Part 3: Un-Spinning Healthcare Reform - The Economics

How ironic. I caught the flu right in the middle of blogging about health care reform. After two days of misery, I awoke this morning to see Tina Brown on CNN talking about how, as a Brit, she has been able to go to the doctor whenever necessary without question or worry. She said that for everyone born in the U.K. or Europe this is just a normal expectation of, "living in an evolved society." And she said everyone has always had the option to "go private" for enhanced care. Can you imagine the peace of mind that must offer?

The big question is how do they pay for it? That is what Congress is wrestling with now. It seems to me they are making it way more complicated than it needs to be.

A British writer and friend named Mark has lived in Paris for the last decade. Now a permanent resident of France, he has the unique perspective of both health care systems. He wrote to me saying, "In the U.K. basic health care is covered by National Insurance Contributions, which pays for the National Health Service, as well as retirement. In other words, if you're hospitalised in an emergency, nobody asks you if you're insured or, conversely, to write a cheque. The food may be lousy, but the chances are you'll live. NI contributions are taken right out of everyone's salary on a scaled basis and you barely notice them."

According to my American friend Elizabeth who now lives in the U.K. (see her story in Part 1), a noticeable difference between the level of care in the U.S. and British systems is the hospital ward. Here in the U.S. we're used to having "semi-private" rooms wherein two strangers are housed in adjacent beds in the same hospital room with curtains for privacy. In England, multiple patients are housed in an open ward with curtains for privacy. In a culture where our sense of community has completely broken down and we no longer know our neighbors, this would definitely require a psychological adjustment. However, unless our healthcare reform is going to include the cost of demolishing and rebuilding every standing hospital in the U.S., that's just not going to happen. Thus, ostensibly, we'll have the comparative luxury of semi-private rooms while gaining the peace of mind of no longer having to fight insurance companies and worry about losing our homes while we fight the cancer that put us in the hospital to begin with.

In France, things work a little differently. Free medical care for all, including the jobless and homeless, is the guiding principle, however implementation is a little more complicated. The French national health care system, L'Assurance Maladie, provides for standard medical care at 100% support. If you have a trauma, you are wheeled into the hospital, you receive the same standard of care we expect here in the U.S., and you pay for nothing. You are healed, given ample opportunity for recovery, and no one from billing contacts you. Also, the doctors don't have to get permission from an insurance company to determine what procedures to provide. They just get the job done.

When it comes to routine preventive care, in France, fees for doctor appointments and dental care are reimbursed at 80%. According to Mark, you present the receptionist with the French equivalent of a Social Security Card and pay 20-50 euros. You also give the card to the pharmacist when you pick up prescription drugs. He said, "If you're lucky enough to have an employer with a 'mutuelle', or private healthcare scheme, a small amount is taken out of your wages. You send a form to your mutuelle saying how much you paid for your check-up or dental appointment, and it's reimbursed. The result: you pay nothing."

Under debate by Congress now is a tax-based system that appears to be similar to the one used in England where roughly 10-11 cents of every dollar you earn is put in a giant fund to pay for every U.S. citizen to get the health care they need. I don't know about you, but one thin dime for every buck you make seems like a very easy trade for being able to see the doctor any time you need to. It is certainly a very easy trade-in on all of the stress of fighting the insurance company bastions over routine denials.

But what will all of this change mean for the doctors who care for us? I consulted with another friend, Steven R. Hindes, MD, MPH of Colorado. Dr. Steve and I went to high school together. I remembered him as one of those delightful people who always had the best interests of everyone in mind, so it was no surprise for me to learn that he graduated from the University Of North Carolina School Of Medicine with both his medical degree and a Masters in Public Health. He is a board certified family physician, and he operates a private practice outside of Denver. He is also a professor of medical health economics at the University of Denver. This week, I went to school with Dr. Steve on the economics of healthcare reform.

The big sticking point for most Americans, including Congressional Blue Dogs and RINOs, is how to fulfill President Obama's pledge that reform will be "deficit neutral." First, we need to understand why the deficit exploded in the first place. Presidents Clinton, Bush and Obama (sorry Dems, there's ample blame to go around on this one) abandoned the Pay-Go law that prevented Congress from approving any new expenditure until a tax was increased or a different expenditure was eliminated in order to make the new spending budget neutral. Add together the long list of unfunded mandates including Medicare Part D, the Iraq War and the Wall Street and Auto Industry bailouts, and we have the fix we're in today. One of the few programs in decades mandated to be deficit neutral is health care.

