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Let’s get real about the economy and health care

I just got a call from a reporter at one of the major news organizations to talk about the chances for health care reform.

We both commented on the almost surreal environment we are all in. I’m not sure if my friends and neighbors are in denial or just numbed by the recent cascade of events in the financial world. Up on the Hill and in the presidential campaigns it’s business as usual when it comes to extending the Bush tax cuts, spending on alternative energy, or the imperative to do health care reform.

The reality is we are now headed down an unavoidable slope into a recession. The only question is how bad. Today, Dr. Phil told his audience to stop spending money, get their credit card debt paid off, and hold cash–"Cash is king." They are and they will.

General Motors’ stock hit a price today not seen since the 1950s because no one is buying cars–and won’t be for quite awhile.

A slowed economy means less tax revenue at a time we were already headed for a $500 billion budget deficit in 2009 — and that was before we would spend as much as $200 billion to extend all (McCain) or most (Obama) of the Bush tax cuts. (Anybody want to give odds on that?)

The next Congress and the next President are facing unprecedented fiscal challenges presuming the credit crisis starts to work itself out.

Someone recently told me an economic crisis doesn’t necessarily mean we won’t have important social legislation. After all, Social Security came from the depths of the Great Depression. It did. But it was pay-as-you go–there was no big upfront cost as there is in health care.

This denial–or numbness–in the face of a harsh reality reminds me of the times I have called the airlines in the face of a blizzard looking to get them to rebook my flight without penalty. The usual answer is, "The computer says its on time so far." Of course you know it isn’t going to take off in the midst of the terrible storm outside.

Health care reform isn’t going to take off in the midst of this huge financial storm either and McCain, Obama, all those offices on the Hill saying it will aren’t going to make it so.

The sooner we get real–on health care and everything else–the sooner we can start talking about what is really possible.

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15 replies »

  1. i think that the econymical struggles in this contry have been very intrugeing for the past few years i also think that the goverment is over going a huge economic scam of the people 9/11 was a goverment consperisy lead by president bush so he can start a war put it thrugh to iraq and collect the exses money as pocket money why do you think hes so happy about obama becoming president? any way as far ans health care goes the goverment is using

  2. I propose that we use the consumerism model being employed by most health insurance companies as a basis for real universal healthcare. We can use this model to institute a true single payer national healthcare system without losing the benefits of a competitive free market. All preventative healthcare such as physicals etc. would be covered 100% as well as all families under the poverty level would be 100% covered. All families above the poverty line would be required to meet a yearly deductible via the proliferation of HSA’s (we could potentially explore the possibility of letting people access their 401k’s to either fund the HSA’s or pay for medical expenses). The deductible would be directly linked to the family size and income level. Larger families have a larger deductible as do wealthier families up to a cap. After meeting the deductible the single payer system takes over similar to a high deductible health plan. The national healthcare system will provide payment for standard prescribed services beyond the consumer’s deductible. Where I would differ is the consumer would still retain the option of using any additional funding in their HSA to pay for additional services, such as private service rather than public, advanced treatments etc. using tax free HSA money.
    This strategy has multiple benefits including:
    Everyone is covered and no one is forced to buy anything.
    Regardless of income level all citizens are covered and able to receive the medical care they need. No one is unfairly burdened by being forced to pay for insurance they cannot afford. Medical costs will not be inflated to cover the costs associated with treating the un-insured.
    Consumers become more engaged in their healthcare decisions. Lowered healthcare costs.
    By voting with their dollars consumers will be better positioned to drive innovation and control medical costs. Similar to shopping for an auto mechanic or construction contractor the consumer will be allowed to research and seek out the best services for the greatest value.
    The public will have a financial incentive to maintain their health.
    The healthier you are the less you will spend on healthcare. Un-used HSA funds can be used to supplement retirement income should the consumers health and financial situation warrant it. Consumers who maintain a healthy lifestyle will be rewarded with a healthy, tax free, supplemental retirement income thanks to their careful planning and proper choices.
    Consumerism creates open market entrepreneurial opportunities.
    The competition for consumer dollars will create businesses and drive innovation. Along with the new businesses will come jobs and new opportunities for high quality low cost healthcare solutions.
    Alleviates many of the known pitfalls associated with other national healthcare systems.
    Through the melding of consumerism with national healthcare we can limit or remove many of the common complaints associated with other national healthcare systems. Long wait times for service will be limited by the competition for the consumer’s dollars. Stagnant medical innovation would also be eliminated via increased competition brought about via consumerism. By allowing those with the desire and means to do so to use HSA dollars to fund out of pocket expenses for advanced or un-orthodox treatments we can encourage and drive innovation that may eventually become the standard in the future providing an ever better quality of healthcare for all.
    Obviously this is a very high level outline and does not get down deep in the weeds. I do feel however that this can be a very workable solution. The health insurance companies are clearly staking a lot in the success of this methodology to maintain profitability going into the future. If they can use this to be profitable, a not-for-profit single payer system should easily be able to break even without costing more to the consumer. Even if it is government run! J
    I’m all for using profitability as a driving force where it makes sense to do so. In my opinion, health insurance simply doesn’t fit the mold. One of the easiest and most common ways for a health insurer to make a profit is to deny claims. With the need to make a profit, denying a claim is reduced to simply a way to make a buck. Remove the need to make a profit and the playing field changes. No longer is the person who needs an expensive transplant on the other end of the phone simply an income drain. Suddenly they are a person, a mom, a dad, a brother or sister and they need help. Life is too precious to be left to profitability.

