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Sunday, November 04, 2007

A few questions for health care reformers 


Ezra Klein is my favorite lefty blogger, in part because he is one of the few who can legitimately lay claim to the adjective "progressive". He is particularly strong on the question of health care policy, a subject in which he has turned himself into a genuine expert. In that regard, he has a web article at American Prospect that everybody -- conservatives included -- would do well to read: "Ten Reasons Why American Health Care Is so Bad." I have some nits to pick, but in the main it lays out the case for doing something about the financing and management of heath care in the United States.

For a taste of counterargument, read economist Greg Mankiw's piece in today's New York Times, "Beyond Those Health Care Numbers." Mankiw, who advises the Romney campaign, implicitly accepts that we need to do something, but obviously looks at the data differently than Klein.

I encourage Professor Mankiw to respond to Ezra Klein point by point, allowing Ezra a shot at rebuttal. That would be a fascinating exercise for those of us who are confused about this important subject.

Of course, one can never derive "what ought" from "what is." Proving the case for reform does not then tell us what that reform should look like. As confused as I am about the argument for reform, I am even more confused about the various competing proposals surfaced by the presidential candidates and their advisors (yes, that means that I am not reading Ezra and others as often as I should be -- I'm too busy running an actual health care company). They range from very statist to very free market, but at the end of the day they need to deliver better care at the same cost or the same care at a lower cost. If a plan does not achieve these objectives, then it can be, at best, sheer redistribution, which is not politically achievable even if it is morally or socially desireable.

That said, I do have a series of questions for all of those who would propose to reform the financing and organization of health care in the United States. In addition to the basic financial and structural questions -- aggregate cost, degree of choice, and breadth of coverage being the most important -- all candidates who put forth health care reform proposals should answer these questions:

1. Innovation. Will your plan decrease the quantities of drugs and devices used in American health care, or the prices paid for those drugs and devices? If so, it will decrease the rate of return on investment in new technology. At the margin, a reduced rate of return will reduce the quantity of investment in new technology. How much reduced innovation is acceptable? No fair claiming that there will be no reduction in innovation unless your plan sustains the profitability of the drug and device industries at current levels.

2. Personnel. Will your plan decrease the incomes of physicians and other health care providers? If so, it will cause some people to choose other professions in lieu of medicine. At the margin, that will mean that less capable people will become physicians and nurses and so forth. If your plan reduces the incomes of physicians (in particular), please explain how your plan will mitigate the resulting impact on the quality of the personnel delivering health care. Two possible responses occur to me. First, you might argue that we do not need our absolutely smartest people competing to get into medical school. Apart from a few people in academic medicine, we could get along just fine with marginally less capable people in medicine. Second, you might claim that changes in your reform program will substantially increase the non-monetary satisfaction of medical practice, so we will be able to attract similarly bright people into medicine in the future. Do you have a different response?

3. Individual vs. social taste for risk. Our system, as expensive as it is, allows the large percentage of the population with health benefits to make their own decisions about the allocation of risks and benefits. So, for example, public health experts will generally say that it is wasteful for women in monogamous relationships to have a pap smear every year. Annual pap smears for the "worried well," including the downstream interventions necessary to follow-up on the almost two million false positive tests each year, are enormously expensive in the aggregate and -- from a collectivist perspective -- suck up resources that would be better spent elsewhere (such as on the screening of uninsured women who have never had a pap smear). Nevertheless, we allow people with a low tolerance for personal risk to be tested or screened frequently. More centralized, data-driven systems prevent interventions that have a poor return in lives saved or other metrics. The Dutch will pay for a pap smear only once every five years, reckoning that they get a better return investing the money saved in other interventions. A Dutch woman who would prefer annual screening simply because she is risk averse is (as I understand it) essentially not allowed to get such screening. Our system, therefore, gives the patient a large role in assessing and acting upon their own tolerance for risk, whereas more centralized (and cheaper) systems often make those decisions for everybody. To what degree does your reform proposal save money by dictating the risks that patients must bear?