As a physician, Dr. Steve says that a public health care option that is "administered as efficiently as Medicare" is favorable. While the argument that a government option will drain consumers off the insurance company rosters has been used as a negative, Dr. Steve says this will be a positive effect. The reason: private insurance is currently way over-priced. Proof is how quickly premiums have outpaced cost-of-living and wages in the last decade. While he accedes that supply and demand per se doesn't work in health care, the fact is that supply drives demand and leads to excessive and redundant treatment with no benefit outcomes.

This is what the President speaks about often. "When these expensive sources are controlled and only used as truly needed, then the total billing goes way down," wrote Dr. Steve. "If someone wants to get the test or procedure even when it has been deemed not medically necessary, then they can pay for it themselves with their own money but the taxpayers will NOT pay for it." (His emphasis.) Critics spin this as "rationing." Truthfully, it is an end to CYA medicine a.k.a. "defensive medicine" that is done simply to avoid malpractice claims. Tort reform is essential.

As a family doctor, Hindes says that increasing the financial incentives to go to primary care and to get preventive services will reduce the high cost of specialist services that can be just as well handled by primary care physicians. This echoes what I learned a few years ago when I provided P.R. consultation to the Georgia Academy of Family Physicians. Our national addiction to specialists has made it economically infeasible for our front line physicians to practice in most rural areas and low income zip codes.

Another thing Dr. Steve believes will truly impact the cost of health care in reform is the elimination of direct-to-consumer advertising for medications which he says drives inappropriate demand and inappropriate use.

"When the uninsured have insurance, they will be seen early and fixed early," Dr. Steve wrote to me. "Now they wait until they are very ill, go to the ER, need advanced care and don't pay, so the hospital shifts the cost onto the next patient who walks in the door with good insurance and jacks up the bill...This is cost shifting, and it makes care seem extraordinarily expensive for those who are insured." Dr. Steve says that when everyone is insured, then preventive care is incentivized. That way when someone does need advanced care, the cost for those high-end services is spread across everyone, not just across those who happen to get sick.

Now that sounds like healthy economics.

Follow Kimberly Krautter on Twitter: www.twitter.com/kimbrlykrautter

Comments

[mightbesane]

One point that is hinted at in this post but not fully explained is that private insurance companies in France are actually quite healthy financially. The single payer system handles 75 - 80% of routine costs, as the author suggests, but it's not only employers who purchase 'top-up' (as it is called) supplemental insurance from private companies. Everybody...well, just about everybody...buys it. The supplemental insurance market is both competitive and profitable.

The next time somebody laughs at the French healthcare system in front of you, forget reason. Put 'em in the hospital.

[hsr0601]

A pay for outcome / value payment system & HEALTH CARE IT, key to the deficit-neutral, might be capable of bringing all groups together.

Supporters of the agreement say it could save the Medicare System more than $100 billion a year and 'improve' care, that means more than $1trillian over a decade, and virtually needs no other resources including tax on the wealthiest. (Please visit http://www.kare11.com/news/news_article.aspx?storyid=820455&catid=391 for detailed infos).

As much as 30 percent of all health-care spending in the U.S. -some $700 billion a year- may be wasted on tests and treatments that do not improve the health of the recipients,” Thus the remaining $239 billions over a decade do not matter. Supposedly even the conservative number of such savings might be able to meet the goal.

Dr. Armadio at Mayo clinic says, "If we got rid of that stuff, we save a third of all that we spend and that is 2.5 trillion dollars on health care. A third of that and that is 700 billion dollars a year. That covers a lot of uninsured people."

Apparently, just in case of the difference between the estimate and result, or the worst case of scenarios, Obama officials may have made a statement taxes may rise to pay health care.

THANK YOU !

[greyhound2]

Let's see. Obama says the US does not have the best health care system in the world, just the most expensive. Correct.

According to the UN WHO, the US ranks 37th in the world in health care available to the "average" citizen. Correct.

In other words, the US health care system is not cutting the mustard and it's costs are out of control. It is time to scrape the whole program and start from scratch. There are 36 examples of other countries doing a better job with some at half the cost. Obama's big mistake is that he wants to improve a system which Americans are used to. Is this some flag waving patriotic exercise that because our system is a bunch of crap and that we need to stay with the crap because it's American crap?

Don't waste any more time arguing about how to fix a broken system while lobbyists push to preserve their special interests at the cost of the American people. Scrap it, junk the crap and start over.

