Quote of the day

Marcus Davies, an official of the Saskatchewan Medical Society, on the difference between Canadians and Americans:

Us Canadians, we’re kind of understated by nature.  We don’t go around chanting ‘We’re No. 1!’ But you know, there are two areas where we feel superior to the U.S.: hockey and health care.”

The quote comes from an article in Newsweek by T. R. Reid, the guy who put together a documentary about healthcare around the world for PBS about a year ago.  Reid says that countries typically develop healthcare systems that reflect their national character and Canadians have built a system that neatly fits theirs: “ferociously egalitarian, but thrifty at the same time”.

So where’s the American national character on this issue?  Hugely confused, I’d say.  Americans are not radically less egalitarian or thrifty than people in other countries.  Unfortunately, many Americans think that their fellow citizens can get all the help they need though emergency rooms and charity.  Or that unregulated free markets are the answer.  Or, even if they aren’t the answe,r government intervention will just make it worse.  Thus, contrary to the example of virtually every developed country around the world, we are doomed to deliver healthcare in an unethical and wasteful way.

Even after months of debate and publicity it seems that large numbers of Americans have little idea what happening around the world or in their own country.  Lovely.

Update:  according to Bob Laszewski we Americans are confused about another matter:  we think the healthcare we receive is generally based on scientific evidence, when it’s not.

Whew

What an unbelievable relief to have Peter Orszag at the Office of Management and Budget.  Here he is introducing Obama’s first budget:

“The single most important thing we can do to improve the long-term fiscal health of our nation is to slow the growth in healthcare costs.  …the path to fiscal responsibility must pass directly through healthcare”

Orszag is one of the few people I’m aware of who really understands that the federal budget (and realistically everyone’s budget) depends on getting healthcare under control.  If McCain had won in November, we would be listening to someone railing against “entitlements” and “government waste, fraud, and abuse”, and the desperate need for tax cuts.

No compromise

In his blog Paul Krugman makes the point that the stimulus bill before Congress isn’t going to end up with bipartisan support.  The GOP wants tax cuts and the Democrats want spending.  The difference of opinion isn’t so much a debate over the proper course of action, it’s a “collision of fundamentally incompatible world views”.  Says Krugman:

If one thing is clear from the stimulus debate, it’s that the two parties have utterly different economic doctrines. Democrats believe in something more or less like standard textbook macroeconomics; Republicans believe in a doctrine under which tax cuts are the universal elixir, and government spending is almost always bad.

Republicans certainly like tax cuts, but I think it’s important to be clear why. It’s not because they think tax cuts will pay for themselves (even though they say so); it’s not because they don’t like the government to spend money (see Iraq War, et al); it’s not because they are particularly greedy (well, maybe it is, but let’s just stipulate that one).  It’s because the massive borrowing required by tax cuts will eventually accomplish what they can’t accomplish through more straightforward means:  destroy broad based social insurance programs like Social Security and Medicare.  This is the “fundamentally incompatible world view”.  For the modern conservative Social Security and Medicare are “European-style socialism”.  And if Obama tries to pass anything approaching national healthcare, he’s going to have a major collision with that world view.

Chart of the day

This is kind of fun.

The economists at the Center for Economic and Policy Research have put together an interactive chart demonstrating the effect of healthcare spending on the federal budget.  You can look at the federal budget as projected by the Congressional Budget Office—and recoil in horror as the deficit, which has bubbled along at 0 to 6% of GDP for decades, explodes to 50% of GDP by 2080!!!

Then you can see how that projection would change if the US could deliver healthcare as efficiently as, say, Australia, Canada, Germany, or the UK.

If the US healthcare system wasn’t so grossly inefficient we would be projecting a massive surplus.

Update:  by the way, this is just healthcare.  No change whatsoever to Social Security.

Health care stimulus

One of the strange things about our current economic situation is that, over the long run we need to save MORE, but over the short-term we are saving TOO MUCH.  Over the past ten years or so we have been saving almost nothing and consuming with borrowed money.  And the borrowing was against an illusory asset—housing prices in a bubble. Not good.

