Free Markets, Free People

Medicare


Health Care Speech – The Morning After

As I think about last night’s speech by President Obama, two words kept coming to mind: partisan and combative. The speech was highly partisan, even though he gave lip-service to bi-partisanship. And I thought he was needlessly combative – calling people liars and describing those who disagree in less than flattering terms.

It was not his finest hour. Nor was it a particularly good speech. It seemed to go on forever and that is usually a sign that it isn’t holding the attention of the audience.

As I figured, since I was at a loss as to what else he could do, he attempted to repackage the same old proposals that the country has been rejecting and called it “new and improved”. He promised details, but there were scant few. And that was particularly true in his attempt to describe how he’d pay for the mess.

Let’s look at some quotes:

There are now more than thirty million American citizens who cannot get coverage.

I’m wondering what happened to the 17 million “Americans” that Democrats and Obama have consistently claimed were uninsured. Where did the 47 million uninsured go? Is this an acknowledgment that they’ve been purposely pumping the numbers up for quite some time?

Well the time for bickering is over. The time for games has passed. Now is the season for action.

This is what I mean about needlessly combative. Those who attended townhalls and other gatherings to voice their opinions and protest what the Democrats were trying to pass do not consider what they did to be “bickering” nor do they feel they were engaged in “games”. Those gaming this were the Democrats who tried their hardest to pass this monstrosity without the benefit of debate, without anyone being able to read and digest it and without Republican participation.

That is gaming the system. There’s no rush to do this and pretending there is also falls under “gaming”.

My health care proposal has also been attacked by some who oppose reform as a “government takeover” of the entire health care system. As proof, critics point to a provision in our plan that allows the uninsured and small businesses to choose a publicly-sponsored insurance option, administered by the government just like Medicaid or Medicare.

So let me set the record straight. My guiding principle is, and always has been, that consumers do better when there is choice and competition.

But it has never been Obama’s guiding principle – not when he insists that “choice” and “competition” can only be achieved by introducing a government run entity into the mix while declining to consider other options.

Remove the regulation that prohibits health care insurance providers from selling across state lines, remove the mandates that require the insured to buy coverage they don’t want or need and facilitate the removal of health care insurance from under employers into the open market. All of those moves – which would require little in the way of tax dollars and government intrusion – would actually deliver choice and competition while driving insurance costs down.

Now, I have no interest in putting insurance companies out of business. They provide a legitimate service, and employ a lot of our friends and neighbors. I just want to hold them accountable. The insurance reforms that I’ve already mentioned would do just that. But an additional step we can take to keep insurance companies honest is by making a not-for-profit public option available in the insurance exchange. Let me be clear – it would only be an option for those who don’t have insurance. No one would be forced to choose it, and it would not impact those of you who already have insurance. In fact, based on Congressional Budget Office estimates, we believe that less than 5% of Americans would sign up.

And most experts say that 5% would not be enough to keep such a system fiscally sound and it would eventually have to turn to the government for subsidy. Want a real insurance exchange? See my comments above.

That’s why under my plan, individuals will be required to carry basic health insurance – just as most states require you to carry auto insurance. Likewise, businesses will be required to either offer their workers health care, or chip in to help cover the cost of their workers. There will be a hardship waiver for those individuals who still cannot afford coverage, and 95% of all small businesses, because of their size and narrow profit margin, would be exempt from these requirements. But we cannot have large businesses and individuals who can afford coverage game the system by avoiding responsibility to themselves or their employees. Improving our health care system only works if everybody does their part.

Mandatory health insurance – something he said he didn’t believe in during his campaign. So a young person who would prefer to pay for his health care as needed now no longer has a choice.

Key word – choice. Remember Obama’s “guiding principle”. Well he violates it right there. You no longer have a choice. And remember, in the bill now on the House floor, this will involve the IRS fining you if you fail to comply.

Companies are left with no choice as well.

Some of people’s concerns have grown out of bogus claims spread by those whose only agenda is to kill reform at any cost. The best example is the claim, made not just by radio and cable talk show hosts, but prominent politicians, that we plan to set up panels of bureaucrats with the power to kill off senior citizens. Such a charge would be laughable if it weren’t so cynical and irresponsible. It is a lie, plain and simple.

Certainly there are aren’t any literal panels called “death panels” in the pending legislation, but within the structure of the bill (HR 3200) there are certainly plenty of panels which will be determining what constitutes “best care”. The obvious logical argument then says, if they are there to determine what constitutes “best care” and are using the reimbursement mechanism to encourage their recommendations be followed and the refusal to reimburse if they aren’t, then it isn’t at all incorrect to logically conclude that “best care” when it comes to the elderly may conflict with the desired care the family and doctor want to render the patient.

That argument gets to Obama’s claim that he would prevent any bureaucrat, government or insurance, from getting in between you and your doctor.

So is what those are saying about “death-panels” “a lie, plain and simple”? Or is the lie to be found in the entrails of HR 3200 and in the glib assurances of Obama?

As an aside – is a president calling for “civility” really being civil when he calls those who disagree with him liars in a speech before a joint session of Congress?

There are also those who claim that our reform effort will insure illegal immigrants. This, too, is false – the reforms I’m proposing would not apply to those who are here illegally.

See my post on Joe Wilson. He yelled “you lie” for a reason.

To my progressive friends, I would remind you that for decades, the driving idea behind reform has been to end insurance company abuses and make coverage affordable for those without it. The public option is only a means to that end – and we should remain open to other ideas that accomplish our ultimate goal. And to my Republican friends, I say that rather than making wild claims about a government takeover of health care, we should work together to address any legitimate concerns you may have.