[Artemis34]

Watch "...guaranteed to keep prices sky high!"

"With nothing to give Washington, these people get nothing from Washington in return."

http://www.pbs.org/moyers/journal/07312009/watch2.html

"July 31, 2009

BILL MOYERS: Watching the people in those lines waiting patiently and hopefully for free medical treatment, I couldn't help but think about how little chance they have against the powerful interests that are deciding the health care debate underway in Washington right now. In the weeks since my interview with Wendell Potter was first broadcast, the reports have kept piling up, and the message is the same: money trumps need.

[crease]

If you haven`t seen the movie Sicko , please do, it will open your eyes to the 21st century health care systems around the world that work for the people and watch the Bill Moyers interview with Wendall Potter.

[Jgm322]

Some Ideas to Control Costs:

1. Pass a law outright restricting the pay of health care workers. For instance, currently a Nurse with a two year degree should not be earning more than $35 an hour. A Doctor with her eight year education should not be earning more than $700,000 per year. We could probably get a majority to agree to this approximation, saving billions of dollars per year.

2. Establish a new non-profit status for any organization making health care equipment and cap profits by a percentage of sales based upon a frequently audited parts and labor amounts, saving billions of dollars over the years and reducing equipment fraud.

3. Establish a strong enforcement wing of the IRS that specializes in health care fraud. Federal authorities in Miami have prosecuted 1.5 Billion dollars in health care fraud cases in just the last three years.

4. Natural competition. Don’t over-regulate private insurance companies. Let them compete closely with a government financed plan. This will cause them to reduce spending or reduce profits, or even better; causing them to sell only life, auto, and home insurance.

5. Treat people in primary care situations before they get sick.
These are just a few ideas. I don't firmly subscribe to these ideas, but I think that two or more should be enacted.

6. Legalize street drugs like marijuana. Tax them. Shootings and stabbings stop.

7. Tort reform. Pain and suffering base payments. Time lost.

[Artemis34]

Single payer!

True single payer system would cut cost $3,000 per person per year!

ONE TRILLION DOLLARS efficiencies in the first 13 months!

[Artemis34]

point 7) lawsuits are shown to be a TINY factor in costs (less than 2%)

Here is a funny (and true) comment from Newsweeks':

Jonathan Alter
What’s Not to Like? [tongue in cheek]
Reform? Why do we need health-care reform? Everything is just fine the way it is.
Jul 31, 2009

"OK, if you really press me, I'm for one change. It's the one that Republicans trot out to prove they're "reformers," too. We could save our whole system if we just capped malpractice awards. Two of our biggest states—California and Texas—did it a few years ago and nothing has changed there, but who cares? It sounds good."

http://www.newsweek.com/id/209817/page/1

On this point, the only thing that would help would be government price controls on malpractice insurance b/c corporate greed is the only thing driving prices up there, not court awards.

[Robert87G3]

"Presidents Clinton, Bush and Obama ...abandoned the Pay-Go law".

President's don't have the option to abandon Paygo. Paygo is a 1980s budget tool developed by Sens. Graham, Rudman, and Hollins. It became a tool of the 1990 Budget Enforcement Act.

Congress modifies how Paygo is applied and to what. The result of Paygo between 1995 and 2000 was a budget surplus. The Republican Congress turned Paygo on and off through 2006 but the deficit remained small because the economy produced off-setting revenues.

The 'fix we're in' today has nothing to do with Paygo. Republicans redefined what constitutes emergency spending that increased off-budget spending. They also applied the Reagan era theory that the deficit is only relevant as a percentage of the GDP. Bush and the Republican Congress spent upwards as the economy rose. When Bush left, the dept to GDP ratio was very low at 1.5%. The economy tanked and the ratio rose as old policies continued to spend money and new policies aimed to spend more money to prime the pumps.

So, we are in a fix because of off-budget spending tools and spending increases that continued when tax revenue dwindled. Two examples are the Bush tax cuts that continued after they stopped being effective and the money for Iraq and Afghanistan. If those people had paid the taxes and the money wasn't spent for the wars, we would be in a surplus well over $1 trillion.

Robert McElroy

[crease]

Wow, nice rebuttal.I am a blue union man that is all over this health care issue and I agree with your comment wholeheartedly.I am no economist but I do understand what you said and BUSH and his minions went through the Clinton stash like John`s at the Bunny Ranch in Nevada.As I have researched this issue I have found it disgusting that it is profit driven and basically run by Wall St and the hedge funds on a term that`s called Medical loss ratio when you spend to much on health Care and not saving enough money(profits).This is the main reason we need single payer.This is the single most important issue right now because to many small businesses going under because of health care cost.70 percent of all Americans are employed in small business and they are slowly being sacrificed because of Health care.