4. System of rationing. There are, in the end, only three ways to allocate health care (or any other good or service): queuing (standing in line, literally or figuratively, for a fixed supply), bureaucratic fiat (government or HMO "experts" decide what test or treatment is appropriate in each situation), or auction (ability to pay). All systems allocate some health care by each of these methods. In the United States, emergency room service works by queuing, the allocation of scarce vaccine is by bureaucratic fiat (remember the flu vaccine shortage a few years ago?), and breast enhancement surgery is by auction. In more socialized systems, a much larger proportion of health care is allocated by bureaucratic fiat or queuing than by auction. Under your reform proposal, which services are you going to allocate by queuing or fiat rather than by auction?

5. Relative power of practice specialties. Practice specialties are already famously competitive over the dollars available to support their procedures. Cardiac surgeons and interventional cardiologists have been punching it out for years, recognizing that their different treatment methods are often competing for the same patient's expenditures. One can imagine similar fights breaking out between spine surgeons and physical therapists and neurosurgeons and psychiatrists. I am sure there are many other such examples. The question, therefore, is how will your proposal shift the allocation of dollars in the system from one specialty to another? Note that most of us ought not care what the answer is, but it has enormous bearing on the political viability of your proposal.

6. Capital investment. How will your proposal affect the rate of capital investment in American health care? We are famously rich in big equipment -- MRIs, CT scanners, and all that good stuff -- compared to other, less costly systems. The result is that we snap images at the dropping of a hat. Will your proposal influence the proclivity of providers to invest in capital equipment? If the answer is yes, what will be the impact on patient care? If the answer is no, then where else will you get the economic efficiency you claim?

7. The adoption of new technology and the First Amendment. Statist systems often save money by delaying the adoption of new drugs and technology. Sometimes these delays have no impact on patient care and in other cases people die or suffer because drugs and devices available in less regulated systems cannot be obtained locally. Either way, few people outside the United States complain about this because most governments ban the advertisement of drugs and devices so the people do not even know about products their health system will not buy for them. In the United States, however, the First Amendment quite clearly and properly prevents the government from banning truthful direct-to-consumer advertising about drugs and devices. If a government agency refuses to pay for a new technology, the manufacturer can drive grassroots demand here to a degree that is simply impossible virtually everywhere else. The question, then, is whether your proposal will rely on slower adoption of new technology to save money. If so, how will you contend with the political consequences?

8. The quality of our bureaucrats. Let's be honest here -- government social programs never work as well in the United States as they do in, say, France because our best people do not go into the government. Most Americans, deep down, think that if you work for the government in any capacity that is not uniquely governmental -- the police, the judiciary, the prosecutor's office, the military, the intelligence services, or the diplomatic corps -- it is probably because you do not want to contend with the intense competition of the private sector. Either you cannot cut it, or you do not want to work hard, or you want the sort of security that comes with a job in Trenton, Albany, Madison, Sacramento, or Washington, D.C. In France, which has had a reasonably effective central government for almost 700 years, the top graduates of the top schools go into government service. With rare exceptions, the top American students go into the professions or industry. That is not going to change any time soon. So, does your proposal rely on attracting substantially more capable people into government service, or can we get by with the same people we have now?

All presidential candidates with a health care reform proposal -- and they should all have them -- should feel free to post their responses in the comments below. Along with the rest of you, of course.


23 Comments:

By Anonymous tyree, at Sun Nov 04, 03:13:00 PM:

Ezra Klein makes some good points, but anyone who leaves the lawsuit industry out of their list is of "Why American Health Care is so Bad" is missing one of the top 5.  

By Anonymous tyree, at Sun Nov 04, 03:24:00 PM:

It is important to back up my assertion so here is link to loads of information on the subject at http://www.overlawyered.com  

By Blogger Dave Schuler, at Sun Nov 04, 03:34:00 PM:

Excellent post, Tigerhawk. There are a couple of points I think are worth considering.

First, to Ezra's list of ten should be added one more: our healthcare system increases the cost of healthcare worldwide.