Once again the combative and dismissive of the right. This was not a speech that really welcomed Republicans into the process. And, I found it amusing when he tried to imply the Republicans weren’t a part of the process because they’d refused to participate, Republican members of Congress waved the three bills they’ve submitted in the House for all to see.

First, I will not sign a plan that adds one dime to our deficits – either now or in the future. Period. And to prove that I’m serious, there will be a provision in this plan that requires us to come forward with more spending cuts if the savings we promised don’t materialize. Part of the reason I faced a trillion dollar deficit when I walked in the door of the White House is because too many initiatives over the last decade were not paid for – from the Iraq War to tax breaks for the wealthy. I will not make that same mistake with health care.

Second, we’ve estimated that most of this plan can be paid for by finding savings within the existing health care system – a system that is currently full of waste and abuse. Right now, too much of the hard-earned savings and tax dollars we spend on health care doesn’t make us healthier. That’s not my judgment – it’s the judgment of medical professionals across this country. And this is also true when it comes to Medicare and Medicaid.

The stated cost is $900 billion. That’s before the CBO looks at it. But of course the CBO can’t look at it until it is written legislation. But the CBO has already dismissed claims that saving of the amount Obama is claiming can be achieved by “finding savings” in “waste and abuse”.

And isn’t it telling that Obama admits that the system he now runs – Medicare – is “currently full of waste and abuse”. If eliminating fraud and abuse is so easy, one would assume a) there’d be none now or b) he could direct waste and abuse be ended now and those savings accrued immediately.

This is a hand-wave at fiscal responsibility. It is a glib nothing which he can stretch into a claim the cost of his proposal is “covered”.

Also remember that the front end of all these plans are loaded with collections, but no health care reform. Reform doesn’t kick in until 2013 – after Obama hopes to be safely reelected. But in the intervening years, we’ll begin to pay for it. Consequently we’ll have 10 years of money and only 7 or 8 years of reformed health care to pay for in that time frame. That means costs will explode after the 10th year and add to the deficit. Point? His proposal will add heavily to the deficit but not until he’s well out of office.

Knowing seniors were very wary of his plans, and he was losing their support, he attempted to win them back:

In fact, I want to speak directly to America’s seniors for a moment, because Medicare is another issue that’s been subjected to demagoguery and distortion during the course of this debate.

More than four decades ago, this nation stood up for the principle that after a lifetime of hard work, our seniors should not be left to struggle with a pile of medical bills in their later years. That is how Medicare was born. And it remains a sacred trust that must be passed down from one generation to the next. That is why not a dollar of the Medicare trust fund will be used to pay for this plan.

And in his next breath he says:

The only thing this plan would eliminate is the hundreds of billions of dollars in waste and fraud, as well as unwarranted subsidies in Medicare that go to insurance companies – subsidies that do everything to pad their profits and nothing to improve your care. And we will also create an independent commission of doctors and medical experts charged with identifying more waste in the years ahead.

These steps will ensure that you – America’s seniors – get the benefits you’ve been promised. They will ensure that Medicare is there for future generations. And we can use some of the savings to fill the gap in coverage that forces too many seniors to pay thousands of dollars a year out of their own pocket for prescription drugs. That’s what this plan will do for you.

Well, first, Medicare part D is the Medicare prescription drug plan, so I have no idea who all these seniors are paying “thousands of dollars a year” for drugs.

As I recall, what Obama is primarily targeting, though he is very careful not to actually mention it, is doing away with Medicare Advantage.

If you’re wondering what Medicare Advantage plans are, you can read about them here. One of the things Advantage plans pay for is prescription drugs.

And, as the website points out, “In addition, you might have to pay a monthly premium to your Medicare Advantage Plan for the extra benefits that they offer.

I guess the Advantage plans must be considered one of those “gold-plated” plans.

Also note the promise of yet another bureaucratic panel – so, could continuing care on grandma at some point in time be considered “waste” and a different form of “care” be encouraged? Is it possible that could conflict with what you and your doctor prefer?

Again, nebulous language that can be interpreted and logically extended to mean precisely what Obama denies is in his proposal.

Reducing the waste and inefficiency in Medicare and Medicaid will pay for most of this plan.

This is the oldest claim in politics and the most bald-faced of its lies.

Obama mentioned demonstration projects for tort reform (and I am glad to see tort reform at least on the edge of the table). I’ve got an idea for a real demonstration project – if it is so easy to reduce the “waste and inefficiency” in Medicare and Medicaid, you have 3 years in which to do it. And once you’ve been successful and that success is unequivocally documented, then come back to us and we’ll talk about further reform.

Overall, as mentioned, not his finest speech. In fact, probably one of his poorer speechs. There was a measure of arrogance that was unattractive. There was a feeling that he wasn’t trying to convince but instead dictate. Nothing I heard last night was new. Nothing I heard last night was particularly compelling in terms of making a convincing argument for doing what he contends we must do.

Instead I heard frustration voiced in surly combativeness. That’s not the way to convince your opposition to see things your way. Leadership was again missing in a speech and moment that practically begged for it.

~McQ


Republicans: Dumber Than A Box Of Rocks

The Republican Party is hopeless.

Given a meta-issue from heaven (smaller government, less intrusive government, less taxation, less spending) and a building mandate as exemplified by the anger at townhall meetings, they manage to fumble it completely.

Instead of actually addressing the problem (see meta-issue) they pander and play politics. Instead of talking about market solutions and less government, they decide to establish government health care as a civil right.

The Republican Party issued a new salvo in the health debate Monday with a “seniors’ health care bill of rights” that opposed any moves to trim Medicare spending or limit end-of-life care to seniors.

[...]

Intended as a political shot at President Barack Obama, the Republican National Committee manifesto marks a remarkable turnaround for a party that had once fought to trim the health program for the elderly and disabled, which last year cost taxpayers over $330 billion.

