Health Reform and the Queen Mary

May 29, 2010 - You can’t turn around the Queen Mary on a dime. And you can’t turn around the U.S. economy with $847 billion stimulus package, and you can’t reform health care, which is approaching 20% of that economy with a ten-year $1 trillion reform bill.

Some things take time, especially health reform, which brings me to the Queen Mary, whose history parallels that of health reform.

The Queen Mary was a luxury ocean liner, christened in 1946 and dry-docked in 1967. Jet airliners crossing the Atlantic in a few hours quickly rendered the Queen Mary obsolete. It took her 10 days to several weeks to cross the Pond. She is now moored in Long Beach, California, where she has been converted into a luxury hotel, a rest home and a play pen for the very rich.

Like the Queen Mary, American health care was launched after World War II. Congress poured billions into the National Institutes of Health and into building hospitals. New technologies came on board, and American doctors specialized to master the new technologies.

The U.S. became the Wonder of the Western Health Care World. But alas, costs grew, and the elderly and the poor could soon no longer afford care, and Medicare and Medicaid boarded the government ship in 1965.

Now, 46 years after the Medicare-Medicaid launch, the U.S. health system faces bankruptcy if it does not change course. The U.S. system partly assumed its present configuration a few years before 1946, when the government told U.S. businesses they could offer tax-free health benefits in lieu of salary increases as part of the World War II effort. These benefits caught on big-time when the Blues and others entered the health market. With government programs and employer-sponsored insurance, health care became an entitlemen. Demand and costs boomed.

In 1967, the Queen Mary had to be docked and her propellers, turbine, and engines removed. But unlike the Queen Mary, Medicare and Medicaid churned ahead full-speed, generating huge costs in its wake and far-outpacing the rate of general inflation. By 2010, the U.S. was spending $1 trillion on the twin programs. In 2010, 50% of the federal budget, $1.8 trillion of $3.6 trillion, went for entitlement and social welfare.

It was clear something had to be done, not only about government spending but private spending as well. Neither task was easy. Medicare was wildly popular among a vital voting bloc and had a 46 year track record; private insurance as a tax-free benefit had been part of the U.S. economy for 68 years.

The point is you do not undo or redo massive programs that took 46 to 68 years to evolve. Medicare, the third rail of American politics, makes this doubly difficult. Touch Medicare politically, and you will be electrocuted. Republicans just learned this again in the upsetelection in Western New York State. Never mind that Obamacare vows to cut $575 billion out of Medicare, as we know it, for current 65 year olds. The Republicans are saying we must restructure Medicare 10 years from now for those 55 and under. The Devil you now, presumably, is worse than the Devil you don't know, even he is trying to save your skin.

Add to this to the complexity of U.S. health care. As George Halvorson, CEO of Kaiser said in his 2009 book Health Care Will Not Reform Itself,

“Health care in American is badly organized, highly inconsistent, internally dysfunction, sometimes brilliant, almost always compassionate, close to data free, amazingly inexplicable in key areas, too often wasteful, too often dangerous, and extremely expensive.”

This type of thinking was in back of the 2009 Accountable Care Act. Personally, I thought the law was overreaching. I concur with Mark Twain's opinion of the music of Richard Wagner, "It is not as bad as it sounds."

Nevertheless , the waves whipped up by the deepest recession since the depression, which shows no fundamental signs of receding or recovering soon, complicate reform.. Indeed, according to Investor Business News, the economy may be getting worse.

• Businesses last month slashed orders for autos and other durable goods by the largest amount in six months.

• Industrial output dropped the most in April for any month since the start of the recovery, indicating the manufacturing sector may be rolling over.

• Jobless claims last week unexpectedly shot up and topped 400,000 for the seventh straight week, signaling that payroll growth remains soft — in fact, the pace of hiring may be slowing.

• April housing starts plunged 11%, confirming the housing industry remains moribund.

• Foreclosures last quarter accounted for 28% of all home sales — the highest share in a year and nearly six times above the normal rate.

• Consumer spending last quarter expanded just 2% after rising at a 4% clip in the fourth quarter.

• Net corporate profits last quarter fell 1% after rising 3% in the fourth quarter, and weaker earnings continue to act as a drag on stocks.

• The overall economy last quarter grew a lower-than-expected 1.8% vs. 3.1% in the fourth, showing gross domestic product growth is braking hard.

Then, of course, there are the sea changes induced by Patient Protection and Affordability Act. In 2011, these changes have induced unexpectedly choppy seas – rising premium costs, a wave of 1372 waivers, the storm over Medicare’s future, and public sentiments opposing the law and supporting its repeal.

How long will it take to turn around the Queen Mary of health reform? Four years? Eight years? Ten years as proposed in the health reform law? And in what direction? Toward Medicare dry-dock? Towards market-driven reforms?

If you are the captain of the Ship of State, look out for economic icebergs. It has taken health care over 65 years to teach the current position on its voyage, and it is unlikely to be turned around until the economic climate warms. Only a fool would believe that the U.S. health system, or the whole of American society. would change overnight and that everyone would start to behave rationally, wisely, unselfishly, altruistically, rady to sacrifice for the common good