Health Care Reform

Health Care Reform

The U.S. is currently spending 18 percent of its GDP on health care. As the economy shrinks, health care costs inflate, and health care insurance is expanded as proposed by Barack Obama and Congress, the percentage of GDP spent on health care will soon exceed 22 percent. As our population ages, the percentage of GDP consumed could easily grow to 25 percent.
Health Care is not Health
We now spend so much on health care that it is very likely reducing our health compared to having a minimal system. In order to pay for our health care system, Americans are forced to work 25 percent longer hours than they otherwise would. Except for young people building their skills and reputation, working long hours is bad for a person's mental and physical health. The person who works 60 hours per week instead of 48 has less time to exercise, less time to relax with family, and less time to sleep.
If the money that we paid for health care turned us all into Michael Phelps it would certainly be worth it, but working those extra hours every week, year in and year out, has instead turned us into obese desk slaves.
Given the cost of our current health care system, the U.S. would probably have a longer life expectancy than our present 78 years if we had no hospitals, no doctors, and no drugs beyond the cheapest and most basic, such as penicillin, aspirin, etc. We have clean public water supplies, good sewage treatment, vaccines against epidemic diseases, and antibiotics. Without the possibility of a helicopter medevac flight, Americans might rethink the wisdom of putting texting 17-year-olds behind the wheels of 7000 lb. SUVs, thus reducing the need for trauma services. Without the possibility of diabetes treatment, statins, coronary bypass surgery, or stomach stapling, eating in moderation would become more fashionable. Nobody is seriously advocating eliminating our health care system, but it is worth occasionally asking the question "Is our system so broken and expensive that we'd actually be healthier with nothing?"
Who Voted to Spend All of Our Money on Health Care?
Our mature economic competitors, such as Japan and France, spend between 8 and 11 percent of GDP on health care. China spends about 5 percent. As noted above, we're going to spend 22 percent. Did someone vote for that when we weren't looking?
Without any public debate, Americans have decided that we will spend money on health care rather than invest it in any of the following:
general research and development, which is currently just 2.7 percent of GDP (source)
education
renewable energy such as solar power
improved telecommunications facilities, including a wireless Internet over the entire U.S.
public transportation systems
highways, bridges, and other infrastructure
technology and systems to reduce air pollution, which may cause as many as 70,000 deaths in the U.S. annually
technology and systems to reduce automobile fatalities, which number approximately 40,000 annually
Without any public debate, Americans have decided that we will spend money on health care rather than spend it on any of the following:
longer vacations and shorter work weeks
food made from something other than corn (see The Omnivore's Dilemma )
housing with more light and better ventilation
sports, coaching, gym memberships, personal training
charity, which tends to give donors a mental lift
If we cut our health care costs to Japan's percentage of GDP, for example, we would be able to finance the entire U.S. military plus our adventures in Iraq and Afghanistan, and still have enough left over to double our economy's R&D investment.
Luxury Health Care or a Paid-for Life?
Suppose that you could give up two years of life expectancy in exchange for the following: paid-for housing, paid-for cars, paid-for college, paid-for vacations, paid-for children. Instead of living 78 years, you'd expect to live 76, but you'd never have to work full-time and could probably pack a lot of enjoyment into those 76 years because you wouldn't be a slave to day-to-day expenses.
Let's compare the U.S. to Mexico. Mexicans share our continent, our love for soda and corn syrup, and our tendency towards chubbiness (source). We spend approximately $8500 per year per American on health care and live to the age of 78. A Mexican can expect to live to age 76. How much do Mexicans spend on health care? Their per-person GDP is only about $13,000 per year, and they supposedly spend about 6 percent of GDP on health care (source) so $800 per person is a good estimate.
An American will spend $600,000 in order to add two years to the end of his life. Those two years may very well be spent in an intensive care unit or a nursing home and certainly are not likely to be spent on the tennis court or visiting the Venice Biennale.
For that $600,000, an American could have the following:
a house, free and clear of all mortgages (median price for a single family house sold nationwide in May 2009 was $170,000)
a lifetime supply of automobiles, assuming $20,000 per car, a 10-year life per car, and 50 years of driving ($100,000)
50 vacations for a family of four (average cost $1600; total of $80,000)
a college education ($25,000 of tuition for four years at a public university)
two children, reared to the age of 17 ($125,000 per kid, average cost for a basic family (source); note that a pair of Americans could have four children, all of whose costs would be completely paid for out of this $600,000)
$75,000 in walking-around money
On the Mexican plan there would be no helicopter medevacs, no death-after-weeks-in-the-ICU, and many fewer MRIs. A Goldman Sachs employee might well decide to spend $600,000 of his TARP-funded bonus in order to live two years longer, but why should every American be forced into spending this $600,000 on health care? Admiral John McCain, Sr. was famous for saying "Not another penny on doctors! I'm spending it all on riotous living," in response to his wife's suggestions that he address some of his health and dental deficits.
Additional Problems with Our Current System
Aside from the ruinous cost, we have the following problems with our current health care system:
tremendous waste and inconvenience for doctors due to voluminous and disparate insurance company forms, procedures, policies and whims; one doctor friend works in a practice with 11 other docs and they employ 8 full-time people simply to handle billing and insurance; another doctor is a solo practitioner; she has a full-time employee (1:1 ratio) to deal with insurance bureaucracy
tremendous waste and inconvenience for patients due to inefficiencies, indifference, and errors by health care providers who don't care what patients think of them (and why should they, since an insurance company or Medicare is paying the bill?)
a lot of patient time wasted with unnecessary tests
a lot of society's money and time diverted to litigation
lack of transparency or fairness in pricing for the uninsured; a doctor might bill $10,000 directly to a patient for a procedure that Medicare pays $800 for.
The Real Question: Why Aren't Things Much Worse?
Among all of the products and services that we buy, health care has some unusual characteristics. The government pays for more than half of it directly. Most of what we pay, typically through our employer, is tax-deductible. The amount of services to be delivered, i.e., the tests and procedures to be conducted, is determined by the people who are getting paid to deliver them. There is no limit to what a service provider can collect from the government or a private insurance company for treating single patient. The real question about this system is not "How come it costs so much and works so badly?" but "How come it costs so little and works at all?" Why did we ever expect this system, as currently set up, not to bankrupt us?
My theory is that the perverse incentives in the system are ameliorated to some extent by dedicated individuals at all levels, from insurance company executives down to hospital orderlies. If health care professionals responded to incentives like Fortune 500 or Wall Street executives do, health care would consume 80 percent of GDP and most of us would be dead due to complications from our daily X-rays, blood transfusions, medication cocktails, dialysis (you can never be sure that your natural kidneys are functioning perfectly, so why take a chance?), etc.
What Could We Get for Our Money?
As the health care industry has never been competitive, nor had any incentive to control costs, we have no idea how much American health care could or should cost. Hospitals are much more like defense contractors than participants in a free market. They talk about their costs and how they need to be paid "cost plus". Given sufficiently poor incentives, it is possible for Americans to be spectacularly inefficient. The U.S. government decided to buy some helicopters that were already being built in Europe and flying happily all over the world. The helicopters could have been purchased for $30-50 million each and delivered in three years. By the time Lockheed-Martin and the U.S. military finished working together to design some enhancements and move production to the U.S., the delivery time had stretched out to 10 years and the cost escalated to $400 million each (Wikipedia). Health care in the U.S. is primarily paid for by the U.S. government and more or less in the same way as we buy military hardware.
The reengineering that has transformed other American industries hasn't been tried in health care because there has been no incentive to try and very little competition. Health insurers cannot do business across state lines. Doctors licensed in one state cannot practice in another. Fully trained doctors from countries with superior medical systems to ours cannot legally practice here. A hospital that charges less money cannot attract more patients, since the patient is almost always entitled to go to the hospital closest to his or her house (the same guy who would drive up to New Hampshire to save 6.25 percent sales tax on a set of tires wouldn't drive up there to save his insurance company $5,000 on an operation).
When a business process is rethought and reengineered, the savings can be astonishing. We can mourn the death of the American Main Street, but Walmart is able to deliver goods at prices that would previously have been considered unsustainably low. If we'd had the structural barriers to innovation in retailing that we have in health care, we never would have known that groceries could be 22 percent cheaper (source) in what was already thought to be a competitive market.
Consider the four-passenger automobile, a product that everyone agreed needed to cost about $20,000. Japanese companies improved the quality, but did not question the premise that a 170 lb. human needs to be wrapped in 3000 lbs. of machine in order to move down the road. A few engineers in India questioned all the previous assumptions in car design and came up with the Tata Nano, a perfectly functional four-passenger car that costs just over $2,000.
Reform Suggestion One: Provide Universal Coverage
The U.S. government already spends more than half of the health care dollars spent in the U.S. As this is a larger percentage of GDP than Japan spends on health care for all of its citizens, we have the proven ability to pay for universal health care, assuming that care is delivered in an internationally competitive manner.
Does this mean that we need a government-run national health service, as they have in the United Kingdom? No. Via the public schools, we've already demonstrated that a large-scale enterprise staffed with American civil servants ends up being a national embarrassment and a huge drain on the treasury. Private HMOs and clinics should be able to compete to take care of patients, paid for on a per-patient (not a per-procedure) basis by the federal government.
Should we cover visitors? Sure. An American traveling in a lot of other countries can count on free treatment, at least of emergencies. We can set up reciprocal arrangements with other countries for non-emergency care. If an American can get a flu shot in France for free, a French tourist should be able to get a flu shot here.
The question of illegal immigrants has caused a lot of controversy in Massachusetts, a state with universal health insurance and hardly any illegal immigrants. Illegal immigrants pay sales tax, gas tax, property tax (through their landlords), and, if they're using someone else's Social Security number, payroll and income taxes. Why shouldn't they get what American citizens are getting? Keep in mind that we're controlling costs by keeping the services provided fairly basic.
