Why We Need Healthcare Reform

by Dave Schuler on January 22, 2013

This graph is from the same Treasury report that I mentioned in my previous post. The scale on the left is the percent of GDP represented by the increasing Medicare expenditures over time. Three things to note:

  1. These are the projections under current law, i.e. with ObamaCare. Without ObamaCare the expenditures are estimated to be even higher.
  2. A large and increasing proportion of expenses are not covered by current levels of taxation.
  3. It assumes an average 5% per year per recipient growth in spending.

This reminds me of Elbert Hubbard’s (not to be confused with L. Ron) wisecrack: “No man needs a vacation so much as the person who has just had one.” Now that we have healthcare reform what do we need? Healthcare reform.

Does that seem more or less likely now than it did in 2009?

{ 30 comments… read them below or add one }

Icepick January 22, 2013 at 9:51 am

Hey, pictures! More content!

/ snark

Drew January 22, 2013 at 10:53 am

The notion that ObamaCare will reduce the cost curve without limiting quality or availability I find absurd. But you all knew that.

Does anyone have an example of government intervention curing a cost escalation issue without the maladies I just cited?

I know I sound like a broken record, but just look at the graphs and ask yourself “what’s a mother to do?” We are screwed. I get dismissed for the view that we need to turn health care expenditure back to insurance and not subsidized holistic maintenance and let market pricing prevail. But when you look at the graphic and consider the implications, anyone got a better answer??

jan January 22, 2013 at 3:47 pm

Here’s a fairly comprehensive review of Obamacare, via Hot Air: Obama concedes Obamacare didn’t do anything for rising health care costs.

Fundamentally, Obamacare is a bust!

Our president spent two years, during the worst economic downturn since the Depression, passing a law more than 50 percent of the public still hates because 85 percent of them were satisfied with their current coverage, imperfect though it was. He turned the crayon box upside down to draw a picture no one wanted and we all must now pay more money to enjoy his vision.

steve January 22, 2013 at 4:29 pm

Everyone who follows health care policy, not just those who follow it when it is in the news or want to score points, knew that this would be just the first step of many. Everyone has ideas, but no one really knows how to control health care costs. If it was easy, it would already be done. It will take, IMHO, many tries and a lot of adjustments. At some point, I hope the GOP becomes interested in it, but until then we have just the Dems trying.

Steve

jan January 22, 2013 at 5:45 pm

“At some point, I hope the GOP becomes interested in it, but until then we have just the Dems trying.”

????????????

Republicans have had a patchwork of ideas that have been floated out there. Bobby Jindal has been at the forefront in encouraging some of these ideas:

1) Voluntary purchasing pools
2) Portability across state lines
3) Tort reform (a huge potential cost-saver)
4) Tax-free Health Savings Accounts
5) Premium rebates and incentives for healthy lifestyles (one of my favorites)
6) Transparency and payment reform — giving people more information regarding provider choice and costs of care. Including the consumer in their care choices, giving them options and more knowledge has long been advocated as lowering costs of medical care.

steve January 22, 2013 at 9:50 pm

@jan- Setting aside that some of these ideas would make me really rich, or are already in the ACA in some form, which of these did they pursue when in power? If you are willing to spend political capital on it, it doesnt count. Anything you propose will have opposition. It risks being demagogued. You might lose votes. When we look at what has really been done, we see Medicare Part D and the SGR, which the GOP then promptly voted against enforcing.

Steve

jan January 22, 2013 at 10:47 pm

Steve,
I just don’t see the dems as taking over something like a seventh of the economy, in a one-sided, comprehensive health care reform, that was opposed by all Congressional R’s and a majority of the public, as being honorable or worthy of acclaim, like you apparently do — just because the dems were brazen enough to spend political capital on it. Both political parties are pretty insufferable at the moment — the dems being bullies, and the republicans being whimps.

Dave Schuler January 23, 2013 at 7:10 am

Everyone who follows health care policy, not just those who follow it when it is in the news or want to score points, knew that this would be just the first step of many.

