Sunday, March 31, 2013

Innovation Myths
Myth is the secret opening though which the inexhaustible energies of the cosmos pour into human cultural manifestation. Religions, philosophies, arts, the social forms of primitive and historic man, prime discoveries in science and technology, the very dreams that blister sleep, boil up from the basic, magic ring of truth.
Joseph Campbell (1904-1987),  American Mythologist,  author of The Power of Myth
Innovation is boiling up out there.   I can’t put my finger on it.  But part of it is about myths of innovation.  Since I started promoting an online forum of healthcare innovation a month ago,   hits on my medinnovation blog have tripled.
Yet  myths persist about innovation. “Innovation”  is a chameleon word. It means different things to different people. Everybody wants to be innovative.  Innovation creates a magical feeling.  It is considered a creative path out of the morass and away from the edges of the abyss.
Here are a few of the myths.
·         Innovation belongs to the young.   This may be  because the young have created many of Internet innovations – Google, Facebook, Microsoft, Intel, Apple, Cisco, Twitter, Amazon, eBay, You-Tube, and others.  Last week, Yahoo bought the news-reading app of Nick  S’Alioso, 17,  for a $ billion or so.  But the young may be exceptions.  Most innovators who win the Nobel Prize average 60 and took 20 years to get the prize (Tom Agan, “Why Innovators Get Better with Age", NYT, March 31, 2013). 

·         Innovation occurs mostly among individuals working out of their garage, dorm room, and makeshift office.  In truth, most innovations come out of the corporate world with teams of individuals or joint ventures with health care organizations, all striving for goals that make a difference for their companies in a competitive world. The future of innovation is more likely to lie with health care corporations working with Internet and data based technology companies.  

·         Innovation is strictly about creativity.   In actuality innovation is just as much  about money.  Capital, and access to it, is what differentiates America from competitors in Europe, Japan, and elsewhere,   America is the venture capital center of the world.  And in places like Silicon Valley, venture capital, communications between entrepreneurs, and innovation know-how  have come together to create a climate for producing and implementing creativity.

·         Innovation is unique to America  and Americans -  To certain extent this is true, given  our traditions and conditions  of risk taking and economic freedoms of our democracy.  But many U.S innovations come from foreign enterpreneurs who have come to American to practice their craft.  Access to private capital  and government and corporate investments in R&D may be even more important preconditions for innovative breakthroughs  than the  form of government or nature of a society( Edward Conard, Unintended Consequences: Why Everything You’ve Been Told about the Economy are Wrong, Portfolio/Penguin, 2012; Eamon Fingleton, “America the Innovative, “ NYT, March 31, 2013).

·         Most innovation can be traced to the Internet -   The U.S. has  certainly capitalized on the Internet to accelerate U.S productivity which remains the wonder of the world.  We work harder and faster than any other nation with fewer workers producing more product than our rivals.  This holds true for our health system as well, which has fewer physicians per capita than most developed countries.    In the short run, this health care productivity may go down with more regulations,  shorter working hours per physician,  more women physicians, who have more family obligations  outside of practice;  more salaried physicians,  and physician desire for balanced lives.  In the long run, however,  the Internet,  telemedicine,  mobile apps,  Skype-like and email communications, and  monitoring devices promise to increase productivity.  

Tweet:   Certain preconceptions  – that innovation belongs to  the young,  individuals, the inherently creative, and to Americans – are myths.

Book Review: The Physicians Foundation – A New Voice for Physicians, by Richard Reece, MD, 217 pages, Medinnovation Press, 2013. $19.95.  Volume discounts available.
To review one’s own book is height of ego. So this will be short.  Very short.  The book has sold 83 copies so far. I would like to sell more.  It’s about decline in private practices,  physician shortages,  loss of physician morale,  unintended consequences of health reform law,and their effects on physicians. . It is based on series of national surveys by the Physicians Foundation.  One  survey involved  630,000 practitioners, the largest of its kind ever undertaken.
Buy it. Enjoy it. Learn from it.  Purchase it at 1-203-245-3959 or rjjulia@ondemandbooks.  Thanks for listening.

