OP-ED

Op-Ed: A Social Democrat Weighs in on a Government Health Plan

David hansen 09

I was born into a Berkeley family of Social Democrats—my father studied Swedish economic  policies—then I trained in social-democratic Economics in Scandinavia, before cutting my career teeth in a Norwegian Labor Party think tank. I thereby personify the threat trumpeted by Republicans: the sinister spread of Social Democracy.

So I am cheering wildly for establishing a federally owned health plan, right? Wrong.

Not that I’m particular opposed, either: It’s just not a big deal. Either way, new government-run plan or not, there won’t be much impact on our nation’s enormous health care problems.  Our health care dilemmas—high costs, poor access, and mediocre outcomes–stem from much more fundamental issues than who sits on the board of yet another insurance plan.

These include the perverse incentive structures for key decision makers in the industry, including insurers, providers and patients. Insurers earn money by serving the well rather than the ill who need their assistance most, providers don’t become rich by managing care over time but by medically over-treating the critically sick, and consumers are incented to both stay out of the insurance pool until they’re sick and to seek medical help late.

Many health insurance executives I know would like to act more in keeping with the public good, but they can’t. If they did, they’d be driven out of business. Wherever there are large financial tradeoffs, the margins aren’t sufficient to allow choices other than prioritizing the organization’s cash flow. The same would apply to a publicly owned insurance company, as also its executives won’t be immune to the economic forces compelling antisocial decisions. Instead, economic realities in our poorly designed health care market would force behaviors similar to those by executives in for-profit, not-for-profit, and local/state government-owned health plans currently.  Unless, of course, we were to see a highly implausible scenario unfold with hundreds of billions in ongoing subsidies, something that in turn necessitates either improbable tax increases or unimaginable charity from Chinese government.

The government’s main role in any sector, a Scandinavian economist would claim, is ensuring that the sector’s “framing conditions” promote both each organization’s viability and the public good simultaneously. Establishing proper framing conditions does not mean attempting to micromanage a sector with hundreds of thousands of critical decision makers. Rather it means shaping incentives at a macro level such that the hundreds of thousands make decisions in line with interests of the whole. Make it so insurers, physicians, hospitals, and patients do good for society in order to do well themselves. Framing conditions and incentives matter regardless of the payer system chosen, whether based on private insurers or a single-payer government entity.

Establishing a new government-run health plan, or not, changes little or nothing of the health care industry’s incentive structures and framing conditions. Thus, the debate about it is a distraction. Having political distractions can be good, of course, if populist rabble-rousers on the left and right thereby are kept from messing negatively with truly critical issues. However, I beseech those of you central to forming policy for the pending reform: Please keep your eyes on more important matters. There is too much at stake if also you ignore the fundamentals.

David Hansen has aided organizations with health care strategy, IT planning, and new venture development for a couple decades, both in Norway and in the USA. He holds graduate degrees in Economics and Business Administration, the latter from within the People’s Republic of Berkeley.

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SHAUNMaryBrucerpwMD as HELL Recent comment authors
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SHAUN
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SHAUN

While there are certainly a number of issues that require correction and improvement in the arena of health insurance and health care costs, I am utterly amazed (and frankly quite appalled) by the engrossing arrogance of the house leadership (aka the Democratic Party, which is not democratic in their actions at all). Not only are members of Congress not involved in the ‘public health care option” because of their false sense of entitlement and priviledge, but it is because their personal benefits (which are in fact much better than the average Joe or Jane will EVER experience) are so much… Read more »

Mary
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Mary

We need more in Congress who think like this…John Flemming…….
Under the current draft of the Democrat healthcare legislation, members of Congress are curiously exempt from the government-run health care option, keeping their existing health plans and services on Capitol Hill. If Members of Congress believe so strongly that government-run health care is the best solution for hard working American families, I think it only fitting that Americans see them lead the way. Public servants should always be accountable and responsible for what they are advocating, and I challenge the American people to demand this from their representatives.

Bruce
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Bruce

The one factor that influences costs more than anything else (my opinion and my son’s who is an MD) is the liability system in the U.S. Access to the legal system is incredibly easy in this country because lawyers know they have little risk in most lawsuits. Insurers charge enormous premiums to doctors to cover their risks, and the unintended consequences of this is to lose doctors to many specialties and to less risky professions. The best option for the remaining doctors is to cover their potential liabilities by performing redundant tests to ensure mistakes aren’t made. Much of this… Read more »

Nate
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Nate

“you would then agree that if the public plan were being run by people immune to short-term political pressures (like getting certain politicians reelected or serving special interests) then it could be “incredibly effective.” I think you will reflexively disagree, but you’re going to have to do some awfully hard twisting to be able to say a government run plan will necessarily be run badly and the military is often run well.” JD is it correct to assume you don’t know anyone in the military? You don’t have politicians sitting with each unit micromanaging it. You don’t have politicians sitting… Read more »

rpw
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rpw

I don’t know if this is the place for this, but I’ll take everyone’s silence to mean that I’m in the wrong forum. I’ve been reading THCB for a couple months now, mostly on the topic of reform (like most of us I think). I am currently entering my 13th and final year of training and in another year I will be a boarded sub-specialty surgeon. There has been little discussion here or elsewhere (please re-direct me if I’m wrong) about how we are going to continue to have access to medical and surgical specialties that are in low supply… Read more »

