THE TREATMENT MARCH 7, 2010
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David Brooks thinks it. David Gregory thinks it. The Washington Post editorial page thinks it. And, what the heck, I think it. If health care reform passes Congress, the final legislation probably won't cut the cost of medical care as quickly as seems possible on paper.
But would the legislation make a good start--as good a start as possible, given political reality? Brooks, Gregory, the Post, and plenty of other critics seem to think the answer is "no." I think they are nuts. And since arguments about costs are likely to loom large in the thinking of nervous House Democrats, it's worth explaining why.
The issue here isn't, or shouldn't be, whether the legislation will save the government money in absolute terms. The Congressional Budget Office has predicted that health care reform, fully implemented, will save a small sum of money in the first decade and a considerable sum of money in the second decade. This is not an accounting trick, as critics like Republican Congressman Paul Ryan has claimed. If anything, it's a worst-case scenario, given CBO's famously dour predisposition. And, despite what you may have heard, the government has actually kept promises to cut costs before.
CBO doesn't produce estimates of how reform will affect overall health care spending--that is, the amount of money our society, as a whole, will devote to health care. But the official actuary for Medicare does. The actuary determined that, after ten years, overall spending would be slightly higher. But that's largely because of a one-time burst in spending, which comes from the expansion of coverage to those who don't have insurance and strengthening of coverage for those who do. Overall, the long-term trend is towards less spending: Inflation after ten years would be lower than it is now. And it's the long-term trend that matters most.
OK, but couldn't reform bring down costs even more? Well, sure. If it were up to me, the government would be more aggressive about determining which treatments to finance and what prices to pay for them. A good starting point would be to establish a public insurance option--which, with its potential to drive down prices of medical services and goods, could save another $100 to $150 billion in the first ten years, according to the Congressional Budget Office.
But it's not up to me. It's up to Congress. And if you were to survey its 535 members, you'd get 535 different ideas of the best way to cut costs.
You'd get answers that reflected different ideological beliefs. The more liberal the member of Congress, the more you'd hear about putting the onus for cost control on government. The more conservative member, the more you'd hear about putting the onus for cost control on individual consumers. Senator Bernie Sanders of Vermont, for example, would tell you we should have a single-payer system--in which the government had far more price-setting powers than anybody is contemplating now. Paul Ryan would say it's all about making sure individuals have more skin in the game.
You'd also get answers that reflect the influence of special interests. Remember, "cost control" is a euphemism for taking a dollar out of some person's, or institution's, pockets. It may be the right thing to do--a lot of times, that dollar isn't making anybody healthier--but you're not going to get it without a fight. Want to dictate lower prices on drugs and medical devices? Rest assured, the drug and device industries will have something to say about it. Want to change the way medicine is practiced, by pushing physicians into groups that coordinate care? The American Medical Association will see you now. Want to start the tax on benefits sooner and make it bigger? Say hello to the unions.
Critics insist President Obama should have demanded these groups give up more--or simply fight them openly. I've actually made that argument myself, mostly about the deal the administration (along with Senate Finance Chairman Max Baucus) made with the drug industry. But, overall, it's awfully hard to argue with a straight face that the administration didn't push for cost control. Were it up to Congress, even the scaled-back versions of the benefits tax and Medicare advisory board probably would not be part of reform today. But Obama made them top priorities, both publicly and privately. The political capital he spent getting those victories was capital he didn't have for other purposes, including--to my chagrin--better subsidies and protection against out-of-pocket expenses.
Of course, sometimes the people and interest groups resisting cost control efforts have a point. Or, at least, you can understand why they think what they do. There are conservatives who worry, honestly, that government might push too hard on prices, running some practitioners or suppliers out of business and leading to shortages--just as there are liberals, like me, who worry that exposing consumers to excessive cost-sharing will cause some, particularly the non-rich, to ration their own care in ways that lead to worse health. The truth is, almost any cost control effort can go too far.
In addition, most of our ideas on how to control costs involve some speculation. They've worked well in demonstration projects or shown impressive results in academic papers. But nobody has tried them on a wide scale, at least here in the U.S. In such a situation, there's a certain logic to trying as many different approaches as possible, but pursuing each one in relative moderation, in order to see what works best (and what works worst).