But now, fear has caused people to spend too little.  People are even afraid to save money in traditional ways; its all going to the safety of US Treasury securities.  So we need the federal government to step in and fill the gaps.  First we need massive spending to stabilize the economy; then we need a prudent level of savings to provide for investment over the long term.

Over at TNR Jacob Hacker makes the case for healthcare reform as the perfect stimulus:

During the campaign, skeptics complained that a health care overhaul would involve a lot of upfront costs and that the saving would only come later. But that’s exactly what we need right now. Health care involves major spending in the near future, but, more than other initiatives, it will put a brake on federal outlays in the far future.

Exactly.  Hacker has some of the detail of how this will work in the short-term, but in the long-term it could be a huge savings, plugging a large portion of the $53 trillion hole in the federal budget that our accountant in chief, David Walker, likes to talk about.

Fear Disbelief Relief

No posts since November 2.  What happened?  I think I’ve been going through the 3 stages of political grief (in reverse).

At first it was Fear that despite polls, Obama wouldn’t win.  Then, Disbelief that he actually won.  Then Relief that someone with brains, maturity, and a coherent value system is actually going to be running country; that he will be backed by large majorities in both houses of Congress, and all of this is happening after 8 long years of idiocy.  Whew. Unbelievable.

In any event, this is a blog, so what’s the topic of the day?  Ah yes, the auto industry.  To bail or not to bail….

I have a love/hate relationship with the big American auto makers.  I love my car.  I’m not sure I love Detroit cars.  At the same time American automakers literally invented the car market:  Henry Ford,  Louis Chevrolet, Cadillac, Nash, Packard….on and on.  It’s an American success story.  How can we just toss this industry overboard?  Particularly at a time of economic panic.  Do we really want to dismantle Ford and GM in bankruptcy court?  I don’t.  Would Japan or Germany dump on their major manufacturers that way?  No.

GM and Ford certainly have their problems; some of them self-inflicted, other not.  One that’s not, is their “legacy costs” associated with providing health insurance for retirees.  GM got efficient.  Now they have far more retirees than workers.  Should they be punished for that?  No.  Health insurance should have been nationalized fifty years ago, but the radical right blocked it then, just like it’s blocking it now.  It was a massive error to ask employers to provide insurance that really should be social insurance.  Now GM is paying the price.  And so are we.

But the radical right still doesn’t get it.  Yesterday, Mitt Romney announced that he favors letting the Big Automakers die.  Who cares what it does to the economy.  Apparently he puts Country Second and Destroying Unions First.

One other thought:  the automakers are asking for a $25 billion loan.  A lot of money.  But is it really?  Last time I checked, corporations were accumulating huge amounts of cash.   For example, Exxon (according to their 6/30/08 10Q statement) has accumulated $35 billion in cash.  That’s not just equity or working capital or short-term investments.  That’s cash.  I guess they can’t figure out what to do with it.  Maybe they should loan it to their friends at GM who make the cars that use their fuel.

Accountant vs. Tsunami

Apparently America’s chief accountant, David Walker, is now a movie star. From the NY Times:

The movie, “I.O.U.S.A.,” debuting Aug. 21, is an 87-minute alarum on what it calls the tsunami of debt bearing down on the United States’ future, caused by the rising national deficit, the trade imbalance and the pending costs of baby boomers cashing in on entitlements.

Early reviewers have dubbed the film “An Inconvenient Truth” for the economy… .

“I.O.U.S.A.” offers up as its action hero David M. Walker, former head of the Government Accountability Office. With movie-star looks that scream “accountant” rather than “Terminator,” Walker has been the Cassandra — or Chicken Little — of America’s growing deficit for some time. …

His message

“You probably know that the national deficit is $9.6 trillion and rising. What you don’t know is how bad things really are. If you include all the unfunded entitlement obligations — Social Security, Medicare, Medicaid and so forth — we are actually in a $53 trillion hole, Walker says.”