What Republicans would commit us to by making this guarantee is debt your grandchildren, and perhaps their grandchildren will have to pay to the tune of 58 trillion in unfunded liabilities. In other words, the promised benefits for Medicare are underfunded by 58 trillion in the outlying years and the Republicans have just guaranteed them. With what is anyone’s guess, but certainly not with “less taxes and less spending”.

The other thing they do, apparently unwittingly, is make health care a “civil right” (how else do you interpret something the Republicans would call a “seniors health care bill of rights?”).

That is all the opening the left needs to, at some point, throw it back in the Republican’s lap and ask why such a right exists for one group of citizens but not another. The “fairness” police will have a field day with this and the Republicans will have no answer.

If this move is indicative of the level of intelligence and leadership within the Republican party, I say go hire any random person off the street to run the party. They could not do any worse. They have a political opponent in the middle of self-destructing, and they make a dumb move like this.

Amazing.

As they say, you can’t fix stupid.

~McQ


Democrats And The “Senior” Vote

More polling to consider from a Politico article:

“Seniors are one of the most attentive and engaged constituencies, especially on health care issues, and we’ve seen that in the Medicare Advantage programs,” said Robert Zirkelbach, a spokesman for America’s Health Insurance Plans.

A July 31 Gallup Poll found that just 20 percent of Americans aged 65 and older believe health care reform would improve their own situation, noticeably lower than the 27 percent of 18- to 49-year olds and 26 percent of 50-to-64-year-olds who say the same.

The senior citizen problem could pose a serious problem for the 2010 election cycle.

Older Americans turn out in much higher numbers than other age groups during midterm elections. In 2006, the 55-and-older age group still had the highest voting rate of any age group, at 63 percent, even though younger voters turned out in record numbers for a midterm, according to census data. Half of all votes cast in the 2006 midterms were from voters age 50 or older, according to AARP. And one out of four were AARP members.

Of course, one of the ironies the left likes to point to is that seniors are actually saying they don’t want their socialistic, single-payer system changed. I think that’s a very lazy bit of analysis. I would instead suggest that since seniors have no choice about their socialistic, single-payer system (they’re automatically enrolled at age 65) that what the system is has nothing to do with the protest. They had no choice in the matter.

Seniors are a very tuned in group when it comes to health care because they know what they have is all they can have and the government is talking about legislation to cut that. And one of the areas targeted is the private insurance that covers the gaps Medicare doesn’t cover:

But Obama is talking about finding hundreds of billions in savings from Medicare — cuts supporters say will trim fat from the program — including slashing $156 billion in subsidies to Medicare Advantage, a privately administered Medicare program.

The cuts will also target the amount health care providers are paid to treat Medicare patients.

One of the dirty little secrets about the cost of private health care that you’ll never hear the Democrats or the Obama administration point out is the tremendous amount of cost shifting that goes on from the private sector to cover the public sector.

For every dollar of health care delivered to a Medicare patient, the government pays, on average, $.94. Medicaid only pays $0.86. However, health care providers are able to squeeze those nasty old private insurance providers for $1.34* for every dollar of health care provided. That’s how badly government has distorted the health care industry. It then has the temerity to scream that the private side is “bankrupting” us. Meanwhile it is the private side that has, for decades, been subsidizing the public side.

But back to seniors. Seniors know you don’t recover or save health care costs from healthy people. Seniors also know that they’re in the group in which most health care dollars are spent. Consequently, any savings, a stated goal of the so-called “reform” is most likely going to come from their part of the health care pie.

The proposed cuts to Medicare Advantage are real, but Democrats are also fighting full-blown myths that have gained traction, attacks claiming that reform would create government “death panels” authorizing euthanasia.

The rhetoric is designed to rattle seniors already nervous about health care

because they pay a higher percentage of their income for health care

than younger Americans and face rising costs on fixed incomes, said Jim Dau, a spokesman for AARP.

“Some are simply trying to derail health care reform by targeting seniors, by scaring them, making them, frankly, more dubious, more nervous,” said Dau.

Dau’s protest simply has no legs. The House legislation targets Medicare and talks about cuts to that system. That’s not something the protesters have made up to “rattle” seniors. Instead, it is something which exists, in writing.

And, as I point out above, if you’re a senior you don’t have to be an MIT grad to understand from where the euphemistic “savings” have to come. From the group where most of the spending occurs – duh?!

“Death-panels” and other nonsense aside, seniors have sniffed out the plan and aren’t happy with it. And, again, if you look at the rooms in which these protests are taking place, there are a tremendous number of grey heads evident.

So, we have independents (below) not happy with this power grab in the health care area and we have seniors obviously not happy. Are Democrats paying attention at all or, like Dau, do they plan to wave it all off as opposition dirty tricks and pretend all will work out for the best after they ram this through?

2010 is looking like a lot more fun than I believed it would be.

~McQ

————

[*] Those numbers came from Betsy McCoy, former Lt. Gov of NY, in an interview. McCoy is a Senior Fellow at the Hudson Institute and a patient advocate.


CBO: Busting The Health Care Savings Lie

Does anyone know who Dr. Doug Elmendorf is? He’s the director of the Congressional Budget Office. And today, in testimony before the Senate Budget Committee he answered a few questions from Sen. Kent Conrad (D-ND) about the supposed great savings the country would reap under the planned Democrat “health care reform” bills under consideration by Congress.

Here it is uncut, unfiltered and unedited [emphasis mine]:

Conrad: Dr. Elmendorf, I am going to really put you on the spot because we are in the middle of this health care debate, but it is critically important that we get this right. Everyone has said, virtually everyone, that bending the cost curve over time is critically important and one of the key goals of this entire effort. From what you have seen from the products of the committees that have reported, do you see a successful effort being mounted to bend the long-term cost curve?

