Writing on The Health Care Blog, D.C. insider Bob Laszewski puts the chances of health care reform—at least in the form envisioned by the presidential candidates and ambitious activists—at about zero in the wake of Wall Street’s meltdown. It’s easy to see why Laszewski is so pessimistic:
“On top of the $500 billion deficit [that the government faces ]in 2009…and the cost of the Freddie and Fannie bailout . . . the Congress is now being told it must take on a total of almost $1 trillion in government long-term costs to try to turn the financial system around.”
That’s a problem. McCain claims his reform plan will cost $10 billion; Senator Obama says his will cost $65 billion. Both are no doubt low-ball estimates. Obama’s plan, for example, is more likely to cost $86 billion in 2009 and $160 billion in 2013, after it’s expanded, according to the Urban Institute. Given these numbers, Laszewski says that the candidates have to “get…real” about how they’re “really going to deal with health care reform in the face of all of these challenges.”
In an upcoming post, Maggie will dig deeper into just how health care reformers can and should ‘get real’ in post-meltdown America. But instead of talking about what reformers should do, I want to discuss another important question we have to pose in the upcoming age of austerity: will the public even care about health care reform anymore, now that the economy has gone south?
On September 30th, the Partnership to Fight Chronic Disease (PFCD) held
a conference call with reporters. On the call were Ken Thorpe, PFCD’s
Executive Director, and former U.S. Secretary of Health and Human
Service Tommy Thompson. Though I’ve never been a fan of Thompson, he
had some interesting things to say.
Thompson opened
by laying out the numbers behind U.S. health care expenditures, noting
that “16 percent of the [U.S.] gross national product goes into
healthcare [every year], and [that proportion is] on its way to 21
percent.” He also pointed out that “we’re spending $2.4 trillion, on
the way to $4.6 trillion, and 75 to 80 percent of that cost is over
chronic illnesses” like cardiovascular disease, strokes, cancer,
diabetes, and obesity.
While these statistics are hardly new to health care wonks, they’re
worth reconsidering in light of Congress’ bailout plan. Seventy-five
percent of $2.4 trillion is $1.8 trillion—meaning that, annually,
chronic diseases cost us almost three times as much as the current
bailout bill. The nation’s total health care bill is the equivalent of
passing a bailout, saving Bear Sterns, nationalizing Fannie and
Freddie, and propping up AIG twice every year.
If nothing else, the Wall Street implosion puts the sheer scale of
America’s health care woes in perspective. As such, Thompson and Thorpe
agree that the economic meltdown is a powerful wake-up call to the
American public. During the call, Thompson said that he thinks that
citizens are “absolutely frustrated with Congress and Washington
avoiding problems,” and are thus likely to begin demanding action on
long-term crises like health care. The need for reform “is hung around
the neck of Democrats, Republicans, George Bush and everybody else, and
Wall Street,” he said, and the American public wants to “find an
answer.” Thorpe agreed, saying that outrage surrounding the economic
crisis has “stirred a bee’s nest” of dissatisfaction that will “elevate
the interest and desire to do something on healthcare reform in 2009.”
In other words, our economic crisis highlights the danger of senseless
spending and lays bare the catastrophic danger that comes with ignoring
the rumbling of a financial crisis. As Thompson and Thorpe see it,
voters are deciding that they’re mad as hell—and health care is another
area triggering their wrath.
Dr. David Kibbe of the American Academy of Family Physicians agrees. Also writing on The Health Care Blog, Kibbe argues
that Americans’ feelings of betrayal over Wall Street’s greed will
spill over into health care. Kibbe notes: “[A]ny sentient observer of
this [economic] trickery on such a massive and systematic scale will
start to ask questions about who else among our highest paid and most
trusted professionals might be lying to us about the well being we
place in their hands. Who else [besides financiers,] they will ask,
is making money off our trust in them? Who else, they will ask, is
skimming money off the top of an inflated and ultimately doomed—because
unsustainable—market for complex services? Where is the next bubble
that privatizes profits but socializes risk?”
