Rahm Emanuel has warned that when gauging President Obama “Republicans and others have made a mistake: He has an open hand, but it's a very firm handshake."
I don’t usually think of Rahm Emanuel as a phrase-maker , but in this case, he has hit upon a superb metaphor for the president’s willingness to reach out to his opponents, and invite them into an honest bipartisan dialogue– while making it clear that he is not willing to compromise his bedrock values.
The president displayed his inner steel last Thursday when he told Republicans that he will not let them use a filibuster to veto his health care proposal. The threat of a filibuster had hung over the administration’s health care initiative until last week, when President Obama persuaded Senate Democrats to follow the House and include “reconciliation protection” for health care in the budget bill. This means that Republicans cannot block reform by reading the phone book—and Democrats need only a simple majority (50 votes ) to pass health care reform in the Senate.
Yesterday, when Congressional negotiators agreed on the budget bill, they gave President Obama virtually everything he wanted, including the fast-track budget reconciliation rules that smooth the way for passage of his healthcare initiative. Today, the House of Representatives and Senate plan to vote on the $3.5 trillion plan, with final passage expected before Obama begins his evening news conference.
How This Changes the Scenario for Reform
White House critics charge that the president has betrayed his commitment to bipartisanship. But, in truth, Obama has not given up on the Republicans. The budget bill gives them 5 ½ months to come around, participate in the process and help shape healthcare reform—even if they cannot mold the legislation to match their priorities. At the same time, the president has put a time limit on negotiations: if Congress hasn’t reached a bipartisan agreement by October 15 the reconciliation rules kick in, and healthcare reform will come to an up-or down Senate vote. No filibuster allowed.
At that point, rather than needing 60 votes to break a filibuster, the administration will need only a simple majority, or 50 votes out of 100 votes, to pass the healthcare portion of the budget bill. Vice-President Joe Biden would break any tie. (Democrats currently have 58 votes in the Senate.)
This changes the scenario. Until last week, it appeared that there was no way the administration could get its full health care bill through the Senate. The president’s plan includes public sector insurance as an alternative to for-profit insurance in order to, in the president’s words, “give people choices and to keep the private sector honest.” But it was unlikely that any Republican Senator would vote for a plan that included a public sector alternative. This meant that the administration had just 58 Democratic votes in the Senate—two short of the 60 that everyone assumed they needed.
Yesterday, Senator Arlen Specter’s stunning announcement that he is joining the Democrats changed the math. Assuming Democrat Al Franken is eventually sworn in as the next Senator from Minnesota, the Democrats will have their 60 votes. (Former Sen. Norm Coleman is appealing Franken's victory in the state Supreme Court.)
But even assuming Franken is finally allowed into the Senate, the reconciliation clause is still hugely important. It ensures that even if blue-dog Democrats break ranks, the health reform bill should pass. And the inclusion of the reconciliation clause tells us where President Obama stands on health care legislation.
In the past, many observers have suggested that health care just isn’t a top priority for this president. I, too, thought it would rank third—behind the economy and foreign policy. We were all wrong because we didn’t fully appreciate the degree to which the president shares White House Budget director Peter Orszag’s view that runaway health care spending is the major threat to our economy. And, of course Orszag is right. (I discuss Orszag’s analysis here )
The president has made it clear that he would greatly prefer that the passage of healthcare reform be a bi-partisan process –as has Senator Baucus, the Democratic chairman of the Senate Finance Committee. But if it isn’t, Obama seems to be saying—“So be it.”
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The Republicans Howl
Meanwhile, the Republicans continue to express a combination of outrage and disbelief that the President has blocked what they seem to see as their constitutional right to, in effect, veto any legislation they don’t like, simply by filibustering. Earlier this week Representative Paul Ryan of Wisconsin, senior Republican on the House Budget Committee, told the New York Times that the budget . . .” marked a turning point in American history – and not a good one. Ryan stated that the inclusion of reconciliation in the budget was tantamount to forcing Republicans to negotiate on health care with a gun to their heads. “This is the moment when Americans switch their kind of government, their size of government, switch their relationship between the government and the individual,’” Ryan declared. .
In fact, this is not a unique moment. Somehow, Ryan seems to have forgotten that the Republicans used the “budget reconciliation’ tactic to adopt Bush’s signature tax cuts for the rich in 2001. And the Republicans used it again in 2003 to pass Bush’s second round of regressive tax cuts.If the tactic can be used to facilitate tax cuts for the wealthy why can’t it be used to shield legislation that aims to provide high quality, affordable health care for all Americans?
The reconciliation process has been used many times since 1980, often by Republicans. House Majority Leader Steny Hoyer lays out the many precedents in a document posted on TalkingPointsMemo.
Moreover , since he had been in office, President Obama has repeatedly extended his hand—and been rebuffed as the Republicans closed ranks. Only three Senate Republicans backed the $787 billion economic stimulus measure (though ultimately those three provided the crucial margin of victory), while not a single Republican voted for budgets approved by the House and Senate.
“In a meeting with House Republicans at the White House Thursday, “Ryan Grimm reports on Huffington Post, “President Obama reminded the minority that the last time he reached out to them, they reacted with zero votes — twice . . . And then he reminded them again. And again. And again.
“A GOP source familiar with the meeting said that the president was extremely sensitive — even ‘thin-skinned’ — to the fact that the stimulus bill received no GOP votes in the House. He continually brought it up throughout the meeting.”
As every good mother teachers her children: if you want other people to like you, you have to like them, and the Republicans have made little effort to like Obama. (Their mothers taught them to be warriors. Obama’s mother taught him to be a magician–someone who transforms things. If you're famliar with Jung's psychotypes, you know that rather than opposing others, the magician incorporates the best of what is around him, and weaves a magical web of support.)
Will the Opposition Compromise?
Indeed, some observers suggest that Obama’s transformational powers are such that he will soften the hearts of conservatives and open the minds of the lobbyists . Over at The New Republican, Jon Cohn speculates that the reconciliation clause is “a game changer” because the administration’s opposition now knows that the Democrats “may not need [conservative] support after all. If [conservatives ] demand too much,” Democrats may just ignore them altogether–and craft a bill, perhaps with the help of more cooperative lobbyists, that is not in their self interest. In this scenario, there are three options on the table. A bill you like, no bill at all, and a bill you really hate. So what do you do? Chances are, you concentrate a lot harder on trying to get that bill you like.”
