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Tag: Economics

Are We Too Small to Succeed?

The logic behind the government bailouts in the financial and automobile industries goes like this:  some institutions are so large and interconnected that their failure could collapse the entire economy.  They are considered to be too big to fail.      The notion of too big to fail implies its opposite, that some individuals and businesses are too small to succeed.  Of course, that includes most Americans.

Author, commentator, and former Republican strategist, Kevin Phillips, uses the near economic collapse to illustrate current reality regarding American values.  He calls the government bailouts welfare for the financial sector.  Conversely, he points out that whenever topics like universal health care or national pensions arise, they are invariably described as too expensive or socialistic.  The same arguments were made about the bailouts, but they did not prevail.  Thus, we can afford to bail out large corporate entities in self-made crises, but we cannot afford a basic level of health care for all Americans. This has been true for nearly a century.  Prior to the Great Depression, government took a hands-off approach to economic bubbles, allowing the ‘invisible hand’ to work its magic.  Since that time, government has taken a hands-on approach to economic crises.  In the current case, everybody must pay for the greed of a few, some of whom continue to be rewarded for their behavior.  The invisible hand seems to have become the visible finger.

In contrast, universal health care has been proposed and defeated repeatedly over the past century (in 1915, 1935, 1948, and 1994).   With the exception of the old and the infirm (Medicare) and the young, the disabled, and the poor (Medicaid), we as a society have not defined health care as a public good like education or police and fire services.  The Social Security Act of 1965 that created Medicare and Medicaid is attributed to the masterful legislative skills of LBJ.

Unlike comedian Jack Benny, our leaders don’t have to think much about the question, “Your money or your life?” With the exception of the SSA of 1965, financial security (money) has always trumped health security (life).  In effect, the acute condition (economic crisis) gets action while the chronic condition (health insecurity) does not.

For those with health insurance who have not tested its boundaries, health care is not a crisis.   It might be costly.  It might be time consuming.  It might be infuriating to navigate the insurance and health care labyrinth.  But it’s not a crisis.  It will probably take a catastrophe like the collapse of the safety net hospitals before universal health care becomes public policy.

Many Americans believe the fix is in, the system is rigged. A friend refers to members of Congress as “the whores in Congress” and suggests they should wear sponsor patches like those worn by NASCAR drivers.  To be fair, we the people don’t seem to have a problem with outsourcing political campaigns to the private sector.  That’s the game we allow to be played in Washington.

If health care were a product, this would be the current offering.  Pay twice as much as other industrialized countries, waste 30% to 40% of that payment due to a highly inefficient system, get lower overall quality (33% less value in terms of outcomes), cover only 80% to 85% of the population, and put 15% to 20% of those with insurance at risk financially if they fully use the product.  According to the Business Roundtable, this product puts American business at a competitive disadvantage globally.

One wonders if Yankee ingenuity has died or has simply been co-opted by a collection of balkanized special interests.  If we Americans are unable to create a sensible health care system out the current mess, we really are too small to succeed.

Don Lindstrom is a business strategy consultant.  His firm recently recommended a redesign of the Florida Medicaid program.  He can be reached at don@OrionResearchInc.com.

A Crucial Requirement To Cure U.S. Healthcare Long-Term: Curb Raging Inflation

The Senate Finance Committee pushed the likelihood of mandatory U.S. healthcare insurance a giant step forward this week by passing a healthcare reform bill that is likely to become law in some form by year-end. That’s the good news. Unfortunately, this is dwarfed by the bad news: The focus of the legislation is the implementation of healthcare for the uninsured, not fixing the healthcare system overall. So the need to substantially trim crippling U.S. healthcare inflation rate is getting lost in the shuffle.

Healthcare premiums have soared because healthcare inflation is nearly triple the overall inflation rate. Last year, during a period of general deflation, healthcare inflation rose 5.5 percent. Healthcare costs are expected to consume nearly 20 percent of the GDP by 2017, the year that Medicare is projected to become insolvent.

While there is still time, policy makers must take steps to substantially amend the nature of healthcare reform. They must set clearly articulated goals, including a normalized healthcare inflation rate. They must build alignment across multiple interest groups to make sure that all key stakeholders are truly on board, not just passing legislation. Most important, they must shift the focus of the debate from “who pays” to “how much” America should pay for an effective healthcare system that delivers real value. If this isn’t addressed, no changes will ultimately succeed.

Continue reading…

What would actually work? Driving down the cost of health care

If competition actually drives the cost of health care up rather than down, what would bring lower costs?

