Implications for Healthcare Reform – Part 1
In a private conversation with bloggers at the Families USA healthcare conference last week, Princeton healthcare economist Uwe Reinhardt recalled a conversation, when he asked health care economist Victor Fuchs, “When will we ever have universal health insurance in the U.S.?”
Fuchs’ answer: “Not until World War III, a Great Depression, or a major epidemic that threatens everyone.”
In other words, Fuchs believed that it would take a catastrophe before Americans finally would realize that we are all in one boat together: Wars, natural disasters and economic upheaval can create great solidarity.
We may not have long to wait. Despite President Obama’s best efforts, it is all but inevitable that this recession will deepen. As the president warned last night, this is not an “ordinary, run-of –the-mill” recession. In the worst-case scenario, the meltdown could lead to a “lost decade” of growth.
At this point, America’s middle-class finds itself on the edge of a cliff. As unemployment rises, it will become apparent how quickly an upper-middle-class family can find itself part of the middle class—no longer able to afford private school, skiing vacations, or, in the worst case scenario, the payments on a mega- mortgage. Meanwhile, middle-class families risk slipping quietly into the nearly invisible lower-middle-class—a group often referred to as “the working poor.”
Rising insecurity should mean that the push for healthcare reform will build. But the recession cuts both ways: it also means that government tax revenues will shrink, leaving fewer dollars for the subsidieswe will need if we hope to cover everyone. Conservatives will say that we cannot afford healthcare reform.
Already, despite much talk of bi-partisanship, the debate over the fiscal stimulus passage makes it clear that conservatives are not in a compromising mood. Yesterday, New York Times columnist Paul Krugman pointed out that “centrist” Republicans have joined conservatives in stripping the package of $80 billion worth of programs that included “much needed spending on school construction,” help for the unemployed, Food Stamps and aid for cash-strapped sates—“the measures that would do the most to reduce the depth and pain of this slump” for those who will be hit hardest. This afternoon the version of the bill that cleared the Senate cut more than $50 billion from programs that specifically help children., such as Head Start, school construction, education for disadvantaged children, and prevention programs
“How did this happen? “ Krugman blames: “President Obama’s belief that he can transcend the partisan divide — a belief that warped his economic strategy.” The Princeton economist points out that “many people expected Mr. Obama to come out with a really strong stimulus plan, reflecting both the economy’s dire straits and his own electoral mandate. Instead, however, he offered a plan that was clearly both too small and too heavily reliant on tax cuts. Why? Because he wanted the plan to have broad bipartisan support, and believed that it would. Not long ago administration strategists were talking about getting 80 or more votes in the Senate.” Last night, they barely escaped a filibuster with 61 votes. What does this mean for healthcare legislation?
There is a real danger, Uwe Reinhardt confides, that politicians will settle for universal coverage that continues to ration care according to ability to pay–leaving us with a sharply tiered system. This, Reinhardt confides, is what he thinks will happen, “unless we, the more affluent, step forward to tax ourselves.”
On the question of opening our wallets in order to cover everyone, the most recent Kaiser poll on health care reform conducted less than two months ago, is not encouraging. It shows that “the public is split down the middle in its willingness to sacrifice financially in order to cover more individuals: roughly half (49%) say they are not willing to pay higher insurance premiums or taxes, while a similar percentage (47%) say they are. There are big partisan differences here, with most Democrats (59%) saying they are willing to pay, most Republicans unwilling to pay (67%), and independents divided (49% willing, 47% unwilling)”.
When asked whether the economic meltdown makes reform more or less likely, the answers again split along partisan lines: “more than three-quarters (77%) of Democrats think health reform ‘is more important than ever’ due to the economy, while six in ten (62%) Republicans believe the nation “cannot afford to take on health reform now.”
Let me be clear: I agree that we cannot afford to subsidize care for all at current, wasteful levels of spending. But all families, rich or poor, should receive the same level of evidence-based medicine. (Beware of reformers who talk of “a health care plan for every pocketbook.”) And I worry that Republicans will trim government subsidies to a point that we wind up, as Reinhardt suggests, with two or three classes of health care.
This, after all, is what we have today.On the lowest tier, Medicaid pays health care providers significantly less than Medicare pays for the same procedure . On the next tier, Medicare pays primary care providers such small sums that, in cities like New York, many physicians are refusing to take new Medicare patients. On the top tier, patients pay health care providers whatever they choose to charge.
I am not suggesting that all physicians are underpaid under Medicare: in 2005, while Medicare paid only $82 for a 30 minute visit with a PCP, it paid $206 for a 30-minute conoloscopy. Most of the care that Medicare patients receive is at least as good as the care they will receive under commercial insurance. We need to redistribute the dollars that Medicare pays to doctors—paying for value, not volume. But we do not need to increase total payment.
