Some things that America could learn from Europe

It's now clear that President Obama's preferred vehicle for health-care reform is the bill taking shape in the Senate Finance Committee under the watchful eye of Senator Max Baucus (D-MT). As the substance of that bill becomes evident--sweeping new regulations of the private insurance industry; insurance exchanges where the uninsured can buy from a menu of government-approved private plans, with generous government subsidies; and government-financed nonprofit co-ops that would compete with the private sector--it appears that last summer's arguments against a government (or "single-payer") system, like that of Great Britain's, were misplaced. While many U.S. liberals may yearn for such a system, any health-care reform that passes muster in Congress is likely to be very different and create something more akin to the systems of France or Germany than Canada or the U.K. If the biggest disease threatening the long-term health of the U.S. economy is entitlement spending in Medicare and Medicaid, however, these models are also the wrong solution.

If the U.S. opts for insurance co-operatives, heavily subsidized by the federal government, it will be travelling down a path opened by Bismarck in the nineteenth century and long embraced by politicians in France and Germany. In both these countries, the majority of citizens are enrolled in heavily regulated and subsidized sickness funds --mandatory health-insurance plans that charge premiums based on income-- which are mainly provided through employers.

In France, at least, this has until recently provided a good blend of universal coverage and high-quality care-- the holy grail of any health reform. The big problem is cost. The system constantly consumes far more than citizens pay in dedicated taxes and other health-related contributions. Between 1997 and 2006, the French health system ran up a cumulative deficit of $61 billion (adjusted for inflation) for a population of 65 million--a little over 20 percent of the current U.S. population.

Germany, too, has long relied on its mandatory sickness funds, which insure about 90 percent of the population (those over a certain income can choose to buy private insurance). These funds are required to give certain health benefits to subscribers, as well as provide temporary income to those too sick to work. In theory, the funds sustain themselves from a 14 percent payroll tax, split equally between the employer and employee. In reality, the funds increasingly rely on taxpayer support through general revenues. Health-care costs in Germany are exploding, with estimates reckoning that it will consume 30 percent of GDP by 2020 if left unreformed.

Central governments in both countries have responded to ballooning health-care costs by rationing care and tightening control over the system, undermining patient choice and access. In 2004, 286 of France's most senior hospital doctors signed a petition bemoaning the increases in waiting lists. "In casualty units, sick people have to wait for hours, sometimes even days, on gurneys, because there are no beds for them in the hospital," said the doctors' petition, sent to Le Monde. The focus on containing costs has also had the perverse effects of reducing competition between providers and limiting the use of technological innovations that could lead to the cure of costly chronic conditions and help keep patients out of more expensive, hospital-based care.

In Germany, successive governments have been forced to charge citizens for over-the-counter drugs and increase co-payments on physician visits and prescription drugs. Anecdotally, waiting lists for certain kinds of treatment are on the rise, and the use of technology such as MRI and CT scanners lags considerably behind the U.S.

As outsiders, it seems to us that the real problem with U.S. health care is not the absence of public provision for the uninsured (who are generally young and healthy), but a lack of competition among health insurers, resulting in mind-bogglingly expensive premiums. The U.S. links the tax deduction for health insurance to employers and not individuals, and current law forbids the selling of health insurance across state boundaries: both of these policies are major barriers to insurance competition and cost control. Until individuals can choose their own portable insurance from a transparent, truly competitive national market, cost pressures will remain unchecked.

U.S. policymakers still enamored of European solutions have better models to choose from. Switzerland enjoys some of the highest quality health care in the world, largely because it has avoided some of the pitfalls of the Franco-German model, allowing a large measure of consumer-driven competition while subsidizing premiums for the indigent with taxpayer dollars. It's not perfect: mandatory insurance has led to some cartel-like behavior among insurers and given the government increased control over health-care provision, but it has kept a lid on health-care inflation while continuing to offer patients high quality and more choices.