And everyone who follows American history and politics knows that no major social policy has ever been effected that way. We’ve never passed a bill strictly on partisan lines that was inoperable and unpopular out the door and then continuously tweaked it into workable form. Could we? Anything is possible. However, we have no experience in doing it so it’s a stretch.

Are laws changed over time? Sure. But not quickly. Think decades rather than months or years.

I have been very consistent in my support for healthcare reform but all along I’ve recognized that we’d be stuck with whatever we got for an extended period. That means you’ve got to make a bigger change in order to make an effective one. Continuing approximation just isn’t the way our politics works.

Steve Verdon January 23, 2013 at 10:49 am

Everyone has ideas, but no one really knows how to control health care costs.

Actually, the means to control health care cost are fairly obvious…they are also wildly unpopular. Hence no politician will ever put forward a policy to implement them.

Dave Schuler January 23, 2013 at 12:22 pm

Steve V., I think it’s a little more nuanced than that. There are at least two conflicting approaches to controlling healthcare costs. One of them is unpopular with voters and the other is unpopular with donors. Politicians are, therefore, motivated to do whatever it takes to convey the appearance that they’re doing something without actually doing anything. That’s their best strategy.

Steve Verdon January 23, 2013 at 12:56 pm

One of them is unpopular with voters….

Like decoupling benefits from compensation and making health care insurance more like actual insurance.

….and the other is unpopular with donors.

Like using the coercive power of government to set/influence prices/wages. This would piss off doctors, nurses, health care workers in general, and also big companies like pharmaceutical companies and medical equipment manufacturers.

Taken together we get:

….the means to control health care cost are fairly obvious…they are also wildly unpopular.

Politicians are, therefore, motivated to do whatever it takes to convey the appearance that they’re doing something without actually doing anything. That’s their best strategy.

Which is why I find steve’s eternal optimism so amusing. It is like a kid who still believes in Santa Claus.

Dave Schuler January 23, 2013 at 3:20 pm

Like decoupling benefits…

Right on both counts. It’s as though you were reading my mind!

Don’t forget insurance companies. Perversely, they like healthcare costs to rise. In most cases of employer-supported plans they don’t act as insurers but as administrators for self-insured plans and are paid a percentage of the amount disbursed. Remarkable, but that’s the way it works.

steve January 23, 2013 at 4:00 pm

“And everyone who follows American history and politics knows that no major social policy has ever been effected that way. ”

From my POV (as provider and follower of policy), Medicare has been altered many times, in ways large and small, since its inception. Same with Medicaid. Welfare has had major changes. Does every president pass major new changes to education or does it just seem that way?

That aside, given our divided electorate, we just arent going to see sweeping new changes. You know as well as I do that a major critique of the ACA was that it was too big. Many (on the right) claimed to want smaller adjustments passed. Since we can only have legislation, of any type, that will be voted for by a 60th senator, you are not getting one big sweeping change. We get incremental, or we get nothing. Since we got the individual mandate, and everyone with lower costs has one, that was pretty significant.

” unpopular”

Nearly everything except for the individual mandate polls positively.

Steve

steve January 23, 2013 at 4:06 pm

“Like decoupling benefits from compensation and making health care insurance more like actual insurance.”

We should decouple it from employment. I agree. Saying it you want it more like real insurance is either meaningless or suggests you are forgetting how health care dollars are really spent. The need to use insurance is central to the cost problem. You can always just let more and more people go without.

Steve

Dave Schuler January 23, 2013 at 4:25 pm

steve, you have that impression because of all of the changes that have been made over the last 10 years. Here’s the legislative history. Basically, the plan went practically unattended for 15 years. Then there was a flurry of tinkering. Then it went fairly unattended for 10 years. A flurry of tinkering has been going on for about the last ten years.

However, Medicare a) had bipartisan support and b) was popular from the get-go. Unlike ObamaCare. I see a real, major difference between ObamaCare and Medicare or Social Security.

Andy January 23, 2013 at 6:34 pm

steve,

The problem, in my view, is that the underlying system no longer works, therefore tinkering cannot accomplish much. There’s only so much that can be done as long as our system is based on employer-provided coverage and a primarily third-party fee-for-service payment model. You can’t get out of the limitations inherent in those two factors by tinkering.