Physicians who take Medicaid patients, by contrast, are grossly underpaid. And this is a major reason why Medicaid offers “subpar” care. Care-givers are stretched too thin and have too little support. Just two examples from an earlier HealthBeat post: One study reveals that while 77.2 percent of new mothers received timely postpartum care under commercial insurance plans, only 40.7 percent of those on Medicaid were lucky enough to receive the needed follow-up. Another recent study in the Journal of the American College of Surgeons found that patients who undergo colon cancer surgery in hospitals where more than 40 percent of patients are on Medicaid have a higher risk of death.
Yet, under the stimulus package, even most liberals seem comfortable putting the newly unemployed on Medicaid—which suggests that legislators might , as Reinhardt suggests, accept different levels of care for the rest of America.
A Lopsided Economy- How Wealth and Income are Distributed
We are, after all, accustomed to living in a sharply tiered society. American families play and work in separate pods, defined, to a large degree, by how much we earn. We send our children to different schools, shop in different stores, live in separate towns, and vacation in different places, segregated by what we can afford. And this, Reinhardt has suggested, is why we are the only developed nation in the world that does not have universal health insurance. We lack “social solidarity.”
In other countries, the majority of the citizens are middle-class, and they identify with each other. When it comes to healthcare, the French are willing to pay for high quality, universal coverage because they feel that nothing is too good for another Frenchman. But in the U.S., we do not feel that way about each other.
As Reinhardt reminded his audience at the conference last week, in our economy the lines separating us are stark. Consider how the nation’s wealth is distributed:
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–The richest 1 percent own 34 percent of total wealth –The richest 20 percent own 85 percent of aggregate wealth –The remaining 80 percent own just 15 percent of the nation’s wealth |
“This isn’t a middle-class country,” Reinhardt observed after presenting these numbers. “It’s not even a democracy; it’s an aristocracy.”
Wealth and power have become consolidated in the hands of a few because, over the past 29 years, income has been distributed so unevenly, allowing the wealthy to speculate on real estate and high-flying stocks.. Since the early 1980s those who could afford to play this high stakes game have bid prices ever higher, and as a consequence, their net worth has soared.
Despite the stock market crash of 2000, the real estate bubble kept the wealthy afloat: indeed from 1995 to 2004, the wealthiest 25 percent of the nation saw their net worth (assets minus debt) double while the middle class made meager gains.
At the top of the economic ladder, high salaries gave the affluent the funds they needed to speculate. According to the Census Bureau, in 2007 the 20 percent who own 85 percent of all wealth also commanded roughly 50 percent of all income while earning an average of $168,000 that year. (Half earned more than $168,000 and half earned somewhere between $100,000 and $168,000.)
As the table below shows, just one giant step down on a five-step income ladder, upper-middle-class households earned 23 percent of aggregate income, taking home an average of $79,000. On the third and middle step, “middle class” households earned 14.5 percent of the total while receiving an average of $50,000–leaving a measly 12 percent of the pie for the 40 percent of the population stuck on the bottom two steps –where they averaged $29,000 and $11,500 respectively.
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–In 2007, the wealthiest 20 percent earned 50 percent of all income –Households one step down on a 5-step ladder received 23 percent of all income –Households on the middle step took home 14.5 percent of all income –The bottom 40 percent of the population d divided 12 percent of all income |
Some observers point out that the rich pay more in taxes than the rest of us, but even after taxes, the top 20 percent hauled home 45 percent of the nation’s earnings.
Others try to rationalize the consolidation of wealth at the top by arguing that income gaps have widened because education has become much more important. Granted, a college education makes a difference, but the last few decades have hardly created a meritocracy. The bulk of the divergence in salaries has been among those with comparable levels of education. High school teachers, nurses and CEOs all spend roughly the same number of years in school, but corporate chieftains earn far more than those responsible for educating our children and caring for the sick. Even Ph.Ds and those with professional degrees in law and medicine often net much less than MBA’s who work in business, real estate or finance.
Conservatives also like to argue that if you add in the benefits that middle-class workers and poorer Americans have been receiving from employers and government, you will find that all Americans are gaining ground. To test that hypothesis, consider the research done by the Congressional Budget Office. When calculating income, the CBO includes all the standard household revenue streams — wages, dividends, interest, and the like – plus food stamps, Social Security and employer-paid health benefits.
Using that formula, the CBO discovered that even if you include the health benefits the incomes of America’s statistical middle class –the 20 percent in the exact middle of U.S income distribution —rose only 15 percent over 25 years, or less than 1 percent a year.
Finally, the bottom line: To get at the truth of income distribution, adjust all incomes for inflation, and you will find that from 1973 to 2005, the average income of all but the wealthiest 10 percent of the income ladder fell by 11 percent. No wonder the middle class has so little savings to fall back on in hard times.