It’s health care, says Kibbe—a sector where “fifty million people are
without health insurance, and at least that many are under insured,
while revenues going into the industry continue to increase at double
digit rates of increase year after year.” Then he asks: “How can this
go on much longer?”
Under normal circumstances, the answer might be a good, long time.
After all, our health care system has been dysfunctional for decades.
But today Americans aren’t just disappointed with the way our
institutions work—they’re outraged and scared. In a Gallup poll
released yesterday,
53 percent of Americans said they felt “angry” about the financial
crisis, and 41 percent said they felt “afraid.” Americans feel that the
system has failed them—and, as perverse as this might sound, it’s that
sort of disillusionment with institutions that is needed to fuel
changes as far-reaching as health care reform.
Interestingly, the Gallup poll shows that more affluent Americans are
the angriest. Sixty-three percent of college graduates say they have
felt anger over the recent events in the financial world, compared with
50 percent of non-graduates and only 43 percent of those who have not
attended college. Sixty-two percent of respondents in upper-income
households with annual incomes of $60,000 or more have been angry,
compared with 50 percent of those in lower-income households. This is
important: it’s always hardest to convince the “haves” that the system
is broken, because the system is built to work best for them. But if
Americans of higher socioeconomic status begin to acknowledge that an
unsustainable system threatens the entire economy, institutional
overhaul becomes a much more plausible political proposition.
Granted, all of these numbers refer to the financial crisis and not
health care. But the assumption that worries about the economy will
fuel outrage over health care isn’t as far-fetched as it may sound.
Polls show that concerns over the economy and health care do in fact
trend together. Check out the graph below, from the Kaiser Family
Foundation, which I originally posted back in January to illustrate this very point.
Moreover, public interest in health care is still high: the September 2008 Kaiser Family Foundation election tracking poll puts
health care as the number three priority of all voters, and health care
remains the second most commonly reported economic hardship (after
paying for gas). What will happen when our long-time interest in health
care is mixed with a new appreciation for government oversight and
regulation, smart spending, and building system that works? Maybe, just
maybe, a renewed political will for health care reform.
Admittedly, in post-meltdown America, resources will be limited. It’s
also true that the sort of done-in-one reform packages that reformers
like to trumpet—cover everybody! Cut costs! Improve quality!—will
probably have to be unpacked into separate initiatives. (This isn’t
necessarily a bad thing—as Maggie said
last week, “we shouldn’t rush into providing health insurance for
everyone until we’re sure that we’re offering Americans health care”
anyway).
In the meantime, don’t be too quick to assume that Americans have
forgotten about health care because the economy has taken a nosedive.
It may be that, as people feel increasingly insecure—and get wise to
the danger of governmental inaction—they will want health care reform
now more than ever.
What do Health Beat readers think? Is health care on hold, or will the
backlash of the economic crisis fuel a new impulse for reform among
American voters?
Generic medications are a great way to keep your prescription drug costs down. I’ve seen ads on TV for Caduet. It has two ingredients. One is Amlodipine and the other is Atorvastatin. With my RxDrugCard I can get 30 tablets of Amlodipine for $9 and 30 tablets of Simvastatin for $9. I’ll bet they are charging more than $18 for this new drug! The unthinking public is going to pressure their doctors into giving them something just because it’s new, when something old or generic would do the job for cheaper.
Is it possible we are experiencing a health care bubble, much like we experienced with home prices?
How can the cost of health care continue to increase much faster than wages over so many years (as we experienced in the housing market)?
At least when we consider a 30-year mortgage, the run-up in prices can still be affordable, for a house that doubles in price won’t have the same doubling effect in mortgage payments.
The same analogy does not hold in health care.
Premiums tend to increase in line with the increasing costs.
Have premiums increased even faster than prices, due to the availability of comprehensive insurance coverage?
Don Levit
I agree Don the analogy doesn’t hold in healthcare. There won’t be a healthcare bubble, because when it runs out of money you get told no. It is a continually renewable entity, people get sick every day people don’t need to buy a house but once. Whereas the bubble burst and you are left with a mortgage in a house you can’t afford and face foreclosure, if the healthcare bubble burst and the finances are less, you get incrementally less care by some sort of rationing.
