Monday, September 28, 2009

Give market forces room to breathe, and costs will decrease

The dirty little secret is that "Obama-care" isn't about reducing healthcare costs or making coverage more secure. It's about robbing Peter to pay Paul.

How many young and elderly people can we rob to subsidize coverage for the uninsured? How can we leverage the 50% of health spending that government already controls to push payments below costs among the other 50%? How many special interests should we bribe along the way? (Answer: all of them.)

Supporters from President Obama right down to you assure us that consumers will come out ahead. The only losers, you assure us, will be the insurance industry.

The opposite is true: Democrats in Congress are taxing workers to pay off insurance companies. Democratic Sen. Max Baucus (D-Mont.) just proposed $774 billion in subsidies for private insurers. (Somehow, that's supposed to be more moderate than House Democrats' $773 billion in subsidies.)

The outrage at the August town halls came from voters realizing that under Obama-care, they're not Paul -- they're Peter.

"Almost every political pronouncement now emphasizes cost reduction as a central object of healthcare reform," writes Stanford health economist Victor Fuchs. "The policy recommendations that follow, however, frequently aim at cost shifting rather than cost reduction." Cost shifting, Fuchs reminds us, "does nothing to reduce the real cost of care."

Real reform would reduce costs by letting individual consumers control their healthcare dollars and choose their health plans. Eliminating the tax preference for job-based coverage would let workers control the $4,000 to $10,000 of their earnings that employers now control and choose secure coverage that stays with them between jobs. Converting Medicare to a voucher program, with larger vouchers for the poor and the sick, would protect seniors from government rationing.

Consumers will spend that money more wisely than employers or government ever could. They will drive costs down because they will personally reap the rewards.

Real reform would further reduce the cost of coverage by letting workers purchase coverage from other states. As Cal State Northridge economist Shirley Svorny suggests, real reform would also make medical services more affordable by eliminating barriers to competition by nurse practitioners and other mid-level clinicians.

Those two steps would not only increase competition and reduce costs. They would improve many dimensions of quality by helping the Kaiser Permanente model spread to other states. That sounds better than summarily kicking Kaiser out of Medicare Advantage, doesn't it?

Our healthcare sector is a mess. Countless Americans are suffering and dying -- yes, dying -- because well-intentioned government interventions are driving costs higher, blocking innovation and leaving us with insecure coverage.

Yet the greatest strength of America's healthcare sector is that it shows what competition can do when market forces are given room to breathe. What do you say we give market forces a little more breathing room?

But first, let's stop the kleptocrats and kill this insurance-company bailout.


BaucusCare: A NICE Alternative to ObamaCare

Viewed by some as a better alternative to ObamaCare because of its much-touted lack of the controversial Public Option, the Baucus plan may seem, with a little tweaking and fine-tuning, to be a promising route to a possible be-partisan compromise on Health Care Reform.

The Public Option in ObamaCare has given rise to fears of government rationing of Health Services. Could the Baucus Plan now lay them to rest? Clearly not everyone thinks so. One mainstream news commentator has remarked that Republicans in particular were staying away from it, in part because it would make significant cuts to Medicare, hurting Seniors.

Those fears are justified and wildly understated. BaucusCare launches an all-out frontal assault on Medicare and legally sanctions exactly the sort of rationing of health services most feared by those leery of the public option in ObamaCare.

Last week we observed that Comparative Effectiveness Research, which would recommend the provision of health services based on the results of a cost-benefit analysis, inevitably leads to rationing and denial of services. These and similar phrases thus become mere euphemisms for rationing.

Senator Baucus showed awareness of this on June 9th when he quipped before a Brookings Institution-sponsored conference that the phrase “Comparative Effective Research” may just sound a little too ‘ominous’ and suggested substituting a softer expression like “patient-centered outcomes research” in its stead. Or, he jokingly claimed, just call it “Fred.”

According to a December 2007 CBO Paper Entitled “Research on the Comparative Effectiveness of Medical Treatments,” now “under current policy and law, Medicare generally covers any treatment or procedure that has net medical benefits---that is benefits that outweigh the risks of the procedure---regardless of its costs….”(32).

Additionally “Medicare is effectively precluded from taking costs into account when making decisions about coverage” and would need “new legal authority”(29) to do so. The Baucus Plan would give Medicare exactly this authority.