Then, in partial response to your first question, when considering the rate of innovation in the U. S. we have to recognize that we're overinvesting in healthcare here. Between half and 60% of all healthcare dollars here come from government in some form. That means that either the government involvement is completely unnecessary or we're spending more than in a real market system. I think the latter is more likely and that in turn means that we're putting more money into healthcare than we would otherwise.

That, in turn, means that in a more optimal allocation of resources (without the subsidies) R&D will drop somewhat. Tough, but that's just the way it is.

Note, too, that in order to defend the current rate of investment you've got to to defend the present rate of government subsidy.  

By Blogger Rick Ballard, at Sun Nov 04, 05:12:00 PM:

Tigerhawk,

The Commonwealth Fund can generate spurious info by the freight car load for Klein to spin. (Take a look at who Robert C. Pozen, Board member, has supported with max donations). Professor Mankiw will not live long enough to be able to knock down every "almost a fact" that Commonwealth can generate.

Just sorting through the implications of "The U.S. scores lower than anyone else, at 30 percent. Similarly, electronic medical records -- which both increase the quality of care and lower its cost -- have 89 percent penetration in the U.K., 79 percent in Australia, 98 percent in the Netherlands, and 28 percent in America. On both these metrics, we perform miserably." in regard to privacy issues (does Klein propose involuntarily embedding "H"(ealth) chips behind ears in order to make sure all info is up to date and correct?) would require a full day of thought and discussion.

Why not skip the response to a "Brave New World" and spend the time discussing Romney's plan? I'm not particularly enamored of Mankiw's Pigovian solutions but at least they don't involve tagging and tracking.  

By Anonymous Anonymous, at Sun Nov 04, 05:57:00 PM:

Tigerhawk --

You left THE MOST IMPORTANT QUESTION.

Will you close the border and deport illegal aliens, or provide free health care to Mexico?

Health Care reform involves some sort of increased government spending for health care. Unless the border is closed and illegal aliens deported (self-deporting, a massive effort at round-ups, or some combination) the end result is America spending free health care for Mexico.

Mexico has about 100 million citizens. They are mostly desperately poor and have no access to health care. Unless health care reform is paired with closing the border and deporting illegal aliens already here, all the spending will simply be soaked up by Mexican nationals wanting free health care that is also superior to anything that could be available in Mexico at ANY price.

Best estimates are that there exist in this country now somewhere between 12 million and 40 million illegal aliens. ANY increase in health care spending will simply go the illegal aliens, crowding out citizens.

This is why Hillary-care and other health care reform is DOA. Because in the lack of closed borders and deportations (self-deportations or otherwise) it simply transfers American tax dollars into free health care for Mexican nationals.  

By Blogger Larry, at Sun Nov 04, 06:45:00 PM:

Health care in America is unspeakably bad, I guess. But I have noticed a couple of odd things that don't seem to be addressed much.

Several people of my close acquaintance (including myself) would be dead several times over if we had been anywhere else.

I rarely hear stories of anybody going to any other country for help, excepting only the Laetrile clinics.  

By Blogger Purple Avenger, at Sun Nov 04, 10:31:00 PM:

or provide free health care to Mexico?

Already being done at my local hospital. An illegal with no ID or money is eligible to be treated for free.

Actually, the Palm Beach County taxpayers pick up the tab for all the free treatment...to the tune of like $160M that gets billed back to the county every year.  

By Blogger SR, at Mon Nov 05, 12:22:00 AM:

TH:
All your questions are excellent ones. You don't expect any politician (Hillary especially) to give clear and serious answers, do you?  

By Blogger Fritz, at Mon Nov 05, 10:14:00 AM:

I think that on items #3 and #4, particularly, Hillary's plan has several attractive features. As I understand it, her plan mandates everyone to buy either private or public health insurance, with assistance for those who can't afford it, and disallow coverage denial based on pre-existing conditions.