Similarly, the same problem exists with the national security establishment in this country which is still largely the product of the 1947 NSA. We’ve done a lot of tinkering, but are things getting worse or better? Like health care, national defense is an area where the legacy system has run its course. Not possible, IMO, to tinker or increment our way out of a broken system.

Steve Verdon January 23, 2013 at 6:43 pm

Nearly everything except for the individual mandate polls positively.

Bullshit. Go ask employees at companies that provide health care benefits if they’d like to see them uncoupled (and the resulting pay taxed).

Saying it you want it more like real insurance is either meaningless or suggests you are forgetting how health care dollars are really spent.

It means only covering things that cost alot and are rare. Not covering every thing, and things people actively pursue. Why don’t many health care plans cover things like laser eye surgery? Because people like it. It would be like having car insurance covering upgrading your car’s sound system.

So…

routine check-ups, not covered
routine tests/procedures, not covered
child birth, not covered
glasses, not covered
birth control, not covered
colonoscopies, not covered
etc.

You can always just let more and more people go without.

Exactly. The idea of covering everything for everybody is an extremely expensive proposition.

steve January 23, 2013 at 7:25 pm

Medicare- Est 1966.
1973- Adds ESRD pts, ALS and railroad.
1980-Adds those with environmental exposures
1981-1983- DRGs
1983- Non-profits employees added
1986-Covers state employees. IIRC, Reagan then increases payroll tax.
1990-20% coinsurance added to Part B along with a deductible
1992-Part A payments no longer “usual and customary”
1997-Medicare C and the SGR. Part B premium set at 25% of program costs.
2006-Medicare Part D.
2010-ACA and its effects on Medicare.

There are also lots of smaller changes going on during these times. Adding screening tests. Paying for different kinds of chemo. Adjusting what is to be paid for nursing home care/hospice care. These go on every year or two. It looks to me like we get fairly big changes every 5-10 years, though as often as every two years. The ACA was approved in 2010. It would not be out of the norm at all to add new legislation in 2014 or 2015. Suppose we decide to make Verdon happy and make the $10,000 deductibles in the ACA go up to $50,000? The framework is there, so if we had the political resolve, big if, the mechanics would be very easy.

Steve

steve January 23, 2013 at 7:35 pm

“routine check-ups, not covered
routine tests/procedures, not covered
child birth, not covered
glasses, not covered
birth control, not covered
colonoscopies, not covered
etc.”

Good. You have just eliminated about 5% of our total spending, but at a cost. There are data showing that people who should not, will skip some of these studies. They will then show up with more advanced disease. This will be covered by their insurance. You may end up losing money with this scheme. I would suggest Value Based Insurance (VBI) instead. Price individual procedures so that we end up paying the least in total costs. Since routine check-ups have almost no value, have a very large co-pay or dont cover it. For screening tests that decrease total costs, maybe colonoscopies before the age of 65, provide those for free or with a minimal copay.

Steve

Andy January 23, 2013 at 8:11 pm

There are also lots of smaller changes going on during these times. Adding screening tests. Paying for different kinds of chemo.

steve, I think you’re just proving the point. It’s almost half a century since Medicare was begun and the program began. Where has incrementalism gotten us? Is Medicare fundamentally different?

What we need is reform on the scale of medicare and we didn’t get it, or the 1947 NSA, or Social Security through incrementalism.

steve January 23, 2013 at 8:50 pm

@Andy- Medicare was a big change. The ACA was a big change. Medicare is much different than what it was when conceived. 30 years from now the ACA will be much different. It fell far short of the final solution that we need, but it is a step in the right direction. Absent control of the Senate with 70 senators, what else would you expect? As dave always notes, every congressperson and senator won their own election. With a closely divided electorate, we arent getting changes as big as we need, just steps towards an end. Im not sure that is all that bad. Steve is convinced he knows how to cut costs. Thats not so clear to me (barring untenable solutions).

Steve

Miscounted. There were only 69 Dem senators in 1965 when Medicare was passed. 67, out of 96, in 1935. The common bond of near universal military experience and/or the recent war surely made the NSA possible. Now, our pols have little in common other than they are mostly rich and crooks.