Comparing the U.S. to Nations that Have Universal Coverage
As the twentieth century drew to a close, CEO pay set the bar for our New Rich. Take a look at the truly startling chart below: the ratio of executive pay to the average worker’s pay has risen from 41:1 in 1960 to as high as 531:1 in 2000, at the height of the stock market bubble, when CEOs were cashing in big stock options. In 2005, it stood at 411:1. By way of comparison, the same ratio is about 25:1 in Europe.
CEOs’ Pay As a Multiple of the Average Worker’s Pay
Source: Executive Excess 2006, the 13th Annual CEO Compensation Survey from the Institute for Policy Studies and United for a Fair Economy.
Indeed, the distribution of income is more lopsided in the U.S. then in any other developed country. This was not always the case. For decades, the disparities were much wider in Europe. But over the last twenty to thirty years, the gaps between classes in the U.S. have grown. As the chart below shows, when you compare the incomes of the top 20 percent to the bottom 20 percent in the rest of the developed world, the ratio averages around 6:1. In the U.S. the ratio that separates the rich from the poor stands at 9:1.
The countries clustered in the middle of the chart are largely middle-class. On the far right, the U. S stands alone. As Reinhardt points out, we are no longer a middle-class society. While middle-class shrinks, extremes of wealth and poverty have become more common. It’s probably not coincidental that, as the vertical axis of the chart reveals, the U.S. also is an outlier when it comes to math and literacy scores: in other developed countries, taxes are significantly higher, and more resources are poured into education.
As Home Prices and Stocks Crater, Those Who Can Afford it Least, Lose the Most
Of course the current meltdown in housing prices, combined with the plunge in stock prices has made a dent, both in incomes and in total net worth. But the recession isn’t closing the gaps between the middle-class and the wealthiest families.. At the Center for Economic and Policy Research (CEPR) Dean Baker and David Rosnick have used the Federal Reserve’s Survey of Consumer Finances to assess the effects of the current recession, and their work shows that those who could least afford it took the hardest hit, while more affluent households shed a smaller share of their wealth. When an asset bubble bursts, this is almost always the case.
Baker and Rosnick assumed that stock portfolios have fallen in tandem with the S&P 500, and that, since March of 2008, homes have lost 20 percent of their value. Using those numbers, they calculated that in middle-aged families (where the person responding to the survey was somewhere between the ages of 45 and 54) households in the top quintile in terms of wealth lost 33.4 percent of their net worth (total assets minus debt)—leaving them with $1.47 million. One rung down on the ladder, families lost over 37 percent of their net worth, and because they had so much less to begin with, they were left with only $224,675.Clinging to the third rung of the ladder, the middle class watched its net worth fall by 60.3%, leaving it with net worth of $81,544. On the bottom step, a family’s holdings have been slashed to a point that the average family wound up in debt, with a negative net worth of $2,503.
In older households the wealthy fared even better. In families where the person who answered the survey was 55 to 64, those in the top 20 percent lost just 22 percent, winding up with $2.57 million. By contrast, those hanging on to the third middle rung of the ladder saw their net worth cut nearly in half (down 49%) leaving them with a home and savings worth $147,196.
How We Got Where We Are Today
In 1972, a group of researchers funded by the Volkswagon Foundation published a book titled The Limits to Growth. Based on a MIT computer model using system dynamics, the book predicted that unless the current trajectory of population and industrial growth was altered, we would eventually face a sudden and uncontrollable decline. .
“By challenging our beliefs in the inevitable rightness and goodness of technical, industrial, and economic growth, the book evoked great controversy, notes John Van Doren writing on the Sustainable Home Blog, “and would eventually sell over 30 million copies in more than 30 languages.”
The authors of The Limits to Growth predicted that the signs of imminent decline would include:
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Rising debt; eroding goals for health and environment
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Investment in human resources (education, shelter, health care) postponed in order to provide immediate consumption and security demands.
- Deterioration in renewable resources – surface and ground water, forests, fisheries, agricultural land.
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Rising levels of pollution.
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Growing demands for capital, resources, and labor by military and industry to secure, process, and defend resources.
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Growing instability in natural ecosystems.
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Growing gap between rich and poor – between the powerful and the weak.
Why would a widening gap between the elite and the rest of the population foreshadow an economic meltdown? Van Doren turns to John Williams, of Shadow Government Statistics, for an explanation: “income variance is a long-term (multi-year) indicator of economic activity. The more extreme it gets, the worse the economy and the financial markets eventually will become. Looking at two simplified markets with one man making $100,000,000 per year or 1,000 men making $100,000 per year, there will tend to be more speculative financial markets in the first case, but more automobiles will be sold in the second case. The system tends to be self-adjusting when income variance reaches an extreme, with the speculative market bubble eventually bursting and income and economic activity tending to get redistributed.”
