Time to Focus on the Tough Health Care Reform Questions

It’s funny what people complain about concerning health care reform. I see people people ridicule the Senate Finance Committee for producing a 1,500 page bill. Or complaining that Senate Majority Leader Harry Reid and House Speaker Nancy Pelosi are combining the different versions of legislation passed in their respective chambers into consolidated bills behind “closed doors.”

Who cares how long the bill is? Much of the language is boilerplate anyway. The length of the bill reflects the complexity of the issue and the numerous sections of existing law that need to be changed. Complaining about the size of the bill is foolish and immaterial. It doesn’t matter how long a bill is. What matters is what it says.

As for private meetings among lawmakers to help shape the bill, what do people expect? Are Senator Reid and Speaker Pelosi supposed to have cameras trailing them as if they were stars of a reality TV show? As the Associated Press reports, these legislative leaders are determining what health care reform bill their caucus members can support and, if not, what changes are needed. These are not discussions best held among politicians playing to the media. And it’s not like the health care reform package is going to be passed in the dark of night when no one is watching. Already there have been weeks of public hearings, days of town hall meetings, and hours of press conferences. The legislation put forward by Senator Reid and Speaker Pelosi will be available online, dissected by bloggers, lawyers, and reporters from all political perspectives, and the subject of televised debates in Congress. Everyone will have more than enough opportunity to review – and to attack – whatever is put forward.

These frivolous attacks on the health care reform process are more an expression of frustration than a substantive problem with reform. That frustration stems from the reality that those making these charges are losing on the public policy issues. Seeing health care reform move in a direction they oppose, they are driven to throw every pebble they can find to slow down or derail the legislation. Ridiculing the Senate Finance Committee for generating a 1,500 bill may make them feel better in some way, but it doesn’t help their cause.

Many of the faulty ideas circulating around Washington today stem from a misunderstanding of health insurance and/or economics. These are the issues critics should be raising.

Issues like the need to balance a mandate on carriers to sell coverage to all applicants regardless of health conditions (“guarantee issue” with a requirement that all Americans purchase coverage (an “individual mandate.”)  An imbalance between guarantee issue and an individual mandate will lead to disastrous results. The tough issue is making the balance affordable – a topic that is worthy of substantial discussion.

Another example: opinion leaders need educating concerning what drives health insurance premiums. Jonathan Alter is a bright man and his columns in Newsweek are usually well reasoned, even if his conclusions are controversial. Mr. Alter’s recent comments on health insurance premiums, however, reveals an unconscionable and surprising naiveté. “The key to a political victory on health care,” he writes, “isn’t just passing a bill, it’s controlling insurance premiums. After much-ballyhooed reform, Massachusetts failed to restrain premiums, which are set to increase another 10 percent next year. If the same thing happens nationally after Obama signs a bill, Americans will take it out on Democrats. So assuring that premiums don’t skyrocket should be the No. 1 priority as committee chairs get down to the short strokes.” Mr. Alter’s solution is a government-run health plan and/or caps on premiums.

If health insurance premiums were set arbitrarily, Mr. Alter’s suggestions might have merit. But health insurance premiums reflect medical trend. Here’s some uncomfortable facts (based upon this inflation calculator):

  • It takes $1,820 in 2009 to buy what $1,000 purchased in 1989 after adjusting for retail price inflation.
  • $1,000 in wages in 1989 have grown to $1,805 today based on wage inflation.
  • However, it now takes $2,623 to pay for the same medical costs that $1,000 would have purchased twenty years ago.

The kind of public option being considered by Congress is not going to reduce medical costs. Only if a public plan can unilaterally impose reimbursement rates on medical providers will costs come down. Of course, if a government-run plan has the authority to set reimbursement rates there’s no future for private carriers. So if the public option is going to be designed in a way that eliminates private carriers, the logical solution is to skip the transition period and jump right into a completely government-insured system. Now that’s a weighty subject deserving attention and concern – a heck of a lot more concern than how lawmakers negotiate).

A cap on insurance premiums won’t directly effect medical costs either. (One might argue they could indirectly bend the cost curve if medical providers knew the carriers couldn’t pay more for their services, but caps are a messy way to achieve this speculative results). Premium caps – like any wage and price controls – are a feel good solution (who doesn’t like bashing insurance companies?) that accomplishes virtually nothing of substance.