Rules and regulations:
each resident will be given a voucher good for signing up at the clinic or HMO of his or her choice; the amount of the voucher will depend on the resident's age and sex (the weighted average of all vouchers will equal $2,000 or whatever we've decided we want to spend)
a clinic or HMO that wishes to get any revenue from the federal government will be required to take any person who submits a voucher, regardless of preexisting conditions
a resident of the U.S. can switch clinics annually, let's say on May 1.
the clinic is responsible to pay for the resident's emergency medical care at another facility
One likely side effect of this reform is the return to centrality of the primary care physician. Joe Medicare Patient often does not have any doctor who understands much less coordinates his care. If Joe has seen six specialists, he may be on drugs that are working at cross purposes. If Joe is in the ICU at a typical hospital, the multiple doctors treating him may never talk to each other. Each one knows what tests and procedures he or she has ordered, but, except by looking at the patient's chart, has no idea what the other doctors are investigating. One primary care doctor who reviewed this proposal said "The first item I address with new patients in my office is to try to get them off as many drugs as possible; when a 70-year-old is on 11 meds you better believe there are many unintended interactions."
Limit the Cost by Limiting the Cost
Right now we have intellectual arms race of the government trying to limit costs by cutting payments to providers for various procedures. Medicare cuts the amount that it will pay for a doctor to talk to a patient. The doctor decides to make sure that at least half of the patients seen will need something cut off with a scalpel, which can be billed to Medicare as a "surgical procedure". In While America Aged , wags noted that after General Motors added podiatry to its workers' and retirees' health care coverage, workers had their feet operated on one toe at a time.
We currently spend about $8500 per year per American on health care. Japan spends about $2,700 and her citizens live much longer than Americans. After a public debate, we would decide affirmatively how much of our tax dollars we wanted to spend on health care. Suppose that we decided that it should be an average of $2,000 per person on the public clinics. Let's further suppose that all 300 million residents of the U.S. signed up. The annual cost would be $600 billion. How does that compare to current government spending? Medicare and Medicaid alone cost over $800 billion and cover only a fraction of the U.S. population.
Would it be possible to provide basic health care for only $2,000 per person here in the U.S.? Health insurance right now for a middle-aged American costs closer to $3,000 per year for a basic plan, but our clinics are going to exclude a lot of expensive tests and procedures that these plans cover. We're also going to eliminate most administrative costs by folding the insurance company into the clinic. Now they won't each have to hire staff to fight with each other.
We can make the Patient the Customer
One reason why the health care industry provides such appalling service is that the patient is seldom the customer. You might pay $16,000 per year to insure your family of four and think of yourself as entitled to some deference from a vendor (i.e., doctor or hospital). But the vendor will be getting paid by the insurance company and has no reason to care what you think. The vendor can keep you waiting for three hours, make a lot of mistakes and not apologize for them, etc. You probably won't switch HMOs or insurance companies due to the hassle and the fear of being denied due to a preexisting condition.
Were the health care system to be reformed along the lines proposed in this article, the patient would almost always be the customer. The public-only patient would have the freedom to switch clinic/HMO annually. The wealthier patient who was buying some services on the open market would by definition be the customer.
Reform Suggestion Two: Increase the Supply of Doctors without Increasing the Number
If we are going to have more patients, we are going to need more doctors. At 2.4 doctors per 1000 residents, the U.S. has fewer physicians per capita than other developed countries. The OECD average was 3.1 per 1000 residents; France has 3.3. We don't have enough doctors for our current system, especially doctors who do primary care.
We can increase the supply of doctors to some extent without increasing the number of doctors. How? A doctor today has to spend time choosing an IT system, figuring out which insurance networks to join, filling out insurance paperwork, arguing with insurance companies, interviewing assistants whose job it will be to fill out insurance paperwork, argue with insurance companies, etc. The Byzantine complexity of the American medical system significantly reduces the amount of time that our doctors have to practice medicine. If we make it easy and simple for a doctor to treat patients while earning a reasonable salary, the existing group of doctors will have more hours in which to see patients.
Streamlining insurance and litigation also increases the supply of doctors. If fewer people sign up to private insurance, once a universal public care system is available, the insurance companies won't need to employ so many MDs to review claims. If medical malpractice cases are taken out of the tort system, we will have fewer doctors tied up serving as expert witnesses (at least one on both sides of each case).
Consider a doctor who moves from New York to Massachusetts because of a spouse's sudden job transfer. This fully trained doctor might have to spend some months out of the labor force because he or she has not completed the paperwork for being licensed in Massachusetts (whose Board of Registration says on is Web site that it "usually requires a minimum of 4 months" to get a license). Each of 50 states has a physician licensing board, which itself employs physicians. You might think that these boards protect patients, but in practice physicians who've committed serious errors in one state are typically able to get licensed in one of the 49 other states. A federal licensing system for physicians will (1) make it easier for doctors to work wherever they happen to move, (2) enable doctors who are spending time on state licensing boards to go back to seeing patients, and (3) make it tougher for an incompetent doctor to shop around for a new state in which to get licensed.
Reform Suggestion Three: Increase the Supply of Doctors by Increasing the Number
According to the Wall Street Journal, April 4, 2008, "The U.S. went more than 30 years without a new med school". (source) With a population growing at 1 percent per year, the 131 current medical schools have become ridiculously insufficient and finally there are a few startups. The dean interviewed by the Wall Street Journal estimated the cost of starting up a new school at approximately $100 million, including dormitories, classrooms, and laboratories. In other words, for the cost of bailing out GM and Chrysler, we could have financed 1000 new medical schools. Since the U.S. government is the largest purchaser of services from physicians, it makes sense for the federal government to provide financing for perhaps 100 new medical schools. The government should provide a standard curriculum, including online textbooks, and a standard staffing plan, the use of which would guarantee accreditation.
New medical schools won't alleviate our immediate shortage, however. For that we need to make it easier for foreign physicians to immigrate to the U.S. and practice. If we said that we would admit a doctor from any country whose life expectancy was at least within 2 years of the U.S. that would encompass MDs from roughly 70 countries (source). Currently a foreign doctor must surmount a tortuous bureaucracy and a visa lottery to get into the U.S. (the 9/11 terrorists were all in the U.S. legally, but the U.S. Citizenship and Immigration Services does a great job of keeping Australian doctors out). Once here, he or she must repeat much of the training that was already completed back in the old country, e.g., Australia, Sweden, France, or Switzerland. Let's replace this a virtually automatic 5-year work visa, a one-year transition training program, and a challenging exam at the end (for specialists, perhaps simply require them to become Board-certified, something that U.S. physicians are not required to do).
Fairness
Fully implemented, this proposal would leave the U.S. with a U.K.-style public/private two-tier health care system. The rich would have access to more doctors, more procedures, more tests, more drugs, and fancier facilities. Isn't it every human's right to equal quality medical care? Shouldn't the standard of care be the same for a hobo as for an AIG executive?
The current system aspires to fairness but falls far short. Barack Obama travels with a personal physician and nurse (story). Back at the White House, he and other top officials have four doctors "steps from [the Oval Office]". Suppose that a surgeon in France has developed a life-saving procedure. A rich American can get in a private jet and visit that surgeon, paying for the operation out of pocket; the average American might have to wait 5 or 10 years until a surgeon in his or her region had been trained to perform the operation.
Some unfairness is a necessary component of any system involving humans. If 1000 people buy 1000 Honda Accords tomorrow, each will have a very similar driving experience. If 1000 people visit 1000 doctors tomorrow, each will have a very different experience. Some doctors will be smarter or more skilled than others. Some doctors will be better rested and hence able to do a better job than others. It is literally impossible to construct a system in which everyone gets equally good care. Thus we might as well construct a system in which everyone gets good care without bankrupting the nation.
Reform Suggestion Four: A Basic Standard of Care
Currently the standard of care is "we'll do anything that might conceivably prolong a patient's life regardless of the cost, regardless of what else society might have done with that money, and regardless of risks and suffering to the patient." When we're done, we'll send Medicare, Medicaid, or Blue Cross a fat bill, even if the patient goes home in a box, just as expected. If a clever doctor came up with a $1 million operation that would provide a one-year life extension for anyone about to die, our present insurers would essentially be obligated to buy that operation for every sick or old American. A 105-year-old would have his life extended indefinitely at a cost of $1 million per year to working-age Americans.
As part of the reform, the government needs to define a basic standard of care to which vendors must adhere as a minimum. In some ways this standard of care might be higher than the present average, e.g., in requiring hospitals to use checklists and better handwashing to avoid errors and infections. In others, the standard of care could be arguably inferior. We'd need to gather experts in all fields of medicine and economics to figure out which therapies were the most cost-effective in terms of improving peoples' lives. The standard of care would be continuously reevaluated as new procedures, devices, and drugs became available. It is probably safe to assume that a taxpayer-funded patient with terminal cancer won't have a series of exhausting and expensive operations that might prolong life by a few months, that a 95-year-old won't have a monthlong $250,000 stay in an intensive-care unit, and that someone who falls off a bike and has a headache won't get an MRI immediately the way that people currently do in cities where the physicians own the MRI.
Competition among clinics/HMOs should result in a higher standard of care being offered by some in order to attract consumers. As noted above, because the health care industry has never been competitive, we have no idea what cost-savings might be possible. If McDonald's were run as incompetently as a typical hospital, a Big Mac would cost $25. An increased supply of medical doctors might also result in a higher standard of care being deliverable than is presently possible for a reasonable cost.
Remember that nothing stops someone from spending his or her savings on additional tests or procedures, or on private insurance that might cover such expenses.
Reform Suggestion Five: Shut down the Veterans Administration Hospital System
Now that every resident of the United States is entitled to health care, we can shut down the Veterans Administration health system that costs taxpayers $50 billion annually. The vast majority of patrons of the VA health care system are veterans whose medical needs are no different than any civilian's. For those veterans who have specific combat-related injuries, the military can pay for supplemental care in private facilities. For soldiers who have combat trauma that requires critical care, we already have excellent military-run hospitals that specialize in such care. We can take any VA hospital units with combat trauma experience and transfer them to the active Department of Defense hospital system.
