OP-ED

Victims of Health Care Reform

Who will be hurt the most by the health reform legislation Congress passed last year?

Answer: The most vulnerable segments of society: the poor, the elderly and the disabled. That’s right. Virtually everyone in Congress who is left-of-center voted for a law that will significantly decrease access to care for the people they claim to care most about.

Why isn’t anyone writing about this?

Answer: Because almost all the people who write about health care know almost nothing about economics.

Basically, there are two ways to reform health care. One way is top down. The other is bottom up. The latter is based on the economic way of thinking. The former rejects that way of thinking. The latter gets the economic incentives right for all the individual actors, leaving the social result largely unpredictable. The former starts with a social goal and tries to impose it from above, leaving individuals with perverse incentives to undermine it. The latter depends for its success on people acting in their self-interest. The former depends for its success on preventing people from acting in their self-interest.

I think I can probably count on the fingers of two hands the number of people in health policy who accept the economic way of thinking. All the rest — 99.9% of the total, including a lot of people with “Ph.D., economist” after their names — reject it in spades.

Almost everybody in health policy thinks you can have a plan designed by people at the top that will work, even though every doctor, every nurse, every hospital administrator and 310 million patients all have an economic self-interest in defeating the plan.

They are so convinced of the collectivist vision of health care they do not even think it’s necessary to discuss the incentives of individuals. For example, Harvard health economist David Cutler (who admits to having a hand in the health reform bill) wrote an article the other day entitled, “The Simple Economics of Health Reform,” in which he mentioned the word “patient” not even once. For perspective, this would be like an economist writing about the market for gasoline without even mentioning the people who drive cars, trucks and vans. It would be like an economic analysis of the housing market that completely ignores the role of homebuyers.

Here are some points I’ve made before that completely escape Cutler, but should be included in any economic analysis of health reform:

  • Thirty-two million otherwise uninsured people will try to double their consumption of medical care.
  • Almost everyone with private insurance and all Medicare enrollees will try to increase their consumption of preventive services — promised without deductible or copayment.
  • With no increase in supply, doctors and patients will face a huge rationing problem.
  • There will be up to 900,000 additional emergency room visits and the time price of care (rationing by waiting) will jump substantially at every emergency room, every primary care facility and for most specialty services as well.
  • If everyone in America succeeds in getting all the recommended preventive care, for example, primary care physicians will have to spend more than 7 hours of every working day delivering services to basically healthy people.
  • Patients whose plan pays below-market rates will be pushed to the rear of the waiting lines; this includes our most vulnerable populations — the elderly, the disabled and poor families on Medicaid.
  • In the meantime, a large flourishing market for concierge services is likely to emerge — draining resources from the third-party payer system and making the rationing problem worse for all who are left behind.

In general, the left is obsessed with distributional issues. That’s why it’s so surprising that they passed a law that is going to force middle- and upper-middle-income families to have more insurance than they really want. Once they have it and act on it, they will in the process make access more difficult for the poorest and most vulnerable segments of society.

It’s amazing how much you can learn if you really do take advantage of some “simple economics.”

John C. Goodman, PhD, is president and CEO of the National Center for Policy Analysis. He is also the Kellye Wright Fellow in health care. His Health Policy Blog is considered among the top conservative health care blogs where health care problems are discussed by top health policy experts from all sides of the political spectrum.

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43 replies »

  1. This paints a rather frightening picture of healthcare in the US but the points raised seem valid. There has to be more non-political dialogue with people that matter.

    In the UK we are extremely privileged to have our NHS system which is ostensibly free.

  2. The new health care bill will create more problems for patients wanting access to care. I am a RN working in an outpatient specialty clinic. Right now the clinic is understaffed and overpopulated with patients. Often times, a provider is seeing 15-20 patients in a 3 hour period. Patients are being rushed during appointments and not being given the best quality of care. What happens when legislation provides insurance to all and the need for specialty follow-up care is more difficult to access due to lack of providers? Not only the lack of providers, but the lack of nurses in clinics. Nurses have the opportunity to provide patient education, but often times that education gets pushed down the ladder due to high patient volume and lack of resources. Will the new bill allow for more funding in nursing education? Will the bill allow for increased provider reimbursement? These are examples of what could help with the future of increased insured Americans and lack of resources currently available.

