Mitt Romney’s entire career reflects a businesslike approach. On the one hand he has been willing to act boldly to solve problems. On the other hand he has been willing to keep what works and discard what doesn’t. The latest Romney pronouncements on health policy are consistent with that history.
As President Obama has said on many occasions, ObamaCare is based on a health reform Governor Romney spearheaded in Massachusetts. But blindly copying a health reform — while ignoring what’s really worth copying and what’s not — is hardly sensible presidential leadership.
Here is what is good about the Massachusetts health reform: (1) Governor Romney brought both parties together to achieve genuine bipartisan reform (something Barack Obama failed at miserably at the national level); (2) he cut the insurance rate in half by giving substantial tax relief to people who must purchase their own insurance, and (3) he did all this without raising taxes.
Under the Patient Protection and Affordable Care Act (PPACA), state governments are expected to set up health insurance exchanges through which individuals will buy their own health insurance, in many cases with substantial subsidies. Should the states comply?
In the following point-counterpoint discussion, Linda Gorman and I give opposing answers to this important question. Leave your thoughts in the comments.
John Goodman: Yes
If the states abdicate their responsibilities under PPACA, the federal government will step in and act in lieu of the state. Under this scenario, states will relinquish all power to make a bad law better. Letting the federal government implement reform almost guarantees bad outcomes.
Linda Gorman: No
Exchanges are required to perform a variety of duties beyond distributing ObamaCare subsidies, and these duties are likely to add significantly to estimated costs. Some of them will damage a state’s business climate by creating new opportunities for crony capitalism. Some require that currently fashionable, but poorly tested, models be forced on health care providers. Some require that state exchanges have expertise equal to private insurers. Others force states to increase the cost of health insurance for people who currently have coverage.
John Goodman continued:
The states should engage in preemptive reform over the next two years. This means enacting responsible, rational reforms — the kind of reforms that they should have enacted all along, in the absence of federal legislation. Where possible, states should try to make their reforms compatible with the new federal law — but only if compatibility does not sacrifice the major goals of the state’s reform.
“GOP to the Uninsured: (Feel Free to) Drop Dead.” So reads the title Michael Millenson post at the Health Care Blog yesterday. It gets worse:
[N]o Republican presidential candidate has ever presented a serious plan to cover all the uninsured … The difference between Democrats and this generation of Republicans — unfortunately including even the GOP Doctors Caucus — is not at its core a disagreement on what government can legitimately do to help create universal access to health care for the 50 million Americans without it, but whether the goal itself is worth pursuing.
Was Millenson completely asleep (like Rip Van Winkle) during the last election? Does he not read my Wall Street Journal editorials? Does he never visit my blog? Or was this meant to be an April fool’s column?
John McCain’s health plan was more radical and even more progressive than Obama Care. I’ve never seen any serious health policy wonk deny that. Maybe Millenson doesn’t live in a battle ground state. If he did, he would know that the Obama campaign spent more money attacking the McCain health plan during the election than has ever been spent for or against a public policy idea in the history of the republic. In fact, it is probably no exaggeration to say that Obama successfully turned the election into a referendum on the McCain health plan!
The McCain health plan is discussed at this blog here, here, here, here and here.
And although Millenson singles out Oklahoma Senator Tom Coburn as an especially egregious example of the Republican failure on health policy, the McCain vision actually was based on a bill, sponsored by Sen. Coburn and Sen. Richard Burr (R-NC), along with Reps. Paul Ryan (R-WI) and Devin Nunes (R-CA), [hereinafter called the Coburn bill]. That bill, in turn, was based on an idea which Mark Pauly and I proposed in a Health Affairs article more than a decade ago. (Does Millenson not read Health Affairs?)
There are two conservatives for every liberal in America. That’s the message of a recent David Brooks column as well as a Gallup survey. I think the imbalance is much starker. I would guess there are four conservatives for every liberal. Maybe even more.
Here’s a test I invite you to take. Watch C-Span’s morning call-in show and listen to what people who phone in on the “Democrat” or “liberal” line have to say. When is the last time you heard a caller say, “We should all pay higher taxes so that the government can provide us with universal day care”? Or how about, “We should all pay higher taxes so the government can provide us with universal long term care”? I bet you can’t remember ever hearing that.
Here is what I suspect you will hear: Teachers complaining that teachers aren’t paid enough. Union members complaining about competition from workers overseas. Senior citizens whining about the meagerness of Social Security or Medicare benefits. Minority callers advocating more affirmative action. What is the common denominator of these comments? Self-interest.
Yes, I know. Special interests are in both parties. Why wouldn’t they be? Yet as I wrote in my analysis of “progressivism,” the left in America has elevated special interest privilege to an art form.
Here’s the point: people wanting more, more, more are just people pursuing their own self interest in politics. They are not in principle different from any other special interest group. Importantly, they have nothing in common with what we normally have in mind by the term “liberalism.”
The authors’ recent book, Medicine in Denial, briefly mentions the subject matter of this post — the effects of fee-for-service payment. This post examines the issue in more detail, because of its importance to health care reform.
The medical practice reforms contemplated by Medicine in Denial have large implications for a host of policy issues. As an example, consider the issue of fee-for-service payment of providers. The health policy community has arrived at a virtual consensus that fee-for-service is a root cause of excessive cost growth in health care. Payment for each medical service rendered seems to involve an unavoidable conflict of interest in physicians: their expertise gives them authority to increase their own payment by deciding on the need for their own services. This conflict of interest has driven countless attempts at health care regulation. These attempts usually involve some combination of price controls, manipulation of incentives, and third party micromanagement of medical decision making. For decades these attempts have proven to be hopelessly complex, illegitimate in the eyes of patients and providers, often medically harmful, and economically ineffective.