In other words, upon reflection, the conservatives will realize they have a choice between a bill they can live with and a bill they abhor. So they will reach out to the administration, and make an honest effort to participate in shaping meaningful health care reform.
As usual, I'm just not as optimistic as Cohn. I doubt that either insurance industry’ lobbyists or the conservatives will reach out in the true spirit of bipartisanship For the industry, there is simply too much money at stake. The for-profit insurance industry desperately needs the millions of new customers that universal coverage will bring to the market, government subsidies in hand. It is panicked by the prospect of competing for those customers: insurers know that this would mean changing the way they do business, putting patients ahead of profits.
As for the idea that, upon reflection, Republicans will try to meet Democrats halfway, I’m not sure that today’s Republicans are capable of reflection. Certainly, in the early 1990s, politicians like Bob Dole understood the art of reason and compromise. But in the years that followed, Karl Rove and others drove a great many thinking Republicans out of the party. Those who are left are all too likely to fall back on an ideology which requires little reflection: “my way or the highway”.
In that spirit, on Friday, Fox News reported that a GOP Senate committee aide told the network that “Republican lawmakers are considering offering amendments to the legislation that would be unpalatable to Democrats.
“Senate Republicans made a similar move with the D.C, Voting Rights Bill, which would have given the city its first seat in the House,” Fox noted, “By adding a controversial amendment that would repeal most of the District's local gun-control regulations. That bill now is waiting for a vote in the House.”
“For the health care bill, Republicans would try to add amendments that require employers to provide a certain number of dollars for every employee and limit the ability of uninsured Americans to choose health care providers, specific changes that Democrats have said will not be included in any comprehensive health care plan,’ the aide said.
"’I would assume this is the only option left,’" he told FOX News”
None of this has happened yet, because Congress has not yet considered how to finance health care reform. That is a separate, potentially explosive issue. And it is very possible that conservatives will choose that moment to try to turn the public against reform.
Indeed, over at “The Wonk Room,” Igor Volsky warns that the administration should be worrying about losing public support for its health care initiation: “Right now, you hear more about votes than public opinion because there's no plan for the public to have an opinion on. Soon, that'll change, and a lot of the energy that's now going into changing the minds of legislators will go into changing the public's mind on the legislation.”
In my view, if the Republicans try to turn public sentiment against the administration, this would be an extraordinarily self-destructive move. A recent Pew poll reveals that only about 24 percent of all Americans identify themselves as Republicans, the lowest share in three decades. It's not so much that the Republican base has shrunk: the Democratic slice of the pie has expanded. When Bill Clinton was elected in 1992, the Democratic base represented 30 percent of the electorate; swing voters were 43 percent and Republicans 27 percent. Last year Democrats made up 41 percent; swing voters dropped to 32 percent and Republicans stayed put at 27 percent. As Emory University political scientist Alan Abramowitz points out in a recent essay these changes are largely rooted in demography —particularly the growing nonwhite population. The changing democraphics are baked into the cake, and are likely to continue to influence U.S. politics for the foreseeable future.
The conservative cadre is shriveling. The Republicans are, in effect, marginalizing themselves. As Senator Specter pointed out in his press release announcing that he was joining the Democrats: “Since my election in 1980, as part of the Reagan Big Tent, the Republican Party has moved far to the right. Last year, more than 200,000 Republicans in Pennsylvania changed their registration to become Democrats. I now find my political philosophy more in line with Democrats than Republicans.”
The bottom line on health reform: few Republicans are likely to compromise. Insurance industry lobbyists will continue to fight a public sector alternative with their last dollar. But "reconciliation" means that even if some blue dog Democrats defect, the administration will need only 50 of the 60 Democratic votes that should be available (Specter brings the number to 59, and Franken would make it 60.)
Not a Done Deal –Len Nichol’s “Modest Proposal”
Yet, while the president’s health reform initiative is likely to pass, no one should assume that it will survive intact. There is still talk of watering down the public sector option so that it won’t be too competitive. To that end, the New America Foundation’s Len Nichols has put forward a “modest proposal” that has attracted some attention.
Here are just a few of the features of the proposal:
- The public sector plan could not be a version of Medicare
- Providers who serve Medicare patients should not be required to take patients who are on the public sector plan
- Providers should be able to negotiate rates with the public sector plan.
These three provisions alone guarantee that either premiums for the public sector plan will be relatively high (because the government agrees to pay providers like Boston’s Partners’ hospital whatever they demand) or the network of providers available to patients on the public plan will be relatively small (if Medicare refuses to meet the demands) making the public sector alternative more like Medicaid. The proposal also would erase the advantages a public sector plan enjoys by virute of being part of the federal:government: the public plan doesn’t need a reserve fund, and some administrative functions are covered by other government agencies.
Of course what for-profit insurers see as “unfair advantages” actually benefit patients on a public plan by making it less expensive. . But these private insurers tend to think in terms of what is an advantage for them or their competitors—not in terms of what will help make insurance affordable for patients.
In the end, as Bob Laszewski shrewdly points out on “Healthcare Policy and Marketplace Review,” in their efforts to level the playing field, Nichols and colleagues have turned the public plan into just another version of private insurance.: “When the day is done, it seems to me the authors are arguing they can create something that looks just like the existing private health plan market . . . While trying to overcome the objections to a public health plan the authors have . . .just come full circle and toward what end? Just how would a ‘modest’ public health plan provide something materially different [from private sector insurance]?”
It wouldn’t. Yet the entire rationale for offering a public-sector plan is that it would give Americans a chance to choose something different—a plan with lower administrative costs that enjoys the economies of scale the government provides and that doesn’t need to squander huge sums on marketing, advertising, lobbying and seven-figure executive salaries. Like Medicare, an affordable public plan would attract enough participants that it would have the clout to refuse to cave to providers' demands for excessive reimbursements. Instead, the public plan would be designed with an emphasis on the public good.
For example, this year, Medicare will be raising some physicians’ fees while lowering others, with an eye to which services provide the greatest benefit to patients. It also will continue to look for ways to reward hospitals for high quality care, while penalizing those where sub-par care leads to an unusual number of readmissions. Presumably, Medicare E will follow Medicare’s reforms. And ultimately, Medicare E (the public plan) could set high standards for all insurers as to what insurance must cover, how equitable it must be, and how affordable it must be.
