Tuesday, June 23, 2009

Some candor on health care is in order

President Obama lost a bit of his famed cool at today's press conference when he was asked about the "public option" in his health care plan crowding out private insurance. It's not logical, he said, if private coverage is better than public coverage, i.e., if those insurers are doing such a great job, then folks won't choose the public option.

I'm not a health care economist, but it seems to me that this would be true only under one set of circumstances. It might be true if the public option was no more than the right of people to enter the public option by paying the COBRA premium, i.e., the amount that a terminating federal employee would have to pay to stay in the federal plan (or, if the federal plan is not subject to COBRA, it's equivalent). In other words, it would be true only if there were no subsidy masking the true cost to the government.

Even under those circumstances, it seems to me that there would be a tendency for employers with high cost populations, e.g., those with a larger number of older workers, to drop coverage. That will, of course, increase costs for the public plan.

If the plan is subsidized, then a certain number of employers will have an incentive to drop coverage and let the federal government pay a portion of the health care costs that they now bear. Some of the private savings may be passed along in wage increases but, for health care, the result will be increased public domination of the health care market.

What would be wrong with that? It'd just be "Medicare for all." Here are a few. First, medicare is going broke. Adding more subsidized insureds would require some new revenue source that the President has yet to disclose.

More fundamentally, Medicare exists today with unseen subsidies. Every doctor I know says that his or her non-medicare patients wind up paying more than they otherwise would because medicare arbitrarily refuses to pay the true cost of the services that it purchases. If we enact "medicare for all," there would be, at best, a diminished private health sector over which to spread the cost of this (much larger) subsidy.

To say, as Obama and the Democrats do, that they can provide universal coverage and control costs with no real pain is disingenuous. The unanswered question is this: While the US has a problem with the absence of insurance and with the economic dislocations caused by the accident of employer provided coverage, the fact remains that the overwhelming majority of us are happy with our health care. Turning the system upside down is not the self evidently proper thing to do.

31 comments:

Anonymous said...

Tell me how this situation should be addresses: The aging law professor suffers an injury and is no longer able to work. He and the Reddess scrape together enough money each month and use COBRA to continue their employer-provided health insurance. At some point, however, the party is over and COBRA ends or the money runs out.

Now what? Under the current scenario, the Professor is screwed and has no coverage. Bankruptcy follows.

What's your solution to this very real problem, Herr Professor?

William Tyroler said...
This comment has been removed by the author.
Dad29 said...

Clearly, Obama's 'I dare you' language of yesterday was meant for his leftist admirers. Anyone with real world experience saw through that silliness immediately.

Your take is precisely correct: the "gummint option" WILL NOT cover parties at 'market price' premiums. Therefore, it WILL NOT 'compete' with private-sector insurers--and that's before such things as capitalization cost (zero to gummint.)

Sandra said...

1. the US has a problem with the absence of insurance and with the economic dislocations caused by the accident of employer provided coverage

2. To say, as Obama and the Democrats do, that they can provide universal coverage and control costs with no real pain is disingenuous.

3. Turning the system upside down is not the self evidently proper thing to do.

The first two, I agree with, though "pain" is not the word I would choose.

The third, though, seems to contradict the second.

How do we solve such a massive and intolerable problem without, at least in part, "turning the system upside down"? Surely, the status quo is not "self evidently proper"?

Seth said...

For starters, this is isn't just an issue with the public plan. If private plans in the discussed insurance exchange undercut what employers are offering now, the incentive is there to drop the current coverage and direct employees to those. In other words, a coverage shake-up on some level is inevitable with any reform, and it's not something that's unique to the inclusion of a public option. How widespread and, perhaps more importantly, how negative that shake-up is for some people (i.e., there's a difference between switching insurers and being forced to switch primary care doctors) is dependent upon how the reform is structured, and that question is, rightfully, being debated.

In fact, here's what Obama actually said in yesterday's presser in response to the issue you pose about the public option: "Now, I think that there's going to be some healthy debates in Congress about the shape that this takes. I think there can be some legitimate concerns on the part of private insurers that if any public plan is simply being subsidized by taxpayers endlessly, that over time they can't compete with the government just printing money."

Adding later: "Now, let me go to the broader question you made about the public plan. As I said before, I think that there is a legitimate concern if the public plan was simply eating off the taxpayer trough, that it would be hard for private insurers to complete. If, on the other hand, the public plan is structured in such a way where they've got to collect premiums and they've got to provide good services, then if what the insurance companies are saying is true, that they're doing their best to serve their customers, that they're in the business of keeping people well and giving them security when they get sick, they should be able to compete."

