Why Aren't We Talking About The Cost of Care?

Yet another missive from the persistent Nancy Ann Min DeParle, Director of the White House Office of Health Reform:

Good afternoon,

Hi, Ms. DeParle. I was just spending the afternoon counting the number of millions of dollars in your back account that came from businesses in the health care industry - - the industry you are now seeking to reform. I got up to $5.8 million dollars and that's only in the last three years before you were appointed to the WHOHR. You must spend a lot of time thinking about that money - - it's so much I can hardly get my brain around it myself. But that's just me, because I've never seen a million dollars, not in all my years of working put together.

Anyway, you probably wanted to talk about reforming the health insurance industry. I think you might have made the least money from health insurers in those last three years before your appointment. Maybe that's why they're your current whipping boy. But who can say?

If you’re an American under the age of 65, there's roughly a 50/50 chance that you will find yourself without coverage at some point in the next decade.1

Simply put, losing insurance can happen to anyone.

Yes, and now that you mention it we have this thing called COBRA, which stands for the Consolidated Omnibus Budget Reconciliation Act, and which has been around for quite some time now. COBRA gives anyone who loses their group insurance the right to continue paying for it on their own at nearly the same rate for up to 18 months. Recent federal legislation extended that timeframe to 36 months. States also have laws (usually referred to as "mini-COBRA" laws) that provide similar extension rights and in some cases more lenient extension rights.

So is the issue here the *opportunity* to continue paying for insurance, or the *ability* to continue paying for insurance? Those are two very different things.

At yesterday's health reform event, President Obama told the story of Natoma, a self-employed woman in Ohio who found herself in the position of losing her health insurance after yet another rate hike from her insurance company:

OK. So you mean the *ability* to pay for insurance. So what we are really talking about here is the affordability of insurance premiums in general, not necessarily the loss of coverage due to a specific event.

"She realized that if she paid those health insurance premiums that had been jacked up by 40 percent … she couldn't make ends meet. So January was her last month of being insured.

Say now, the Obama plan would have relieved Natoma of the difficulty of her decision by making it for her: she would not have had the option of foregoing insurance because of the individual mandate. So, whether the reason was that she couldn't make ends meet, or that she just wanted to spend her money on something else, she would not have had the option either way.

You might respond by saying that your reform efforts will lower premiums. Every experience however is to the contrary.

And while I'm thinking about it, if Natoma really couldn't make ends meet, how come she didn't qualify for Medicaid? Details, details.

Like so many responsible Americans -- folks who work hard every day, who try to do the right thing -- she was forced to hang her fortunes on chance... And on Saturday, Natoma was diagnosed with leukemia…

Well of course she was, otherwise why would Obama be talking about her in a speech? But is Natoma's story everyone's story? Here's something from the source you cite on the uninsured: "45 percent of Americans in households making between $50,000 and $100,000 went without health insurance at some point between 1997 and 2006." (see page 2) Do you suppose those moderately well-off households were "forced to hang their fortunes on chance" or do you suppose that they just decided of their own free will to do so?

Should we have the freedom to make bad choices? Perhaps you don't think so, but I do.

Here's something else: "57 percent of Americans under 30 went without insurance between 1997 and 2006." (also on page 2) One might suppose that young and healthy individuals without a lot of disposable income might want to spend their money on other more important things, like repaying educational debt, or building up some good credit history, or maybe putting away early for retirement. Shouldn't they be able to? Your plan for an individual mandate would saddle youths just out of school with an expensive mandate to purchase a product that they will make very little use of. Not good news for young kids, considering that they will also have the highest Social Security Tax imposition ever to deal with, a national debt to be serviced that will amount to 90% of GDP, and a likely doubling of the state and federal outlays for Medicaid. Where exactly is all that money supposed to come from?

"Part of what makes this issue difficult is most of us do have health insurance, we still do.... But what we have to understand is that what's happened to Natoma, there but for the grace of God go any one of us."

Yep, Ms. DeParle, unfortunate things happen to people sometimes, and they don't always have millions in the bank like you to fall back on. Like the young kids that will be forced to buy health insurance when they don't need it and don't want it. That's a rather unfortunate thing, and they won't have yet made their millions.

For Natoma and the millions of other Americans forced to face the burden of medical bills they can't pay while at their most vulnerable -- the time is now for health insurance reform. Watch the video of Natoma's story and learn what more you can do to help spread the word about the need for reform.