Whether the Obama administration will achieve victory on this score remains to be seen. But in refusing to let the idea of bi-partisanship trump bedrock values, Obama has now made it clear that he knows that he is in control As he puts it, “We won.” Some have objected that this is a polarizing statement. But Obama isn’t gloating. He says “we won” with an easy smile. Open hand, firm handshake. The conservatives are no longer in power. That is simply a fact. The country is headed in a more progressive direction.
I live in Conservative central PA, and I have lots of contact with the local conservative mindset, although they know my politics. Lately an interesting thing has been happening. The conservatives have begun to realize that Obama is likely to get his way (especially with the Specter switch), and they are starting to ask me the usual questions about whether we will become a socialist state. I try to tell them to step back from the magic “bad word” syndrome, and begin to think about what is really happening. The average majority player/worker in America may be in for more security in their lives as they age, and maybe might actually be able to retire again! Since most of these conservative types are NOT in the elite leader/rich class, I wonder if they sense that this hopeful change may actually benefit their lives as well!
NG–
AS I said in the post, I don’t have much hope for the vast majority of Republicns in Congress–these days they are ideologues, and firmly set in their thinking.
But the average voter who thinks of himself as a conservative is not an ideologue.
As you suggest he may be much more open to realizing that what Obama is trying to do would help him.
Essentially, Obama want to take some of the great wealth that has accumulated at the top in the past 20 years and use it to build a social safety net for everyone– effective healthcare, better public schools, roads and bridges, help for the unemployed, financial help so that the
unemployed can afford Cobra
insurance (a very good idea) tax cuts for middle-income and low-income people,etc. He wants to cut the waste out of Medicare to make sure that it’s still there 30 years from now.
Especially in bad economic times, I think people sense that they can trust him. . .
Fingers crossed. He really will need 8 years to try to dig us out of this hole.
Maggie,
I hardly know where to start on this.
I think Len Nichols’ analysis has it right. Medicare has not demonstrated much ability to control costs and should not be trusted with even more control over the healthcare system. It functions as a giant claims paying machine and makes little or no effort to manage care. It pays any bill that meets its criteria and it accepts all providers that are willing to live by its rules whether they are good or bad, efficient or inefficient.
If we need a public plan to keep the private plans honest, I don’t think it’s unreasonable to expect honest, level playing field competition from the public plan as well. That means, in part, that the premiums charged should cover ALL costs including functions performed by other government agencies. A public plan may well be able to operate with lower administrative costs because it is not required to earn a profit, it will spend little or nothing on advertising, it won’t pay brokerage commissions, and it will pay lower salaries, especially at the executive level. At the same time, private plans could and probably would develop efficient provider networks, do a better job of actually managing and coordinating care, and be able to earn investment income on their reserves. As for paying brand name providers like Partners whatever they demand, it may interest you to know that Harvard Pilgrim Healthcare offers a lower cost plan that specifically excludes Partners from its network for non-emergency care.
I’m all for competition as long as it’s fair and on a level playing field though I have my doubts that the government could sustain such a system even if it started out that way. As soon as costs start to run over budget, it is likely to try to impose dictated prices. The rationale for a public plan is not to give people something different. Its objective should be to give them superior value for money after covering all costs and living by the same regulatory rules as the private plans have to operate under. If it can’t do that, we don’t need it.
There is plenty of opportunity to reduce healthcare costs via payment reforms ranging from episode pricing to capitated payments to refusing to cover or pay for services, tests or procedures that are deemed not cost-effective. Malpractice reform would also be helpful as would a more sensible approach to end of life care.
Private insurers, I believe, are prepared to accept tighter regulation including guaranteed issue and the elimination of medical underwriting coupled with a requirement that everyone purchase insurance with subsidies to help those who can’t afford it. It’s also worth noting that approximately 40% of the commercial insurance marketplace is currently controlled by non-profit insurers.
The public plan is a deal breaker for most republicans. The insurance industry is against it and most hospitals are probably uncomfortable with it as well. I think substantive health reform that would improve the lives of tens of millions of people could probably pass with strong bipartisan support if the public plan is not part of it.
Let’s see CMS adopt some of MedPAC’s payment reform ideas, if Congress doesn’t block them first, to see if it can bend the medical cost growth curve before we trust it with even more control over the healthcare and health insurance systems.
I would like to preface my comments by saying that I am a democrat and I support Obama’s objective to reform healthcare. That said, I agree with Barry’s post.
The rubber meets the road here: “Of course what for-profit insurers see as “unfair advantages” actually benefit patients on a public plan by making it less expensive. . But these private insurers tend to think in terms of what is an advantage for them or their competitors—not in terms of what will help make insurance affordable for patients.”
I take issue with this statement because while the premium may be lower, the overall cost of care has not changed. By simply ignoring reserves, IT costs, etc does not mean that these costs disappear. By eliminating marketing, lobbying, salary expense and adding back the costs of significant additional disclosure requirements and the initial investment required to get this off the ground and running efficiently, is there really a belief that this will improve access and reduce cost? If we do price in these “unfair advantages” which is the only way to reduce premiums and thereby increase access, there will be a tsunami of unintended consequences. It is these consequences like the crowding out of private insurance and subsequent de facto nationalization of insurance that while for some may be desired are for others unthinkable. In all industries, positive sum competition yields choice and value. What happens when this competition is eradicated? There is certainly no choice, and value remains an open question. If history has anything to say, a healthy competitive industry delivers more value and more choice than a nationalized one. The key is to set the rules so that healthy competition is possible. This is what lacks.
“If history has anything to say, a healthy competitive industry delivers more value and more choice than a nationalized one.”
Unfortunately, that maxim breaks down in health care.
Viewing all health care systems, including our own, it is immediately clear that nationalized insurance systems and very heavily regulated “social insurance” systems deliver much lower costs and significantly better care than our “competitive” system.
It is also clear that except for the short interval of the ascendency of managed care in the late 80’s and early 90’s Medicare has in fact done more to control costs than private insurance, which has been handicapped by competitive pressures and the need for profits.
In the end, the reason that competition does such a poor job in health care is that the customers for health care are not equipped with the knowledge required to make a market system function effectively to control costs and deliver high quality results. As Adam Smith tells us, the first requirement of a healthy market is adequate information to allow appropriate evaluation of choices. That does not exist in health care.