Saturday, March 30, 2013

75% Scenarios
Not all scenarios are rosy.
As I read the news, I keep running across 75% scenarios.
·         France has raised its top income rate to 75%.

·         Delos Cosgrove, MD,  CEO of the $5 billion Cleveland Clinic, predicts government, which now pays for 50% of total health costs, may soon pay for 75% costs.

·         Merritt Hawkins,  the nation’s largest physician recruiting firm, believes 75% of physicians will be employed by hospitals and large health care organizations by 2020 and probably ooner.

What would health care look like if these 75% scenarios came to pass?

1.       If the income tax goes to 75%  in the U.S., it would result in capital flight from the U.S., as it has in France.   But where would the rich go? As matters stand in U.S. now,  the effective U.S. top rate is 39.5%, but it is more like 45% if you throw in other taxes, like the 3.8% Obamacare tax, new Medicare taxes,  the payroll tax, and other hidden taxes.    Keep in mind that many blue states already effectively tax income  at 50%.  But, given Americans’ dislike of high taxes and big government,  the 75% rate is highly unlikely  in the US.  Still, on a smaller scale, capital flight is already occurring  in the U.S. – from high tax Blue States – California, New York, the Midwest, the NE corridor-  to Red States – particularly those with no income tax – Florida, Texas, Tennessee (“Laffer and Moore: The Red-State Path to Prosperity,” WSJ, March 27, 2013). 

2.        If and when government pays for 75% of all health costs, there will likely  be a massive migration of patients and physicians out of the system to concierge and cash only practices,  to any setting that is free of third party restrictions and paperwork, to self-funding by large and small businesses,  to health savings accounts with high deductibles  away from PPOs and HMOs, to anything with lower premiums and more freedom of choice, to the underground economy . It will not be pretty.  It will be chaotic.  But this is what happens in a country that prefers individualism to collectivism and the freedom to do what one wants in a nanny-free environment.

3.      If hospitals and large integrated health systems employ 75% of doctors, including physicians,  a colossal  consolidation into larger and larger entities with capital, administrative, analytical, and technological resources will take place.  These huge entities will have enough wherewithal  to establish monopolies, to fend off government, and to  negotiate larger payments from health plans  Hospitals will charge higher fees for physician services to offset losses from declining numbers of beds, dwindling  Medicare revenues,  and losses from  less-productive physician practices.  Physician productivity will drop about 30% as physicians become salaried employees.  Some of these entities will take the form of accountable care organizations.   Government antitrust actions will ensue, In a worst case scenario,  a physician shortage will occur, as physicians drop out of workforce,  work part-time, or seek non-clinical work, and there are not enough nurse practitioners  or physician assistants to take up the slack or fill the primary care gap.

I hope none of these 75% scenarios happens.  I would not like  to be labeled as “Doctor Worst-Case Scenario.”

Tweet: Worst-case scenarios:  U.S. income tax rates climb  to 75%, government pays for 75% of total care, and hospitals employ 75% of doctors.

