The New York Times has invited me to be part of a online panel of healthcare experts
commenting on the President’s speech. Our comments should be posted here by mid-day tomorrow.
This has led me to think
about what I hope the President will say.
Most likely, he will outline
a broad plan for universal healthcare.
Then he will toss it back to Congress to figure out how to fully fund
reform.
I say this because the President and OMB
director Peter Orszag (who is fast becoming the president’s unofficial
healthcare czar) understand that universal coverage will be very expensive. We
cannot cover everyone without controlling costs. And this will take time. This
is why the President has repeatedly said that he hopes to achieve universal
coverage by the end of his first term. Not this year, not next year, but in
four years.
Recently, as I reported,
Orszag stated that this is still the administration’s “goal.”
Moreover, Orszag indicated
that “The next step on health care is a set of changes
to Medicare and Medicaid to make them more efficient, and to start using those
programs more intelligently to lead the whole health care system.
I hope the president will
make it clear tonight that the current rate of inflation in Medicare spending
is not sustainable. We cannot afford to
watch the nation’s Medicare bill continue to rise by 6 percent to 7 percent a
year. But soaring Medicare costs are
not inevitable.
Some
pretend that Medicare bills are rising because the boomers are aging (which
would mean that Medicare inflation is baked into the demographic cake.) But in
fact as OMB Director Peter Orszag pointed
out in 2008, “the aging of the population . . . accounts for only a modest fraction of
the growth . . .in Medicare and Medicaid spending that CBO projects.” http://www.cbo.gov/publications/collections/health.care
Sources of
Growth in Projected Federal Spending
on Medicare and Medicaid (Percentage of GDP)
Orszag understands what drives
healthcare inflation—or “excess cost gowth’–both in the Medicare system, and
in the private sector. In a presentation
to Stanford University’s Center for Public Health last October, he pointed to several studies which suggest
that “technology-related changes in medical practice” account for 38 percent
to 65 percent of the growth in health care spending from 1940 to 1990. Some
of those advances help improve our health; some don’t. They just cost
more.
In the same presentation,
Orszag used the chart below to illustrate how cutting-edge care does not always mean
better care. In states like New York, Massachusetts, Florida,
California, and Texas, where Medicare spends far more on aggressive, high-tech
care (see dots on the far-right of the chart), the quality of care is often
lower than in states like Iowa, Minnesota and Northern New England, where
Medicare spends much less on very similar patients. (Spending is adjusted for
differences in local prices, race, age and overall health of the population).
The problem: we use
costly new medical technologies (which include drugs, devices, tests,
equipment and surgical procedures) indiscriminately. Frequently,
health care providers prescribe new products and services for a much broader
swathe of patients than actually benefit. .
We do not need to cut Medicare spending by
refusing to cover treatments that help patients. We do not need to raise
co-pays. We can rein in health care inflation simply by squeezing out the
wasteful spending on care that is not helping patients—and in some cases
hurting them. As Orszag puts it, we can
“reduce costs without impairing health outcomes overall.”
This
does not mean that achieving universal coverage will be cheap—or easy.
Tonight,
I expect that President Obama will make it clear that we need to find further
funding for health care reform, and we need to begin to control costs.
Over
at The New Republics’ blog, “The Treatment”
blog, Jonathan Cohn has said that the believes that in his speech,
the President will acknowledge that he “intends to rely on unspecified fiscal moves to fulfill
his vision of health care reform.” If
that’s the case, say Cohn (who tends to underplay how difficult reform will be)
“ it’s
important he use rhetoric to convey the depth of his commitment to making sure
everyone is covered.
One of the things I like best about this president
is that he doesn’t employ rhetoric to gloss over the numbers –or to make promises
he cannot keep.
He speaks the truth, even when it is not what many
people want to hear. This, indeed is Change.
I hope, most of all, our president does NOT suggest that the problems of healthcare costs will be solved by healthcare information technology (HIT). While deeply promising, it is still in its emergent state. HIT vendors are presenting it as the key. Currently, it is the key to a blueprint, or perhaps a tree house; certainly not a viable structure. I believe strongly in the ultimate promise of HIT, but right now, it’s more promise than solution.
Ross–
I couldn’t agree more.
I plan to write about this again soon–
I’m pretty hopeful that this administration understands that it needs to have clinicans –who have a deep understanding of the problems as well as the potential of healthcare IT –take a look at what is available, and recommend the simplest, most user-friendly, and least expensive IT.
As you say, IT vendors should not be driving the choices.
“As Orszag puts it, we can ‘reduce costs without impairing health outcomes overall.’ ”
Has anyone considered the implications of these cost savings in terms of jobs?
“Has anyone considered the implications of these cost savings in terms of jobs?”