What provisions in a “health reform act” would actually drop costs in health care? Let’s leave aside for the moment all the myriad other arguments – some might be seen as too much government intrusion, some would destroy the health plan industry, some would be cripplingly difficult for providers, and so on – and just focus on cost. Given the real structure of health care markets in the United States at this moment, what could be written into federal law and regulation that would actually reduce cost?me of these changes are massive, some would be invisible to those outside the industry, but all could be legislated or regulated, and all would “bend the curve” toward lower costs. Choose any you like, though some are “and” choices, others are “or” choices:

  1. Single payer: Eliminates insurance company overhead, increases medical loss ratio (the percentage of dollars put in returned as medical resources) to perhaps 95%, and gives the government (probably some rate-setting commission) the power to dictate prices and availability, like Medicare on steroids.
  2. “Robust” public option: All providers must take its payments as full payment, rates tied to Medicare rates (perhaps plus a percentage), Medicare rates decided by an independent rate-setting commission.
  3. Limiting medical loss ratios: Many European countries dictate that health plans must return 85% or 90% or 92.5% of the premium paid in as medical services paid out.  U.S. health plans, in contrast, compete on (and brag to Wall Street analysts about) how low their medical loss ratio is. Some are as low as 60%.

Continue reading…

Obama’s Medicare Half-Truth

Picture 12

Obama was called a liar during his recent address to a joint session of Congress. Actually, he was not fully truthful about the implications of cuts to Medicare. Obama repeated that his health reform plan includes payment cuts for private Medicare Advantage (MA) health plans:

The only thing this plan would eliminate is the
hundreds of billions of dollars in waste and fraud, as well as
unwarranted subsidies in Medicare that go to insurance companies —
subsidies that do everything to pad their profits and nothing to
improve your care. … So don’t pay attention to those scary stories
about how your benefits will be cut… That will never happen on my
watch. I will protect Medicare.

Obama’s claim that the cuts will trim insurer profits but not Medicare benefits was meant to calm nervous seniors. As I and others have pointed out the proposed cuts will in fact reduce benefits to some degree, contrary to the President’s assertion. But seniors, in general, should not be concerned. First, only about 23% of Medicare beneficiaries are enrolled in an MA plan.

Continue reading…

Balancing Consistency and Innovation in Healthcare

Our healthcare system is now facing a problem that has plagued business leaders for years: how do you  balance consistency and innovation?

The drive for consistency in healthcare is based upon the fundamental observation that physicians across the country treat similar medical conditions in dramatically different fashions.  Sometimes, these different approaches are costly, such as using a more expensive treatment when a less expensive approach might be as effective.  In other cases, these practice variations are dangerous – failing to provide patients with treatment the evidence suggests is best.

Standardizing the delivery of care — identifying “best practices,” and then insisting physicians follow these guidelines – could, in theory, save money while improving quality, and is the basis of Obama’s healthcare proposal.Continue reading…

Health care reform: econo-think, democracy and sustainability

Wendell Potter on Bill Moyers Bill Moyers Journal recently interviewed Wendell
Potter, who spent much of his career in corporate communications for health
insurance giants CIGNA and Humana. Every American concerned about affordable
and quality health care and the American political system should watch it.

Potter went public to tell the truth about how the health
insurance industry advances both its bottom line and its massive political
advocacy against meaningful health care reform.

Moyers asked Potter, “Why is the industry so powerful on both
sides of the aisle?”  Potter’s
reply: “Well, money and relationships, ideology.”

The distinctive ideology Potter mentions deserves more national
dialogue and deeper understanding.

Alvin
Toffler in his groundbreaking work Future Shock labeled the strict adherence to free market principles
Potter references “econo-think.”

A core belief is that investor profit drives
the material and moral “worth” of products and services, and is the metric of
social progress.

Continue reading…

Is an IOM v. CBO Smackdown Looming on Health-Reform Costs?

The U.S. can cut health-care spending by $250 billion a year within a decade, a
congressionally chartered panel will say this month in a bid to
show costs can be contained even if all Americans are insured.

A report from the Institute of Medicine, which advises the
federal government on health care, will counter “stingy”
estimates from the Congressional Budget Office, said Arnold
Milstein
, planning chairman of the institute’s working group on
health costs. The panel’s annual figure is five times the amount
the budget office says the U.S. will save under a bill in the
House of Representatives, according to the budget office’s July
17 letter to House Ways and Means Committee chairman Charles
Rangel
.

The preliminary findings from the institute, part of the
National Academies in Washington, will be issued amid a growing
debate over the health-care overhaul proposals that President
Barack Obama
is urging Congress to pass. The report will help
bolster the argument that covering the nation’s 46 million
uninsured won’t bust the budget, advocates of the bill say.