  3. I am by no means an expert on the health care reform but have done quite a bit of reading up on it for a class in my Master’s program. I currently work as a nurse. I don’t understand at all why you would think the poor and elderly would be the victims of this reform. From what I have gathered, this is who will actually benefit. It’s the middle and upper class who will continue to pay more because they make more. Why would you assume that 32 million uninsured, once they obtain insurance, would double their consumption of care? I think they would obtain care as you and I do. Emergency room visits would hopefully decrease d/t the fact that more people have access to preventative care. You talk about supply and demand as far as patients seeking medical care. As another response was posted, this would create more jobs. As a nurse, I know many new graduate nurses who can’t get a job now. I also don’t know where in the reform it mandates that middle and upper income families purchase more insurance than they already have? Previsions may be made to their existing plan but I have not read that they have to purchase more? Resources to support points made would be helpful.

  4. Nate and fellow libertarians, are you aware that there are nongov aid organizations that are active in the 3rd world and the US, but not in Canada or Europe?
    One obvious major difference between US and other developed world poor is the fact that the poor in the US don’t have medical coverage, except for those who have medicaid. Also, I haven’t seen so many people with terrible dental status in germany or France.
    Probably just a liberal conspiracy that wants to embarass US capitalism.
    It would also be interesting to compare the number of homeless and illiterate people – has a lot to do with (legal and illegal) immigration, but immigration does also exist in Europe.

  5. Keep in mind that most of these European countries can probably afford to maintain a uhc system because the health burden in those countries is much lower than in the US where unhealthy lifestyles and the resulting problems are a major reason for our current costs. Therefore the “minor” inefficiencies of UHS in Europe would probably be exacerbated in the US.

  6. “The US is definitely closer to developing countries than the rest of the industrialized world due to the huge income differences between rich and poor,”
    Not a very accurate or honest argument rbar, our poor as exactly the same as the poor in the rest of the industrialized world, our rich are just considerably richer. While technically accurate your claim doesn’t support your argument.
    http://www.coyoteblog.com/coyote_blog/2011/02/speaking-of-income-distribution.html
    When comparing to European social democracies, it turns out that while the US’s income distribution is wider, that is almost entirely due to the top end being higher. The poorest 10% make about the same as the poorest 10% in Europe,

  7. JUST LIKE MAGGIE
    Thanks for proving my point, that so many OweBama-its can’t do math.
    Looking forward to you and OweBama, failing miserably.
    —-
    ” .. But let me reply in the same vein: Na na na boo boo stick your head in doo doo.”

  8. Bart,
    Even though I do not agree with you, your points are well taken and your comments are thought provoking. But let me reply in the same vein:
    Na na na boo boo stick your head in doo doo.

  9. He doesn’t mention “patient” once, eh? Did you read it?
    “Providers that receive the bundled payment would then be responsible for the hospital costs, post-hos- pital rehabilitation, and subsequent follow-up care for those patients.”
    “This type of methodology shows up in many guises: from bundled chronic disease programs, to accountable care organizations (bundling payments for patients as a whole), to pay-for-performance programs for primary care physicians.”
    I see “patients” twice, but that’s a stupid argument anyway, there are plenty of other ways you can express “patient,” and indeed in insurance parlance–this is more about insurance than anything–the term “beneficiary” is probably a better one anyway.

  10. BEYOND STUPIDITY
    What is 100% clear here, is how many people do not understand math, finance and economics.
    They are as blind as OweBama, Pelosi and Reid about limited resources and UNLIMITED demand.
    Having NEVER been accountable for managing large numbers of people and resources, they thumb-suck and claim “government can do this.” Right – and pigs will fly, too. And Europe and Asia will pay their fair share of medical research costs.
    See you in court. See you, after your inexperienced, naive efforts fail and you have to be rescued.

  11. “Gee, what have I been saying since this farce of an act was signed: you can’t mandate people buy insurance.”
    Tell the Germans, French, Swiss, Dutch……
    Steve
    The Germans, French, Swiss, and Dutch have their own national constitutions that their body of laws must stay within. Two federal judges have now looked at the individual mandate and declared that it falls outside of the bounds of the U.S. Constitution, which is the only constitution they get to look at when deciding.