And this is exactly what has happened over the past 29 years. As those at the top grew wealthier, they spent more. Driving consumption and investment, they pushed the price of everything from mortgage-backed derivates to condo sheathed in glass into the stratosphere. Cars began to resemble military vehicles; homes became mansions with 15 foot ceilings, and hospitals became hotels. The problem was that with so much wealth concentrated at the top, too much money was chasing too few things. Prices levitated far above fundamental values. Meanwhile, everything from homes to healthcare became increasingly unaffordable for the rest of the population. Those who wanted to buy a house had to borrow more. Alan Greenspan’s easy money policy greased the path to insolvency.
An economy hooked on growth would depend on consumers to keep it going. President Bush assured Americans that we could shop our way out of a recession if we just purchased more “stuff.”
The authors of The Limits to Growth were not against growth, per se, Van Doren explains, but they warned: “A sustainable society would be interested in qualitative development, not physical expansion. It would use material growth as a considered tool, not a perpetual mandate. It would neither be for nor against growth. Before this society would decide on any specific growth proposal, it would ask what the growth was for, and who would benefit, and what it would cost, and how long it would last, and whether it would be accommodated by the [natural] sources and sinks of the planet.”
But in the 1980s and 1990s, we didn’t ask those questions. Instead, as the authors of The Limits of Growth predicted, “investment in human resources (education, shelter, [public] health care) were postponed in order to provide immediate consumption and security demands.”
By the spring of 2004, I was worried as I completed the final chapters of Bull! A History of the Boom and Bust, 1982-2004: “U.S. real estate sits on a mountain of mortgage debt. If Washington’s goal was to create a faith-based economy, it is succeeding.”
By 2005 the share of income held by the top 1 percent was as large as it had been in 1928, when the last Gilded Age drew to a close. This was an ominous sign.
By 2006, “household debt equaled 90 percent of GDP, up from a low of 12 percent at the beginning of WWII,” Van Doren observes . “U.S. credit card debt currently exceeds $950-billion . . . For two decades consumer spending had been the engine that drove the U.S. economy but now, Van Doren points out, “the American consumer is ‘tapped out.’”
In the second part of this post, I will explain what all of this has to do with healthcare reform. Americans are not all in the same boat, and this could threaten fair-minded reform. The divide is partially based on ideology, but it also reflects greater economic security among some voters. At the same time, the lobbyists already have begun to fight any effort to measure value in our health care system. Nevertheless, if the voters who elected President Obama unite, we can win high quality, sustainable healthcare for all.
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Thanks, Maggie, for the great analysis, summary and quotes from Rheinhardt. We need a peaceful revolution to redefine our national values and priorities. Right now, we’re trying to expand the capacity of free clinics to treat the growing ranks of the uninsured while we wait for a more universal solution. That may be a while.
Thanks Maggie
Of course the fundamental issue of fairness in health care is especially important as you, Reinhardt and others believe.
But I am also convinced that we must apply the same kind of bold and creative thinking to health care reform/transformation as we are applying to energy and environmental reform. Sustainablity seem common to all three.
I don’t think there is much political support though from both parties or the public to accept the magnitude of change that I believe that we really need?
Economic circumstances as described by Peter Orszag and David Walker,however, may force our hand?
Looking foward to part two of this series.
Dr.Rick Lippin
Southampton,Pa
Well researched articles like this deserve better than a blog where they will roll off into obscurity after a few days.
You need to create some sort of sidebar with permanent postings that can be cited easily.
That’s a great analysis of the big picture behind the current meltdown in financial markets, Maggie. Let me guess that in your second post on this topic you will propose that successful health care reform has to reverse our extreme disparities by replacing the massive waste in our health care system with resources to benefit the social determinants of health—education, economic security, early childhood experiences, social safety net, food security, access to health care services, etc.).
getting beyond the chronic political paradox where the only people who think the US is an aristocracy rather than a democracy are members of the former group, this summary seems to conflate two issues that may be distinct.
if the problem is ultimately growing income inequality, then we should forget about health reform and access and focus instead on income inequality. solve that and all will be able to afford access to quality care.
many argue that today’s system is incredibly inefficient. if that’s so, then why talk about the need for added resources. wennberg and others seems to suggest the money we spend today is more than adequate to fund an efficient system for all.
in other words, if you made delivery more efficient and simply taxed away part of the savings, you’d free up enough money to cover the uninsured without asking people to pay more. seems attractive to me.
The “monetization” of healthcare is at the heart of the bad-incentives our medical students and young physicians face. I suggest that our medical schools and Graduate Medical Education programs a) face the reality that Medical professionalism MUST be a part of the curriculum, and b) that de-monetizing the practice of medicine is a necessary (not, by itself, sufficient) re-draft of how we train and reward physicians. It could make a difference.
