Health Care is Local

Former House Speaker Tip O’Neill famously noted that “all politics is local.” And he’s right. He was not talking about the rules of the political game. Those are established by a national constitution and subject to state laws as well as local ones. He meant that the political dynamics of each district are what determines the ideological shading of a district.

Some examples are obvious: compare the voting record of legislators from Massachusetts and Utah. Others are less so: Republican Senator Charles Grassley had been a reasonable voice on health care reform until he remembered he was up for reelection in 2010 and saw how conservative Iowans were responding to unfounded claims of “death panels” and the like; he is now embracing aspects of the silliness.

Health care is local, too. The medical delivery system in Los Angeles looks far different from the one in Cheyenne. Even what’s considered standard treatment varies from community to community. And as Dr. Atul Gawande demonstrated in his New Yorker article, the cost of care varies greatly among localities based on medical provider’s approach to health care.

How the local nature of politics and health care interact underscores the complexity of health care reform. Because health care is local, what’s broken in the current system varies from place-to-place. Because politics and is local, acceptable solutions vary depending on locale. It may just be a coincidence, but it is worth noting that the initial advocate for community-based health insurance co-operatives, Senator Kent Conrad, hails from North Dakota where rural electricity co-operatives are common while many of those claiming only a government-run health plan will do represent urban areas.

Recognizing this dynamic, the the House Energy and Commerce Committee has described HR 3200’s impact on each Congressional District. (My thanks to Dwight Mazzone for bringing these documents to my attention). Reading through these is a glimpse of the richness and variety of America.

For example, in Wyoming (which has one Representative for the entire state) up to 19,000 businesses would be eligible for tax credits to pay for health insurance, 7,400 seniors would benefit from reducing brand name drug costs, much of the $23 million in uncompensated care hospitals and health providers face would be eliminated, and the tax surcharge to pay for reform would impact 3,120 households.

Compare this to the Los Angeles area district represented by Henry Waxman, the Chair of the Energy and Commerce. In California’s 30th District up to 14,300 businesses would be eligible for the subsidy, 5,200 seniors would see lower prescription costs, hospitals and other providers would be relieved of much of the $85 million in uncompensated care they deal with today, while 22,100 households would pay the tax surcharge.

The statistics cited come from legitimate sources, but are presented in order to muster support for HR 3200. Were the same information to be presented by House Republicans it would no doubt have a different spin. Nonetheless, the information is a treasure trove of insight into the local politics and health care that drives the health care reform debate.

These statistics should also give lawmakers demanding a single, one-size-fits-all solution to health care reform pause. As I’ve argued before, state health care reform efforts usually fail. America’s health care system is too large, too interrelated and too complex to be reformed on a state-by-state basis. States lack the tools needed to make meaningful changes work; the national government has those tools. However, the reforms themselves could benefit from local implementation. For instance, instead of creating one, national government-run health plan to compete with private carriers, enabling the creation of local health insurance co-operatives to generate competition where it is needed is more appropriate.

Finding the balance between federal and local management of health care is critical to a well-functioning medical system. It is also good politics.

29 thoughts on “Health Care is Local

  1. I’m a healthy 43 year old who works out six days a week. I’ve got cholesterol well under control and some mild arthritis in one toe. It wasn’t easy or cheap for me to buy my own insurance. Thank God it was just me. I hate having to say that.

    • Why should health insurance be cheap? It’s not cheap to be treated particularly for something serious and or chronic. Part of the misguided public discussion is the government will swoop in and make everything cheap. Ask the folks who trying to balance the Medicare budget.

    • As has been pointed out in several of these discussions (and as noted by Mr. Goodman), but has not generally been addressed in the political discourse, HR3200 is largely a payment plan and has little to do with direct cost control.

      If the goal is to provide insurance for every American citizen, then HR3200 can be seen as somewhat on point, with the proposed catalyst being a nationally run health insurance program….

      If the goal is to reduce cost, HR3200 is not particularly sensible. In fact, expanding insurance coverage without regulating cost may in fact increase the cost of care by prompting unregulated cost drivers (industry, hospitals, physicians, etc.) to increase prices or increase case load.