Action Accountant vs. Debt Tsunami. Actually, I think the premise has promise. Think Paul Revere. But maybe that’s just the accountant in me speaking.

Unfortunately, as I’ve written before, those like Walker who focus on cutting “entitlements” and federal spending as a solution to the problem are barking up the wrong tsunami. The problem isn’t entitlement programs; the problem is healthcare costs. That’s how they come up with a “$53 trillion hole”, by projecting trends in healthcare costs into the indefinite future.

Healthcare costs are a tsunami no matter who pays them, but if, as Walker says, the federal budget deficit is the problem, I have a simple solution: have the government get completely out of the healthcare business and have employers and individuals cover all the costs. Presto, problem solved!

Unfortunately that would simply move health care finance into the private sector;  Instead of taxes and debt service eating up a huge portion of our income, health insurance premiums and out-of-pocket costs would be eating up a huge portion of our income.   It would rearrange the deck chairs on the Tsunami, so to speak.

But, to paraphrase Walker,it’s really worse than you think. It turns out that healthcare financed by the private sector is even more costly than healthcare financed by the government. So, pushing more people into the private healthcare system (cutting back Medicare and Medicaid) would likely increase the problem.

I realize this is counter intuitive to free market believers, but the facts speak for themselves. Not only is our own public sector more efficient than the private when it comes to healthcare, if we look at other countries that adopted universal healthcare decades ago, we find them spending 3-8% less of their income on healthcare with similar or even better results.

The unavoidable (and apparently inconvenient) truth is this: we have the most private healthcare system in the world; it is also the most expensive. It’s hard to imagine how privatizing it even more would decrease costs, yet that’s the solution implied by those who want to cut government spending on healthcare and push even more people into the private sector.

War on Healthcare

Today’s word: medical underwriting. “the use of medical or health status information in the evaluation of an applicant for coverage”

—

As I’ve pointed out before McCain’s healthcare plan relies heavily on state-run high-risk pools; it would essentially eliminate employer-sponsored group insurance by making group premiums non-deductible for employers. Everyone would be given a tax credit for $2500-$5000 and pushed into the individual market. It would likely be a nightmare for many people. It also bears a striking similarity to the plan offered by the health insurance lobbying group, AHIP. Shocking, I know.

"I have suffered through publicly financed healthcare my entire life. I will not waiver in my efforts to save the American people from a similar fate." --John McCain

If McCain and AHIP are successful in implementing their plan they will have delivered a gold mine to private insurers and a minefield to state governments. Private insurers will be working in the most profitable demographic imaginable: healthy people with money. Everyone else–literally those most likely to need healthcare–will be looking to government at all levels to help them out: the old (Medicare), the poor (Medicaid), and the sick (state high risk pools). As a taxpayer my question would be this: if we taxpayers are going to provide health insurance to all the high risk folks, why not the low risk too? At this point what exactly is the point of having private insurers around?

Moreover, let’s take a look at the process by which insurers would identify these potentially costly customers, medical underwriting. Insurers say they need to screen out high risk people, like people with pre-existing conditions, people with a family history of certain diseases, age, gender, and so forth—so that they can keep premiums affordable for everyone else. This might make some sense if they were planning to actually exclude someone from the healthcare system. But no one, to my knowledge. actually proposes to do that.

That’s not to say it doesn’t happen all the time (for more on that subject, I highly recommend Jonathan Cohn’s book, Sick). No, insurance companies don’t explicitly say they want to exclude people from the healthcare system, they just want to exclude certain people from their healthcare system.

What private insurers propose to do is to use medical underwriting to shift costs from private insurers to the government. In other words, if the health insurance system worked exactly as the insurance industry says they want it to, medical underwriting would be merely an expensive, useless process that shifts costs to the public. However, since our healthcare system doesn’t work as advertised, medical underwriting is an evil process, tossing random people into the giant cracks and crevices of our patchwork healthcare system–in addition to being expensive and useless.