And what it now gives to Medicare it would like to see extended throughout the whole health system. As pointed out in a White Paper outlining the essentials of BaucusCare entitled “Call to Action: Health Reform 2009,” “Many of the proposals in the plan are based in the Medicare program because of its unique ability to lead the way for system-wide changes.”(36)

To carry out the comparative effectiveness research, the Baucus Plan would set up the “Health Care Comparative Effectiveness Research Institute” as an independent entity shielded from Congressional or other government oversight.(56) It would perform functions similar to those of the British National Health Services’s “National Institute for Health and Clinical Excellence (NICE), namely assessing “the full spectrum of clinical interventions, including pharmaceuticals, medical devices, procedures, services and other therapies”(56) and making binding recommendations on its findings intended to guide clinical decisions by specifying a range of approved drugs and procedures. But, the CBO paper observed, “to reduce health care spending, the results of comparative effectiveness analysis would ultimately have to change the behavior of doctors and patients---that is, to get them to use fewer…or less expensive services.”(30)

To force doctors to fall in line behind the Institute’s recommendations, the Baucus Plan would change Medicare’s payment structure from the current fee-for-service [pay-for-reporting] reimbursement system to what it calls a “pay for quality” model(42) because it says the former offers doctors little incentive to work toward quality and efficiency improvements(49). The change would reward physicians for following the Institute’s recommendations and penalize them for not doing so, giving them a significant financial incentive for essentially rationing care.

Now, NICE is mentioned in the CBO paper as, “Perhaps the best known example of an agency that assesses comparative effectiveness….” (6) Yet, it is for others also the best known example of a rationing board, because of its practice of screening drugs and procedures for approval via quality-adjusted life years (QALYs), a decision procedure which decidedly favors the interests of the young over the old. It is for Sarah Palin the very paradigm of a “Death Panel.”

Thus, if you would like to see health care decisions in the US governed by a rationing board similar to that which governs them in the British National Health Service then, for you, BaucusCare is a NICE alternative to ObamaCare!


The second-best solution to health care: Do nothing

The second-best solution for the health-care crisis? Do nothing. Of course, that drives the interventionists crazy. “Do nothing?” they cry! “Don’t you realize that we’re in a crisis? We can’t afford to do nothing!”

What they fail to realize is a fundamental principle about interventionism: It produces more crises. Therefore, any new health-care intervention, whether termed “reform” or “modification” or “improvement” is only going to make things worse than they already are. New interventions will produce new and bigger crises, thereby producing calls for more “reform” in the future.

What ultimately happens is that as the crises and interventions grow in number and intensity, people get so frustrated that they end up supporting a complete government takeover of that particular segment of society. In fact, that’s already happening in the health-care debate.

So, if doing nothing is the second-best solution for the health-care crisis, what’s the best solution?

The answer to that question depends on figuring out the root cause of the problem. In a sense, that task is no different from that which a physician faces when an ailing patient comes to visit him. The doctor examines the patient, arrives at a diagnosis, and issues a prescription. The correct prescription usually depends on a correct diagnosis. Get the diagnosis wrong, and more often than not the prescription will be wrong.

It’s really no different in principle with ailments that afflict the body politic. Get the diagnosis wrong and it’s likely that the prescription will be wrong.

The diagnosis that interventionists have reached in America’s health-care crisis is that the crisis is caused by too much freedom and free enterprise in the heath-care arena. Thus, their prescription is not surprising: Socialism and interventionism.

The problem with this diagnosis, however, is that the diagnosticians fail to account for the critical factor in the ailment of the patient: massive socialism and interventionism in health care in the past. It simply never occurs to these people that those things could be the root cause of what ails the body politic — the root cause of the health-care crisis. To socialists and interventionists, it is inconceivable that socialist and interventionist programs are anything but positive, healthy things for a society. That’s why they consider them the medicine, not the source of the ailment.

That, of course, leads us to an opposing diagnosis — that it’s not freedom and free enterprise that have caused America’s health-care crisis but instead the socialism and interventionism that have infected every aspect of the health-care field.

First, on the demand side of health care you’ve got ever-growing Medicare and Medicaid expenditures, which have placed an enormous upward pressure on health-care costs.

Second, you’ve got massive government regulation of both the medical and insurance industries, adversely impacting both the demand side and supply side of health care.

Third, you’ve got income-tax manipulation that has perverted the market with respect to employer-provided health-care insurance.

Fourth, on the supply side of health care you have occupational-licensure laws, which have strictly limited the supply of health-care providers.

Therein lies the root cause of America’s health-care crisis. Thus, the prescription is obvious: radical surgery by removing all of this cancerous material from the body politic. No reform. Simply an immediately repeal of Medicare, Medicaid, health-care and insurance regulations, and medical licensure. End all government involvement in health care. Given the positive power of the free market and the enormous resiliency of human beings, the body politic will immediately begin recovering.

That is the only solution to America’s health-care crisis. But if Americans cannot bring themselves to rid the body politic of all this socialist and interventionist cancer, then the second-best solution is to do nothing at all. Because infecting the body politic with even more cancer will only make the condition worse.


