The Health Care Bill: Progress or Retrogression? Becker

Studies show that men and women place a high value on even small decreases in their probability of dying at different ages. Presumably, the same is true of increases in the quality of their lives. This is why, given the rise in incomes over time, and the revolution in the development of blockbuster drugs and the advances in medical technology, the share of national income spent on health care would have risen over time in the US, even if it has had the best health care delivery system. Indeed, the share of income that is spent on health has risen quite sharply over time in every economically developed country, regardless of the nature of their health system.

Clearly, however, the American health system does have many defects, which contributed mightily to the growth of the share of medical spending to 17% of American GDP. Yet when I was recently asked whether I prefer the present healthcare bill to no change in the health delivery system for a decade, I answered “no change”. Even though the American healthcare  system can use many reforms, regrettably the bill that passed the House and Senate is a messy compromise to attract reluctant Democrats that is short on needed reforms. Instead, the bill is filled with many complicated, and generally bad, new regulations, higher subsidies, and greater taxes.

The most important needed reform is an increase the fraction of total medical costs that come from out-of pocket expenses in the form of large deductibles and significant co-payments. Out-of-pocket spending accounts for only about 12% of total American spending on healthcare, whereas the share of out-of –pocket spending is over 30% in Switzerland, a country considered to have one of the better health delivery systems. Partly because of this major difference, health care takes 11% of Swiss GDP compared to the much higher American percentage. As far as I can discover, nothing in the new bill really tries to raise the out-of-pocket share, and some changes would reduce it even further. These include tax credits for individuals and families that earn up to 400% of the federal poverty level (up to about $90,000 for a family of four) that enable them to get coverage through newly created Insurance Exchanges.

Another desirable reform is to reduce the reliance of the American health system on tax-deductible employer-based insurance since tax deductibility has encouraged low deductibles and low co-payments. It has also locked workers with health problems into their current jobs since they may not qualify for insurance at other companies because of these pre-existing health conditions. The bill does propose to phase out tax deductibility for the more expensive plans by 2018, but who knows if that will ever be implemented.

For the most part, however, the bill increases our dependence on employer-based health care by imposing sizable penalties on companies that do not provide their employees with sufficient health insurance. Many companies are already beginning to add to their projected future costs the anticipated increase in the cost to them of insuring their employees. These changes will particularly affect the costs of smaller companies since they are the main ones that do not provide health insurance for their employees. Since smaller companies are responsible for a disproportionate share of additions to employment during recent years, this provision of the bill will tend to reduce the demand for workers and hourly wages.

The US health care market is over-regulated rather than under-regulated. One example is that families in one state are generally not allowed to buy their health insurance from companies located in other states. Another example is the mandates that states impose on insurance companies, such as coverage of the costs of normal birth deliveries. Such coverage has little to do with insurance against unexpected health costs, whereas coverage of extraordinary delivery costs is a desirable protection against unexpected health care risks. The bill generally pushes in the direct of greater regulation, such as the limitations imposed on how much health insurance companies can spend on administrative costs relative to their other costs, the mandated reviews of the premiums charged by health insurance companies, and the mandated provision of health insurance by small companies.

Health savings accounts (HSAs) have been one of the most important innovations in the health care field during the past decade. These accounts require large deductibles, such as $2500, that individuals and families most cover out of their own pockets. Unused portions of the amounts in these accounts can be carried over tax free from any year to future years, and can eventually be phased into their old age pension accounts. HSAs with large deductibles encourage individuals to economize on their normal health care expenses, such as visiting doctors for colds or flu shots that they could get much more cheaply at CVS, Walgreens, and other retail medical clinics. There is little mention of HSAs in the new bill, and certainly no encouragement to their expansion.