Friday, March 29, 2013

Healthcare Reform Endgame
Only a consumer-driven healthcare system with bullet-proof ideal medical savings accounts will align all the stakeholders’ incentives.
Stanley Feld, MD, FACP, “Obamacare’s Deception,” Repairing the Health System, crrp://
The obvious, which is not so obvious, and the simple, which is not so simple.
The Practical Cogitator, 1959
The health reform endgame is obvious.
The endgame will be consumers and voters agreeing to spend  enough of their own money to shop for  and choose what they want  using health savings accounts  with high deductibles  for routine care but catastrophic ceilings to protect against economic losses and with subsidies to protect the poor.
While this may be obvious, it is not simple.
Progressives would oppose it.  For them, the endgame is a government-run system that is “free” but with regulations and an accompanying bureaucracy directed by them  to control that expense and to perpetuate their political power.  
Health-savings accounts  would take health-care decision-making out  of the hands of government and place it in the hands of consumers.  HSAs would disempower government.  These accounts would puncture the illusion  that health care is, or ought to be, “free’,  and that anything short of that noble goal is a moral failure.  
HSAs would put the onus of choosing what is the right care in the consumers’, employers’, physicians’, hospitals’, and health plans’, and health suppliers’ camps, for they would have to cater to consumers and to prove to them what they is provided at the right place, at the right time, for the right price.   Consumers, not government, would know what is “best.”
Universal HSAs would not happen overnight – or even in a decade, or perhaps ever.   Government dependency is a powerful and appealing sedative,  as all utopias are.  Universal HSAs would require a number of painful steps.

·         The government and voters coming to the conclusion that the present health law is dysfunctional,  does not protect consumers,  and is unaffordable.

·         Acknowledging that informed consumers are in the best position to shop for what is best and affordable for their own personal  care.

·         Creating an analytical system,  with stakeholders participating  at all levels,  capable of delivering objective information  on transparency and quality, but letting the consumers make subjective choices of what fits their personal health and economic interests best, given the resources at hand.
Tweet:   The ideal ultimate endgame in health reform would be for consumers to own health savings accounts allowing them to choose their own care.


Thursday, March 28, 2013

Two Voices from My Past:  Paul Ellwood, MD, and Regina Herzlinger, PhD
The past is prologue.
Paul Elwood called me last night from Wyoming to inform me my computer had been hacked, and he was receiving emails asking for money to get me out of Belgium. I was pleased to hear from him under any circumstances.  We had a delightful conservation.   Paul, at age 86, spoke with a clear voice.  He reminded me of his role in reshaping health care.  He has been an advisor to multiple presidents  and persuaded President Nixon to pass the HMO act, which required businesses to offer HMOs.   He was also a principal advisor  in the Clinton reform effort.  Paul  said he was re-entering the health reform arena, and his chief interest was what to do with Medicare Advantage Plans.   He thought Obamacare might be  on the brink of becoming unraveled and wanted to do what he could to rescue it, and some its ideas, like Accountable Care Organizations.  He reminded me that he played a role in forming UnitedHealth, and he was astonished it was now a $115 billion corporation.  He said he still thought the future resided  in large  integrated, capitated, salaried community-based physician groups.  I said I would like to interview him about the current state of health care, which he played such a pivotal role in creating, and he agreed to give me a hearing.
Regina Herzlinger, the first tenured woman professor at Harvard Business School, is the subject of a flattering interview “Opening the Door” in the March issue of the HBS Alumni Bulletin.  It is largely about how she opened opportunities for woman teachers and students at HBS.  I came under her spell as a student at a graduate course in 1976.   Later she wrote the foreword for my 2007 book Innovation-Driven Health Care: 34 Key Concepts for Transformation (Jones and Bartlett).   Her claims to fame are being selected as the best teacher at Harvard in 1997 and a series of books, notably  Market-Driven Health Care: Who Wins, Who Loses in the Transformation of America’s Largest Service Industry (1997);  Consumer-Driven Health Care:  Implications for Providers, Payers, and Policy Makers, Consumer-Driven Health Care (2004); and Who Killed Health Care: America’s $2 trillion Medical Problem – and the Consumer-Driven Cure.   As the titles indicate,  Regina thinks the final solution for America’s health care will be informed health care consumers.   Of Obamacare, she says in the interview; “I agree that the individual mandate is essential.  But with Obamacare, agents who don’t know our individual needs are selecting plans on our behalf and that’s not consumer-driven health care.  Obamacare establishes health-care exchanges, or markets but a consumer-driven  system would require transparency  in health-care quality and costs Can you imagine shopping in a supermarket where you don’t know products’ prices or ingredients?”  