Continue reading…

Obama’s Medicare Half-Truth

Picture 12

Obama was called a liar during his recent address to a joint session of Congress. Actually, he was not fully truthful
about the implications of cuts to Medicare. Obama repeated that his
health reform plan includes payment cuts for private Medicare Advantage
(MA) health plans:

The only thing this plan would eliminate is the
hundreds of billions of dollars in waste and fraud, as well as
unwarranted subsidies in Medicare that go to insurance companies —
subsidies that do everything to pad their profits and nothing to
improve your care. … So don’t pay attention to those scary stories
about how your benefits will be cut… That will never happen on my
watch. I will protect Medicare.

Obama’s claim that the cuts will trim insurer profits but not Medicare benefits was meant to calm nervous seniors. As I and others
have pointed out the proposed cuts will in fact reduce benefits to some
degree, contrary to the President’s assertion. But seniors, in
general, should not be concerned. First, only about 23% of Medicare beneficiaries are enrolled in an MA plan.

Continue reading…

Not Really an Option

To: Executives leading U.S. Hospitals

The public option appears to back in the national dialogue and I’m wondering how concerned you all are about that.

After all, many of you have been quite successful at minimizing the appearance of true profit by growing your cost structure on the backs of private insurers, right?

Thinking back over the last ten to fifteen years, many things have changed.Continue reading…

Innovation and Absence of Evidence vs. Evidence of Absence

Congress

Jon Gabel from the National Opinion Research Center has an excellent op-ed piece in today’s New York Times. The basic argument is summarized in his conclusion:

“The Congressional Budget Office’s integrity is beyond questioning. But the record shows that it has substantially overestimated the cost of health care reform three times out of three. As Congress now works on its greatest push for reform in generations, the budget office needs to revise the methods it uses to make predictions about costs.”

Far from being an arcane methodological debate, CBO’s approach has profound consequences for health care reform and for the long-term health and economic conditions of the country. As Gabel puts it:

“The budget office’s cautious methods may have unintended consequences in the current health care reform effort. By underestimating the savings that can come from improved Medicare payment procedures and other cost-control initiatives, the budget office leads Congress to think that politically unpopular cost-cutting initiatives will have, at best, only modest effects. This, in turn, forces Congress to believe it can pay for reform only by raising taxes, which then makes reform legislation more difficult to pass.”

The reason that CBO has underestimated savings from past reforms of Medicare is that it makes the assumption that — without convincing empirical evidence of an initiative’s cost impact — it basically “scores” it as delivering zero savings. No doubt that CBO is consistent and conservative, but that doesn’t necessarily produce the most accurate budgetary forecast.

Perhaps more so than any other area in the federal budget, there are an enormous number of unknowns in health care. CBO has historically built its model on the premise that absence of evidence equates with evidence of absence.

But there is a major distinction. “Evidence of absence” means that we have an empirical reason to believe that there is no effect of an intervention (in this case on cost). In that case, it makes sense to score zero savings.

In contrast, “absence of evidence” simply means that we do not have sufficient evidence that an intervention produces any effect.  The problem is that, by definition, any true “innovation” (defined by Merriam-Webster as “the introduction of something new”) has no evidence. Which is to say: CBO has effectively ruled out scoring savings for true innovation.

Perhaps some would argue that’s an overstatement in that we certainly commonly use the term innovation to describe something that has been around long enough to be tested. Yes and no. There’s no doubt that new and innovation are relative terms, but there are still important reasons why that approach for CBO remains flawed.

First, evaluation takes time. To design a study, appropriately manage it, collect and analyze data, submit to peer review, and publish often takes many years.

Second, the level of evidence that CBO typically requires takes A LOT of time.

Third, innovation often comes from combining different initiatives and strategies that create a combined effect greater than the sum of their parts. Information therapy, patient decision aids, comparative effectiveness research, and other delivery system reforms may have a powerful impact when thoughtfully and appropriately combined together.

Fourth, the pace of innovation and the greatest innovative impacts can be dramatically robust. There is no way, in its current model, for CBO to capture those things that will have the most important effects on the federal health budget.

Like Jon Gabel, I don’t question the CBO’s integrity or analytical capacity, but I do believe that its methodological approach requires amendment. As I have written before, we — as health services researchers (and I admit to being one myself) — need to maintain our analytical rigor while being as creative in our research methods as the innovators are at innovating.

We should not shy away from the empirical idiosyncrasies that innovative care delivery initiatives create. Rather, we should rise to the challenge by employing a broader set of research and analytical skills to tackle these compelling research questions about new innovations. Indeed, the new care delivery strategies create opportunities for health services researchers to develop their own innovative research techniques.

I hope that health services researchers out there are up to that challenge.

If we aren’t, we will continue to create perverse public policy incentives.

Joshua Seidman is the president of of the Center for Information Therapy that aims to provide the timely prescription and availability of evidence-based health information to meet individuals’ specific needs and support sound decision making.  He frequently blogs for THCB and the Center for Information Therapy Blog, where this post first appeared.

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