So, the president recognizes the very issue you raise. He's offered plenty of candor with regard to it. But, again, the key is in the structuring of a public option, or an exchange with just private options, not in the existence of either of those things.

And the other point is this, from the president yesterday: "Now, are there going to be employers right now -- assuming we don't do anything -- let's say that we take the advice of some folks who are out there and say, oh, this is not the time to do health care, we can't afford it, it's too complicated, let's take our time, et cetera. So let's assume that nothing happened. I can guarantee you that there's a possibility for a whole lot of Americans out there that they're not going to end up having the same health care they have, because what's going to happen is, as costs keep on going up, employers are going to start making decisions: We've got to raise premiums on our employees; in some cases, we can't provide health insurance at all."

In other words, while you're correct that polls do show most people who have coverage are at least somewhat happy with it, the trend lines are heading in the wrong direction because of cost. In fact, when asked about the cost of their coverage, the split is 50-50 on the question of satisfaction (with a plurality of 1/3 falling into the 'very dissatisfied' category). And while it isn't necessary to "turn things upside down," building on or tinkering with the same system that is admitted to suffer from "the absence of insurance and...economic dislocations" just isn't an option – fundamental reform is necessary. And, as it happens, polls show an overwhelming majority of people believe that, too.

Rick Esenberg said...

Seth

You make some good points. If the private coverage in the insurance exchange would be subsidized to the same extent as the public option, then part of the problem would be resolved. In fact, under that scenario, the exchange would be a step toward what I think should be done and that is to create a private market for insurance.

This would help to avoid the type of scenarios suggested by Anon 6:43. Coupling health insurance with employment is not something that any would advocate ex ante and it distorts both the employment market and the health care market.

But the problem is that Obama seems to want to go beyond the creation of a private market to dictating the nature of coverage and adopting a series of measures that would interfere with what care is provided and at what cost. To create a true market, there would need to be no or minimal coverage mandates.

I am not, incidentally, so much offended by the notion that one cannot deny persons with a pre-existing condition (or refuse to cover it). ERISA requires the same thing, but only if the person has had qualifying coverage during a relevant time period. The obvious reason for this is to prevent people from first seeking coverage when they are sick which, of course, undercuts the notion of insurance. The one "advantage" of ERISA coverage is that it forces young and healthy people to pay for coverage (through reduced wages) that they otherwise would not buy. How to deal with this in a private market without ever denying coverage to preexisting conditions is problematic.

Seth said...

But the problem is that Obama seems to want to go beyond the creation of a private market to dictating the nature of coverage and adopting a series of measures that would interfere with what care is provided and at what cost.

As to the first part, I don't think that's just a matter of 'what Obama wants,' rather it's something that most health economists say is necessary for true reform. If some standards for coverage aren't established, adverse selection will result in skimming and pricing the un- and less-healthy out of the market.

As to the second part, I don't know of any measures proposed by Obama, the Senate, or the House that interfere with the actual decisions about care made by doctors, aside from those that establish a best practices methodology for reimbursements, which is aimed at reducing unnecessary tests ordered for nothing more than billing or defensive medicine, which makes malpractice reform an important piece of reform.

To create a true market, there would need to be no or minimal coverage mandates.

Of course, therein lies the problem, or at least the fundamental disagreement. I don't think there ever will be a 'true market' for health care in the same way as a true market could exist for something like home appliances due to the nature of third party payer structures. Without a reasonable level of structuring and regulation involving such things as coverage mandates, adverse selection takes over and those who don't need much coverage are priced into cheap, bare-bones plans while those who need coverage are priced into plans that don't meet their needs (and lead to medical bankruptcy) or out of the system entirely.

If a solution to adverse selection exists w/o requiring coverage mandates, I'm sure Obama would be all ears (no pun intended).

The obvious reason for this is to prevent people from first seeking coverage when they are sick which, of course, undercuts the notion of insurance.

Right, and that's also why every plan being discussed includes in individual mandate, so you wouldn't have healthy people excluding themselves from the market until they need coverage. The preference, of course, is to avoid the need for an individual mandate -- as Obama stated in the campaign during debates with Clinton -- but the reality is that the only way insurance is affordable is if healthy people are in the market to subsidize, in a sense, the unhealthy; and the only thing that's fair about this is that, eventually, the vast majority of us will be unhealthy, or less healthy, and need the coverage we perhaps didn't need for many years.

jp said...