So what history, both in the US and in the world, shows us is that government controlled systems –whether direct government ownership of health care systems, direct government ownership of insurance systems, or high levels of government control of non-profit insurance companies — work significantly better than the for-profit market system in the US. If health care reform pushes us in that direction, we will be much better for it.
Pat,
I agree with much of your post. The issue is a lack of information and it is exactly this that should be addressed. Mandate outcome reporting for providers, regulate price transparency, these are worthwhile legislative goals. In every example I know of where outcome reporting has become standard practice, the quality of care has increased and the cost of care has gone down. Why not make this our first step?
I have lived for years in countries with socialized insurance and medicine. A couple interesting trends: 1) privatized care (and insurance) is becoming more and more popular 2) overall costs continue to rise at rates similar to the US. Most importantly, there is a level of rationing (dare I say the word) that I’m not sure would be tolerated by many Americans.
Another significant fear is that nationalized insurance will lead to a two-tier healthcare system far beyond what we have today. Is this really what we want?
Very small numbers of people in any country with a national health system choose private coverage. People tend to make a lot of noise about it (no one is totally satisfied with their health care system,) but they rarely decide to do anything about it. For example, in Britain and Germany, both of which allow private care as an option, fewer than 5% of people choose it. Part of the reason is that people realize that the only things that they gain are private rooms, fancy interior decoration, better meals, and the option to get surgery they might not really need. In most systems, including Britain, they get the same doctors, just rushing around at the end of the day to take care of private patients after they finish their work for the day at National Health.
The key statistic is that the people who opt for private programs do not have better results than those in the national health. The “two tiers” refers not to quality of care, but quality of lunch.
Barry–
First, over the past few decades Medicare has done a slightly better job at holding down health care inflation than private insures.
In the past 9 years Medicare has done a much better job of holding down inflation.
The statement that Medicare does not manage care is false.
For instance, Medicare recently decided that it won’t pay extra for virtual colonosocpies.
Also, Jim Jaffe’s post on how we already have rationing, with Medicare refusing to pay extra for care that isn’t significantly more effective.
Now that we have a White House that is willing to put significant sums into comparative effectiveness research, Medicare will be doing more to manage care.
The insurance industry is not willing to accept regulation. They will go along with guaranteed issue and community rating because in return they get an individual mandate– everyone has to buy their insurance! A captive audienceof customers!
True regulation (of the type that private insurers face in Europe) would mean telling them how much they can charge and what they must cover. It would mean that they would have to get permission from the government anytime they wanted to raise rates . . .
It would mean that they would not be allowed to pay exectuives $11 million
salaries. . . And that’s just the beginning.
When you talk about “leveling the playing field” you’re talking about taking away the advantages that make public sector insurane less expensive.
But the fact that public sector inturance would be less expensive is an “advantage” for patients. They are the people we should be worrying about, not the private insurers’ shareholders.
Dustin–
In theory, the private sector is always more innovative and works harder (because of the profit motive) and so can do thing better and more efficiently than government.
Conservatives have been saying this for years.
But if it turns out that government insurance can offer excellent care at a lower price, then why should we subsidize a private insurance industry that charges a higher price and/or provides less comprehensive benefits?
The point of health care is not to create jobs or prop up an industry. The
point of health care is improve the health of the population with sustainable, affordable care.
Moreover, much of our private sector industry is Not-For-Profit. And those insurers (Kaiser, Geisinger, Puget Sound, etc. Have No Problem With Competiing With A Government Plan.
They welcome the idea. And they would be very glad to see the for-profit insurers get out of the business becuase competing with for-profit insurers has forced non-profits to do things that they consider contrary to the public good.
For instance, Kaiser’s CEO told me that they did not want to start offering high-deductible insurance which tends to attract poor people (because it is cheap) who cannot afford to use it (because the deductible is so high)
. He said that this was not in the public interst, but added that Kaiser finally had to offer high-deductible insurance in order to stay in business and compete with the for-profit insurers in California.
A governmetn plan won’t “crowd out” good not-for-profit insurance, though it may well crowd out the greedy for-profit insurers that, virtually everyone agrees, have not served the public well.
Not-for-profit insurers like Puget sound have had great success in expanding preventive primary care.Kaiser has managed to
eliminate heart disease as the no. 1 killer among its patients.
Name one for-profit inurer who has done anything like that.
.Finally,as Pat points out in Europe for-profit insurers have survived by offering insurance with frills at a higher price. Most people won’t pay the higher price because the healthcare is no better than what you get under the public plan, but some people want the frills.
Pat S., Dustin and Barry–
As Pat S. points out, health care is one industry where competition does not serve to lower prices and raise quality.
This is in large part because the seller has a gun to your head. If you can possibly afford it, you need health insurance. you can’t wait for prices to come down. If you can possibly afford it, you want the best possible insurance–you are not looking for a bargain that is “good enough.”
Thus, buyers wil pay what the seller chooses to charge.
Especially once we mandate insurance (requiring everyone to buy it, which we must do if we have guaranteed issue and community rating) the private insuresr will have a monopoly–unless we have a public sector alterantive that won’t collude with their price-fixing.
Virtually every health care economist in America will tell you that “market competition” doesn’t work in the healthcare industry.
Dustin–
It is simply untrue that the cost of healthcare is rising in other developed countires at the same rate as in the U.S.
Healthcare inflation in the U.S. is running 6% to 7% a year. In Sweden, it has been holding flat for a number of years (even though Sweden’s population is older).
And outcomes in Sweden are much better.
In other European countires, healthcare inflation runs at 4% or 5%.
When you start compounding that extra 2% (in the U.S.) makes all of the difference.
And of course they are starting from a much, much lower base. While we spend nearly 17% of GDP, they are spesnding 12% of GDP –or less.
Ours is the most wasteful system in the world, largely because the profit motive inspires greed.
Secondly, when it comes to buying Insurance, lack of information is not the issue. The fact that the customer has no choice, can’t (or shouldn’t) put off buying insurance, means that the customer will pay whatever the seller asks.
(See my reply above to “Pat S., Dustin and Barry.”
When there are more insurers in a region, prices go up, not down. Why do you think that is?
In other industries, when there are more sellers, there are price wars. But not in the health care industry. Generally, the market will bear whatever
sellers decide to charge.
When it comes to purchasing healthcare itself (not insurance) the customer’s relative lack of knowledge becomes important.