It’s for this reason that our healthcare system cannot work without mandatory participation. Everyone gets coverage; everyone pays something. That requires an end to the vast majority of medical underwriting. if McCain and the health insurance companies had one ounce of dignity they would be begging the government to stop them from medical underwriting. Like slavery and child labor it’s a morally bankrupt practice that has been outlawed in other countries for decades. But, instead of ending it, they want to expand it. They want to refine it, fine tune it, devote vast resources to it, so that they can more efficiently identify those who are at risk of costing them money.  So that they can more efficiently dump them on the taxpayers.  So that they can more efficiently mine their particular niche of the healthcare system for gold.

They call this proposal—I’m not making this up—“a plan for guaranteed access” and “covering the uninsured“. Although the medical underwriting they propose to use has precisely the opposite effect—it excludes people from the system—they call their proposal “guaranteed access” because… ummm…they’re going to ask taxpayers to guarantee it. As AHIP puts it on their website, they will “encourage states to develop and implement access proposals”. McCain’s website assures us that “as President, John McCain will work with governors to develop a best practice model that states can follow – a Guaranteed Access Plan or GAP”.

Right. Is there one person in America who believes the GOP has any intention of raising $1 of tax money to pay for this? As I write they are working as hard as they can to defund social insurance and social programs all across the country. Even children cannot escape the GOP attack on government financed healthcare. Now they are proposing that state governments (with their vast resources!) start covering millions of people who would be uninsurable under McCain’s plan? Please.

Its hard to avoid seeing this as a cynical ploy to protect the private insurance industry’s turf. I imagine McCain and his AHIP buddies sitting around the planning table trying to figure out what to do about financing their “Guaranteed Access Plan”.

McCain: OK, we’ve done what we need to do, consulted industry, packaged our plan with the right buzz words—how can we best insure that in never actually happens?

Adviser: John, let’s get the states involved. Obviously a weaker taxing authority than the federal government; divided into 50 separate jurisdictions; they have constant budget problems, 17 states don’t even have high risk pools, and as a rule, our party operatives have been very successful at demagoguing the tax issues for years.

McCain: OK, excellent. Our plan will be to “work with the states”.

In my humble opinion its a total outrage that McCain and the health insurance industry are taken seriously. Especially McCain, having spent his entire life covered by publicly financed health insurance; where does he get off recommending this type of program for the rest of us?

Of helmets and healthcare

Joe Paduda had an interesting post the other day on the limits of personal choice:

There are few issues that do more to crystalize the balance between personal freedom and personal responsibility than motorcycle helmet laws.

Twenty states require motorcyclists to wear helmets.. . Opponents of helmet laws see it is a personal choice and often claim wearing a helmet decreases visibility and situational awareness. Could be.

Proponents of mandatory helmet laws note that….falling off a bike onto one’s head without a helmet is likely to cause a more serious head injury than if one was wearing a helmet.

…there is an ongoing back and forth debate… but ultimately wearing a helmet is a personal decision, until you get a traumatic brain injury, whereupon it becomes a societal issue.

Exactly. Because all of us, either through insurance or government programs, will have to take care of someone with terrible injuries. In other words we may be disinclined to interfere with someone engaging in risky behavior because, “hey, that’s their choice”, but if their bet turns out bad, we all bear the cost. So we all have an interest in what kind of risks people take. Thus, motorcycle helmet laws.

Paduda says it would make more sense to impose high insurance premiums on people taking risks instead of mandating helmets. Maybe so. But I would like to point out an even more destructive example of choice run amok: Consumer Directed Health Care.

Conservatives believe that the problem with our healthcare system is that people don’t have to make enough choices. Third parties pay for everything. What’s to stop people from going to the doc every five minutes with a hangnail if it’s free? That’s the reason for the terrible overspending on healthcare, they say, and therefore we need high deductibles and Health Savings Accounts that will force people to pay docs and hospitals themselves. That’s when costs will come down!

Maybe. But, what actually happens when healthcare consumers are given more choice?

Here’s report on high deductible health plans as quoted in the Register-Guard today:

“Health insurance plans that require enrollees to pay up-front deductibles before coverage kicks in have an alarming side effect, according to two studies released Tuesday by health policy researchers at the University of Oregon.