The American health care delivery system needs greater transparency and easier access to medical information by consumers. The bill takes a valuable step in this direction by encouraging the development of online medical records and medical histories for all individuals, no matter how many doctors they have seen, or how often they have moved. A few other parts of the bill would also increase information and transparency, but for the most part the bill obscures rather than enlightens consumers about the health area. Many of the most important taxes come early while the additional spending kicks in much later, so that it will appear for a few years as if the new system will cut medical costs. Consumers will get a false impression that they are getting a more efficient medical care system when in fact the new system will turn out to be both expensive and invasive of individual choices.

Proponents of the bill claim it will save hundreds of billions of dollars during the next ten years from cuts in Medicaid and Medicare, but it is far from obvious how such cuts will materialize. Moreover, some changes will clearly increase the costs of these programs, such as the expansion of Medicaid coverage to individuals well above the poverty line, and by additions to drug coverage of seniors under Medicare. I do not see how the bill will lead to Medicare savings since there is no increase in out of pocket payments by Medicare enrollees, and Congress is likely to continue to override any scheduled cuts in payments to Medicare doctors and others. The most likely attempt to cut future Medicare costs will be through greater rationing of health care to the elderly, but lobbying groups for the elderly will fiercely resist these efforts.

Adequate and appropriate coverage for persons with pre-existing health conditions is a challenge for any healthcare system, especially those with private insurance. Although the bill addresses this issue, it makes coverage of pre-existing conditions more difficult in one dimension by expanding rather than contracting employer-based health insurance. The bill prevents insurance companies from dropping individuals if they develop serious sicknesses, and also prevents these companies from imposing limits on how much they will pay to cover an individual’s health costs during any year. In addition, uninsured individuals with pre-existing conditions will be able to obtain health insurance through the new health insurance exchanges run by non-profit companies.

The only truly efficient way to handle the pre-existing condition issue is to try to develop an insurance system in which young adults, who generally have few serious existing medical conditions, can take out long-term healthcare insurance. Long-term health insurance programs have been proposed in the academic literature, but they have been implemented only to a very small extent. Perhaps the bill’s approach to pre-existing conditions is the best that can be expected at this point if nothing is done to wean the system from employer-based tax-deductible health insurance (which at least does provide long term health insurance for employees who stay with the same company for many years).

Although the impact on the costs to taxpayers of the more than 40 million uninsured persons in the US is usually greatly exaggerated, I do support a requirement that everyone has health insurance that covers medical catastrophes. Coverage limited to catastrophes would not be expensive for the uninsured since they are mainly young and are generally in quite good health. They could readily pay the premiums for catastrophic insurance from their incomes. The health care bill does make health insurance compulsory, but it does this in an unsatisfactory way by requiring rather extensive benefits, and by subsidizing coverage for individuals and families with incomes far above the poverty line.

So for all the reason I have given, and many more, no change in the present American healthcare delivery system would be much better than the new bill. The American system has many great strengths and some serious weaknesses. The bill will generally weaken the strengths and strengthen the weaknesses.  

 

 

Comments

[Jim]

The real problems have been and will continue to be in the trenches where the individual patient receives "health care". The system is by nature complex and getting more so for reasons too lengthy to go into here. But because the system, the art, and the technology has gotten so complex and inter-related, most people cannot navigate through it nor do they understand anything about their own bodies and how medical processes work sufficiently to make good decisions about what is necessary or helpul. Pulling back to a rationed or "protocol" type approach will make patient understanding even worse. Citing Medicare as an example of insurance sanity is insane. Medicare is not an insurance scheme. It is a subsidy and a bankrupt one at that, ten times its original estimate in 1965. The bill under discussion is not about health care, or cost. And certainly not about quality. It is about control and the government's desire to have a voting majority dependent on the power elite. Anyone who thinks that their access will improve can imagine caling a provider and getting on a phone tree something like, "If your problem is with your prostate, press 1, if it is your heart, press 2, etc." Good luck!!!!!

[Kelly]

The data is pretty clear, Americans pay twice as much as everyone else in the world for medical services (see link below).

http://voices.washingtonpost.com/ezra-klein/2009/11/an_interview_with_kaiser_perma_1.html

If we reimbursed medical services on parity with the rest of the world, we would spend 8.5% of GNP, instead of 17, including the private insurance overhead rip-off.