Tweet:  Paul Ellwood, MD, father of the HMO, and Regina Herzlinger, champion of consumer-driven health care are still active in health reform.


The Dysfunctional Relationship between Government and Doctors
The element of a plan, law, strategy, or system that fails to perform as expected and disrupts or threatens to disrupt some or all of the other elements.
Definition of Dysfunctional
To say that Obamacare is dysfunctional as we move towards  full implementation in 2014  is an understatement. Yesterday’s announcement by the Society of Auditors that Obamacare would raise overall costs by 32% by 2017 underscores the dysfunctionality.
Nowhere is this dysfunction more evident than in the relationship of the Obama administration and physicians. A headline  in yesterday’s Wall Street Journal “Warning Over Doctor-Run Groups” is an example.  The article warns of physician groups owned by orthopedic and spine  surgeons  that serve as intermediaries between medical device manufacturers and hospitals.  The Inspector General calls these groups “inherently suspect” and warns they “pose dangers to public safety.”
This is not the first time a government agency has gone up against physicians.    It did so when Congress shut down fthe building of future physician-owned hospitals.  It does so when it prints 1600 pages of more regulations and piles them upon an already over-regulated health care industry.  It does so when it threatens to imprison doctors or suspend their licenses if they do not follow Medicare compliance rules to the letter.  It does so when it  forbids doctors from privately contracting with patients.  It does so when it requires doctors to prescribe electronically and to install expensive electronic health systems at a loss with no hope for a return on investment.  It does so when it ascribes tremendous increases in cost of care  (now 18% of GDP) to fee-for-service medicine by accusing  physicians of greedily  increasing their incomes based on volume rather than quality.  It does do when it funds Obamacare partly by systematically reducing physician incomes at every turn over the next decade.
What are the results of this dysfunctional relationship?
A White Paper published by an advisory panel of the Physicians Foundation “Health Reform and the Decline of Physician Private Practice” sums it up nicely.
·        “Reform will drastically increase physician legal compliance obligations and potential liability under federal fraud and abuse statues.”

·        “Most physicians will be compelled to consolidate with other practitioners, become hospital employees, or align with large hospitals and health systems for capital, administrative and technical resources.”

·        "Reform will exacerbate physician shortages, creating access issues for many patients.”

Government is looking for a villain outside of government, and they have found it in physicians.  “Trust, but verify",  Ronald Reagan’s old saying for dealing with the evil empire has become “Distrust, but deny and  comply.”  This may be a winning strategy but it has one glaring problem: Patients trust their physicians more than government.

Tweet:  A dysfunctional relationship exists between government and physicians who distrust each other’s motives.

Wednesday, March 27, 2013

Slippery Slope Health Care Spending Topics – Mandatory vs. Discretionary, Value vs. Volume,  Consumers/physicians vs. Elites
Once you put human life in human hands, you have started on a slippery slope that knows no boundaries.
Leon Kass, MD (born 1939), American physician who considers himself a humanist
Certain slippery health care topics keep rearing their heads. How you think about them depends on how far down the human slope you have slid and on how highly you regard human decision-making.
Slippery slope topics include:

One, Mandatory  spending is authoritative, compulsory, obligatory, and ideological.  Discretionary spending is left to the discretion of health care consumers and physicians.   Of the federal budget,  62% is mandatory (Medicare, Medicaid, Social Security) and 38% is discretionary (military, domestic programs).  Mandatory spending is  an increasing part of budget; discretionary spending is declining.   Mandatory spending is ideological. Most Democrats (Obama and Senate) believe more  federal dependency will win more voters, now and in the future.
Two, Value-based spending is determined by outcomes based on data, paying only providers who practice evidence-based medicine. Volume-based spending is based on fee-for-service spending regardless of “quality” based on data.  Volume-based spending is winning because less than 1% of health care spending is now based on “quality,” and progress to pay  for “value” is still very slow, with only 10% of health plans using this criteria, though propaganda to the contrary is immense.
Three, Consumer/physician based spending  is based on what  health consumers choose to spend on out-of-pocket or out of their own money  in health savings accounts with high deductibles before they reach the deductible and what doctors they choose to visit or rely upon.  Elitist spending is based on what policy makers and government officials think is best for the consumers, and, of course, government knows best.  Consumers/physicians are winning. Small and large companies are increasingly offering only health savings account plans with high deductibles;  and consumers and physicians are increasingly bypassing  third parties through concierge and cash-only practices.   