Health Problems Health Care Can't Fix

President Obama and Michael Moore's inconvenient truth

Maybe President Obama has watched too much "Sicko" because he sure likes to reiterate Michael Moore's bromides. In his joint address of Congress, he said: "We spend one and a half times more per person on health care than any other country, but we aren't any healthier for it."

But as Mr. Obama is fond of saying, that simply is not true.

While Americans may have a lower life expectancy than other affluent countries, the disparity is mainly due to Americans' poor personal health-care practices -- not to any flaw in health-care treatment. "The U.S. actually does a pretty good job of identifying and treating the major diseases. The international comparisons don't show we're in dire straits," says University of Pennsylvania's Dr. Samuel Preston, a researcher who has studied the matter.

The real problem, it turns out, is that Americans are accident-prone, health unconscious slobs. Until the mid-1980s, the U.S. had the highest per capita cigarette consumption in the developed world, and the U.S.'s obesity rate today is more than twice that of Canada and ten times that of Japan. These aren't problems of the health care system (i.e. in the diagnosis and treatment of disease). These are problems of behavior. Adjust that data for the higher U.S. incidence of homicide and obesity, and Americans actually have the highest life expectancy in the developed world.

This is the kind of inconvenient truth that the somewhat lax Mr. Moore is accustomed to overlooking. A svelte gym rat like Mr. Obama should know better.


Death panels coming to Australia

Courtesy of a Leftist government, of course: The same folk who brought you eugenics in the first half of the 20th century. This already happens in England and is much feared by opponents of ObamaCare -- after evil Ezekiel proposed such measures

DYING cancer patients could be weaned off taxpayer-funded drugs as the Federal Government is confronted with spiralling health costs. Health Minister Nicola Roxon wants debate about the moral challenge as the Pharmaceutical Benefits Advisory Committee plans trials to determine when costly drugs become ineffective and should no longer be dispensed.

Talks between the PBAC and oncologists are part of a broader debate on how taxpayer money could be better spent, as doctors brace themselves for a rising tide of cancer patients, an ageing population and growing health expenses.

Ms Roxon is also believed to be talking to doctors and pharmacists about diverting patients to some cheaper generic drugs. It could spark greater competition and save the Government millions of dollars. [But see here]

Ms Roxon argues that relief from cancer drugs in the last months of life should not be underestimated, but says some are not cure-alls. "Would the community support looking at mechanisms to better control the use of these medicines so that they are only used when the evidence shows they are truly effective, balanced by greater investment in palliative care, so we can better meet the needs and preferences of patients at the end of life?" The question recently put to doctors in Sydney comes as PBAC chairman Lloyd Sansom stressed that moves to keep the Pharmaceutical Benefits Scheme sustainable would not impeach or impair patient safety. The PBS costs taxpayers $8 billion a year for more than 3500 subsidised medicines.

Prof Sansom said more information was needed. "We need trials to be done ... to address any advantages in continuing with drugs when the patient (cancer) has progressed. If there is any benefit," he said.

The Australian Medical Association vice-president Steve Hambleton said the issue was sensitive and some doctors had trouble saying "no" to patients. "If you're on your last legs, there's no point in having expensive chemotherapy if there's no clinical benefits," Dr Hambleton said.

But apart from cancer drugs - which can cost taxpayers up to $50,000 a patient - Ms Roxon is asking why doctors dispense expensive, subsidised drugs to patients when cheaper generics are prescribed.

Ms Roxon told The Courier-Mail yesterday the Government had to be smarter in how health dollars were allocated. "The current pharmacy agreement negotiations are very important," she said.



sisterrosetta said...

Thanks, JR.

This question has to do with the employer "free-rider" mandate in BaucusCare.

The CBO has stated that with the Baucus bill, there will not be an appreciable decline in the numbers of Americans who get their coverage through their employer.

Americans for Tax Reform has stated that the $400 per employee penalty for not providing coverage will be a huge incentive for employers to drop coverage.

As $400 per employee is a heck of a lot less than what empoyers are expending now.

Who is right?

Thanks in advance.

Anonymous said...

Excuse my outburst of comments, but it's kind of fun to watch myself as an example of a scientifically trained layperson, coming to terms for the first time ever of "what's up in the health care debate?".

Looking for waste in the current capitalistic system, I discovered a form of socialism indeed: emergency medicine.

What I did not consider at all was a more obvious drag on the system: making simple mistakes into a form of evil worthy of LITIGATION. You have actual lawsuits and you have a second huge role of insurance companies.

I feel a bit stupid to have left it out of my high school level essay. But I don't feel so stupid when I search this huge blog of yours for 'liability', 'tort' and 'lawsuits' I get a mere half dozen headlines that focus on lawyers. They look quite worth reading. But they contain information I really have to dig for.