That's what this bill does. Conservatives frequently say they'd prefer a system in which everybody has high-deductible insurance. But the new minimum requirements for insurance would still leave people with substantial out-of-pocket expenses--much more, frankly, than I would prefer. Liberals want more direct control of prices. But the White House's latest twist would give government regulators the opportunity to reject premium increases that are excessive. Pushing doctors into multi-speciality groups, bundling payments to encourage quality over quantity, changing the compensation for malpractice reform--all of these, and more, are in the bill already.
Some of the people complaining about this bill seem to acknowledge the political forces at play. If it's not possible to pass a bill with stronger cost control, they suggest, there should be no bill at all--or, at least, not one that looks like this one. They'd prefer only a very small expansion of coverage, if any, until real cost control has set in.
But here, too, the political logic isn't so simple. Just think about hospitals for a second. Reducing spending on health care is going to require a massive change in the way both public and private insurers pay them. But, as Len Nichols has pointed out in the New England Journal of Medicine, that's neither advisable or practical without simultaneously expanding coverage:
Two thirds of hospitals lose money on Medicare now. Virtually all lose money because of Medicaid underpayment. To impose serious delivery reform and incentive realignment while leaving hospitals on the hook for the mounting billions of dollars in uncompensated care would bankrupt many and strain most to the breaking point. With expanded coverage, we'll get absolutely essential hospital cooperation. Without expanded coverage, hospitals will have to protect themselves from change, and their local communities will want them to.
You could make the same argument about other interest groups--or what the public, as a whole, would be willing to tolerate. The most aggressive cost control efforts from left and right would start by getting everybody out of their present insurance arrangements. Good luck trying to enact that.
To be absolutely clear about this, I would support health care reform if it did nothing more than expand and strengthen health insurance coverage. I think it's a moral imperative, as much for the sake of the middle class as the poor. But it so happens that the bill moving through Congress will do something more. It will reduce the cost of care--not by a lot and not by as much as possible in theory, but as much as is possible in this political universe. That's far better than the alternative, which is to do nothing.
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19 comments
How long will we continue to accept spending twice the average of other developed countries on health care? Adding mandates and subsidies, and with premiums due to double again in ten years, this is a big deal. The most effective way to control costs is not in doubt - have a single, not for profit system of financing health care. That's how many other countries do it; none rely on for profit insurance. But to say "But nobody has tried them on a wide scale, at least here in the U.S." is literally true, but avoids what has been so clearly demonstrated over and over - take the profit motive out and have a single system. Not stating this clearly fails to move us in the politically challenging direction that we need to go. With the debt that we have, spending on health care with the mess of a system that we have is completely irresponsible.
- bsemple
March 8, 2010 at 1:06am
There is a further point in favor of moving on this bill now: For the reasons that Jonathan outlines, it is politically impossible to achieve meaningful cost control in advance of an increase in coverage. The reverse, however, is not the case. Once we have near universal coverage, there will be no going back. And if the costs then continue to eat the economy, we will have no choice but to impose meaningful control and it will be difficult in light of the financial consequences for even Republicans to impose them. The only means of controlling costs is to control them - for the government to dictate what will be paid for under what circumstances, according to the best medical practice, and the rate that will be paid. It doesn't really matter much whether this is done through a single payer system or with private payers. Once they are out of the business of rationing care and denying coverage, the private insurers would be mere administrators. Let them compete as to who is the most efficient. Along the way to effective cost control, we are going to have to insist that doctors and their production facilities -- hospitals -- are a single enterprise and that doctors may not be paid as independent contractors without paying the hospital a sufficient fee to cover its costs. In no other enterprise that I can think of do workers get paid by purchasers while the production plant gets stiffed for its necessary share. Nuts. The alternative to controlling costs directly is to expose consumers to the cost of care. A little "skin in the game" is not going to provide the equivalent of market prices from the demand side. Indeed, we cannot have both insurance and market prices from the demand side. The two are fundamentally antithetical. Thus, if we are going to have health insurance, or guaranteed care, whatever you want to call it, at prices that people can afford, we have no alternative but direct cost control. It works in other industrialized nations with no worse medical outcomes. It can certainly work here. But we will no longer be graduating doctors who expect to make millions.