A revenue source for “Medicare for all” could be premiums currently paid to private insurance companies. In addition, current Medicare covered services are less than many private plans, resulting in “cost savings”. However, plans covering unions, politicians and large groups of voters and/or campaign contributors would be exempt.

Dad29 said...

The problem you have, Seth, is not in your proposals.

The problem you have is that the President has zero, nada, zip, credibility. What he says and what he does are very often diametric opposites.

Ask HRC, or John McCain, specifically with regard the health issue.

To be impolitic and brief: he lies all the time.

Seth said...

The problem you have is that the President has zero, nada, zip, credibility.

If you say so, Dad29.

Dad29 said...

Seth, remain on-topic.

The President has reversed himself on Gitmo, on withdrawal from Iraq, on 'mandatory participation' in health insurance, and this morning on taxing health benefits.

And that's just the short list.

Polls have nothing whatever to do with his credibility.

Rick Esenberg said...

The problem with too many mandates is that they preclude or limit the ability of plans to compete on coverage. It's one thing to mandate things like a certain level of hospitalization coverage.
It's quite another to say specify deductibles and mandate coverage or coverage levels for chiropractors, autism, mental health, etc. Not that there is anything wrong with covering these things but there is no reason to believe that one size should fit all.

As far as not interfering with the nature of care, "a best practices methodology" - if it is enforced by reimbursing only best practices - is just that. To some extent, those decisions are inherent in any third party payment system, but they tend to be more heavy handed in single payer systems and my sense is that the Obama administration is suggesting a far more aggressive centralized rationing of care.

As far as an individual mandate, it may well be that a private market would require one or at least overwhelming incentives to buy coverage and, perhaps, substantial penalties for failing to do so. I don't like that but health care is a bit different in that we generally don't let uncovered people die in the streets.

Seth said...

Polls have nothing whatever to do with his credibility.

Credibility is a perception, Dad29. Polls absolutely have something to do with credibility.

You may not think it's right, and it may not be the case for you, but, on the whole, Obama has more credibility with the American people than any president in recent memory.

And, speaking of staying on topic, I think we have a pretty decent, respectful, substantive conversation going on this thread, which I think it exactly what Rick was calling for the other day. And then you come in with this ridiculous 'he lies all the time' crap. Maybe there's some anonymous (or pseudonymous) commenter out there who wants to engage with you in that nonsense, but not me. I'm going to get back to the substance.

Rick,

It's one thing to mandate things like a certain level of hospitalization coverage.
It's quite another to say specify deductibles and mandate coverage or coverage levels for chiropractors, autism, mental health, etc. Not that there is anything wrong with covering these things but there is no reason to believe that one size should fit all.


Now I think we're getting somewhere. If the issue is just the level of mandated coverage, then that's something that should be debated and hashed out with the input of experts. Personally, my inclination is toward a tiered approach -- which is actually built in to the Senate Finance Committee's plan and may be with the other's, as well -- in which the least expensive would have the fewest mandates, and so on. We're obviously not going to work out the details in a comment thread, but I think people can find a reasonable common ground there if there's a willingness to put aside the campaigning and do so (and, yes, that goes both ways).

As far as not interfering with the nature of care, "a best practices methodology" - if it is enforced by reimbursing only best practices - is just that.

You don't need to only reimburse the best practices, but you can scale it toward that to limit what amounts to fraud by the needless ordering of tests. And, the fact is, we ration now, we just do it based upon who can pay, as opposed to through a conscious best practices framework (and that's not to say those who can afford it won't be able to do something under a reformed system; money will always get you in the door, no one is proposing making out of pocket procedures illegal).

I don't like that but health care is a bit different in that we generally don't let uncovered people die in the streets.

Agreed. It's in preventing and managing illness that real savings is realized, and that takes people who are properly insured.

reddess said...

anon #1 (6:43)

Everyone is aging including you.
If you weren't, there would be no need to worry about health insurance.

Dad29 said...

I don't know of any measures proposed by Obama, the Senate, or the House that interfere with the actual decisions about care made by doctors

You're not paying attention--even to the President. HE was the one who suggested that ObamaCare will 'suggest a pain pill' instead of remedies for those who are "dying."

Dave Obey wrote the enabling legislation for that committee.

Dad29 said...

And Seth, in the interest of candor, will ObamaHealth have lifetime limits, as do many commercial insurance policies?

If NOT, won't 'savings' be kinda hard to find?

Seth said...

HE was the one who suggested that ObamaCare will 'suggest a pain pill' instead of remedies for those who are "dying."