Let’s face it, the insurance industry’s inept behavior (both politically and many of their business practices) make them a too easy target. Watching politicians and pundits bash insurance carriers is like watching high-tech hunters take down Bambi’s mom – it’s hardly a fair fight. It’s also immaterial to making America’s health care system work. If critics – and columnists – want to provide a meaningful public service, they should take a pass on the easy stuff (the number of pages in a bill or uninformed attacks on carriers) and raise tough issues like what it will take to address medical costs.

It’s harder to contribute to a debate than to snipe, but the time has come for heavy lifting.

9 thoughts on “Time to Focus on the Tough Health Care Reform Questions

  1. Interesting that cost reduction is being used to sell a very large new government entitlement program. Whether you are for or against government run health care you have to admit that no actual cost savings are going to take place. How about shifting the cost to the wealthy. I guess that wouldn’t play politically. A National High Risk Pool subsidized by the federal government and a tax deduction for individual health insurance premiums would go a long way to solving what’s wrong with our health insurance system. Also expanding the HSA law to allow everyone to have a health savings account would be a good idea.

  2. The main problem that I see with this bill is that is does nothing to control cost. I have not heard any conversations about doctors ordering unnecessary tests or about tort reform. Both these issues should be discussed if we are going to control cost.

  3. Spot-on observations as always Alan. I still wonder (especially at this late stage) why the discussions barely discuss actualy cost-reductions and only cost-shifting (from public to private). The current public option does little if anything to improve care or reduce costs. Instead they impose their increases on the private system who makes for an easy villain.

    Provider reimbursement reform: Change how we pay doctors and hospitals… instead of the current fee-for-service system which encouranges MORE not necessarily BETTER health care. A better system would reimburse based on quality outcomes and allow doctors to practice quality-based health care. How much added cost is directly due to provider bill-padding or defensive against med malpractice?

    Tort reform: I recall Obama stated all would have to make a sacrafice in meaninful reform but tort reform yet tort reform is side-stepped as a contributing solution. Could this help reduce costs by more than 5%?

    Pharmacy price controls: The Forbes 500 2009 report ranks the Insurance Managed Care industry 35th and averaged only 2.2% profit margin versus 19.3% for the 3rd ranked pharma industry. Medical products and equipment ranked 4th highest at 16.3% profit. Interesting how the insurance industry is perceived as making huge profit margins yet the number is rarely quoted. Not as much as most think.

    What else? Medical tourism? Fraud prevention? Everything else is just cost-shifting.

  4. Alan: From a logical perspective the size of the bill shouldn’t matter. What matters is focusing on the real problems plagueing our health care system, primarily, the cost of care. We will only acheive universal access to insurance when we have general affordability of care and insurance subsidies for low income Americans.

    However, the American people seem to be tiring of long winded solutions that not only don’t work but mask unspoken political motives. We’ve come to understand that accomplishing the stated goal is not always what legislation is about. Many times it’s much more about rewarding friends, punishing enemies, hidden taxes, social engineering and getting re-elected. This is why the public and many critics are becoming so irrational about the size of these bills. Additionally, we all now realize that no elected representative can read and comprehend bills of this size. They are much more likely to vote based on party loyalty and political pressure, not content. If Congress would address one problem (or even one set of related problems at a time) with clear, specific legislation addressed to only that problem, they would enjoy a tremendous boost in their credibility ratings. And.. we might actually make some progress.

  5. Alan,

    While I consider you far wiser and more knowledgeable than me (evidenced by my reading your blog as opposed to the reverse), I would disagree on the size of this legislation, as I did with the stimulus bill and do with cap and trade.

    It’s another symptom of what’s wrong with our government–you can’t possibly write a piece of legislation that large and have it read and understood by those who need to most. If it needs to be that voluminous, they’re tackling too much in attempting to do it with one bill.

    Besides which, regardless of its length, what are they actually going to accomplish? As you have mentioned, nothing in their supersized “novel” will slow down the cost of health care. And if they don’t do that, they’ve failed miserably. Unless of course, that’s their ultimate goal, so eventually gov’t takes over health care. I have come to believe that is the ultimate goal and this represents a foot in the door, however large or small. The only thing left for this liberal Democrat-controlled Congress is to figure-out how they get their “foot in the door” legislation through Congress and onto the President’s desk.

    Hopefully for our sake and for America’s, they can’t get it done.