We need to remember that the economic model for health care is upside down. Shareholders expect the industries they invest in to grow every year. But supposedly the health care industry is here to make us more well. If that actually worked there would be less money to be made in the industry because there would be fewer sick people. Instead, what we have is a model where preventive care is downplayed and the real money is made when someone gets really sick.
The premiums have actually not increased faster than prices; actually it is the opposite, they are barely keeping up with costs. The only growth in profits for the insurance industry is in Medicare Advantage because the Congress stupidly decided to overpay the companies for that service. Now Medicare Advantage is spiraling out of control and Congress will probably repeal that stupid stipulation.
A theme of the current US economic crisis is the demise of “the free market solves all problems” model. Thus a return of the need for regultory oversight in many sectors is upon us.Health care especially requires regulations for many reasons not the least of which is the need for compassionare and fair rationing so that ALL American citizens can obtain some basic level of quality affordable care.
While the current economic crisis (as the war has) will make less money available for major new high tech-high cost programs and/or deccelerate their implementation timetables, the fundamental theme of increased regulations in many sectors including health care will prevail.
Hence health care reform will still happen soon but costs will be more closely scrutinized. This set of dynamics should drive my personl favorite themes of individual(health behaviors) and institutional(public health) prevention.
Dr. Rick Lippin
Southampton, Pa
ralippin@aol.com
Don and Jenga–
Let me weigh in on the the question of a bubble.
Don–Any financial bubble is, by definition, a matter of too much money chasing too few goods.
This happens when there is too much money sloshing around in the world.
What creates big pools of money? Governments printing money (which the U.S. has been doing hand over fist for years) to paper over economic problems, and low interest rates, which encourage lots and lots of people to borrow lots and lots of money.
Too much money helped fuel the stock market bubble of the 1980s- 1990s.
When that bubble burst, low interest rates and easy money continued to generate large pools of money –large enough to pump up the real estate bubble. (Greenspan kept rates low because he didn’t want to pay the price for the stock market bubble he helped to create. Back then, we should have had the deep
recession that we’re going to have now. And it’s going to be much worse because we delayed it.)
During the real estate bubble, appraisors said, “Sure that house is worth $2 milion”–and banks lent you the money to buy it at that price.
How does this relate to health care? Over the same period an economoy hooked on growth continued to develop more and more health care technologies of various sorts, putting higher and higher prices on them.
Again, there seemed no limit. And when private sector insurers balked (in the 1990s, (during the era of managed care), the media, patients, and doctors howled–you can’t say no!
So around 2000, insurers backed off and began paying for most treatments–without anyone asking if they were effective–and passing the cost along in the form of skyrocketing premiums.
Meanwhile, hospitals have gone on a building boom in recent years in large part because interest rates have been so low. Money was so cheap, it seemed free, so why not?
So now we have excess hospital capacity in much of the country — but we’ve come to the point that both insurers and individuals can no longer afford to keep up with sky-rocketing premiums.
Hospitals may be able to fill the rooms and keep the MRI units busy(because in healthcare, supply drives demand) but they’ll be filling those private rooms with more uninsured or underinsured patients–patients who have a 20 percent co-pay on the big ticket items (hospitalization, surgery, the surgeon’s fees, expensive medication, chemo), and can’t afford the 20 percent.
Eventually, wema see hospital construction projects halted in the next couple of years. They’re just stop building midway through the project. And I would expect hospitals closings in coming years.
Jenga– Unfortunately, when this healthcare bubble bursts, it doesn’t means that we’ll all be told “no.”
It means that our tiered health care system will become much more sharply tiered. And care will be rationed based on an indivdual’s ability to pay.
At the bottom, Medicaid patients and the poor will get even less care than they do now. ERs already are turning them away after “stabilizing them” (what the law requires) without treating them.
