Paul Krugman’s column this morning on the health care reform is a sometimes astonishing mixture of good sense and hooey. Here’s an example of the good sense:
Health reform will fail unless we get serious cost control — and we won’t get that kind of control unless we fundamentally change the way the insurance industry, in particular, behaves.
and here:
Back in 1993, the political strategist (and former Times columnist) William Kristol, in a now-famous memo, urged Republican members of Congress to oppose any significant health care reform. But even he acknowledged that some things needed fixing, calling for, among other things, “a simplified, uniform insurance form.â€
Fast forward to the present. A few days ago, major players in the health industry laid out what they intend to do to slow the growth in health care costs. Topping the list of AHIP’s proposals was “administrative simplification.†Providers, the lobby conceded, face “administrative challenges†because of the fact that each insurer has its own distinct telephone numbers, fax numbers, codes, claim forms and administrative procedures. “Standardizing administrative transactions,†AHIP asserted, “will be a watershed event.â€
Think about it. The insurance industry’s idea of a cutting-edge, cost-saving reform is to do what William Kristol — William Kristol! — thought it should have done 15 years ago.
Here’s an example of the hooey:
It’s a sign of the way the political winds are blowing that insurers aren’t opposing new regulations. Indeed, the president of America’s Health Insurance Plans, the industry lobby known as AHIP, has explicitly accepted the need for “much more aggressive regulation of insurance.â€
What’s still not settled, however, is whether regulation will be supplemented by competition, in the form of a public plan that Americans can buy into as an alternative to private insurance.
An insurance plan subsidized and administered by the government = competition? We have always been at war with Eastasia.
The H-word is honesty and while we’re being honest what we call “health insurance” isn’t insurance at all. It’s a pre-paid healthcare plan. There are two fundamentally different strategies that could be used to reform health insurance that might be effective: make it insurance or reduce the costs of what the plans are paying for.
Making health insurance more closely resemble actual insurance is the approach that seems to be favored by most anarcho-capitalist and minarchist-leaning economists. That would be accomplished by detaching health insurance from employment, most likely by taxing current style plans as compensation, eliminating the deductibility by employers of such plans, or something of the sort and moving towards high deductible plans (high deductible defined as in the thousands or tens of thousands) paid by consumers.
I don’t think that will actually reduce costs, at least not in a way that’s compatible with good public health for the simple reason that health care is provided by a cartel, it operates like a cartel, not like a free market, and, unless you believe that healthcare providers (professionals, hospitals, etc.) would be willing to take a pay cut rather than less consumption resulting in lower costs there will be lower consumption and higher costs. People will put off essential treatment as well as excessive treatment and the general level of public health will suffer as a consequence.
My own view, repeated ad nauseam here, is that we need to increase the supply of healthcare dramatically via a combination of training more professionals, abandoning restrictions on competition among hospitals, telemedicine, and better and more use of technology. That will reduce costs and make healthcare more available to everybody.
BTW, I can come up with a half dozen ways of reducing the cost of the medical claims process right off the top of my head, none of which involve alleged competition from a nascent national health service.
Update
While Greg Mankiw makes this observation to the same passage from Dr. Krugman that I quoted above:
It seems to me that this passage, like most discussion of the issue, leaves out the answer to the key question: Would the public plan have access to taxpayer funds unavailable to private plans?
If the answer is yes, then the public plan would not offer honest competition to private plans. The taxpayer subsidies would tilt the playing field in favor of the public plan. In this case, the whole idea of a public option seems to be a disingenuous route toward a single-payer system, which many on the left favor but recognize is a political nonstarter.
which is fairly sensible and basically makes much the same point as I made above, he continues with this:
If the answer is no, then the public plan would need to stand on its own financially and, in essence, would be a private nonprofit plan. But then what’s the point? If advocates of a public plan want to start a nonprofit company offering health insurance on better terms than existing insurance companies, nothing is stopping them from doing so right now.
which is all quite true but here’s the corker:
There is free entry into the market for health insurance.
an excellent example of why I frequently wonder whether economists get out much. There is emphatically not free entry into the market for health insurance and there is a federal government agency and 50 state regulatory boards all imposing their own regulations on everything from capitalization requirements to what must be covered under a healthcare insurance plan to see to it that there isn’t free entry into the market.