Reform Suggestion Six: Scrap Government-mandated Health Care IT
Information technology could make medicine safer, more efficient, and cheaper. Suppose, for example, that the government ran a central medical records system for all of the people signed up to the basic healthcare plan. Rather than investing in an IT system, a clinic or individual physician who wished to participate in the government-sponsored system could use this central system. Consider an individual doctor. She sets up shop in a small town, buys a PC for $300, signs up to broadband for $29/month, and is done with her IT selection and investment. When a patient comes in to see her, she looks up the patient's history, plans a treatment and types in what she did. The patient's record is updated and the physician gets paid for her time. That's how computer systems could save the country money, but it is not how the federal government is proposing to use computers.
The current federal system mandates that physicians use an electronic health record, but provides no guidance or assistance. Consider an individual physician setting up an office. She needs to choose among 30 different software packages, sold and supported by 100 different vendors. This is the kind of IT choice that, at a hospital, would be made by a committee of eight experts doing research and getting demos over a period of 9 months. Our physician, who has no training in software or IT management, is expected to make an informed choice in between seeing patients. When she does make her choice, she'll pay $30-100,000 for the system and between $10,000 and $100,000 per year for maintenance, updates, and system administration.
What about the larger implications for societal efficiency? There are at least 100 comprehensive yet different patient health record systems out there, each with a different way of storing the same information. The government is mandating that these data be exchangeable, but has thus far provided no standards for the exchange. With 100 different systems out there, there are roughly 5000 possible pairs of heterogeneous data models. We would need all of the programmers in India to write 5000 data converters to usher in the era of electronic health records.
If privacy concerns make it untenable for the government to run an efficient electronic medical record system for the health care providers being paid with tax dollars, let's at least have the government fund a few open-source electronic medical record projects. The goal should be a simple one: an individual physician or small group should not have to endure any IT expense beyond purchasing a PC and cable modem.
Given the hopeless state of the health care IT industry right now, with hospitals spending $70 million or more on systems that doctors find inferior to paper, perhaps the best thing the government could do is stop pushing the industry to buy more software. At least until the average health care application works as well as a free Google application, society is better off not buying any more of this inferior product.
Reform Suggestion Seven: Eliminate Tax Deductions for Health Care Expenses
Do we want Americans to spend more and more money on health care? If not, why do health care expenses get favorable tax treatment? We made mortgage interest deductible and ended up with the world's most ridiculous mortgages, as well as the world's most inflated real estate prices. We've made health care expenses deductible and that probably contributes to the fact that we have the world's most inflated health care prices.
The typical American, after this reform plan is implemented, won't have significant health care expenses. He or she will get a voucher, hand it over to a clinic or HMO, and put aside a few extra dollars for aspirin. An executive who enjoys a lavish company-funded concierge medical service should not be able to stick a Walmart worker with part of the cost.
Reform Suggestion Eight: Simplify Medical Malpractice Dispute Resolution
Estimates of the cost of malpractice insurance, lawsuits, and defensive medicine range from 2 percent to 10 percent of our current total health care expense. If we accept the 10 percent figure, that means it is inching up toward $300 billion per year, perhaps enough to pay half the cost of a reasonable health care system for every American.
Consider the ludicrous nature of our current system. Imagine that you're a jury on a case involving a baby with Cerebral Palsy. John Edwards, the personal injury lawyer turned senator, is channeling the thoughts and voice of the fetus. You, who has never had any training in biology, chemistry, neurophysiology, medicine, or epidemiology, are listening to evidence about what happened during a mother's labor and delivery. You're listening to experts hired by each side trying to educate you about the causes of cerebral palsy. The Wikipedia page says "Despite years of debate, the cause of the majority of cases of [Cerebral Palsy] is uncertain." Scientists who've worked on this for decades cannot agree on what causes the condition, but you're supposed to figure it out in a week or two. As part of your service as a juror, you are precluded from doing any research on your own. You, however, are going to decide whether or not the horribly sick child gets $10 million or nothing. Good luck.
Patent appeals aren't heard by a general purpose judge and no jury is involved. These highly technical cases are heard by a special court. We could do the same for medical malpractice, thus making the process less of a lottery. Cases heard before a judge with specialized training in the process of medicine would be less likely to depend on whether the jury sympathized with the kindly physician or the horribly injured patient. The malpractice court judge would have the ability to hire independent experts to conduct analysis for the court, rather than simply relying on expert witnesses hired by the plaintiffs and defendants.
Our current malpractice dispute resolution system doesn't serve anyone well, except perhaps some lawyers. Most victims of medical malpractice are unable to find a lawyer to represent them because the cost of litigation in conventional court is so high. Unless you've been reduced to a vegetable or killed by a doctor, it is unlikely that you'll ever get an apology from the health care provider who screwed up, much less a refund or compensation. We need to make it easier for victims of less-than-epic mistakes to get compensation, if only to encourage clinics and HMOs to do a better job. We also need to make the costs of losing a malpractice dispute more predictable for the clinics and HMOs, capping punitive damages and pain and suffering awards.
How Do We Ensure Quality?
Some of the proposals advanced by the Obama Administration and Congress have included various government committees and initiatives that aim to improve the quality of health care services. If this reforms proposed in this article were implemented, what would be the quality control mechanism?
We now have a more or less standardized product that consumers are buying, i.e., one year of health care to at least the basic standard. When comparable products are available at similar prices from competing suppliers, the marketplace should ensure that the highest quality methods and suppliers bubble to the top. We don't need a government committee to figure out if a Honda Accord is better than a Toyota Camry. They're both pretty good, first of all, because inferior designs have been driven out of the market. Despite the horse-trading culture of car dealers, the prices are fairly transparent. Because the products are available nationally, a variety of magazines and Web sites are able to help consumers figure out which product is best for them.
If the government, as the main buyer of health care services, wishes to help consumers compare, it could define a metric of health, encompassing such factors as blood pressure, pulse, body mass index, cholesterol levels (before tweaking by statins), age, chronic conditions, medications taken daily, alcohol and tobacco consumption, any positive tests for cancer, etc. Each clinic/HMO would measure its customers upon entry into their progam and at every checkup. If the data were published it would be possible to compare different clinics at improving their customers' health (a patient who died would score a 0!).
How come it has been so hard to ensure quality in the current American health care system? The patient is not the customer and competition is very weak, so suppliers make very limited attempts to communicate with patients. Prices are not published, so nobody can figure out if something is a good value. If no prices were available, you might think that a Honda Accord was kind of crummy compared to a BMW 7-series sedan. Upon finding out that the BMW costs four times as much and consumes twice as much gas, your opinion of Honda's engineers would probably improve. If the automobile industry were like America's health system they would say "It is every American's right to have the best car that can be constructed with 2010 technology, regardless of cost." But the average consumer would rather have the Honda Accord and and $60,000 in walking-around money than the BMW.
How Does the Health Care Industry Prosper?
With all of these proposed changes in place, how could the health care industry prosper? Thanks to universal coverage, the industry will have more paying customers, but the government basic rate won't be as high as what the industry currently gets from Medicare and Medicaid. How can insurance companies survive now that every American will have buit-in catastrophic health insurance?
The answer is product and service innovation. Big changes in technology or markets do sometimes trip up companies that fail to innovate. The record companies are a familiar example, out there trying to sell the same product that they did 120 years ago, i.e., a physical embodiment of a sound recording (in 1890 it was an Edison cylinder, then an analog disk through the mid-1980s, then a digital Compact Disk). Sales are down and the industry complains about Internet file sharing. The average consumer, though, wouldn't clutter his or her house with CDs even if they were free. The consumer's home entertainment budget is spent on (1) subscriptions to cable TV, Web sites, and satellite radio; (2) video games, and (3) movies on disk at ever-improving quality (contrast to the sound recording industry, which went from the CD to low bit rate digital recordings on iTunes (a computer application that they weren't even able to build for themselves!)). A movie that cost $150 million to produce may sell on Blue-ray for $9-15 or is delivered on demand for $4 over FiOS. Why would we expect any consumer to pay $18 for a sound recording?
There is no law that says the health care industry needs to display the same lack of innovation that the recording industry does. And universal coverage doesn't mean that there is nothing left to sell. Even today insurance companies are very successful at selling supplemental insurance to seniors eligible for Medicare.
Aside from supplemental insurance, the insurance companies could promise to steer consumers to the most qualified doctors. Right now a doctor being part of an insurance company's network probably means that he or she is willing to accept the company's derisory financial terms. The insurance company, however, by looking at rates of complications and other outcome measures, probably has a pretty good idea of who the best providers are in a region and could make good money by selling that information to consumers, either directly or in the form of a "only the best doctors" supplemental policy.
Health care providers could sell more convenience and luxury to consumers. There is hardly a family in America whose transportation needs would not be met by an $8,000 Chevy Malibu auctioned off by a rental car agency, yet the car makers have no difficulty in selling $25,000 new cars or even $50,000 pavement-melting SUVs. You don't have to be a genius to cook a basic dinner from raw ingredients, but supermarkets have no trouble charging 2-3X more for already-cooked food.
Let's start with convenience. A doctor or nurse could equip a van or motor home with all of the basic primary care or pediatric equipment and supplies and drive around to patients' houses. You can get a dog groomer or veterinarian to come to your house, why not a doctor? With modern computer software and wireless networks it should be possible for a big HMO to route a doctor from house to house so that time lost in transportation is minimal. By visiting the patient at home, the doctor may be able to get a better sense of what might be wrong with the person.
Time of day is another opportunity for the health care industry to make money. You can go to the supermarket at 7 pm. How come you can't go for a doctor's appointment at 7 pm? A lot of patients would pay extra to avoid having to take time off work or school.
Many patients would pay a substantial sum in order to avoid being bounced from building to building and from day to day. If a doctor thinks that you need an opinion from a specialist, why can't that specialist walk down the hall, come into the exam room, and look at you then and there? This saves the specialist from having to write a letter back to your primary care doctor, since your primary care doc is still in the room.