MD as HELL
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MD as HELL

Clearly the reason they have not expanded Medicaid for all the uninsured is because it is a terribly wasteful and expensive program. Expanding it unchanged would cause every state to go bankrupt immediately. That leaves the President’s goal; commandeer ALL the premiums for healthcare and cram everyone into the same system. This hardly seems politically feasable. Thank God. There is not enough unused capacity in American healthcare to allow everyone to show up at the ER all at once. There are not half-empty schedules in doctors’ offices just begging for more patients. Increase the demand for MD services and they… Read more »

jd
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jd

“Our military is incredibly effective when free of politics. It’s biggest failures have come when it was being ran by the government.” Oh, man. First, the military is always run by the government and its employees are government employees. The Commander in Chief is, you know, the President. Second, fine, when political pressures intrude, military considerations can be outweighed by the need to placate constituencies and that can create problems. No one disagrees, just as no one disagrees that political pressures and interests can make any branch of government be badly run. Third, following what I think is your logic… Read more »

Lonnie Fuller MD
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Lonnie Fuller MD

Nate, You raise an interesting point. You are correct that relying on the doctor regarding preventive services is inefficient. However, physician organizations have lobbied to ensure that patients cannot get these services unless a physician orders them. So, if a diabetic wanted to check their LDL cholesterol yearly like the guidelines state, nobody would run the test for them without a physician’s order. Since we pay physicians for their time rather for what they accomplish, the physician only gets paid for the office visit, whether the patient gets the test or not. I read recently a comparison describing the US… Read more »

Nate
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Nate

George; 1. They would have purchased insurance that wouldn’t allow them 31K in out of pocket cost 2. Hopefully none it’s not their job to deliver care they are suppose to reimburse you for expenses you had, it sounds like they did this. What where your expectations of the insurance company? 3. I would disagree with your macro assumption. Our military is incredibly effective when free of politics. It’s biggest failures have come when it was being ran by the government. Iraq before the Army surged like it wanted to. Somolia with it’s minimial force and inbigious equipment. Vietnam. Our… Read more »

MD as HELL
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MD as HELL

george, To answer your questions: 1: They would take out a loan, sell something or make payments to the hospitals and doctors for a long time at no interest. 2. Insurance companies do not pay willingly or easily. Someone has to haggle. 3. Who says we have a great military establishment? I am hopleful that other militaries around the world are at least as screwed up as ours. 4. Did you have bad healthcare in the US? It sounds like your daughter did well. Should you have taken her to France for superior care? Group, The only ways to cut… Read more »

Lonnie Fuller Jr., MD
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Lonnie Fuller Jr., MD

Hi Nate, Sorry for not providing more focused direction. The report is not mine, it’s from the NCQA. Pages 19-88 provide tables showing the percentage of patients who get various treatments. The table of contents on page 3 will allow you to go to specific clinical metrics. As you review the data you will find that many insured patients don’t get appropriate testing or reach beneficial clinical targets. The Institute of Medicine reports that on average, it takes 10-15 years from the time a medical intervention is proven effective to the time it is ubiquitous at the bedside. Note that… Read more »

Peter
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Peter

Tom, how will tax credits reduce the spiraling cost of healthcare? It’s also interesting that you call your ideas “market based” when they require government to do the funding. And what different options do people need in healthcare other than – when sick get treated. A public plan would/should not restrict your doctor or hospital of choice.

George
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George

Nate and everyone that agrees with you, I can see you have some strong convictions and ideas about this stuff. Before I give you my point of view I would like to give you a little context. I’m an engineer with an advance degree in Mathematics I make over 280K a year. In a way I know neither I nor anyone in my immediate family we’ll ever go with healthcare. I’ll be able to afford it in almost any environment. Last year my young daughter had an accident, I won’t go into the details of the accident since they really… Read more »

Peter
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Peter

Nate, the “corruption and greed are 3-5 times higher in public plans then private” all come from providers not government. Government may be at fault for not spending more/enough on fraud investigation/prevention. But I will tell you that as soon as Medicare/Medicaid start agressive fraud investigations the providers will be on the phone to their congressman complaining of over reaching government.

Nate
Guest
Nate

once again peter your complete lack of understnading on healthcare leads to silly comments. How do you not know by now that corruption and greed are 3-5 times higher in public plans then private? Medicare and Medicaid have 10% fraud rates compared to 1-2% in private insurance. Medicare nor Medicaid have reasonable cost 10-20% of private premium is cost shifting from public plans. Public plans don’t pay state premium tax. What cost shifting are you talking about? Medicare providers lobby just as much if not more then private insurance. I think you managed the holy grail of inaccurate commenting, everything… Read more »