I cringe every time this comes up. If, somehow, we were very successful in eliminating a lot of the wasteful utilization of healthcare resources, I seriously doubt that there will be many doctors looking for work, though quite a few specialists might make less money than they did before. There will still probably be a shortage of primary care doctors, especially after we bring the currently uninsured into the system.
There is also a chronic shortage of nurses, especially in hospitals. Lower hospital based utilization might bring the supply and demand for nurses into closer alignment. I don’t think any of them will lose their jobs either, or, if they do, they can probably find another one fairly easily someplace else.
While there could be some reduction in demand for less skilled people like foodservice workers, laundry workers, orderlies, etc., the turnover rate among these folks is quite high, and it probably wouldn’t be long before most of them who were laid off found similar work elsewhere.
Drug and device manufacturers might have to shrink their sales and marketing staffs somewhat, but I don’t think that would be such a terrible thing from a societal standpoint though it could be hard on the affected individuals.
The most important point, though, is that if we can find safe and effective ways to spend less on healthcare by reducing the waste and the cost ineffective care, it will free up resources that can be redeployed elsewhere like infrastructure, education, clean energy, and the like. Widely shared prosperity requires productive and efficient allocation and utilization of resources. We can’t afford to tolerate waste and inefficiency in healthcare or anywhere else.
Harry & Barry–
Harry-
We do not want to continue employing people who ultimately hurt patinets: thousand of drug reps lying about their products’ side effects and risks; people making MRI units that will lead to unnecessary tests and unncessary surgeries; people processing those unnecessary tests; those doctors who prescribe unnecessary tests and treatments, sometimes reocmmedning surgical centers, devicss and drugs in which they have a financial interest.
The goal of healthcare is to improve the health of the pouplation–not to create more jobs for pepole who profit from ineffective treatments.
Barry–
Thank you so much for saying that you “cringe” whenever the jobs issue comes up.
I do too.
You write: “The most important point, though, is that if we can find safe and effective ways to spend less on healthcare by reducing the waste and the cost ineffective care, it will free up resources that can be redeployed elsewhere like infrastructure, education, clean energy, and the like. Widely shared prosperity requires productive and efficient allocation and utilization of resources. We can’t afford to tolerate waste and inefficiency in healthcare or anywhere else.”
So very well put. I really can’t add anything. Thank you.
I like to fantasize about the president and Washington politicians waking up one day realizing that health care costs could be effectively controlled by reducing demand for medical services. As things now stand, the government’s agriculture and food policies have resulted in an abundance of cheap food with little nutritional value. Worse yet, the USDA’s Dietary Guidelines contain four major mistakes that have persisted for nearly four decades. These would be 1) the recommendation restrict fat intake to control weight, 2) the doctrine that saturated fat is a MAJOR health hazard because it raises LDL cholesterol, 3) failure to warn the public about excessive omega-6 polyunsaturated vegetable oil consumption, and 4) failure to warn the public about excessive fructose consumption. The combination of abundant, poor quality food and terrible nutritional advice contributes to the growing burden of chronic disease.
Maggie, I suggest you and your readers take time to peruse comments submitted to the 2010 Dietary Guidelines Advisory Committee. http://www.cnpp.usda.gov/dietaryguidelines.htm
Where does the data come from regarding the quality of care? How do they know which states have lower quality? What is the source for measuring quality? Where is the information (regarding quality) coming from? I was at a recent presentation where the speaker displayed a chart demonstrating the surgical errors at one anonymous hospital. He made a comment “I know, looks like a train wreck, but actually this is in-line with national standards.” That was one of my questions for him…what national standards!? We have national standards somewhere on acceptable incidents of surgical errors? Where?
Jobs…the last thing the public is concerned with is saving jobs in healthcare, that’s not a concern right now and likely won’t be. It’s just part of the process of evolution.
I didn’t hear all of Obama’s speech, what I did hear wasn’t about healthcare…but I heard my check’s already in the mail.
Maggie,
Having just watched the Obama speech a bit of pre-emption to your blog tommorrow
Thrilled he emphasized health care reform as one of three issues on which he will not yield! Bravo!
His emphasis on costs right on target (Orszag influence)
I agree with Ross Koppel below on HIT-it’s just a tool and an immature one.
Emphasized Prevention- my issue for 35 years!
On “cure for cancer” Obama missed the boat. There “IS NO CURE FOR CANCER” as there is no cure for aging. We can and do cure individual cancers in patients but we will NEVER cure all cancer which is too much tied to cellular aging.
SPEECH WAS A GENUINE BLOCKBUSTER!
Dr. Rick Lippin
Southampton,Pa
David, Lisa, Rick
David, thanks for the link to the guidelines.
Lisa– Sorry, I should have put a credit line on the chart, though it’s one I’ve posted a couple of times in the past. (IT is also in the book)
The chart is from the Dartmouth reserachers–the folks who have spesnt more than two decades reseraching quality of care.
And yet, we have guidelines and benchmarks and standards–it’s just that many health care providers ignore them.
