OP-ED

The Unbridgeable Gap between Left and Right on Health Reform

Though thoroughly smothered under 2900 pages of well meaning but poorly focused, expert-driven “good works”, the core of the Affordable Care Act was providing 30 million people subsidized health insurance coverage. As the country continues to decide how it feels about this monumental legislation, a major ideological divide persists over whether the aggressive coverage expansion in health reform was really needed or not.

Far from “selling itself,” as a overconfident White House aide suggested it would back on March 23, 2010,  health reform remains strikingly unpopular. Only 37% of the public thinks the country will be better off as a result of health reform, and only 28% think their families will be better off, according to the May Kaiser Family Foundation tracking poll.  There is a stark partisan divide over health reform.  While 72% of Democrats have a favorable opinion of health reform, a substantial minority believes the bill could have done more (covered more people, provided a public option or path to single payer).  Alternatively, 74% of Republicans have an unfavorable opinion of health reform; the same percentage favors repeal.  Independents tend to break toward the Republican view of the bill (49% unfavorable vs. 35% favorable).  Those opposed feel more intensely about health reform than those in favor.

The Ryan House Budget for 2012 zeroes out all new spending for health reform (while keeping ACA’s Medicare cuts, devoting them to deficit reduction!).  The conservative narrative is that the problem of the uninsured was liberal mythology, not meriting major new spending.  In the blogosphere, an analysis surfaced suggesting that the real uninsured problem is only about 4 million people. This apparently originated in a Heritage Foundation blog posting from late August, 2009.  Other conservative analysts charitably suggest there may be as many as ten to twelve million uninsured worthy of federal help.   To take care of this smaller number, you do not need a major coverage expansion, but merely to apply the familiar market oriented remedies: selling insurance across state lines, high deductible health plans, malpractice reform, high risk pools, etc.

How do you get from 51 million (the 2009 Census Bureau estimate derived from the Current Population Survey) to four million (the Heritage blog actually started at 46 million, the estimated Census number of uninsured for 2007)?   Well, begin by subtracting those who are not uninsured for a full year.  According to the Heritage blog, that gets you down to 36 million.  Then subtract another 6 million children who are uninsured but eligible for Medicaid, and whose parents have not signed them up.  That gets you down to thirty million.  Then you subtract twelve million “illegal aliens” who are uninsured (down to eighteen), and the substantial number of “free riders” who come from “wealthy” households above $50 thousand in income and, voila, you’re down to four million “poor, sick uninsured for a lengthy period.”  This facile exercise in people subtraction is riddled both with errors and questionable judgments.

It is true that the 51 million uninsured estimated for 2009, which derives from the Current Population Survey of the Census Bureau, over-counts the actual number of uninsured due to significant under-reporting of Medicaid enrollment. Subtract that out and you have about 46 million people who reported that at one point in time they were uninsured during 2009.

There is great fluidity in health insurance coverage, just as there is in employment status and also in income eligibility for public programs like Medicaid.  Separate analysis using data from the Agency for Healthcare Research and Quality using the Census’ MEPS survey data suggested that in 2008 almost 41 million were uninsured for an entire year.  In a two-year analysis using the same data series, a little more than thirty million people were uninsured for two complete years (2007-2008).

Why those who have short-term coverage issues should be less worthy of help than the “hard core” long term uninsured is unexplained by the Heritage blogger.   Diabetics, or people with high blood pressure, or with depression who interrupt their medication because they cannot afford it even for a matter of months end up costing the entire society money in acute care for avoidable illness.

There is reasonable certainty that about a quarter of the uninsured are eligible for public programs (e.g. Medicaid or SCHIP) and are not enrolled.  This number, 11-12 million, is scaring Governors and Medicaid program directors all over the country.  Policy wonks ungallantly call them “the woodwork people”- that is, folks who will come out of the woodwork, like termites, in 2014 when the individual mandate requires them to have insurance coverage.  Unlike those to be newly covered by the ACA Medicaid expansion, the cost of the woodwork people will be paid for at the existing match (which averages 43% from state general funds).   States struggling with their present 53 million Medicaid enrollees will have to find a big chunk of new money.

