In short, Obama is lying about the dearth of conservative approaches to the health care; he's trying to force a liberal all-or-nothing "solution", and he hopes that voters will buy into his disingenuous state of denial. I don't presume to speak on behalf of all conservatives on this matter; the interested reader is encouraged to review, e.g., Gingrich's Center for Health Transformation, the Cato Institute, and the Heritage Foundation.
Requiring Health Care Insurance?
I will say there is a significant difference of opinion in the conservative sector: the very issue of a mandate. Let me use the concept of life insurance as an example. The basic purpose, of course, is providing an financial buffer in the unlikely event that the family breadwinner dies, leaving a homemaker and young children without steady income. This may be prudent financial planning, but to what extent does the government have the right to impose the purchase decision on the individual? On the other hand, the concept of an insurance mandate when we're talking about drivers on the road, where a driving mishap can cause more economic damage than the driver's personal assets, is accepted. Fortunately, the risks of a catastrophic accident are low, and by spreading the risk, the costs are more affordable (vs., say, requiring drivers on the road only when they have accumulated assets as minimal collateral).
But, and this is a critical issue for discussion, the recent CBO analysis of the Kennedy health plan indicates that it would simply reduce the net number of nonelderly uninsured from 19% to 13%; more specifically, of the 39 million projected insured through the prescribed option, only 16 are net not-insured, with the majority actually coming from insured in the private sector, e.g., employers dropping plans or households individually buying insurance. So Obama might call it "universal" health coverage, but when we're talking about spending $1T over a decade just to reduce the net percentage of uninsured to about 6%, we have to ask if there's a better way.
My personal view is that there should be a mandate, because ultimately we have to provide coverage of costs in the event of emergencies. Younger people may prefer to opt out of insurance, not wanting to subsidize the coverage of more expensive older policyholders. I agree that younger people tend to be healthier, but they are less likely to have assets to cover expenses for serious health issues or catastrophic accidents and to some extent we need to cost-share genetic health issues. I do believe that there should be flexible ways for young people (and/or others) to minimize out-of-pocket costs for insurance, including relevant concepts of collateralized bonds, high-deductible plans, and health savings accounts.
Big Picture Issues
Obama often discusses health care issues by pointing on comparisons with Medicare and Medicaid and relevant administrative costs. As I've mentioned in past posts, these are disingenuous comparisons, because Medicare and Medicaid do not assume the same costs (qualifying and negotiating with doctors, marketing, regulatory compliance, cost controls (including anti-fraud), etc.) They dictate reimbursement rates.
Doctors in essence run small businesses: they have their own costs, including rent, office staffing, malpractice insure, paperwork and having to do with the headaches of referrals and vendors (e.g., lab work) consistent with the patient's plans. Low margins on Medicare/Medicaid patients, not to mention cutbacks on federal payments for these programs, have led doctors to freeze or cut back the number of relevant patients.
The Stealth MedPAC Approach
MedPAC (the 17-member Medicare Payment Advisory Commission) traces its genesis back to the 1997 Balanced Budget Act passed by the GOP-controlled Congress.
Even liberal advocates, e.g., Maggie Mahar of Healthbeatblog.org, concede, based on MedPAC analysis, concede that Medicaid funding doesn't cover costs but argue that some hospitals don't lose money on their Medicare business. Ms. Mahar particularly loves to cite the Mayo Clinic as her prototype, the famous non-profit hospital where doctors are salaried; she argues that the costs are lower because of a quality focus, i.e., getting the diagnosis and treatment right from the get-go, eliminating unnecessary tests, e.g., related to defensive medicine (cf. tort reform and malpractice below). She also notes the variability in costs, e.g., twice the cost at UCLA versus the Mayo Clinic for the same procedure. The liberals argue that what the federal government should do is to effectively scale the Mayo Clinic concept across the board.
I have not reviewed the cost bases between Mayo Clinic and other hospitals, but off the top of my head, there are a number of factors to consider, e.g., operational costs in Rochester, MN, versus, say, the Los Angeles area, the number of tests might reflect things like tort reform status or the prestige and more selective physician recruitment processes. The point is, some distinctive cost factors may not be replicable. Moreover, I'm skeptical of methodological-based "best practices" explanations for cost differences; given professional journals, websites, conferences, medical databases, etc., I seriously doubt that what Mayo Clinic is doing right is proprietary and not shared with other physicians, hospitals, insurance companies, etc.
MedPAC does, in fact, raise a number of good points, e.g., the disparity of reimbursement and the location of new hospitals. For example, a family physician might be reimbursed under $100 for a half hour consultation on an intricate medical problem, but a specialist might be reimbursed over $400 for a colonoscopy taking the same amount of time. Another example: hospitals are often built, within miles of each other, in the suburbs. This goes back to an anecdote I've mentioned in a past post: A boy is looking for his lost coin under a streetlamp. A man passing by him asks him whether he lost the coin there. The boy says no and indicates he lost it away from the lamp. "Then why are you looking here?" "Because the light is better..." There is a lot to be said about building hospitals and clinics closer to patients in underserved areas, e.g., in urban or rural areas.