Where You Stand on Topics Depends on...
Where one stands on these topics depends, of course, on where one sits;   who pays and what one considers to be of “value”;  and  how one thinks ideologically, i.e., whether government collectivism  or market individualism  should prevail .
In a March 25  WSJ article , “The Great Recession Has Been Followed by the Grand Illusion,” Mort Zuckerman, chairman and editor of U.S. News and World Report, put the problem in  this context:
“What the administration gives us is politics. What the country needs are constructive strategies free of ideology. But the risks of future economic shocks will multiply so long as we remain locked in a rancorous political culture with a leadership more inclined to public relations than hardheaded pragmatic recognition of what must be done to restore America's vitality.”
Tweet  To solve mandatory vs. discretionary, value vs. volume, &  consumer vs. elitist spending problems, we need less ideology and more pragmatism.

Tuesday, March 26, 2013

Hospital Malfeesance – Fees for Services, Fees for Items,  Fees for Facilities, Fees for Physicians
I like to be in America!
OK by me in America!
Ev’rything free in America!
For a small fee in America!
Stephen Sondheim(born 1930), West Side Story
Steven Brill made quite a splash when, in a 2400  word article in the February 20 issue of Time,  the most lengthy in the history of the magazine.  Brill accused hospital executives of ripping off Americans. 
How?  By using  a billing mechanism known as chargemaster accounts to charge exorbitant fees for everything from use of hospital rooms, to operating rooms, to recovery rooms,  to ICU rooms  to Tylenol to cotton balls to band aids.   The proble? Chargemaster accounts are so complex, convoluted, and arcane that nobody seems capable of figuring them out or unraveling them.
Alleged fee abuse  may even more complicated than that with hospitals hiring physicians in record numbers  and then upping the physicians fees and charging “facility fees” for use of operating rooms and other specialized facilities using physician  services.  As employees of the hospital,  physicians no longer have any choice  for setting their fees or controlling facility fees.
Yet it is easy to understand why hospitals impose  these various fees.  Hospital occupancies are dropping;  Obamacare cuts $256 billion out of Medicare funding for hospitals over the next decade;  hospitals are required  to  care of all comers even if they can’t pay;  and hospital executives are not hired to lose money.   It’s hard to criticize hospitals for trying to make up for the loss of income.
Small wonder that hospital inpatient fees are up sharply.  Once cannot blame physicians.  As John Commins points out in a March 20 Healthleaders Media article:
“Hospitals look at themselves as healthcare companies and there are a bunch of reasons why they are aligning with physicians. And it is not just their desire to do so. Physicians are also facing this new market where they are being asked to do more with less with regards to capital investment and health information technology and developing a quality infrastructure platform and malpractice and other typical costs that make it difficult for them to continue to practice in that two- or three-doctor practice."
Brian Klepper, an independent health care analyst, gives  another reason .   He followed the Brill piecein the  March 22 issue of The Health Care Blog “Why Only Business Can Save America from Health Care, ” with this commentary:
“Why haven’t America’s business leaders united to be a counterweight to the health care industry’s massive influence? After all, only one group is larger and more influential than the health care industry, and that’s everyone else.
Part of the answer lies in the health care industry’s masterful divide-and-conquer tactics. Every community’s most prosperous and influential business leaders sit on local health company boards. No Chamber of Commerce will organize efforts that oppose the egregious practices of its largest members, the health plans and hospitals. Business health coalitions that welcome drug and device firm subsidies are loathe to mount efforts that might offend their benefactors.
So far, business has not displayed much appetite for galvanizing on this issue. But the fact remains that, unless the business community and its champions come together, health care will almost certainly continue to have its way with Congress and the national largess, planting the seeds of financial instability and undermining the nation’s future.”
True enough, but the answer may also be deeper than that.  To coin a phrase from James Carville, who said, “It’s the economy, Stupid!” ’It’s structural and cultural, Stupid!”
We live in a capitalistic society where individual fees for individual acts are expected and the norm. For hospitals, these fees are for service lines,  such as orthopedics,  general surgery, cancer and imaging; and for individual items charged to patients; and for individual facility use – operating rooms, recovery rooms, private rooms, and ICU rooms.
Individual  fees are built into American culture and business structure., and rest on the premise that people can be trusted to do the right thing or they will cease to be a competitive force.   Obamacare proposes to change all of this by converting fees-for-individual things  into bundled and capitated  fees for all illness categories,  episodes of care,  types of patients classified by payer, such as Medicare.  Hence, the Accountable Care Organization.  For cancer care, for example,  Ezekiel Emanuel, MD,  Obama’s former chief medical advisor and now vice provost of the University of Pennsylvania, says one way to do this is:
Over the next few years, a payment system needs to move away from fee-for-service to a system of bundled payments, in which doctors are paid one fee for all the treatments needed in care for the patient.(“A Plan to Fix Cancer Care, “ New York Times, March 24, 2013).
Lots of luck, Ezekial.  Changing the fundamental structure of health care economics will not be easy. Why?  Because of the immense variations in individual doctors,  individual hospitals, and individual patients. I suppose one can minimize these individual variations by consolidating everything into one big bundle and using reinsurance to compensate for variations.  But it won’t be easy.  There will be economic losers, who will hire lobbyists to minimize the damage and protect the entrenched self-interests in the hospital and the surrounding communities.

