The progress (if that’s the right word for it) of healthcare reform legislation (if that’s the right word for it) in the Congress is the story of the day:
WASHINGTON — As the battle over health care lurches toward a conclusion, President Obama is confronting an increasingly sharp divide on the Democratic left, with liberals in the Senate and the House split on a critical question: How much of what they want is enough?
In the Senate, where time is running out for Democrats to meet the president’s deadline of passing a bill by Christmas, liberals signaled on Tuesday that they would hold their noses and vote for a version of the measure that would strip out some of their most cherished provisions, including an expansion of Medicare and the possibility of a government-run insurance plan.
But the House seemed unwilling to fall in line. The majority leader, Representative Steny H. Hoyer of Maryland, said flatly on Tuesday that the House would not “simply take the Senate bill” and adopt it unchanged.
I continue to have little doubt that something called healthcare reform will be enacted by the Congress. It’s becoming increasingly doubtful that the Congress will have accomplished anything meaningful by doing so.
I would divide the objectives of healthcare reform legislation into three categories: things we need to do, things we should do, and things we’d like to do.
We need to control or, even better, reduce the costs of healthcare while preserving or improving outcomes. That we need to control costs is manifest. The dirty secret of healthcare expenditures is that all that needs to happen for healthcare to become unaffordable for most Americans is for healthcare costs to grow at the general rate of inflation. That’s the short version of what has happened over the period of the last 25 years.
The reasons for preserving Medicare and Medicaid are as sound now as they were for creating the programs 40 years ago. Medicaid is necessary for both pragmatic and ethical reasons. Without it the poor would become increasingly sick and when the poor are sick, the rich get sick, too. That’s why we’ve had public health departments over the period of the last 150 years.
Without the subsidies that Medicare provides the elderly would be penurized by their healthcare expenditures and forced from their homes. There is no imaginable level of income, level of investment, or type of investment that would change that. It’s cheaper for them to take care of themselves for as long as is possible than it is for them to become Medicaid recipients or institutionalized. It is also more dignified and humane.
Medicare is actuarially out of balance by an amount in the tens of trillions, larger than any foreseeable level of growth will enable us to pay for without significant pain. The report of the Social Security Trustees should be an eye-opener:
As we reported last year, Medicare’s financial difficulties come sooner—and are much more severe—than those confronting Social Security. While both programs face demographic challenges, rapidly growing health care costs also affect Medicare. Underlying health care costs per enrollee are projected to rise faster than the earnings per worker on which payroll taxes and Social Security benefits are based. As a result, while Medicare’s annual costs were 3.2 percent of Gross Domestic Product (GDP) in 2008, or about three quarters of Social Security’s, they are projected to surpass Social Security expenditures in 2028 and reach 11.4 percent of GDP in 2083.
The projected 75-year actuarial deficit in the Hospital Insurance (HI) Trust Fund is now 3.88 percent of taxable payroll, up from 3.54 percent projected in last year’s report. The fund again fails our test of short-range financial adequacy, as projected annual assets drop below projected annual expenditures within 10 years—by 2012. The fund also continues to fail our long range test of close actuarial balance by a wide margin. The projected date of HI Trust Fund exhaustion is 2017, two years earlier than in last year’s report, when dedicated revenues would be sufficient to pay 81 percent of HI costs. Projected HI dedicated revenues fall short of outlays by rapidly increasing margins in all future years. The Medicare Report shows that the HI Trust Fund could be brought into actuarial balance over the next 75 years by changes equivalent to an immediate 134 percent increase in the payroll tax (from a rate of 2.9 percent to 6.78 percent), or an immediate 53 percent reduction in program outlays, or some combination of the two. Larger changes would be required to make the program solvent beyond the 75-year horizon.
The projected exhaustion of the HI Trust Fund within the next eight years is an urgent concern. Congressional action will be necessary to ensure uninterrupted provision of HI services to beneficiaries. Correcting the financial imbalance for the HI Trust Fund—even in the short range alone—will require substantial changes to program income and/or expenditures.
The situation is actually worse than the trustees are portraying it as. The increased healthcare spending mandated by healthcare reform in its present form will cause Medicare to go broke even sooner. The history of subsidized healthcare in the United States is that increased utilization results in cost increases disproportionately higher than the increased utilization and the measures in current legislation to reduce costs are mostly a combination of accounting sleight of hand and wishful thinking.
I shouldn’t have to defend the notion that we need to preserve or improve outcomes but I’ll make a brief stab at it. It’s terribly difficult to compare outcomes across national boundaries but the outcomes of healthcare in the United States are, at the very best, not materially better than those in other OECD countries who are spending a fraction of what we’re spending on a per capita basis. The most optimistic assessment we can make is that we’re achieving decreasing returns to marginal expenditures, that is, we’re seeing a little less improvement for every dollar we spend than we did for the dollar before.
