Health Care’s Cold Truth: An Iowa Perspective – Michael Millenson

Obama_webI am writing this blog from Cedar Rapids, Iowa, grateful that the
temperature has warmed from brutally
cold to pleasantly sub-freezing.
Fortunately, the warm feelings left by the extraordinary victory of
Sen. Barack Obama, the candidate for whom I was knocking on doors and
making phone calls these last few days, has trumped the temperatures.

Talking to real voters in the suburbs and rural areas surrounding this
small city provides a nice change from  the insular health care policy
world. For one thing, it reminds you that most people don’t care about
“policy,” per se, of any kind. Successful candidates connect first with
the heart and then the head. We instinctively believe that if we trust
a candidate’s values and broad beliefs, we will trust that candidate’s
detailed policy decisions.

Yet the sad reality is that a vast number of citizens won’t even make
that small emotional investment, and they don’t hesitate to proclaim
their apathy when you knock on the door or call. As much as you may
have heard about voters disenfranchised from the Iowa caucuses,
many more simply didn’t care enough to participate. That, alas, makes
Iowa quite representative of the nation as a whole. While Democratic
turnout at this year’s caucuses was double that of four years ago, that
merely turned a “tiny” slice of registered voters into a “small” one.

More broadly, the primaries should remind us how disconnected the details of policy are from the politics that put into place the leaders who will make the final policy decisions. While we may wade through bullet-pointed detail of health care platforms, few real voters share our interest at this time. Polls and interviews clearly indicate that Republican primary voters did not care much in Iowa, and show no inclination of caring elsewhere, about universal coverage or any other sort of health care “reform.” Their main issues are the economy and immigration. If any health-related issue is at all salient, it is abortion, part of a larger social agenda. The Republican candidates have responded by promising that tax-credit tinkering, and a little bit of faith, will bring good health and good health care to all.

The Democratic electorate, meanwhile, wants “affordable” health care for all, and wonks would do well to pay attention to that first word. A nurse in Marion, Iowa, told me she liked Obama, but worried that his health care plan would raise her taxes. I assured her Obama’s plan was less expensive than that of his Democratic rivals and that phasing out the Bush tax cuts for the rich would pay for it. Those assertions are true, but, of course, not quite the whole truth I would tell if sitting at my computer rather than shivering at a stranger’s doorstep. Yet in those simplified truths there is shortcut wisdom, for they are a way of saying that this candidate connects with your concerns. And your concerns about health care have nothing to do with health IT, evidence-based medicine or a score of other technical issues.

On the phone, a woman in a working-class rural area told me of medication for her five-year old hemophiliac son that runs a stunning $80,0000 a month – “more than the cost of my home.” Fortunately, she has a job where the insurance covers the cost and doesn’t count it against her family’s lifetime maximum of $2 million. “I’m glad I like my job,” she said, and I figured it wasn’t the time to discuss the fine points of pharmaceutical pricing on innovative biological products.

President Bill Clinton got the sound bite version of health care reform precisely right in 1993 when his “Health Security Act” referred to “health care that’s always there.” That’s the essence of what Americans want; the rest is commentary.

13 replies »

  1. IMHO, there are lots of tax loopholes to close that could help fund such a plan, and lots of tax loopholes congress could open to make the funding impossible. The campaign’s assertions are credible, but what the congress eventually does cannot be predicted. We instinctively believe that if we trust a candidate’s values and broad beliefs, and we will trust that candidate’s detailed policy decisions.
    iowa drug rehab

  2. Thanks to all who raised factual questions. Here is my response:
    The Obama Web site does have a specific cost estimate on the plan, but they don’t make it easy to find. After going to “Healthcare” under issues, you have to click on either the FAQ PDF or “Read the Plan.” See: http://www.barackobama.com/issues/healthcare/
    According to the campaign: The cost would be $50-$65 billion when fully phased in. (Note: This is less than the estimates for the Edwards or Clinton plans.) The campaign says the costs will be paid in part by efficiencies enabled by the plan and the remainder by letting the Bush tax cuts expire for those earning $250k a year or more.
    IMHO, there are lots of tax loopholes to close that could help fund such a plan, and lots of tax loopholes Congress could open to make the funding impossible. In other words, the campaign’s assertions are credible, but what Congress eventually does cannot be predicted.
    As for the cost of recombinant Factor VII (rFVIII): Research on the Web shows that in 2003,a few patients cost more than 50,000 Euros per MONTH to treat. Given the lower price of drugs in Europe compared to the United States, and given price trends sine 2003, the mother’s estimate of $80k per month in drug costs is credible given the immense number of units her child needed. More broadly, even if her math was somewhat off, she was clearly talking about monthly, not yearly, costs.
    Let us all count our blessings.