  12. Uhmmh, industrial health, the rest of the industrialized world HAS universal coverage or sthg close. You may want to read up on that.
    I lived in 2 european countries (and now live in the US after realizing that my spouse’s US diplomas would be of better use in the US, and I traveled a lot incl. developing countries (south america, india, thailand). The US is definitely closer to developing countries than the rest of the industrialized world due to the huge income differences between rich and poor, poor social net resulting in gated communities, ghetto (akin to slum-) formation, poverty, people with serious untreated health conditions … and as a side note, also relatively poor infrastructure and a relatively large percentage of uneducated and/or religious fringe views in elected officials.

  13. It truly amazes me that one can make a comparison of medical care in developing countries as opposed to developed countries and draw social conclusions. Of course, the more we give over our health care and other economic planning decisions to the government, the sooner we might actually know what it feels like to be in a developing country…

  14. While the author writes about the importance of economic thinking, he does not suggest an economic solution. Our current system is a deeply flawed marketplace with externalities, monopolistic marketplace and public good characteristics. The problem is that our current private insurance based system does not provide an efficient market place provide both high quality care and efficient costs. Rather, the primary incentive is for insurance sponsors to exclude, through benefit design, pricing or marketing individuals with serious and predictably high medical costs. The insurers shift the costs to others, forcing those with chronic conditions to poverty and government sponsored plans.
    The author provides several micro examples of how incentives might result in higher costs without addressing the fact that the current situation is unsustainable.
    What reforms would the author propose that would address the fundamental flaws of the marketplace. Please don’t repeat the overly simplistic nostrom of higher copays and deductibles. That “solution” has been the the primary strategy of health plans for the last 15 years, and does not appear to have accomplished anything.

  15. “Gee, what have I been saying since this farce of an act was signed: you can’t mandate people buy insurance.”
    Tell the Germans, French, Swiss, Dutch……
    Steve

  16. “I think I can probably count on the fingers of two hands the number of people in health policy who accept the economic way of thinking. All the rest — 99.9% of the total, including a lot of people with “Ph.D., economist” after their names — reject it in spades.”
    No, we just reject your particular view of economics. This will come as a major shock to you and your acolytes, but there are many POVs when it comes to economics. Yours are not the ones written on clay tablets. (Your paragraph ranks as one of the all time dumb things I have ever seen written by an economist.)
    Steve

  17. Really, all I want to know is will our son still have access to medical care? He has two chronic illnesses. With scheduled (expensive) treatment he is able to work. Without it, he would likely be unable to work and require constant care and frequent hospitalization. He’s in the care system now. What happens to it with Obamacare?

  18. You have to love politicians, who mostly are lawyers, compose legislation and not realize that the primary basis to fund it could be declared unconstitutional, because it tries to take a path no prior Congress ever attempted.
    Is this funny, or pathetic? I’m talking about the law, not the politicians. There is nothing funny about people trying to screw the public!
    Gee, what have I been saying since this farce of an act was signed: you can’t mandate people buy insurance. So now we will see if the Supreme Court will agree or not. Gee, it also makes you wonder, in the desperation to win at all costs, if the book “The Pelican Brief” could become a non fiction story. I do not put it past any group to stoop this low to win a law or agenda.
    Sad to say, but this is what politics has degraded to. The Republicans made us eat a war, now the Democrats insurance.

  19. I understand both sides to this argument and this is the first I heard this side having an economic take on it. Very interesting.

  20. I am so sorry for Mr. Goodman that he is the only real economist on earth (or at the least one of the chosen 0.1%). It’s funny that this post starts with an admission that he is standing for fringe views, and we should applaud for that degree of honesty.

  21. Shoutin’ out to the choir, eh Ms Mahar?
    “Continue to drown out the truth with the lies, and bury the masses deep with the excrement of the falsehood of this legislation, and they will faint from the stench of the sheer mass of deceit and deceptions. We will win, at whatever cost.”
    Some Roman quote, or did I make it up to fit here!?
    Bet the ruling from Florida warms your soul tonight!

  22. “… a culture develops where hospital administrators and patients collude to extract as many resources as possible from health insurers…”
    Is this some sort of parallel universe?
    And then this little jewel…
    “There is a clear tension between a humane policy to the individual and a just policy toward society”
    We’ve come a long way…..