The Dutch have followed suit. The Netherlands for years labored under a Franco-German health-care model that absorbed 30 percent of its GDP growth. In 2006, it shifted to a Swiss-style system in which all citizens must purchase insurance from one of 41 competing private-insurance funds. This introduced a strong element of price competition into the system, with large numbers of switching customers forcing insurers to focus on patients' needs and increase their back-office efficiency. The new arrangement has injected innovation into the system, too, as insurers seek to steal a march on their competitors. Crucially, costs have been kept under control without rationing. Since the Dutch enacted their reforms, health-care spending inflation has slowed from 4.5 to 3 percent annually, even as quality has improved.

The lessons for the U.S. are clear. Creating a state-subsidized insurer or non-profit co-op to cater to those unable to afford private premiums is the most expensive way of covering the uninsured. As Switzerland and the Netherlands demonstrate, lifting barriers to competition among insurers can provide a more sustainable solution to the cost and access problems that plague American health care. Mandatory insurance, however, needs careful checks on insurance cartel power.

Better still, a uniquely American solution would create universal health-savings accounts (with government subsidies targeted at the poor and high-cost patients) that would encourage consumers to adopt healthy lifestyles and seek care in cost-effective settings--like buying generic drugs at Wal-Mart or seeking basic care from retail clinics. The central insight now lacking in the health-care debate (whether in Europe or the U.S.) is that consumers demand better technology at lower cost from every market where they have "skin in the game" --whether it be electronics or automobiles. A combination of high-deductible catastrophic health insurance and HSAs is the only kind of "universal health care" that will, in the long run, work.

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Senate panel wraps up work on health care

The Senate Finance Committee managed to fend off significant changes to its health care reform plan as it looks ahead to passing the bill — and a decision over whether to include the public plan — off to Senate Majority Leader Harry Reid.

As early as next week, the bill could go to Mr. Reid, Nevada Democrat, who has the difficult task of trying to meld the Finance bill with a more liberal reform plan approved by the Health, Education, Labor and Pensions (HELP) Committee.

The Finance Committee ended its debate early Friday morning and will vote for final passage once it has a preliminary cost estimate, likely next week. Chairman Max Baucus, Montana Democrat, told the panel that it would only vote on the bill if it is deficit neutral or creates a surplus.

Mr. Baucus has said that he expects to have the votes. Sen. Olympia J. Snowe of Maine, the only Republican who is open to voting for the bill, told reporters she isn't sure yet of her vote. "I have a lot to think about," she said. "This is the first step in a long journey."

The next step in that journey will come as Mr. Reid determines whether the bill that goes to the Senate floor, which he said he expects to happen the week of Oct. 12, contains the government health insurance plan, called the public option, and requires employers to offer insurance coverage. The HELP Committee bill contains both, but the Finance plan does not. contain a public plan. It's less clear whether the public option has the votes in the Senate. Eventually, those bills will need to be combined as well.

In a win for public-option advocates, the Senate Finance Committee voted Thursday to allow states, if they choose, to pool individual tax credits to negotiate private insurance coverage for the poor. The proposal from Sen. Maria Cantwell, Washington Democrat, would allow states to collect the tax subsidies designated for individuals within 133 to 200 percent of the federal poverty level — income under $44,100 for a family of four — and negotiate with a private insurance company to provide coverage. Miss Cantwell called it a "public plan with market forces," and said the best way to drive down health costs is to negotiate prices with insurance companies.

In one of its last moves, the panel agreed to further reduce the penalties imposed on individuals who defy the requirement to obtain health insurance. Individuals who aren't poor would face a penalty of only $750 per year, down from the $3,800 originally proposed.

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Finance Committee Democrat Won’t Read Text of Health Bill, Says Anyone Who Claims They’ll Understand It ‘Is Trying to Pull the Wool Over Our Eyes’

Sen. Thomas Carper (D.-Del.), a member of the Senate Finance Committee, told CNSNews.com that he does not “expect” to read the actual legislative language of the committee’s health care bill because it is “confusing” and that anyone who claims they are going to read it and understand it is fooling people. “I don’t expect to actually read the legislative language because reading the legislative language is among the more confusing things I’ve ever read in my life,” Carper told CNSNews.com. Carper described the type of language the actual text of the bill would finally be drafted in as "arcane," "confusing," "hard stuff to understand," and "incomprehensible." He likened it to the "gibberish" used in credit card disclosure forms.