Rick–
Yes I tend to agree that i seems very unlikely that we will ever find a cure of All cancers.
From the little I know, this is not one disease, and it seems to be an evolving disease.
I have a feeling that, at the last minute, someone suggested “Let’s promise to try to cure cancer.” It did sound very naive, which makes me think it was a last-minute suggestion.
But the rest of the speech was good. You will find my comment on the NYT “Room for Debate” blog.
It should be up fairly soon.
I appreciate that fact that Maggie Mahar states, in her October 8, 2008 post, that the issue is national health insurance not national health care. I have written about the same thing.
I do differ with her in its creation. As an insurance industry veteran, I have a different perspective to be certain. I have a very good understanding of how insurance works and an opinion on the root causes of the problems we face as a nation. However, the reason that I do not believe that nationalized health insurance will be enacted stems mostly from the fact that I do not believe that the electorate will approve a plan that will cost more than the $2.5 Trillion dollars spent on insurance premiums each year – which will likely increase each year thereafter. Once the plan and how to pay for it comes to the fore, with increased taxes no doubt, I think the plan will seize.
From the NYT post at the beginnig of Maggie’s post above: President Barack Obama said in his speech to Congress that the nation must address “the crushing cost of health care,” with premiums having grown four times faster than wages in the past eight years and 1 million more Americans having lost health insurance each of those years. Reform won’t be easy, he said, but it cannot wait another year.
Pricing of insurance is directly related to covering the cost of claims. Therefore, there are two ways to lower the cost of insurance premiums. One is to raise the loss ratio used in pricing. The second is to lower the cost of claims (i.e. charges by doctors, hospitals and other providers). Price = Cost of Claims/Loss Ratio
The driver of cost of insurance is claims. The driver of the increase in insurance costs over time is claims. The cost of claims is constant in terms of the pricing calculation, no matter whether covered by nationalized health insurance or private insurance.
As I show in my post on loss ratios, http://www.insuranceinthelight.com/?p=18 , the lower the loss ratio set by the insurance company, the higher the premium necessary to cover the cost of claims. And conversely, the higher the loss ratio, the lower the relative premium necessary to cover the cost of claims.
If the idea is to eliminate our need to deal with insurance companies, so no insurance company will come between you and your doctor, nationalized health insurance will not meet that need. Currently, Medicare, which is nationalized health insurance, outsources the claims, certificate issuance, underwriting and customer service to insurance companies. http://www.kxnet.com/getArticle.asp?s=rss&ArticleId=317415 This is known in the industry as an Administrative Services Only (ASO) contract. The insurance company is paid and makes a profit on the service they provide to the federal government. The insurance company bears no risk and they set no prices – those tasks go to the federal government.
North Dakota happens to be home to the former President of the National Association of Insurance Commisioners and US Rep, Earl Pomeroy. Nothing wrong with Noridian, part of Blue Cross Blue Shield of North Dakota, earning a federal contract. Nothing wrong with Mr. Pomeroy taking care of his constituents. But to think that nationalized health insurance will rid you of dealing with insurance companies is naive. Indeed, nationalized health insurance will be a trough of money to be politicized.
It will be interesting to see what happens. Polls show 59% of Americans approve of the concept of nationalized health insurance. Mr. Obama moved the idea forward last night, to be sure.
The delivery of better outcomes, managing testing et al and government negotiated discounts is all conjecture, at this point.
In that same vein, should nationalized health insurance come to pass, I see two different systems of insurance in much the same way our public education is run, juxtaposed private and parochial schools. Market forces will easily provide for this. There will be nationalized health insurance to pay for all citizens care. And there will be private insurance that will pay for the wealthier to receive better care. Better doctors, hospitals and other providers will migrate towards this market in search of higher fees and larger profits.
As I said, it will be interesting to see what transpires.
I wish us all good health and prosperity.
Scott Dowling, haven’t seen you around these parts before, hello. I agree with your last paragraph “…much the same way our public education is run…” I see it the same way.
With all due respect to your insurance background, I think you’re oversimplifying things a bit. Obviously claims are a cost driver, but as Maggie has pointed out again and again, folks get a lot of medications, tests, procedures, treatment that they probably just don’t need. Supply drives demand. Kickbacks from device mfr’s, Big Pharma, et al, drives demand (claims).
Why do I have to pay 3x more for an MRI if I don’t have insurance?
Maggie, not trying to be a pest, but where is Dartmouth getting their information regarding quality? Whose definition of quality? How did they KNOW we got bad quality care in Texas, there’s no way for them to know that unless somebody wrote a book about it or something. Is their definition of quality different than a patient’s? I’m really curious how are they, or anybody, able to measure quality?
Thanks for ocntinuing the thread–I’ll be back later to reply
Thanks for ocntinuing the thread–I’ll be back later to reply