Thank you all for your comments.
Jim–
You are right; there are two problems here. But it’s not an either/or: both need to be addressed.
The waste needs to be squeezed out of the system, not only becuase it’s a waste of dollars, but because it is hazardous waste–hazardous to our health.
Elminating the waste doesn’t necessarily mean that we would cut total health care spending below the current $2.3 trillion (no one expects to do that) but we would re-distribute the dollars: more for primary care; more for palliative care; more for public health;
more for counseling for alchoholism, smokign cessatoin, etc. while spending less on diagnostic imaging that too often diagnoses “pseudo diseases,” less on the most aggressive intensive care that does little good for the patient–a final round of chemo 10 days before death (it’s relatively easy to predict when a cancer patient is dying) dialysis for someone in the ICU who is dying of congestive heart failure; overpriced, needlessly complex devices (bespoke knees for women,, etc.)
After redistributing dollars, the goal would be to rein in healthcare inflation (now running 6 to 8 percent a year) to something like 2% (or whatever number would match growth in wages and GDP.) Over time, this means that our healthcare bill would not double in 10 years.
Reining in inflation is what most people envision when they talk about reducing the cost of health care.
But even then, at least 60% of the population could not afford health care without some help.
This means that, as Reinhardt says, more affluent taxpayers need to subsidize heatlhcare for the rest of the popoulation. More affluent taxpayers also need to contirbute more to public education. Obama is right: the infrastructure of our shcool system is crumbling, and our public school teachers are paid to little to attract the most talented to the profession.
This means redistributing income in a way that would narrow some of the income gaps.
Finallly, we need to fight poverty as we did in the 1960s.. It is the leading cause of premature death.
Ultimately, we need to get back to where white America was in the 1950s and 1960s–a largely middle-class country, like most European counries today. Except in the 21st century, all Americans (not just white Americans) would be part of middle-class society.
One final fix: I would love to see a shareholder rebellion on the subject of CEO pay. There is No evidence that paying CEOs more leads to better performance.
A cap somewhere around $750,000 would seem sensible–and that woud include stock options (which can be valued), bonsues, deferred payment, severance as well as regular wages.
Of course there are only so many CEOs in the U.S –but there are many others whose pay is set with an eye to CEO pay (hospital administrators, highly-paid doctors and lawyers . .. Their pay has been spiralling because CEO pay sets the bar so high.
I’ll be back to reply to more comments later.
Maggie, your post is right on. However, I’m pessimistic that we can make much progress on these issues. I see no evidence that Americans are willing to pull together for the common good. You and I and people like us will continue to work to improve these dreadful conditions, because its the right thing to do. I just don’t see us being successful.
Maggie:
Thanks so much for providing such an informative and important posting.
A couple of excerpts and my comments.
“We are, after all, accustomed to living in a sharply tiered society.”
I think much of this is due to people’s beliefs they can become anyone they wish to become, if they work hard enough.
Maybe this is an illusion that is absolutely vital, according to Ernest Becker’s idea in his book “The Denial of Death.”
“Conservatives also like to argue that if you add in the benefits that middle-class workers and poorer Americans have been receiving from employers and government, you will find that all Americans are gaining ground.”
In my opinion, this is a rationalization technique used by the wealthy to justify the widening income gap.
For example, the fact that health insurance premiums for a family may be 25% of the median household’s income, is not unfair. In fact, it is perfectly reasonable, based on the evolving numbers.
I think part of this “logic” extends back to the Theory X and Theory Y, in which one is asked “Is man basically lazy?”
Thus, one’s wealth is directly related to his desire and willingness to do whatever it takes to succeed.”
Don Levit
Maggie, It depresses me to say that I think that your analysis of income differences and the resistance to sharing is correct. We are approaching the time when we will have to put our money where our collective mouth is and I perceive a change in attitude.
On the issue of what constitutes a “fair share” tax burden, I think it is interesting to reflect on an exercise proposed by Warren Buffett as described by Alice Schroder in her recently published biography of Buffett, “The Snowball.”
The exercise goes like this: Suppose you are one of two identical twins about to be born. You are told that one of you will grow up in Bangladesh, you will have to make your life there but you will never have to pay any taxes. The other will be raised in the U.S. and make your life there. What percentage of your lifetime income would you bid to pay in taxes in order to be the one that gets to be raised in the U.S. and pursue the opportunities that the U.S. society makes possible?
