control costs. Where do we go from here? Washington is paralyzed ahead of the elections, and may largely remain so afterwards.  Even if Democrats beat the odds to win the Presidency and both houses of Congress, health lobbies need to win over just a handful among them to stymie measures that would lower prices.  So don't count on Congress.

But there's good news.  Individual states can achieve a lot of price reductions on their own, and more so with support from just the President's Administration.   That's because states have much control over the key factors behind high prices - supply constraints like a scarcity of doctors; hospitals facing little competition; and wasteful practices and regulations. 

Here are key steps that states can take on their own:

• Eliminate physician shortages with the help of foreign doctors.   The existing license requirements typically include clearing all three parts of an examination (USMLE) that in turn require completing at least a year of US residency. But states can set up parallel criteria to let foreign doctors without such residency get licensed to practice within the entire state or even just sub-regions designated as underserved areas. The states of course can and should emphasize quality, restricting eligibility only to candidates who have substantial experience and are trained in reputed, approved institutions, so they are expected to be on par or better than their typical US counterparts. They should clear the USMLE provided the doctor dominated bodies sponsoring the tests agree to let them participate.  Once US doctor bodies realize that they cannot restrict physician supply they'll likely go along with changes that allow the US to meet future requirements internally.

• Use the same licensing procedure as above to allow foreign doctors based in their home countries to practice telemedicine on US patients in the state.  In an April 2011 narrative I had explained how effective and inexpensive this could be.  A local nurse can act as the hands of the foreign doctors who see and treat patients through videoconferencing with such an office visit costing a third to a sixth of typical US rates.  So even the uninsured get a huge relief.  With ready availability of such doctors wait times can be eliminated and patients can see their doctors as needed on a walk-in basis.  Medicare under section 1834(m) of the Social Security Act allows payments for such telehealth services.

• Enable and encourage good foreign managed hospitals to set up shop.   This includes easing state rules that hold up hospital creation in general, like the CON (Certificate of Need) laws.    We need more hospitals regardless of ownership simply to reduce the market power of incumbents.  But foreign-run hospitals with their cost efficiency will change the whole dynamic, forcing others around them to adapt and lower prices dramatically.  These hospitals typically employ their own doctors, so ensuring availability by importing more doctors as above ties in well with this proposal. 

• Complement HHS measures to reduce unnecessary, burdensome or obsolete regulations on hospitals and healthcare providers. An obvious one to consider is malpractice caps even though it's more of an excuse for, than a cause of, high prices and costs.

 States have little control over some aspects.  For example, drug prices can largely be impacted only by federal measures, as by allowing drug imports from other countires, or for Medicare or CMS to directly negotiate prices.  Medical tourism (sending patients abroad) under public funding is not possible without changes to sections 1812, 1814(f)(1) and 1862(a)(4) of the Social Security Act.

In other matters states can achieve much on their own, and more so with minor federal support.  For example, states can license foreign doctors to practice here, but their visa and work authorization falls within federal purview.  An expansion of J or H-1B visas for doctors will certainly help, though even without it states will be able to get doctors under existing rules, or from countries whose citizens have less restrictions.  And then again, we may get foreign doctors who first come into the US for other reasons, or immigrate after marrying US citizens.

 Which states are most likely or suited to take the lead in such measures?  Almost all can hugely benefit, whether they are Democratic or Republican, because the massive cost savings can be used to fill budget holes, extend coverage or lower taxes depending on ideology.  California has often led in path breaking legislation and is a top candidate. Its crisis of budgetary shortfall and desire to continue providing generous Medicare ("Medi-Cal") benefits while avoiding other cuts lend further impetus for it to act.  Other such states with centrist and innovative leadership that come to mind are New York, Illinois and New Jersey.  And while they can easily act individually they may even consult and band together for a common approach.  Once experiments like this succeed, other states and even Washington should soon jump in.

Won't health interests on getting wind of any impending changes in the states jump to exert the same kind of influence as they do in Washington to block them?  Very likely yes. That's why payers who enormously benefit from lower costs should be prepared to ensure these reforms don't get derailed.  The best suited for such a role are the large employers.  I have long maintained that their National Business Group on Health should focus on becoming a potent counter-lobby to push for politically difficult reforms that enormously benefit payers and patients.  The other thing in favor of state reforms is that their budget gaps are more dire, they cannot print their own money and gain more from healthcare savings.

 When it comes to fixing healthcare prices states should rush in when the US fears to tread.

Test (Or Prove) Your Ignorance About Obamacare

Here's a short Kaiser Health Reform quiz with ten "yes" or "no" questions to test if you really know the key points about the Affordable Care Act (Obamacare).  You can take it and see how you compare with the rest of the country before reading further.