Elmendorf: No, Mr. Chairman. In the legislation that has been reported we do not see the sort of fundamental changes that would be necessary to reduce the trajectory of federal health spending by a significant amount. And on the contrary, the legislation significantly expands the federal responsibility for health care costs.

Conrad: So the cost curve in your judgement is being bent, but it is being bent the wrong way. Is that correct?

Elmendorf: The way I would put it is that the curve is being raised, so there is a justifiable focus on growth rates because of course it is the compounding of growth rates faster than the economy that leads to these unsustainable paths. But it is very hard to look out over a very long term and say very accurate things about growth rates. So most health experts that we talk with focus particularly on what is happening over the next 10 or 20 years, still a pretty long time period for projections, but focus on the next 10 or 20 years and look at whether efforts are being made that are bringing costs down or pushing costs up over that period.

As we wrote in our letter to you and Senator Gregg, the creation of a new subsidy for health insurance, which is a critical part of expanding health insurance coverage in our judgement, would by itself increase the federal responsibility for health care that raises federal spending on health care. It raises the amount of activity that is growing at this unsustainable rate and to offset that there has to be very substantial reductions in other parts of the federal commitment to health care, either on the tax revenue side through changes in the tax exclusion or on the spending side through reforms in Medicare and Medicaid. Certainly reforms of that sort are included in some of the packages, and we are still analyzing the reforms in the House package. Legislation was only released as you know two days ago. But changes we have looked at so far do not represent the fundamental change on the order of magnitude that would be necessary to offset the direct increase in federal health costs from the insurance coverage proposals.

Conrad: And what about the Finance Committee package, as it stands?

Elmendorf: I can’t speak to that Mr. Chairman. We have been working with the Finance Committee and the staff for a number of months on proposals that they have been addressing. But our consultations with them have been confidential because they have not yet released the legislation, and I don’t want to speak publicly about that.

Conrad: All right. In terms of those things that are public from other plans, what are the things that are missing that in your judgement prevent a bending of the cost curve in the right way?

Elmendorf: Bending the cost curve is difficult. As we said in our letter to you, there is a widespread consensus, and you quoted some of this, that a significant share of health spending is not contributing to health. But rooting out that spending without taking away spending that is beneficial to health is not straightforward.

Again, the way I think experts would put it – the money is out there, but it is not going to walk in the government’s door by itself. And devising the legislative strategies and the regulatory changes that would generate these changes is not straight forward. But the directions that have widespread support among health analysts include changing the preferential tax treatment of health insurance. We have a subsidy for larger health insurance policies in our tax code, and that like other subsidies encourages more of that activity. Reducing that subsidy would reduce that. And on the other side, changing the way that Medicare pays providers in an effort to encourage a focus on cost effectiveness in health care and not encourage, as a fee for service system tends to, for the delivery of additional services because bills for that will be paid.

So here is the opinion of the director of the organization that both sides like to quote and use as a definitive source saying that what has been legislatively put on the table will not – not – bend the “cost curve” down, but, will instead bend it upward. It does not – not – in fact accomplish the goal of “cost savings” in terms of health care spending.  Anyone with the brain of a glow worm who had taken a look at the proposals and the promises knew it was a large load of pony pellets.   Those on the side of “belief and faith” (and hopeychangitude) chose to believe in the politician’s promises and have faith in their truth.

Unfortunately for them, Dr. Elmendorf apparently deals in facts and figures.

The last part of the questioning is equally important.  Elmendorf discusses the funding mechanism (along with the eternal promise of corralling “waste, fraud and abuse”). Some savings will come from eliminating waste, fraud and abuse (all of which are rampant in both Medicare and Medicaid and politicians have vowed to end for decades), but not enough to fund the rest.

So they’re left with few options besides a general tax increase. Those options, per Elmendorf include taxing health care benefits and reducing the cost of Medicare by changing how providers are paid (i.e. cutting payments and prohibiting procedures Medicare doesn’t feel are necessary to treatment – the very accusation the government health care proponents constantly level at private insurance).  The first isn’t very palatable politically (and they’d have to exempt unions which would be very unpopular politically) and the second would most likely find a back lash among seniors.  So the fall back position is “tax the rich” – an unstable revenue stream (once the rich figure out how to dodge it).

Anyway, the Democrat’s “cost savings” narrative is again busted. Not only will the proposed legislation not save money, it will cost us a bundle. As I said yesterday, I believe, when I posted the chart with the curve of proposed health care spending under the Democrat bills, the curve isn’t going to go down.

Today the CBO validated that point.

~McQ


Podcast for 12 Jul 09

In this podcast, Bruce, Michael, and Dale discuss the health care bill that will presented on the House floor.

The direct link to the podcast can be found here.

Observations

The intro and outro music is Vena Cava by 50 Foot Wave, and is available for free download here.

As a reminder, if you are an iTunes user, don’t forget to subscribe to the QandO podcast, Observations, through iTunes. For those of you who don’t have iTunes, you can subscribe at Podcast Alley. And, of course, for you newsreader subscriber types, our podcast RSS Feed is here. For podcasts from 2005 to 2007, they can be accessed through the RSS Archive Feed.


Busting Medicare’s “Low Overhead Advantage” Myth

One of the favorite arguments of the government health care crowd is the supposed Medicare low overhead argument – i.e. Medicare is more efficient than private insurance because its overhead is so much lower than private administrative costs.