I suppose what that means for #4 is that you would get health care distributed by auction, with somewhat more care given to those who can afford to buy private insurance. Because everyone has to buy it (including healthy people), the pool of risk is distributed over a wider population and so insurance gets cheaper for everyone, and hopefully Bob Herbert will have fewer sob stories to write about.

For #3, people who want to buy expensive insurance (or are happy with their current insurance) can do so, and then get all the procedures they are willing to pay for. I find it an elegant solution.

I haven't yet seen a critique of Hillary's plan that didn't boil down to an allegation of bad faith and/or an acute case of Hillary Derangement Syndrome. If one were voting one's self-interest, and were happy with one's current health-insurance, what's not to like about this plan? The main issue to me would be that in the long term taxes might increase, but that's going to be true of any effort that expands care for the currently uninsured.  

By Anonymous Anonymous, at Mon Nov 05, 10:51:00 AM:

Please list Hillary's qualifications for managing our health care. If centralized health care systems such as the one she advocates are so terriffic, why do you see Canadians and British coming to the US for care that they cannot get or must wait months or years to receive instead of a flow going the other direction? Democrat plans to sneak groups of the population into dependency on a centralized system by altering definitions of who qualifies - 25 year old "children" or those at 250% of the poverty level in SCHIP for example - do not tend to inspire confidence that any of them can devise a program that surpasses our current system. Those efforts appear to be solely an attempt to fix a problem that does not exist and to add to the "dependent class". If the Dems are serious, let them forego earmarks as they said they would when campaigning last cycle and reduce our taxes by an equal amount. With less money coming out of people's paychecks, more could afford care. Let them put a leash on the John Edwards of the world thereby reducing the cost of malpractice insurance that now costs physicians in the high 5 figures or low six figures per year. Its not Hillary Derangement Syndrome to question the facts behind her assertions, its simple verification.  

By Blogger Rick Ballard, at Mon Nov 05, 01:17:00 PM:

"what's not to like about this plan?"

Some people just aren't terribly fond of the idea of yet another government mandate "for our own good". Slippery slope and all that.

One might suppose from the fact that there are over 9 million people living in households with incomes above $75K per annum who choose not to purchase medical coverage that the imposition of a mandate will be met with rather firm resistance.

Miz Clinton's much less than modest accomplishments in life to date do not warrant an extension of trust to any proposal made by her, much less a proposal affecting a sector comprising 16% of the GDP.  

By Blogger Fritz, at Mon Nov 05, 01:26:00 PM:

Anon: have you read even a summary of Hillary's plan? She isn't advocating a centralized, single-payer system. The key feature of her plan is that it mandates that everyone buys health insurance, either from insurance companies or a public insurance alternative (key word, there), since more uninsured healthy people will have to buy coverage, the proceeds from their premiums (as well as tax breaks) will be used to cover currently-uninsured sick people.

Rick: so basically, if I'm reading you right, your only substantive objection to Hillary's proposal is that households who choose not to purchase insurance and who are wealthy will now be forced to purchase it?  

By Blogger Rick Ballard, at Mon Nov 05, 02:09:00 PM:

$75K per househeld probably does appear "rich" to those already living on a collective but it really isn't.

My substantive objection involves exchanging the freedom to decide - including the decision to decide poorly - for the mess of pottage that is the "collective safety" offered by Miz Clinton. Her "no choice" statism is charmingly Stalinist but lacks appeal to those familiar with the next probable step.  

By Blogger Fritz, at Mon Nov 05, 02:45:00 PM:

Rick: According to this WSJ site, if you make $75k you're somewhere close to the top 10% of the country, so I'd say that's pretty well off. But I still don't understand what your real objection to Hillary's plan is. What do you mean by the "mess of pottage that is the 'collective safety' offered by Miz Clinton?" Your hypothetical $75k household that is currently opting not to buy insurance, would not be forced to buy into HRC's public plan, which is primarily aimed at low income families; they could buy into any private insurance that they chose. Hillary's plan is not "statist" in that sense, because it keeps the private sector and the choice that comes with it intact.