Because regulating the conflict of interest has proven to be so difficult, the health policy consensus is now that the only escape from the conflict is to avoid fee-for-service payment. But this consensus misunderstands the conflict’s origin. The conflict of interest arises not from fee-for-service payment but from physicians’ monopolistic authority over two distinct services: deciding what medical procedures are needed and executing the procedures they select. The conflict does not disappear when payment switches from fee-for-service to its opposite–-capitation. Indeed, then the conflict becomes even more acute–-physicians have an incentive to withhold their expertise from costly patients who need it the most.
If you care a great deal, I’ll give you an account number you can use to make a deposit.
[Note to Self: Send this Alert to the folks at Commonwealth. Also to Nancy Pelosi and Harry Reid. CC Uwe Reinhardt as well. You never know what they might do. They certainly talk about this topic a lot.]
While you’re thinking about the initial question, here are a few follow-up questions:
Do you care whether I have life insurance?
What about disability insurance?
What about retirement insurance? (A pension or savings plan.)
Do you care whether I keep my money at an FDIC-insured institution?
Or whether I bought an extended warranty on my car?
Or whether I bought travel insurance before taking my scuba diving trip to Palau? (It pays off if you get sick and can’t go.)
I’m sure there are busybodies who would like to run everyone else’s life. But society as a whole has taken a more rational approach. We basically don’t care whether people insure to protect their own assets (at least we don’t care enough to make them do so). But we do care about events that could create external costs for other people.
Take a look at the chart below. It shows representative prices for a knee replacement for different patients in different settings. The most shocking thing about the chart is that prices for essentially the same procedure are all over the map. Here are some obvious questions:
- Why is the price of a knee replacement for a dog — involving the same technology and the same medical skills that are needed for humans — less than 1/6th the price a typical health insurance company pays for human operations? Why is it less than 1/3 of what hospitals tell Medicare their cost of doing the procedure is?
- How is a Canadian able to come to the United States and get a knee replacement for less than half of what Americans are paying?
- How are Canadians getting knee replacements in the U.S. able to pay only a few thousand dollars more than medical tourists pay in India, Singapore and Thailand — places where the price is supposed to be a fraction of what we typically pay in this country?
- Why do fees U.S. employers and insurance companies are paying vary by a factor of three to one, when foreign, and even some U.S., facilities are offering a same-price-for-all package?
It’s amazing how often people cannot see the forest for the trees. Think how many volumes have been written trying (and failing) to explain why our health care costs are so high. Sometimes the answers to complex questions are more easily found by asking the simplest of questions.
Did you know that an estimated one of every three uninsured people in this country is eligible for a government program (mainly Medicaid or a state children’s health insurance plan), but has not signed up?
Either they haven’t bothered to sign up or they did bother and found the task too daunting. It’s probably some combination of the two, and if that doesn’t knock your socks off, you must not have been paying attention to the health policy debate over the past year or so.
Put aside everything you’ve heard about ObamaCare and focus on this bottom line point: going all the way back to the Democratic presidential primary, ObamaCare was always first and foremost about insuring the uninsured. Yet at the end of the day, the new health law is only going to insure about 32 million more people out of more than 50 million uninsured. Half that goal will be achieved by new enrollment in Medicaid. But if you believe the Census Bureau surveys, we could enroll just as many people in Medicaid by merely signing up those who are already eligible!
What brought this to mind was a series of editorials by Paul Krugman and Robert Reichand blog posts by their acolytes (at the Health Affairs blog and at my blog) asserting that government is so much more efficient than private insurers. Can you imagine Aetna or UnitedHealth Care leaving one-third of its customers without a sale, just because they couldn’t fill out the paperwork properly? Well that’s what Medicaid does, day in and day out.
Put differently, half of everything ObamaCare is trying to do is necessary only because the Medicaid bureaucracy does such a poor job — not of selling insurance, but of giving it away for free!
There are not very many good things you can say about a deep recession. But from a researcher’s point of view, there is one silver lining. This recession has given us a natural experiment in health economics — and the results are stunning.
But, first things first. Here is the conventional wisdom in health policy:
- In the United States, we ration health care by price, whereas other developed countries rely on waiting and other non-price rationing mechanisms.
- The U.S. method is especially unfair to low-income families, who lack the ability to pay for the care they need.
- Because of this unfairness, there is vast inequality of access to care in the U.S.
- ObamaCare will be a boon to low-income families — especially the uninsured — because it will lower price barriers to care.
As it turns out, the conventional wisdom is completely wrong. Here is the alternative vision, loyal readers have consistently found at this blog:
- The major barrier to care for low-income families is the same in the U.S. as it is throughout the developed world: the time price of care and other non-price rationing mechanisms are far more important than the money price of care.
- The U.S. system is actually more egalitarian than the systems of many other developed countries, with the uninsured in the U.S., for example, getting more preventive care than the insured in Canada.
- The burdens of non-price rationing rise as income falls, with the lowest-income families facing the longest waiting times and the largest bureaucratic obstacles to care.
- ObamaCare, by lowering the money price of care for almost everybody while doing nothing to change supply, will intensify non-price rationing and may actually make access to care more difficult for those with the least financial resources.
The Obama administration has told us how it intends to change Medicare many times and in many places.
It wants to replace fragmented decision making by independent doctors with coordinated care delivered by doctors working in teams, connected to a medical home. It wants Medicare to purchase quality, not quantity. It wants decisions to be evidence-based. It wants electronic records in order to standardize care and reduce errors.
So how does the administration plan to get all this done? It plans to spend hundreds of millions of dollars on pilot programs to try all these ideas out and then ……
Wait a minute. Aren’t these ideas already being tried out somewhere? Yes. In Medicare, as a matter of fact. How well are they working? As a long-time critic of managed care, I admit the results look pretty good.