It goes like this:

But the administration of Medicare is a miracle of low overhead and a model, despite all the fraud and abuse, of what government can do right. Three percent of Medicare’s premiums go for administrative costs. By contrast, 10 to 20 percent of private-insurance premiums go for administrative costs. Roll that figure around on your tongue. When you swallow and digest it, you’ll understand that any hope of significantly reducing health-care costs depends on a public option.

Right now, the Medicare average is 3% and private insurance averages 12%. But Tom Bevan points out, some of that difference is an apples and oranges comparison:

But here’s the catch: because Medicare is devoted to serving a population that is elderly, and therefore in need of greater levels of medical care, it generates significantly higher expenditures than private insurance plans, thus making administrative costs smaller as a percentage of total costs. This creates the appearance that Medicare is a model of administrative efficiency. What Jon Alter sees as a “miracle” is really just a statistical sleight of hand.

Furthermore, Book notes that private insurers have a number of additional expenditures which fall into the category of “administrative costs” (like state health insurance premium taxes of 2-4%, marketing costs, etc) that Medicare does not have, further inflating the apparent differences in cost.

However, when you make an apples to apples comparison, Medicare comes out much worse than private insurance:

But, as you might expect, when you compare administrative costs on a per-person basis, Medicare is dramatically less efficient than private insurance plans. As you can see here, between 2001-2005, Medicare’s administrative costs on a per-person basis were 24.8% higher, on average, than private insurers.

So, contrary to claims of Alter, Krugman, and President Obama, moving tens of millions of Americans into a government run health care option won’t generate any costs savings through lower administrative costs. Just the opposite.

Make sure you click through and check out the real Medicare administrative costs as compared to private industry.

Then there’s waste fraud and abuse. Did you happen to catch that little hand wave at “fraud and abuse” in the first quote touting Medicare’s efficiency? What, pray tell, is one of the primary jobs of an administive system? Would you imagine it to be the elimination of fraud and abuse – or said another way, to ensure that the company pays legitimate claims and avoids fraudulent and unnecessary payments?

How efficient is a system which is awash in both fraud and abuse? And, without profit, what incentive do they have to eliminate it?

John Stossel takes that part of the “Medicare efficiency” myth apart:

But there’s a bigger point – the connection between “low” administrative costs and staggeringly HIGH levels of fraud and waste. As Michael Cannon at the Cato Institute and Regina Herzlinger at Harvard Business School have pointed out, much of the 10 to 20 percent of private insurance administrative costs goes to preventing fraud. Private insurers, you see, care about whether or not they lose money. Medicare, with its unlimited claim on the public purse, does not. It’s only taxpayer money, after all.

The results are predictable, but breathtaking nonetheless: an estimated $68 billion (with a B) in outright Medicare fraud every year (About $3 billion in Miami-Dade county ALONE.) On top of that, according to well-respected Dartmouth researchers, roughly a third of Medicare’s total $400 billion annual spending goes to procedures which were medically unnecessary.

That’s, on average, 68 billion every year. Imagine a private insurance company surviving with loss figures like that. But as Stossel points out, without an incentive to eliminate fraud and abuse, it continues year after year after year, with politicians and Medicare administrators tut-tutting but never really doing anything about it.

That is the reality of Medicare’s efficiency. It is also the probable model any future health care insurance run by the government. Efficiency is an illusion brought about by a statistical sleight of hand and ignoring the systemic waste, fraud and abuse of Medicare.

~McQ


Parsing Obama on Health Care

While I’m sure the specials last night on the deaths of Farrah Fawcett and Michael Jackson vastly outdrew the ABC’s Obama healthcare special the other night (no I didn’t watch it – I was being disappointed by the Yankees/Braves game), there were some very telling moments apparently. And, being the curious type, I found the transcript and read the whole thing.

Let’s say Mr. Eloquent was less than convincing. But he did shed some light on what he’d like to see the final product look like.

Naturally there were some moments that were instantly reported by the media and other bloggers. For instance when he essentially said that if that he’d use his wealth if necessary to go outside any system that denied his family the healthcare he thought they needed. The obvious point is he concedes that his system will do so – i.e. ration care through denial. Of course that’s one of the big complaints he’s had about private healthcare – rationing through denial.

But there were some other things said which only a careful reading of the transcript reveal. Let’s start with this question:

DR. JOHN CORBOY, NEUROLOGIST & MEDICAL PROFESSOR: Well, I think you still have to provide the appropriate care. And I think we all know that there is a significant amount of care that actually is inappropriate and unnecessary.

And the question then is — for you, Mr. President, is, what can you convince — what can you do to convince the American public that there actually are limits to what we can pay for with our American health care system?

And if there are going to be limits, who is going to design the system and who is going to enforce the rules for a system like that?

This question is loaded with key words and phrases. The first is “appropriate”, as in “appropriate care”. Who gets to decide? If you listen to a glib Obama, he constantly says medical decisions should be left to doctors. But this question isn’t being addressed to that point, is it? If there is an “appropriate care” standard, someone is going to have to define it.

And that is precisely what Corboy asks – “who is going to design the system and who is going to enforce the rules?” In fact, who gets to decide what the rules are?

I think you know the answer, but let’s look at the President’s answer:

OBAMA: Well, you’re asking the right question. And let me say, first of all, this is not an easy problem. If it was easy, it would have been solved a long time ago, because we’ve talking about this for decades, since Harry Truman.

We’ve been talking about how do we provide care that is high-quality, gives people choices, and how can we come up with a uniquely American plan? Because one of the ideological debates that I think has prevented us from making progress is some people say this is socialized medicine, others say we need a completely free market system.

We need to come up with something that is uniquely American. Now what I’ve said is that if we are smart, we should be able to design a system in which people still have choices of doctors and choices of plans that makes sure that the necessary treatment is provided but we don’t have a huge amount of waste in the system. That we are providing adequate coverage for all people, and that we are driving down costs over the long term.