[Artemis34]

Clinton and Gore balanced the budget. They had to bring the government to a screeching halt to do it.

Thank you for your courage gentlemen!

Learn more at the non-partisan IOUSA the movie
http://www.iousathemovie.com/

The social security trust fund has been squandered on things conservatives wanted to do like fight wars without provocation. If the fund were paid back, it would be solvent. If we established a rational objective immigration program to make sure we always had enough current workers to support current retirees, social security would be solvent. If we ended the cap on social security tax (now $106K) then social security would be solvent.

Here is a more humorous view of some of these ideas:

Al Gore's State of the Union Address
http://www.nbc.com/Saturday_Night_Live/video/clips/gore-state-of-the-union/229115/

[hsr0601]

No Rationing Is Required, from my standpoint.

In case you are a doctor, and your pay is dependent upon your patient's outcome, you will more likely strive to prescribe the best medicine for your patient, let alone avoiding unnecessary cares, and hope your patient will feel better as promptly as possible.

Studies have documented that nearly one half of physician care in the United States is not based on best practices and that at least 98,000 Americans die of a 'medical error' each year.

Under the new health care program, practitioners are expected to eagerly and voluntarily implement the 'recommendations', not 'rationing' , I think.

Nowadays, we can't imagine the society without IT SYSTEM, just to think of the bank that lacks it, presumably what we should fear most would be the medical institutes without A MUST. I think measurable savings in the transformative health program might be reached.

Thank So Much !

[salud101]

A word from one of those "overtesting" asthma specialists, who really did not learn how to take care of this chronic condition, during my medical school education that cost over 250K nor residency training, that focuses on how to put out fires rather than prevent them. This shift onto generalists for preventive care sounds wonderful, but simplistic. No doubt, more support and incentives are needed to support the gp's, i.e. in these communities. I just hope that it is not at the expense of the specialists, who should help support the foundation of the new health care home. In certain northeast urban areas, which have one of the highest rates of asthma morbidity and mortality (across the nation 11 people die daily from this very controllable condition), there are not enough generalists, and, definitely not enough specialists. No different for brittle diabetics or labile hypertensive patients. Changes are needed at many levels, including undergraduate and graduate medical education, patient expectations, insurance companies, etc... In the future, I hope that dialogue brings more views into the conversation

[wilsonveteran]

Just like progressives I show an article an people say they are from England and this is not true. Well I am from England also and it is. But take that for what it is answer these questions. The federal government runs the post office and it cannot pay for itself so they pay for it with tax dollars. The federal government runs Amtrak and even without any competition it cannot make a profit and runs in the red so tax dollars keep it afloat. The federal government runs medicade and medicare one is bankrupt and the other will be there soon. However our tax dollars will keep it going. The federal government runs Social Security and it will be bankrupt soon but once again our tax dollars will keep it going. With all of this inefficiency what makes you think the Federal Government should run health care and make health care decisions for you and me. There seems to be a pattern here. Now before you jump up and blame Bush and the Republicans I said Federal Government and the last time I checked that included Republicans, Democrats, and Liberals.

[b9Web]

Let's get this straight. We do not need a government run health insurance program or health care program any more than we need the socialized fire protection we now have run by governments, local abd state. We need to return to the system Ben Franklin, a great American, founded, which was fire protection provided by fire insurance companies, like the one Franklin owned. Home owners put a fire mark, a company logo, on the front of the house, so the local fire department (organized by Franklin) would know which home got protection and which didn't. Simple. If a homeowner wanted to provide his own fire protection, he could. Just like today you can use the Internet to learn how to perform your own surgery. Health is a choice, not a government mandate.

[Kimberly Krautter - Huffpost Blogger]

Dear Benign- Your comment is high satire befitting the irony of your alias as no serious person can suggest that only those who can afford fire protection have a right to it. Thanks for the belly chuckle. Cheers!

[shockwave11]

Thank you for your post. Makes sense to me.

[mbaty]

France spends much less than we do here, and everyone is covered. There is no excuse why this can't be recreated here. The only people stopping this are those who are making huge profits from the current system.
There's enough that we share. We can all have health care.
If we can afford to bail out AIG we can afford to take care of you and me.

