July 15, 2009

Guest Post: ‘Reform health care culture and politics first’

Filed under: Economy,Health Care,Taxes & Government — Tom @ 10:07 am

Note: Frequent commenter and friend of BizzyBlog Joseph Crea has assembled a column that deserves wide notice. I am glad, thanks to the residual traffic from yesterday’s Instalanche at another post, to provide it.

Joe is, I believe, the first person to coin the term “Democrat effect” to describe what happens, and has happened, to the economy when leftists first control Congress and then the entire federal government.

The earliest BizzyBlog comment that I could find from Joe containing his term is here from September 2007. That comment, which foretold the seriousness of the impending Democrat-inspired economic calamity we now endure, preceded your truly’s resoundingly vindicated recognition of the POR (Pelosi-Obama-Reid) Economy, now the POR Recession/”Repression” as Normal People Define It, by about 10 months.

So take heed, and read on.

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Reform health care culture and politics first

Health care has been politicized such that many are convinced that the disease — misaligned social, market, and regulatory structures — can be cured by treating the symptom, high costs. When people speak of the need for “health care reform,” what they usually mean is “cheaper” and “government-run.” This is akin to treating lung cancer with cough medicine on the advice of Phillip Morris.

One quick test to evaluate whether with whom you are speaking has any clue about reforming the U.S. health care system is to evaluate their arguments. If they use any variation of the following myths (PDF), they have no idea what they’re talking about:

1. The U.S. spends twice as much per capita on health care yet our system is ranked 37th in outcomes. In reality, disparities in commonly cited nonspecific health outcomes–infant mortality, lifespan, etc.–have less to do with the health care system or how it is financed than the cultural, demographic, and genetic characteristics of the population it serves and the way the statistics are defined, collected, and reported. For example, when adjusted for violent crime and accidents, the U.S. life expectancy is actually the highest in the world.

2. Medicare’s administrative costs are only 2% compared to 20% in the private insurance market. This myth of government efficiency–an oxymoron–that perpetuates a false confidence in federally-imposed health care long since have been debunked. What the Medicare overhead calculation obscures is how efficient any insurer could appear if it only offered one product for one market segment in which everyone was mandated to buy it; which was prepaid and collected by someone else under penalty of law; reimbursed only 80% of a provider’s cost; did not have to survive solely on premia, investments, or make a profit; did not have to obey the various state regulations, but instead set its own rules; could not be sued; and much of its overhead functions, debt, and debt service were absorbed by its competitors and various other federal and state agencies. That is Medicare; and despite these advantages, this system is broke, and has been mismanaged to the tune of trillions in unfunded liabilities! In actuality, the cost-shifting of Medicare and Medicaid to private payers is 2½ times that due to the uninsured! Yet this is the system that is being held out as the model for the U.S. system of the future.

3. Markets don’t work in health care. On the contrary, market-based solutions work well in health care. The reasons are competition, price transparency, and consumerism. One example is conventional Lasik surgery where the price has decreased 30%+ in real terms with high satisfaction. Another example is medical tourism whereby mostly private providers in other countries offer medical procedures in accredited facilities at lower cost with equal or better outcomes. Because of this, many U.S. health insurance companies have or are considering programs to cover medical care abroad. Even the competition aspects of Medicare Part D have brought down premiums one-third from expected.

The way to think of health care systems is like cars. Those that want government-run health care are trying to advance the argument: “Why does a Mercedes E-350 cost so much more than a VW Beetle? They’re both cars!” This would almost be a reasonable argument if a Beetle health care system was acceptable to consumers, politicians, and trial lawyers in the U.S.

Health care reform is a cultural and political problem more than a medical or economic one. In Canada and Europe, they are getting no frills Beetle that gets you from A to B 90% of the time. That’s why their systems are cheaper, but that wouldn’t fly here. The American culture expects (or has been conditioned to demand) the best possible care (decreasing benefit) as soon as possible (increasing cost) paid by someone else (employer or government) and sues if the outcome isn’t acceptable (defensive medicine).

All health care systems ration care; but the results of rationing—more inconvenience, worse outcomes, and less choices–employed in more socialized systems would not stand in the U.S. Managed care cut costs well in the mid-1990’s. Real growth in per capita health care spending was cut in half with equivalent quality. However, politicians to this day decry the rationing practices that made it possible–gatekeepers, denials, and limited choices–yet hail as exemplary the more socialized systems for which these same practices are critical. If they were too problematic and impersonal for American culture then; what makes them agreeable now? If all we want is cheaper, the health care expectations of Americans (and trial lawyers) will need to change; but if we want better, it’s government policies that need to change.