You haven’t gone to medical school. Equally important, you don’t have the inutitive experiential knowledge that cocmes with 20 years of treating hudnreds of patients–things that you can barelly articulate–a smell, a sound–help you form your diagnoss.
How does the patient know who the best doctor is? He can’t. Our “outcomes reserach” is useless when it comes to evaluating a single doctor or even a small group of doctors.
The Instiute for Healthcare Imrovement and others have made that clear.
First, medicine is filled with ambiguities. What counts as a “better outocme”–if the heart patient survived the operation, and then was warehoused in a nursing home for five years (unable to recognze relatives) , or if he didn’t have the operation, and died at home, withut ever going to a nursing home.
What if the doctor advised against the operation, and he lived for another 2 years, then died, while his twin brother, who went to another doctor, had the operation and wound up in the nursing home for 5 years?
His brother lived longer, who had the better doctor?
80 percent of our healthcare dollars are spent on people suffering from chronic diseases like diabetes or cancer. Usually they suffer from 2 to 5 chronic diseases simultaneously.
What if hte doctor controlled the diabetes, but the cancer killed the patient? What if another doctor managed to get the cancer in reimission but the diabetes killed the patient? Who is the better doctor?
Aside from the ambiguity of medicine, there is the fact that in the relatively small pool of patients that one doctor or a small group might see, relatively few nono-oomplicant patients, or simply difficult cases, will skew results.
There is no such thing as “transparent information” on quality.
I know this is frustrating. Everyone would like buying healthcare to be like buying a refrigerator.
No one wants to hear about the ambiguities–but that is what honest doctors like Harvard surgeon Atul Gawande will tell you. (See his book
Complications.”)
Pat S.–
I agree about the two tiers in Europe. Last year a pediatric oncologist from Germany visited me.
He was in his late 40s and said that he had Germany’s public sector insurance because the private insurance was “much more expensive and no better when it comes to better care.”
In the U.S., however, we would be more likely to crete a two-tier system that actually provided two-levels of care. This is because we do not have the same social solidariy–or concern for our fellow citizens–that many Europeans have.
So we are content to have the poor receive sub-par care under Medicaid. (If you are on Medicaid you are much more likely to died of a disease than if you had the same patient profile and were on private insurance).
Medicaid (unlike Medicare) pays doctors and hostpitals so poorly that patients have a very hard time finding care, and when they do , it is often
sub-standard.
The fact that we are willing to treat poor children this way suggests that we would also be willing to treat our middle-class that way–and even our upper-middle-class.
Unless we fight for truly equitable reform, we will wind up with a system where care is so expensive that only the wealthiest 5% receives good care (though some will be killed by overtreatment), the next 60% might receives something equal to Medicaid today, and the final 35% receives little care, or very spotty emergency care.
In other words, when it comes to health care, we will be like a third world country.
Medicaid is a terrible program, and is a true example of a “two tiered” system discriminating on the basis of wealth.
One of the things we can hope for in any health care reform effort is the elimination of Medicaid, replacing it with access to a Medicare based federal insurance option and/or well designed private insurance programs that feature co-pays and deductibles that do not block access to health care for low income people.
Pat S wrote:
Medicaid is a terrible program, and is a true example of a “two tiered” system discriminating on the basis of wealth.
———-
So true, and traditionally even more so with auxiliary services such as dental care for covered children, which historically has been rejected by the dental profession so that only about 1 in 5 covered kids can find a realistically participating dentist. It seems more recently, the medical profession my well be following this tactic more closely so that more and more kids cannot access medical care.
My question/curiosity for you is to ask if you think this Medicaid relative access failure is a sign of which of the following:
–Greed and territorial protectionism by American providers
–Ideological political statements that those deserving handouts don’t deserve too much
–American healthcare system mission failure or non-existence
Maybe a combo of all three, but I would be interested in your comments!
Medicaid fails because of low payments, partly caused by state by state policies, partly by the notion that when Medicaid started it was thought to be “found money” for providers who would otherwise be providing the care for free (true in some cases, not true in others,) and partly because it wastes so much money on costs of qualifying and re-qualifying because of fear that someone will get health care who doesn’t “deserve” it. It is bad enough in some states all the time, but is becoming a real disaster now, as states make cuts due to budget problems.
So I would say the problem is two fold: mostly due to failure of political will, but partly due to unwillingness and inability of providers to absorb the losses related to the payments.
An example: I once worked in a town where the pediatricians and family practice doctors found that the payment for children’s immunizations was lower than the costs of billing. These doctors, who felt they faced an ethical obligation, decided to give the vaccinations for free, since that actually worked out better financially than billing for them.
Maggie,
At least part of Medicare’s recent ability to hold down costs relative to the private sector is due to cost shifting which the consulting firm, Millman, estimates at $80-$90 billion or more than 12% of aggregate private sector health insurance premium revenue.
You keep writing about high deductible private sector plans that are full of holes and that lower and moderate income people can’t afford to use. Yet, Medicare Part A charges a deductible of slightly over $1,000 each time a senior is admitted to a hospital. Part B services require 20% co-insurance with no out of pocket maximum. Part D requires seniors to pay 5% of their drug costs even after they enter the catastrophic insurance zone. Yet lower income seniors can’t afford a Medigap policy which accounts, in part, for the popularity of Medicare Advantage plans among that group. Private insurers’ average pretax profit margin is in the mid-single digits and their average return on capital over an economic cycle is not much different from the S&P 500. I would hardly call that greedy profiteering. The non-profits, for their part, have profit margins closer to 1%-3%, but, as a group, their SG&A as a percentage of premiums is somewhat higher than their for profit competitors. Premiums charged are roughly comparable, and they all attempt to keep premiums in line with their rising medical cost trend. They hear loud and clear from their employer customers, both large and small, that affordability is a huge problem, and they have plenty of incentive to do everything possible to mitigate healthcare costs on their customers’ behalf.
I don’t understand your comments about customers having no choice but to pay whatever private insurance companies demand in premiums. Price fixing and collusion are flat out illegal under anti-trust laws. Insurance companies win and lose business regularly in both the self-funded and at risk markets, in small, medium and large groups and in the individual market as well. Massachusetts has an exchange which makes it very easy to compare insurance benefits and premiums among all market competitors. Insurance brokers help their customers sort through the available choices as well. The health insurance market is quite competitive though the same cannot be said of the health CARE market. That market is almost completely opaque with respect to both prices and quality.