[wilsonveteran]

More Progressive propoganda. No one lies like the progressives when it comes to control over the people and pet programs to gain that control. See what the British papers actually say about British health care.

http://www.timesonline.co.uk/tol/life_and_style/health/article4535178.ece

http://www.telegraph.co.uk/news/2547393/Patients-should-not-expect-NHS-to-save-their-life-if-it-costs-too-much.html

Our government currently runs the post office and it runs on a deficit so they tax us more to make up for it. Our government runs Amtrak and it runs in the red so they tax us more to make up for it. Our government runs Medicare and Medicade. One bankrupt and one going bankrupt in a couple of years but they will tax us more to make up the difference. Government runs Social Security soon to be bankrupt yet there will be more taxes. With all of this failure we are now going to trust them with our health care. How crazy are we.

[kerrie882]

The odd article in an English newspaper means nothing. Everbody moans about what they have. The fact is our health care (I'm English) is brilliant. It makes me so angry that sombody like you who clearly has no experience of our healthcare dares trawl through hundreds of articles you must have come across to find two that are slightly critical. The over 50s are well looked after. We have excellent health care for EVERYBODY, which is where you effort at care fails miserably. The 'if it costs too much' is also again, in isolated cases. If a drug is ridiculously expensive and will only save a few people from death, no, we won't use it. If it is ridiculously expensive and saves thousands, we will. How can you complain about the governement allocating resources when you blindly fork out thousands of pounds to receive the one and only difference between your actual care and ours... a yearly physical. And I'm sure you'd all drop dead without that.

[kerrie882]

And please, do not criticise what you know nothing about. As the article above says, if you want more, you're quite welcome to pay for it. But the chances are, unless you have some obscure disease, or want a cancer drug that has an effect on a very narrow range of cancers and benefits only some, you will never ever need that.

[juanjo]

Odd how everyone I know who is from England or Canada are more than content with their systems of medical care and one never hears any serious proposals to abolish their respective single payer plans. Meanwhile the number of people who regularly go bankrupt or die because they cannot afford health care in this country continues to grow. If you are rich or a member of Congress, you have excellent medical care in the United States. If not, good luck. Bean counters in insurance companies make the medical decisions in the United States and they are driven by a profit motive, not health care concerns. They decide how long you stay in the hospital, what treatments are available to you and the medications you will receive.

Funny how we can always find the extra cash to bomb another country into the stone age but can never find the money to provide health care or quality education to our own citizens.

[wilsonveteran]

If you want affordable health care then have tort reform. Doctors pay 200K a year on average for malpractice insurance and order losts of test to cover themselves. You want affordable health Care then tell the federal government to stop taking one thousand dollars a health policy every year. You want affordable health care let the insurance companies sell health insurance across state lines like car insurance. Why don't we try this it does not cost us a thing and then if it doesn't work you can say told you so.
Finally those of you that say you insurance companies deny you coverage is an Urban legend. If you have the policy and have paid for it they can't. If you change insurance companies when you change jobs and have a precondition that new insurance company has to cover that precondition. Thats the law.

[unite4change]

It would be helpful if you would provide current news articles, these links are dated.

FYI, we didn't have these problems until Bush privatized most of them, meaning these are privately owned businesses operating these institutions but they should be operated by our government.

When I hear Americans and politicians talking about the government in third person, it's a WTF moment for me. People, we are the government. It appears, we have elected representative constantly making derogatory comments about the government and their employer, us.

Since the government can't do anything right, politicians are making it abundantly clear, they don't want to work for us and we should accommodate them by sending them home.

[b9Web]

I agree. We also need to eliminate socialized fire protection. Back in Ben Franklin's day, insurance companies contracted local fire departments to provide protection only to home owners who bought the insurance and placed the company logo on the front door, a fire mark. If you wanted to provide your own fire protection, you could. No need to pay. If your home burned to the ground, so be it. That was your choice. Today, you can easily use the Internet to find the information you need to perform your own surgery if you don't want the hassle of health insurance. You have that choice.

[Kimberly Krautter - Huffpost Blogger]

Ben Franklin was a genius, I'm a huge fan of ole Ben, but you know what they say about the thin line between genius and insanity... remember... Franklin was the one who thought our national symbol should be the wild turkey instead of the majestic bald eagle... Your penchant for the comic riff is appreciated as this idea you are proposing is just that: A turkey.

[NickHP]

Private- semiprivate - sorry, I've read that the latest experimental evidence is that patients in shared rooms pass around infectious organisms in only a few hours. The best treatment is individual rooms.