To conclude.
Do not equate hospital fees with malfeesance,
With societal, business & hospital malfeasance.
Fees are part of our   capitalistic U.S. culture,
Individual  fees is part of  our infrastructure.
One could charge bundled fees.
For all procedures and diseases.
But that will take radical restructuring
And societal and business destructuring.

Monday, March 25, 2013

What Are Limits to Obamacare?
No limits but the sky.
Cervantes (1547-1616), Don Quixote de la Mancha
Climb high
Climb far
Your goal is the sky
Inscription on Hopkins Memorial Steps
Williams College, Williamstown, Massachusetts
After scanning this morning’s health care news, this question sprang (after all, it is Spring) to mind, what are the limits of Obamacare? Obama seems to think the sky is the limit, and there is no budget deficit problem.  Others  see clouds and limits on the horizon.

These are questions that arise when thinking about limits.
·         Will  it be  the magnitude of the national budget deficit?  That is the crux of the dispute between our two political parties. The deficit  will likely exceed $20 trillion in Obama’s 2nd term,  and the big drivers are Medicare and Medicaid.  Senior fellows at the Hoover Institute think we have gone beyond that limit, “Many current government policies are going well beyond such limits, as shown by excessive spending and taxes, growing debt, intervention government policy, and burdensome regulations that shave slowed growth and job creation)”A Better Strategy for Faster Growth, “ WSJ, March 25, 2013.   

·         Will it be the cost of health exchanges?   I read in Robert Laszewski’s piece in The Healthcare Blog, it will be $935 billion in California alone,  the federal government will be running 33 of these exchanges? 17 states will set up their own exchanges, with financial aid from Washington, including $124 million for Vermont, $253 million for Kentucky, and $252 million for Kentucky. The other 33 states will have to find their onw money.  What will be the limits for federal and state largess, and where will the money come from?   More taxes, most likely.
·         Will it be doctors willingly participating in Accountable Care organizations?       No one knows for sure, but a piece in HealthLeaders Media indicates doctors await proof of ACO performance in achieving the magic thing called “care coordination” before jumping the private practice ship.  Why leap before Accountable Care Organizations  have proven their worth? Primary care physicians are keeping an open-mind on the matter, with a poll indicating 70% are willing to wait and see if ACOs deliver on what CMS projects.