At its inception in 1965, Medicare basically copied the indemnity plans that were then prevalent in the private insurance market. Private insurers long since moved away from those in favor of HMO’s and PPO’s. Insurers try to eliminate the least efficient providers from their networks, steer patients with complex conditions toward Centers of Excellence, offer tiered drug formularies that create incentives to utilize less expensive generic drugs when they’re available and provide true catastrophic protection via out of pocket maximum provisions. Medicare does none of that. Moreover, it was in existence for 41 years before it even offered drug coverage which private insurers offered for decades, and Medicare never updated its indemnity model of accepting all providers willing to conform to its rules and accept its payments. In short, innovation is not its strength to put it mildly. Its dictated prices result in overpaying for some procedures and underpaying for others, especially primary care. In the early days, Medicare paid usual and customary rates to physicians and paid hospitals on a cost plus basis. In the 1980’s, it implemented the DRG payment system for hospitals, but if there were complications and the patient had to be readmitted, it generated a new DRG and another payment. Hospitals also have an incentive to keep raising their list price so they can maximize reimbursement for outlier cases. For doctors, Medicare gave us RBRVS and then the SGR formula. Somehow, the geniuses who run this system are supposed to be able to figure out the right rice for gall bladder surgery in Southern Alabama or Northern Florida or what a hip replacement should be reimbursed for in NYC or Omaha. In the meantime, it basically ruined primary care. Forgive me if I don’t want CMS to extend this approach to the entire healthcare system.
Finally, as to health outcomes in the U.S. vs. other countries, you have written in the past that healthcare accounts for only about 10% of health status with personal behavior accounting for 40%, genetics for 30% and socioeconomic status and environmental factors making up the other 20%. Even if we could import the German or French or Swedish healthcare and health insurance systems tomorrow, it probably wouldn’t change our life expectancy, infant mortality or other popular international outcome rankings anytime soon.
They are talking about 5% pay hikes for Primary care (even this is questionable given budget neutrality). These sort of efforts seem to lack the true desire to address the problems that are glaring clearly in everyone’s face.
Ray and NG
Ray– I agree that a 5% pay hike is not sufficient to make primary care viable.
But Medicare is also talking about bonuses–in addtition to a base pay hik–for primary care doctors who create medical homes, or improve disease management.
In addition, it is very likely that health care reform will continue to lift PCP’s paymetn by more than inflation over the comingyears. 5% a year for 3 years would be 15%– compounded that would be a meaningful money.)
I wouldn’t second-guess what health care reform will mean for PCPs. I think the Obama administation is going to surprise many people. Just don’t expect it all to happen this year.
NG–
On the origins of why Mediciad offers sub-par care:
When LBJ was trying to get the Medicare/Medicaid bill through Congress (it was one piece of legislation) southern Congressmen made it clear that they would not vote for the legislation if doctors who cared for poor patinets (on Medicaid) were paid as
much as dcotors who paid for elderly patients (under Medicare)
At the time,relatively few black Americans lived past 65–most seniors were white. But many black Americans were poor (and would be on Mediciad0
The Southern Congressmen did not want white doctors and whtie hospitals caring for poor black people. They assume that much lower pay for those who cared for Medicaid patients would ensure Medical Apartheid–and they were right.
In later years, a feeling that as you put it,”the poor don’t deserve too much” reinforced the original impulse.
As for doctors, it seems to me that most doctors could take a few Medicaid patients–and that would make a differece.
Many don’t want poor patients, not just because of the low pay, but because these patients are often “difficult” cases. . .
Barry —
The most important statistics comparing the health care in various countries are not the gross population statistics, which as you say are mostly due to the poor social conditions in the US, with our lack of good safety net programs for housing, unemployment programs, wages, pre-natal care, sick days, etc. etc.
The critical statistics are those for outcomes of people who are actually admitted into the medical system for care for particular conditions. When we find that patients managed for trauma, for coronary heart disease, for kidney disease, for congestive heart failure, for asthma, for lung disease, etc. etc. do substantially worse in the US than in Canada, Britain, Germany, France, Australia, New Zealand, the Netherlands, the Scandanavian countries, and other places, that strongly suggests we are doing something wrong, not just in society, but in the health care system. Studies of economic cohorts that show that the wealthiest people in the US do worse in health measurements than the poorest people in other countries are also important information.
Also, there are several recent studies about the impact of health care systems on health status in the US. A recent study showed that after 3 years as Medicare beneficiaries African-Americans, Latinos, and poor white people significantly closed the gaps in health status compared to the well off and middle class whites, strongly suggesting that a significant part of the health gap observed between disadvantaged groups and mainstream Americans is due to failures in the health care system specifically related to the failure of private insurance and Medicaid to provide effective care to disadvantaged people rather than to the underlying societal conditions.
It is also important to note that when we say that 10% of the differences in health status are due to health care system failures we are talking about a very large impact overall. If poor health care accounts for 10% of the increased risk of premature death, we are talking about a non-trivial impact that we can actually change fairly easily compared with huge society wide changes needed in other areas.
Finally, some important gross population statistics are in fact due to health care system defects. For example, good prenatal care from early in pregnancy, including advice about lifestyle impacts, is very important in preventing infant mortality, premature delivery, and maternal complications. Access to effective periodic examinations for blood pressure, blood sugar, and asthma, coupled with education and treatment, makes diabetes, hypertension, and asthma much less lethal. That is why we not only have more cases of these conditions, but more deaths per number of cases compared with other countries where access to good health care is more universal and where financial status is not an impediment to receiving appropriate health care.
Pat,
I appreciate your informative and detailed response as always. I would like to offer a few additional comments.
First, I think everyone agrees that we need universal health insurance coverage. There is, however, lots of disagreement around how to finance it and the role of government vs. private insurers. I prefer a strong role for private insurers, including the for profit companies, because I think it is more likely to ensure continued innovation and choice which is consistent with our culture. If it’s slightly more expensive and administratively complex to organize it that way, that’s a price I’m willing to pay and accept.