  6. The kind of public option being considered by Congress is not going to reduce medical costs. Only if a public plan can unilaterally impose reimbursement rates on medical providers will costs come down. Of course, if a government-run plan has the authority to set reimbursement rates there’s no future for private carriers. So if the public option is going to be designed in a way that eliminates private carriers, the logical solution is to skip the transition period and jump right into a completely government-insured system.

    *****
    Everybody read that paragraph three times. Forget about what you personally do for a living (assuming many of you work in health insurance as I do) and consider the bold truth that Alan has laid out. Now ask yourself how else we might seriously bend the cost curve in this country. The health insurance industry has made considerable and valiant efforts to do this for years through creative plan design– all to no avail. The curve continues to bend in the wrong direction with no end in sight.

    If all these efforts result in a robust public option that sets agressive reimbursement rates that –as Alan suggests– finally contain runaway costs and the worst consequence is that the private insurance companies cannot compete, is that not still the best result for the country at large?

    • Bob: I appreciate your perspective. It’s not unreasonable, but I don’t happen to agree with it. Yes, unilaterally imposing lower reimbursement rates on doctors and hospitals might lower overall health costs, but then again, it may not. Providers could simply opt out of working with the public plan. Fewer people might enter medicine and hospitals might close. Reduced supplies usually lead to higher prices. The public option is a crude instrument for controlling costs.

      But at least your argument in favor of a government-run plan is about the right issue. I think there are better ways to address runaway medical costs. There are plenty of ideas floating around on the issue. The point of my post was to point out that this is the discussion that should be taking place, not how many pages there are in the legislation. So thanks for your comment. As I said, I appreciate your sharing your perspective.

      • How to fix the Health Care Crisis: Growing up around medicine and doctors I have learned a few things about the rise of the health care cost problem. It is not what many think…fat cats increasing rates. For effective control of costs and a re-emergence of the grandeur of the US Health system, ten steps must be taken immediately. They are not cruel suggestions, rather real solutions for the problems we face.
        1. Standardize Prices for procedures – Equalizing the cost Hospitals and Medical Groups may charge for a similar procedure allows insurance to budget expected costs.
        2. Limit Liability for Malpractice – For any mistake including Gross Negligence, neither person nor family affected by the malpractice claim may capture more than 1 Million in damages.
        3. Force all Medical Malpractice to Arbitration – Less expensive for the hospital, medical group and easier access for consumer to file a complaint / claim.
        4. Nationalize a Government Healthcare System – Provide government Health Insurance for Government Hospitals– Consumers can opt to have free insurance via the government (funded by taxes) to be insured. Government run Health (like VA system) will be longer lines but less expensive health care and focus more on acute care rather than preventative. Care is first come first serve basis, as socialized medicine.
        5. Incent the taxpayer to have private health insurance instead of the free one by giving them a $8,000 direct tax write-off.
        6. Force Pharmaceuticals to offer name brand meds as generics to Government Health System at 50% off.
        7. Repeal any laws requiring private hospitals and private practice to care for uninsured. Instead refer them to Government Health System.
        8. Set a max threshold payment any insurance (private or government) would pay, whereby anything beyond 1M within 10 years is not covered for any reason. The unhealthy will die anyway and should not bankrupt the system.
        9. Employers may at their option, choose the least expensive option for employees, even no insurance (Government Health System).
        10. Give additional yearly tax credits for every member of the family for obesity body fat measurements that can be certified and filed online by any healthcare provider. Severe / High – no credit, Mild / Elevated – $200, Normal / Low $500.
        11. Health Care Database – Based on Social Security Numbers, a facility treating a patient may request and receive secure electronic medical records from a previous treatment or facility.
        We face a certain break in our health care system within the next 1 to 5 years unless significant change occurs. The rise of health care costs is because the system is ineffective at treating and communicating together. The changes above all or partial will help lower the costs of healthcare to the individuals, allow for coverage for everyone and incentivize better health and private insurance.

      • I don’t believe unilaterally imposing lower reimbursement rates on providers will have much of an impact on costs. I do agree that providers would opt out of the public option if possible. If the private insurers are forced out by the public option and practice revenues are considerably reduced by the government’s fee schedules, many private practices will close and providers will instead choose to become salaried employees working by the hour, and organized so that collective bargaining will become the norm. It would then become the problem of the hospitals and other employers to make the numbers work.

Comments are closed.