Steve

Dave Schuler January 24, 2013 at 8:49 am

steve, the first change to Medicare other than expanding its coverage was, as I said, with the introduction of DRGs in 1981—15 years after passage. The next change other than expanding coverage came in 1992, roughly 10 years later, with the reform to Part A.

A lot of the changes in recent years are just negating the changes of prior years, e.g. the annual ritual of passing “doc fixes”.

As I see it you’re left with two equally untenable positions. Either ObamaCare can be made viable by expanding coverage which seems pretty unlikely or that the Congress will have a sudden epiphany and make structural change other than expanding coverage (“time inconsistency”).

Icepick January 24, 2013 at 9:27 am

Medicare- Est 1966.
1973- Adds ESRD pts, ALS and railroad.
1980-Adds those with environmental exposures
1981-1983- DRGs
1983- Non-profits employees added
1986-Covers state employees. IIRC, Reagan then increases payroll tax.
1990-20% coinsurance added to Part B along with a deductible
1992-Part A payments no longer “usual and customary”
1997-Medicare C and the SGR. Part B premium set at 25% of program costs.
2006-Medicare Part D.
2010-ACA and its effects on Medicare.

And oddly enough, none of those changes have resulted in Medicare consuming a smaller portion of GDP over the long-term. Shockingly, people in the medical profession don’t have a problem with this.

Steve Verdon January 24, 2013 at 11:37 am

You may end up losing money with this scheme.

Or not, people may end up dying way before they get to Medicare age making things vastly cheaper.

As I see it you’re left with two equally untenable positions. Either ObamaCare can be made viable by expanding coverage which seems pretty unlikely or that the Congress will have a sudden epiphany and make structural change other than expanding coverage (“time inconsistency”).

I too believe in the Easter Bunny!

steve January 24, 2013 at 1:17 pm

“Either ObamaCare can be made viable by expanding coverage which seems pretty unlikely”

Everyone else with lower costs has everyone covered. It makes it less likely that you will just engage in divisive politics when trying to address costs.

Steve

TastyBits January 24, 2013 at 1:22 pm

@Dave Schuler

Don’t forget insurance companies. Perversely, they like healthcare costs to rise. In most cases of employer-supported plans they don’t act as insurers but as administrators for self-insured plans and are paid a percentage of the amount disbursed. Remarkable, but that’s the way it works.

That would explain a lot. The supply/demand mechanism is working in reverse. What I would expect is rising demand, rising costs, and rising supply. The supply would never be able to match the demand, and increasing costs would not limit demand.

Dave Schuler January 24, 2013 at 1:30 pm

Everyone else with lower costs has everyone covered.

I think you’ve got the causality backwards. France, Germany, and the UK are able to have everyone covered because they’re willing to demand lower healthcare costs. Increased coverage without the willingness to demand lower healthcare costs just means costs that are even more out of control than ours are now.

The evidence that we aren’t willing to demand lower costs comes in just two words: “doc fix”.

TastyBits January 24, 2013 at 1:40 pm

@Steve Verdon

Or not, people may end up dying way before they get to Medicare age making things vastly cheaper.

I have long thought that people living longer would cost more than dying early. I have joked that smoking should be encouraged.

Steve Verdon January 24, 2013 at 3:22 pm

I have joked that smoking should be encouraged.

Exactly!! Everybody said, “We should encourage people to stop smoking! We should pass laws! We’ll save money!”

Then they look at the numbers and go, “Oh, welp! Never mind.”

Turns out smokers, by dying sooner, were a net positive when you factor in that by dying early they didn’t consume as much medicare (if any) and Social Security (if any).

Get people to die younger, lower health care costs.

Now, it should be obvious why policies that result in these kinds of outcomes are not all that popular.

Everyone else with lower costs has everyone covered. It makes it less likely that you will just engage in divisive politics when trying to address costs.

steve,

How about a 50% pay cut?

Icepick January 24, 2013 at 5:57 pm

I have long thought that people living longer would cost more than dying early. I have joked that smoking should be encouraged.

I’ll just say that everyone that deals with medical retiree benefits already knows this.

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