And "stalinist?" Yeah, my derangement-syndrome sensors are picking up some vibrations here.  

By Blogger Rick Ballard, at Mon Nov 05, 03:42:00 PM:

Fritz,

Comparing "individual" and "household" incomes creates a fruit salad - I'll stick with current census data as a source. $75K for a houshold puts it at the bottom of the 70th percentile - the 90th percentile isn't hit until about $135K.

"they could buy into any private insurance that they chose"

Pretty slippery - I'd say the proper locution would be "they must buy private insurance". So they can be part of the collective "we're all in this together" (whether we wish to be or not) that truly is Stalinist.

I mentioned the paucity of Miz Clinton's achievements in life to date - perhaps you have examples that might change my mind. What has she accomplished since birth that would lead one to presume that she is competent to manage a transition involving 16% of the GDP?

She's been a Senator for six years. What legislation has she drafted that one might examine in order to understand the depth of her ability as a lawmaker?  

By Blogger Fritz, at Mon Nov 05, 03:59:00 PM:

Rick: When we get down to it, your only real objection to HRC's plan is that it takes the choice to remain uninsured away from families who are well above average. I don't think this is a very strong objection, especially since it would be a *good idea* for families like this to buy insurance. But making people buy insurance is "Stalinist?" Get some perspective, man, because you are pretty deranged if you really think that.  

By Blogger Rick Ballard, at Mon Nov 05, 04:25:00 PM:

Fritz,

While it was Lenin who layed the ideological foundation regarding the necessity for the state to act for the "collective good" (much as Alinsky furnished the framework of social activism that was adopted wholesale by Miz Clinton), it was actually Stalin who oversaw the sometimes messy details involved in "helping" the kulaks and Ukrainians reach an understanding of the necessity to lay aside freedom of choice in order that a "good idea" might be imposed upon all. Stalinist is apropos.

Did you forget my questions concerning Miz Clinton's demonstrated abilities?  

By Blogger a psychiatrist who learned from veterans, at Mon Nov 05, 07:02:00 PM:

Then, in partial response to your first question, when considering the rate of innovation in the U. S. we have to recognize that we're overinvesting in healthcare here.

I don't know that really adresses the thrust of the argument which seems to be that the ability to derive a profit affects innovation. It seems an odd argument to say that the government is spending too much on healthcare; so it should buy more. Why not quit 'overinvesting' if indeed that is what is happening.  

By Anonymous Catron, at Tue Nov 06, 09:38:00 AM:

Klein misunderstands a lot of the Commonwealth Fund data to which he alludes. Much of it undermines the case for "universal" health care.

For example, their "free" health care notwithstanding, Australians and Canadians face significiant out-of-pocket health care expenses.

They also have just as much trouble as we do with medical errors and access to PCPs during non-traditional hours.

It goes without saying, of course, that wait times for non-emergency surgeries are much shorter for us than any of the countries surveyed (except for Germany).

So, if these countries are dealing with the same issues that we are (and underperforming in many areas) it suggests that "universal" health care is no panacea for our problems.  

By Blogger Christopher Bird, at Tue Nov 06, 01:27:00 PM:

LARRY:

I rarely hear stories of anybody going to any other country for help, excepting only the Laetrile clinics.

America, moreso than any other nation, is driving medical tourism right now, due mostly to Americans being unable to afford surgery costs in their homeland. (One hospital in Thailand gets 50,000 American patients per year.)

If you want to look at it from a "but America gives the very best healthcare" model, nobody disputes that a significant portion of the absolute best surgeons and doctors and such are American. But the procedure that saved Rudy Guiliani's life was invented in Denmark, and it's Canadians who are developing genetic therapy for Alzheimer's, and... the point is that advanced care happens everywhere. American medical schools do not have access to special textbooks that the rest of the world can't read, after all.

anonymous:

why do you see Canadians and British coming to the US for care that they cannot get or must wait months or years to receive instead of a flow going the other direction?