It does not take a genius to see that the problem is not overuse of medical services by Americans, but a completely ineffective system for pricing medical services (unless you are a provider or shareholder in big pharma).

All the freemarket hobbyhorse "medical fixes" are all predicated on demonstrably false premises--overuse of services by whiny Americans or "tort reform" (insurance is 3% of medical spending--if we give doctors complete immunity from suit it would only save 3% of 17% of GNP).

I understand why hacks in Washington oppose real health care reform, and why any real provisions for fixing the mis-pricing of medical services were stripped from the HCR bill (K-street?). But why do right-wing academics, who presumably aren't on the corporate take, insist on publishing public policy proposals based on junk and bunk?

[Rodrigo]

>>But why do right-wing academics, who presumably aren't on the corporate take, insist on publishing public policy proposals based on junk and bunk?<<

Too much emphasis on modeling and simplifying and theorizing, and not enough on appreciating the real complexities of the health care markets. And too much exposure to unqualified free-market dogma, with all respect to the learned academics at the Chicago school.

[Rodrigo]

America has the highest infrastructure and technology to patient ratios across almost every category. Yet America lags on almost every health metric and spends twice as much (in terms of % GDP) as most of the OECD nations on health care. America spends a higher percentage of its health care dollars on administrative costs than any other OECD nation.

It's hard to argue against the data. If our "free-market" system is great the proof should be in the pudding.

[K]

Three links for you Dr. Becker.

Cost Containment
http://www.nytimes.com/2010/03/10/business/economy/10leonhardt.html

Selling Across State Lines
http://www.cbo.gov/doc.cfm?index=6639&type=0
http://www.pbs.org/wgbh/pages/frontline/shows/credit/more/rise.html

[Jack]

K. The Times is on the right track. We spend about $6500 per person for a patchwork delivery system we all know is far from what it could and should be.

Let's see what we MIGHT whack out of it:

Insurance company overhead is 30% or so plus the friction of a blizzard of paperwork to comply with over 1000 different contracts. Surely with one or a few contracts gatekeeping of what's covered can be reduced to 10%. Savings? At least 20% of $6500 Bam! $1300 right off the top.

Next? Often overlooked in these disussions is our spending on drugs:

"The United States has the largest pharmaceutical industry in the world. In 2007, its pharmaceutical revenue totaled at US $315 billion."

Ahh, a bit over $1,000 per person. We know that Canada and others pay less than half what most in the US pay, and that our VA which is "allowed" to price shop and use generics when it's practical also pays half the going rate. How about "allowing" Medicare D the same shopping privilege as the VA? Let's say we pruned them back 25% and let the rest of the world chip in to make up their advertising and R&D costs for a per person savings of $250?

Well we're down to $5,000 each. While we all appreciate the high technical skills of hospitals, surgeons, MRI and CAT scans they're all done in other advanced nations at far lower costs and in a natioln of flat wages for most, there is NO system in which we can pay for soaring costs in one sector. So cost cutters unite! Be it improvements in efficiency and higher usage rates for scans and other tech, surely we should be able to compress costs in this area 10% and implement methods to restrain the per capita growth.

$5,000 less $500 for a target of $4500 per capita and about 30% less than we spend/waste today. Well, perhaps too optimistic as that amount is only $1,000 higher than what Canada spends per person!

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"It's unfair," Mr. MacDonald said. "Millions and millions of people are being excessively charged late fees and bad-check fees and over-the-limit fees and then these 25 percent APRs to make the profits for the industry, so that they can keep the rates lower for people who are rate sensitive, who can in fact shop the system.''

Mr. Kahr, for one, makes no apologies. "If someone is riskier, he should be paying a higher rate,'' he said. "It's more economically sound. It's fairer for riskier people to pay a higher interest rate, higher fees, whatever it is, than less risky people.''

Ha! "fairness" aside, venue shopping for lax usury laws and how that may well turn out if "insurance" companies were prematurely let out from under what little state regulation and commission oversight we have today.