·         Will it be the 2014 elections?   Betsy McCaughey, the former lieutenant governor of New York and author of a new book, Beating Obamacare, says the 2014 elections will set the limit because  ordinary citizens  will vote to retain the GOP majority in the House and will win back the Senate. In “Disaster for Dems” Obamacare; the 2014 Vote,” she reasons as follows: young people (19% of those who voted for Obama) will revolt when their premiums double; middle-class folks will shudder with 20% to 30% premium hikes; workers in the retail, fast food, and hospitality industries won’t like losing health coverage, experiencing premium increases, and being reduced to part-time status; senior will be shocked by cutbacks and loss of benefits.  Chaos will reign in 2014, and the people will vote  for a GOP House and Senate, who will overturn or defund Obamacare.
We shall see if Obamacare has limits and, if so,  who and what  will set these limits?
Tweet: Converging forces will limit Obamacare - budget deficits, health exchange costs,  physician ACO responses,, and 2014 midterm elections.

Four Contrasting Views of  Privacy and Big Data
The American has no sense of privacy. He does not know what it means.  There is no such thing in the country,
George Bernard Shaw (1856-1950), Speech in New York City, April 11, 1933

Big Brother is watching you.

George Orwell (1903-1950),  1984

The latest leaps in data collection are raising new concerns about infringement on privacy- an isue so curcial that it could turmp all others and uset the Big Data bandwagon.

Alex Pentland, director of the Human Dynamics Lab at MIT, 2013
We’re on the cusp of a golden age of medical science  and care delivery, but a privacy backlash could cripple progress.”

George C. Halvorson,  CEO of Kaiser Permanente 2013
Tweet: Should you have right to possess personal data, to control its use, and to destroy and distribute it. What would George Orwell think?

Sunday, March 24, 2013

The Art of Obamacare Rationalization
Rationalization is the process of not perceiving reality, but attempting to make reality fit one’s emotions.
Ayn Rand (1905-1982), Philosophy: Who Needs It?
We are now engaged in the process of implementing Obamacare.  Success or failure depends on the strength of the followers of one’s political philosophy – whether government or markets should run the show.  The outcome is difficult to predict  because we are all born a little bit liberal and a little bit conservative, whether we are for the common good or one’s own good. We all tend to make our argument, well, rational.
A good example of rationalization appears in this Sunday’s lead editorial in the New York Times.  
The Times posits these four positions in its support of Obamacare.
·         Expanding coverage -  The Times reports that 6.6 million young adults under 26 are now covered under their parents’ plans; that 71 million Americans have received at least one “free” preventive care, without co-pays or deductibles; that 34 million seniors have gotten “free” preventive services; that 17 million children with pre-existing disease are now covered. 

As Milton Friedman (1912-2006)  said, “There is no such thing as a free lunch.” However one rationalizes it, Obamacare is eating the lunch of private health plans, who as stock-held companies beholden to  investors,  are responding by dramatically upping  premiums by 20% to 30% overall, and 100% to 200% for individuals and some small businesses. 

·         Savings consumers money -  The law requires health plans to spend 80% to 85% on claims and quality, rather than on marketing or administration, or the plans have to  pay a rebate.  Last year the health plan industry paid rebates of $1.1 billion.   The law also requires discounts on drugs for seniors,  which The Times said saved seniors $6.1 billion in 2010 with more to come.

It is inevitable that health plans will raise premiums and drug companies will raise prices on drugs for non-seniors.  When government pushes down on the health cost balloon,  increased  prices will pop out somewhere else.  Neither health plans or drug firms are in the business of losing money or profits to please government. It is the structural nature and requirement  of capitalism. 

