GOOD HEALTH, A SHARED RESPONSIBILITY WHICH GENERATES WEALTH


 

Back to the Guide to Editorials    **     Go To Everybody In, Nobody Out . ORG

HEALTH POLICY MALPRACTICE

Let me tell you about two government-financed health care programs. One, the Veterans Health Administration, is a stunning success but the administration and Republicans in Congress refuse to build on that success, because it doesn’t fit their conservative agenda. The other, Medicare Advantage (MA), is a clear failure, but it’s expanding rapidly thanks to large subsidies the administration rammed through Congress in 2003. Some still think of the VA as a decrepit institution, which it was in the Reagan and Bush I years. But thanks to reforms begun under Clinton, it’s now providing remarkably high-quality health care at remarkably low cost. The key to the VA’s success is its long-term relationship with its clients: veterans, once in the VA system, normally stay in it for life. Meanwhile, the Bush administration is channeling Medicare recipients into private HMO’s, even though HMO’s have substantially higher costs per patient than conventional Medicare, because they add an expensive extra layer of bureaucracy and also spend heavily on marketing. Additionally, Bush pushed through the Medicare Advantage program, which offers heavy public subsidies to HMO’s. According to the independent Medicare Payment Advisory Commission, MA plans cost the government 11% more per person than traditional Medicare AND achieve mortality rates in 40% higher than those of elderly veterans in the VA.

EINO COMMENT:

Pride, Prejudice, Insurance

Let's start with the fact that America’s health care system spends more, for worse results, than that of any other advanced country. In 2002 the United States spent $5,267 per person on health care. Canada spent $2,931; Germany spent $2,817; Britain spent only $2,160. Yet the United States has lower life expectancy and higher infant mortality than any of these countries.

Taiwan, which moved 10. years ago from a U.S.-style system to a Canadian-style single-payer system, offers an object lesson the economic advantages of universal coverage. In 1995 less than 60% of Taiwan’s residents had health insurance; by 2001 the number was 97%. Yet according to a careful study published in Health Affairs two years ago, this huge expansion in coverage came virtually free: it led to little if any increase in overall health care spending beyond normal growth due to rising population and incomes.

EINO COMMENT: You mean to say we are spending nearly twice as much as we need to, just so that we can make sure that some of our citizens remain outside the system?

Ailing Health Care

Rising health care spending isn’t primarily the result of medical price inflation. It’s primarily a response to innovation: the range of things that medicine can do keeps increasing. For example, Medicare recently started paying for implanted cardiac devices in many patients with heart trouble, now that research has shown them to be highly effective. This is good news, not bad. So what’s the problem? Why not welcome medical progress, and consider its costs money well spent?

The fact is that in health care, the private sector is often bloated and bureaucratic, while some government agencies -- notably the Veterans Administration system -- are lean and efficient. In health care, competition and personal choice can and do lead to higher costs and lower quality. The United States has the most privatized competitive health system in the advanced world; it also has by far the highest costs, and close to the worst results.

EINO COMMENT: Wouldn't it be nice if we could actually take pleasure in medical-technological improvements? If they were used wisely to further the health status of our nation? Is living longer, being physically active longer a health care problem?

The Medical Money Pit

A 2003 study published in Health Affairs tried to resolve the puzzle, of why we spend so much and yet receive so little for it, by comparing a number of measures of health services across the advanced world. What the authors found was that the United States scores high on high-tech services we have lots of MRI’s but on more prosaic measures, like the number of doctors’ visits and number of days spent in hospitals, America is only average, or even below average. There’s also direct evidence that identical procedures cost far more in the U.S. than in other advanced countries.

Above all, a large part of America’s health care spending goes into paperwork. A 2003 study in The New England Journal of Medicine estimated that administrative costs took 31 cents out of every dollar the United States spent on health care, compared with only 17 cents in Canada.

EINO COMMENT: This is indeed a main issue in the crisis and one that should unite almost every conservative and liberal. Why should we not be getting a decent value for our money spent on health care?