There are two main factors that go a long way to determining a life’s outcome, in my view – luck and effort. Part of luck is the country you are born in. Part of it is the socioeconomic circumstances you are raised in. Part is native intelligence and brain wiring – natural aptitudes, personality, etc. Just being in the right (or wrong) place at the right (or wrong) time can be a huge factor. Part relates to work, effort, discipline and the like. Some people are dealt a bad hand while others make bad or irresponsible choices. Taking all that into account in trying to determine a fair share tax burden defined as total combined federal, state and local taxes (including the employer’s share of payroll taxes) as a percentage of gross income, I personally think that less than 25% of income is too low and more than 50%, even for the wealthy, is too high. Somewhere in the 33%-40% range is about right. That’s just my view. Others may come in higher or lower. However, the opportunity to get rich in America is something that many people aspire to and think is possible. We don’t want to destroy that dream with oppressively high taxes. I want prosperity to be widely shared and I want people to have access to decent healthcare and a good education but we need to ensure that pursuit of these goals doesn’t result in permanently shrinking the size of the economic pie or depressing its long term secular growth rate to the point where we leave more people even worse off than they are now.
Appreciate such a well presented essay . . .Thank you for presenting it so, enjoyed reading this and look forward to the following post!
Maggie,
An interesting post to say the least! I have dusted off my old copy of “What is to be done” and eagerly await Part II.
Clif, Dr. Rick, Robert, David,Richard, Pessimist
Thank you all for your comments. (Will be back to reply to other comments later . .)
Cliff–
Welcome to the blog-
Free clinics seem to me the best “medical home” for many. And if I’m not mistaken, they were quite successful in the 1960s.
I would like to see health reform provide good funding and staffing for these clinics–and ideally, provide some incentive for specialists to make time in their schedules to take referrals from these clinics in a timely fashion.
At least in New York City, people on Medicaid or who are uninsured have a very, very hard time getting to see a specialist.
Dr. Rick– I’m hoping that a combinaion of economic circumstances and public education will ultimately persuade people that expensive care and more care is not necessarily better care . . .
Robert–
I keep meaning to make a good list of best post
Ideally a list of the most substanative HealthBeat posts–ones that reallly sum things up.
But I just don’t have time. I’m always writing a post, commenting on a post, reading other blogs . .. . I wonder if a reader (or maybe more than one reader) might make up a list . . .??? Hint . . .
David– Thank you. Yes I am going to write about redistributing health care dollars–and putting more into public health– but I’m afraid we also need to raise taxes on the top 15% to 20% in order to come up with the seed money needed to get health reform strated.
Over time, a more efficient health care system should pay for itself in the sense that we should be able to hold health care inflation to roughly 2 percent a year, or a number that matches GDP growth.
So we won’t need to keep raising taxes to fund health care. But in other countries, where the government provides subsidies for everything from medical education to care for people who cannot afford to pay for it themslves, more affluent tax payers do help pay for the less affluent to a much greater degree than we do here. (This also is true of education, housing, long-term care and fighting poverty. More affluent taxpayers fund a social safety net through a combinatino of income taxes and VAT (sales) taxes on certain items.
This, of course, is one reason why less wealth is consolidated on the top in these countries– progressive taxes redistribute wealth from the top down.
We, by contrast, have chosen to have a “low-tax, low-service” society where govt’ provides fewer services (in terms of child-care, subsidies for education and healthcare, long-term care, etc.) and we pay much lower taxes than other developed countries
At this point in time, however, as we face a serious recession, citizens are realizing that we need government and government servcies to shield those who are hit hardest–the many who will be unemployed, children, those who are chronically ill, etc.
So I am hopeful that those of us who are more affluent will, as Uwe says,
“step up and tax ourselves.” The society is just too lopsided and that isn’t good for the society or the economy.
Richard– I absolutely agree that Medical professionalism should be part of the curriculum in Med schools. Would be doctors need to talk about their responsibilties to their patients, the fact that medicine is not a business like another other, patients should be able to depend on their doctors to put them first, why it is so important for doctors to avoid the appearnce of conflict of interest, questions of medical ethics; etc.
And yes, the tight connection between medicine and money shoudl be loosened. That’s one of the things I like about Mayo. Docs there are on salary and don’t even know which of their patients are on Medicaid, or are getting financial help from Mayo; they also don’t know how much Mayo bills for particular services. “The office worries about all of that.”
Doctor just concentrate on caring for patients.
Pessimist– I agree that progress seems very slow. But sometimes hard times do cause people to pull together.
In any case, all we can do is bring up our own children to look at things collectively–and to understand that there is little point to being here if you are not, in some way, helping other people (or the environment, or animals–but in some way trying to make the world a better place.)
Denial of America’s economic class system is an article of faith to those with very conservative political views, and has been so since the Gilded Age. Regarding medicine, no one selected it as career in which to make lots of money prior to the 1960s or so. Physicians expected a comfortable, professional income and way of life. The advent of very high salaries was the serpent we let in, and now find it hard to drive it out.
Also, we are the only developed nation in the world with a tort system that places a $250,000/year liability burden on Obstetricians. Yes we lack “social solidarity.”