      If the issue is improving the quality of(not neceessarily the access to) patient care, then arguments about payment and cost may be very distracting and off point.

      • Cost containment has disappeared from the conversation when the President dropped health care reform and decided it was about health insurance reform. He has also dropped”comprehensive” and replaced it with “basic”.

        In a sense calling it basic could be considered a concession to cost. The talking heads on cable and most members of congress really seem clueless as to the problems. You can’t solve the problems if you fail to identify the problems.

        We are finding that politics and health reform do not make for good bedfellows. The risk is what are they going to do.

        • I would agree. Given that basic premise, what are the problems that need to be solved (politics aside if possible)?

        • As Alan Katz has said on this site there are two fundamental issues. Universal coverage and affordability are the issues. Without universal coverage it would be impossible to lower costs.

          It’s unfortunate and perhaps hazardous to have switched the discussion form health care to health insurance. You can legislate guarantee issue and doing away with preexisting conditions. Carriers have actuaries that can calculate the rates. Without universal coverage the cost would be unaffordable by most people. Without preexisting conditions concerns people would by their coverage at a kiosk in front of a medical facility.

          How do you reduce the cost of care is the magic question. In the last two years I’ve gotten 1-2 calls a month from insured who are in disbelief at the amount of a hospital bill.

          With all that being said there is room and perhaps a need for some sort of a public plan or contribution. COBRA and state variations have been a huge improvement over past conversion plans. For people who have been laid off COBRA can simply be too expensive. A safety really is needed and should be part of any reform.

          The health insurance industry needs to do a better job educating Washington and the public how Medicare impacts under 65 plans. You reduce Medicare reimbursements where does the facility or practitioner make it up?

  2. I was diagnosed with multiple sclerosis THIS YEAR. My injections cost over $2000 MONTHLY. Now that I have a PRE-EXISTING CONDITION, – will you, the PROTESTERS, PAY for the medicine I will NEED for the REST OF MY LIFE if I want to further my career at a different company?!!
    Private insurance penalizes those with chronic health conditions!!! I pay taxes. Why should I not be able to get health insurance?!? If YOU will not help me pay for my lifelong medical condition, then you should keep your insurance as Obama has said SEVERAL TIMES, and I should be able to get help through the reform Obama is pushing.
    YOU PROTESTERS are basically saying that anyone with a chronic condition has to stay at the job they currently are with. I shouldn’t be punished into staying at my current job just because IF I LEAVE IT I WONT BE ABLE TO GET HEALTH INSURANCE BECAUSE NOW I HAVE A PRE-EXISTING CONDTION.
    YOU PROTESTERS ARE SELFISH!!!

    • EzSay: My condolences on your condition. The good news is that very few of the commenters on this blog oppose guarantee issue so long as everyone is required to buy coverage as well. If health insurance premiums are to be kept affordable, matching a mandate to sell with a mandate to buy is necessary. I can’t speak for everyone leaving a comment here, but most of those I’ve read would agree with this.

      There are some proposals in Washington that would require carriers to sell coverage, but allow consumers to buy only when they need it. While I personally think this proposal is ill-advised, the good news for you is that it would break you free of your current job lock.

      The biggest controversey facing reform now is whether there should be a government-run health plan or not. How that issue gets resolved has nothing to do with eliminating pre-existing conditions. Listening to the debate doesn’t make that clear, but it is the case: guarantee issue (which is what requiring health plans to accept all applicants) is an issue completely independent from whether or not there should be a public plan.

      I believe there will be health care reform passed in the next few months. I don’t know all the details, but I am very confident your situation will be addressed. And I certainly hope it is. Good luck.

      • I agree to all above. Good luck to you as well. I too believe you will have some positive solutions to your situation.

    • EzSay, I too have encountered the frustrating problem of ‘pre-existing condition’, so my condolences. Unless I’m wrong, the current HR3200 proposal prevents qualified health benefit plans (QHBP) from excluding participation due to pre-existing conditions (Title 1, Subtitle B). I don’t believe this is a major point of contention.