  23. Well, I turn on the news as I type these words and hear that the Federal Court out of Florida has ruled the mandate to buy insurance cannot be applied, thus undermining the whole legislation. This being the suit filed by 20+ states. Time for the Supremes to sing.
    Do not twist my interests, we need assistance from the political bodies both state and federal to get health care back on track to allow providers to treat and patients to be treated, but not some unilateral intrusion by politicians alone. If there is real truth and justice, maybe we will see a bipartisan, hell, call it a multipartisan effort to get real changes for the better implemented, and soon.
    By the way, I am sure the organizations asking for waivers were only interested in a one year period. Right; and where is this bridge over miles of sand I am supposed to be interested in purchasing!?

  24. It’s becoming evident that preventative medicine raises costs in the long term. More people with chronic illnesses survive to enroll in Medicare and go on to utilize hundreds of thousands of health care dollars before they die. It turns out anti-smoking campaigns raise costs since dying in your 50s or 60s of lung cancer is more inexpensive to society than paying their medical bills in their 80s and 90s.
    The US, more than any other country right now, has got to come to grips with the “R” word (rationing). There is a clear tension between a humane policy to the individual and a just policy toward society. Is it just for society to be virtual slaves to the ill and dying with no propect of ever paying for their services rendered? Is it humane to deny the ill and elderly medical care that reaches some threshold of expense?
    Our society is going to have to tackle these questions.
    The baby boomers have just started to retire. We ain’t seen nothing yet.

  25. David Cutler uses the word “patient” as an adjective or as the recipient of action. He seems to ignore any active or decision-making role for the patient as a buyer of medical services. In his view the U.S. health care system is a top down model where patients make few decisions once they walk through the doctor’s office door.
    It is common for health policy wonks to assume the tenants of economics somehow do not apply to health care. We know from the RAND Health Insurance Experiment that patients will reduce spending when faced with significant cost-sharing. But the bulk of costs are experienced in a hospital setting. For instance, I’m often described an anecdote along the lines of… if you’re in an ambulance suffering from a heart attack, you are not in a position to compare prices or negotiate fees.
    That may be true. But when most medical costs are paid by third-parties, providers in the health care system have no incentive to hold down spending. When patients care little about prices and are eager to maximize the quantity of services performed on them, a culture develops where hospital administrators and patients collude to extract as many resources as possible from health insurers (and Medicare). If we could get patients in the habit of paying their own day-to-day medical bills, it would be much easier to manage the large hospital expenditures that are rare. It would also be much harder for providers to charge high prices for inpatient services while being competitive for outpatient services.

  26. “The most vulnerable segments of society: the poor, the elderly and the disabled. That’s right. Virtually everyone in Congress who is left-of-center voted for a law that will significantly decrease access to care for the people they claim to care most about.”
    Can Mr. Goodman tell me in countries with government run/controlled healthcare who is getting significantly decreased access to care?
    “even though every doctor, every nurse, every hospital administrator and 310 million patients all have an economic self-interest in defeating the plan.”
    Shame on them.
    “This is a straw man argument. Those people don’t have health care access now. The real concern underlying this kind of commentary is that the “haves” will be forced to share with the “have nots”.”
    Exactly, but the really laughable part is nearly all those “haves” get their healthcare through subsidies.

  27. “more and more organizations and groups are getting these waivers to opt out”
    The waiver is a one-year delay in complying one specific requirement of the law: the minimum cap of $750,000 in annual pay-outs.
    In terms of number of enrollees, the largest recipient of waivers is the fast-food industry, who, through their national association, lobbied against the law.

