A Medical Doctor Weighs in on Health Care

ACA

This is a good quote speaking to the rationality of good health care as being based on the relationship between doctor and patient. Mark Sklar writing in the WSJ:

The patient should be the arbiter of the physician’s quality of care. Contrary to what our government may believe, the average American has the intellectual capacity to judge. To give people more control of their medical choices, we should move away from third-party payment. It may be more prudent to offer the public a high-deductible insurance plan with a tax-deductible medical savings account that people could use until the insurance deductible is reached. Members of the public thus would be spending their own health-care dollars and have an incentive to shop around for better value. This would encourage competition among providers and ultimately lower health-care costs.

By contrast, the Affordable Care Act’s plans for establishing “medical homes”—a team-based health-care delivery model—and accountability-care organizations will only add more bureaucracy and enrich the consultants and companies organizing these entities.

To improve quality, we need to unchain health-care providers from the bureaucracies that are strangling them fiscally and temporally. We can better control medical costs if we strengthen physicians’ relationships with their patients rather than with their computers.

A True Healthcare Market?

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There are many small fixes that can help repair the market for healthcare and health insurance – a market that has been seriously distorted for the past 30+ years. This article hits on the basic principle that catastrophes need a functioning insurance market based on actuarial probabilities, but healthcare maintenance is something we all need to SAVE for. Health savings accounts are a necessary component that the ACA attempts to excise. Why?

From Barron’s:

Unmanaged Competition

By THOMAS G. DONLAN

Making health care into a real economy

A reader recently asked, “If the Affordable Care Act isn’t the answer, what is?” Another asked, “Do you really want a health-insurance system without government regulation?” These are fair questions. We have found problems with the new health-care law—both operational and philosophical—to be so compelling that even the status quo ante seems preferable, but we also have a better vision.

Neither a benevolent dictator nor an army of bureaucrats can create an ideal system that serves all possible buyers of health care and properly rewards all who provide it. Only independent individuals can operate in a market, deciding what to buy and what to sell, finding prices that clear the market.

But a market cannot work when third parties stand over the supplier and the customer to fix prices or supplies. So the first element of a good U.S. health-care system must be that all Americans must purchase their own health-insurance policy.

Unlike Obamacare, this mandate should leave lots of room for competition and choice.

Limited Choice

Nearly all health care in the U.S. is paid for by third parties—government, employers, insurance companies—who have neither the provider’s nor the customer’s interests at heart. Individual choice is deliberately limited for the convenience of the real payers.

So the second element of a good U.S. health-care system must be that the citizens must make choices for themselves. Price and scope of coverage are the consumers’ business, not their government’s.

Health insurance is too complicated to be left to policy makers, and if we have a real market, the business will be even more complicated because every insurance company—and new ones—will create more policies tailored to the consumers’ various preferences. In a free market for health insurance, we will have at least as many different styles of health insurance as there are flavors and prices of canned soup in the supermarket.

Insurance, like banking and other potential Ponzi schemes, does need government auditing and supervision, to ensure soundness but not to limit variety.

The current U.S. health-care system is parsimonious. Americans are fearfully aware that their health-insurance coverage may have holes and that they won’t know where the holes are until it’s too late. Some procedures may be excluded from coverage; some health-care providers won’t accept certain types of insurance. Hospitals and doctors do not compete on price; many don’t disclose their inflated official prices, except on the bills; few if any disclose the discounts they offer to the real payers.

Many doctors refuse to accept patients covered by the two biggest government programs, Medicare and Medicaid, both of which have arcane systems for setting what they will pay, regardless of providers’ billed prices.

On the other hand, the U.S. health-care system is not just parsimonious; it is also notoriously wasteful. Insurers, including the government Medicare plan, carefully define what services they will pay for and arrange with providers how much they will pay, but they do almost nothing to limit the number of allowable services they will pay for. Providers living under price fixing make it up on volume.