While the quiz responses are being continuously updated the picture has hardly changed since a Kaiser analysis of the responses in February 2011, a year after the passing of the law.  It shows less than 1% of Americans getting all 10 answers right.  Worse, (given the bell shape of a normal distribution) even monkeys pulling levers with these yes or no choices would have done better than Americans actually did.  That's because the Americans' average score was under 5 while blind guessing or coin toss would get you 5 out of 10 correct on average.  (Assuming you ignore the "don't know" option as that is throwing away the question without even trying to score.)

This may largely explain why half the Americans are opposed to Obamacare - they don't even know what's in it.  True, Obamacare has way too many flaws and limitations but at least it makes the overall US health care situation better than before. 

I have another hypothesis which may be fun to test if the quiz respondents are also asked to state their political affiliations - whether they are / lean Democrat, Republican (or are truly independent).  I expect Republicans on average to fare worse on this quiz, i.e., they are more ignorant about this law.  Here's why:
 (a) True to human nature their political leanings and prejudices make them subconsciously block out facts about a law that they associate with Democrats.
(b) They get their news mainly from sources like "Fair and Balanced" Fox News where facts take a back seat to furthering Republican causes.
(c) People living in red states (by definition Republican dominated) that are largely in the US hinterland tend to be less well read or informed about the issues and simply go by what their favorite politicians tell them. Remember the "Keep Government out of My Medicare" slogans of Tea Party protesters?

In his July 16 column "Five Obamacare Myths" in NYTimes, Bill Keller does a good job killing some of the biggest pieces of misinformation. He followed it up today with "More Myths of Obamacare" by refuting some of the blow back, mostly from special interests and political opponents, and addressing three more myths.  I wonder though about the "taking the horse to the water" factor, as to how much of such fine work actually reaches the people who are the least informed, or the most misinformed. 

Back to the quiz, if you did score well on it, congratulations!  You're also then an outlier, or not a typical American.  Or un-American, in Tea Party parlance.

Obamacare Lives, Now Let Trade Really Heal Health Care

The US Supreme Court verdict on the Affordable Care Act (Obamacare) is out and largely upholds key provisions.  These include the mandate to have insurance (though only as a form of a tax rather than as a more drastic coercion.)  So Obama and the Democrats should be celebrating. 

But this law and the judgement focus on health coverage for everyone, and barely touch the biggest problem affecting most Americans, which is the high and soaring cost of health care.  This puts a huge burden on payers, hamstrings international competitiveness of US labor, and squeezes out public investments in education, scientific research, infrastructure, and even defense.  Moreover it threatens to devastate public budgets with future escalations. 

Heeding our advice in a WSJ Op-Ed four years ago would have already made a huge difference today.  As I said earlier, trade is critical to rescuing our dysfunctional health care system.  To see why, look at the dominant cause of high costs and how trade corrects this with speed and efficacy that can't be matched by other options, while maintaining or improving the quality of care.

Why is health spending in the US so high? This is the topic of a special writeup by OECD accompanying "Health at a Glance 2011: OECD Indicators", addressing it more honestly than the US experts and academics with industry ties. Simply put, the key reason is outrageous prices that are 2-3 times those in "expensive" West Europe, not to speak of much higher multiples of Asia's best providers.

And what causes providers to over-price?  It is largely their market power arising from an artificially constrained doctor supply and a lack of hospital competition.

For decades private doctor bodies have determined the number of residencies that control the number of doctors entering the profession. This flies in the face of a free market for jobs. Then in 1997 a Gingrich/Republican controlled Congress in the guise of spending control further helped doctor cartels by capping all future medical residencies at 1996 levels. The US has 2.4 doctors per 1000 people, compared to the OECD median of 3.4. Even this doesn't reflect the true differences in availability, as US doctors on average spend less time seeing patients. This is due to more of their time being wasted dealing with complex insurance plans, regulations and payment procures, and other steps to protect themselves in a litigious environment. The US also has a higher proportion of women doctors (who typically work shorter hours). 

The market power of our hospitals enables them to be paid almost $4,000 per hospital day compared to under $700 for West European hospitals, according to the 2011 Comparative Price Report by IFHP (P.8) Hospital consolidations since the early 1990s have jacked up prices, in combination with a faulty "cost plus" payment system that rewards or at least condones inefficient and wasteful operations. A February 2006 RWJF report finds (p. 4) that 90% of MSAs (metropolitan areas) face concentrated markets.  The situation is worse in less populated areas where payers may have to accept prices set by the only hospital in the area.