Don, Joan C, Barry, Benjamin, jamesd Chris
Thank you for your comments
Don– Yes, I agree– the notion that if people jsut work hard enough, anyone in the U.S. helps rationalize the income gaps
and this dream of infiite possibility is probably also tied up with our refusal to accept he fact that life is finite.
Conservatives try to argue that those who were born on third base get to home base becuase they are more industrious are more inventive.
Anyone who takes a serious look at opportunity in this country knows that is simply not true.
Without your helth–and a good education– it is impossible to puruse opportunites. And in our society, poorer families are much less healthy and their children are consigned to underfunded schools (with funding based on property taxes–i.e. the value of real estate in their neighborhoods.)
Joan C.– Thank you – and I agree that we are approaching a point when things will have to change.
The economy is heading for a wall.
Barry– You suggest that tax rates should range from “25% to 50%,. Somewhere in the 33%-40% range is about right”
But the 40$ of the country with household income averaging $11,000 (bottom 20%) or $29,000 (next 20%)
really cannot afford to pay out 25% of their income for taxes–not if they want to eat, stay warm, pay for shelter,etc.
The same can be said for many middle-class households averaging $50,000 (depending on where they live and how many people are in the household)
Barry, you consistently seem to refuse to realize just how little a huge number of people in this country earn. But these are the facts. You are a fair-minded person. I think if you take in these numbers, you would realize that there is a problem with income distribution in the U.S.
Meanwhile,we have much reserach showing that as
income disparities grow,
economic mobility drops.
In the U.S. the ability to move “up” in our economy is much less than in most European countires.
The NYT did a mutli-part series on the lack of mobility in the U.S.–I’m pretty sure I’ve given you the reference in the past.
(OECD reserach confirms that in coutries where gaps berween classes have grown larger, mobility falls.
Benjamin & Jamesd– thank you both . I hope you like part 2!
Chris–
Yes, in the U.S. we have a long tradition of pretening we have no classes. And I agree: “with the advent of very high salaries was the serpent we let in, and now find it hard to drive it out.”
As Freud warned, beware of what you wish for. I would hazard a guess that the average physician was much happier with his career before money became such a major part of medicine.
“Somewhere in the 33%-40% range is about right”
Maggie,
I was not very clear when I wrote that. I intended it to mean 33%-40% is about right for the top 20% of the income distribution and more than 50% is too high, even for the wealthy. As for people of modest means, out here in suburban NJ, with some of the highest property taxes in the country, even the owner of a very modest house often pays property taxes in the $6-$7K range per year. So, with Social Security and a modest pension and perhaps some interest and dividend income adding up to $35K, such a homeowner could find himself or herself paying 20% of gross income in local property taxes alone. Even if they no longer have to pay FICA taxes because they are out of the workforce and don’t have a high enough income to owe either federal or state income taxes; sales taxes, gasoline taxes, alcohol and cigarette taxes (if they drink or smoke) can add up to a total tax burden of 25% of income. For renters who pay 30%-35% of their income for rent, 6% of income or 18%-20% of the rent usually represents the landlord’s property taxes. Even at very low incomes, when you add it all up, very few people, at least in the higher tax states, can avoid paying less than about 15%-20% of their income in taxes. Personally, I don’t think people with income below the poverty level should pay anything in taxes. My focus is on the top 20% of the income distribution who already pay most of the income taxes. You and other progressives want to tax them much more heavily. I think there should be more of an attempt to quantify what is a fair and reasonable total tax burden percentage to expect from this group. Too often, I think, progressives seem to suggest a “fair share” is always more than whatever you’re paying now, not matter how much that is.
Barry–
AS I explained in the post, the fact that so much income has been consolidated at the top of the economic ladder has encouraged specualtion, and led to asset inflation, destablizing the economy.
One of the few ways to undo the damgage is to begin to redistribute wealth downward by raising taxes for the top 10% to 15% and investing that money in human capital–healthcare, education, housing, public health.
Inheritance taxes also need to be raised, on estates over a certain amount (perhaps $2 million) to avoid the consoidation of wealth in the hands of a relatively small group of famlies.
These tax increases at the top should take place over a number of years, so that the economy (and taxpayers) can adjust.
But history tells us that we were much betterr off — as a society and as an economy– when we were a largely middle-class country.
Keith & Barry-
Thanks for your comments
Keith–
I agree that it would be a very good idea to subsidize med school and pays doctors more upfront, and less later in their careers. In total, we would pay less, but doctors would be spared much economic anxiety and would have the money they need when trying to buy a home, start a family, etc.
On group practice: in Germany, while many “officie physicians” work sol, many physicians work for hospitals, on salary. Others work for large ambulatory clnics, on salary (This is a new development and the number of clnics is growing rapidly, as is the number of doctors working in groups).