  3. Health care costs as a percentage of GDP continues to rise, not only in the U.S., but in all other Western countries. Right now, with costs at 16% of GDP, we are at a breaking point. Productivity increases? Sure. But it still takes a surgeon an hour to do an appendectomy, and it takes a physician ten or fifteen minutes to see a patient. The blunt fact is that more procedures, drugs, and tests are available each year, and people demand to have them. So… who’s going to convince the public they will have to settle for less than they feel they need?

  4. Social insurance can be combined with multiple payers as in the Netherlands, Germany and Israel. While it will be a difficult process, we may see the following emerge:
    1) In 2009 Medicaid may be folded into Medicare to remove a major burden from state budgets. States cannot run fiscal deficits – the Federal government can. Rather than give Federal bailouts to the states, it might be easier to cover the acute care costs of the low-income population and long-term care costs of the elderly using nationally uniform eligibility standards and benefits by having Medicaid becoming 100% Federally funded. It would also dramatically reduce inequalities, as currently wealthy states have more generous Medicaid eligibility and benefits and poorer states have less Medicaid eligibility and benefits. As over half of Medicaid is already spent on long-term care, it might be presented as a change benefiting the elderly, blind and disabled.
    2) In 2010, Medicare will be expanded again by the creation of a national high-risk uninsurable program. McCain has talked about spending $7-$10 billion in Federal subsidies to help states expand or create high-risk programs. His own health policy advocates have said that the costs might be 10 or 25 times higher, depending on how quickly the employer-based insurance system falls apart and the generousity of the state programs. Rather than have 50 such programs, do it through Medicare.
    3) Then in 2011 start a transition to a Federally-regulated market, using a risk-adjusted voucher, as in the Netherlands or Israel. A risk-adjusted voucher provides more equity than a fixed refundable tax credit, and is provided at the start of period of coverage, not after the year.
    The premiums would be relatively low with the substantial costs of long-term care, the care for the permanently disabled and those who are uninsurable removed from the costs to be covered. Individuals could have a choice of plans, as in the Netherlands and Israel.
    As part of this transition there would be a reduction over time in the tax-exclusion on employer-provided health benefits, but not the radical ending them all at once as McCain has suggested.
    4) There obviously would be shifts in costs from states and employers to the Federal government. To preserve budget neutrality, these costs could be paid for by gradual increases in taxes on tobacco, beer, wine, spirits, edible fats, ammunition, and fossile-fuel engines. All of these have direct or indirect adverse effects on health and such externalities should be incorporated into their prices as medical care is being universally provided.

  5. tcoyote, neither candiate has a good plan for healthcare. I’m not in favor of employer financed plans but an income tax based single-pay system where the government will create a budget and control costs. This way people are always covered, even the self employed. The money would come partly from money we now pay insurance companies, sorry insurance industry but you’ve never been part of the solution. I actually think John McCain’s plan will get us to single-pay much faster than Obama’s plan because McCain believes the private market and individuals negotiating with insurance companies will actually work. As for his plan to tax company health benefits, I think that’s fair because I get NO tax break for paying for my own healthcare. But as more people become uninsured under McCain’s plan we will get closer to crisis and something that will work – single-pay.

  6. Of course health care reform isn’t going to be easy, or even fully plausible at any point in the near future. But we need to start somewhere. We need to focus on making small changes to the system, and those changes will hopefully trigger larger changes over time. Any major “reform” or “overhaul” of the health care system touted by the Presidential nominees is just “fluff” – great ideas, but nowhere near realistic. And maybe that’s ok, just as long as it doesn’t stop us from making any changes at all, regardless of how small they might be.

  7. Robin/Dr. Levin/others – You are all so eloquent in your comments and your personal blogs, but the biggest question I have is: Are you ready to be part of the solution? The reason the overwhelming majority of Americans can’t talk about healthcare reform without mentioning the U.S. government is because we, as insiders in the healthcare system, have not developed solutions on our own. I talk a lot about reform in my blog (that’s really all it’s about), but I’m ready to step up and be part of the solution. If anyone else is willing to be part of the solution, I challenge you to make it known.

  8. Where the subsidy funds are going to come from to help pay for health insurance for the unemployed uninsured (who are not already on Medicaid)? Obama not only plans to raise taxes on all the Sub S Corporation that make more than $250 k, but also hit them for paid family leave. So in addition, to mandate that they provide health benefits or pay a tax instead will invade shrinking corporate cash flows and divert funds which would otherwise be used to create jobs. Tough to do in a recession, no?
    Would you rather have jobs or richer, federally guaranteed benefits? You won’t get both in an economic slump.

  9. Don’t worry, there’s plenty of money now. Seems the Dow is up 900+ today. There, glad that’s fixed, wasn’t that easy. Next bailout, healthcare – no problem.