·         Reining in costs -   Here rationalization reaches the level of a true art form.  The Times says Obamacare,  not the recession, “presumably” overall health costs to decline over the last three years.  “Presumably” possesses powerful shades of ambiguity,  And the Times hastens to add, “it is possible that the focus on reform has led many providers to act more frugally.”  It is also possible that Obamacare attacks on Medicare Advantage plans have decreased  costs by reducing “unjustifiable overpayments to private health plans.”

Anything is presumably possible when it comes to justifying slurs on one’s ideological adversary.

·         Better quality of care – The Times reasons that Medicare penalties embedded in Obamacare have reduced hospital readmissions from 19.0% to 17.8% over the last five years and that Medicare demonstration projects, just being implemented will move hospitals and doctors to provide “coordinated “ care, lowering costs and elevating quality in one fell swoop,  when backed by massive reams of outcome data.

Nice try, but hikes in “quality” and drops in costs have yet to be “demonstrated,”no matter how rational they seem on the surface.

Perhaps these various rationalizations will ,in the end , clarify our thoughts about reform.   May the strongest and most rational arguments win. The outcome will depend on political events, on how the public votes, on cost outcomes,  on the level of the budget deficit,  on whether doctors are available to provide necessary care, and whether one believes government or markets can best distribute health care services at an affordable prices in convenient locations.

Tweet:  The U.S. is engaged in a great debate rationalizing whether government or markets can deliver what patients want out of the health system.


Online Healthcare Innovation Forum:  Two  Growth Industries – Growing Human Organs in Labs and Growing Democrat Opposition to Medical Device Tax
The development of lab-built body parts is being spurred by a shortage of organ donors and rising demand for transplants.
Gautum Naif, “Researchers Grown Human Organs in Lab,” Wall Street Journal, March 23, 2013
1.      “The industry is being punished for its innovation and growth.”

2.      “The tax is a burden on medical  device businesses but, most importantly, it is a disincentive for jobs. It stifles innovation, and it makes it more difficult  for the next generations of lifeesaving device to make it the market.
Quotes from Minnesota’s two Democrat Senators,  Al Franken and Amy Klobuchar, in “Their Own Devices, “ justifying their vote to repeal $29 billion excise tax on medical device sales, Wall Street Journal, March 23, 3013.
Innovation based on human organ growth is in.  Taxes on medical devices as stiflers of innovation is out.
For wildly different reasons.
·         With lab growth of human organs,  researchers discovered that stem cells – found in human bone marrow and fat and elsewhere –can  be transformed into other organ tissues.  Scientists at Wake Forest’s Institute for Regenerative Medicine have grown human bladders and now at work on other bio-engineered body parts,  including blood vessels and livers.  At London’s Royal Free Hospital, scientists have grown and transplanted a trachea.  In Madrid and elsewhere, scientists are hard at work growing hearts, ears, noses, urethras, and bile ducts.   The big pay-off, scientifically and economically,  will come with a lab-built heart parts,  coronaries, valves, and myocardial patches, and maybe, in 5 to 10 years, a whole heart. 

·         As for Democrats coming out to support innovation and to repeal  the Obamacare-imposed tax on medical devices, this may come as a revelation, or more likely, but there's  a revolution against a law that hurts home-grown industries and employment.  In the Senate, the medical device tax lost in a rout, 70 to 29, big enough to withstand a Presidential veto. Democratic Senators from traditionally liberal states –Massachusetts, Minnesota. Washington State, Illinois, Maryland, and Connecticut – came out of the woodwork to vote down the medical device excise tax.  As the Wall Street Journal editorial puts it, “All of this isn’t so much a change of heart, but a full cardiac transplant.” To put it another way, negative influences on your constituents may cause discontinuance of your previous point of view.
Tweet:  Innovation is in  – in labs where human organs grow  and in U.S. Senate, causing it to reject an  innovation-stifling medical device tax.