OK, let’s stop for the moment right there. We begin with Obama in stump-speech mode. That’s a time buyer. He’s fumbling for an answer and is filling time. By the third paragraph he’s beginning to formulate an answer. Of course, I had to laugh because a uniquely American solution would be to have government back off and let the market take the ball and run with it. But obviously that’s not his plan. I think what he’s saying here is he hopes for a Euro-socialist plan with an American twist.

Anyway, in the third paragraph we’re again into some key words – this time “necessary” and “adequate”. Again, who will decide what is “necessary” and what form of coverage is “adequate”? Well, trust me, it won’t be you or your doctor, because his priority is what? That’s right – “driving down costs over the long term”. So “necessary” treatment will be considered in the context of “driving down costs”. I’m sure you figure out what that means.

Then there’s the “we should be able to design a system”.  He’s not talking about you or the market here.  He’s talking about government.  He’s a part of the ‘we’ – you’re not.

Last, of course, is the overriding priority – drive costs down. He claims health care is the reason for the current deficit.  So the obvious first priority for this so-called reform is to cut costs.

But let’s add 47 million new insured while driving costs down.  Make sense to you?  And if it does, then you have to admit that lesser cost, if possible, will have to come from some part of the current health care system.  He has his ideas, and we’ll cover that in a different post.

Moving on with the answer:

If we don’t drive down costs, then we’re not going to be able to achieve all of those other things. And I think that on the issue that has already been raised by the two doctors, the issue of evidence-based care, I have great confidence that doctors are going to always want to do the right thing for their patients, if they’ve got good information, and if their payment incentives are not such that it actually costs them money to provide the appropriate care.

Here we find a very critical clue to the plan for your health care – the term “evidence-based care”. This is the new way of saying “we’ll decide for you”. Evidence based medicine claims to use the scientific method to determine optimum treatment decisions. The Centre for Evidence Based Medicine says it is “the conscientious, explicit and judicious use of current best evidence in making decisions about the care of individual patients.”

Said another way, a group somewhere doing research decides that certain diseases or conditions should be treated in certain ways.  Those treatments are then applied to individual cases without any caveat for unique situations.  The cost savings comes with uniform procedures and uniform care – no deviations.  In other words, for the most part, decisions on how to treat individual cases will most likely have to conform to EBM guidelines or be considered outside the system. So what Obama said with that simple term is “we’ll decide how you will be treated, not your doctor”.

Of course critics of EBM are many and claim that it has some utility in outlining suggested treatment for populations as a whole, but has limited utility when taken down to the individual situation since each is unique.

And then there’s the inference that medicine to this point hasn’t been based on science. As Abraham Verghese said:

“Evidence Based Medicine” is a term which makes about as much sense as “Sex-based intercourse”–Were we practicing based on zodiac signs before EBM came along?

That brings us to the bit about “doctors always want to do the right thing for their patients”. Yes, of course. But what he says next hints that “the right thing” may be what the technocrats think is right, not necessarily what the doctors might think is right. He says doctors will do that “if they’ve got good information, and if their payment incentives are not such that it actually costs them money to provide the appropriate care.”

Anyone know right now instances when “appropriate care” costs a doctor “money to provide”? Yup, Medicare and Medicaid. It’s the reason so many opt out of treating Medi patients.

How then does he plan on changing their payment incentives so it doesn’t cost them money? Well to do that you either change the reimbursement rate or you change what is “appropriate”, don’t you? EBM promises the latter.

That brings us to the final part of his answer:

And right now, what we have is a situation, because doctors are paid fee-for-service, and there are all sorts of rules governing how they operate, as a consequence often times it is harder for them, more expensive for them, to do what is appropriate.

And we should change those incentive structures.

Now this is simply a load of road apples.

Litigation is part of the problem. Obama refuses to address that as a basic health care cost problem. It drives up costs and it also induces doctors to use unnecessary tests in a CYA gambit. Want to “change incentives?” Here’s a great place to start.

The second problem is chronic underpayment by the government through Medicare and Medicaid – something Obama and Congress want to again reduce by up to 20%. That causes cost shifting to the private side of things. But insurance companies have gotten smart and now refuse, in many cases, to pay more than the Medis. That is an artificial distortion of the market introduced by government arbitrarily deciding what a medical procedure is worth.

And the rules under which doctors operate are no less stringent under the Medis than under any private insurance plan.

That’s one question from the staged ABC “town hall meeting”. There was an amazing amount of info in that one question and answer. Enough information that you should be absolutely shaking in your boots, because what he said is he plans on doing precisely what he has been telling you he wouldn’t do – design a system which will decide how your doctor will treat you. It is all there, and no one has even bothered to take the close look it deserves.

I’ll parse a few more questions from the interview as I have the time, but suffice it to say, if you look hard enough you can figure out exactly where this guy wants to take us.

~McQ


Health Care “Reform”: A Little History Is Always Useful

Daniel Henninger gives us a little walk down memory lane to remind us of the effect of our first attempt at “health care” reform.

Back before recorded history, in 1965, Congress erected the nation’s first two monuments to health-care “reform,” Medicaid and Medicare. Medicaid was described at the time as a modest solution to the problem of health care for the poor. It would be run by the states and “monitored” by the federal government.

The reform known as Medicaid is worth our attention now because Mr. Obama is more or less demanding that the nation accept another reform, his “optional” federalized health insurance program. He suggested several times before the AMA that opposition to it will consist of “scare tactics” and “fear mongering.”

Whatever Medicaid’s merits, this federal health-care program more than any other factor has put California and New York on the brink of fiscal catastrophe. I’d even call it scary.