The middle-class–and people on Medicare–will find themselves getting the level of care Medicaid patients receive today (see Niko’s post.) Their providers will receive relatively low payments from Medicare and private insurers who sell relatively cheap policies to the middle class. Providers will be resentful and care will be sub-par.
The upper middle-cass will find themslves spending a much larger share of their income on insurance (maybe 20%–or $20,000 for a family policy) in order to get the care the middle-class gets today. They will be able to see the doctors who are considered “better”–but only by spending a very large share of their income on health insurance. And some cutting edge treatments will not be available to them. They also can expect long waits, especially for primary care.
The upper-class will see an elite group of doctors (who are perceived as “the best) and who provide conceirge medicine. They will be treated on a separate floor of the best hospitals.
We can avoid this only if we a) contain costs by beginning to say “no” to ineffective unproven, unnecessary care for EVERYOONE today. That means battling the lobbyists who profit from those treatments as well as some doctors and many patients who don’t want to hear “no”–ever.
Simultaneously, in order to be able to afford high quality, effective care for everyone, we have to be willing to pay higher taxes and redistribute income–perhaps by taxing the health insurance benefits that emploees receive from their employers as part of the employee’s income, as McCain suggests. This is the only way to fund the parts of health care reform that will be very expensive: electronic medical records, better chronic disease management (which is labor intensive) higher pay for doctors and nurses who listen to and talk to patients, long-term home care (as patients live longer) . . . over time, we can save money. But upfront we’ll need some sort of tax hike to seed reform.
This is the one truly equitable part of his plan. The fact that health care benefits are not taxed helps the very wealthy who are in a higher tax bracket and –who are most likely to receive $13,000 worth of benefits from their employer, and helps the low-income employee-who is more likely to receive $4,000 worth of benefits, or no benefits.
One of the pernicious aspects of bubbles is that they pay off for awhile. If you see most or all of your friends and neighbors making a lot of money in Internet stocks or real estate and you’re not, you feel either like an idiot or there is a great party going on that you weren’t invited to. Since you can invite yourself anytime you want to, you feel psychological pressure to participate in the fun and profit. As Warren Buffett put it in his recent interview with Charlie Rose, it’s like Cinderella at the ball. We know it’s all going to turn into pumpkins and mice at midnight and we all think we’re going to leave at two minutes to twelve. The problem is that there are no clocks on the wall. Politicians, for their part, tend to want to let the good times roll because there’s apparent prosperity, it benefits tax receipts in the short term, and a lot of people are sharing in and benefiting from the good times.
I think the politicians, especially the Democrats, are being disingenuous when they try to convey the message that despite a projected $500 billion federal deficit, the near term cost of the financial rescue package and the huge unfunded long term liabilities in Medicare and, to a lesser extent, Social Security, 95% of Americans can still have a tax cut. All we need to do is to raise taxes on the top 5% of the income distribution and everyone else can have a free ride. Give me a break.
Straight talk is in short supply, especially during this election season. The middle class is going to have to sacrifice too if we are ever going to address these problems in a serious and honest way. I think the middle class is going to have to eventually accept, if not the elimination of the tax preference for employer provided health insurance, then at least a sharp reduction in it or turning it into a tax credit along the lines that McCain has proposed. Congress is going to have to give CMS the authority to specifically take cost into account in deciding what to pay for and what not to pay for, especially as it relates to new drugs and devices including the ultra expensive specialty drugs to treat cancer and other serious diseases. If politicians refuse to talk straight with the middle class because they’re afraid it will hurt their reelection chances, then we’ve met the enemy and it’s us!
Barry:
The problem with the McCain tax credit is that it covers less than half the cost of a typical individual plan. How is that going to cover more people?
Martha,
I know the McCain tax credit covers less than half the cost of an individual health insurance plan, and I’ve said before that I’m not a fan of his approach overall. I’ve also said that if it were up to me, I would eliminate the tax preference for employer provided health insurance which the CBO scores as costing the Treasury between $200 and $250 billion each year. Even though that would cost my family more than $4,000 per year in higher income and (probably) payroll taxes, I still support it. I’m not like most people who just want to solve the problem at someone else’s expense.
