Thursday, August 09, 2007

Magical thinking on health care

Christian Schneider writes two of the best paragraphs on "Healthy Wisconsin" that I have read. Commenting on the idea that the Democrats think that they can buy more health care for 15 billion than insurance companies and private administrators buy for 18 billion, he writes:

This brings up an interesting contradiction within the Democratic ranks in the State Legislature. Think about the University of Wisconsin System and the nearly $1 billion the state provides to the system annually. Now imagine the state cutting $300 million from the UW System and freezing tuition, while doubling the number of students the state’s campuses had to accept. Is there any Democrat in the Legislature that wouldn’t say the quality of education those students receive would be drastically harmed by such a scenario?

Yet this is similar to what the Healthy Wisconsin plan proposes doing. Democrats are proposing pulling $3.3 billion in “savings” out of the health care system, while drastically increasing the scope of individuals and procedures covered. And this isn’t supposed to affect our quality of health care?

Isn't this just magical thinking? The justification for this is that government is an 800 pound gorilla that can negotiate down prices in a way that insurance companies and private admonostrators (each of whom presumably controls something the providers want, i.e., patients) cannot.

There is a sense in which this may be true. If HW crowds out private insurance (something that I am not at all certain will happen), then we'll spend 15 billion on health care because that's all we'll spend on health care. The notion that providers will simply provide more for less seems fantastical.

What seems likely to happen is a diminution in care (the government and providers needn't be concerned that consumers will go to another plan)and, as Christian points out, gradual expansion of the patient's costs. Obviously this will still be better for those that are not currently insured but it seems unlikely to be for those who are. This is, as I think, the problem with single payer schemes. They take a system that works for most people and blow it up to address the fact that it works less well for 10-12% of us. You'd think it would make more sense to go at it from the other end.


John McAdams said...

One of the key things to remember about the "uninsured" is that most are either uninsured for a short time (they are between jobs, and don't want to pay for COBRA coverage) or are voluntarily uninsured.

If memory serves, about 15 million of the uninsured are eligible for Medicaid, but just haven't bothered to file the application.

Seth Zlotocha said...

For starters, Healthy WI isn't single payer.

Second, the health care market is far more complex, layered, and fragmented than the UW budget; an example of one big difference between the two is the existence of third-party payers in the health care market.

I'll admit I'm a little disappointed that the Senate Dems haven't released a full Lewin report on Healthy WI. But one does exist for the WHP, which would have largely the same impact on costs as Healthy WI. On pages 23-27 of that report on the WHP, the Lewin Group explains four ways that the WHP could reduce spending: 1) HDHP incentives, 2) insurer competition, 3) bulk purchasing of prescription drugs, and 4) administrative costs. Each is explained in detail in the report. The only one of those four that wouldn't apply to the Healthy WI initiative is the first one (which I think is unfortunate -- I would prefer to see the WHP adopted as is).

As for health care quality, when Riemer overhauled the state health plan about five years ago -- which is the reform that's in large part the basis for Healthy WI and the WHP -- it saved the state tens of millions of dollars. Alberta Darling called the result "a shining example" that represents "the best in the country." Yet, in spite of the significant savings, the quality of care experienced by state employees didn't drop a bit. To apply Schneider's logic, though, would mean that just couldn't be possible.

Anonymous said...

Insurer competition? Really? That would be great. I have always thought one of the biggest wastes of money in Government was that they only used unions for most of their contracts. Oh wait, they still do...Odd that competition will finally take place in a new huge money Government project, not the reward of contracts for campaign 'donations'. Also odd that in a country where we pay two to five times as much for private healthcare as other industrial countries pay for public healthcare, there aren't a little bit more savings immediately realized.

Anonymous said...
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Anonymous said...


This plan is nothing like the Wisconsin Health Plan - and yes, it is single payer. Get over it.

The authority is the authority. It simply dumps payments to provider networks. Call it whatever you want, but it is what it is - a mess.

Seth Zlotocha said...

By your definition, Anon, every employer would be effectively offering single payer today since that employer is always going to be "the authority" over the health care for all of its employees.

When people say "payer" they typically mean the direct payer of the health care that's received, i.e., the health plan. There will be multiple health plans to choose between under Healthy WI, just as there is now for state employees and a number of private employees even though there's a single authority deciding what those options will be. But if you want to make up your own definition of single payer, I suppose you're free to do that.

And the multiple payer structure is almost identical under Healthy WI and the WHP; in fact, the only difference is that Healthy WI has an additional option -- the FFS plan -- which wasn't included in the WHP. The only other significant difference is the lack of HDHPs under Healthy WI. What other significant differences do you see?

Like I said before, though, I'd prefer the WHP. If Republicans pushed for that as an alternative, that would actually make for a productive dialogue.

Rick Esenberg said...


Single payer generally refers to the aggregate of health care claims in a community. In Canada, the government is the single payer. While you could say that US Bank is the "single payer" for it employees, everyone doesn't work for US Bank so it is not the single payer in Wisconsin or the US.

With HW, as I understand it, there may be more than one plan but they are all going to be paid by the state and must meet the state's mandates which will be rather exact. (That's the only way "everyone" can get what state employees get.) That seems to raise many of the issues surrounding single payer.

Seth Zlotocha said...

The WI Health Security Act was one of the three options that Senate Dems considered when crafting the Healthy WI proposal. According to the website for the Health Security Act, "By replacing more than 700 different health insurers with a single publicly financed plan, it would eliminate waste, runaway costs, and red tape." Would you say that's single payer? I certainly would.

Now compare that payer structure to the payer structure in Healthy WI, which allows residents to choose between a variety of health plans that are in explicit and direct competition with each other for participants. Clearly this is not the same payer structure as the Health Security Act.

So if we want to call the Health Security Act "single payer," how is it at all accurate to lump Healthy WI into the exact same boat despite its clearly different payer structure?

Anonymous said...

Reimer's plan let insurers participate in an individual market. This thing does not by design. It is single payer and only recongnizes " provider-owned health care networks" to bid. Read the plan, Seth. Sen. Lehman said, "folks in the business of selling health insurance will be out of business". And why is there no talk of the thousands of people in the insurance industry who will be out of jobs as a result of this mess? Honest hardworking people in sales, custoner service, etc who pay taxes. Maybe they all become state employeees and AFSCME members?