Last week, the Finance Committee considered an amendment offered by Sen. Jim Bunning (R-Ky.) that would have required the committee to post the full actual language of the proposed legislation online for at least 72 hours before holding a final committee vote on it. The committee defeated the amendment 13-10.

Sometime in the wee hours of this morning, according to the Associated Press, the Finance Committee finished work on its health-care bill. "It was past 2 a.m. in the East--and Obama's top health care adviser, Nancy-Ann DeParle in attendance--when Sen. Max Baucus, D-Mont., the committee chairman, announced that work had been completed on all sections of the legislation," said the AP. Thus far, however, the committee has not produced the actual legislative text of the bill. Instead the senators have been working with “conceptual language”—or what some committee members call a “plain English” summary or description of the bill.

Senator Jeff Bingaman (D-N.M.), who sits on the committee, told CNSNews.com on Thursday that the panel was just following its standard practice in working with a “plain language description” of the bill rather than an actual legislative text. “It’s not just conceptual, it’s a plain language description of the various provisions of the bill is what the Senate Finance Committee has always done when it passes legislation and that is turned into legislative language which is what is presented to the full Senate for consideration,” said Bingaman.

But Sen. John Cornyn (R-Texas), who also serves on the committee, said the descriptive language the committee is working with is not good enough because things can get slipped into the legislation unseen. “The conceptual language is not good enough,” said Cornyn. “We’ve seen that there are side deals that have been cut, for example, with some special interest groups like the hospital association to hold them harmless from certain cuts that would impact how the CBO scores the bill or determines cost. So we need to know not only the conceptual language, we need to know the detailed legislative language, and we need to know what kind of secret deals have been cut on the side which would have an impact on how much this bill is going to cost and how it will affect health care in America.”

Carper said he would "probably" read the "plain English version" of the bill as opposed to the actual text.

In a Thursday afternoon interview outside the hearing room where the Finance Committee was debating the final amendments to the still-unseen bill, Carper explained why he believes it would be useless for both members of the public and members of the Senate to read the bill’s actual text. Committee members did not have a “clue,” he said, when one senator recently read them an example of some actual legislative language. When you look at the legislative language, he said, “it really doesn’t make much sense.” “When you get into the legislative language, Senator Conrad actually read some of it, several pages of it, the other day and I don’t think anybody had a clue--including people who have served on this committee for decades--what he was talking about,” said Carper. “So, legislative language is so arcane, so confusing, refers to other parts of the code—‘and after the first syllable insert the word X’--and it’s just, it really doesn’t make much sense.” Carper questioned whether anybody could read the actual legislative text and credibly claim to understand it.

If this bill became law, it would mandate dramatic changes in the U.S. health care system. “So the idea of reading the plain English version: Yeah, I’ll probably do that,” said Carper. “The idea of reading the legislative language: It’s just anyone who says that they can do that and actually get much out of it is trying to pull the wool over our eyes.” Carper compared the full legislative language of the bill to credit card disclosure documents that he described as “gibberish,” meaning that “you can’t read it and really know what it says.”

When asked if Republican members of the committee should have a chance to read the full text of the bill if they believe they are capable of understanding it, Carper suggested Republicans would only pretend to understand the bill when in fact they would not understand it. “They might say that they’re reading it. They might say that they’re understanding it,” said Carper. “But that would probably be the triumph of man’s hope over experience. It’s hard stuff to understand.”

Carper said if Americans were given the chance to read the actual text of the bill he believes they would decide that it made little sense for either them—or members of Congress—to read such texts because of the difficulty in understanding them. “I think if people had the chance to read that they’ll say you know maybe it doesn’t make much sense for either the legislators or me to read that kind of arcane language,” said Carper. “It’s just hard to decipher what it really means.”