Liberals argue that capitalism doesn't seem to work when it comes to hospitals, that the only way to get hospitals to get serious about cost containment is to put it on a forced diet by holding the line or even cutting federal payment for various services. Indeed, to a certain extent, there is limited competition for services within a geographical region. Uninsured patients, without pricing power, are often charged up to double or more of costs charged to insurance companies; some Americans have looked overseas where the savings on major surgery are significant over and beyond travel costs.
Conservatives are empathetic to the concept that businesses, including hospitals, should be subject to the forces of a brutally competitive global economy, and hospitals that operate inefficiently should be allowed to fail. The problem is that the way that the way that hospitals have responded to money-losing patients has been to pass on their costs to other patients, i.e., through their insurance companies. Patients also often do not have a vested interest in cost containment. A typical example was a story I read from a roommate of a patient writing on a blog; the patient supposedly wanted to book an ambulette and had to be told that he didn't qualify because he was ambulatory.
I also think we have to look at the pattern of spending in Medicare and Medicaid versus the private sector. For example, Ms. Mahar at one point discusses that there may be a perverse incentive to choose higher-reimbursed options (a coronary bypass) versus a more economical (stent) decision. However, for example, health blog reader Nate's comment reflects on whether MedPAC, in an effort to control costs by minimizing tests or otherwise controlling costs (e.g., by rationing care), may end up being penny-wise, pound-foolish.
Senator Jay Rockefeller is sponsoring legislation, favored by Obama, which would cede more power to MedPAC to modify things like adjusting reimbursement rates, in a manner which would depoliticize processes in a manner similar to how military base closures are now done, where the Congress has to consider them all-or-nothing. There are a lot of things to recommend this approach, especially to a problem solver like me. The devil is in the details; MedPAC already has an input into the Congressional appropriation process, and I'm concerned of the Congress ceding its constitutional responsibility over revenues, Trojan horse proposals, and delegating tough decisions to MedPAC.
Tort Reform
A glaring issue that they have to deal with is the soaring cost of malpractice insurance. Obama, in a repeating pattern of behavior we have seen before (e.g., his lip service to deficit reduction), acknowledged the malpractice insurance concern at the 2009 AMA meeting, but it was little more window dressing: Did you expect him to alienate a key constituency group, namely trial lawyers? So he's defending lawsuits based on economic damages to patients. That's a red herring, and physicians are not fooled. Nobody is arguing over recovery of economic damages, and Obama knows it. The key issue is noneconomic (e.g., pain and suffering) and/or punitive damages. The fact is that lawyers have a low barrier of entry and can use the long, expensive legal process to extort settlements; you have the typical means to deal with these issues: e.g., regulate legal fees (caps on legal costs)
The relevant issue here is tort reform. Towers Perrin Tillinghast in 2004 noted that "at nearly $27 billion in 2003, medical malpractice costs translated to $91 per person. This compares to $5 per person in 1975 (not adjusted for inflation)." Pricewaterhouse Coopers in 2008 concluded that over half of what the US spends in health care is wasteful spending with "defensive medicine, such as redundant, inappropriate or unnecessary tests and procedures, was identified as the biggest area of excess."
The American Tort Reform Association points out that paid claims have increased NEARLY THREE TIMES THE RATE OF INFLATION, and recommends a four-point medical liability reform approach (with which I concur): "(1) a $250,000 limit on noneconomic damages; (2) a sliding scale for attorney’s contingent fees; (3) periodic payment of future damages; and (4) abolition of the collateral source."
Towards a Compromise
The Washington Post looked at the implications of the CBO study today and basically concludes it will require a compromise; one relevant option with respect to Medicare would be raising rates for participants. Another consideration is capping the tax-deductible portion of health care expenses, an idea that John McCain floated last fall and which the Obama campaign attacked. Insurance companies have talked about waiving preexisting health conditions, eliminating gender-based premium costs and supporting some financial regulations; however, they oppose (as do I) a government competitor, which would be essentially a Trojan horse for a single-payer system.
Of particular note today was the announcement of a new initiative led by former Senate Majority Leaders: Republicans Howard Baker and Bob Dole and Democrat Tom Daschle. This plan includes a combination of tax increases, a mandate, and various cost containment procedures, including an innovative state/regional plan option:
the need for strong insurance reforms that require guaranteed issue; the elimination of medical underwriting for pre-existing conditions and rating limitations; new state and regional coverage options through exchanges; reforms that constrain cost growth; and financial assistance through Medicaid and tax credits.I would also like to see some version of catastrophic health insurance which would limit, on a means basis, the maximum out-of-pocket expenses for the year.