Communication is something that patients have already demonstrated a willingness to pay extra for. Patients on concierge medicine plans can call their doctor, or at least a doctor, 24/7 and expect the person who picks up the phone to know their medical history.
What About All of those Rich Doctors?
Would health care reform as proposed here keep doctors from getting rich? Actually, despite the larger number of doctors permitted to practice in the U.S., some existing doctors should be able to earn considerably more.
Right now the best doctors cannot effectively market themselves to patients and therefore cannot command higher prices than average or below average doctors. A doctor's customers are clerks at insurance companies and bureaucrats at Medicare. All these folks care about is how much she charges; they don't care whether or not she is more effective at curing disease. Consequently, doctors who barely meet the minimum standards for their specialty might get paid almost as much as superb physicians in the same specialty.
A fantastically gifted primary care physician today would be lucky to earn half as much as a heart surgeon who kills half of his patients. Our system rewards doctors who cut, slice, and blast with lasers. It doesn't reward doctors who restore us to health. Our health and well-being has no value to an insurance company or Medicare and therefore a physician cannot charge anything for making us healthy. A savvy consumer, on the other hand, might be delighted to pay a significant sum to a primary care physician who effectively coordinated the efforts of specialists, as needed, and kept the consumer healthy.
The doctors who have become rich by opening a chain of clinics and taking on business risk should continue to prosper as long as they can deliver services competitively. The doctors who have become rich by investing in hospitals or MRI facilities and then referring their patients to those facilities will surely see their incomes fall.
Freed from the bureaucratic hassles of dealing with insurance companies, doctors of average ability and ambition who see a lot of private patients would immediately realize a huge improvement in profitability if only because they could replace most of their billing staff with a simple credit card machine.
Summary
Anything that is sufficiently expensive is bad for our health. Nothing that American society buys is more expensive than health care. By crowding out time and money that could be devoted to things other than working at our mostly sedentary jobs, the American health care industry reduces the overall health of Americans.
To dig us out of the hole that we started digging for ourselves in World War II, when the current American system of health insurance began to take root, here is a comprehensive plan:
provide a reasonable standard of health care for all Americans and visitors to our country, paid for with tax dollars
the government pays for annual care of a resident to at least a basic standard; the government is not on the hook for individual procedures or tests nor is it obligated to pay for exciting new procedures, tests, and drugs
make it easy for doctors to practice medicine
increase the supply of physicians by making it easy for foreign-trained doctors to work in the U.S., and making it easy for universities to start new medical schools
eliminate the VA hospital system
abandon the federal mandate for health care providers to buy hundreds of disparate mutually incompatible information systems
eliminate special tax treatment for health care or health insurance expenses, whether paid for by an employer or an individual
move medical malpractice into a specialized court with no jury
Comparison to Obama Administration and Congressional Proposals
It is difficult to compare this proposal to what's being proposed by the Obama Administration at http://www.healthreform.gov/ because the government's Web site doesn't say what should be done, i.e., there is no actual Obama Administration proposal other that "reform". It talks about problems and costs associated with the present system and how they are intolerable. Providers are overbilling Medicare, for example, and "reform" is going to stop these clever people from being clever in the future.
America's Affordable Health Choices Act of 2009, H.R. 3200, a bill currently before Congress, is more specific. Looking at Section 100(c) of this bill, we find that nothing is going to happen until the year 2013 ("Y1" = 2013). In other words, Congress is rushing to enact more than 1000 pages of legislation, without anyone having time to work out the costs or implications, because reforming health care is critical to reestablishing continued economic growth in the U.S. On the other hand, the problem is not so bad that it can't wait until January 1, 2013. This gives the politicians who vote for or sign the bill more than three years to take credit for having "reformed" health care before anyone starts to suffer from the consequences of these changes. This makes health care reform a bit like increasing pensions for public employees. A politician gets a boost in popularity that lasts long enough to ensure reelection; the taxpayers get stuck with paying the bill for the next 30-50 years (see While America Aged for how generous pension benefits granted by Robert Wagner as part of mayoral reelection efforts of 1958 led to the city's near bankruptcy in 1975).
As best as I can tell, every group that makes a lot of profit from the current system has hired enough lobbyists and supplied enough cash to politicians that their way of doing business won't be significantly changed. Insurance companies will continue to operate as oligopolies with byzantine rules that enable them to give doctors and customers the infinite run-around. Existing doctors won't face competition from a large crop of graduates from new medical schools or from foreign doctors in significant numbers. Hospitals will get paid by the procedure. Personal injury lawyers will be able to sue in the same courts and present cases in front of the same juries. We thus have the spectacle of Congress saying that they're going to "reform" the health care system, except that there can't be any significant change for doctors, hospitals, lawyers, or insurance companies. What is left?
Unless one has a morbid interest in where one's tax dollars go to die, it is tough to come up with a reason to pay attention at all to the current debate in Washington. The "reform" currently being discussed is simply the government printing money to give to insurance companies to put more people into the world's least efficient system of health care administration.
Comments from Medical Doctors
Before making this document public, I circulated it to some of friends who are doctors. Here were their reactions:
in government-run or union-organized hospitals, exactly the same services could be delivered at 50-70% of the current cost, merely by dividing labor and working more efficiently.
insurance company paperwork is an enormous drain on physician time and energy, despite the large staffs employed by physicians hoping to insulate themselves from this debacle
there should be more emphasis on patient responsibility; citizens of normal weight should not have to subsidize the obese and all of their expensive problems
this article understates the costs and the inefficiencies associated with health care IT
More
· "The Cost Conundrum", by Atul Gawande in the June 1, 2009 New Yorker; good explanation of how we currently manage to spend so much
Reader's Comments
2 more: - Add a requirement for doctors to publish their prices for procedures and charge the same price to everybody independent of insurance status. I have a high deductible plan and whenever I ask a doctor about cost I rarely get a straight answer. I am starting to suspect that they are making up their prices based on what they they think a patient can pay. - Publish all available quality numbers. Doctors will complain that they are misleading and confusing but this will be much better than having nothing as we do now. Insurance companies probably have these numbers and all of them should be published IMO.
COST OF BILLING
If I had been writing that article, I would have emphasized more the high cost of the current billing system.
When I was working in medical computing (the early 1980's), a number people threw around was that every item on a patients bill cost $7 just for the billing. So those $7.50 bandaids people got billed for when they went to the Emergency Room were in fact correctly priced.
I'm sure the number is different now. I would guess higher, for reasons you discuss.
This is related to what your physician reviewers said about how much physician time is spent on billing, but physicians are a small part of the cost of third-party billing.
PATIENTS AS CONSUMERS
One point that nobody seems to make when talking about the idea of patients as consumers is that nobody who actually provides medical services actually has any idea how much they cost the patient. So even if you wanted to have tests done only if they had a reasonable chance of finding something that could be treated at a reasonable cost, you would find it very difficult to find even the cost to you of the proposed test, let alone of theoretical treatments.
well done.
i assume you've also seen this Atlantic article by now... many similarities.
I hear many people say that Obama is working against a lot of inertia within the American public on the part of people who are satisfied with their health coverage and think they'll be screwed by their automatic inclusion into an enormous government-run clusterfsck of a system to replace it. These people seem to favour an incremental series of changes to our current system, like covering additional people or reworking the rules so insurance companies can't do scummy things like drop people under false pretence when they get expensive, and making the government prove itself on those before going further.
To address these concerns, I think it's really important to emphasise the amount the average US worker is missing in salary just by passing the cost of their insurance on to their employer. A lot of people pay lip service to the concept and say they take it into account when considering the health care question, but I'm really not sure they're appreciating the gravity of the concept.
Yeah, the government might take some additional cash to get this thing rolling--they aren't known for getting things done on time and under budget, for that matter, and cost overruns come out of the taxpayers pockets. But once this thing is passed, you'll instantly be getting hundreds or even thousands of dollars more from your employer every month, immediately. They'll be giving you most or all of what they're spending on your health insurance without having to pay an additional cent to compensate you. Even if you're taxed on it, that's going to be more than enough to sign yourself up for one of the competitively-priced supplemental plans that insurance companies will certainly begin to offer. Or you can just use the government baseline and spend the rest on airplanes, or vacations, or coke and hookers.
You'll have to put in a little more time each time renewal comes around than you put in considering your auto insurance and shopping around, and you're golden.
nitpicks
Compact Disk should be Compact Disc
$150 million to produce sells on Blu-ray may sell for $9 should be $150 million to produce Blu-ray may sell for $9 on Blu-ray ... also, most movies sell for much more than $9 on Blu-Ray, don't they? I'm sure you could find some low-quality overstocked titles at that price but continuing the analogy to the music industry I could find a copy of Mariah Carey's "Glitter" much cheaper than $18. I just wouldn't really want to
Dave: Thanks for the comments. I just checked over at Amazon. On the very first page they are selling a Blu-ray disk of "2001: A Space Odyssey" for $9.99. I believe that it was an expensive productive for its time, 1968, costing $10.5 million at the time. -- Philip Greenspun,
The real reason healthcare is expensive is due to the AMA licensing cartel. This restricts the supply of doctors and drives up the price of health insurance.
All you need is a computer and a compiler to write software. So, the supply of software engineers is determined by the free market.
You need a license from the government to work as a doctor. The supply of licenses is not set by the free market, but by Congress. The supply of doctors is restricted, driving up prices.
If I thought "Doctors are overpaid! I'll go work as a doctor!", I have to go to a State-licensed medical school, pay a couple hundred thousand dollars, and take 10+ years. If I get a license, that's just taking one away from someone else.
It's silly to say "The USA free market health care system failed." The USA does not have a free market health care system, due to the AMA licensing cartel.
I'm highly skeptical of market solutions to health care, because efficient markets require the participation of well informed rational agents. Beyond basic recommendations (break addictions, exercise, maintain a healthy weight), the general public cannot be sufficiently informed to participate well in a health care market. People who are sick or injured (especially the mentally compromised) do not make optimal choices.