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A mandate has the same effect as a universal tax

What if the government taxed people just because they were living and breathing? Taxation already touches almost all aspects of life, from paychecks to cable bills.

We can be sure our congressional representatives are experts at creating new pretenses for taxation. But a tax whose impact cannot be mitigated and is imposed solely for the act of breathing would surely be derided as un-American.

Yet, rest assured, this "living and breathing" tax is on the table right now. It’s called "Individual Mandate." It is part and parcel of the Obama health care plan. As Obama lectured George Stephanopoulos in his recent Sunday talk show marathon, “You've got to take a responsibility to get health insurance.” And if you choose not to, government will force you to pay up anyway in through what may appropriately be called the Orwellian Prescribed Extortion Cartel (OPEC).

OPEC Care is Orwellian because in order to force its will, the government will have access to some of the most intimate conversations one could possibly have--those protected by doctor-patient privilege. They also will have access to patients' bank accounts as a result of the bill.

So, unlike the way Social Security direct deposits currently function, in which money is only deposited, this provision is a two-way affair--money can be taken out of accounts as well. This is a dangerous negation both of privacy – and of solvency.

The term "individual mandate" is also a lie. It sounds like the individual is empowered, but, rest assured, he's certainly not the one doing any mandating. The government issues the mandates to the mandatee who is the individual. It’s actually a government mandate.

Under this bill, the individual is mandated to procure insurance from a de facto government-protected cartel of insurance companies. This system forces people to buy and guarantees these companies have a market and customers. And if someone dares to oppose OPEC-Care, he is penalized with a steep exise tax, though Obama claims this is not a tax despite the word being used in the bill. Its not designed to insure people as much as its designed to "ensure" companies have customers. Obamacare's "public option" was not market-based choice and nor is OPEC-Care's "individual mandate".

Proponents claim that buying health care from OPEC-Care is somehow supposed to magically reduce the price of health care. But a cartel by definition does nothing to lower prices. Cartels control prices by dominating supply. Most people comparison shop when they buy most things, but no more with OPEC-Care should this "compromise" bill pass.

Doctors also lose big because OPEC-Care is the only game in town. Right now, if an insurance company is slow to pay on claims, a doctor can choose not to deal with that insurance company in favor of others. Many car dealers are near bankruptcy from the Cash for Clunkers scam--now comes the government with another dysfunctional solution.

OPEC-Care amounts to a compulsory tax for living and breathing. People can't opt out until they're dead, so how else could it be characterized? Rather than depriving people of choices by establishing a cartel, the government should expand the horizons. Allowing the thousands of insurance companies currently in business to compete across state lines is a great start. But that would promote freedom instead of restrict it. And that’s not the Obama OPEC-Care way.

Government protecting companies from their clients by making it illegal not to buy from them is precisely the wrong direction. Only genuinely increasing market influences and competition will lower costs. Anything else is an insult to the 85% of Americans who are currently satisfied with their health care. And taxing the life and breath out of them adds lethal injury to that insult.

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How the U.S. Government Rations Health Care

The agency that would likely run the 'public option' was slow to pay for implantable cardiac defibrillators

President Barack Obama deflects criticism that his health-care plan will bring on government rationing of medical care by arguing that insurance companies ration care. Everyone knows private payers limit access to some health care. But government does it in far more byzantine and arbitrary ways.

Consider the $450 billion Medicare program. It provides a model for —indeed its bureaucracy could well end up running— the "public option" health plan that Mr. Obama wants to offer all Americans under the age of 65. In recent years, Medicare's staff has been aggressively restricting coverage for costly treatments. Looking for ways to control spending on medical products —and preserve the illusory "trust fund" that pays Medicare claims— is what shapes the culture of the organization and motivates the agency's staff.

This often means limiting access to the costliest technologies. To do this Medicare relies on its rationing and pricing systems. National coverage decisions (NCDs) are assessments issued by Medicare's medical staff that define who is eligible for new but often expensive treatments. Medicare then assigns medical products and procedures with "codes" that determine which regulated category they fall into. Finally, price "schedules" are developed by Medicare's staff each year to assign each unique code with its own updated payment rate. The process for getting a favorable code on a new product is a source of intense lobbying. It can make or break a technology.