BTW does ANYone here think today's credit card schemes represent a functional market of willing parties coming to equitable terms?

[Chris Graves]

I believe that this entire discussion, as many of these discussions of public policy slip into, is based on confusing the role of establishing justice in contrast to pursuing the good. I can see how both Professor Becker and Judge Posner consistently conflate these two vital concerns of political philosophy since they both assume some variation of utilitarianism, which John Rawls observed as being the prime source of this mistake.

Classically liberal rights-based justifications for the government are founded on individuals delegating their power to protect their rights to the state which acts on their behalf thereafter to clarify and enforce their rights. Hence, the state is empowered to use violence or the threat of violence to protect the individual and associations of individuals from violations of their rights modeled on the concept of property as a private sphere each individual is entitled to be free to manage according to his own judgement. The demands of justice are centered on protecting these rights and facilitating individuals peacefully and respectfully engaging one other within the bounds of these rights otherwise leaving people free to voluntarily pursue their own conception of the good.

Health is a good that each of us pursues in his own way. In a free society, we are left free to purchase the type of health care that we see as best for ourselves. We are free to purchase health insurance at the level and range of coverage that we desire and can afford. Just as the central government in our Federal system should leave us free to pursue our own relationship with God as we so choose or our various relationships with one another as we so choose within the broad legal constraints of justice, we should be free to pursue our own conception of what constitutes the good as far as our own personal health. Therefore, the health care bill along with other measures that have been taken by the Federal government along these lines are out of order. Health is a matter of the good that should be left to individual discretion or among voluntary organizations that people are free to join or ignore which offer a variety of approaches to pursuing better health.

So, what about the poor and their need for health care? Dealing with poverty and its related problems should not be viewed as a matter of justice. Rather, aid for the poor should be seen as a matter of pursuing the good. How can we best help the poor? John Winthrop, the first governor of Massachusetts Bay Colony, made the point that God has ordained some to be rich and others to be poor, in part, to cultivate a community of mutual aid and complementary support. Those who are entrusted with more have a greater responsibility to aid those in need. Winthrop writes:

"Thirdly, that every man might have need of others, and from hence they might be all knit more nearly together in the bonds of brotherly affection. From hence it appears plainly that no man is made more honorable than another or more wealthy etc., out of any particular and singular respect to himself, but for the glory of his Creator and the common good of the creature, man...There are two rules whereby we are to walk one towards another: Justice and Mercy.... By the first of these laws, man as he was enabled so withal is commanded to love his neighbor as himself. Upon this ground stands all the precepts of the moral law, which concerns our dealings with men. To apply this to the works of mercy, this law requires two things. First, that every man afford his help to another in every want or distress. Secondly, that he perform this out of the same affection which makes him careful of his own goods, according to the words of our Savior (from Matthew 7:12), whatsoever ye would that men should do to you..."

This is the same work that President Reagan famously alluded to in his admonition that the United States be a "City on a Hill" that should inspire the world by our example. Reagan drew from this portion of Winthop's "A Model of Christian Charity":

"For we must consider that we shall be as a city upon a hill. The eyes of all people are upon us. So that if we shall deal falsely with our God in this work we have undertaken... we shall be made a story and a by-word throughout the world."

http://religiousfreedom.lib.virginia.edu/sacred/charity.html

When the Federal government confuses justice with mercy and justice with pursuit of the Good, it degrades and perverts each of these distinct but complementary principles.

[Jim]

The devil is in the details and unintended consequences of the health-care reform bill. The United States is not France, the United Kingdom, Germany, Switzerland or Sweden. Trying to make the United States, run like those countries will ultimately require some form of compulsion and rationing. Insurance coverage does not equate with access, and I suspect medical care providers in the trenches will find a way maintained their positions and financial status. One of those ways will to become more efficient and automated. The patients are going to love it when they phone a physician or other health care provider and are put into a phone tree, which begins as follows: "if you are calling about your prostate, touch one, if you are calling about your heart, touch two........... if you would like to speak to the medical clerk, touch zero. Please note that there will be an extra charge for any compassion shown by our personnel. We regret that you will not be able to speak to a physician as they are busy seeing a patient every 10 minutes in order to pay the expenses of running this office. Our next available appointment is in three months. If you wish to be seen sooner. Please go to an emergency room. Good luck"

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[treebagger]

Here's a challenge to the Right, and to those of you who claim to be independent,etc.