      As I hear the debate over HR3200, the major controversy has to do with worries about the government running a major health plan (given it’s tendency toward bureaucracy and control), especially with the proposed position of ‘Health Choices Commissioner’ running the ‘Heath Choices Administration” (Title 1, Subtitle E). I believe this administrative process is meant to govern the qualified health benefit plans, but just the title of national “Health Choices Commissioner” can be alarming.

      Furthermore, according to the proposal, people who qualify for the national insurance plan would still have to pay premiums, so it costs taxes and premiums (it’s not free). In fact, the proposal calls for penalties for those who do not purchase insurance, but it does provide some help for lower income individuals.

      The other major provisions of the bill would prevent QHBPs from excluding individuals due to pre-existing conditions, would limit premiums except for age and would require QHBPs to take part in the health insurance exchange (and be accessible nationwide). These alone (absent the government-run plan) would be a tremendous help.

      But, I return to what appears to be the ‘white elephant’ that is not being addressed: the cost of health care. HR3200 may immediately expand coverage, but this ‘payment legislation’ does nothing to reduce cost. In fact, over time, in this medical economy, if more people can pay for healthcare services, why would not any entity doing business in the unregulated healthcare sector (hospitals, pharmacy, vendors, lawyers, physicians, etc.) simply raise their rates?

      So, AzSay, passage of HR3200 would make things immediately easier for you (and those of us with pre-existing conditions). However, providing more coverage would seem to address only half of the problem. Unless I’m missing something, in the long run, more coverage without regulating cost would be a formula for increasing, not decreasing, the percentage of our GDP spent on health care.

      So, what is to be done?

      Bart

  3. The New Yorker Article was excellent. In my opinion it accurately describes the problems with the current Fee-for-Service business model. Many opponents of healthcare reform point to malpractice insurance and litigation costs as a primary reason for escalating healthcare costs. Their argument is that doctors order unnecessary tests to avoid malpractice lawsuits. This article points out that they order unnecessary tests simply to make more money and effectively rebuts the litigation argument. In essence medical care is just another Bubble Economy with doctors as the chief beneficiaries.

    The question then becomes would HR 3200 would correct this problem. The Bill as currently worded has some sections where the Title indicates that cost control provisions are being considered. One such proposal is to return a portion of cost savings to the Healthcare Practitioner. There are other proposals along these lines and it is my guess that those who would be affected by these specific provisions understand the bottom line. That is if they see the golden goose being cooked I do not think they will be writing their endorsements of HR 3200 all too soon.

    As to the report by the Committee on Energy and Commerce, I believe it may be overstating the benefits of the plan.
    As an example I offer the following:

    1) It is my understanding that the total premium for a family of four earning 88K per year cannot exceed 12.5% of the gross income.

    2) It is also my understanding that total out of pocket medical expenses cannot exceed 10K per year, not including the cost of the premium. The two figures combined equate to 21K per year in total medical expenses for a given calendar year or roughly 24% of the family’s total income.

    3) The Report claims that the 19th District had 790 Medical Bankruptcy Filings in 2008 and with HR 3200 the total would have been zero.

    Given the above numbers I do not believe HR 3200 would have prevented every bankruptcy.

    • Excessive self referral can be controlled with appropriate oversight of utilization and indications for the ordering of tests, just like in El Paso, Texas as referenced in the article in The New Yorker. Dr. Gawande was illustrating the differences in the medical culture of different regions, and per capita Medicare expenditures were half those of McAllen in El Paso, mostly because of this difference. Fee-for-service is an excellent motivator for providers to work hard and more hours, regardless of whether self-control over the ordering of diagnostic tests is being exerted. Salaries are not–just ask the British. Incentives for self-control (or disincentives for the lack thereof) is a better option to salaries in my opinion.

      As for potential bankruptcy filings if HR 3200 passes, does the U.S. Treasury count?

      • “as for potential bankruptcy filings if the HR 3200 passes, does the U.S. Treasury count ?” great question….