As an example: I should get a colonoscopy in the next couple months; I've no idea what the cost/benefit comparison is between traditional and "virtual" (MRI) colonoscopies, so I'm going to do what my doctor tells me to. Individuals don't have the knowledge or means to appropriately reward or penalize doctors. The incentives for insurance companies are perverse - the faster a sick customer gets dropped or dies, the better for the company. Information about the performance of insurance companies is difficult or impossible to obtain, and they often hold an effective monopoly. At the very least, government needs to be heavily involved as a regulator.
There's an interesting article on an alternative payment model in this month's New England Journal of Medicine entitled "Building a Bridge from Fragmentation to Accountability — The Prometheus Payment Model".
As described by the authors "The model encourages two behaviors that fee for service discourages: collaboration of physicians, hospitals, and other providers involved in a patient’s care; and active efforts to reduce avoidable complications of care (and the costs associated with them). It accomplishes these goals by paying for all the care a patient needs over the course of a defined clinical episode or a set period of management of a chronic condition, rather than paying for discrete visits, discharges, or procedures."
Having dealt with the health care system with serious illnesses in myself and both my aging parents I believe that you are underestimating the difficulty of evaluating quality of care.
It is true, as you state, that the incentives currently are skewed in favor of high tech procedures and expensive medications, but once you remove these incentives, you are still left with the problem of defining and delivering quality care.
Most serious medical problems have a technical dimension, a psychological dimension, and a cultural dimension and its difficult to evaluate care on all these levels.
As I think you are very smart, I would like to know your thoughts on how to enhance and maintain high quality medical care. -- Brian Gulino,
Brian: "Standard of care" is not "quality of care". The standard of care says whether or not a patient who complains of mild and occasional headaches gets an MRI. Quality of care is something that patients would determine for themselves in a competitive market, perhaps with the assistance of neighbors, magazines, and online communities. Remember that long before insurance companies or Big Government there were some doctors who had good reputations and were sought-after.
The government can help make the market more efficient by collecting and publishing data from all of the clinics/HMOs, but the primary quality control mechanism in my proposal is the market. If people aren't happy with a provider, they will switch for the next year. If a provider kills all of its patients, they won't get their voucher checks for the next year. -- Philip Greenspun,
India has Universal Free Health Insurance aka Aarogyasri and it is near perfect system in place. http://tr.im/lKB3 -- Police Officer,
The current state of the art for government health care (Medicare) electronic submisssion is a 1970s Bulletin Board System, or BBS. A dialup line (no internet) with text, command line, menus.

Health Insurance Plan

Senate Finance Committee Rejects Government-run Health Insurance Plan
The Senate Finance Committee continues to refine its health care reform legislation. Today it broke ranks with other Congressional committees with jurisdiction over health care reform by defeating amendments to create a government-run health plan. The debate was passionate, but ultimately enough Democrats joined with Republican Senators to defeat two attempts by the panel’s more liberal members to insert public option language into the bill.
Keeping the public option out of the bill was a major victory for Senator Max Baucus, chair of the Finance Committee. While acknowledging that a public option would “hold insurance companies’ feet to the fire,” his opposition was based on the goal of enacting health care reform this year. According to ABC News Senator Baucus believes health care reform including a government-run program cannot pass the Senate.
Senator Jay Rockefeller insisted, however, that a public health insurance plan was absolutely essential to meaningful reform. Failure to to create a public, non-profit plan to compete with private carriers, the Associated Press reports the West Virginia Democrat as saying, “was a virtual invitation to insurance companies to continue placing profits over people, and he predicted they would raise their premiums substantially once the legislation went into effect.”
Senator Baucus countered that the legislation being developed by the Senate Finance Committee includes numerous consumer protections, including a provision to prevent insurance companies denying coverage based on pre-existing conditions. None of the lawmakers on either side of the aisle spent much effort in defending the behavior of private insurance companies. Senator Baucus said he agreed with the intent of the Rockefeller Amendment to “hold the insurance industry’s feet to the fire,” according to the Washington Post. The Associated Press quotes Senator Jim Bunning as observing that “the private sector is not doing exactly what it should do with medical services.”
Republican members of the committee were unanimous in their opposition to public options. The Washington Post quotes the ranking GOP member of the panel, Senator Charles Grassley, as warning that a government plan “will ultimately force private insurers out of business” and that “The government is not a fair competitor. It’s a predator.”
The first public option amendment, offered by Senator Rockefeller, would have permitted the government-run plan to set reimbursements to medical providers at levels paid by Medicare for the first two years. (After that period, I believe the Senators proposal would have permitted the public medical plan to, like Medicare, impose rates on providers). It should be noted, Medicare often pays doctors and hospitals less than the cost they incur providing services. The five Democrats joining with Republican committee members to defeat this amendment were Senators Baucus, Thomas Carper, Kent Conrad, Blanche Lincoln, and Bill Nelson.
Senator Charles Schumer then proposed an amendment that would have required the public plan to negotiate reimbursement rates with providers, much as private carriers do today. Three Democrats – Senators Baucus, Conrad and Lincoln – voted against accepting this amendment.
I’ve maintained for some time that a government-run health plan was unlikely to be part the health care reform plan passed by Congress. The Senate Finance Committee’s rejection of this provision increases the likelihood of this outcome, but the debate will continue. Senator Schumer, for one, pledged to continue the fight.
"’The present system is broken’" the Washington Post reports him as saying. “He said he was pushing for a public option not for ideological or symbolic reasons but because ‘costs are going through the roof.’ And he expressed confidence that, ‘with some work and some compromise,’ proponents of the provision eventually could get 60 votes on the Senate floor. ‘We are going to get at this, and at this, and at this, until we succeed, because we believe in it so strongly.’"
With polls showing 65 percent of the public support a government-run health plan operating like Medicare to compete with private health insurance plans, President Barack Obama continuing to argue for a public option, and Speaker Nancy Pelosi claiming the House was unlikely the House would pass health care reform that did not include a public option, this debate is far from over. Assuming the Senate Finance Committee moves forward a reform package this week, the next step will be for it to be integrated into the bill passed by the Senate Health, Education and Pensions Committee – legislation that does include a public option.
Getting health care reform is a long hike. Today’s vote in the Senate Finance Committee is a step along the way – albeit a very significant step indeed.
Rationing and Other Realities of America’s Health Care System
Later this week the Senate Finance Committee will likely vote out a health care reform bill. With this action, all five committees of jurisdiction in the House and Senate. Speaker Nancy Pelosi and her leadership colleagues will begin the arduous process of combining the various flavor of reforms pass by three House committees into a single package the full House can consider. Senate Majority Leader Harry Reid and his colleagues will be doing something similar with the two reform bills passed by Senate committees. This process will unfold as an even greater storm of bombast and hyperbole is unleashed than the public has already been forced to endure. Before the debate gets too loud, I thought it might be helpful to put a few of the issues in perspective.
Rationing:
Health care in America is rationed. yes, rationed. This being America, it looks different than the rationing available in Canada, Great Britain, and elsewhere. In America, rationing is based primarily on ability to pay. If you have money and/or insurance coverage, you have more options concerning what health care you get, when you get it and where you get your health care than if don’t. Anyone who says otherwise is trying to sell you something.
Because we ration health care in America, it does not follow that anyone goes without some coverage. We have a safety net. But the quality, timeliness and convenience of your care in America depends on your ability to pay for the cost of the care you receive – or to have a third party (i.e., an insurance company or government health plan) pay the cost for you. Sharon Begley, a Senior Editor at Newsweek makes this same point, calling the rationing debate “ignorant and duplicitous.” Every health care system in the world rations care in some way. (Another recent Newsweek story describes how a country’s health care system – and approach to rationing – reflects the countries’ culture). America is no exception. And it won’t be after reform is passed.
Someone is Always Between You and Your Doctor:
Apparently, in heaven or somewhere nearby, the health care you receive is determined solely and exclusively by your wise, cost-effective physician. No outside factors intervene. And certainly, no one is looking over doctors’ shoulders, second guessing decisions or, heaven (or somewhere nearby) forbid, denying coverage. That this is not the way it works in America’s health care system today – or the way it will work tomorrow regardless of what reforms are enacted – does not stop lawmakers from declaring this heavenly dream is their goal.
Liberals and conservatives are united in their defense of keeping the space between doctors and their patients interference-free. The only difference between ideologues is who they accuse of intruding. Liberals claim insurance company bean counters are the culprit; conservatives warn against granny-killing, unfeeling government bureaucrats getting in the way. The fact is someone always has been, and always will be, between patients and doctors.
Both are correct to a point. Both carriers and the government come between you and your doctor. A tragic case that became political fodder for former Senator John Edwards brought this reality to light. An insurer denied a liver transplant for a California teenager because the procedure was considered experimental given her circumstances. Without assurance they would be paid, medical providers would not perform the transplant. After intense public pressure the carrier relented, but before the operation could take place the patient died. As I said, a tragic story used by Senator Edwards to castigate the insurance industry. What he never mentioned it, but the Sacramento Bee did, it that Medicare and Medicaid – public health programs – would also have denied the treatment as experimental. Not every treatment, procedure, service or medication requested is safe, necessary or effective. There will always be an umpire determining what care is responsible and what is not, reform or no reform.
Not all umpiring is bad, however. Nor does applying comparative effectiveness research to medical care (and, consequently, eliminating waste and unnecessary treatment) require handcuffing doctors or forcing them to treat patients from a menu. The experience of the Geisinger Health System in Pennsylvania, among others, has demonstrated that sharing knowledge concerning effective protocols for treating conditions can lower costs while still allowing doctors to determine appropriate care.
Increasing Medical Costs Cause Increasing Premiums
Health insurance premiums increase far faster than general inflation or wages. As USA Today reported recently, since 1999, health insurance premiums for families rose 131 percent. Inflation during that time increased by just 28 percent.
Many politicians and pundits place the blame for this disparity at the feet of greedy health insurance executives. Never mind that profits and administrative costs, as a percentage of premium have remained roughly constant over time. Apparently health insurance premiums are set by stock brokers, not actuaries.
