Friday, August 14, 2009

Let's All Take a Moment to be Frank About Health Care...

There are a lot of misconceptions about health care on the right and the left. On the left, too many are in love with the idea of 'reducing costs' in some way that will miraculously solve the system's problems. The liberal idea that more access to primary care doctors will lower fundamental health care costs is akin to the conservative idea that cutting taxes leads to increased tax revenue. It's so counter-intuitive as to be ridiculous. Better health access to better health care will always raise health care costs, and as I go on I will explain in more detail and give a tremendously cogent example.

On the right, there is a failure to understand that one is frequently advocating what one is professing to hate and fear. Namely: rationing, the writing off of human life for utilitarian benefits conveyed to society by so doing, and ultimately a far greater number of otherwise preventable deaths. This is the horror scenario presented by the right to frighten us all out of supporting what is, essentially, far from 'comprehensive health care reform' but rather a health industry bailout following on the heels of the bailouts of the automotive manufacturing and financial industries. There are lots of reasons for finding fault with the House health care bill, and even more to find fault with the Senate Finance Committee bill. None of those reasons are vaguely related, however, to socialism, government takeover of health care, or rationed care. The current system, as it exists now, is a system of rationing: economic rationing. The ability to pay guarantees access to care and those unable to pay face significant health risks and even greater economic burdens. 'Free market based' reform of health care will simply be a crystallized, finalized statement that economic rationing is the correct social decision.

Jenn Q Public quotes an Atlantic article by David Goldhill on her blog, an article highly critical of current health care reform efforts that Jenn rightly (in my view) refers to as 'mommy kisses and a Dora the Explorer band-aid.' Mr. Goldhill is a business man and registered Democrat who begins his piece with a very moving personal testimonial about his father's death and how a hospital hand-washing procedure rejected by doctors as 'unnecessary' could have prevented it. He then moves on to discuss how the experience drove him to research health care problems and solutions. Clearly, he put some work in.

Goldhill is correct in his fundamental analysis of the fact that the current reform package will affect the problem of fundamental health care costs: it won't. He is also correct in his characterization of the reform bills currently under consideration as merely fundamentally re-cementing the foundations of the current system. As I said above, what is being discussesd now in Congress is not so much 'comprehensive reform' of the health care industrty, but a comprehensive health care industry bailout. Goldhill certainly recognizes that and is not afraid to say so, to his credit:

"But fundamentally, the “comprehensive” reform being contemplated merely cements in place the current system—insurance-based, employment-centered, administratively complex. It addresses the underlying causes of our health-care crisis only obliquely, if at all; indeed, by extending the current system to more people, it will likely increase the ultimate cost of true reform."

I can't disagree with that assessment at all. Nor with:

"Health care simply keeps gobbling up national resources, seemingly without regard to other societal needs; it’s treated as an island that doesn’t touch or affect the rest of the economy."

The problem, however, lies in how Goldhill sees health care reform and how he defines failure. It is important graps this definition of 'failure' and the full consequences of such thinking in the long run. I don't know if Goldhill grasps them or not. It's very reflective of much of libertarian and conservative thought about health care reform and it reflects the blind spots and rationalizations inherent in many of their arguments and solutions.

"But even leaving aside the effects of price controls on innovation and customer service, today’s Medicare system should leave us skeptical about the long-term viability of that approach. From 2000 to 2007, despite its market power, Medicare’s hospital and physician reimbursements per enrollee rose by 5.4 percent and 8.5 percent, respectively, per year. As currently structured, Medicare is a Ponzi scheme. The Medicare tax rate has been raised seven times since its enactment, and almost certainly will need to be raised again in the next decade. The Medicare tax contributions and premiums that today’s beneficiaries have paid into the system don’t come close to fully funding their care, which today’s workers subsidize. The subsidy is getting larger even as it becomes more difficult to maintain: next year there will be 3.7 working people for each Medicare beneficiary; if you’re in your mid-40s today, there will be only 2.4 workers to subsidize your care when you hit retirement age. The experience of other rich nations should also make us skeptical. Whatever their histories, nearly all developed countries are now struggling with rapidly rising health-care costs, including those with single-payer systems. From 2000 to 2005, per capita health-care spending in Canada grew by 33 percent, in France by 37 percent, in the U.K. by 47 percent—all comparable to the 40 percent growth experienced by the U.S. in that period. Cost control by way of bureaucratic price controls has its limits."

