Tuesday, June 9, 2009

Health care realities - Getting Real About Health Reform

As the health reform debate heats up, the public and politicians are getting real and the Obama health care juggernaut is beginning to take on water. Obama is now saying he feels obligated to plunge into the debate, as his health initiatives show signs of floundering. Why this concern on the part of President Obama?

First, the public is growing restless over the “trillion here and a trillion there” policies of the Obama administration. Obama has now been in office longer than Bush has been out of office, and blaming the deficit solely on Bush is losing traction. In his first 120 days, Obama has doubled the Bush deficit, accumulated over 8 years, and the public is beginning to see deficits are far as the eye can see and the mind can stretch. Consequently, moderate Blue Dog Democrats are insisting the Obama team specifically identify how it proposes to pay the estimated $1.5 trillion bill, which will come due in 10 years. For the Democrats the means of covering the deficit – raising taxes when they promised not to, taxing alcohol, tobacco, and soft drinks, and making corporate health benefits taxable – carries political risks.

Second, the Medicare and Medicaid Paradigm – modifying and saving money through new and untested Medicare programs, not paying for complications and “never-never” events, rewarding only those doctors who adopt medical records, and extending these programs to cover all – as the solution is coming under closer scrutiny. CMS may be the biggest enchilada, the biggest payer, and the Sheriff of the system with the biggest stick and biggest badge, but CMS has a miserable track record for containing costs. Expansion of CMS programs without cost controls is a recipe for financial disaster. Programs such a more prevention and more electronic records sound good in theory, but the savings are unproven and long term. CMS may be part of the problem, and not the solution. With 78 million baby boomers coming on board in Medicare in 2011, Medicare’s unfunded liabilities are $34 trillion, and it may go bankrupt by 2017.

the American people are leery of programs such a public plan that would undercut existing private plans. More than 160 million Americans are in private plans, and, rightly or wrongly, many fear a public plan would undermine private plans and might be a path to “socialized medicine” They also fear taxing existing corporate and employee health benefits, which could bring in $550 billion, to pay for Obama’s ambitious goals, represents a $4000 to $5000 increase in taxable income. Finally, the people in plans tend to be satisfied with what they have, including the ability to avail themselves promptly of the wonders of modern technology without waiting in line. Massachusetts, the only state with near universal coverage, now has the highest costs in the U.S. and the longest waiting lines for office appointments. This may be a sign of things to come with universal coverage.

Four, there is currently a spirited debate about whether regional practice variations are “unwarranted” or are merely a function of regional differences in cost of living and ethnic and cultural differences in our vast continental nation. I recently commented on this debate in a letter to the editor of the Wall Street Journal as follows.

To the Editor: Re: Obama’s Health Care Cost Illusion, June 8.
You have hit a nail on the head. The Obama team’s effort to portray practice variation as a “30% waste” for U.S. health care is an illusion.

Practice variation depends on local conditions – costs of doing business, demands and traditions of locals, ethnic mix and culture of local populations, number of the local uninsured and their relative health and stage of disease, where local patients enter the system - ERs,urgicenters, retail clinics, hospitals, specialists or primary care offices, levels of medical technologies among local competing hospitals.

To delude oneself into thinking you can lower costs by 30% by narrowing these local variations by bringing costs down from high-spending regions to low spending regions based on Medicare data is statistical tomfoolery and ignores and misses cultural complexities of local health systems.

Using retrospective Medicare data to federalize, standardize, and homogenize health care behaviors for the entire health system based on half-baked Medicare economic theory will end up being an exercise in bureaucratic futility.

Five, politicians should begin to pay more attention and give more credence and credit to the market-based solutions as embodied in Senators Coburn and Barr’s Republican alternative plan which recommends eliminating corporate employer and employee health benefits, replacing them with generous tax credits, and allowing consumers to shop using their own tax-free monies. There is a school of thought, led by Regina Herzlinger of Harvard, Grace Marie Turner of the Galen Institute, and John Goodman of the National Center of Policy Analysis, that says only consumers spending their own money and assuming responsibility for their own care, can control health costs. You won’t be hearing much of this as Democrats control the debate and position themselves to install a government-controlled system guided by Washington based policy wonks.

1 comment:

Elen Elizabeth said...

I’d like to comment on the first part of your blog. One must not compare the deficits of the Bush administration and the Obama administration; they are not near in size nor in their means of accumulation.
Obama has some of the smartest economists in the country working for him, if there was a less expensive alternative to fueling consumer spending and reducing the escalation of unemployment I’m sure they would have taken that route.

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