The aforementioned MEPS survey found almost 6 million uninsured children in 2008 but not 100% of these are eligible for Medicaid or SCHIP, because many of them live in households above SCHIP’s income threshold.  Many families are daunted by the public program enrollment process, either because of mistrust of the government or deliberate bureaucratic barriers.  States in fiscal trouble have a powerful economic motive to make it complex or difficult for people to enroll.

Hospitals are actually the biggest “promoters” of public coverage both for adults and children, for the excellent reason that it reduces their bad debts.  But you have to be sick enough or patient enough to use the hospital to get their attention. To suggest that public coverage is simply “there” and that parents are dilatory in not using it does not tell the whole story, given the program’s “welfare” lineage and bureaucratic inertia.   There is clearly a problem here, but a different one than the Heritage Foundation blog analysis suggests.

A greater and less defensible leap is assuming that the entire “illegal alien” population is uninsured and since they shouldn’t be here in the first place, we shouldn’t worry about them.  According to the Pew Hispanic Center, in 2008, there were about 11.9 million people in the US illegally. Almost 40% of the illegal adults actually have some form of insurance, whether provided by employers or, via false documentation, through public programs. In 2006, the National Institute for Healthcare Management estimated that there were only about 5.6 million uninsured undocumenteds in the US in 2006. The Congressional Budget Office arrived at an identical figure for the current uninsured undocumented in a March 2011 report.

The number of undocumented folk in the US has probably fallen significantly in the past three years due to the collapse of housing construction and the shrinkage of tourism in the Sun Belt- two major employers of undocumented workers. In some states like Texas and California, the undocumented may yet constitute as many as one-third of the uninsured.  But the Heritage estimate of “12 million illegal uninsured” likely at least doubles the real number, as well as ignoring the on-the-ground reality – the public health threat posed by a large number of uncovered and highly mobile undocumented workers and their families.  Congressman Ryan’s proposed 2012 budget not only zeroes out money for the coverage expansion, but also cuts the safety net expansion provided community health centers, which serve the undocumented population without complaint.

The “high income” uninsured, who the conservative blogosphere assumes to be free riders, constitute a surprisingly large percentage of the long term uninsured.   Of the more than thirty million uninsured who were continuously without coverage for the entirety of the first two years of the recession (2007-2008), somewhat more than 45% had household incomes over 200% of poverty ($42 thousand a year for a family of four) , and more than 40% earned over 400% of poverty ($84 thousand a year for a family of four).  These are not small numbers.  But the idea that there are massive amounts of unallocated free cash sloshing around in their household budgets that is available to pay health premiums is laughable.

By the time of the 2007-8 recession, American consumers had accumulated a staggering $14 trillion in consumer debt.  When they ran out of cash, many consumers defaulted,  creating a landslide of uncollectible accounts that caused our financial crisis. According to the Federal Reserve, only about a trillion of this unsustainable consumer debt burden has been liquidated, mostly by being written off or paid off.  Thirteen trillion dollars in consumer debt remains a huge drag on the economy and a massive claim on future consumer income.  (As late as 2004, the total consumer debt was only $8 trillion).

If consumers had free cash, they’d be spending it, and we would not have 9.1% unemployment.   The idea that there are huge undiscovered cash reserves that would enable cash strapped consumers to take on a $14 thousand a year health insurance expense is delusional.  Unless we were willing to write off the remaining $13 trillion in debt and insist that people spend any resultant free cash purchasing health insurance, the idea that tens of millions of “wealthy” Americans are “voluntarily” foregoing insurance coverage does not reflect the on-the-ground reality. There may be free riders here, but not fifteen million of them.