  28. I keep mentioning so often how advocates and allies of the legislation are asking for waivers out of it, which is getting more press the past few days, one article I linked to at another thread the other day. How interesting NO ONE commented on it pro or con. Avoiding the subject will just conveniently make it go away? Not with the current House focusing on the issue.
    Ok, again, advocates here telling those of us who do not favor the legislation, explain to us how more and more organizations and groups are getting these waivers to opt out, and why, over 700 last count, per an article today at the Washington Times, this should not raise concern or doubt to the endless benefits, literal and figuratively, of this legislation! Your replies will be brief if any made, because they will have no substance to them!
    Isn’t it getting old, unbiased and objective readers, to read these shout downs by the Democrat lackies who don’t want the negatives noted? For every legitimate perk this legislation offers there is an equal damaging consequence, and that adds up to a neutral act in the end. And don’t we want legislation that does mostly good, and minimal bad?
    I decided to link the article while typing this, so I hope those who want truth and all facts will read it, and then pay attention to the deniers’ reactions:
    http://www.washingtontimes.com/news/2011/jan/28/tawdry-details-of-obamacare-420960137/
    And the bulk are unions, ferocious backers of Obama. And yet they must know something that makes them want out! Perhaps something Dr Goodman is writing about above?
    Pay no attention to the man behind the curtain! Come on, Obama, Reid, and Pelosi et al, we are on to you!!!

  29. “The real concern underlying this kind of commentary is that the “haves” will be forced to share with the “have nots”.”
    The real concern behind this sentence is the desire to get more of someone else’s money.
    There, that was simple. Now both sides feel better, I guess.

  30. I agree with Margalit Gur-Arie.
    It seems to me that JOHN GOODMAN, PhD is another one of those overly educated individuals who have no common sense. He is complaining that we will have a great increase in demand for medical care. You know what happens in a capitalist country when demand increases?
    Someone steps in to meet that demand. More demand = more jobs.
    And your complaint about creating more jobs is… what?

  31. Here is a little math:
    Cost of doctor’s visit for treatment to prevent an ashtma attack: $200
    Cost of hospitalization for asthma attack: $10,000 to $40,000
    Source Kaiser Permanente CEO George Halvoroson.
    In the poor neighborhoods of NY City four times as many children come to the emergency room for asthma attacks than from the wealthier neighborhoods.
    Source: NY City Dept of Health and Mental Hygiene

  32. ‘the “quite simple” and “inexpensive” solution to the primary care physician shortage’
    Pay them more. Lots more. 75% more. 25% would go to decreasing the size of their patient panels so they could provide more comprehensive care; 50% would go to increased take-home pay. As a percentage of total health care expenditures, that would be a drop in the bucket, and would be partially balanced by decreases in sub-specialist/ER care.

  33. “Why isn’t anyone writing about this?”
    Because its an overly simplistic, shallow, and questionable view of the way things will pan out.

  34. @pcp I’d be very interested in knowing the “quite simple” and “inexpensive” solution to the primary care physician shortage, especially in rural and underserved areas. Those of us struggling to resolve this crisis are waiting with bated breath for the easy way out…

  35. “900,000 additional emergency room visits”
    This reminds me of the fact that a few states actually put their National Guard units on alert when Medicare was passed in the 60’s to maintain order during the expected “deluge of patients on the emergency rooms”.
    We have a primary care physician shortage now, and when we start delivering basic medical services to people who are not getting them now the shortage will become greater. I suspect many of the ACA Pilot Projects are aimed at evaluating the reorganization of primary care and delegation of tasks to physician extenders to help meet the new demand.

  36. Sounds like the real problem you’ve identified in your bulleted points is not that too many people will have insurance (as you think), but that there is a shortage of primary care docs. Nothing new there. The solution to that problem is quite simple and actually quite inexpensive.

  37. I think the basic fallacy in this argument is the same one that underlines all arguments for analyzing health care as just another consumer good or service.
    People will not consume more medical care just because it is cheaper, “on sale” or more accessible. Most people don’t want to see doctors, or have surgeries. It is not at all like chocolate or vacation spas.
    Medical care usually hurts and is always uncomfortable. The only increase in demand you are going to see will come from folks that need medical care and were previously unable to obtain any, with significant “economic” repercussions to the system. If those people get their needed care on time, they will need less care down the road, saving us all money and freeing resources.

  38. This is a straw man argument. Those people don’t have health care access now. The real concern underlying this kind of commentary is that the “haves” will be forced to share with the “have nots”.

  39. While I don’t find economics to be all that simple, the rule of “supply and demand” is not at all difficult to grasp. If I have to wait a couple of weeks to see my physician or six-ten hours in the E.R., then what will happen when I’m competing with so many more patients for my share of time with a doctor?

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