Link to the quote and then I'll discuss it. I'm not going to spend my time chasing down the meaning of sentence fragments.

And Seth, in the interest of candor, will ObamaHealth have lifetime limits, as do many commercial insurance policies?

I'm not your research assistant, Dad29. If that point is important to you, go find out and make your case beyond, "won't 'savings' be kinda hard to find?"

Dad29 said...

Try this, Seth:

http://www.latimes.com/news/nationworld/nation/la-na-health25-2009jun25,0,1978875.story

In a nationally televised event at the White House, Obama said families need better information so they don't unthinkingly approve "additional tests or additional drugs that the evidence shows is not necessarily going to improve care."

He added: "Maybe you're better off not having the surgery, but taking the painkiller."


THAT decision is not for a Government committee to make, however.

Seth said...

"HE was the one who suggested that ObamaCare will 'suggest a pain pill' instead of remedies for those who are "dying."

vs.

Obama said families need better information so they don't unthinkingly approve "additional tests or additional drugs that the evidence shows is not necessarily going to improve care."

He added: "Maybe you're better off not having the surgery, but taking the painkiller."

Oh, yeah, now why in the world would I want to see the exact quote?

For starters, Rick and I already had a bit of this conversation above, and the part of the sentence of mine that you didn't quote ("aside from those that establish a best practices methodology for reimbursements, which is aimed at reducing unnecessary tests ordered for nothing more than billing or defensive medicine") also discussed it.

That said, I'll reiterate the point that a reimbursement system doesn't need to be structured to exclude payment for any proven procedures. The idea of 'pay for performance' is that health care providers are paid based upon meeting delivery goals and quality, rather than straight fee for service. The key, of course, is how the goals are established, and that's something that needs to be worked out and, in all likelihood, shaped over time even once a system is in place.

What's more, the political point in this is that this payment structure established by the government would only apply to a public option, if one exists. Private insurers can choose to reimburse however they work it out with providers; and, in fact, many private insurers already use a pay for performance system. So, if the argument is that a government-established pay for performance system would result in negative outcomes for patients, then it would follow that fewer patients are going to pick the public option -- they'll go with one of the private options instead.

Dad29 said...

You're assuming that physicians have a choice in the matter. The physician CAN, of course, deny non-effective/efficacious tests or procedures to his patient(s). But then he would need a 'hold harmless' indemnification, which would have to be backed by force of law.

Further, (and I, too, have had some experience with these decisions,) those 'performance' standards are already being worked out; insurance companies often deny payments. We may or may not like the decisions, but those are currently subject to litigation, or at the very least, one can eventually find a new carrier.

Not so easy to find a new Gummint, which is to say, it's 'force of law' back in play.

Seth said...

The physician CAN, of course, deny non-effective/efficacious tests or procedures to his patient(s).

Yeah, they can now and they will be able to in the future.

But then he would need a 'hold harmless' indemnification, which would have to be backed by force of law.

Why?

insurance companies often deny payments

Yeah, payment is denied for a whole host of reasons ranging from the service not being covered by the plan to pre-existing conditions to out of coverage care. But if payment is provided and how payment is provided are two different things, and pay for performance deals with the latter.

at the very least, one can eventually find a new carrier.

And one can do the same in the health care exchange.

Dad29 said...

But then he would need a 'hold harmless' indemnification, which would have to be backed by force of law.

Why


You've heard the term "defensive medicine"?

Dad29 said...

But if payment is provided and how payment is provided are two different things, and pay for performance deals with the latter.

You imply that 'performance' will be judged accurately 'on the margins.' The vast majority of standards will be easy, but the marginal 20% (or whatever--maybe 10%) will be case-by-case individual problems. Not too easy to decide either timely OR accurately.

Dad29 said...

The "exchanges" you advocate do not have to be Gummint-run. Simply remove Ted Kennedy's 'no interstate plans' legislation (remember HMO's?) and it's a done deal.

What we call "less" regulation.

Seth said...

You've heard the term "defensive medicine"?

Yeah, I quoted it above. How does a payment system that reimburses based upon outcomes exacerbate defensive medicine?

Seth said...

Wow, is this rapid fire commenting? Try taking a breath before hitting 'publish,' it makes it easier to respond.

You imply that 'performance' will be judged accurately 'on the margins.' The vast majority of standards will be easy, but the marginal 20% (or whatever--maybe 10%) will be case-by-case individual problems. Not too easy to decide either timely OR accurately.

Pay for performance is about outcomes. Sure, there are standards of care, but the bottom line is what works and what works efficiently.