Is it possible for you to discuss this issue without mentioning taxes?

You're like HBO host Bill Maher in this regard. He can't go 60 minutes on any topic without talking about legalizing marijuana. You can't discuss anything without talking about taxes.

If you have a point to make about whether or not this law benefits Americans, discuss the merits of the law without invoking the spectre of taxes rising up to destroy us all.

Once you have made your point and we have discussed the impact of the Law on healthcare, then we can more on to discussing the "value" of the bill.

[Asel]

The health care system in this country is putrid. I'm glad to see you agree to no change along with a large number of dubious associations and lobby organizations.

[Rodrigo]

Jim,

How exactly do you think the American health system works now?

[Rodrigo]

A summation of the comments of Chris Graves:

Americans should not use the body empowered and chartered to look after their collective interests to actually look after their collective interests. Acting collectively is unamerican.

Except when corporations act collectively at the expense of individuals who cannot protect themselves because they refuse to act collectively. That is OK because it is capitalism, and capitalism is very American.

Your dangerous and self-limiting rhetoric amounts to exhorting your fellow citizens to deffer on decisions about their health, freedom, and safety to powers that have no incentive to protect any of the three. It shackles people to their circumstances and the mercy of powers greater and more aware by forcing them to turn their eyes down to the reality beneath their feet and within their grasp and blinding them to the greater world around them and what it could be if they thought in terms grander than themselves.

So nuts to you. Every great thing we've ever accomplished we've done as a collaboration, and government is just another form of collaboration. We shouldn't be afraid of government. Government is us.

[cardiology emr]

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[Eric Pearson]

My name is Eric Pearson, and as a Democratic Party candidate for the U.S. Congress in 2010, I want to thank the below list of the truly courageous and honorable Democrats that voted against the health care bill.

John Adler – New Jersey, 3rd District
Jason Altmire – Pennsylvania, 4th District
Michael Arcuri – New York, 24th District
John Barrow – Georgia, 12th District
Marion Berry – Virginia, 8th District
Dan Boren – Oklaholma, 2nd District
Rick Boucher – Virginia’s 9th District
Bobby Bright – Alabama, 2nd District
Ben Chandler – Kentucky, 6th District
Travis Childers – Mississippi, 1st District
Artur Davis – Alabama, 7th District
Lincoln Davis – Tennessee, 1st District
Chet Edwards – Texas, 17th District
Stephanie Herseth Sandlin – South Dakota, 1st District
Tim Holden – Pennsylvania, 17th District
Larry Kissell – North Carolina, 8th District
Frank Kratovil – Maryland, 1st District
Daniel Lipinski – Illinois, 3rd District
Stephen F. Lynch – Massachusetts, 9th district
Jim Marshall – Georgia, 8th District
Jim Matheson – Utah, 2nd District
Mike McIntyre – North Carolina, 7th District
Michael McMahon – New York, 13th District
Charlie Melancon – Louisiana, 3rd District
Walt Minnick – Idaho, 1st District
Glenn Nye – Virginia, 2nd District
Collin Peterson – Minnesota, 7th District
Mike Ross – Arkansas, 4th District
Heath Shuler – North Carolina, 11th District
Ike Skelton – Missouri, 4th District
Zack Space – Ohio, 18th District
John Tanner – Tennessee, 8th District
Gene Taylor – Texas, 18th District
Harry Teague – New Mexico, 2nd District

Thank you, and God bless America.

Eric Pearson, Democratic Party candidate for US Congress in the 5th district, Tennessee.
Site: http://www.democraticreformparty.com

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