Unless Dr. Mankiw means something different by “free” and “market” than I would. I would think that a free market does mean the difference between 5 vendors and 100 vendors, not between 5 and 6.
I think telemedicine has real potential. A great many of the trips we make to doctors — 2 kids, 2 middle-aged adults — are probably unnecessary. Doctors look in the kids ears and say, “Yep, that’s an ear infection, all right. And it looks bacterial, so here’s a scrip for an anti-biotic.”
The diagnosis is carried out solely on the basis of a look inside the ears, a temperature reading, and a brief history. Couldn’t that data basically be collected with an iPhone attachment and a $1.99 app? The same app could handle the insurance submission and forward a scrip to the pharmacy.
Michael –
My father (who was a doctor; what would now be called primary care physician) told me that something like half to 2/3rds of the people who came to see him weren’t really sick. But things quickly get more complicated.
1. Sometimes they are. And much of what primary care is about is separating the mundane or inoccuous from the serious. My father also told me: There is absolutely no substitute for direct observation and touching of the patient, and watching first hand the responses to inquiries during the history. Period, full stop. Its really what they are trained to do. So, yes, telemed will be OK most of the time. But we have to decide as a society if we can accept the failures that will occur. I suggest that current malpractice experience says absolutely not.
2. So my father would tell patients “you aren’t sick. You don’t need a hospital. You don’t need pills. You don’t need therapy. You don’t need studies. Go home. You are 45, you are going to have aches and pains. This will resolve itself on its own.”
Problem is, they really didn’t like that response. “Well my neighbor says….” “I read in a magazine…” “Can’t you just write me a…….” etc etc. Some people just want attention. Some can’t come to grips with the everyday aches and pains associated with advancing age. Some seek pills. Some seek disability opinions. Some seek 100% absolute surety. And on it goes.
So I always come back to the same point. Why do we want to create Rube Goldberg solutions to the medical cost problem without first attempting first principles: re-introduce price into the medical consumer’s equation. As long as health care is considered “free” we will have subsidized and unwarranted demand – and price escalation.
Dave observes that providers act as a cartel. In my judgement he overstates the issue, but the basic point is fine. But the “cartel” benefits from the fact that a third party payer system subsidizes consumer practices. We should make this priority one. Re-establish deductibles and coverage policy that makes current health “insurance” really health care maintenance – and return it to insurance.
We can go from there.
One of the many shortcomings of the present debate on healthcare policy is that nothing that anybody on either side of the question is proposing will do a darned thing to help people in communities that are already underserved. Geographically, that’s most of the country.
It’s basic economics. There are more people in urban areas, more prospective patients, and, consequently, the pay is higher so there are more healthcare providers there. Consider this graph. It shows the number of physicians per 100,000 population by state. Massachusetts has 451 per 100K, Idaho 175. Nobody, including the AMA, believes that’s enough but nobody has a plan that will do anything about it.
My emphasis on increasing supply would. And that’s where telemedicine comes in.
The public competition argument particularly irks me. I live in seat of government in which probably a third of workers are employed by government, receiving government healthcare for them and their spouses. You add in Medicare, Medicaid, and Tricare, public health coverage is by far the norm. I’ve observed no “comeptive” benefits from this, other than the fact that a small business cannot compete with publicly funded insurance, so many employees will opt out of our plan for a spouse’s coverage in a goverment program. But this gets into the issue of labor competition, which is really separate. I see no evidence that insurance coverage is priced any differently in this market than any other market with less government insurance. Shouldn’t it?
I’m inclined to think that we need to fix both the supply-side (breaking the cartel) and the demand-side (ending the tax incentives for employer-selected insulation plans) problems in order for the health care market to work properly. Fixing either side alone would be an improvement over the current system, but far from a full fix.