        • I believe Nosedoc was just being facetious. Based on economics 101, a country that owes its own currency cannot go bankrupt as it has the capacity to just print more. Of course then both interest rates and inflation would then go through the roof.
          However, if we do nothing about Health costs then the government will, as Nosedoc says, go “bankrupt” anyway. His suggestion about incentives (disincentives) to control spending is the way to go.
          As to Nosedoc’s comments about how the British feel about their Healthcare system, I have attached one of many links where the British defend their system and prefer it over the American system. Also, according to one article I read, the British do have access to private health insurance and if you have private health insurance you will receive preferential treatment, but the bottom line is everyone is covered. If I locate that article I will post it here.

          http://thelede.blogs.nytimes.com/2009/08/14/british-leaders-defend-their-health-service/?scp=4&sq=British%20healthcare&st=cse

        • Is the current health care debate about expanding insurance coverage or is it about reducing cost? As I understand it, the two are very different.

        • My remark about the British system had to do with the number of hours worked by British physicians per week, on average, and the wait time involved to see a specialist, which is considerably longer than it is here. Paying a physician a salary results in just enough work to justify that salary and no more, regardless of demand. The benefit of the elimination of fee-for-service (from the physician’s perspective) is that the employer(s) would then be responsible for the cost of malpractice insurance, hiring and maintaining the support staff and compliance with the vast array of regulations and unfunded mandates faced by private practices every day.

          And yes, I was being facetious about bankruptcy of the treasury. The dollar may be nearly worthless, however, and that’s not a joke.

        • Bart, that’s a great question. My belief is that there is an “Oh, to hell with it!” point at which it is globally no longer worth the work and aggravation to remain in private practice. For example, should the 20% across-the-board Medicare cuts go through in January, 2010 as laid out in the SGR formula (unless this gets changed), we would probably see such a threshold reached first by a large number of internists and primary care physicians. The hospitals would probably be called upon to pick up the slack as the employers in this case, unless the government itself sets up the infrastructure a la the British Health System.

        • Several issues there.

          The SGR is regarded as ‘cost’ reduction, but is actually payment reduction and does not directly impact cost. As payments are reduced, it’s likely that the most vulnerable health care sector (health care personnel, patients) would be impacted more than less vulnerable entities (insurance companies, vendors, pharmacy, hospitals?, etc.), and there would be little net reduction in overall cost but possible reduction in patient access. Ironically, those that may be impacted most by reduced payments contribute least to overall cost (personnel vs. industry, see http://www.mckinsey.com/mgi/reports/pdfs/healthcare/MGI_US_HC_fullreport.pdf, http://www.mckinsey.com/mgi/reports/pdfs/healthcare/US_healthcare_report.pdf). Practically speaking, reducing payments while ignoring cost will drive health care workers out of lower margin occupations while strongly bolstering specialty practice.

          Seems that to realistically impact the cost of care, there must be serious attention paid to ‘regulating’ all cost drivers: pharmacy, vendors, hospitals, insurance company margins, physician fees (?), administrative costs, legal vulnerability, etc. If these continue unchecked, how can cost come down?

          I would agree that at some minimum ‘salary’ level, the emotional demands and legal vulnerability of being a health care provider would not be worth it. Is one inadvertent result of the current health care reform a reduction of payment to that minimum level for any given provider domain? I believe it would drastically affect quality of, and access to, some kinds of care.

          On the other hand, one model of health care may be to make it a branch of government, with a cabinet level director, so that all in the field are government employees (like the military). In that case, the government would negotiate with vendors, much as the DOD negotiates with Boeing, etc. Provision of health care would be purely a government function, much like military defense of the country…….

          The overall basic dynamic seems to be public entitlement to health and the ‘infinite value’ placed on health combined with a political system comprised of officials elected for ‘promising’ the above and payers who harvest money from hundreds of healthy people to support care for one ill person. It’s complicated a feed-forward political and financial model. Real change would involve culture and finances.

        • What I like to say is that when it comes to health care services, the public can certainly get less than what it pays for, like it does now, but to expect any more would be foolish. Health care reform is all about getting the best value for the taxpaying public without compromising quality or mandating any unreasonable “rationing” of care, and ensuring that a basic level of care is provided to essentially everyone. I use the word “essentially” because the issue of undocumented aliens needs to be addressed.