  3. Many hospitals are just as bad as insurance companies, they are controlled by big Corporate Investment groups, that what to show a profit on Wall Street.
    This is just plain wrong, Mark. Approximately 85% of all hospital beds nationwide belong to non-profit institutions. In major Eastern markets like New York City and Boston, virtually all of the hospitals are non-profit, though a few of the most famous do have sizeable endowments. Moreover, the largest for profit chain, HCA, which went private a year or so back, had a profitability rate about in line with the average S&P 400 Industrial company. Drug and device manufacturers, by contrast, are much more profitable than average, at least until the last few years. Most hospitals are lucky to earn a profit margin on sales in the low single digits (under 5%) in most years.
    As for insurance reimbursement to hospitals, most in-patient care episodes are paid either on a case rate or on a per diem basis. Out-patient services are generally paid on a case rate basis (for surgical procedures) or by CPT-4 code for services like imaging. Medicare pays hospitals based on DRG code (diagnosis related groups). There are 543 such codes the last time I looked.
    That all said, hospital list prices, called chargemaster rates, are often arbitrary and almost always absurd. Moreover, many hospitals raise these rates by as much as 10% per year on average. This is why people without insurance often get ludicrous bills for even comparatively minor operations like gall bladder surgery. There is no penalty for a hospital to set its list price as high as it wants since the vast majority of its bills are paid by either private insurance, Medicare or Medicaid at contract rates that are far lower than chargemaster rates. When a case turns out to be much more complex than normal, however, at least under Medicare, there is something called outlier payments. Under these, as I understand it, Medicare usually pays a percentage of the difference between the normal DRG rate and the full list price. So, the higher the list price, the higher the outlier payment the hospital may be eligible to collect.
    I have felt for sometime that cost control efforts should be focused on care that happens in hospitals because this is where the big ticket costs are (including separately billed physician fees for procedures that take place in a hospital setting). There is a lot of futile care that takes place at the end of life, care to fix mistakes which have historically been paid for but shouldn’t be and general inattention to cost control and efficiency. That all needs to change and soon.

  4. One of the problems I see from above is NO one really knows how much the treatments cost. I can tell you that from my experience, hospitals will put through whatever amount they can get from the insurance companies, usually padding the cost with other charges. Many hospitals are just as bad as insurance companies, they are controlled by big Corporate Investment groups, that what to show a profit on Wall Street. So people are charged differently all over the country, and when they can’t make huge profits, they move on. Insurance companies just say, this is what health care costs now, so they raise their rates, across the board.
    My experience being injured has been an eye opening experience about hospitals and Insurance companies in this country. They are all about profit, they don’t care about people, they don’t see any difference between a widgit or a human being, this is what our country as become, short term profit for a select few on Wall Street at any cost to human life.

  5. There is no real math on Senator Obama’s web site. Here’s all there is: “The additional revenue needed to fund the up-front investments in technology and to help people who cannot afford health insurance is more than covered by allowing the Bush tax cuts to expire for people making more than $250,000 per year, as they are scheduled to do.”
    That reinforces my point. One can’t redirect an already-expired tax cut to pay for new spending. One certainly can raise taxes to do so, but of course Senator Obama doesn’t want to say he’ll do that. At least John Edwards honestly admits he’ll raise taxes to pay for his health plan — Senator Obama should do the same.
    And with respect to my point that no major health reform plan could possibly take effect before January 2011 — yes of course I can’t provide you any evidence that something that could happen in the future absolutely won’t happen. But let’s take your example of President Bush and education: it took a full year following his inauguration for No Child Left Behind to be signed into law. And health care reform is considerably more complex.
    But even if it only took from January 2009 to January 2010 to pass a new health reform law, it will take time for new regulations to implement the law to be issued, revised, published, etc. So the idea that the federal government could implement an Obama health reform plan by the beginning of calendar year 2011 is the best case scenario, and highly optimistic at that.
    And that feeds back into my original point that Senator Obama can’t use the by-then-expired Bush tax cuts to pay for his new health care spending.
    I admire your passion for Senator Obama’s campaign. But when candidates like Senator Obama make promises that they can’t possibly fulfill, that’s how passion is turned to cynicism. Don’t set yourself up for that to happen.