Most government-run health care financing schemes in social democracies function because the citizens accept long wait times, high taxes, and the foregoing of marginally better but more expensive treatments as part of their social contract. Canada’s socialized health care financing system (insurance is a misnomer) is a point of pride; whereas, the U.K.’s true socialized system–government-run everything–is openly derided. Canada has  two significant advantages, however: those that choose not to accept prolonged waits for timely access to commonly available care can come to the States relatively easily; and it also can free ride off of our pharmaceutical and biomedical R&D and military. The latter is what allows the E.U. systems, both health care and economic, to function at all.

True health care reform is being inhibited by trying to force the square pegs of government and politics through the round holes of culture and economics. In order to fit, the corners will need to be carved by eliminating the general deadweight loss from government pass-throughs and redundant state and federal regulations along with tort reform. This would decrease the compliance costs and allow standardization, which would free up capital for health information technology and its efficiencies without assaulting the American culture.

Two good first steps would be to allow health insurance to be bought and sold across state lines and tax equity for individuals who buy nonemployer-base covergage. A third would be to set up an evidence-based “loser-pays” tort system for medical products and services. These reforms alone would decrease costs and free up the necessary resources (i.e. capital) for real system reform. Likewise, portability, competition, and consumerism would be promoted. The ultimate results would be lower costs for businesses, lower premiums for all, a decrease in the uninsured, and a higher-quality, cost-effective health care system.

Now that’s reform.

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UPDATE, July 17: On Thursday, Kurt at FundMastery posted Joe’s column with permission. Thanks for the interest.

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5 Comments

  1. On the US spending twice what the world average does, Political Calculations did a nice piece on this:

    http://politicalcalculations.blogspot.com/2009/07/redefining-health-care-debate-part-2.html

    Bottom line like many other liberal assertions of fact, it turns out to be a falsehood waiting to be exposed.

    Comment by dscott — July 15, 2009 @ 11:04 am

  2. [...] (UPDATE: Michelle Malkin indicates that the plan is to Soak the Rich – no surprise). Ed Morrissey of Hot Air adds some intriguing details, including a plan that amount to taxing the uninsured because they are uninsured Bizziblog has an essential read: ‘Reform health care culture and politics first’. [...]

    Pingback by Blue Dog Dem Contact Numbers and More! « Temple of Mut — July 15, 2009 @ 11:40 am

  3. BTW – apart from my reference on #1 post, the reason for a significant portion of US medical costs is due to the availability of medicine in general, there are no caps other than one’s ability to pay. To claim US health care costs twice the world average is disingenuous. Just as your example of the VW and Mercedes to compare the macro economics between countries, the same holds true for individuals. If the top 5% of the US population has 70% of the wealth, then it stands to reason they spend many times more for their health care than the 95% of Americans with 30% of the nation’s wealth. With that kind of disparity, claiming the US spends twice the amount is unreasonably lumping both these very different groups together to add apples and oranges which inevitably makes a false assertion.

    Point #2 is cost shifting, Medicare reimbursements are below market and as a result, many medical providers are not accepting them. You can not claim efficiency when you are literally low-balling the cost of health care by making someone else pay for it. Nor can you complain about the cost of private health care when government policy drives up that cost via cost shifting which amounts to a private subsidy of government mandates. Between Medicare, Medicaid and 13 million illegals (who don’t pay their hospital bills), the cost must be paid by someone therefore, the increase in prices are mostly a function of the increasing burden of cost shifting to subsidize those three cost burdens.

    In view of point #2, it is adding insult to injury by demanding those who currently pay, to pay even more to solve a problem that is caused by the government let alone allow the government dictate the level of coverage of those health insurance policies which will only drive up those prices further due to subsidizing coverage for things like abortion like in RomneyCare. We have gotten away from the real reason for Insurance, protection against catastrophic financial loss and this is why the cost of health care is going up more than inflation. Insurance is not an entitlement anymore than eating or breathing.

    Comment by dscott — July 15, 2009 @ 11:51 am

  4. If you are going to advance the idea of loser pays the legal bills, then we need to mandate that at least 1/3rd be taken from the lawyer who brought suit. The ambulance chasers need to pay otherwise there is no consequence to setting up a fall guy. We all know that lawyers have a financial vested interest in bringing a suit so their financial penalty should be commensurately proportional with the gain they sought to obtain.

    Comment by dscott — July 15, 2009 @ 4:30 pm

  5. [...] is a thought provoking post by Joseph Crea on Bizzyblog.com about healthcare reform. He does a good job at debunking some of the disinformation used to argue [...]

    Pingback by Noteworthy Blog Posts « WhiteCoat’s Call Room — July 17, 2009 @ 5:42 pm

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