Plentiful Funds

We often hear that the health-care industry constitutes one-sixth of the U.S. economy, heading for 25% of the economy as the population ages. Less frequently are we reminded that the federal government’s taxpayers and lenders are already paying for half of health-care expenditures. Almost never does anyone note that the federal government’s per capita expenditures on health care for about half its citizens are enough to run a universal health-care system like that in the United Kingdom.

We should not want a government care system filled with problems like the U.K. system; the point is that the current U.S. health-care system already has more than enough money sloshing around to provide excellent care for all Americans.

So the third element of a good U.S. health-care system is to subject health-care to the discipline of consumer discretion.

David Goldhill, CEO of GSN, the cable-TV-network company, is the author of a terrific recent book on the American system: Catastrophic Care: How American Health Care Killed My Father—And How We Can Fix It. Most of the book is devoted to the ills of the current system, which Goldhill sums up as, “All of us are spending insane amounts of money, yet the system makes us feel like paupers.” The health-care industry has hardly any accountability to the customer, and thus it offers terrible service, high prices, limitations on supply of doctors and hospitals, excessive errors, underinvestment in information technology, and lack of coordinated care.

Readers will be encouraged to jettison the current payment systems and the current payers, perhaps to take up these reforms:

Market Power
  1. Employers should not be allowed to provide health insurance, and the federal government should provide direct subsidies only for low-income consumers.
  2. High-deductible catastrophic insurance should be encouraged, not limited. That would lower premiums so that citizens could create Medical Savings Accounts for most of their routine care. Those too poor for this system should receive government subsidies for their insurance premiums and their savings deposits, putting them on the same footing as other citizens when they choose their providers of health care and health insurance.
  3. Medical underwriting should be encouraged, not outlawed, with those who are uninsurable participating in assigned-risk pools subsidized by the federal government.
  4. There could also be a direct subsidy to providers, by which the government would pay a percentage of every bill for every payer with income less than the median income. The share should be significant but not so large that patients would lose their price sensitivity and their incentive to shop.

The essence of our health-care system has been to confuse everyone into thinking they have control without paying for it. In health care as in other things, if we pay for what we get, we may get what we pay for.

The Unforeseen Entitlement Crisis

The alternative is not a pretty future. It’s a future in which older people receive Social Security checks but still go hungry, in which Medicare is a paper entitlement because doctors and hospitals can’t be found to provide services for what Medicare is willing to pay.

We’ve explained before on these pages how the crucial issue in healthcare is not only making it affordable, it’s making it available. In economic terms it means we have not only the effective demand issue of paying for it, but a supply challenge of producing the goods and services demanded. Thus, healthcare can only be provided where supply intersects demand at the right price. Accurate price signals are the only way to coordinate this market process – there is no other proven method in the history of civilization. Unfortunately, the ACA disregards this simple truth. So, are you voting for solutions, or for more of the same failed promises?

From the WSJ:

Robots to the Rescue?

The flip side of an entitlements crisis is a labor shortage.

By HOLMAN W. JENKINS, JR.

In 1999, a golfer named Payne Stewart and crew were rendered unconscious by a loss of cabin pressure and their private jet crashed when it ran out of fuel. What does this have to do with the fiscal cliff? Read on.

Even in 1999, one could puzzle over why controllers on the ground couldn’t take command of a plane and bring it down safely. Technology certainly existed to make such a thing possible. Yet today we’re skipping right past pilotless airliners in anticipation of self-driving cars.

Why? Because we’re old. Technological innovation is less miraculous than it seems: It responds to need, and we’re an aging country with more people who need help and fewer people to do the helping, including driving us around.

All this was once foreseen by Alan Greenspan, the Federal Reserve chairman in the 1990s, who pointed out a corollary to the giant unfunded long-term liabilities of Social Security and Medicare. Not only does an aging population mean fewer workers to pay for the oldsters’ benefits. It means fewer workers to actually produce the goods and services that idle oldsters will want to consume. The corollary to an entitlement-spending crisis is, by definition, a labor shortage.