Let's just say tort reform is a term few would find familiar. No uproar against lawyers has occurred on the Left, no only because politicians are almost all lawyers themselves, but since tort reform would deprive common people of their power to punish powerful entities for having made simple mistakes.

The amazing thing is that the ideal solution of making it O.K. for doctors to make mistakes and only allowing their bosses to be sued if the are negligent in weeding out the worst blunderers or doesn't instigate quality control is a solution that is dirt simple (no new taxes or bureaucracy) and would merely require toning DOWN the rhetoric of how great it is to become a millionaire if your doctor makes a simple mistake.

Here, given how simple the solution seems, I detect deep hypocrisy. Who have I heard pointing out statistics about the scope of the problem? What percentage of my insurance cost is due to litigation? I have no idea. If it's 50% I'd be pretty pissed that a few people are winning lottery level prizes for something that happened to them quite randomly and not through corruption or gross negligence (akin to a hospital letting a doctor operate on people while swigging whiskey).

No sign-waving mobs of protesters are to ever be seen, demanding tort reform. Yet if this is a LARGE slice of the pie then the existing protests and babbling about caring so much for the uninsured, then it's much like war protests that suddenly dry up when a Democrat is president.

Is there a third and possibly fourth BIG FACTOR in addition to emergency care ethics and litigation?

It can't be public opinion towards health. That's already saturated with educational programs. Exercise is the simplest and lest controversial factor there. Not much debate and certainly not the avenue to reduce insurance costs.

Ah, a third component indeed presents itself, one that dwarfs all others. It is how costs are relative to income and that chronic stagnation in quality of life wealth makes the cost of necessary things that are not commodities very high. We can't import health care from China. It's hand made. Even the equipment is hand made, much like the Space Shuttle or fighter jets are.

One example should suffice. I'll post it separately. John has indulged me in the past in hijacking his blog, and each time I've promised to only do so a couple times a year.


Anonymous said...

The prime example of absolute income being the real problem vs. the cost of health care is nuclear power. This was thwarted in the USA, making energy into being a large percentage of the cost of all material and service products. Health care just happens to be one of the products we need which cannot be mass produced so does not automatically become cheaper and cheaper as production methods improve. The common man's income is much less this decade because no nuclear reactors were built in the USA in the last few decades. This raises energy prices even in nuclear nations like France, since fuel isn't made form nuclear power.

So possibly not that much is really awfully, horrifically wrong with health care, but we are starting to finally truly suffer the effect of anti-capitalistic success stories and bloated government. Might a government 1/10th the size it is now result in 1/10th the tax burden on the society and thus a 900% level of "stimulus" indeed?

I mean just look afresh at what we are suddenly suffering for financially. It's basic needs! It's no longer cheap to dine out and get "home cooked" healthy foods. Gasoline is very costly, as is daily rapid transit in my city. Telephone lines etc. And health care. Add up non-housing costs that are basic necessities and you are suddenly taking about a large percentage of even a normal person's income.

What are the Utopian efforts to fix health care worth if overall there simply is NOT enough absolute wealth being produced to sustain the absolute costs requited to provide health care to everybody? That is a system that will work for a few years and then drag the entire world into utter depression. What if they instituted universal health care, regulated to have to be top notch, in the middle of the Depression? It would have been laughable. It's the equivalent of regulating that everybody should be paid enough to afford a large house and two cars.

That's where we are likely at right now. We are like the little kids who adults used to be who describe their youth as being a situation of being "poor but not knowing it."

Real health care in your later years costs a hell of a lot more than a house and two cars. Yet that is already *being* paid for by free emergency care and a literal stately mansion and and two Ferraris being awarded to "malpractice" clients and their lawyers.

What I did not realize was that modern medical care is the very definition of a luxury good. It cannot be made cheap in the sense of having low energy and brain power inputs required per unit of output.

Health care is the one industry in which massive R&D tends make things more instead of less expensive. Even fighter jets become assembly line objects once the initial prototype is made. Lots of skilled manual labor is then needed, merely. But never in our lifetimes will we want nurses to operate on us or diagnose our heart problem. It's as if each fighter jet or PC or car or even each toothbrush required the full paid skills of the original inventor of the assembly line object, to make each and every laptop or toothbrush!

Medicine is a luxury good. It will never be SUSTAINABLY affordable to the masses unless energy production becomes Utopianly cheap. That it appears affordable to most people now is an illusion that is bankrupting world economies through debt that is financed through modernization of countries like China. Modernization is by definition unsustainable, since catching up leads to being caught up.

What is likely to happen is that China will stop lending us money and it will become China who develops a sustainable health care system that is sustainable by the cold hard logic of rationing treatment to a level that the economy can actually support. Anything else is much worse since it ends in utter disaster.