Medical bills they can't pay? Now wait a minute, we started out talking about the affordability of *insurance,* and now you are talking about the affordability of health *services.* Those are two very different things, yes? It would be important for the Director of the White House Office of Health Reform to understand that.

Because, you know, if we are going to start talking about medical bills and the actual cost of health care services then we have to start a whole different conversation.

50/50 is the latest number in 'Health Reform by the Numbers,' our online campaign to raise awareness about why we just can't wait any longer for health insurance reform. Help spread the word by sharing this message with your family, friends and online networks.

Oh, dear, you're wrapping up already and we never got to talk about medical bills! Like, why can't we talk about the cost of chemotherapy drugs? You know, the kind poor Natoma will need for her cancer treatment? Maybe we can't talk about the cost of chemotherapy drugs for Natoma because of the $80 billion dollar sweetheart deal you cut with big pharma. From the LA Times:

Under the deal, the Pharmaceutical Research and Manufacturers of America, or PhRMA, agreed to provide $80 billion in cost savings over 10 years. It also promised to promote healthcare reform in a multimillion-dollar ad campaign. In return, the White House agreed to consider the $80 billion as a cap on PhRMA's costs in the overhaul legislation. In addition, the White House agreed not to require rebates on sales of commonly prescribed drugs to patients enrolled jointly in Medicaid and Medicare.

So, Ms. DeParle, your boss traded the support of the pharmaceutical industry in exchange for TAKING ANY DOWNWARD PRESSURE ON PRESCRIPTION DRUG COSTS OFF THE TABLE FOR THE NEXT TEN YEARS. This is how our elected leaders are dealing with the "biggest threat to our nation's balance sheet?"

Hey, um. The Kaiser Foundation had this to say about prescription drugs: "While prescriptions are a relatively small share of overall health spending (11%), they are a key driver of health spending trends, growing almost twice as fast all other health services in recent years."(1-1)

And when Barack Obama was running for President he said: "The 2003 Medicare Prescription Drug Improvement and Modernization Act bans the government from negotiating down the prices of prescription drugs, even though the Department of Veterans Affairs’ negotiation of prescription drug prices with drug companies has garnered significant savings for taxpayers. Barack Obama and Joe Biden will repeal the ban on direct negotiation with drug companies and use the resulting savings, which could be as high as $30 billion [a year], to further invest in improving health care coverage and quality."(2-2)

So is it clearer now why we're not talking about health care costs? Obama traded away $300 billion dollars worth of potential savings in health care costs in order to get pharma's support for his current health insurance reform effort. They're untouchable now. And they got it for a promise.

Let's get it done.

Yeah. I'm feeling pretty "did" these days. Can't wait for tomorrow . . .

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1 Department of the Treasury, The Risk of Losing Health Insurance Over a Decade
(1-1) Kaiser Family Foundation, Prescription Drugs
(2-2) BARACK OBAMA AND JOE BIDEN’S PLAN TO LOWER HEALTH CARE COSTS
AND ENSURE AFFORDABLE, ACCESSIBLE HEALTH COVERAGE FOR ALL

I Was Wrong And I Admit It

In an earlier post I said this about Obama's health care proposal:

Imagine a salesman that walked up to your house, looked at your missing front door, and said, "You know, if you bought some new windows you could really snug up this place." If you buy the Obama proposal you are paying for new windows while ignoring your missing front door.

Boy was I wrong about that. I had overlooked a then very-recent re-analysis of the President's 2011 budget proposal by the Congressional Budget Office. Kind of buried in there was the following line:

Under the President’s budget, debt held by the public would grow from $7.5 trillion (53 percent of GDP) at the end of 2009 to $20.3 trillion (90 percent of GDP) at the end of 2020. (emphasis mine)

And then this:

Mandatory outlays under the President’s proposals would be above CBO’s baseline projections by $1.9 trillion (or 8 percent) over the 2011–2020 period, about one-third of which would stem from net additional spending related to proposed changes to the health insurance system and health care programs. (emphasis mine again)

So I take back may analogy; it was a poor one. I should have said this:

Imagine a salesman that walked up to your house that had just been hit by a tornado, looked at your missing front doorgiant scrap heap, and said, "You know, if you bought some new windows you could really snug up this place." If you buy the Obama proposal you are paying for new windows while ignoring your missing front doorthe fact that the rest of your house is completely fucking wrecked.