Anyone who has paid any attention to the health care debate know full well that Medicare and Medicaid have become huge black holes with future funding obligations in the tens of trillions of trillions of dollars.

Now, pointing that out and doubting the government’s ability to do any better is apparently “scare tactics” and “fear mongering”. Reminds me of the AGW nonsense.

After 45 years, the health-care reform called Medicaid has crushed state budgets. A study by the National Governors Association said a decade ago that because of “new requirements” imposed by federal law — meaning Congress — “Medicaid has evolved into a program whose size, cost and significance are far beyond the original vision of its creators.”

There is nothing to convince anyone that the same won’t happen with a “public option”. And although the present plan is to have such an option pay for itself through premiums, there’s nothing to stop Congress from deciding the taxpayer should pick up the tab at some point in the future.

In his speech, Mr. Obama said the cost of the Public Option won’t add to the deficit: “I’ve set down a rule for my staff, for my team — and I’ve said this to Congress — health-care reform must be, and will be, deficit-neutral in the next decade.” If we’re honest, that means tax increases are inevitable.

The thing to remember – “deficit-neutral” doesn’t necessarily mean cuts in spending. It means that revenue must equal spending and that obviously means that spending increases must have added revenue – tax increases.

There is some resistance starting to form to the “reform”. The Democrats plan on rushing this through with limited debate. If they succeed, “Son of Medicare” will wander out the government lab and bankrupt this nation much more quickly than now anticipated.

~McQ


Right Policies: Opting Out

Yesterday Jon Henke challenged the Right to come up with policies that are popular, viable, workable, transformational and sustainable. (Follow the link to see what he means by each of those.) I’ve previously suggested a broad-based agenda that I thought could be sold as an alternative to the Democrats’ agenda, but I think a few of the specific policies are particularly strong, and they stick to a consistent theme.

Libertarian paternalism — which means that certain initial decisions are made for you, but you are left a way to opt out — can be a good or a bad thing, depending on the status quo. If the status quo is freedom, I’d just as soon not add in an element of paternalism in virtually any case. But if the status quo is paternalism, then libertarian paternalism is a step in the right direction.  Fortunately, giving people more options is much more popular than changing their status quo decision.

I propose that the Right should target existing paternalism and offer as many opportunities to opt out as we can devise. My main two examples are education and entitlements.

Education

I consider education to be any political coalition’s #1 long-term priority. If your opponents control education, chances are you will eventually lose on everything else. So, what policies should the Right pursue on education?

Vouchers aren’t a new idea, but we on the Right could be pursuing them in much more creative ways than we are now, to build a broad working alternative to state schools.  With variable-cost vouchers and pilot programs that target the “victim classes”, the Right can play full court press on vouchers in every school district.

Variable-Cost Vouchers

In every school district across the country, we should have vouchers at least equal to the variable cost of sending one extra child to public school. Democrats have argued for a long time that we need more spending per student to give kids smaller class sizes and better materials such as textbooks, and have used that to justify countless bond measures and tax increases to increase public school funding.

If a voucher just covers the variable cost of an extra student, then a voucher helps create smaller class sizes and increases the amount of money the public school can spend on each student.

You can see how a voucher for variable costs puts the Left in a Catch-22: Every extra dollar they want to spend per student is an argument for a bigger voucher, and an opportunity for the private sector to spend the dollar more efficiently than the public sector.

Make Friends in Low Places

We can do even better: pilot voucher programs should very openly target kids who are performing worst in the current system, in part because proposing vouchers for them undercuts the argument that vouchers just skim the cream of the crop.

Voucher proponents have already focused on several low-income and minority populations, using needs-based criteria and simple geography; the Right should be pushing this smart strategy much more aggressively – it undercuts Democrats’ arguments against vouchers beautifully, and makes a direct play for the Left’s base. The apparent success of the DC voucher system has made attempts to cut the program very embarrassing for Democrats; we need more of that.

Moreover, the Right should propose vouchers that help children who score on the bottom half of the test-score distribution. The research I’ve read indicates that these children show the greatest gains from voucher programs.  For the same reason, target kids with histories of disciplinary problems and special-needs children (paging Sarah Palin).

It would be a bridge too far for the Democrats to argue that these kids enhance the performance of public schools after using the opposite argument to fight vouchers for so long.

And finally, the Right should propose voucher programs to target the many minors who have already dropped out of school.  Kids who have outright given up on the public school system, or who rarely show up, aren’t doing anything to improve the performance of those schools.  If Democrats want to keep up the pretense that they care about these kids, they shouldn’t have any problem with helping these kids become part of a new private education market.

Those are just a small number of ways we can turn the Left’s most popular arguments against them and start to build a real market in education. In the meantime, the Right would be demonstrating that markets can work better than state-administered programs, and help the “little guy” who’s been screwed by the public system.

Where necessary to make the policy viable, the Right could be flexible on the matter of vouchers for church-founded schools (like Catholic schools); the first priority is building a broad education market outside of the state.

Entitlements

Here’s another place where reform would be truly transformational. The Right should push for an opt-out for the major entitlements – Medicare and Social Security. A reform doesn’t have to be a full privatization to accomplish a great deal of good.

Many people are currently collecting benefits from Medicare and SocSec, and we can assume that they will turn out to vote against anything that takes away those benefits. The Right can start making progress on reducing our crushing long-term obligations by (once more for effect) giving everyone as many opportunities to opt out as possible.