The short answer is that you don't, when you exclude Canadians living or working part-time in the United States (quite common - you get older and you have a comfortable lifestyle, so you live part of the year in Arizona or Florida or what have you - to say nothing of students studying abroad in the States, people here on business, et cetera) or those already here on vacation who need medical care.

When you actually tally those Canadians who enter the United States specifically for medical service, it turns out to be about the same small percentage as Americans traveling to Canada to receive care, and the Canada/America exchange figure is actually higher than other countries due to geographic proxmity.

Catron:

For example, their "free" health care notwithstanding, Australians and Canadians face significiant out-of-pocket health care expenses.

Primarily because we haven't nationalized dental and optical care. (I just laid out $1800 for oral surgery last month. That was fun.) Go figure - a non-nationalized portion of a universal healthcare system generates additional costs.

It goes without saying, of course, that wait times for non-emergency surgeries are much shorter for us than any of the countries surveyed (except for Germany).

Except that people who cannot afford or otherwise obtain non-emergency surgeries in the United States aren't counted, which is like treating their essentially infinite wait time as zero. You can see where this skews the figures significantly in favour of American wait times.  

By Blogger AST, at Tue Nov 06, 09:42:00 PM:

Those 50,000 surgeries in Thailand wouldn't be for sex change and other cosmetic surgery would they?

My own hunch is that HillaryCare would increase paperwork with little or no improvement in care provided. There is already such a layer of bureaucracy between caregivers and patients that one wonders how much we'd save if health care procedures weren't being muddled by insurance companies and the need for "defensive medicine" in which unnecessary tests are done in order to prepare for potential malpractice litigation.

It would be interesting to know how much $ is being siphoned out of the system into lawyers' pockets, which could be saved by a non-court, arbitration style board of review system empowered to award damages where they're legitimate with the entire award going to the patient, not being split 60-40 with attorneys.

My biggest irritations with our current health-care system have come from dealing with the clerical staffs, technicians and physicians' assistants who fail to pass on important information or explain why you're being scheduled for tests you haven't asked for. One sometimes feels, as a patient, that one is merely the sausage being run through the machine. I don't see that improving with more insurance or more government involvement.  

By Blogger Christopher Bird, at Wed Nov 07, 12:13:00 AM:

ast:

Those 50,000 surgeries in Thailand wouldn't be for sex change and other cosmetic surgery would they?

I'm sure there are possibly a few, but again, that's fifty thousand surgeries in one year in one hospital, not all of Thailand.

And Thailand isn't even the biggest medican tourism destination for Americans. That would be India, whose medical tourism industry dwarfs just about every other country's due to a surfeit of skilled doctors and low costs.

There is already such a layer of bureaucracy between caregivers and patients that one wonders how much we'd save if health care procedures weren't being muddled by insurance companies and the need for "defensive medicine" in which unnecessary tests are done in order to prepare for potential malpractice litigation.

The Congressional Budget Office did a study in 2004 (as this was an election issue at the time) about the potential for cost reductions from malpractice tort reform via less defensive medicine. Their conclusion was that savings would be "negligible to small."

t would be interesting to know how much $ is being siphoned out of the system into lawyers' pockets

According to the comprehensive malpractice study Health Affairs magazine published in 2005, it's about $6.5 billion dollars a year. Which sounds big, but it's slightly less then half of one percent of all health care costs in the United States.

People worrying about malpractice suits driving up the costs of healthcare are, plainly and simply, jumping at shadows.  

By Blogger Fritz, at Wed Nov 07, 10:21:00 AM:

AST: "My biggest irritations with our current health-care system have come from dealing with the clerical staffs, technicians and physicians' assistants who fail to pass on important information or explain why you're being scheduled for tests you haven't asked for."

How sad for you, really. My biggest irritation with our current health-care system is that it leaves millions of Americans uninsured, which means that they can't afford the care that they and their kids really need, which is something that HRC has a good plan to fix. But hey, you're anonymous here, so no need for a conservative to pay lip-service to all that "compassionate" nonsense, right?  

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