People enrolled in these plans were two to three times more likely than enrollees in other types of plans to quit taking drugs to control cholesterol and high blood pressure, said Jessica Greene, professor of health policy in the UO’s department of planning, public policy and management.

She and Judith Hibbard, a professor in the same department, were co-authors of the papers, which were published in the peer-reviewed journal Health Affairs.

Cutting back on antihypertensive and lipid-lowering drugs may result in higher long-term health care costs, Greene said. “These consumers may be making shortsighted, cost-saving decisions that may have higher-cost and unfortunate health ramifications,” she said.

Oops. Giving people more choices in healthcare makes it more likely that they will engage in risky behavior (not getting screenings, going off meds) that will very likely impose large costs on all of us–eventually.

Great. Another gigantic deferred cost imposed on our society by conservatives under the banner of personal choice.

Medicare Smackdown

As we progressives dream of universal health coverage, one overriding fear clouds the horizon. Who can take on the health insurance lobby? Based on a vote in the House of Representatives last week, one worthy opponent appears to be American Medical Association. The House voted Tuesday on a plan to restrain Medicare spending. One option was to cut reimbursements to the insurance industry’s favorite program, Medicare Advantage; the other option was to cut reimbursements to physicians by 10%. The vote result: AMA lobby-355; insurance lobby-59.

Take that, Humana!

Even more astonishing, Bush has threatened to veto the law should it get to his desk, but Senate Republicans so far have successfully filibustered it.

My question: how in the world did the GOP end up going to the mat to defend the health insurance industry against the docs? In an election year, no less. Bush and the GOP of course will say they are desperately, desperately, concerned about budget deficits and tough choices have to be made.

Right. This, from the $5 trillion man.

The answer is that the modern GOP hates and fears social insurance programs like Social Security and Medicare. Remember that Bush’s first priority when it came to using his political capital from the 2004 election was an attempt to privatize Social Security. Now he’s now willing to alienate a powerful constituency, the docs, to force fellow Republicans to defend Medicare Advantage, the GOPs attempt to privatize Medicare.

How does Medicare Advantage privatize Medicare? Here’s a brief history:

• 1997- Congress enacts “Medicare Choice (Part C) allowing private insurers to offer a competing product to traditional Medicare. Medicare had always offered a fixed benefit package; private insurers could offer different types of policies as long as they were at least a good as traditional Medicare.
• 1997-2003 – few people enroll in Medicare Choice
• 2003 – Congress overhauls Medicare Choice and renames it Medicare Advantage. New rules permit increased payments to private insurers and richer benefit packages to enrollees (dental, vision, lower co-pays) in effect paying insurers to market Medicare Advantage and rewarding seniors who enroll in private Medicare.
• 2008 – It works. Humana reports that 66% of its profits come from Medicare Advantage policies. Seniors like it too; enrollment hits 25% of all Medicare beneficiaries.

One problem. Medicare Advantage costs taxpayers 13-17% more per enrollee than traditional Medicare. Thus, the budget problem.

I just have to laugh at this. Let’s take a step back and ask “why were private insurers brought into Medicare to begin with?” To lower costs, of course! But it turns out that, given a level playing field, insurers weren’t very interested. So Congress sweetened the pot. Paid them to write Medicare policies and paid beneficiaries to enroll in private Medicare. The fact that the entire enterprise accomplishes exactly the opposite of it’s stated intention is apparently irrelevant to Bush and the GOP. They are so delighted with the program, they are willing to cut physician’s reimbursements by 10% to defend the program.

So what will happen? I don’t think there is any chance physician fees will be cut and the GOP doesn’t want to cut them. They just got maneuvered into a bad political situation. Likely Congress will gets some cut in privatized Medicare and will punt on everything else. But I’d like to hope that this entire episode highlights that the problem of healthcare cost isn’t going to be solved by private insurers.

One other thing: the GOP is far more interested in delivering loot to the insurance industry than it is in solving actual problems.