Social Security

Why not allow people to adjust their expected benefits, with higher or lower individual taxes to compensate for the change from the “standard” level?  The SSA could set a minimum level of contributions to guarantee its promised benefits, so that the legislation becomes non-threatening to beneficiaries, and thus politically viable.  To get the greatest tax cut, you opt out of all retirement benefits; you can change your mind later, but your benefit and/or tax level must be adjusted appropriately.  And the more people who opt out, the lower the minimum tax rate can go; that rate could be adjusted at periodic intervals, perhaps once a year.

Similarly, why not allow people to adjust their expected retirement age, again paying higher or lower taxes to compensate?

Both of these adjustments would introduce flexibility along with a price mechanism.

Yes, this means that some people might choose to pay the minimum tax and find themselves at age 67 regretting their earlier decisions, but everyone would know that they made a conscious choice to change from the status quo.  And in the meantime, those who opt out don’t feel like such direct stakeholders.

Medicare and other state medical benefits

To get more people off the rolls, allow them to opt out of Medicare eligibility and other state medical benefits in exchange for some mix of:

    • lower payroll taxes
    • tax-free health savings accounts
    • a tax cut on their individual health insurance
    • vouchers for private insurance and private disability coverage

… as long as the total cost of the mix is lower than the expected cost of Medicare benefits.  This way, the Right can not only cut into the massive expected costs on the near horizon, but also get fewer people to feel like stakeholders in the future of the state-administered system.

Conclusion

The most effective arguments against reform are allegations that people will lose the benefits they have now. Psychologically, we regret losing a dollar more than we regret not acquiring that dollar in the first place. That’s a big part of how the Right beat universal health care under Clinton: by telling the American people that they would lose their current insurance, with which most of them were satisfied.

Whether we like it or not, it is stupid to do a frontal assault on a hardened position. Instead, we should apply libertarian paternalism to divide and conquer by giving our opponents as many chances to defect as possible.


Medicare Rationing – The Shape Of Health Care To Come

I love the way the Wall Street Journal starts this editorial about health care reform and rationing. It is something I’ve been wondering for some time here at QandO:

Try to follow this logic: Last week the Medicare trustees reported that the program has an “unfunded liability” of nearly $38 trillion — which is the amount of benefits promised but not covered by taxes over the next 75 years. So Democrats have decided that the way to close this gap is to create a new “universal” health insurance entitlement for the middle class.

In fact what they’re proposing defies logic. It is counter-intuitive (some wag said that “counter-intuitive” is the new “stupid”). I mean think about it – they’re essentially saying “we’ve run the 46% of the health care segment we have into $38 trillion of unfunded debt. The way to fix that is to give us the rest”.

But the bulk of the editorial is about who, under this new grand scheme the Democrats are proposing, will be making decision about how to treat you. And in this case one example serves to make the point:

At issue are “virtual colonoscopies,” or CT scans of the abdomen. Colon cancer is the second leading cause of U.S. cancer death but one of the most preventable. Found early, the cure rate is 93%, but only 8% at later stages. Virtual colonoscopies are likely to boost screenings because they are quicker, more comfortable and significantly cheaper than the standard “optical” procedure, which involves anesthesia and threading an endoscope through the lower intestine.

Virtual colonoscopies are endorsed by the American Cancer Society and covered by a growing number of private insurers including Cigna and UnitedHealthcare. The problem for Medicare is that if cancerous lesions are found using a scan, then patients must follow up with a traditional colonoscopy anyway. Costs would be lower if everyone simply took the invasive route, where doctors can remove polyps on the spot. As Medicare noted in its ruling, “If there is a relatively high referral rate [for traditional colonoscopy], the utility of an intermediate test such as CT colonography is limited.” In other words, duplication would be too pricey.

Consequently, because there might be a percentage of referrals (that Medicare assumes might be “relatively high”) which then require a traditional colonoscopy, no Medicare patients may have the virtual colonscopies even if they are quicker, more comfortable and, as with any invasive procedure, less dangerous.

Now I assume I don’t have to lay out all the implications of this to readers here – this is prefect example of precisely what opponents of government health care have been saying for years. And it certainly gives lie to the claims by some that all government wants to do is offer “insurance”.

Led by budget chief Peter Orszag, the White House believes that comparative effectiveness research, which examines clinical evidence to determine what “works best,” will let them cut wasteful or ineffective treatments and thus contain health spending.

The problem is that what “works best” isn’t the same for everyone. While not painless or risk free, virtual colonoscopy might be better for some patients — especially among seniors who are infirm or because the presence of other diseases puts them at risk for complications. Ideally doctors would decide with their patients. But Medicare instead made the hard-and-fast choice that it was cheaper to cut it off for all beneficiaries. If some patients are worse off, well, too bad.

One of the complaints about private health insurers is that patients resent someone group on high deciding what is best for them. That should be their doctor’s decision. Yet here is that complaint being sanctioned for the largest purchaser of health care in America – Medicare. And, as the WSJ points out, since private carriers usually adopt Medicare rates and policies, the virtual colonoscopy could be a technology which is “run out of the market place”.

Mr. Orszag says that a federal health board will make these Solomonic decisions, which is only true until the lobbies get to Congress and the White House. With virtual colonoscopy, radiologists and gastroenterologists are feuding over which group should get paid for colon cancer screening. Companies like General Electric and Seimens that make CT technology are pressuring Medicare administrators too. More than 50 Congressmen are demanding that the decision be overturned.

All this is merely a preview of the life-and-death decisions that will be determined by politics once government finances substantially more health care than the 46% it already does. Anyone who buys Democratic claims about “choice” and “affordability” will be in for a very rude awakening.

Is this how you want health care decisions affecting your life to be made? Political fights in Congress? Look at the financial health of the US government right now and consider the huge unfunded liabilities in front of it. What side do you really think such decisions will come down on – yours or the least costly alternative regardless of your individual need?

~McQ

[HT: Anna B]