The reality is medical costs drive health insurance costs. And unless Congress address this dynamic with more than rhetoric, their reforms – whatever they may be – will flounder. What can Congress do about it? There’s no shortage of ideas.
Kaiser Permanent CEO George Halvorson, wrote a book “Health Care Reform Now!” that examines the elements of medical care costs and what can be done to restrain them. Among Mr. Halvorson’s recommendations: create a medical care delivery system that allows for quality measurements, an appropriate approach for the treatment of the five chronic diseases that account for more than 50 percent of medical spending in the country; and change the motivation for medical providers to provide more care rather than the right care.
Similar recommendations for reducing medical inflation are offered by Dr. Albert Waxman, a CEO of a venture capital firm focusing on health care related enterprises. In a guest blog posting on CNBC.com, Dr. Waxman calls for replacing “fee for service” payment models with performance-based reimbursement and providing incentives for healthier lifestyles. (Full disclosure: Dr. Waxman’s VC firm is funding a client of my consulting firm).
The challenge in cutting costs in medical care is that opponents of reform – or of the reformer – will claim such changes will lead to rationing and put government (or the insurance companies) between doctors and their patients. When listening to these charges, however, it might be useful to remember: it’s not whether there will be rationing of medical care in America, but how we will ration care. And it’s not whether someone will evaluate whether the treatment our doctors recommend or not, it’s what this evaluation will be based upon and how it is applied.
We can have health care reform that reduces costs and increases access. Doing so will require facing facts concerning the status quo, not ignoring them.
If You Could Ask Just Three Questions …
And now for something completely different: Imagine you’re a health insurance broker on a plane to somewhere. It’s not until the captain announces you’re approaching your destination that that you realize the person sitting next to you is a key player in the health care reform debate. Maybe she’s a lawmaker, an analyst at the Congressional Budget Office, a deputy in the White House, or a prominent policy wonk. Numerous questions occur to you, but you only have time to ask just three.
You realize a lot of people are talking about the details of health care reform (What legislation is likely to pass? When will its provisions take effect?). What very few discuss pertains to distribution (Do you see value in the services of brokers in today’s system? What role should brokers in a reformed health care system? That kind of thing). This is your chance to ask. What would your three questions be?
Between now and September 26th (Saturday for those keeping track) please list your three questions by adding a comment to this post. Starting on Sunday and at least through Monday (September 27th and September 28th) I’ll post a survey allowing visitors to this blog to vote on the questions submitted. Then we’ll see if we can’t provide answers tor some of the more popular questions.
Every reader of this blog is invited to participate in this exercise regardless of whether or not you’re a broker. If you can, please try to keep the questions focused on distribution (I know, with everything going on, that could be tough).
The plane is descending. You’ve got time for three questions. Ask away.
Senator Baucus Reaches Out to Liberals and Moderates on Health Care Reform
Posted by Alan on September 23, 2009
The Senate Finance Committee has embarked on its long journey to amend and refine the Chairman’s Mark of America’s Healthy Future Act of 2009. While there’s a lot of attention being given to the fact that committee members have submitted over 500 amendments that number is less impressive than it may seem. Many of these proposed changes are technical in nature while others are duplicative. Besides, it’s not the number of amendments that matter, it’s the substance of them that determines the scope of the task facing the committee.
The task is great. Three ideologies are at play on the committee: conservative, moderate and liberal. While conservatives will have their say and no doubt get a few of their proposals added to the bill, it is moderates and conservatives – most all of them Democrats – who will truly shape the final outcome. Most Republicans have made it clear they will vote against any bill that resembles the Chairman’s Mark. This effectively removes them from the mix, leaving the shaping of the legislation to a tug-of-war between moderates and liberals.
Senator Max Baucus modified his Chairman’s Mark to address criticism from liberals and to reach out to some moderates.
For example, Senator Baucus’ health care reform plan requires all individuals to obtain medical insurance and provides a premium subsidy to help make the coverage affordable for lower-income households. Originally, those subsidies were designed to cap premium costs at three percent of a household income for those making 100 percent of the Federal Poverty Level rising to thirteen percent of household income for those households earning 300 percent of the FPL. Senator Baucus modified his original proposal to “lower the maximum amount of income that families would contribute to their health insurance premiums to two percent of income for those at 100 percent of the Federal Poverty Level …” He also increased the number of Americans eligible for those subsidies to households earning 400 percent of the FPL ($43,320 for an individual; $88,200 for a family of four) and capped their premium costs at 12 percent of income — $10,584 for a family at 400 percent of FPL. (Page 6 of the Modifications to the Chairman’s Mark). To illustrate how the subsidies under various health care reform bills work, including the modified version of Senator Baucus’ proposal, take a look at the nifty subsidy calculator on Kaiser Family Foundation site.
Senator Baucus also reduced out-of-pocket maximums for households between 200 and 300 of the poverty level to two-thirds of the HSA out-of-pocket limit ($3,987 for an individual; $7,073 for a family in 2010). (Page 6 of the Modifications).
A change requested by Senator Olympia Snowe, the Republican most likely to support the bill in committee, was accepted by Senator Baucus. It would require small employers to provide a plan with a deductible of no more than $2,000 for individuals and $4,000 for families unless higher amounts are offset by HSAs, HRAs or the like. (This requirement would not impact the “young invincible” catastrophic coverage medical plan (that also cover preventive care) available to those 25 years old and younger. (Page 6 of the Modifications).
Speaking of the young invincible bill, Senator Baucus accepted another proposal by Senator Snow, opening up eligibility for these plans to those who would otherwise have been eligible for a hardship exemption from the requirement to obtain coverage. The exemption was available to those for whom premiums exceed 10 percent of their income. (Page 6 of the Modifications).
As originally proposed, workers receiving coverage from their employers that met certain conditions would be ineligible to receive tax credits to enable them to purchase coverage on their own through a health insurance exchange. Senator Baucus accepted yet another amendment from Senator Snowe that lowers this threshold, permitting employees whose share of premiums through their employer-sponsored coverage exceeds 10 percent of their income to qualify for the tax credit. (Page 7 of the Modifications).
There are other significant changes, too. For example, the threshold for plans on which insurance companies would be subject to a tax (so-called “Cadillac plans) had not been indexed to inflation in the original proposal. Over time this meant these plans (costing $8,000 for individual coverage and $21,000 for family coverage in 2013) would likely look more like Chevrolets. Senator Baucus now indexes the threshold for these plans. He also increased the excise tax from 35 percent to 40 percent.
The amendments accepted by Senator Baucus without a debate highlights his desire to placate Senator Snowe and other moderates on one hand while addressing some of the concerns of liberals on the other. The political calculus is simple: the more these Senators can claim that they improved the bill, the greater their political cover to vote for it.
Put another way, it is unlikely any of the changes accepted by Senator Baucus reduces the chances of the bills passage and many increase its chances. With hours of debate and dozens of sustentative changes to consider, this journey is far from over.
Affordability and America’s Healthy Future Act
In yesterday’s post answering questions about Senator Max Baucus’ health care reform proposal, I inadvertently overlooked a question posed by JimK. He points out the proposed health care reform legislation provides a tax credit to those earning up to 300% of the Federal Poverty Level (FPL), but questions whether the Chairman’s Mark mandates people pay 13 percent of their income in premium as alleged on Countdown with Keith Olbermann. Here’s how (I think) Mr. Olbermann’s math works.
Under the America’s Healthy Future Act every citizen would be required to purchase health insurance coverage. As JimK notes, subsidies would be available to help those earning less than 300 percent of the Federal Poverty Level purchased coverage through the exchange. (Subsidies are apparently not available to those purchasing coverage in the traditional market). These premium subsidies are available on a sliding scale. Those households at the poverty level would be required to contribute three percent of the income toward their health insurance premiums; households at 300 percent of the poverty level would contribute 13 percent. (Chairman’s Mark page 21, page 24 of the PDF)
The FPL is adjusted annually. In 2009 the federal poverty level is $10,830 for an individual and $22,050 for a family of four. If the Baucus health care reform plan was in-force today, individuals earning 100 percent of the FPL would pay $325 toward their medical premium; a family of four with household income of 100 percent of the FPL would pay $662. Individuals at 300% of the Federal Poverty Level ($32,490) could pay $4,224 for medical coverage while our hypothetical family of four (earning $66,150 annually),could pay as much as $8,600.
There are two things to keep in mind concerning this aspect of the Senate Finance reform plan. First, these are preimum subsidies. Consumers could pay thousands of additional dollars — and a greater percentage of their income — for out-of-pocket expenses.
Second, once household income exceeds 300 percent of the FPL no premium subsidy is provided. In 2009, according to a Kaiser Family Foundation study, “average annual (health insurance) premiums for employer-sponsored health insurance are $4,824 for single coverage and $13,375 for family coverage.” Granted, coverage obtained through the work place is usually much more expensive than insurance purchased on one’s own. Finding an average price for policies purchased on one’s own is a bit harder. eHealthinsurance, based on the carriers they represent and consumers purchasing through their site, found the median premium for individual health insurance was $1,584; for families it was $3,948 (the numerical averages were higher: $1,932 and $4,596 respectively). eHealthinsurance reports the average deductible for the individual plans it sold was $2,326 while it was $3,129 for family coverage)
For an individual earning $35,000 (323 percent of the Federal Poverty Level) and ineligible for a subsidy, the median premium ($1,584) represent 4.5 percent of household income; the average premium ($1,932) comes to 5.5 percent. For a family of four earning $70,000 (317 percent of FPL) their $3,948 median premium amounts to slightly more than 5.5 percent of household income; the average premium ($4,596) represents 6.6 percent of their income. Again, this is before any out-of-pocket medical expenses are paid.
Which raises the question: assuming the eHealthinsurance rates are roughly equivalent to the cost of coverage available after health care reform, will coverage be affordable? If Americans must purchase health insurance it’s only fair that the cost for this coverage is within their means.
