“Elephant in the living room” is an English metaphorical idiom for an obvious untruth going unaddressed. In most political platforms about healthcare and its coverage, there is a most resolutely immovable elephant in our living room. It is there with every single candidate. But with Bernie….
You’ve just got to love Bernie Sanders. It makes me feel like I’m 22 years old in the 1960’s and dumb as all get out about how you pay for things. But let us consider Mr. Sanders’ healthcare proposal. From his own website:
“Bernie’s plan would create a federally administered single-payer health care program. Universal single-payer health care means comprehensive coverage for all Americans. Bernie’s plan will cover the entire continuum of health care, from inpatient to outpatient care; preventive to emergency care; primary care to specialty care, including long-term and palliative care; vision, hearing and oral health care; mental health and substance abuse services; as well as prescription medications, medical equipment, supplies, diagnostics and treatments. Patients will be able to choose a health care provider without worrying about whether that provider is in-network and will be able to get the care they need without having to read any fine print or trying to figure out how they can afford the out-of-pocket costs…[etc.].”
Bernie sure didn’t go half way on this one. All care, whenever, wherever, however. A fundamental right with no filter. OK. So he jumped in with both feet. You’ve got to admire his elan. But what might this mean and how can he ignore what happened in his own home state?
Yes, I agree that access to quality healthcare is a fundamental human right for every man, woman and child legally in this country, and for America not to be responsibly working toward that is seriously problematic. But we have to do this with our eyes open. We don’t usually celebrate December holidays by giving the children unlimited access to Toys R Us.
Let us consider for the moment what happened in Vermont, Senator Sanders’ home state, when they attempted to implement their universal health care system called Green Mountain Care. To put it mildly, Senator Sanders was supportive of this venture. But this is not the sort of venture where you retain liberal economists to do the financial projections. Bottom line: It never left the ground.
As the Boston Globe reported in early 2015 (plenty of time for Bernie to reconsider):
“The numbers were stunning. To implement single-payer, the analysis showed, it would cost $4.3 billion in 2017, with Vermont taxpayers picking up $2.6 billion and the federal government covering the rest. To put the figures into perspective, Vermont’s entire fiscal 2015 budget, including both state and federal funds, is about $4.9 billion.”
The Globe went on to report that the Governor’s office estimated needed tax increases on income and payroll that more than doubled existing taxes. The Governor, who ran on this issue, pulled the plug, and the predictable howls followed.
I mentioned liberal economists. Even they stead fastedly ignore the elephant in the living room. By way of example, and this is by no means atypical:
Dr. Gerald Friedman, an economics professor at UMass-Amherst and a part-time Vermonter, has worked with [Bernie Sanders] to develop and calculate the cost of his plan and says the budget wasn’t the problem for the Vermont proposal. The governor was the problem. “On the economics, it would have been cheaper, but the governor just lost the political will,” Friedman said.
Huh? This was not “political headwinds.” It was economic reality.
Or as put so indelicately:
“According to critics, from the New York Times’ Paul Krugman to USA Today’s editorial board, Sanders’s single-payer plan is something between a well-intentioned fool’s errand and a political pipe dream, an unrealistic idea that has been proven not to work in the senator’s own backyard.”
And to a less spectacular extent this is also being played out in Massachusetts with Romneycare, and federally with Obamacare (don’t you love these titles?). The programs are being overwhelmed with costs, and the savings are almost nonexistent. These programs were implemented with almost complete disregard for their costs. For Obamacare, I’d refer you to Stephen Brill’s, “America’s Bitter Pill.”
So what is really going on here? As I’ve said before when commenting on Mr. Trump’s healthcare proposal, it’s always about the claims expense. You cannot (I repeat cannot) ignore the claims expense, which as a component of overall healthcare costs, particularly when you include Medicare, approaches 90% of the total bill. And under Mr. Sanders’ plan, there is a “right” to unfettered access for all such costs without any filter of any kind. No bean counter HMO getting between the and her doctor or pharmacist.
IF under today’s environment where there are at least some (albeit inadequate) attempts to control the rate of use of services, the total claims expense nationwide were $3 Trillion, what might it be under Berniecare?
Senator Sanders, like so many other pols and even seemingly intelligent commentators, always point to the administrative costs and profits of insurers as the whipping boy of why American healthcare costs are so high. While significant, they are a relatively small part of the bill. Perhaps 15%. Mr. Sanders and others try to prove commercial insurer bloat by comparing their admin costs of say 12% with Medicare’s admin costs of somewhere, allegedly, under 2%. That is unfair for so many reasons that we haven’t time to list them all. But consider, if an insurer had the economies of scale Medicare has; did as little as Medicare does on all the things regulators require the commercial insurers to do (quality of care, utilization review, managed care, wellness, population health, fraud and abuse, etc.);and only insured the elderly who have much higher claims expense,they too might approach such a low administrative charge. And insurers (unlike the government) need reserves. I think you get my point here. Oh, and the oft-touted Medicare admin expense figure of 1.4% is just flat wrong. See, e.g., Forbes, “The Myth of Medicare’s ‘Low Administrative Costs’.”
Could a universal healthcare system reduce administrative costs? Sure, but at what price so to speak? The result would be virtually no controls over the rate of use of services, which (to repeat) remains the specific ill-tempered elephant in the living room.
It’s an inconvenient reality, but claims expense consists of two major elements: price and use. Price is the fees we pay ($100/office visit) and use is the rate of use of services per person (office visits of say 3.6 per year per person). The fees we pay providers here in America far exceed those of other countries. And the fees Medicare pays providers are far less than the fees paid by commercial insurers. Commercial insurer fees are in some instances the difference between solvency and bankruptcy for physician groups and hospitals. I’m assuming we won’t move suddenly nationwide to paying doctors and hospitals something at or below the Medicare fee schedule. Imagine! But in any event, it’s not the fees that break the bank. It’s the use.
When it comes to use, Americans are (to be blunt) bellying up to the bar for the free lunch.And we are encouraged (seduced?) to do so by doctors and hospitals and big pharma and mid-afternoon ads on TV. We use services at a rate heretofore unknown to the human race. And even if the citizens of other countries were inclined to use medical services at the rate we use them, they couldn’t. Call it rationing (the “R” word) or simply delays in scheduling, but it wouldn’t happen.
And we believe we have a fundamental human right to continue this pattern. Fee increases over the last 15 years have been significantly less than 5% per year. Use increases have been double digit, on average. And our unhealthy lifestyles and failure to access the delivery system appropriately will ensure that this will continue unabated, unless something is done. I assure you, that “something” will not be Berniecare.
To lay it out plainly: We cannot with any fiscal responsibility implement universal healthcare and coverage without serious planning that addresses the nature and rate of use by Americans of medical services. The root causes are many, and if it were an easy thing to correct, we would have done it by now. Much of the problem is cultural, something very different from most other countries. And of course, what we pay for pharmaceutical drugs is truly obscene, but that is for another day and another blog.