  6. It wouldn’t be the first time that someone made a mistake about their own treatment. Hell, most elderly with co-morbidities cannot report their durgs accurately when arriving at the ER (much less their cost) For all I know, this woman gets an EOB that shows the cost as 80,000 but you know that’s not a real number. There are just no clinically valid treatments of hemophilia that I am aware of that cost 80k per month. I really can’t imagine a clinically valid treatment for any chronic condition that costs that much even in the richest country in the world with the most expensive healthcare in the world. It is the equivalent of full time ICU care with no hope of change. Even without complications, it is a present value of 15-20 million. On the other hand, a once a week infusion of factor 8 or 9 (I don’t believe it’s a shot) at $2000 would definitely be 8,000. I don’t want numbers like this to even be part of the debate unless they are better validated.

  7. “Dr. Paul”—I wouldn’t emphasize the “Dr.” part too much, CT. Physicians aren’t exactly known for their political savvy or sense of foreign (or domestic) policy. They are more known for having gotten us into this mess in the first place due to their consistent and overwhelming recalcitrance on the subject of fee-for-service. That is the primary (perhaps the ONLY) reason we are in the health care mess we are currently experiencing. No one would expect Ron Paul, of all people, to help us get out of it.

  8. One can go to the Obama Web site, to which this blog links, and see that the math on the tax cut revenues and the cost of an Obama health care plan is totally legitimate. What remains to be seen, to be fair, is what other social programs might have a claim on those revenues, as well. On the other hand, fairness also demands that certain government spending be seen as what it often is — an investment. This includes science education, building interstate highways, and a host of other expenditures. This blog is not about tax policy, so we won’t ask why so many conservatives detest taxes to pay for health care for kids but not tax subsidies for second homes, million dollar mortgages and the like.
    More to the point, Greylock’s entire post is based on his assertion that no health reform could begin by Jan. 2011 “under even the most optimistic assumptions.” That statement is completely unsupported by any evidence other than his confident declaration. Newly elected presidents choose where to spend their political capital. President George W. Bush made education and tax cuts a top priority and passed them quickly, despite his tiny margin of Electoral College victory. President Obama will attempt to do the same with health care reform. and “under even the most optimistic assumptions,” his landslide victory in November, 2008, carrying Democrats into Congress on his coattails, will ensure that he succeeds.
    Heck, “under even the most optimistic assumptions,” a Republican presidential candidate will genuinely care about universal coverage, as well.

  9. I’m a medical student who was doing the exact same thing – walking houses and making phone calls – albeit for a less successful candidate with far different ideas on health care than Senator Obama; Dr. Paul.
    But whoever you were out there in the four degree weather for, the apathy is real. And Michael has written a real reminder on how Americans vote (and it isn’t with specific policy platforms in mind).
    As an observation of the hundreds of Iowans I talked to not a single one listed health care as their primary concern heading into Jan 3rd. Obviously just a small sample of middle America, but kind’ve humbling.

  10. “I assured her Obama’s plan was less expensive than that of his Democratic rivals and that phasing out the Bush tax cuts for the rich would pay for it. Those assertions are true, but, of course, not quite the whole truth…”
    Not only is that assertion not quite the whole truth, it’s completely false. The Bush tax cuts are scheduled to expire at the end of 2010, which under even the most optimistic scenario is before anyone’s “health reform” plan would begin. So unless the Democratic Congress extends those tax cuts, there won’t be any “tax cuts for the rich” from which a President Obama could draw revenues.
    Maybe you can head up to New Hampshire with the truth about Obama’s double tax hike (no more Bush cuts, plus new Obama taxes to pay for health plan) this weekend.

  11. Elliott,
    I asked the same question of Michael, and he told me that he asked that question as well of the woman. Apparently the child has a rare form of hemophilia and requires multiple injections per day of a recombinant form of Factor 8. That said, I’m not a clinician and don’t know for sure.

  12. 80,000/month is a typo or the woman does not know how much it really does cost.