What’s the bottom line?  While the headline number of 51 million uninsured probably overstates the magnitude of the real problem, there are presently tens of millions of Americans who cannot afford to purchase health coverage without help.  It isn’t just a problem of the “sick and poor”, either.  It’s the middle class, anxious and hurting, that is delaying seeking care because they either cannot afford health premiums or cannot afford the cost sharing their employer provided policies require.

The 4 million Heritage blogger’s number, faithfully reblogged by countless health reform critics, is a convenient rhetorical pretext for rolling back the Affordable Care Act’s coverage expansion, but not a credible estimate of the actual needs. One can legitimately quarrel with the large fraction of the expansion paid for by Medicaid, a broken program whose present covered population states cannot afford.  One can quarrel as well with the unspoken premise that health coverage is a “human right.” It might have been a more efficient use of scarce societal dollars simply to expand the safety net directly.

But simply abandoning the thirty million people promised coverage by the ACA to the vagaries of the “marketplace” (and a very expensive care system) is not only bad politics (a Tea Party gift to a struggling President Obama), but also bad social and public health policy.

Jeff Goldsmith is president of Health Futures Inc, which specializes in corporate strategic planning and forecasting future health care trends. He is also the author of “The Long Baby Boom: An Optimistic Vision for a Graying Generation.”

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Nate Ogden
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Nate Ogden

“Liberals would in general expand public health to include self-contained, long-gestating chronic diseases such as diabetes and high blood pressure, and catching cancers early when possible. (Arnold Kling calls this ‘premum medicine.’)” They would also regulate how much sodium you intake, how many sodas your drink, what you fry your food in, and anything else they could even remotely related to or affecting health. ” may have the reasons why. In any event, weak price controls are not a fact of nature–just a fact in America.” Price controls limit supply, as a freeer, enough E’s, market then those you mention… Read more »

bob hertz
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I am jumping into this string a little late, but let me add two comments for Jeff Goldsmith (who I have admired for years): 1. It may be time for a debate on the scope of public health. Almost all factions would agree that public health should include contagious diseases, plus emergency care for broken bones, infections, and life-threatening conditions such as stroke, heart blockages, impacted bowels, septic shock, etc. But conservatives tend to stop here. (Avik Roy stated this well on one of his blogs last year.) Liberals would in general expand public health to include self-contained, long-gestating chronic… Read more »

Barry Carol
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Barry Carol

Margalit – All or none contracting is exactly what the powerful hospitals insist on now. This includes large systems with multiple hospitals that refuse to let insurers contract with some of their hospitals but not others and even try to resist tiering which strikes me as particularly obscene. Why should a hospital be able to get away with telling an insurer that it can’t charge its own members a higher co-pay than the member would pay to go to a competitor’s hospital? This is another area that probably has to be dealt with via regulation, along with the pricing of… Read more »

Barry Carol
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Barry Carol

Steve – I don’t know how much difference there is geographically in the price actually collected per procedure nor do I know whether there is any correlation between the number of insurers and medical prices. I do know that within a given market, a dominant insurer will pay less than competitors with a much smaller market share. Regarding the growth rate of medical costs, I think it is driven by such trends as advances in technology, including new cancer drugs, the aging of the population, secular upward creep in coding intensity, and, of course, the increase in the price of… Read more »

Margalit Gur-Arie
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Barry,
Why would a Center of Excellence agree to be put in a special tier by the insurer and give up its bread and butter so to speak?
If I was running on of those, I would tell the insurer that it’s all or nothing, and if I was big enough and excellent enough, it would be all, I presume.