- roidubouloi
March 8, 2010 at 1:35am
So sorry. "difficult . . . for even Republicans to oppose them"
- roidubouloi
March 8, 2010 at 2:01am
Roid, good analysis, though it's important to point out that in most of those single-payer Western countries, medical school tuition is highly subsidized, and so their graduates' debt load is much lower. This probably puts downward pressure on provider payments overall, though it'd be interesting to see if those savings outweighed the outlays from the med school subsidies.
- thetraytiger
March 8, 2010 at 8:54am
Absolutely, tiger. In writing about this before on these pages, I have repeatedly noted that controlling medical costs will likely require subsidizing medical education, or making it entirely free. I would be in favor of the latter. I think we would get a lot of great people into medicine if we lowered or eliminated this barrier to entry. I don't think we would have a shortage of talent. For those who take their state education and use it for boob jobs and tummy tucks, we could make them pay the full rental value for the operating theater and tax the service to reimburse the state for the cost of the medical education. I am pretty sure that the cost of medical education would not come close to outweighing the gains from cost control. A drop in the bucket.
- roidubouloi
March 8, 2010 at 9:10am
David Brooks thinks that he's going to lose his NY Times column unless he starts criticizing Obama's HCR plan like every other soi-disant conservative columnist around (now that Andrew Sullivan finally stopped calling himself a conservative). It has nothing to do with an informed decision on whether or not the plans have sufficient cost controls. I hope Chait starts to point out such obvious things in his column, the way he does with the CW-mongerers at Politico.
- wildboy
March 8, 2010 at 10:33am
David Brooks is a ninny and a concern-troll (great word I learned here at TNR!). I used to write him e-mails telling him that he should have Krugman read his essays on economic subjects before he sends them to print so that he can stop embarrassing himself.
- roidubouloi
March 8, 2010 at 11:27am
Somewhat more directly to the point, Brooks is an example of what in medieval times was known as a "court Jew," a Jew whose metier is speaking pablum to power, toadying to curry favor. The court Jew served the special function of legitimizing the every utterance and desire of the powerful by coming from the tribe of the prophets who first spoke truth to power. "See, even the Jews agree with us."
- roidubouloi
March 8, 2010 at 11:36am
"Court Jew"? Ouch! I do like the description of "ninny". At least he's not a nincompoop. Yet.
- tnmats
March 8, 2010 at 12:11pm
As someone who spent four years in medical school, is a small business owner, and is over 65--- i can assure you from personal experience and from theoretical considerations that roid and tiger are right on. I can also assure you that everyone in the health care game is not dealing with the dirty secrets of reality: Doctors and others in the health professions need make less -- in exchange for free or reduced training costs, in some cases. Health insurance doesn't disappear--- but it becomes a commodity, non-monopoly business with much less overhead and profit. All medical treatments for everyone cannot be covered in any public plan. You' re 80 and need a heart transplant?? Thats not going to happen without private insurance supplement. Basic health care will be rationed (as it is now), but with a better scientific and epidemiological rationale. The wealthy will get better care, but everyone else gets decent care. Taxes will be necessary to pay for this--- but the overall costs in terms of % of GNP will be 20-50% less than we now pay. I continue to have more faith in the American Public to understand this if clearly and constantly presented--- something the Obama administration has failed miserably in doing.
- gdbittner
March 8, 2010 at 12:33pm
gd, That's the best short description of what can be achieved with healthcare reform, and what needs to happen to get there, as any I've read. One wishes that the medical profession could be four-square behind reform. That would sway a lot of people. I also could not agree more that the administration has mishandled this politically, although the outcome is about as much as one could hope for at this moment in time given the moribund state of our political system
- roidubouloi
March 8, 2010 at 12:41pm
great thread everyone. roid, you would be surprised about Health care education. My wife has gone back to the states to take nursing and she is on full scholarship. The difficulty comes in getting into the program, not paying for it after you get in.
- blackton
March 8, 2010 at 1:46pm
Well, blackton, while there is financial assistance and even a full scholarship on occasion, medical education in the US is not generally free. Students without money can graduate with a lot of debt and there is not consistent access to the necessary credit.
