In case you need to know more about Medicare as a whole and Medicare drug coverage, there are two new excellent web based presentations from Traci Neuman at the Kaiser Family Foundation. They are Medicare 101 and an overview of Medicare Part D’s Rx benefit. Both excellent and well worth sitting through.

Yesterday I left you hanging with three scenarios as to the future of the system; muddling through; complete collapse leading to government takeover; and system self-reform. The Industry Veteran thinks that I’m on the right track but that I need to consider some other alternatives:

Your alternative scenarios for health care economics seem a bit too despondent to me. You’re quite right to say that the stakeholders in power will try to muddle along with the same bailing wire approaches, but that’s the way the American political economy works. Our system disdains national planning, preferring instead to let the market (i.e., the oligopoly capitalists) decide. That means things must approach the crash and burn stage before our power elite considers making substantive corrections. (Any time they do point to a distant crisis well in advance of its onset, e.g., Bush and Social Security, they’re usually trying to rig the system even more radically in their favor.) Throughout American history this predisposition has often placed progressives in the anomalous position of hoping for worse because that’s the only road to better. Now as far as your alternative scenarios, #3 is wish-upon-a-star thinking. Hope is not analysis and any expectation that the rational adults in health care manufacturing will act wisely by curtailing costs seems too far fetched to take seriously. More likely the earth would cease to revolve upon its axis, continents will crash into one another and the meek will inherit the earth. The question then becomes, what will cause muddling through to fail and turn the health care system into something approximating a nationally administered system? And when will this happen?

You’re probably correct in stating that health care emerges as a more acute crisis during recessions and, right now, the business cycle appears to be on an upswing. This means 2008 may not be a pivotal year for reorganizing health care. Again you’re correct to point out that the old moles of aging baby boomers (talkin’ ’bout my generation) and the ever escalating costs of new health care technology keep burrowing beneath the ground, making the soil ever more friable for fundamental change. What are some other factors at work here?

(1) I look for small employers and state-local governments to stagger beneath the inequitable, irrational weight of health care costs before the large companies do. Even though the top 500 usually maintain self-funded health insurance programs for their employees, health care also causes problems for them, not so much in terms of the absolute costs, but from the competitive disadvantage they suffer if they have to compete against Japanese or other foreign companies who don’t bear such a heavy a burden. I recently reviewed some of the debates over Social Security when Roosevelt proposed it during the 1930s. Auto moguls such as Knudsen at GM favored it because they felt confident of their ability to pass along the cost. Seventy years later automotives are a much more mature industry. Foreign competition constrains their ability to pass through the health care costs but I don’t look for them to take the lead in nationalizing health care. They’ll be around to play a supportive role. I also imagine that other businessmen clearly understand that the current system creates a forced transfer of income and wealth from themselves to health care manufacturers and they will no longer continue to permit it.

(2) The increasing stratification of health care into a two-tiered system represents too obvious a threat to the establishment’s managers. Just as the Vietnam war in the late 60s and early 70s caused students at elite universities to question some fundamental tenets of our entire political and economic system, stratified health care can disaffect wide swathes among the middle-aged and elderly. If social class works through a health care system to baldly determine life or death, too many people can ask too many, disruptive questions. We can see signs of this already from the fact that many elderly, sick people in the middle class must "spend themselves down" to Medicaid eligibility and the states are growing more stingy with these programs all the time.

(3) There is also the possibility, one to be fervently desired, that by 2008 popular discontent with the Iraq war and Bush’s overreach on gutting Social Security will provoke a pervading discontent with his entire program of crony capitalism and evangelical, social Darwinism. (I love your phrase, "theocratic fascism," but the last time I used it, my colleague in New York said, "High fallutin’ terms like that are why John Kerry lost.) If disenchantment with the reactionaries does come about, it’s entirely plausible that the next president, Democrat or Republican, may create a nationally administered health care program as a sort of less contentious sop to a broader, popular discontent. Nixon, after all, pushed the EPA partly as a distracting palliative to his Vietnam war.

In summary, 2008 may not be the year of reckoning, but as Bogart’s Rick said to Ilsa, "Maybe not today, maybe not tomorrow, but soon, and for the rest of your life."

Since I wrote about the Center for Practical Health Reform and their intention to head off a perceived collapse in private sector health insurance at the pass,
a little more attention has been focused on the whole issue. How bad is
the current cost crisis and how long can the rest of the economy go on
pushing money into it?  The press is flowing in two flavors. First, we can’t afford the costs. Second, we’re going to pay more for more cool technology.Here’s the word from the Detroit insurers that fund their health care programs by selling cars on the side (sorry for stealing Uwe’s line): 

Health
care costs are moving front and center as the single biggest factor
impacting corporate profits and U.S. companies’ inability to compete
globally……Health expenditures rose from $1.3 trillion in 2000 to
$1.7 trillion in 2003. The health sector consumed 15.3 percent of the
nation’s gross domestic product in 2003, up from 13.3 percent in just
three years. Industry observers say the problem is bigger even than in
the 1980s, before managed care came on the scene and curbed increases
for a little more than a decade before costs started spiraling again.

Those
who pay for health care — businesses, government and individuals —
are becoming more vocal about the need to bring costs in line. But
that’s about where the agreement begins and ends.

Some rather astute observers of the system think that it can’t take much more of this. My old boss Ian Morrison and his colleagues at Harris have been suggesting that the 2008 election is about the time when this issue will get national attention.  THCB regular The Industry Veteran seems to agree:

I’ve
said it for a long time; at a certain point the top 500 (non-Pharma)
corporations will no longer be able to pass along the exorbitant health
care costs and at that point, they will pose the biggest threat to Big
Pharma. It may not come now because, as this article makes plain, some
of the big companies are pursuing diversions such as
pay-for-performance, evidence-based medicine and so forth. I give it
until about 2008 for the big companies to recognize that IT and efforts
to rationalize providers wonÂ’t adequately control costs. At that
point, if our old buddy John Dingell is still around, he may emerge as
a co-grandfather of a national health care system.

The
folks at the Center for Practical Health Reform want to get the whole
of the industry together to get past their differences, essentially so
that the health care industry as a whole can keep manufacturing an
affordable product for their customers. The problem is that the pace of
the technology change that is the major reason for driving these costs
up is not slowing, it’s speeding up. Just this weekend here’s one
article about new scanning technologies, and another about defibrillators.
Clearly there are incentives to do too many scans, and clearly there
are going to be even more incentives to put defibrillators in even more
people now that it’s been approved for virtually anyone with any heart
condition (such as a pulse). So the system will produce more services
connected to those devices. (And perhaps these scans and devices will
save other costs down the road–but that’s a separate argument we don’t
yet want to have).

But
the point is that as these costs get added onto the system, government
will more or less keep paying just as it always has over the last 30
years. Although employers are starting to eject themselves from the
system, enough of them will keep paying that disaster will not
immediately strike. In no event will there be a huge flow of money out
of the system. Why do I have some confidence in saying this?

Health
care costs are highly related to recessions, and the relative
difference in health costs to overall GDP growth causes alot of fuss.
And it does have a big impact. In the early 1970s we had Nixon’s plan
for universal care and price controls (My, how have those Republicans
changed!). In the early 1980s we had DRGs for Medicare inpatient care,
and in the 1990s we had managed care. Each of those was a reaction to
the high level of health care costs coming out of a recession as this
chart shows.

I’m beyond baffled by this NY Times report: 60 Companies Plan to Sponsor Health Coverage for Uninsured. I’m taking 2 aspirin and will comment in the morning.