Robots are coming because robots are needed. In 2013, we can already see the appetite in the transportation sector. Aviation analyst Kit Darby figures the industry will need 65,000 new pilots in the next eight years to cover expected retirements. One reason for the millions Google has been spending to develop a driverless car is to meet anticipated market demand from America’s growing elderly population.

Or take another example, arising in Baltimore, where a local entrepreneur, following the logic of need, invested seven years and $30 million developing a robotic system for packaging prescription drugs for long-term patients in nursing homes and hospitals.

In a conversation last year, inventor Michael Bronfein told me if he’d known what it would cost him in time and money, he might never have started. How many entrepreneurs say the same? Probably all of them. But Mr. Bronfein saw a need and the power of technology to meet it, and the result was the Paxit automated medication dispensing system.

He saw workers spending hours under the old system sticking pills in monthly blister packs known as “bingo cards,” a process expensive and error-prone. He saw nurses on the receiving end then spending time to pluck the pills out of blister packs and into paper cups, to create the proper daily drug regimen for each patient. (By one study, the 40 million Americans over 65 take an average of eight drugs a day.)

He saw that the bingo-card system was not just wasteful of labor. When a patient died or was moved to a new facility or had his prescription changed, a month’s worth of drugs might have to be thrown out too.

He followed the economic logic that indicated that all the people involved in the old system were becoming too valuable to have their time wasted by the old system. Backed by his company, Remedi SeniorCare, Paxit—in which a robot packages, labels and dispatches a daily round of medicines for each patient—is spreading across the mid-Atlantic and Midwest and winning plaudits from medical-care providers.

Writ small here is an answer to our entitlement morass, when more of us will be living off our savings (or transfers) and fewer of us will be contributing our labor to society. Robots aren’t the only solution. We will still need better incentives for younger baby boomers to save for their own retirement and depend less on Uncle Sam. We still need better incentives for Americans of all ages to supply labor rather than leaving it to someone else to be productive (which means revisiting our massive expansion of unemployment and disability subsidies over the past four years).

We need to preserve the incentive for investors to bring us the robots that will make the future bearable, rather than burying entrepreneurs in taxes in a vain attempt to seize the returns of investments before those investments are made.

None of these matters, of course, has been allowed to intrude in the empty theatrics that President Obama, primarily responsible, has ordained should be the substance of the fiscal-cliff war. But even from the perspective of the fiscal cliff, let’s welcome the new year by envisioning a future that won’t be so bad, where modest entitlement reform and proper incentives for robot builders will save us from the Soylent Green solution to an aging society.

Make no mistake: The alternative is not a pretty future. It’s a future in which older people receive Social Security checks but still go hungry, in which Medicare is a paper entitlement because doctors and hospitals can’t be found to provide services for what Medicare is willing to pay. If we weren’t still in a New Year’s mood, we’d say the latter future is the more likely one.

Reality Check

We could accomplish entitlement reform by design, but, because of our political dysfunction, we’ll get it by default. Unfortunately, the last election showed that it’s probably still too early for a reality check.

From the WSJ:

None Dare Call It Default

A nicer term for what’s about to sock the middle class is ‘entitlement reform.’

By HOLMAN W. JENKINS, JR.

To call Greece First World may be a stretch, but Greece has defaulted once already, and it is only a matter of time until Greece defaults again. Welcome to default-o-rama, the next chapter in the First World’s struggle for fiscal sustainability.

Japan is piling up debt in the manner of a nation beyond hope. France, Belgium, Spain and Italy are defaults waiting to happen unless Europe can somehow generate the kind of growth that has eluded it for decades.

America’s fiscal cliff is an artificial crisis. We have no trouble borrowing in the short term. But at some point the market will demand evidence that long-term balance is being restored. President Obama said in his first post-election press conference that he doesn’t want any proposals that “sock it to the middle class.” He knows better. A long-term socking is exactly what’s coming to the middle class, which must pay for the benefits it consumes.

A few years ago, when the economy was humming, a common estimate held that federal taxes would have to rise 50% immediately to fully fund entitlement programs. Today, a 50% tax increase would be needed just to meet the government’s current spending, never mind its future obligations.