It’s likely Senator Baucus set the subsidy levels based on what the cost of this premium support would be on the federal budget. He determined this is the level of support the country can afford to provide consumers. But can consumers afford these costs? For a family of four with income of $70,000, paying nearly $4,000 in premium plus potentially several thousand more in out-of-pocket medical expenses is a significant burden. The problem is, going without coverage could be much more damaging to their finances — and to their health.
Balancing personal responsibility with the cost of coverage to families and impact of premium support on the federal budget is both a financial and a moral challenge. It requires lawmakers — and voters — to make tough choices. It also shows that the effort to restrain medical costs must be pursued just as rigorously, if not more so, than increasing access. Otherwise health care reform could result in insurance coverage and financial hardship for all.
Senator Baucus Health Care Reform Bill: Q&A
The Senate Finance Committee will be taking up the Chairman’s Mark of America’s Health Future Act of 2009 this week. Several readers have asked questions about the Senator Baucus’ proposal and thought I’d try to address them.
Two caveats before we start, however. First, while I’ve done my best to answer the questions accurately I may have missed the mark. I hope folks who disagree with my analysis will post comments and I urge everyone to read those comments. Second, the Senate Finance Committee will begin marking up the legislation on Tuesday (to “mark-up” a bill is simply to amend it). So what emerges after the Committee’s deliberations is likely to be significantly different than the version we have today. Consequently, some of what’s provided here may be out-of-date in a few days.
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1. Will the federal government define what plan designs are available?
The Baucus Proposal requires all policies issued in the individual or small group market (other than grandfathered plans) to fall into one of five benefit categories. (These benefit designs are defined on page 21 of the Chairman’s mark). The four general categories are:
Bronze: 65% actuarial value
Silver: 70% actuarial value
Gold: 80% actuarial value
Platinum: 90% actuarial value
The fifth option is available only to those 25 years or younger. This catastrophic plan would “be set at the HSA current law limit, but prevention benefits would be exempt from the deductible.”
The proposal limits out-of-pocket expenses to that permitted for HSAs ($5, 950 for individuals and $11,900 for family coverage in 2010) indexed to the “per capita growth in premiums for the insured market.” There are some other restrictions, but within these out-of-pocket guidelines, any plan design is permitted so long as it’s actuarial value is at least 65 percent.
Which begs the question: what does Senator Baucus mean by “actuarial value.” His Chairman’s Mark doesn’t define the term. However, the Congressional Budget Office describes actuarial value as a statistic that “measures the share of health care spending for a given population that would be covered by each plan and thus reflects both covered services and cost-sharing requirements.” The CBO notes, however, there are two ways of calculating this statistic. Again, it is unclear from his document which approach is proposed by Senator Baucus.
2. Underwriterguy asked what the impact would be on high deductible plans.
As noted above, HSA out-of-pocket limits are permitted by the Senator Baucus’ proposal. So HSAs should continue to be available. Further, high deductible plans, even if they are not HSA eligible, will be permitted up to the HSA out-of-pocket maximum.
3. Michael Flynn asked if the insurance exchanges will compete with private insurance brokers or eliminate them.
There is nothing in the Chairman’s Mark that prohibits exchanges from using independent brokers. Better still, the system envisioned by the proposal contemplates a role for brokers. Under the Baucus Plan, exchanges would be created on a state or regional basis. The administrators of each exchange would make the decision whether or not to use brokers. As I’ve written before, I believe the exchanges contemplated by the Senate Finance Committee will be likely to use brokers.
4. Nosedoc asked which health insurance plans will be taxed as so-called “Cadillac Plans.”
Senator Baucus is proposing an excise tax on insurers “if the aggregate value of employer-sponsored health coverage for an employee exceeds a threshold amount. The tax is equal to 35 percent of the aggregate value that exceeds a threshold amount.” In 2013, the threshold amount would be $8,000 for individual coverage and $21,000 for family coverage. So if the annual insurance premium for employer-sponsored coverage was $10,000, the insurance company would pay a tax of $700 ($10,000 premium – $8,000 threshold = $2,000 x 35% = $700). The threshold amount would be indexed to the Consumer price Index for Urban consumers beginning in 2014). (Chairman’s Mark page 202).
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I think these cover all the questions, but if I missed any, please let me know and I’ll do my best to find the answers.
Health Care Reform Odds & Ends
When it comes to health care reform, to maul Dickens: It is the busiest of times. It is the calmest of times. Or as general agent Michael Traynor put it, “These are interesting times when talk of exchanges and pre-existing exclusions have bumped Paris Hilton and Lindsay Lohan from the news.”
This coming week it will be even harder on E! News and the like. Sure, Hollywood has the Emmys, but Washington has the debate in the Senate Finance Committee over America’s Healthy Future Act of 2009. Not a contest. Add to the mix President Barack Obama’s five appearances on Sunday morning television shows (plus his stint Monday night as David Letterman’s guest) and these are strange days, indeed.
There’s several items in the mix I wanted to comment upon, but none of them really warranted their own post. So here they are, mashed together into a single article. Think of it as clearing the deck in anticipation of all the fun news coming out of Washington in the next few days.
1. Excluding Pre-Existing Conditions
Yes, it’s true, health insurance companies exclude individuals with pre-existing conditions. When they can carriers refuse to offer coverage to those likely to use that coverage. According to some politicians and pundits of all political stripes, instead of being a legitimate business practice, this process (called “underwriting”) is evidence of the evil nature of health insurance carriers and their executives.
Under today’s rules, however, underwriting is necessary to keep the cost of coverage from going even higher than it is today. Imagine permitting people to buy auto insurance from the tow truck driver at the scene of an accident. Or picture homeowners buying fire insurance after the flood waters recede. The cost of these policies would be astronomical. Why would anyone buy auto or homeowners coverage before they need it if they can buy the same policy after an accident or disaster? The cost of insurance in this environment would be the cost of the claim (plus administrative expenses). Have $1,000 in damage after that wreck? The cost of the policy sold by the tow truck driver would need to be more than $1,000 because no one else’s premium would be available to cover any of the cost.
The same applies to health insurance. Allow individuals to purchase coverage on their way to the hospital and costs will skyrocket. (Don’t laugh, one of the GOP proposals would allow consumers to buy coverage in the emergency room). In New York and new Jersey, where there’s a mandate to sell individual health insurance but no mandate to buy it, premiums are three-times higher than in California.
Which illustrates the only way to resolve this situation: require everyone to obtain medical coverage. Without this balance (both a mandate for carriers to sell and for consumers to buy coverage) premiums quickly become unaffordable. Lawmakers who propose guarantee issue without a mandate to buy – and they exist on both sides of the aisle – are either grandstanding, mathematically challenged or ill-informed.
2. Losing Coverage When You Need It
The other popular market reform concerns carriers cancelling coverage after claims are incurred by policy holders, a practice called “rescission.” Much of the furor over rescissions in Washington and elsewhere are legitimate, the result of carrier’s tone deaf, heavy-handed, and inept approach to a reasonable concern: preventing fraud. So long as health insurance is voluntary, carriers need to protect their members from being gamed by those who would intentionally abuse the system. To hear some talk about the problem, however, you’d think every claim submission is answered by a termination notice. Estimating the total number of rescissions is difficult due to disparate reporting requirements around the country. Yet in testimony before Congress three of the largest carriers claimed to have canceled about 20,000 health insurance policies over five years. Four thousand annual rescissions sounds like a lot, but it’s a small fraction of the millions of policies sold and maintained by those carriers each year.
Because the number of terminations is small does not excuse the health plans from abusing their rescission power. Change in this area is needed to restrict rescissions to only intentional misrepresentation of medical conditions. In the meantime, overstating the severity of the problem may be good politics, but it is misleading. (Of course, if underwriting is eliminated, this problem goes away: if carriers cannot charge premiums based on pre-existing conditions there’s no reason to even ask about prior medical conditions.)
3. Non-Profit Doesn’t Mean Cheaper
Liberals demanding that reform legislation include a government-run health plan usually claim it will reduce the cost of coverage by introducing a non-profit health plan into the market. Here’s how Senator Jay Rockefeller put it on MSNBC, “There’s got to be some discipline to other insurance companies, that make them take seriously, not just competing with each other, but competing with somebody who because they are non-profit … and don’t have to please their shareholders because they don’t have any, that they can offer premiums at lower prices” (this sound bite begins at about the 2:35 mark). Yet there are already non-profits operating in most states. In California, for example, Kaiser Permanente and Blue Shield of California are two. In some parts of the state, these plans do offer the most affordable plans; in other regions the lowest cost plans are available from their for-profit competitors. Experience indicates little correlation between a carrier having shareholders and their premiums. Claiming it does may sound good, but anyone taking the time to see what’s happening in the real world will realize this is a false argument.
4. Ugly Language is Dangerous.
House Speaker Nancy Pelosi raised the possibility that the angry rhetoric prominent in the health care reform debate could turn violent, comparing it to the situation in San Francisco over gay rights in the 1970s. The link between the anti-gay rhetoric and the murder of Mayor George Moscone and Supervisor Harvey Milk is legitimate. So is the Speaker’s concern. Words can motivate. Passions can lead to horrendous acts – from terrorist bombings to the murder of doctors who perform abortions.
What’s hypocritical about Speaker Pelosi’s comment, however, is that she has contributed to tenor of the debate. When Speaker Pelosi, the individual third-in-line to the presidency calls opponents “immoral” and describes them as”the villains” in America’s health care reform system she loses the ability to complain when others claim her policies are socialist. The fact that Speaker Pelosi is guilty of what she rails against should not mean her warning is ignored. America’s health care system will be reformed by thoughtful deliberation. Depicting President Obama as Hitler, painting swastikas on the offices of lawmakers, pastors praying for the death of President Obama, or calling opponents “traitors” inspires ugly emotions and provides cover for crazies who take the law (both governmental and ecclesiastic) into their own hands.