  10. By all accounts, a social insurance system (e.g. single payer) is the most fiscally conservative: it is the only one that can guarantee that total health care expenditures, including what comes out of our individual pockets when paying privately for medical care, will come down, and that the disgraceful situation of Americans dying because they are priced out of perfectly standard medical services, will stop.
    Social insurance, which all developed nations but ours have adopted, works on the basic principle of spreading risk widely, exerts the greatest purchasing power over providers of services and goods, and cuts wasteful paperwork(dividing people up in risk or income categories is not cheap, nor is marketing “insurance products”, nor are the salaries of the CEOs of private insurance companies whose ultimate goal is to please shareholders). Our current “public/private” financing system is organized around the absurd principle of avoiding the sick and insuring the healthy (that is, until they become sick). As more and more of us can’t afford medical services, taxpayers are forced to subsidize an increasing number of ordinary Americans. This works marvels for Wall Street, but not for patients.
    Maybe with the current financial mess the ideology of “no government/no taxes is always best” will show its true face and fade lose ground in the corridors of power — although I am not holding my breath.
    Whichever the case may be, once ordinary people realize that contributing to shared pool with a predictable amount of our income, whether through taxes or payroll deductions, is far more in our interest than being at the mercy of for-profit insurers, whose real “freedom” is not “market freedom”, but rather the freedom to price an increasing number of us out of their “illness market”.
    In the past, Americans have had the courage to stand up against the status quo, in defense of ordinary people’s interests. Let us hope we can do it again.

  11. I take the opposite view — I actually think the ecomonic meltdown will be a catalyst in moving the needle on health care. I have always believed we’ve needed something catastrophic to get our attention and push us to make real change. Health Reform is at once, too broad and too vague a term to be truly meaningful– What aspect of health reform do you think won’t take off during this economic storm of ours?
    While Congress and states have tinkered at the margins, health care is tethered to the economy and while I don’t expect to see the new Administration/Comgress coming in to town and sitting down to address all of our health related problems, fixing our economy will provide opportunities to rethink: (1)Health Insurance;(2) The promise of technology–electronic health records, patient empowering tools, and (3)Personal Responsibility–with less disposable income, Americans may now find themselves walking and riding bikes more,exercising,fewer fast food crawls, etc surely are steps in the right direction.
    As I point out in my post on Disruptive Women in Health Care (Bailing Out Health Care: My Top 10 Priority List for the Next Secretary of HHS) http://www.disruptivewomen.net/2008/09/29/bailing-out-health-care-my-top-10-priority-list-for-the-next-secretary-of-hhs/
    there is no reason why many of the critically important health reforms we face (in fact, mental health parity has already passed as part of the bailout!) should not be able to take off. Who knows, workforce shortages may now be reversed given the economic downturn.

  12. Clearly Robert, you are spot on. There is not going to be additional funding for health care, and some programs such as funding for healthcare by the government will be delayed for some time. Even providers and health institutions will not capitalize these “improvements” in health care, which in reality have no effect on the quality of the science and medicine. The bells and whistles are not, nor never have been the essence of why American Health Care was once considered to be the best of the world.
    The medical establishment, driven by those who write the checks, ie providers (in certain cases), and their allied appointed administrators now are forced to cut back spending….and perhaps their work force. When you can’t afford it, you can’t afford it. How much is health information adding to quality, and adding to cost?
    Reform for healthcare is not going to be dictated by a bankrupt government, it must come from within, those who understand how the ‘non-system’ really functions.
    Not only will health investment stagnate but we will see rising unemployment in administrative positons for health care.
    There is a conundrum in health, on one aspect we need to diminish expense, and also increase volume since we are caught in the ‘baby boom’ explosion of our aging population. I address some of this in my next blog posting

  13. According to George Soros we’ve been spending about 8% more than we have been earning for the past 25 years. Our wealth has been because of debt creation, not production. Kevin Phillips also pointed this out when he stated that the financial services industry has over taken the manufacturing sector as a portion of GDP. We move money, not products, and usually that money is moved from the lower income groups to the upper income groups. I don’t see this changing and went into a zero debt, cash position a while ago. As for solutions tcoyote, I’m not sure there are any at this point, we’ve dug a pretty big hole. Voters don’t want the truth anyway and any solutions that would require pain won’t get the voters support, although the pain is coming anyway. The only time John McCain tried to tell the truth was when he told Detroit voters the auto jobs were NOT coming back. He changed that approach the next day. What would a maverick do?

  14. I love the airport monitor analogy; clearly the plane isn’t taking off until they have a new crew and possibly a different aircraft. But “Get real” means what, please? Put off “reform” until there is a budgetary surplus? Create a budget-neutral version? Cut spending? Work on “reforms” that don’t involve tax-funded subsidies?
    You’ve clearly got some ideas about this, Robert L, so let’s hear them. What are you expecting them to do exactly besides admit that the pandering stage of the health reform debate is over?

  15. I’m not sure why we should wait for the candidates to tell us how we’re going to reform the system. Let’s get busy assembling the people who really understand the system and what it will take to get it functioning properly.

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