Santayana: "Those who cannot remember the past are condemned to repeat it"
Dr. Russell Blaylock, a neurosurgeon and nutritionist, publishes a monthly wellness newsletter. His September issue addresses some salient issues relevant to the current health care reform debate. One of the things he discusses, in response to current Democratic proposals for health care "reform", is the "same old same old", "been there, done that" arguments and justifications that were used to sell Medicare and Medicaid, including the idea that the programs would be self-financing from all purported cost savings from efficient public sector management, improved accessibility and quality of health care, etc. The costs quickly spiraled beyond control and the best Democratic projections, and the "trust me" cost savings never materialized, with trillions more in unfunded mandates.
[Yes, that's right: we have $36T in unfunded Medicare costs, but Obama and the Democrats have decided that the "real" cost issue that needs to be resolved is the 46M uninsured, many of whom have above-average income and can afford household coverage but elect not to do so. Of course, the Democrats prefer to lecture the GOP on the billions spent in the War on Terror. Some estimate the costs of 9/11 at $2T; I would argue that the money managed by the Bush Administration in keeping the homeland safe from a follow-up attack was a proactive, preventive investment.]
Blaylock notes that before the historic government expansion into health care, doctors typically had not shut their doors to elderly or poor patients based on a limited ability to pay for services. Today we see the same thing; perhaps the programs are better in terms of improving coverage of doctor and hospital costs by elder patients, but typically the costs are subsidized by other patients (with private-sector health care insurance or whom pay directly for services). Am I the only skeptic when the Democrats suddenly "discover", after decades of "managing" Medicare and Medicaid, significant "cost savings", just in time to "pay" for their next expansion of government-run health care?
"We Need to Solve Health Care Now..."
Democrats are trying to manufacture a sense of crisis and emergency; they point out that health care costs account for about 16% of GDP. That hardly seems to be a compelling argument. From a cost perspective, one can argue tax and regulatory burden and an unprecedented federal deficit and national debt are a far more compelling crisis, one more directly controlled by politicians. A failure to control debt will inevitably result in higher interest rates and inflation, which will not only aggravate health care costs, but costs across the economy and destroy jobs in the process (and the tax revenues that income brings).
When the average American voter hears that we can get something for nothing--add 46 million people to government-run insurance at no net cost to the American taxpayer in the middle of a recession--he or she instinctively remembers the adage "there ain't no such thing as a free lunch".
The only real crisis is the Democrats' recognition that their legislative majorities may shrink in upcoming elections and they may need to resort to real compromise.
Does that mean that real reform is not possible? Of course not; a number of tweaks are possible. The Democrats could follow the conservatives' lead in addressing things like the 18% cost disadvantage of small businesses, providing mechanisms for small businesses to band together and self-insure across states, like big companies currently do. The Democrats could follow the conservatives' lead in strengthening state/regional assigned risk pools, which try to spread high-risk/cost policyholders in a fair way among insurance writers. The Democrats could follow the conservatives' lead to increase the number of doctors by streamlining the government footprint in medicine and ending abusive lawsuits through medical malpractice tort reform. The Democrats could follow the conservatives' lead to increase competition by deregulating the marketing of health insurance across states and/or allowing insurers to write barebones basic health insurance coverage in any state. The Democrats could follow the conservatives' lead in achieving equal protection of tax-advantaged health care by allowing individuals to pay for their own selected insurance option through their place of work or providing individual households tax credit vouchers applicable to federal or state-approved policy premiums.
My concern, though, is that Democrats will try to handle things by fiat, e.g., price controls or payment schedules (regardless of underlying costs), bureaucratizing medical care under euphemistically termed "best practices" (an inherently corrupt process whereby Big Government attempts to micromanage medical decisions under the pretext of cost control), etc.
The 80/20 Rule: Why a Government-Run System Means Rationing
Almost any beginning MBA student comes across what is called the 80/20 Rule (sometimes known as the "Pareto Principle" or Juran's "vital few and trivial many"). This manifests itself in a number of ways; for instance, a relatively small percentage of individuals and businesses accounts for the most tax revenues.
As Dr. Blaylock notes, about 5% of patients account for about 50% of the health care costs (and, of course, a lot of these expenses occur near end of life). One of the reasons that Sarah Palin's pithy assertion of "death panels" seems to connect with a lot of people is because of the inevitable attempt to control related cost-intensive treatments (e.g., life support systems). Does anyone doubt that a government bureaucrat, given one spot for hip replacement surgery and two candidates, a 20-year-old and a 60-year-old, might figure that a 20-year-old, with maybe another 45 years of tax-yielding income, should be given the spot? That's why a number of senior citizens are concerned over things like the proposed slashes in Medicare reimbursements to doctors. Do you honestly believe that progressive doublespeak bureaucrats won't lobby elderly patients to consider "quality of life" issues in making personal health decisions?
Personal Accountability?
One of the things Democrats routinely overlook is the importance of the individual when it comes to health care spending decisions... Dr. Blaylock notes it in terms of how many hospitals and doctors today see patients over minor issues that many households in earlier generations handled on their own or a questionable proliferation of vaccines and other preventive measures. John Stossel of 20/20 did a critical expose of an exclusive senior citizen community in Florida, noting frequent doctor visits (and goodie bags), questionable prescription drugs like Viagra, etc. One of the nurses working in a similar facility posted on the related page, saying a certain procedure, normally requiring authorization from private-sector carriers, did not require Medicare approval and was all but a license to print money.