There is mandatory quality reporting and most patients get their care through a public-sector insurance plan. Doctors are expected to follow “guidelines” for care.
In the U.S., while everyone has different anecdotal experiences, very good research done at Dartmouth and other research published in peer-reviewed journals demonstrates that, IN GENERAL, doctors who collaborate in large group practices provide higher quality, lower cost care with higher patient and doctor satisfaction.
Medicine has become “a team sport.” There is just too much to know for any one doctor to know everything he needs to know–and these days as patients live longer, so many suffer from four or five chronic conditions.
Doctors need to be consulting with each other all of the time. This happens more easily and naturally when they work together, in the same place, sharing the same
electronic records.
Also, all of the evidence demonstates that, in general, fee-for-service leads to higher costs without better outcomes.
The VA is a good example. As Dr. Atul Gawande wrote in the New Yorker recently, we know that the VA produces better outcomes than fee-for-service Medicare (most of it delivered by solo practioners or those in small practices) and costs about 30 percent less.
Finally, here in NYC–and in other places where many doctors work solo or in small practices– we have a real problem with doctors who don’t keep up with ongoing reserach and are still doing things the way they did them 20 years ago. Sometimes these doctors are quite defensive; patients are afraid of going for a second opinion (or letting the doctor know they went for a second opinion) because he would be angry,
This is not a good sign.
No one really knows whether these doctors are adhering to “best practice” . .
What we do know is that when doctors take “recertification tests” (or whatever they are called ) the American Board of INternal Medicine
has found that docctors who practice in very large groups score higher on these tests than other doctors..
As Christine Cassel (president of ABIM and a member of our Working Group on Medicare Reform) explains it: “If you’re working in a large group, someone is likely to say ‘Hey did you see that paper . . ?’
Also, if you are in a large group, everyone is lookng at your notes on a patients’ chart. If a doctor does something strange, a colleage will say “John I was wondering why you prescribed . . .for Mr. Johnson . .”
Barry-
Again I agree with most of what you said. There is just one thing that isn’t true: Social Security is NOT IN ANY TROUBLE.
Again, this is a pure and simple lie that has been spread by Cato, the Heritage Foundation and other ultra-conservative groups becuase they have
always been against Social Security (back to the days of FDR) and would like to destroy it.
I’m sorry to sound dogmatic, here are the facts from the CBO– a Sept. 2008 report: “Last Friday, the Congressional Budget Office (CBO) released a report stating that Social Security is in good financial shape and will continue to be so for decades to come . ..
The trust fund will cushion the large baby boom retirement, as it was designed to do, but most benefits will continue to be funded by direct transfers from workers to retirees, as they are now.
the Economic Policy Institute (EPI) think tank noted the report’s finding that “future Social Security beneficiaries will receive larger benefits in retirement…than current beneficiaries do, even after adjustments have been made for inflation.”
According to the CBO projections, Social Security is in decent shape, because – without any changes at all – the projected long-term Social Security shortfall equals a mere 1% of taxable payroll. EPI further states that the biggest problem facing Social Security is not the boomer retirement, but growing income inequality, which increases the share of untaxed earnings above the taxable earnings cap (currently set at $102,000).”
At most, we may wantto raise the amount of earnigns that are taxed for social security to, say $112,000 or $115,000.
But we don’t need to do that now–and I think it would be a bad idea in the middle of a recession when we will, as you say, need to raise other taxes at the high end.
Ultra-Conservatives would like to persuade Congress to means-tests SS. Then wealthy people who didn’t qualify would turn against it.
Alternatively, conservatives would love to privatize it, and let the government–or individuals– invest SS savings in the stock market.
Big Pay Day for Wall Street. Much Risk for People Who Cannot Afford to Lose Their Social Security.
.
Medicare is in trouble–but as you know that’s a separate fund.
And Medicare suffers from the same problems as the larger health care system.
All of the reforms that
talk about here –redistributing dollars, reining in inflation from 6% or 7% to 2% will solve the problem. Reform will require seed money, but otherwise we’re only talking about cutting spending by 4% to 5% (brining inflation down from 7% to 2%. This is completely doable, though there will be much resistance ..
I’ve searched for that Bayh-Doyle post many times, add that to the top 25 for sure.
Sounds like you are in Obama’s camp when it comes to socializing our nation. This notion that we would be better off if everyone were on equal footing(middle class) monitarily is crazy. This thinking promotes laziness. The bottom won’t have any incentive to try harder because everything will be “given” to them. As well the top want have any reason to strive, becuase it will be “taken” from them. An entire country of middleclassness is not the answer. Rest assure that this is the road Obama is taking us down. He wants the government to have control over every aspect of our lives. The pompous, arrogant attitude that government knows best is dead wrong. America isn’t as ignorant as he thinks despite the fact that he is our President.