Are there other reasons for high prices?  Sure there are, like private insurance complexity and middleman inefficiencies that add about 15% according to a 2003 Woolhandler, et al, study published in NEJM. Then there are lesser factors like malpractice burden and cross-subsidy for write-offs for unpaid treatment of the uninsured, but these tend to be little more than red herrings or excuses.  Malpractice premiums are only 3.5% of revenues and 7% of income according to a Health Affairs May 2006 study based on AMA data that is arguably skewed to play up such costs. And for unpaid hospital bills, they're just $49B (USA Today, May 9, '11, that too at the vastly inflated list prices) as compared to hospital receipts of $759B (Table 128 of Health, 2011 by CDC). So they contribute less than 5% to prices. In sum the main reason for our excessive prices is that providers can get away with them, aided by market power and supply scarcities.

Trade can transform this health care landscape, with speed and efficacy unmatched by any alternatives.  This trade should take several forms, allowing foreign providers to (a) come to the US and practice medicine, (b) set up hospitals here, (c) deliver health services remotely, and (d) treat US patients sent abroad to them.  These are explained below:

About increasing doctor supply internally, after - and if -  plans are put in motion to educate and train more doctors, it will take a decade before the first of them enter practice.  Then it will take another decade or more for the deficit to be corrected. In contrast well conceived trade planning allows us to set standards and allow in highly qualified foreign doctors so we have enough within a year or two, augmenting our supply by up to 200,000 doctors to attain European averages. And yes, we can still put in place long term plans to internally meet doctor supply needs in the more distant future.

Establishing more domestically run hospitals will not suffice because it's not just a matter of increasing competition among more of their own. Their managers need to unlearn the ways they've operated all this while, and then internalize and implement radically different procedures. Second, they'll be weighed down by their own legacy of suboptimal decisions and agreements with constituents like health worker unions.  In contrast, foreign management can far more easily adapt their low cost systems to accommodate US regulations and circumstances. It's the concept of reverse innovation that will have US hospitals seeing foreign managed competitors operating beside them at a third of the cost and impel them to follow suit.

Thanks to global connectivity and broadband, remotely delivered services already include diagnostic reports by radiologists ("nighthawking") based in other countries, though only if they're US trained and certified. The concept should be vastly extended by allowing a broad swathe of highly qualified foreign doctors to take US board exams (just like domestic doctors who complete residency here).  They should then be licensed to serve US patients, including through videoconferencing. Such consultations will cost a fraction of US rates, and the enhanced availability may eliminate any waits or need for prior appointments.  Patients may have a US based nurse to assist in physical examinations and use of local equipment. This concept of telehealth in domestic settings has already proved to work well, with even better outcomes than for in person visits, according to a June 25, 2012 report in FierceHealthIT. It should work just as well with foreign doctors.

Medical outbound travel abroad for much cheaper treatment with same or better quality has now become well known.  The fraction of US patients availing this is still quite low because it is limited to the uninsured and the self-payers, since insurers have been reluctant to offer this for fear of legal exposure. All this can change if Medicare and Medicaid start sending patients abroad, while passing on some cost savings to them. Private insurers following exactly the same standards and procedures will have some legal protection against allegations of negligence, and malpractice caps will further encourage them to offer this.  Other than direct savings, medical travel options will also siphon off domestic demand for procedures, likely increasing leverage of payers in negotiating rates with US providers.

How much can all this save?  Our combined proposals make them nearly as trade-able as goods, so trade in health services can drop US prices to levels in Germany or the Netherlands that (like us) don't have a single payer system. Such price drops should cause our expenditures as percent of GDP to decline the same way.  For the US it was 17.9% in 2010 and presently rising to 19.6% of GDP per CMS projections of health expenses (2011-2021), as compared to the German and Dutch 12% in 2010, and about 14% by 2021.

The impact of actually reversing our rising trend and instead lowering expenditures from the projected 19.6% to say 15% of GDP by 2021, will be monumental.  It will mean our total national health expenditure of $2.59 trillion in 2010 rises to $3.66 trillion in 2021 instead of the projected $4.78 trillion, and per capita expenditure of 8,402 in 2010 rises to $10,790 in 2021 instead of to $14,100.  Since CMS projects that half of the total expenditure is met by public funds (with two thirds of that from the federal budget) this would mean annual taxpayer savings of $560B in 2021 of which $370B are in the federal budget.  This should please Democrats and Republicans alike as it goes a long way to let us to keep entitlements and development programs while not raising taxes or the deficit.

What then stands in the way of such trade?  It's the special interests in the health industry of course, in particular the providers who have influence in both parties though more so among the Republicans.  But countervailing pressures to balance budgets without raising taxes may (finally) give the impetus for change, even if it is after election season.  Obama has been opportunistically attacking Romney on outsourcing during his time at Bain. So both candidate may find it difficult to appear open to a new form of trade regardless of its merits.  Fortunately, November is not far away, and after that embracing trade by whoever wins is the best way to progress from widening the blanket of care through insurance to solving the even bigger problem of affording it.