You’ve already discussed the problems with fixing the demand side without fixing the supply side. But if we fix the supply side without the demand side, we’ll still have health care capacity wasted on people overusing health care on their employer’s insurance company’s dime, we’ll still have health care rationed by unresponsive insurance company bureaucrats, and we’ll still have trade-off decisions being made by people who don’t bear the costs of their decisions.
Drew:
People often react with alarm to new technologies. Meaning no disrespect whatever to your father, we heard the same insistence on “hands on” when we began to introduce surgical techniques that were robot-assisted.
I was being a bit flip in suggesting a $1.99 iPhone app. But I can see the day when a small in-home device can check blood pressure, take temperature, draw blood and provide a video and stethoscope link to a doctor who need not be anywhere close at hand. Dr. McCoy’s medical tricorder is no longer science fiction.
We kill Al Qaeda in Pakistan by remote control from bases in Nevada. I don’t believe the vast majority of medical diagnosing is any more technologically demanding. There’s really not much of a technological barrier to be overcome before we can have the vast majority of doctor visits conducted by telemedicine, and only the more complicated cases referred to a doctor’s office — not necessarily in the US.
The same device could file the insurance and request the prescription.
The savings could be immense.
to a doctor’s office — not necessarily in the US.
Yikes. Bad sentence construction. Let’s try, “conducted by telemedicine — not necessarily in the US. — and only the more complicated cases referred to a doctor’s office.”
Still not great, but comprehensible.
Dave –
The point on doctor geographical distribution is no doubt correct. But (and this will get me into trouble) is it not fair to say that for the most part highly educated and trained people want to reside in reasonable metropolitan areas for the obvious reasons?
At the risk of sounding arrogant, I don’t live in Newton, IN. You don’t live in west central TX. Neither do alot of doctors. So I don’t see how we fix that unless we turn medicine into the military.
Oh, wait. That’s what nationalized health care will lead to. Take over GM to make “green” cars? Next: send doctors to northern Arkansas…….in the public interest.
I don’t have an answer. I’m just observing a problem. But if the notion is flooding med schools – and the country – with docs who are OK with living in rural Mississippi (I was trying to see how many out of the way places I could get into one post) I’m not sure I want to go to those docs.
Michael –
“Meaning no disrespect whatever to your father”
None taken.
“we heard the same insistence on “hands on†when we began to introduce surgical techniques that were robot-assisted.”
I think that’s wrong, as a technical matter, but also misses the point. I have to confess that having grown up in a medical family my view may be colored. But I think the comparison is just plain wrong. No doctor I know (my father included) isn’t amazed and appreciative of the fantastic imaging and surgical techniques technology has brought us. (Not to mention drugs therapies.) And for example – My spine surgeon (two cervical fusions for me) is a cutting edge guy.
But having made rounds with doctors so many times I can’t tell you, that first hand observation by the primary care docs of the skin, the fingernails, the palor, the eyes, the muscle tone and strength, the hair, the throat, the reflexes, the demeanor, the body mass and distribution………..the responses to queries about the quality of pain or manipulation is key. It goes on and on. They are trained to see what others do not. Can’t do it over the phone, unless you want to accept a certain failure rate.
Here’s an experiment. I’m sure we all know friends in the profession. Ask them about what I am saying. Compare the responses of surgeons and primary care/internists.
I already know the answer.
The problem with this entire line of reasoning is that we’re graduating about half as many people per 100,000 population from medical schools today as we did 50 years ago. That leaves us with several possibilities:
1) the docs being graduated then weren’t qualified;
2) we aren’t graduating enough docs now;
3) today’s students on average are dumber than the students of 50 years ago.
Now it may be true that we need much smarter docs than we did 50 years ago. I’d need some be persuading both on that and on the notion that today’s docs are smarter than the docs who graduated 50 years ago. I think that a little of 3) may actually be true but what’s most true is 2).
Or the clergy. That’s what physicians used to be. I’d like to see the practice of medicine remain a profession but if that’s going to happen the practice will need a better way of assigning physicians than it uses now. That’s well within the practice’s ability.
