Repeal + Replace

It Begins

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For the second time in a decade, a president and Congress will undertake a large-scale effort to re-engineer the health care system.   

Politics and debate over policy are not the primary cause of this continued upheaval.  It is our patchwork, Rube Goldberg-like system, developed ad hoc over 50 years.      

As THCB readers know, we have an insurance and care delivery system that works less well—in terms of public health, coverage, patient outcomes, and cost—than health care in most of the rest of the developed world. 

And, things are getting worse.  To wit: rising death rates among middle-aged, low- and middle-income white Americans; the unchecked rise in obesity and preventable chronic diseases and opioid addiction; and woefully slow progress to reduce medical errors and improve patient safety.    

On cost, we are on a path to $5.6 trillion, $16,000 per person, and 20% of GDP by 2025—up from $3.3 trillion, $10,300 per person, and 18% of GDP in 2016.  That’s about a 5% rise per year in terms of per capita expenditure, twice the rate of inflation. 

Our system works well in only two ways: it creates jobs (many of which are high paying) and it generates generous profits for large corporations—from pharma and device manufacturers to hospital systems to increasingly consolidated insurance companies.  To be sure, some of that profit derives from welcome innovations, new products and treatments.  But a sizable portion is due to excessive prices ungrounded in any value proposition.   

It may be that that’s what we really want from our system—profit maximization—and that progress in public health, disease prevention and serious cost control is secondary.  Many left wing economists and health policy wonks have argued as much for years.     

The public does not understand our health system dysfunction from a policy or technical perspective, but they very much “get it” at an experiential and intuitive level.  They know how expensive it has all gotten, how vulnerable they are.  Bernie Sanders’ unexpected rise last year can be attributed, in part, to his clarion call for a “Medicare For All” plan.

Indeed, surveys over the past 10 to 15 years consistently show that about one third of the population supports replacing what we have now with a single-payer system. 

Of course, we’re not headed in that direction now—or probably ever.   

Where we are headed now is towards another big debate about the balance between government and private-sector control of the “means of production” in health care, the reach and design of the “safety net,” and the meaning of insurance.   

It’s the 50-year old struggle that has produced the Rube Goldberg system we have.  You know the history so I won’t belabor it.   

But it’s important to understand where we are as we enter this next phase.  We are at 50/50—more or less an equal divide between public (tax financed, government run) and privately run.

In terms of raw, topline numbers:  Medicare and Medicaid cover some 110 million people.  Federal, state and local government (as an employer, but still tax financed) cover another 8 million people or so, including the military and VA.  Private employer-based insurance covers about 152 million people.  The exchanges cover 11 to 12 million, and some 10 million people have individual coverage outside of the exchanges.  About 30 million Americans remain uninsured.   

On spending, of the estimated $3.3 trillion in 2016, Medicare, Medicaid and other federal programs account for $1.4 trillion; private health insurance accounts for $1.1 trillion; consumers and families spend $350 billion out of pocket; about $165 billion is invested (public and private sector); and the remaining $300 billion encompasses public health and other government and private sector programs, such as community health centers and quality improvement.   (Mind you, consumers and families actually pay for all of this via premiums, taxes and out of pocket.)   

The wrinkle this time is a president who is unprecedented in character and unpredictable in action.  He has pledged to maintain Medicare, but Republicans in Congress have other ideas.   He and congressional Republicans want to block grant Medicaid and, of course, dismantle Obamacare.  The VA is up for grabs.   

Their purpose is clear. 

  • Swing the pendulum to privatization, less government control and less government regulation. 
  • Shift control from the federal government to the states
  • Let marketplace competition operate more freely to improve care and restrain costs. 
  • Reform entitlement programs to limit federal liability and spending    
  • And, most importantly (and way less well understood): shift risk and direct costs to consumers and families (more “skin in the game”).

There is nothing inherently evil about these concepts. State and local control has merit; that’s the design of Medicaid and why Obamacare established state-based insurance marketplaces.  Insurance is regulated at the state level, albeit with ERISA providing freedom for (mostly large) self-funded employers.   

Privatization is not anathema.  The government relies on contractors to operate a sizable portion of its health care responsibilities.  And of course the vast majority of providers, paid by government, operate as private entities.

Over-regulation can indeed be burdensome, stultifying and unproductive. Competition is good: Medicare Advantage was conceived, in part, to create competition in Medicare, and many beneficiaries prefer it.  Medicaid managed care is now widespread, and fosters competition for cost-savings and care improvement. 

The Obamacare exchanges created competition between insurers and choice for consumers.  The design was sound, and based on concepts Republicans championed in the 1990s and early 2000s.    

Likewise, some skin-in-the-game for consumers (deductibles, co-payments, and self pay for discretionary care etc.) are an important check on overuse and an inducement to responsibility and self-care. 

In theory, Trump and the Republicans understand the other side of the ledger: (a) the benefit of judicious regulations, standards, and rules, including some that apply to the nation as a whole; (b) the limits of competition in healthcare, where power is concentrated in the hands of companies and providers, and not consumers; and (c) that too much “skin in the game” means loss of coverage and access to care, financial hardship or even bankruptcy for millions of families each year.   

Trump the business guy, the real estate mogul has lived in the world of building codes and construction regulations his whole adult life.  So we might expect that he understands the need for balance.  Importantly, he has also said repeatedly:  “everyone must be covered.” 

My worry is that in the current anti-government, hyper-partisan and anti-intellectual environment, the hard-right and quasi-libertarian Republicans (like Paul Ryan) will prevail. 

In that case, there’s a good chance the pendulum will swing towards: (a) excessive deregulation, (b) topsy-turvy and anti-competitive consolidation among providers and insurers; (c) an unprecedented and dangerous scale-back in the entitlement status of Medicare and Medicaid and (d) let-the-chips-fall-where-they-may for consumers and families.   

Democrats and moderate Republicans must be a strong bulwark against this outcome.    

My other worry is that the era of propaganda, misinformation, truth-averse tweets, and fake news we have entered—like some totalitarian country—will militate against any informed and deliberative debate.  Ominously, Republicans employed these tactics against Obamacare from the beginning—many knowing full well that they were misleading the public with slogans and untruths.   

This propaganda issue is the subject of Part 2 of this blog, coming soon.

Steven Findlay is an independent healthcare journalist, policy analyst, researcher and consumer advocate.   

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Steven Findlay
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Steven Findlay

PJ – I concur with the objective of addressing the social determinants of health….as part of solution and a priority in coming years. RWJF is of course making a major investment in this area. And the federal government, and states, should as well. Thanks for your comment.

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pjnelson

One of the more intense evaluations of Community Health appeared in an April 2006 edition of JAMA. Its title is: “The Association Between income and Life Expectancy in the United States 2001-2004.” Within the Discussion Section, a paragraph began with “There are many potential explanations for why low-income individuals who live in affluent, highly educated cities live longer.” The remaining paragraph offers several statistical explanations. But, the paragraph then ends with “Testing between these theories is a key area for future research.” And finally, the entire report, and its Conclusions Section, ends with “The differences in life expectancy were correlated… Read more »