If we are going to have a tax preference, however, converting the current tax exclusion to taxable income offset by a $2,500 or $5,000 credit for individual or family coverage respectively would be a fairer approach because it equalizes the tax benefits among lower, middle and high income people. Lower and middle income people with employer provided coverage would likely come out ahead while higher income people would probably pay higher income and payroll taxes on balance under the tax credit approach.
For the reasons you stated, McCain’s proposed tax credit would not be especially helpful for those who do not have employer provided health insurance, and, therefore, would do very little to reduce the number of uninsured.
“Will the public even care about health care reform anymore, now that the economy has gone south?”
I think the only aspect of health care reform the ‘average’ consumer ever cared about to begin with was the escalating costs, so I think that’s likely to continue to generate plenty of interest. I think the Wall Street drama will be fleeting in Joe Sixpack’s life.
Maggie:
I think your comments are very accurate. (I agree with them, so if you are right, we both could be prophets, although I would be a minor prophet).
You seem to think the market would move in the direction of more costs for less quality care.
Would this be more than the market would bear?
How will the middle class feel about rationing care on ability to pay?
Barry: You have an excellent definition of a bubble, in addition to Maggie’s – apparent prosperity.
I agree with your assessment of the lack of straight talk.
By the way, do you know why talk is cheap: because supply exceeds the demand.
Martha and Barry: maybe we should look at designing policies differently based on the “inadequate” McCain credits.
Do you know that employers are spending double the amount on health benefits than they do on savings and retirement benefits?
Why continue this unsustainable path?
Don Levit
The biggest myth perpetrated on the American public is that United Protection (AKA Single Payer) health coverage would cost money, when in fact it would save Americans collectively hundreds of billions of now wasted health care dollars per year, and over a trillion dollars in just three short years.
If we would nationalize health coverage instead of socializing Wall Street, each and every year after year from that time forward, we would save over $350 Billion wasted health care dollars (www,pnhp.org), over 101,000 unnecessary deaths (study published in Health Affairs), even more unnecessary disablings (due to lack of access to health care), even more (500,000-750,000) medical bankruptcies, plus prevent tens of millions of Americans from having to continue to live in terror over becoming ill in the richest (perhaps now formerly the richest) nation on Earth.
all are welcome to find the lessons they lean toward in the economic problems of the moment, but there is an element of “what does it mean to the Jews?” here. Or, to a podiatrist, we’re all a bunch of people with bad feet.
seems to me, though, that the financial crisis is simply sucking up all of the oxygen and most of the $s here. while one can make a plausible case that it will hasten the arrival of health reform, the same argument can be made for infrastructure repair or energy independence or many other worthy causes — and probably is in their specialized blogs. one of the dangers when folks with “special” interest talk mostly with each other.
As an insurance agent specializing in employee beneits (health/medical in particular) I have not seen any interest in healthcare reform from the public in general.
All the interest seems to be from a few who are quite often academics or from politicians seeking media coverage. There is no public outcry.
In fact, in my experience most people have no idea what they have, how to properly use it or even know what is meant by healthcare.
I agree with George Burns that Americans have no idea who is paying how much for waht when it comes to our health coverage. Keep us divided and conquered, and the blood sucking monster that is our health insurance industry will be able to keep bleeding our people and our economy dry. The whole key is to maintain their total lack of transparency, and keep diverting our health care dollars in order to purchase political power and miseducate the public about the truth.
I am curious what is the benefit to employers for keeping these costs so secretive.
Obviously, the employers know what they are spending for health care versus retirement and savings for the employees.
The Bureau of Labor Statistics says health care costs are double what employers are spending for retirement and savings.
Go to:
http://www.bls.gov/news.release/pdf/ecec.pdf.
Look on page 4.
Don Levit
Maggie:
The payments by individuals and the balance of the insurance cost left over. How is that balance of cost to be handled? I have read much about the ACA (as you well know) and i could not find much to detail how the balance will be handled.