For a remote agency like Medicare, far removed from clinical practice, it's easier to try and manage the use of a high-cost but specialty treatment than a much lower-cost but very widely used product. Yet cheaper, more commonly used products can still be mispriced and account for more total cost to the agency. For example, low-tech orthotic devices and other "durable medical equipment" are a known source of wasteful spending. These medical products often evade Medicare's attention in favor of less used but more expensive items such as a biological cancer drug.

Take the agency's tortured decisions concerning the use of implantable defibrillators that jump-start stopped hearts during cardiac arrest. Medicare sharply restricted their use in the 1990s. Mounting research proved that the $30,000 devices could be saving many more lives. So in 2003 Medicare adopted a novel theory to expand coverage to some, but not everyone, who needed one. The agency said only patients with certain measures on their electrocardiograms (called "wide QRS") seemed to benefit. It was an easily measurable but ultimately imprecise way to allocate the devices. After another major study firmly refuted the QRS theory, Medicare expanded coverage again in 2005, potentially saving 2,500 additional lives according to a press release issued with that decision.

That experience wasn't unique. From 1999 to 2007, Medicare denied access in a third of the treatments it evaluated through its coverage process, taking an average of eight months to complete its reviews. When coverage was granted, in 85% of cases the treatments were restricted, usually to patients with more advanced illnesses.

Medicare is lately increasing its use of the national coverage process and is becoming more tightfisted. Since 2008, according to my review of Medicare data, it conditioned access in 29% of its reviews and denied new or expanded coverage in fully 53% of cases.

Medicare's methods can also be arbitrary. Take the travails of the pharmaceutical company Sepracor and its drug Xopenex, an innovative respiratory medicine that competes with the chemically distinct and much cheaper generic albuterol. Both are inhaled aerosols used to treat asthma and chronic obstructive pulmonary disease. Xopenex has the same benefits as albuterol, but some believe fewer of its cardiac side effects. Medicare didn't agree.

The agency tried to make a "national coverage decision" on Xopenex but couldn't come up with a clinical justification to limit the drug's usage. So Medicare manipulated its payment process, saying it would pay Xopenex a price equivalent to the "least costly alternative" form of generic albuterol, 10 cents a treatment compared to about $2.50 for Xopenex. Then Medicare was sued by a patient, and a Federal court recently ruled the agency exceeded its authority.

Medicare finally succeeded in reigning in the use of Xopenex with its coding system. By issuing Xopenex the same classification as generic albuterol, it was able to pay both products the same "blended" price—an average of the cost of each individual drug. That lowered the price on Xopenex, but ironically increased what Medicare paid for the generics.

It's not a stretch to say that Medicare spent hundreds of cumulative man-hours focusing on Xopenex while other priorities languished. The question is why? There weren't safety concerns. Xopenex may have been used in lieu of a cheaper alternative, but at peak Medicare sales of about $300 million it represented far less than one one-thousandth of the agency's budget. Simply put, a few staffers inside Medicare were consumed with the drug and its higher price—revealing a process that is capricious and often disconnected from science.

Worse still is how impenetrable these programs have become. Drug and device companies spend millions of dollars trying to influence Medicare decisions. The hundreds of consultants they hire to advise them typically command $20,000-a-month retainers.

Formal patient and provider appeals to Medicare took an average of 21 months, according to a report issued in 2003 by the Government Accountability Office (using 2001 data), with delays in "administrative processing" due to "inefficiencies and incompatibility" of data systems eating up 70% of the time spent processing appeals.

There's nothing inherently wrong with a program like Medicare seeking value for taxpayers. But it shouldn't make up the rules as it goes. When private plans ration care, patients can appeal directly to an insurer's medical staff. Only a small fraction of Medicare's denied claims—about 5%—are ever formally appealed because its process is so impenetrable. People can also switch insurers, and in many cases patients chose a policy because it matched their preferences in the first place. These options don't exist in a government health program.

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