Some of the problem is internationally trained professionals. Docs from Pakistan or Zambia are understandably reluctant to set up practice in Wyoming. But that just circles around to my point that we’re not graduating enough docs.
I’d be interested in any analysis of what the optimal distance to health care providers is. I suppose if you’re suffering a heart-attack, it’s < 1 mile. But to use Drews’s example of Newson, Indiana, that looks like it’s less than 50 miles from the Chicago Metropolitan area and 50 miles from West Lafayette (a mid-sized University town). That doesn’t strike me as likely to be underserved except in an emergency.
Some of the other areas may not have a lot of options within 100 miles. West Texas reminds me that Robert E. Howard’s father was a doctor in that area, but he followed the oil worker camps; he followed the people. Are the people there today?
Drew:
That’s a great suggestion. Unfortunately the only doctor I know personally is a big deal plastic surgeon (burns and serious stuff not boob jobs) and he’s a long distance from family practice.
I do know this: the worst illness I’ve had so far — MRSA — I contracted in a doctor’s office while getting an exam. And anyone with young kids will tell you that we dread a trip in to the doctor: whatever germs you came in with, you’ll leave with more.
But I take your point that we should get some feedback from, you know, actual doctors.
Catching an illness in the waiting room is a good point. We’ve certainly called our doctor’s N.P. to run down symptoms of a bug to make sure we shouldn’t bring a kid in. Really, with the cold/flu/secondary infection stuff, there is not a lot of medical risk of doing the kind of things that at worse might delay a visit by 2-5 days. Seems like an awful lot of the people in the waiting room in doctor’s offices and emergency rooms during cold and flue season are there spreading disease.
Dave –
1. Or a fourth explanation, or should I say 2a: the medical profession is relatively much less attractive than it used to be. I think this is undeniably true (for reasons I assume are obvious to everyone, but if not, just go talk to an Illinois OB/GYN………if you can find one), but I can’t assert that it completely accounts for the ratio change.
2. Doctors were never the clergy. However, I understand point. My dad never practiced for the money. For example, as his patient population aged, and reimbursements per patient fell he never, unlike some, stopped seeing medicare/medicaide patients. They basically were like family.
I’m too far removed from med school application and admittance practices to really say if “the practice” is running a monopoly scam, but it strikes me as similar to those assertions that there are 50 mpg carburators that the car companies won’t install at the behest of the oil barrons.
In Europe between roughly 500 AD and 1400 nearly all physicians were clergyman. See here.
One of my closest friends has served for years on a medical school admissions board. The school in question has always filled every position, has a wait list, and has never admitted every applicant from its wait list. That means that there are numbers of qualified applicants who aren’t being admitted. I have reason to believe that’s true of every medical school in the United States, at least.
A follow-up to an earlier comment in which I suggested:
Couldn’t that data basically be collected with an iPhone attachment and a $1.99 app?
Apple just announced bluetooth connectivity from OneTouch diabetes meters to iPhone.
Dave –
I didn’t think we were talking 1000 AD. I thought we were sort of in the 1930’s plus age. I’m not sure I want to consider practices in 1000 AD “medicine.” BTW – when you said “the practice” has to find away to spread doctors around to all geographies, who is “the practice?” Schools, the AMA, government?……
Concerning admissions……….the same can be said of elite MBA or Law schools, or Engineering Schools or the Ivy League, Juliard etc…… And then people find alternative (perhaps lesser) schools. And so do med students. I’m sure the issue revolves around views on competancy.
Now what does that mean?? In some pursuits (the arts) people either come to see you dance, or they don’t, and then you teach dance rather than perform. Some fields have exams or licences, like law or medicine, and some have hiring company interviews, like businesses hiring engineers or business grads. Goldman? Or the corp fin group at a local bank? Hi tech company? Or GM? But any way you shake it, there are qualification processes. And so go pay scales.
I’m not sure where you are coming from by focusing only on medicine as the sole field restricting entrance and demanding minimum levels of competancy, or paying the graduate for the degree.
I fly alot. I hope you don’t feel the same way about pilots………