A healthy labor force is a more productive one. If we allow outcomes to decline in the name of cost control, we’ll threaten our economic future.
We should ensure that more Americans have access to healthcare. It is a scandal and an outrage that so many Americans have no or inadequate access to healthcare and current legislation, focused as it is on healthcare insurance, does relatively little to expand access in areas that are already underserved.
That those without healthcare insurance have poorer outcomes than those with insurance is manifest. The statistics are widely available and I won’t both to cite them again here. The shame falls on the society as a whole but it falls most squarely on medical professionals themselves. Under the Emergency Medical Treatment and Active Labor Act of 1986 hospitals and ambulance services are legally required to provide care to anyone needing emergency healthcare treatment regardless of citizenship, legal status or ability to pay. Additionally, physicians are ethically required to provide care to the poor. I recognize that this idea is somewhat controversial among physicians. Over the years the ethical obligation has transmogrified from a personal one for individual physicians to accepting Medicaid to being affiliated with institutions that accept Medicaid.
I won’t expand on this at length but that’s inadequate. All ethical obligations are personal rather than institutional and it’s patently absurd to insist that the janitor and the physician, both affiliated with institutions that accept Medicaid, share the same level of ethical obligation.
However, the necessary implication of that obligation is that physicians must charge some patients more than others. That’s a primary cause of the opacity of medical billing.
The list of things we’d like to do is almost limitless.
In my view the Democratic progressive caucus of the Congress made a miscalculation. They calculated that it was easier to get the healthcare reform that they wanted by emphasizing universal coverage over cost control. Everybody likes something for nothing, right? Events have apparently determined otherwise. Republicans have, in my view, acted irresponsibly in denying that there was any urgent reform needed. Some Democrats have, correctly in my view, been able to distinguish between what we need, what we should do, and what we’d like and have emphasized the need for cost control.
I think the White House miscalculated, too. As I see it they considered the Clinton Administration’s experience with healthcare reform and determined that they could get all of the results, the political mileage, and none of the pain by getting Congress to cobble healthcare reform legislation quickly before opposition could mobilize. The miscalculation was two-fold. First, Congress does nothing quickly and, indeed, opposition has mobilized. Second, giving Congress its head and putting healthcare reform through the Congressional sausagemaker has resulted in incomprehensible legislation that reforms very little. Unless things change they’ll get no results and the pain of failure, too. The President’s polling numbers are the lowest they’ve been since he took office.
The irresistible force of universal coverage has met the immovable object of insolvency and the result is nothing.
Very good post. I agree with most of it, but would add a few things (of course). 1) Under costs, we should add in the costs, however you choose to calculate it, of the early deaths from inadequate care. When we calculate the costs of war, we look at more than just dollars. You have suggested in the past that there is some opportunity cost here, but as you note, other countries provide the same level of care for much less. This is a matter of political will as much as it is economics.
While your analysis of Medicare is good, I would also add that having the old folks in their own separate system is a big part of our problem. If the retirees were invested in the same system as the rest of us the politics of achieving a more viable reform like Wyden-Bennett would be much better.
2)EMTALA only provides for emergency care. I think it is fairly clear that it is in the follow up that people are not getting care. I think you have made a brief statement here, maybe to save time or maybe to avoid offending someone (not sure who, God knows I have thick skin), but I think where you are heading is largely true. Physicians have grasped the free market, entrepreneur concept with both hands, not all, but many have. They are running their practices like real businesses, maximizing earnings. It is very easy to do as there is such an information mismatch and you are frequently dealing with people at their most emotionally vulnerable times.
This is why I have severe doubts about proposed free market solutions. I would really like to see it tried in a limited area first. i think that we can incorporate some free market principles into our reform efforts, e.g., more transparency, competition when available, using incentives, but I suspect that there is a reason no country uses a free market approach to health care. (FTR, I work at the hospital on the wrong side of the tracks. We turn down no one as far as I know. I still make a lot of money, but I would make 20-30% more for the same work, with nicer patients also, if I worked at the hospital 20 miles away.)
Lastly, we owe it to ourselves, you should do this (ok , you have briefly written about this), to consider what will happen if no reform bill passes.
I’m pretty much in agreement, BUT…
We need to control or, even better, reduce the costs of healthcare while preserving or improving outcomes.
It’s important to realize that the excess cost growth problem is NOT going to go away without overt rationing, period. We can push it off for a while by reducing system waste (increasing system efficiency, if you prefer) but the reasons that HC costs rise faster than GDP are so fundamental that excess cost growth can not be stopped without draconian controls. As soon as efficiencies are realized, the system will once again revert to the excess cost growth pattern. Just as it has in the past.