In 2020 my oldest child will be 22, and on the verge of entering the job market for the first time. I'd like someone to explain to him the rationale for increasing the debt load that is ALREADY expected to be crushing by the time he is of working age. I'd like someone to explain why the President is focusing on health care instead of righting our economy and getting our national balance sheet back where it belongs. I'd like someone to explain to him why the biggest threat to our nation's balance sheet - - THE COST OF HEALTH CARE - - goes completely unaddressed in his reform proposal. I'd like someone to explain to this sweet boy, who goes to bed dreaming about hockey and video games, who loves the New York Yankees, who wants to manage a professional sports team one day, why our so-called representatives are lining up to pass a bill in service of a slogan championed by a vulgar stand-up comic: "Let's get it done." He deserves more than that.

This is serving in-flight meals on a plane that has no hope of a safe landing.

Enjoy the peanuts.

It's Not Even Health Insurance Anymore, It's Social Insurance

Ms. DeParle's Wednesday e-mail arrived with this subject line: "8".

The first thing I thought was, "Eight more years! Eight more years!" And in fact it turned out to be more cheerleading from the White House Office of Health Reform.

Good afternoon,

8 -- that's the number of people every minute who are denied coverage, charged a higher rate or otherwise discriminated against because of a pre-existing condition.1

If there's a pre-existing condition, then it's not "insurance coverage" anymore, it's just "cost-sharing."

Black's Law Dictionary defines insurance as "[a] contract whereby one undertakes to indemnify another against loss, damage, or liability arising from an unknown or contingent event and is applicable only to some contingency or act to occur in the future."(1-1)

The key here is that the event against which the insured is protected is an unknown event. That's the fundamental nature of insurance.

When you build a house in a flood zone, for example, you pay much more for insurance because there is a higher probability your home will be damaged. Same for coastal properties that experience hurricanes, and for properties built on a fault that are more likely to experience earthquakes. If the event is more likely than not to occur, it's unlikely you can buy insurance for it.

In a not very dissimliar way, traditional health insurance provided coverage for unanticipated events - - hospitalization, surgeries, medical expenses related to an accident or illness.

Pre-existing condition clauses protect against a concept known as "adverse selection." An example of adverse selection might be an uninsured female who becomes pregnant and then purchases insurance to avoid the high cost of perinatal medical services. Or an uninsured male diagnosed with cancer who then purchases insurance to avoid the high cost of treatment. Both cases violate the fundamental principle of "insurance" because they involve liabilities that are certain to occur and that are known to one of the parties prior to the transaction.

The Obama administration excoriates pre-existing condition clauses as an evil device used by the health insurance industry to "discriminate" against the sick because they believe, fundamentally, that all health care costs incurred by anyone at anytime should be shared.

I turn again to Black's Law Dictionary: "Social insurance: A comprehensive welfare plan established by law, generally compulsory in nature, and based on a program which spreads the cost of benefits among the entire population rather than on individual recipients."

Such a plan has to be compulsory in nature because of adverse selection. After all, if you could buy insurance (therefore obligating yourself to pay premiums) at any time, why would you ever buy it unless you actually needed it? But if only sick people buy coverage, the costs are borne by a smaller population, and therefore premiums go up. Which in turn lowers people's propensity to buy insurance unless they really need it. This spiraling effect can only be met by an individual mandate, and that is why the President's plan includes one.

8 is also the number of lobbyists hired by special interests to influence health reform for every member of Congress in 2009.2

This is a curious statement. It seems to imply that the "special interests" opposed to health reform are swarming the Capitol to put the skids on the current effort. In a way, then, voting "For" health care reform would strike a blow to special-interest politics and send a message of some sort somewhere. But would it?

Take a look at the actual source document DeParle uses for this statement. It shows a total of 4,525 lobbyists for all of 2009. By far the biggest chunk (16%) is in the category of "Trade, Advocacy and Professional Organizations" - - 745 in total. Then comes "Hospitals" with 207 (5%), then "Misc" with 166, and in fourth place "Insurance" with 105 (2%).

Drill down on the "Trade/Advocacy" category and the picture gets clearer. Here's a sample listing: "60 Plus Association," "AARP," "Academy of Managed Care Pharmacy," "AdvaMed," "Alliance for Care at the End of Life," "Alliance for Children and Families," "Alliance for Home Health Quality and Innovation," "Alliance for Quality Nursing Home Care," "Alliance for Retired Americans."