The indictment of Medicare as a Ponzi scheme is extremely harsh and is reminiscent of neoconservative indictments of Social Security. In a Ponzi scheme, the sucker gets nothing for his money. The swindler pockets or spends it all and walks away with it. Moreover, a Ponzi scheme is a deliberately orchestrated fraud for profit. One pays off early investors with later investors money, pocket the remainders, and skips town. It's worth noting that the only people actually discussing so treating Medicare (or Social Security) are the Republicans who want to slash it entirely. I have not heard their plans to reimburse all of us paying Medicare taxes. So who are they really fooling? Goldhill's solution to 'the Ponzi scheme' of Medicare is the same as theirs... pocket the money and walk away rather than fulfilling the program's obligations. This is a fundamental flaw in the indictment of the program.

The description of growing health care costs is accurate, but more central than the weakness of the 'Ponzi scheme' analogy is the failure to recognize why Medicare costs (and the costs of health care in nations with thorough health care policy) grow so steadily. It is because Medicare works. If Medicare did not work, it would be the cheapest government program ever.

Consider this: before Medicare, senior citizens frequently lived in circumstances of crushing, absolute poverty or entirely off the support of their younger relatives. The reason that the age of 65 was chosen as the date of entry for Social Security was that the average American life span before WWII was 63. To put it bluntly: old people died more. No one spent anything on their health care... because they were dead. Medicare came along, and old people started living longer. Not only because they got better medical care at far less cost, which they did, but also because the financial burden their health care costs imposed on them had been affecting their entire standard of living. Not only were they able to get medical treatment for their medical problems, the increased ability to provide for their material needs meant that they were far less likely to die (or suffer medical problems) because of the influence of economic factors on their health. Their younger relatives also had more money as a result of the program, contributing more fully and vibrantly to the economy. So their standards of living were beneficially affected as well. Medicare was good for everyone and the country and still is.

So, by pure analysis of what many consider to be the core test of success (whether or not it meets its explicit goals), Medicare is the single most successful government program ever. So much for right wings paens to the United States Postal Service as the only thing the government ever did right. Medicare has done everything it promised, and even exceeded expectations for its success.

Of course, people living longer means more old people visting their doctor twice a month. Which means more medical costs. This is an inherent problem in the system, certainly, but I prefer paying those costs to adopting the Malthusian attitude toward human suffering necessary to lower them.

Here's where it's time to be really frank: when the right talks about how 'the free market' will lower health care costs they mean that only those who can afford health care will have access and everyone else will do without. This certainly eliminates the 'free rider problem', so the people paying for their health care experience cost reductions and the government certainly saves a lot of money on the budget. On the flip side, we're talking about Victorian Era living conditions reimposed on a significant portion of civilized society. Do any of us want that, even if it means lower taxes?

Goldhill's solution to the problem of health care costs is much like right wing solutions. His description of the ideal health care reform package sounds very much like the perfect Republican utopia:

"The most important single step we can take toward truly reforming our system is to move away from comprehensive health insurance as the single model for financing care. And a guiding principle of any reform should be to put the consumer, not the insurer or the government, at the center of the system. I believe if the government took on the goal of better supporting consumers—by bringing greater transparency and competition to the health-care industry, and by directly subsidizing those who can’t afford care—we’d find that consumers could buy much more of their care directly than we might initially think, and that over time we’d see better care and better service, at lower cost, as a result."

Now, it's true, that the right doesn't want to see any direct subsidy of those unable to afford health care. In that sense, Goldhill's proposal is superior. However, the reason that the system of comprehensive health insurance that exists today came into being is because it was already, during the 1940s and 1950s, becoming incredibly difficult for individuals to pay for their own health care. Fundamental costs have risen since then, every bit as rapidly as administrative costs, and eliminating the administrative costs of the insurance agency and government bureaucracy will not reduce the fundamental costs one iota. Real wages are lower than they were in 1950, real health care costs higher. If the working man could not afford to pay for his family's medical care without comprehensive insurance in 1950, how could he possibly hope to do so today? Ignoring these economic realities is very dangerous.