The excess cost growth problem occurs in every single developed nation with anything remotely resembling democratic government, including all the Euro-nations that the left is so fond of exampling. It occurs because health care as a basic need/want comes right after food and shelter and clothing, and the “rewards” for not obtaining it are pain, disability and death. Once those most basic needs are covered, then for each additional dollar in incrremental income resulting from economic growth, an increasing proportion of it will end up spent on health care. We spend more of each additional incremental dollar of income on HC because we are willing to, inevitably pressuring demand.
Particularly when it comes to staving off death, individuals are willing to do anything and spend anything, because the cost of not doing so is everything.
steve, I think it’s better not to pass anything at this point than what appears to be on the table. I’m not assuming, as I believe some are, that if nothing get’s passed this week, nothing will get passed for ten years. I think if this passes, the government will be so discredited that reform needed won’t pass for a generation, particularly since we are bargaining away things like individual mandates that we won’t have to bargain with again. And the cost-cutting measures that the CBO says will be extremely difficult to enact, won’t happen.
The politics still seem backwards to me. The Democrats should want healthcare reform to be blocked by Lieberman or Republican intransigence. The Republicans should want extremely unpopular laws to pass; it’s about the only way back to relevance.
I’d say that Democrats have acted irrsponsibly by denying that health care costs are an issue. Oh sure, they pay it lip service, but in the end they do nothing about it. Actions speak louder than words.
And, doing nothing is probably better than the current “reforms” we are seeing. Everyone says, “the legislation will mean expanded coverage for those without coverage so its good enough.” I think this is extremely short sighted.
Or not as the elderly would be subsidized by the non-elderly…much like we have now. I don’t see why this would change anything.
Exactly how many such solutions have you seen?
My own view is that we need more competition within health care not less. Competition has shown time and again to reduce costs, expand output, and generally improve conditions for most involved. Simplification is good too. The current legislation does neither of these things. The status quo is preferred to the current legislation.
I know, I know, people are probably thinking, “There goes that crazy libertarian Steve again…” Well fine. How about Gene Steuerle? That article is titled, When Health Reform Violates Standards of Equal Justice. So, in effect you are supporting reform that violates the principle of equal justice. Or…some of us are more equal than others.
“My own view is that we need more competition within health care not less.”
Exactly, case in point: I had $5000. deductible, but wanted a colon—–py. I told my doc about this, she suggested a certain clinic(surgery center)…less expensive. My moms colon—-py was covered by her insurance, and she had no idea how much it cost when I asked her. Turned out, it was about $2000.plus/ more. She HAD NO IDEA OF THE COST, and, worse, didn’t care.
I work hard pretty hard to keep my health good, knock on wood! So that, I figured it was worth it to get a c~ even tho the money came out of my pocket.
PD- Our history is that we attempt health care reform once a generation. If it fails, we have a blueprint on how to torpedo it. The people who usually vote will safely have health care for quite a while. The people who will gradually lose health care until reform is attempted again will be the sick and the lower income groups. Not a strong political group.
Am I happy with the current bill? Not especially, but there are also costs to not passing a bill, which is often ignored. More people really will die. More people will be stuck at jobs because of health care issues. I am also a little more optimistic about the cost cutting proposals in the bill. Some of it is stuff I would use.
Steve-Libertarians have much to offer in this debate. However, from where I sit, a lot of it wont work. Competition? Great idea. How will you create competition in areas outside of the large cities? You usually have limited services and few specialists. Our largest areas of expenditures come from heart disease, trauma and cancer care. Have you ever sat with a patient newly diagnosed with cancer? How well do you think they will be able to negotiate prices? How much do you think I can get for doing trauma care on someone at 3 in the morning when I am the only doc available? Negotiate your physical exam costs, sure, but a lot of the pricey stuff, it just wont happen.
Again, why dont we have a free market health care system anywhere in the first world? Maybe the market, that invisible hand thing, has figured out it wont work. Or, maybe there is another reason. I would be open to seeing a version tried in a state or two. I am unwilling to gamble with the whole system, especially as we have proven models elsewhere.
“Or not as the elderly would be subsidized by the non-elderly…much like we have now. I don’t see why this would change anything.”
it is the politics. You can stop any kind of health reform in its tracks by convincing the elderly it will mean cutting Medicare. If the elderly were in the same system, as they are everywhere else, that political ploy does not work.
Oops, here is what we spend on.
crap…messed up that first blockquote. The first sentence is steve’s.
Hmmm, I should have written “a more market based system” not just a free market one. This is one of the points Dave has argued for and I think it is fair to say that Dave does not advocate a free market in health care. Many here seem to think it is a good idea. Politically, dead as a freaking door nail.