Passing the Buck

According to the WHO, the higher costs of private insurers are "mainly due to the extensive bureaucracy required to assess risk, rate premiums, design benefit packages and review, pay or refuse claims." Public insurance plans have far less bureaucracy because they don’t try to screen out high-risk clients or charge them higher fees. And the costs directly incurred by insurers are only half the story. Doctors "must hire office personnel just to deal with the insurance companies" Dr. Atul Gawande, a practicing physician, wrote in The New Yorker. "A well-run office can get the insurer’s rejection rate down from 30% to, say, 15%. That’s how a doctor makes money. It’s a war with insurance, every step of the way.

Second, Americans without insurance eventually receive medical care, but the operative word is "eventually". The uninsured are about three times as likely as the insured to postpone seeking care, fail to get needed care, leave prescriptions unfilled or skip recommended treatment. And many end up disabled d or die ~becauseof these delays. Think about how crazy all of this is. At a rough guess, between two million and three million Americans are employed by insurers and health care providers not to deliver health care, but to pass the buck for that care to someone else. And the result of all their exertions is to make the nation poorer and sicker.

EINO COMMENT: So, the answer's yes we are paying extra just to make certain that some Americans stay excluded from health care and these paragraphs explain how we accomplish this.

A Private Obsession

Yet any effort to reduce this waste would hurt powerful, well-organized interests, which have already demonstrated their power to block reform. Remember the "Harry and Louise" ads that doomed the Clinton health plan? The actors may have seemed like regular folks, but the ads were paid for by the Health Insurance Association of America, an industry lobbying group that liked the health care system just the way it was.

But vested interests aren’t the only obstacle to fixing our health care system. We also have a big. problem with ideology. You see, America is ruled by conservatives, and they have a private obsession: they believe that more privatization, not less, is always the answer. And their faith persists even when the evidence clearly points to a private sector gone bad.

The 2004 "Economic Report of the President" takes a strange view of uninsured Americans - one that is completely at odds with the grim statistics I cited above -suggesting that "many of them may remain uninsured as a matter of choice," perhaps because "they are young and healthy and do not see the need for insurance."

EINO COMMENT: What next? Well, we could deny working Americans the right to send their children to school, dissolve the public education system and then we could claim that they aren't sending them to school because they choose not to (prefering to eat and pay rent, maybe)?

A Serious Drug Problem

Later, the media reported on another scandal: it turned out that the administration had deceived Congress about the bill’s likely cost. But the real scandal is what’s in the legislation. It’s an object lesson in how special interests hold America’s health care system hostage. The new Medicare law subsidizes private health plans, which have repeatedly failed to deliver promised cost savings. It creates an unnecessary layer of middlemen by requiring that the drug benefit be administered by private insurers. The biggest giveaway is to Big Pharma: the law specifically prohibits Medicare from using its purchasing power to negotiate lower drug prices.

Meanwhile, Thomas Scully, the former Medicare administrator - who threatened to fire Medicare’s chief actuary if he gave Congress the real numbers on the drug bill’s cost was granted a special waiver from the ethics rules. This allowed him to negotiate for a future health industry lobbying job at the very same time he was pushing the drug bill.

EINO COMMENT: We have hordes of items of corruption and revolving door between health care officialdom and the major industries at this website. Try a search on "lobby" or "lobbyist".

Always Low Wages, Always

According to a poll cited in a recent Business Week article titled "Safety Net Nation," 67% of Americans think we should guarantee health care to all citizens; just 27 % disagree. The question is whether the public’s desire for a stronger safety net will finally be seconded by corporations that haven’t yet adopted the WalMart model of minimal benefits and always low wages.

Last year Richard Wagoner Jr., G.M.’s chief executive, gave a speech about the costs of America’s "Kafkaesque" health care system that sounded a lot like my recent columns. And his company has made it clear that it likes Canada’s system: in 2002 the president of General Motors of Canada and the head of the Canadian Auto Workers signed a joint letter declaring that "it is vitally important that the publicly funded health care system be preserved and renewed."

EINO COMMENT: So who exactly is against the government guaranteeing health coverage for all Americans? Try the search suggested in preceding item.

One Nation, Uninsured

Public opinion is already favorable: a 2003 Pew poll found that 72% of Americans favored government-guaranteed health insurance for all. But special interests will, once again, stand in the way. And the big debate among would-be reformers is how to deal with those interests, especially the insurance companies.