I was interested in your comments about outcomes once people have entered the medical system to treat a specific condition and your point that wealthy people here often fare worse than lower income people elsewhere. It seems that it is very difficult to isolate the role of the healthcare system alone in accounting for these differences. I wonder, for example, if differences in obesity rates might be a factor. Obesity rates are far higher here than in Western Europe and Canada. Even within the U.S., while over 30% of the adult population is obese (BMI above 30), only 8% of Asian Americans are. Compliance is another factor, especially with respect to patients with diabetes, hypertension, and, to a lesser extent, asthma. Diet and exercise regimens are also important for controlling diabetes and hypertension. Finally, while I have no idea whether it’s the case or not, it’s possible that Western Europeans, especially the more homogeneous Scandinavian societies, and the Japanese may just be genetically heartier than we are.
I also wonder to what extent, if any, Americans may be disadvantaged by too much treatment rather than too little. The combination of defensive medicine, patient expectations, and a more money driven culture among at least some providers could be driving too much treatment. On the other hand, your point about lower income people narrowing the medical outcome gap within three years of going on Medicare suggests that access to healthcare, especially primary care, is important.
At the end of the day, I think it’s a very complicated subject with numerous factors at work. Under the circumstances, the impact attributable to healthcare access and treatment, both too much and too little, is very difficult to isolate. This is especially true when trying to analyze medical outcome data among countries as opposed to regionally within one country. Even the intra-country regional differences are difficult to fully explain and then to develop strategies to reduce them.
Pat S. & Barry
Thansk for your comments.
Pat S.–
You make a very good point when you note that while overall health of the population is influenced, to a fair degree, by factors like poverty, comparative outcomes research looks at how patients fared when treated for specific diseases.
Here, you are comparing people in the U.S. who HAVE health care to people in developed countires who have health care. (Many poor Americans are never treated for congestive heart failure, so they wouldn’t show up in the studies.)
And what
you are looking at is how effective the care is in treating the disease.
Barry–
You assert that for-profit insurers help keep healthcare innovative.
I would like two examples of innovations introduced by for-profit insuerers that have actaully improved patient health.
I can think of a number of innovations introduced by non-profit insurers and government insurers (both the VA and Medicare) but nothing from for-profit insurers.
Indeed, the history of for-profit insurers has been one of government investigations and law-suits (becaue insurers were underpayng doctors, delaying payment to doctors and dropping insured customers after they became sick.)
For example: “One of the nation’s largest health insurers has agreed to pay $50 million dollars in a settlement announced today after being accused of overcharging millions of Americans for health care.
“The New York attorney general’s office launched an investigation after receiving hundreds of complaints about Oxford Insurance and its parent company, UnitedHealth Group, which claims to rely on “independent research from across the health care industry” to determine reimbursement rates. In actuality though, it relies on Ingenix, a research firm owned by UnitedHealth Group.
“New York Attorney General Andrew Cuomo says Ingenix has been manipulating the numbers so insurance companies pay less . . ”
Another fact: “In 2007, the average CEO compensation package for the top 7 “for profit” health insurance companies was $14.3 million”
The price we pay for having these insurers is not just somewhat higher adminsitrative costs–people die because these insurers put profits first.
For example”HealthNet dropped 1600 enrollees when they were sick. The company set goals and paid managers bonsuses based on how many ernollees they managed to drop.”
Meanwhile, a few years ago: ” federal jury awarded $48 million in damages against AMERIGROUP-which triples to $144 million under the federal False Claims Act-for discriminating against people with health conditions and pregnant women enrolled in the Medicaid program.”
For-profit insurers regularly do their best to avoid paying for needed care. This is why the percent of revenues paid out to provide care is called a company’s “loss ratio.”
As you know, if a company pays out a smaller percent of premiums to provide care, its share price goes up. And the history of managed care shows that when for-profit insuers say “no” to care they are just as likley to refuse to cover needed, effective care as they are to deny ineffective care.
As for outcomes, you ignore Pat’s point.
We’re not talking about overall health of the population, we’re talkign about outcomes when patients are treated for specific diseases in the U.S. vs. other countries.
Medical reserachers have shown, again and again, that in most areas, outcomes are better elsehwere, and this includes cases where obestity, exercise etc. are not factors.
The number of hospital errors and infections is higher in the U.S.
Barry, I know this is not what you want to believe, but this is what medical reserach tells us.
Maggie,
I think we’ve been over much of this before. The insurance abuses you cited affect the INDIVIDUAL insurance market and not the employer sponsored group markets. Approximately 160 million Americans get their health insurance coverage through an employer while fewer than 20 million access it through the individual market. Even I have said before that the individual market is dysfunctional. Moreover, while the individual market accounts for about 10% plan members, it only contributes 5%-6% of insurers’ premium revenue. It can be easily fixed through community rating, guaranteed issue and an individual and/or an employer mandate to buy or provide health insurance. The downside is that it will cost some money, especially for subsidies to help lower income people afford insurance, and it will significantly increase the cost of insurance to young, healthy people. By the way, while you cited some of the for profit companies that got caught up in individual market abuses, non-profits like Blue Shield of CA were also guilty and reached settlements with the California regulators. Even Kaiser has not been scandal free with its kidney transplant program failure, which was intended to reduce costs, the most famous recent example.
Regarding the Ingenix database to determine payment rates for out of network doctors, a non-profit will take it over and run it. I suspect that when it does, payment rates will either be in line with the previous determinations or, if they are higher, it will be reflected in higher insurance premiums. As I understand it, the allowed rates were still higher than Medicare rates but lower than in network rates. If insurers paid out of network providers higher rates than in network providers, there wouldn’t be much incentive to join a network.
Finally, on the subject of innovation, my comments related to health insurance benefit design, not health care delivery. The issues I cited including tiered drug formularies, nurse hotlines, Centers of Excellence, efficient provider networks and out of pocket maximums help to steer patients toward more cost-effective providers, generic drugs when available and provide protection from truly catastrophic expenses. I don’t know whether these originated with for profit or not for profit insurers. The point is that they both include these provisions in most of their plans while Medicare does not. If there is a health insurance policy that’s full of holes including $1,000 deductibles for each hospitalization, 20% Part B co-pays with no out of pocket maximum and 5% coinsurance for drugs even after the catastrophic zone has been reached, it’s Medicare.
Barry:
As you cited, there are advantages and disadvantages to all the policy designs available.
One of the disadvantages you did not cite for group health insurance is the average family premium of $12,000 per year.
With median household income of $50,000 per year, the family premium looks very close to a mortgage payment.