Barry Carol
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Barry Carol

Margalit – Yes, I know about the cooperatives. I think Premier Inc. is the largest, but I’m not sure if member hospitals use it to purchase expensive devices or not as that’s a decision driven mainly by surgeons at each hospital, I believe. As for the ACO’s, I’m not familiar with the intricacies of the regulations though much of the provider feedback seems to be negative so far. In theory, assuming they have sufficient critical mass and interoperable electronic records systems, they should be able to achieve some cost savings in care coordination, especially through the elimination or reduction of… Read more »

Margalit Gur-Arie
Guest

So , since as I pretty much expected, there seems to be wide “bi-partisan” consensus that these large health systems should be split up to more manageable size, how do you view the ACO movement, which only makes big organizations bigger, and encourages those that are still small to consolidate, or perish? Will the savings/losses they realize for Medicare (if any) be swiftly shifted to the private market? Or will the very large ACOs just turn into narrow networks for private HMOs? Or both?

Barry Carol
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Barry Carol

Steve – When it comes to patented drugs, even Wal-Mart doesn’t have nearly as much negotiating power as you might think. Big Pharma’s attitude is that if the doctor prescribes a drug, you, the pharmacy, need to carry it. So, our price is our price. As for the device manufacturers, they deliberately keep their prices very opaque to the point of requiring hospitals to sign confidentiality agreements precluding disclosure of how much each paid to any other hospital outside their system. All such confidentiality agreements should be illegal. The more price transparency we can have, the better. Finally, just as… Read more »

Margalit Gur-Arie
Guest

Hospitals already use these purchasing cooperatives. They are called GPO – Group Purchasing Organizations and they deliver everything from hardware to laundry services, including medical supplies. Some of these GPOs are very large national organizations, and other are small regional ones.

Barry Carol
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Barry Carol

“Are you guys suggesting that those corporations should be broken up?” Margalit – Yes, they should be broken up. There are surprisingly few economies of scale in running multiple hospitals. As you can see from the New York magazine article that Steve linked to, labor costs are 60% of the costs of operating a hospital. There may be modest economies when it comes to supplies which are about 15% of costs. Since most hospitals are non-profit, even access to capital is not as big an advantage as it might be. Overall financial health is more important there. The only reason… Read more »

steve
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steve

Barry- You describe the current situation. Most states are dominated by one or two insurers.

http://www.businessweek.com/magazine/content/09_31/b4141022519011.htm

http://www.americanprogress.org/issues/2009/11/insurance_market.html

As far as I can tell, there is no linkage between costs and number of insurers. States like Arkansas are dominated by one insurer. New York has its coverage spread more among different insurers. Both have premiums rising. It appears that even when insurers approach having a monopsony, that providers still have more market power.

As an aside, commercial insurers must be different in NYC. In PA they pay full charges. We love to see the commercials.

Steve

Nate Ogden
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Nate Ogden

“and now you want me to go to Joe’s Med Shack for health care,” Until recently University Hospital was 30% lower then Cleveland Clinic and every bit as good. There are a number of suburban hospitals that are a fraction of the cost of Cleveland Clinic with equally good outcomes. Remember the Government and Dartmouth are about politics, not value. “to save you a couple more pennies?” Actually it doesn’t save me or most payors even a penny, our income is so much per employee per month regardless of how much you spend. It does save you money though, either… Read more »

Margalit Gur-Arie
Guest

But the government is telling me, and “everybody” knows that this is true, that Cleveland Clinic and Mayo and all those Dartmouth Atlas endorsed centers of excellence are providing “highest quality care at costs well below the national norm”, and now you want me to go to Joe’s Med Shack for health care, to save you a couple more pennies?
I assume I can start going to those big name Clinics two years before I drop dead, or do I drop dead two years after I start going there…. Very confusing…

Nate Ogden
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Nate Ogden

“Are you guys suggesting that those corporations should be broken up?” I won’t speak for Barry but yes. Some health systems have way to much power. If there are two hospitals in town and they are owned by the same company they need split. “What you are suggesting, Barry, is regulations, not what I understand as market forces.” If I sell a policy that clearly excludes XYZ drug the market allows people to buy that policy or one that does cover it. What you can’t have is the courts or politicians demand we provide that drug to someone that didn’t… Read more »

steve
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steve

“Some health systems have way to much power. If there are two hospitals in town and they are owned by the same company they need split.”