        • Just to clarify–the public deserves more for its money than it is currently getting, but it can’t get more than it is willing to pay for.

    • It’s refreshing to see attention paid to the actual cost of health care, rather than the ‘payments’ for health care. It would seem that regulating (reducing) payment without addressing cost would simply drive entities (workers, providers, etc.) out of vital low-margin areas (e.g., primary care, nursing, etc.)

      The CBO (Additional Information Regarding the Effects of Specifications in the America’s Affordable Health Choices Act Pertaining to Health Insurance Coverage July 26, 2009), estimates that the public option would attract about 9 million subscribers. This is largely due to the fact that businesses (the chief premium payers) would be penalized for not providing insurance, and the net result of letting employees go to the public option would be more expensive than keeping private payers. Thus the impact of the public option would be less than politicized (see the report).

      With regard to physicians being the ‘drivers’ and ‘beneficiaries’ of health care costs, please refer to the McKinsey Global Institute’s two reports on the cost of health care in the U.S. (http://www.mckinsey.com/mgi/reports/pdfs/healthcare/MGI_US_HC_fullreport.pdf, http://www.mckinsey.com/mgi/reports/pdfs/healthcare/US_healthcare_report.pdf). As I understand these data:

      1. American health care costs about $477B more a year than other investigated countries (Canada, Europe and Japan), with no discernible superiority in health.
      2. Physician’s revenue account for 10% of this amount, with generalists making 31% more than their foreign colleagues, while specialists make 55% more. Malpractice premiums alone account for $20B of cost not experienced in other countries. This does not include the cost of ‘defensive medicine’, whatever that may be (any estimates?). Physicians make $8B a year on ‘physician-owned’ facilities, accounting for 1.6% of the excess American cost. As I understand it, HR 3200 will require that physicians tell patients if they have a financial ownership in facilities that they recommend – a very good provision.
      3. 90% of the excess cost of American health care is other than the physician. Examples of this include insurance company (margins of $98B, or 21% of excess), drugs and equipment ($106B, 22% of excess), and Hospital margins ($75B or 16% of excess), administrative costs (paperwork, $98B of the excess,21%).

      There are many cost drivers in the complex American health care economy. As I understand HR 3200, it directly addresses only ONE cost input, and that is the ‘medical loss ratio’ of private insurance companies – in other words, it mandates that insurance companies can spend no less than 85% of premium revenue on claims. A ratio of less than that will result in reimbursements to premium payers.

      So, while health care ‘reform’ seems to be widely desired, what is it that needs reforming?

      If it is cost, then it would seem that much more effort should be targeted toward regulating actual cost – hospitals, providers, insurance margins, pharmaceutical companies, medical device companies, administrative overhead, even patient accountability for their own health, etc. HR3200 simply does not do that. HR 3200 focuses on an insurance ‘exchange’, and adds another payer to the mix – a government-run ‘public’ insurance company. Unless I’m wrong, simply adding more payment to the equation without reducing cost would be like salvaging General Motors by providing Americans more money to buy cars…..in the absence of cost regulation wouldn’t the price of cars simply escalate?

      If it is ‘quality’, then the government should clearly mandate this and aggressively subsidize competent groups to define quality in a manner that is meaningful to providers and patients. In the end, quality accountability may be the ‘gold standard’ for assigning meaningful value to health care.

    • Just wanted to let everybody know Bill Moyer’s will be covering a great documentary called “Money Driven Medicine” on his show tonight! Check it out on PBS, it should be really interesting.

  4. This is the type of data that might have been presented/explained/debated(particularly given that it is specific to individual locations) at the Town Hall meetings. Unfortunately, the din of “death panels” and “Obama is Hitler” prevented all that.

  5. The “Benefits of America’s Affordable Health Choices Act” per congressional district are very persuasive data in favor HR 3200. I would think proponents of the House bill would be promoting these documents. I don’t live in a cave when it comes to health care and this is the first I’ve heard. Keep up the great work, Alan.

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