Speaker Pelosi hopes for a more responsible tone in the health care reform debate. Her greatest contribution to achieving this goal would be to moderate her own rhetoric.
Posted in Barack Obama, Health Care Reform, Healthcare Reform, Politics, medical cost containment Tagged: America's Healthy Future Act of 2009, guarantee issue, pre-existing conditions, rescission, Senate Finance Committee 2 Comments »
CBO Bolsters Baucus Health Care Reform Plan
The Congressional Budget Office has given a boost to the Chairman’s Mark of America’s Healthy Future Act 0f 2009. In a preliminary analysis of the health care reform proposal put forward by Senator Max Baucus, the chair of the Senate Finance Committee. the CBO estimates the plan would reduce federal budget deficits by $49 billion between 2010-and-2019.
The Congressional Budget Office is highly regarded by both parties for its independent analysis. Their findings can cripple a bill or enhance its stature. In this case, even though the report is preliminary, the CBO adds substantial credence to Senator Baucus’ reform effort. A good thing considering the attacks on the proposal from both wings of the political spectrum.
The CBO presented its findings in a letter to Senator Baucus on September 16, 2009. (The analysis is summarized on the blog of CBO director Douglas Elmendorf). In addition to the positive effect on the federal deficit the analysis projects the health care reform legislation would increase federal revenues by $139 billion over the 10 year period. To be sure, the CBO, working with the staff of the Joint Committee on Taxation notes these estimates “are all subject to substantial uncertainty.” Further, the analysis was based on a description of the Chairman’s Mark of the America’s Healthy Future Act provided by Senate Finance Committee staff, not the document itself let alone actual legislative language.
What the CBO reports is that Senator Baucus’ health care reform bill would reduce the number of uninsured Americans by 29 million by 2019 according to the analysis. This would increase the percentage of Americans legally in the country and under the age of 65 to approximately 94 percent in 10 years from its current level of roughly 83 percent. This would leave “25 million nonelderly residents uninsured (about one-third of whom would be unauthorized immigrants).”
Where these newly insured consumers obtain coverage is kind of interesting. As you read these numbers, keep in mind that the size of the individual health insurance market nationally is estimated to be approximately 18 million people. The CBO estimates roughly “25 million people would purchase coverage through the new insurance exchanges, and there would be roughly 11 million more enrollees in Medicaid than is projected under current law.” These numbers are significant. They will change the dynamics of the market, but they hardly represent a government takeover, especially considering that the Senate Finance Committee proposal does not create a government-run health plan.
The health care reform plan put forward by Senator Baucus has been subjected a great deal of criticism by Democrats and Republicans, but the attacks by liberals have been especially vicious. Which means the real debate has begun. During August it was conservatives dominating the attack on Congressional health care reform proposals. Now liberals are joining the rant party. Here’s another example from Countdown with Keith Olbermann who, like the Glenn Becks on the right, seems unable to disagree with someone on public policy without calling them names or attributing venal motives to anyone on the other side. It’s politics by outrage that demeans the debate, but pleases the partisans.
Are there flaws in Senator Baucus’ health care reform plan? Yes. Hopefully the debate starting next week in Senate Finance will fix many of them. Is his plan better than the status quo?It certainly would be for the 29 million Americans gaining coverage under the proposal. Reducing the deficit seems like a step in the right direction. And, as I’ve noted before, to the dismay of Mr. Olbermann, health care reform will be decided by moderates. And moderates aren’t attacking the America’s Healthy Future Act.
Baucus Introduces America’s Healthy Future Act of 2009
Senate Finance Committee Chair Max Baucus has unveiled his health care reform proposal, the “America’s Healthy Future Act of 2009” in the form of a “Chairman’s Mark.” This means instead of publishing legislative language, the plan is presented in a “here’s the current law and here’s how we should it” format. While specific legislative language would be nice, there’s enough detail in the 223 page document to get a good understanding of what Senator Baucus proposes. And we won’t have long to wait for the legislative language: the Committee will begin debating the bill on September.
No Republican members of the Senate Finance Committee have signed onto the plan, but I don’t think the lack of GOP support at this point dooms the Baucus proposal. As noted in my previous post, at least one of the three Republicans who has been negotiating with Senator Baucus towards a bi-partisan bill, Senator Olympia Snowe, has indicated she’s waiting to see how the bill is amended in committee before committing her vote. Further, the audience Senator Baucus is directing his health care reform plan to are moderate Democrats.
By directing his plan at moderates, Senator Baucus, not surprisingly, infuriates liberal Democrats. Senator Jay Rockefeller has already announced his opposition to the Chairman’s Mark and claims four-to-six other Democrats on the Finance Committee share his views. There are 23 members of the Senate Finance Committee: 13 Democrats and 10 Republicans. So Senator Baucus can afford to lose only one Democrat and still move his proposal out of the committee in the face of unanimous GOP opposition.
My expectation, however, is that neither President Barack Obama nor Senate Majority Leader Harry Reid will let liberals bottle-up the bill in the Finance Committee. If needed, they’ll arrange for some progressive Democrats to speak against the bill, while voting to move it out of committee in order to “let the process proceed.” Of course, if Senator Snowe or any of the other Republicans on the committee vote for the amended bill, fewer Democrats will be needed.
A quick review of the Chairman’s Mark indicates there have been no substantive changes from what was expected. There’s no government-run health plan, it requires individuals to purchase coverage, it establishes state health insurance exchanges. What has been firmed up is it’s price tag: $856 billion over 10 years.
I hope to post more detailed analysis of the America’s Healthy Future Act of 2009 over the next few days, but in the meantime, below are a few articles that summarize the proposal. Senator Baucus describes his proposal in an opinion piece published in the Wall Street Journal today. In reading these keep in mind that what Senator Baucus introduced today is only the beginning. On September 22nd the Senate Finance Committee will convene to debate and amend the bill. The mark-up, as it’s called, will be civil but robust. What emerges from the committee will be different than the Chairman’s Mark.
And that’s just the beginning. The Senate will need to reconcile the Senate Finance Committee’s bill with the legislation put forward by the Senate Health, Education, Labor and Pensions Committee. The result of that mash-up will then need to be reconciled with whatever health care reform legislation the House approves by a conference committee made up Senators and House members. Then both chambers must approve the resulting compromise legislation.
In other words, there’s a long journey ahead for health care reform. There will be plenty of noise and controversy along the way. The path to reform will be subjected to a multitude of twists and turns. We won’t know how it turns out for another two-to-three months. But with the introduction of the America’s Healthy Future Act of 2009, the health care reform debate takes a big step forward.
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Here’s some articles describing Senator Baucus’ health care reform proposal:
“Baucus Unveils $856 Billion Health-Care Legislation” from the Wall Street Journal.
“Baucus unveils health care bill” from the Boston Globe.
“Baucus Offers Health Plan With No Republican Backing” from Bloomberg.com
“Baucus Introduces $856 Billion Health Care Bill” from the Washington Post.
“Baucus Puts Bill In Play” from National Underwriter (my thanks to Dwight Mazonne for identifying this article)
Posted in Barack Obama, Health Care Reform, Healthcare Reform, Politics Tagged: America's Healthy Future Act of 2009, Jay Rockefeller, Max Baucus, Olympia Snowe, Senate Finance Committee, Senate Health Education Labor and Pensions Committee 5 Comments »
Lack of GOP Support for Baucus Health Care Reform Matters, But Not So Much
Posted by Alan on September 15, 2009
After months of trying to craft health care reform legislation that would garner at least some Republican support, Senate Finance Committee Chair Max Baucus appears ready to move forward without GOP support – at least for now. According to the Associated Press, Senator Baucus will release his proposal on Wednesday without any Republican co-sponsor. The media will claim this is a huge setback for Senator Baucus and for President Barack Obama.
Maybe, but I don’t think so. First, there is a possibility at least one Republican will support the legislation when it comes to a vote in committee. Politico.com reports that “Sen. Olympia Snowe (R-Maine), who is considered the likeliest Republican to sign onto the bill, said she wants to wait to see how the committee process plays out. “’I am committed to this process,’” Snowe said. “’I want this effort to continue and I am going to work through all these issues and the committee process will advance that as well and we will continue to work together.’” While the other two Republicans working on bi-partisan legislation sounded less upbeat, they have not completely closed the door to supporting bill either.
The second reason the lack of any Republican support may not matter much in the long run is that Senator Baucus’ bill will appeal to Democratic moderates. And while Republican votes would be useful, it is moderate Democrats that hold the key to health care reform. Without the support of most of the members of the Moderate Dems Working Group in the Senate or the Blue Dog Coalition in the House, Congress cannot pass health care reform legislation. There are 18 Democratic Senators who are a part of the moderate group. At least eight of them must support legislation for it to pass. In the House, where Democrats outnumber Republicans 257-to-178, there are at least 52 members of the Blue Dog Coalition. They need at least 13 of them to support reform legislation.
Yes, there are more liberals in Congress than moderates. And some of these liberals are threatening to oppose health care reform that does not meet their litmus test of including a government-run health plan. But it’s much easier for a moderate to oppose health care reform than it is for liberals.
A moderate can stand on the floor and claim the bill is too expensive or involves too much government. Given their districts, this is unlikely to hurt them politically. In fact, it will likely help them in the upcoming election.
For a liberal to oppose one of the most important priorities of the Democratic Party because it doesn’t go far enough is a much tougher message. They must claim that millions of Americans should go without health care coverage because the bill isn’t ideologically pure enough. They must explain why insurance carriers should be permitted to continue to deny coverage to individuals with pre-existing conditions because the legislation doesn’t include a public option. In other words, liberals need to argue that the status quo is better than any reform. That’s not only a tough argument to make, it’s a foolish one.
Senator Baucus would love for Republicans to support his health care reform bill. President Obama would too. But they don’t need Republicans to support the bill. They need moderate Democrats.
Senator Baucus is pitching his proposal to those moderates. If he succeeds and if President Obama can get liberals to vote for what they will perceive is a partial loaf, then health care reform passes. If either fails in their assignment, so does health care reform.