And, with all the fine innovations you cited provided by group insurers, isn’t it unfortunate that they don’t retain the groups longer, so the individuals can maintain those relationships that are working so effectively?
Don Levit
I hear that Senator Charles Schumer (D, NY) this morning came out with comments essentially supporting the criteria outlined by Len Nichols as the best way to ensure that a public health insurance plan competes on a level playing field with private plans. The criteria include (1) premiums charged must cover all costs incurred with no help from general federal revenue, (2) reimbursements should be above Medicare rates and negotiated, not dictated, (3) the plan must be subject to the same regulations and state coverage mandates as private plans, (4) providers can refuse to participate in the public plan while continuing to accept seniors with Medicare coverage if they want to, (5) the regulator must be separate from the agency that offers the insurance, and (6) the public plan must have a reserve fund to ensure its ability to pay claims just as the private insurers do. While I applaud Senator Schumer for endorsing these criteria, I’m extremely skeptical that the government plan can provide insurance for materially less than private plans under these conditions. If it can’t, there isn’t any need for it, in my opinion. The risk would remain that it would evolve over time toward Medicare style dictated prices if cost targets are significantly exceeded.
Barry–
No one considers the “Blues” part of the non-profit world.
Many have gone for-profit; others act like for-profit companies.
As for Kaiser, it is a huge enterprise; a problem with one program is no surprising.
Darmouth’s Dr. Jack Wenneberg calls Kaiser “the gold standard” for Aemrican health insurance.
Patients on Kaiser stay with Kaiser for generations.
By contrast, the vast majority of Americans rate the for-profit insurance industry somewhere just slightly above the oil industry.
Bob Laslewski (a business consultant, blogger and moderate) has said that the for-profit insurance inustry has doe such a terrible job that it essentially deserves to lsoe the market.
“Dartmouth’s Dr. Jack Wennberg calls Kaiser “the gold standard” for American health insurance.
Patients on Kaiser stay with Kaiser for generations.”
If that’s the case, why hasn’t Kaiser been able to materially grow its market share within its existing markets? Why is its market acceptance better in Northern CA than in Southern CA? If it can really do a better job of keeping patients healthy with lower utilization of healthcare resources than its competitors, it should have a meaningful cost advantage which should be reflected in lower premiums which should attract more members. If its products are so good, why aren’t employers flocking to them?
Since it’s so enormously expensive to build or buy and then staff hospitals and buy up physician practices, it is almost impossible for Kaiser to expand outside of markets where it already has a strong presence. At best, it can grow by moving into areas contiguous to its current facilities. A Kaiser executive told me last year that they once tried to expand in the East by contracting with providers and putting the Kaiser name on the insurance product. It didn’t work. Geisinger faces the same issue in the East, though it owns only three hospitals, I believe. It is very difficult for one organization to be both a payer (insurer) and a healthcare provider through ownership of hospitals and physician practices. It is also extraordinarily capital intensive.
I’m sure there are lots of people who love Kaiser. There are also plenty that don’t. Many employers as well as individual customers don’t like their closed network HMO model which will likely limit membership growth beyond its current 8+ million.
Barry –
Your comments on Kaiser once again raise the issue we have talked about before: the difficulty in exporting the successful culture of large institutions from their bases to other areas.
I think that the problems Kaiser has had in Southern California and in the East reflect that issue, since they were trying to enter markets where providers and patients were used to radically different approaches to medicine. In addition, those expansion attempts occurred at a time (the late 80’s and the 90’s) when Kaiser was having a lot of trouble internally. Those internal problems have been solved by strong new leadership, but the poor performance in some expansion markets persists.
As I have said before, Mayo has had similar problems with exporting its culture. It has done very well in Arizona, but less well in some other markets.
Like Mayo, Kaiser has had successful and unsuccessful experiences with expansion. Kaiser has done very well in Oregon, and quite well in Hawaii, but less well in other places.
In the end, I think the take away lesson here is that if we are to change the behavior and culture of US health care in order to offer more efficient and effective health care and arrest and reverse the potentially disastrous cost trends, we cannot count on market forces alone, since culture can override market forces in many cases. We are going to need very strong leadership on a national basis from the federal government, using its power through Medicare, a reformed and federalized version of Medicaid, its huge employee health plans, and a new federal option insurance program. The argument for this type of leadership is one of the strongest arguments for making the federal option a part of Medicare, so as to maximize the strength of the program in leading the way for these necessary reforms.
Pat,
Putting aside the issue of spreading a culture to new geographies for a moment, my perception is that a key part of both Kaiser’s and Mayo’s ability to deliver high quality, cost-effective care, at least in some locations, is a healthcare delivery model that includes paying doctors via salary instead of fee for service and the use of electronic medical records throughout the system.
While I can easily see Medicare continuing to squeeze provider payments, with or without the added leverage from a public health insurance option for the under 65 population, I don’t see how it can force doctors into large groups, force them to work for on a salaried basis, and mandate that they purchase and implement electronic medical records unless it provides significant financial aid to cover the cost.
Medicare has a long history of squeezing provider payments, however. That approach has both failed to hold down costs because of utilization increases and it made it increasingly difficult for seniors aging into Medicare to find primary care doctors who are accepting new patients.
Medicare already has enough market power to move incentives away from straight fee for service toward bundled payments for expensive surgical procedures and, perhaps, capitated payments for primary care doctors to provide medical homes for patients with diabetes, hypertension, asthma, etc. Existing comparative effectiveness data could be used to stop paying for services, tests and procedures deemed not cost-effective or at least significantly raise patient co-pays for those.
I was relieved to read Senator Schumer’s comments yesterday regarding the way a public health insurance option should be structured. If we must have one, it should look like what he outlined and not be an extension of Medicare with its dictated prices and rigidities.
The concept that a public insurance option should cover all of its costs from premium revenues alone without contributions from general tax revenue reminds me of the mandate given to the U.S. Postal Service in 1971 to cover its costs from postage revenues and related services. While the first class postage rate increased from 8 cents in 1971 to 44 cents as of May 11th, the USPS continues to adhere to that mandate. In the meantime, United Parcel Service, Federal Express and DHL have come on the scene to compete effectively. Of course, we have complete price transparency in that market. While first class postage rates increased 5 ½ fold over the past 38 years, that is about in line with the Consumer Price Index overall. It’s not a bad model to emulate.