But, sure, crafting standards of care isn't easy, nor is it easy to establish a payment system based upon outcomes. Does it need to be? And whatever is devised, it's almost surely going to be a work in progress -- hard, thoughtful policy development and constant reevaluation are fine with me.

The "exchanges" you advocate do not have to be Gummint-run.

If there's a body that exists or could be created that would do a better job managing the exchange, then fine. But if this is just about a reflexive animosity toward government, then you lose me.

Dad29 said...

It's not "reflexive animosity"--at least not entirely.

There are many insurers who could and WOULD sell their product in Wisconsin, except that it is forbidden.

So why should Gummint 'establish' what is already there?

That doesn't make sense, unless you are reflexively pro-Government, and you will lose me there.

As to 'defensive;' think this through. "Outcomes" implies that there SHOULD be 'an outcome' which meets a standard. Failing to meet the outcome standard will bring on litigation. That's why, barring litigation restraint, "outcome"-based medicine will always require defensive medicine.

"Outcome"-based education has been a monstrous failure, as you recall. But nobody can sue MPS.

Seth said...

There are many insurers who could and WOULD sell their product in Wisconsin, except that it is forbidden.

Such as? And what bearing does that have on a federally-designed health exchange?

That doesn't make sense, unless you are reflexively pro-Government, and you will lose me there.

Like I said, if there's a body that exists or could be created that would do a better job managing the exchange, then fine.

As to 'defensive;' think this through. "Outcomes" implies that there SHOULD be 'an outcome' which meets a standard. Failing to meet the outcome standard will bring on litigation. That's why, barring litigation restraint, "outcome"-based medicine will always require defensive medicine.

The outcomes aren't individualized, for starters, but rather based on quality benchmarks (like X percentage of screenings or preventative testing), which are designed to improve the overall quality and efficiency of care in order to reduce costs in the short-run through reducing overutilization and in the long-run through better managed care. And following the standard care guidelines (which are applied to individuals) -- including such things as proper charting and documentation, potentially team-based care, in addition to evidence-based screenings -- has been identified as a means for reducing defensive medicine.

With all due respect to your logic, considering pay for performance has been around for a number of years as an idea and pilot project in some areas (private and public), can you point to any instances of experts or critics identifying it as something that would increase defensive medicine?

Dad29 said...

can you point to any instances of experts or critics identifying it as something that would increase defensive medicine

No more than you can point to examples of gummint-run exchanges which actually work.

You seem to think that MDs and hospitals are ordering tests and procs merely to increase their fee incomes. That MAY be true of some of them--just as it MAY be true that some politicians are corrupt.

OK. It IS true of some of them.

But if it is the case generally, then we have a much larger problem than any Gummint program will solve.

You indicate that the private sector is already working on this.

Hmmmmm. Why would THAT be? And what makes Gummint's effort(s) all that much superior?

Seth said...

No more than you can point to examples of gummint-run exchanges which actually work.

There isn't an example of anything like the reform being discussed for the US, at least in terms of health care. This system would be unique in the world, much as our system is today -- except, of course, better that what we have today. The important point is that there's no shortage of experts who agree the creation of a government-run health insurance exchange, if structured properly, would dramatically improve coverage and cost; here's just one from the right side of the spectrum.

After all, I didn't even ask you for examples of P4P leading to defensive medicine; I just asked for an expert who was making that claim.

And what makes Gummint's effort(s) all that much superior?

I didn't say they were. Government has the ability to provide subsidies and other financial incentives to contribute to the up-front costs providers would face for innovations like EHRs that would be tied to P4P; but that doesn't necessarily mean the government needs to be the only player in the game. In fact, as I said long before in this thread, the P4P being discussed by Obama and Democrats would just pertain to Medicare and the public option, if one is included in the exchange. Private plans still would be responsible for developing their own P4P systems, if they find it's useful.

Anonymous said...

Hello everyone!
I would like to burn a theme at here. There is such a thing, called HYIP, or High Yield Investment Program. It reminds of financial piramyde, but in rare cases one may happen to meet a company that really pays up to 2% daily not on invested money, but from real profits.

For several years , I earn money with the help of these programs.
I don't have problems with money now, but there are heights that must be conquered . I get now up to 2G a day , and I started with funny 500 bucks.
Right now, I'm very close at catching at last a guaranteed variant to make a sharp rise . Visit my web site to get additional info.

http://theinvestblog.com [url=http://theinvestblog.com]Online Investment Blog[/url]