Catastrophic health care insurance is a key portion of Goldhill's program:

"First, we should replace our current web of employer- and government-based insurance with a single program of catastrophic insurance open to all Americans—indeed, all Americans should be required to buy it—with fixed premiums based solely on age. This program would be best run as a single national pool, without underwriting for specific risk factors, and would ultimately replace Medicare, Medicaid, and private insurance. All Americans would be insured against catastrophic illness, throughout their lives.

Proposals for true catastrophic insurance usually founder on the definition of catastrophe. So much of the amount we now spend is dedicated to problems that are considered catastrophic, the argument goes, that a separate catastrophic system is pointless. A typical catastrophic insurance policy today might cover any expenses above, say, $2,000. That threshold is far too low; ultimately, a threshold of $50,000 or more would be better. (Chronic conditions with expected annual costs above some lower threshold would also be covered.) We might consider other mechanisms to keep total costs down: the plan could be required to pay out no more in any year than its available premiums, for instance, with premium increases limited to the general rate of inflation. But the real key would be to restrict the coverage to true catastrophes—if this approach is to work, only a minority of us should ever be beneficiaries."

Great... except that unless he is advocating the government completely subsidize medical costs below $50,000 for everyone who doesn't have fifty grand lying around in case they need life-saving surgery, I don't see how this system of insurance would help most Americans. Despite Goldhill's blithe assurance that competition will naturally lower those costs, I'm highly skeptical. My partner had life saving surgery and the bill (most of which was paid by her workplace insurance) was $56,000. Under Goldhill's system, we would have been responsible to pay for all but six grand. We are facing a certain financial burden from our health care costs as it is, but $50,000? That's an awful lot of debt for the average working American to rack up from one trip to the OR. And my partner is a fairly well-paid employee of a major corporation... but she $50,000 is a lot more than a year's wages for her. It's probably more than the sum of both our yearly incomes. I'm all in favor of the government subsidizing health care in such circumstances, but I'm not sure most of the people who might like Goldhill's plan would be.

Goldhill's solution also relies greatly on personal health care savings accounts, another favorite Republican idea. In his world, like theirs, everyone pays their health care costs out of pocket at point of service. HSAs would increasingly pay people's health care costs as they aged. Except people have a great deal of difficulty saving under current economic realities as it is. What is to make it suddently easier for them to save to pay for their health care? Goldhill is speculating that all that money spent on insurance premiums will be available to go into the bank and he is also speculating that companies, no longer paying for health insurance for their employees, will pay more money. Great... except there is no actual way to guarantee it will actually happen that way. Indeed, in today's corporate culture, the predictable outcome is that corporate employers will simply pocket the savings and reinvest them in increased corporate management costs.

Ultimately, Goldhill's final answer to 'what about those who can't pay' is that the government needs to pick up their tab. For someone who is arguing that health care should be simplified, because the system is too complex, his solution is awfully complicated. HSAs, catastrophic insurance, sliding-scale health care deductibles based on age...

If, in the end, you want everyone with money to be able to buy their own health care and the government to pay for it for everyone else then I'd have to say that single-payer, a national health care service, or the kind of everything-at-once hybrid system used in countries like Sweden makes a lot more sense. Goldhill's agruments for a free market based solution are going to be most attractive to conservatives who will see many of his arguments as echoing theirs... and who will entirely oppose the idea of the government paying any of the costs.


Sheria said...

Thank goodness you mentioned my pal Mark's HP entry or I may have continued to be unaware of the existence of your blog. You've made me start to reframe my blind support for the proposed health care reforms. Somewhere deep down, I think that I suspected that the reform efforts weren't really going to resolve the issues of access to quality health care faced by far too many people, but the current system is so unworkable that I was seduced by the promise of any change. You reframe the debate to focus on the real faiures of the current health care system. I think that you should send this entry to Obam. He states that he reads some of the emails that he receives on a daily basis. Your ideas merit being heard.

Chris Richards said...

I think that the current reform efforts are based on perceived political realities. Pragmatically speaking, there may be an unwillingness to challenge those political realities among many in the Democratic Party right now. Especially in the Senate. I think much of the proposed reform is better than nothing (though I think the Senate Finance Committee version is a bad bill that should not be allowed to pass), even if it does not go far enough.

I think real reform will ultimately be necessary, regardless of whether current proposals pass or not. I do think it would be better for the better of the current proposals to pass than for them not to pass.