Free market economics, except that we will use the coercive power of big government to give insurance companies an edge in negotiations?

Steve

Nate Ogden
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Nate Ogden

Its about giving the residents/consumers a choice not possibly giving the insurance companies an advantage. There are multiple insurance companies, in your logic why doesn’t that give the hospitals an advantage?

Further doesn’t the term free market sorta require an actual market with competition to be free?

steve
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steve

In a free market, both sides will seek to optimize market power. In most states, insurers have already consolidated, ahead of providers (excepting California). Costs have still risen. I have no problem with setting some limits on these provider consolidations, I am just surprised that a free marketeer would be willing to do so. Of course, there will remain the hundreds of small hospitals/clinics that are the sole source of care for millions of people. Also, consolidation of facilities is how hospitals gain enough market power to negotiate lower prices with drug companies, device makers and implant makers. If you… Read more »

MG
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MG

This is the myth of the free market in many industries/aspects. The end point of a mature and long-existing market place is a marketplace dominated by a single company/entity or a small handful of companies/entities that will use their position, clout, and leverage to ensure that position remains unchallenged. Now maybe their stranglehold is ended through some market force (substitution, etc) but in most cases it requires gov’t intervention to intervene to restore competition. This is anathema to most conservatives today.

Nate Ogden
Guest
Nate Ogden

“but in most cases it requires gov’t intervention to intervene to restore competition. This is anathema to most conservatives today.” MG I think you have this flipped, its government intervention that creates non functioning markets not the other way around. Can you name any examples to support your claim? Lets look at a few markets that have never been over regualted by government; Hamburgers or Fast food in general Plumbing, AC, electrical or any of your skilled trades Car Repair etc etc Now if you look at industries broken up by the government this supposed anathema to conservatives it was… Read more »

Margalit Gur-Arie
Guest

I am forced to conclude that I don’t understand what market forces are. What you are suggesting, Barry, is regulations, not what I understand as market forces. What Nate is suggesting is interesting, but again, I don’t see how the lack of first dollar coverage for consumers has any transformational value on that arrangement. Basically, consumer decisions are either irrelevant, or undesirable, and either way those must be restricted as much as possible. On a different note, I don’t quite understand the ant-trust enforcement on the provider side. As far as I know, providers who are not clinically integrated are… Read more »

Barry Carol
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Barry Carol

Margalit and Jeff – Regarding the treatment of the 20% of the population that accounts for 80% of healthcare costs in any given year, I think we need to do the following two things: (1) stop paying for services, tests, procedures and drugs that either don’t work or cost more than they’re worth and (2) work toward universal availability of palliative and hospice care for patients in end of life situations and encourage the execution of living wills and advance directives as well as the appointment of a healthcare proxy with the information stored on a registry so it’s available… Read more »

Margalit Gur-Arie
Guest

Jeff, I assume that the prohibition of first dollar coverage is the mechanism by which market forces are to be applied to medical care. Since the vast majority of people at any given time (80%) are incurring only a small part of expenses (20%), it makes sense that most of us can indeed shoulder first dollar coverage until we cross the threshold and join the expensive 20%, and I can see how market forces can work for this large segment of people, but small segment of medical care. From what I see and read of the private market, such out… Read more »

Nate Ogden
Guest
Nate Ogden

” How do you then increase payments for primary care, without keeping supply down artificially, or without regulating prices?” Lets say a payor is spending $100 PEPM currently for outpatient physician services. $30 PCP and $70 SPC. If a PCP came to me and said I want to sell my Medical Home services for a capitated rate of $50 PEPM and will lower your total OP Physician PEPM to $80 effectivly cutting my SPC spend to $30 and ssaving me $20 I would jump all over it. If they were to get really sophisicated and assist us in managing imaging… Read more »