- roidubouloi
March 8, 2010 at 3:47pm
bsemple writes: "How long will we continue to accept spending twice the average of other developed countries on health care?" When you consider we pay a GM forklift driver wages + benefits that exceed the wages + benefits of a doctor in France, the rest is kind of obvious, isn't it?
- seattleeng
March 8, 2010 at 6:38pm
I see, the reason health care is so expensive in the US is that GM forklift drivers are overpaid, driving up the cost of automobiles (are GM's cars over-priced relative to the competition?) requiring medical providers here to earn far more relative to US median household income than French doctors do relative to French median household income. Makes perfect sense. The rest of the problem is undoubtedly caused by teachers' unions community lending standards, and unemployment insurance and [insert favorite right-wing plutocratic bugaboo here].
- roidubouloi
March 8, 2010 at 7:53pm
Funny, Roid. :) But it hopefully does explain to bsemple that our costs are not directly comparable to other OECD countries costs. How about sharing what you think the total life earning difference should be between the 10th grade high school drop out and the guy that busted ass all through high school, college and graduate/medical/law school? It's fairly germane to the cost and savings issue
- seattleeng
March 8, 2010 at 8:06pm
This is a bit off-topic, but I'm fascinated by the fact that Medicare supports medical education--I would think few know about that Medicare "expense." This from J. Iglehart of the NEJM Volume 359:643-650 August 7, 2008 Number 6 " It has been more than a decade since Congress enacted legislation that significantly altered the policies under which Medicare supports graduate medical education (GME). Now, the political ground under this relationship is beginning to gradually shift again, and if this development gathers momentum, it could lead to greater support for the training of primary care physicians and more scrutiny overall of how these Medicare GME monies are spent. As an increasing number of medical-school graduates pursue specialties with a "controllable lifestyle" and shun careers in primary care, there are distinct signs that Congress will face new demands to examine Medicare payments to teaching hospitals."
- hmseil01
March 8, 2010 at 9:22pm
seat. I can't decide if you are ignorant or dense. Help me out by answering. Roid is giving health care costs in terms of % of GNP. That normalizes a lot of costs (Google normalize, if necessary). Salary costs for most blue and white collar jobs are more in the US compared to OECD or Japan where health care costs are 30-60% less of GNP, or in currency-converted dollars, than in the US--- at least since the 1970's sometime. The exceptions are high-level management or CEO's -- like me. [Again, go Google.] And you?? And THAT has much more to do with luck than skill. Even if YOU may not admit it.
- gdbittner
March 8, 2010 at 10:21pm
I'd say four times the average worker's salary ought to do, which would be 8-10 times that of the 10th grade dropout, about 75%, on average, of what it is today, and still be the highest amongst industrialized nations. Are you under the illusion, seattle, that if everyone in America went to graduate school that then everyone in America would earn 3-5 times the average income in America? What should someone get paid, in real terms, to do all the jobs you need done? Enough to be able to afford food, clothing, shelter and medical care? See this, quoted below http://www.slate.com/id/2227965/ "There's no question that doctors in the United States make a lot of money, especially compared with their counterparts abroad. American doctors make, on average, four times what French doctors earn. And it's not just because everyone in America makes more money: The gap between doctors' incomes and those of professionals is far bigger in the United States than elsewhere. In the 1990s, the ratio of the average American doctor's income to the average American employee's income was about 5.5. In Germany, it was 3.4; Canada, 3.2; Australia, 2.2; Switzerland, 2.1; France, 1.9; Sweden, 1.5; the United Kingdom, 1.4. American doctors' salaries are high for several reasons. The first is the cost of education. In France and Great Britain, students go directly to medical school after high school, and their entire educations are free. In the United States, students must first get a bachelor's degree before attending medical school, and the average medical student's debt is $155,000. Then come at least three years of residency, which usually pays less than $50,000 a year. After all that, it's no wonder doctors feel entitled to six-figure salaries. Another reason U.S. doctors get paid a lot is market forces: In a single-payer system like Britain's, the government can bargain down the prices of treatments, which leads to lower income for doctors. No such entity exists in the United States—Medicare is big, but not that big."
- roidubouloi
March 8, 2010 at 10:42pm