When you start seeing certain insurance companies on TV promising diabetics that they'll handle all the paperwork for medical supplies, provide free delivery, and not a dime will come out of their pockets, or some wheelchair company promises no out-of-pocket costs and guarantees qualified customers with mobility problems to cover the costs of their wheelchair if the government or their insurance company denies their claim, there is reason to be concerned: the rest of society has to put up with bureaucratic nonsense or to pay modest shipping costs for things we want to buy. [I'm not making a judgment about these companies' products or customer service; I'm more concerned about the concept of "no-cost" medical products and services in the status quo, whereby the customer has no incentive to shop for better wheelchairs or diabetics are not encouraged to consider less costly alternatives.]
When you start seeing certain insurance companies on TV promising diabetics that they'll handle all the paperwork for medical supplies, provide free delivery, and not a dime will come out of their pockets, or some wheelchair company promises no out-of-pocket costs and guarantees qualified customers with mobility problems to cover the costs of their wheelchair if the government or their insurance company denies their claim, there is reason to be concerned: the rest of society has to put up with bureaucratic nonsense or to pay modest shipping costs for things we want to buy. [I'm not making a judgment about these companies' products or customer service; I'm more concerned about the concept of "no-cost" medical products and services in the status quo, whereby the customer has no incentive to shop for better wheelchairs or diabetics are not encouraged to consider less costly alternatives.]
The point is, we need insurance to be insurance--to handle the big, unexpected costs, e.g., an auto accident involving damage to property and/or severe medical injuries. I don't need to see a doctor over a common cold or if I scrape my knee; I don't need insurance to dispense vitamins and supplements, condoms, etc. I take a thyroid generic medicine that costs less than $10/month, even without prescription coverage. Many effective generic medicines can be handled out of pocket.
The Republicans have provided one policy mechanism to provide a natural incentive for insurance policyholders to be more frugal in their use of medical products and services: the tax-advantaged health savings account used in conjunction with a high-deductible health insurance plan. The health savings account can be used to cover basic out-of-pocket incidental medical expenses.
The Democrats can speak all they want over these phantom savings, but they need to look at the situation in terms of individual responsibility and incentives. Take, for instance, the question of obesity. Instead of paternalistic progressives trying to regulate food products and preparation methods or penalize obesity, it is time to provide things like tax incentives (e.g., tax credits for fitness center membership and utilization or staged tax credits for sustained weight loss), insurance premium "good health" discounts, and improved information on health care services and products, weight loss scams, etc.
The Republicans have provided one policy mechanism to provide a natural incentive for insurance policyholders to be more frugal in their use of medical products and services: the tax-advantaged health savings account used in conjunction with a high-deductible health insurance plan. The health savings account can be used to cover basic out-of-pocket incidental medical expenses.
The Democrats can speak all they want over these phantom savings, but they need to look at the situation in terms of individual responsibility and incentives. Take, for instance, the question of obesity. Instead of paternalistic progressives trying to regulate food products and preparation methods or penalize obesity, it is time to provide things like tax incentives (e.g., tax credits for fitness center membership and utilization or staged tax credits for sustained weight loss), insurance premium "good health" discounts, and improved information on health care services and products, weight loss scams, etc.
Lack of Transparency of Health Care Costs
One of the problems that the informed health care consumer faces is an unusable flood of paperwork (say, an outpatient procedure), invoices with discounts ranging up to 90% off posted list prices (e.g., for blood tests), etc. It's almost impossible for the consumer to cross-validate costs; when you ask for bottom-line estimate, you might get an evasive response like "can you put a price on your health?", "why should you care? the insurance company is handling it" or "the world is complex". In the business world, and health care is like any other business in terms of having revenues and costs, we don't give an auto repair shop or a construction contractor a blank check.
Hospitals and doctors are correct to point out that price is only one factor to consider (experience, medical school attended, board certifications, reputation, etc., should also be taken into account), but let me give an example. About 8 years ago, one of my younger sisters, a registered nurse, and I (living in different cities) decided to have Lasik eye surgery. I think she paid over $3000 for the procedure, opting to have it done under a surgeon with thousands of relevant procedures. I did it for maybe half the price by a surgeon with 800 procedures under his belt in a practice headed by a more senior surgeon and have been very pleased with the results. The point is, if someone is going to have a procedure, potentially causing thousands of dollars, and there is a good quality hospital a couple of hours away by car can perform it for 40% less money, the health care customer should have access to that knowledge.
The Slippery Slope Argument: Where Does the Nanny State End?
I generally take a dim view of people using a sophistic comparison between auto insurance and health care insurance in terms of mandates. For one thing, driving a vehicle is a privilege, not a right. A person should be responsible for what happens when he or she is driving a car--which has the capability of causing severe injury or death to pedestrians or occupants in other vehicles and/or property damage. Health care, on the other hand, is a necessity of life, just like food and shelter. We have the need for a variety of goods and services without requiring proof of insurance.
Why should we care if billionaire Bill Gates has a health insurance policy to cover his costs or if he puts his hospital charges on a credit card or pays cash?
I'm more nuanced in my approach to the consideration of mandates. I do think there should be a way of spreading catastrophic costs (e.g., the 9/11 tragedy, birth defects and catastrophic illnesses, etc.), and I'm empathetic to the concept of requiring some form of financial responsibility or user fee to cover emergency services (which would satisfied by proof of insurance). However, I don't think we should be forcing people to subsidize, say, Massachusetts' gold-plated mandates or any state regulations effectively allowing uninsured ill people to transfer their health care costs to those buying insurance in good faith. I'm also very concerned about the tyranny of government bureaucrats, unaccountable to voters, raising costs by fiat.
What we need from the public sector is more respect for the individual taxpayer, including improved information for health care transactions, and less regulatory granularity/more flexibility for doctors and businesses to achieve policy objectives. What we do not need is bureaucratic inertia standing in the way of early adoption of creative destructive information or health technologies or innovative therapies with the promise of radical cost savings.