One way or another, then, entitlements will be cut. Don’t call it default. The correct term is entitlement reform.

You saw this day coming and saved for your own retirement. Don’t call it default when Washington inevitably confiscates some of your savings, say, by raising taxes on dividends and capital gains. Taxpayers accept the risk of future tax hikes that may make the decision to save seem foolish in retrospect.

According to economists Robert Novy-Marx and Josh Rauh, state and local taxes would have to increase by $1,385 per household immediately to make good the pension promises to state and local workers, including firefighters and cops. That’s not going to happen given all the other demands on taxpayers. Default, in this case, is the proper word for cities and states using bankruptcy to repudiate their pension obligations.

Prominent voices ask why the Treasury shouldn’t just cancel the government bonds the Federal Reserve has been buying. It’s money one part of the government owes the other. Dispensed with, of course, would be the idea that the Fed, in buying these bonds in the first place, was engaged in monetary policy. The Fed was printing money so Washington could spend it.

Now let it be said that inflation isn’t fundamentally a solution to the entitlement problem, but the Federal Reserve is being led by increments to accommodate inflationary financing of future deficits. Don’t call it default. Inflation is a risk savers are deemed to have accepted by putting their faith in the U.S. dollar.

Here’s what you weren’t told about Medicare during the presidential debates. Under the Paul Ryan plan, the affluent would pay more. Under the Obama plan, the affluent would flee Medicare to escape the waiting lists, shortages and deteriorating quality as Washington economizes by ratcheting down reimbursements to doctors and hospitals. Don’t call either default. You don’t have a legally enforceable right to the free care you imagined you were promised.

“Don’t worry” was President Obama’s implicit message during the campaign: If cutting subsidies for Big Bird is unthinkable, a joke, how much more so cutting benefits for middle-class voters?

Don’t go running to a judge when this doesn’t pan out. The courts do not overrule changes in government policy just because citizens find their promised free lunch isn’t forthcoming. Nor will it be fruitful to appeal to politicians’ sense of “fairness.” Politicians can be relied on to do what will get them re-elected. And, believe it or not, that is the good news.

If politicians weren’t eager to be re-elected, the trust necessary to be an investor would vanish altogether. While there is no escaping our challenges, there is a path in which the economy grows strongly and we don’t savage each other, and there is the other path. For years the trustees of Social Security and Medicare were accused of exaggerating the programs’ deficits by envisioning that America’s long-run growth would become more like Europe’s. Now who doesn’t fret that America’s growth is becoming permanently slower like Europe’s?

Which brings us to President Obama. He knows cuts are necessary but seeks to position Democrats politically as the defender of all spending. Notice that, with ObamaCare, he is deliberately creating a constituency of the young to set against the old in future fights over the allocation of federal health care dollars.

Meanwhile, saving the dynamism of the U.S. economy, while still affording an entitlement state, naturally falls to the other party in a two-party system.

Common Sense and Healthcare Reform

There is no other economic model out there that delivers a desired good, priced efficiently, and in abundance, other than an open, competitive market. We need to move in this direction if we want enough 1st rate healthcare to go around. No matter what political ideology we subscribe to. Aside from the economy, this is more important than all the other partisan B.S.

From the WSJ:

The Wrong Remedy for Health Care

The Affordable Care Act will exacerbate the problems with our current health-care system. Fortunately, market reforms are still possible.

 By JOHN F. COGAN, R. GLENN HUBBARD AND DANIEL P. KESSLER

In upholding the Affordable Care Act, the Supreme Court has allowed the president and Congress to put the country’s health policy on a path that will restrict individual choices, stifle innovation and sharply increase health-care costs. Now the only recourse is to repeal the law through the legislative process and replace it with policies that rely on the power of the markets.

The American health-care system’s principal strength is its ability to produce ever more impressive innovations. The U.S. has no equal in developing new medical technologies, surgical procedures and pharmaceuticals. These extraordinary advances are not the product of government direction but rather the efforts of scientists, investors and entrepreneurs pursuing their individual goals and aspirations in a competitive market system. The Affordable Care Act puts these strengths at risk.