A system in which the government provides universal health insurance is often referred to as "single payer," but I like Ted Kennedy’s slogan ."Medicare for all." Medicare has much lower administrative costs than private insurance. The reason is that single-payer systems don’t devote large resources to screening out high-risk clients or charging them higher fees. The savings from a single-payer system would probably exceed $200 billion a year, far more than the cost of covering all of those now uninsured.

Nonetheless, most reform proposals out there -even proposals from liberal groups like the Century Foundation and the Center for American Progress - reject a simple single-payer approach. Instead, they call for some combination of mandates and subsidies to help everyone buy insurance from private insurers.

Medicine: Who Decides?

In practice, the health savings accounts create by the 2003 Medicare law will serve primarily as tax shelters for the wealthy. But let’s put justified cynicism about Bush administration policies aside: is giving individuals responsibility for their own health spending really the answer to rising costs? No.

For one thing, insurance will always cover the really big expenses. We’re not going to have a system in which people pay for heart surgery out of their health savings accounts and save money by choosing cheaper procedures. And that’s not an unfair example. The Brookings study puts it this way: "Most health costs are incurred by a small proportion of the population whose expenses greatly exceed plausible limits on out-of-pocket spending."

Moreover, it’s neither fair nor realistic to expect ordinary citizens to have enough medical expertise to make life-or-death decisions about their own treatment. A well-known experiment with alternative health insurance schemes, carried out by the RAND Corporation, found that when individuals pay a higher share of medical costs out of pocket, they cut back on necessary as well as unnecessary health spending. So cost-sharing, like HMO’s, is a detour from real health care reform.

First, Do More Harm

Critics of health savings accounts have mostly focused on two features of the accounts Mr. Bush won’t mention. First, such accounts mainly benefit people with high. incomes. Second, they encourage wealthy corporate employees to opt out of company health plans, further undermining the already fraying system of employment-based health insurance.

But the case of diabetes and other evidence suggest that a third problem with health savings accounts may be even more important: in practice, people who are forced to pay for medical care out of pocket don’t have the ability to make good decisions about what care to purchase. "Consumer driven" is a nice slogan, but it turns out that buying health care isn’t at all like buying clothing.

Health Care Confidential

American health care is desperately in need of reform. But what form should change take? Are there any useful examples we can turn to for guidance? Well, I know about a health care system that has been highly successful in containing costs, yet provides excellent care. And the story of this system's success provides a helpful corrective to anti-government ideology. For the government doesn’t just pay the bills in this system -- it runs the hospitals and clinics.

No, I’m not talking about some faraway country. The system in question is our very own Veterans Health Administration, whose success story is one of the best-kept secrets in the American policy debate. Moreover, the V.H.A., as Phillip Longman put it in The Washington Monthly, "has nearly a lifetime relationship with its patients." As a result, it "actually has an incentive to invest in prevention and more effective disease management. When it does so, it isn’t just saving money for somebody else. It’s maximizing its own resources. ... In short, it can do what the rest of the health care sector can't seem to, which is to pursue quality systematically without threatening its own financial viability."

Oh, and one more thing: the veterans health system bargains hard with medical suppliers, and pays far less for drugs than most private insurers.

Death By Insurance

The medical cost ratio is the percentage of insurance premiums paid out to doctors, hospitals and other health care providers. Investors are upset about Aetna's rising ratio, because it leaves less room for profit. But even after the rise in the cost ratio, Aetna spends less than 80 cents of each dollar in health insurance premiums on actually providing medical care.

Most of those 20 cents spent on things other than medical care are unnecessary. Older Americans are covered by Medicare, which doesn't spend large sums on marketing and doesn't devote a lot of resources to screening out people likely to have high medical bills. As a result, Medicare manages to spend about 98% of its funds on actual medical care.

What would happen if Medicare was expanded to cover everyone? Remember the uninsured already receive some medical care at public expense - for example, treatment in emergency rooms that would have been both cheaper and more effective if provided in doctors' offices. And Medicare manages to spend much more of its funds on medicine, as opposed to other things, than private insurers. If you do the math, it becomes clear that covering everyone under Medicare would actually be significantly cheaper than our current system. And this calculation doesn't even take into account the costs our fragmented system imposes on doctors and hospitals. Ben Brewer, a doctor who writes an online column for The Wall Street Journal, recently commented on the excess expenses he incurs trying to deal with 301 different private insurance plans.