The law also exacerbates the central problem of our health-care system: high costs without corresponding value. The “individual mandate” will require that people purchase health insurance with generous benefits and limited cost-sharing. This flawed conception of health insurance has created the bad incentives that have led us to where we are today.

The principal factual claims made by the individual mandate’s supporters are that the failure to purchase conventional health insurance causes harm to the uninsured person (in the form of worsened health) and to others (in the form of a shifting of the burden of the costs of care).

The evidence supporting each of these claims is weak at best. Peer-reviewed studies from the National Health Insurance Experiment and other data dating back to the 1980s have concluded that there is little or no causal relationship between health insurance and a person’s health outcomes.

What about the claim that the costs of caring for the uninsured are significantly shifted onto doctor and hospital bills, thereby raising insurance premiums? George Mason University Prof. Jack Hadley and John Holahan, Teresa Coughlin and Dawn Miller of the Urban Institute published a comprehensive, peer-reviewed study on this in Health Affairs in 2008. It concluded that “Private insurance premiums are at most 1.7 percent higher because of the shifting of the costs of the uninsured to private insurance.”

The problems with the U.S. health-care system are mainly the result of a handful of government policies that have prevented market forces from reducing costs and making services more widely available. So what to do?

Fix the tax code. First and foremost is the federal tax code’s long-standing exclusion from taxation of employer-sponsored health insurance. The exclusion has created a tax advantage for purchasing health care through insurance rather than directly with out-of-pocket dollars. This, in turn, has caused consumers to overutilize health-care services as they and their physicians perceive that someone else is footing the bill. As a result, health-care costs have been driven upward.

Policy makers should make the tax treatment of health care neutral by allowing out-of-pocket expenses and individual insurance to be tax deductible. Alternately, neutrality could be achieved by eliminating the tax exclusion for employer-sponsored health insurance. The Affordable Care Act’s tax on high-cost health plans is a first step toward tax neutrality. Unfortunately, the act couples this policy with others that work at cross-purposes.

Redesign Medicare and Medicaid. The Affordable Care Act includes numerous reforms to the way that Medicare pays health providers, some of which are on the right track. But in Medicare, the main problem is the nearly complete neglect of patient incentives. The Medicare Part B average copayment rate has fallen nearly in half during the past 35 years. One near-term solution is to allow beneficiaries to choose health plans that have lower premiums but higher deductibles, more coinsurance, or more tightly managed networks of providers than those in traditional Medicare. The long-term solution is to provide beneficiaries with a defined level of support to allow them to purchase a private insurance plan. Such an approach is modeled on today’s Medicare prescription drug coverage and is similar to one proposed by Rep. Paul Ryan (R., Wis.) and Sen. Ron Wyden (D., Ore.).

In Medicaid, the emphasis on access to health insurance, rather than access to health care, has stifled innovation in delivering care to the uninsured. The Affordable Care Act does little to change this. Medicaid should be converted to a block grant in which states are given a fixed sum of money and allowed greater flexibility to experiment with new approaches, such as delivering care through organizations that tailor available services to patient needs at reduced costs.

Reform insurance markets. State price controls and the proliferation of state mandates that insurers cover particular medical services and providers have driven up the cost of insurance by as much as 15%, made it less portable, and increased the number of uninsured by as many as 10 million. Unfortunately, the Affordable Care Act enshrines many of these flawed policies in federal law.

The key objective of insurance regulation should be to increase the availability of low-cost, portable health insurance—insurance that delivers the benefits that people want, at a price they can afford. To this end, individuals should be allowed to purchase insurance across state lines or in a federal market that is free of insurance mandates.

The Affordable Care Act will expand the reach of government into our personal health-care choices, while exacerbating the problems with our current health-care system. Market forces, if allowed to work properly, are the best means for reducing the growth in health costs, encouraging continued innovation, and ensuring that consumers have access to quality health care.