So let's see what these lobbyists were up to:

"They cut it. They chopped it. They reconstructed it," Julian Zelizer, a Princeton University professor of public affairs, said about health reform lobbying. "They didn’t bury it. I don’t think they wanted to." The lack of serious cost controls in House and Senate bills are a direct result of health industry lobbying efforts, Zelizer said. The American Hospital Association, for example, supports expanding coverage to the House bill’s level of 96 percent of legal residents, but it lobbied against expanding Medicaid eligibility to levels prescribed in the House bill, which would hinder hospital profits. It is also lobbying to revise or delay Medicare payment cuts and patient readmission penalties.

Something bears repeating - - Obama's own words here: "By a wide margin, the biggest threat to our nation's balance sheet is the skyrocketing cost of health care."

So the administration's crowning achievement would be to ram through a bill crafted by special interest influence that pretends to be health insurance reform but which is really simply a broadened mandate for socializing health care costs and does nothing to address the biggest threat to our nation's balance sheet. Please, where do I sign?

The facts speak for themselves -- the status quo isn't working, and special interests are doing everything in their power to maintain that status quo.

Yes, and the health care provider special interests appear to have won. Why's that?

Well, here's a number we haven't discussed yet: 5.8

As in, $5.8 million dollars. That's what Nancy Ann Min DeParle was paid by major medical companies in the three years prior to her appointment as Director of the WHOHR.(2-2)

$5.8 million dollars.

Being denied coverage because of a pre-existing condition is something we all know is wrong. And for those 8 people every minute who can't find health coverage or face discrimination because of a pre-existing condition, reform can't wait.

We don't all know it's wrong. We don't all agree with a social insurance mandate. And no one who raked in $5.8 million from specific interests in the health care industry should be overseeing reform efforts, period. THAT is wrong.

Statistics like these help put the past year's debate over health insurance reform into perspective, demonstrating how broken our health insurance system has become.

They certainly do put the debate in perspective. There's one person that doesn't yet seem to have been represented: the health care consumer. Everyone wants to tell the consumer what is best for them. Instead of making room for innovations that will benefit consumers, the Obama administration would decide what's best and shove it down everyone's throat. This is what consumers are tired of. They are tired of being told what doctors to go to; they are tired of being told what services to get, what not to get; they are tired of being told how much to pay; they are tired of complicated systems that allow one special interest or another to juice their position based on some complex rules that only a few people can figure out. They are tired of government officials that pretend to represent our interests but who are really just puppets for this interest or that.

If spending millions shmoozing politicians didn't work, do you think they'd be doing it? That's the saddest point implicit in DeParle's letter.

So in fact, voting "For" health reform will send a message, and the message is that our representatives can be bought, that American ideals like individualism and personal responsibility are "evil," and that special interests really DO run the government.

Sorry, I vote NO. That's not the kind of reform I want. That's not the kind of reform Americans deserve. But it's the kind of reform we will get if we don't wake up soon.

Each day this week, we'll promote a key number on WhiteHouse.gov and social networks like Facebook and Twitter to raise awareness about why the time is now for health insurance reform.

You can help spread the word about the need for health insurance reform by forwarding this email to your family, friends and online networks.

And you can help spread the word about the misplaced reliance of the Obama administration on more government intervention to prop up an archaic health care reimbursement system - - a move that will break America's back and bank - - by sharing this response will your family, friends, and online networks. Click the envelope at the bottom of this entry to generate an e-mail message.

Let's get it done.

They should change this to: "Let's get *something* - - - ANYTHING - - done."




(1) HealthReform.gov, Coverage Denied: How the Current Health Insurance System Leaves Millions Behind
(1-1) Black's Law Dictionary, 6th Ed.
(2) The Center for Public Integrity, Lobbyists Swarm Capitol To Influence Health Reform
(2-2) Health firms paid Nancy-Ann DeParle $5.8 million

More Dreck From WHOHR

I received some more dreck from the Director of the The White House Office of Health Reform Nancy Ann DeParle today, and it's worth another sendup so here goes:

Good afternoon,

Welcome back, Ms. DeParle. I hope you brought something better than cheap slogans this time.

$1,115 -- that's the average monthly premium for employer-sponsored family coverage in 2009. Annually, that amounts to $13,375, or roughly the yearly income of someone working a minimum wage job.(1)

Numbers! Oh, goody. Now there's something. Let me see if I've got some numbers here I can throw back at you . . .

OK here's one: $3,260.74 Guess what that is? It's the average monthly premium for a state-mandated family health insurance policy issued in Albany County, New York.(1-1) Did you notice that it's about three times the national average? I wonder why that is? Well for one, this is a "guaranteed issue" policy - - that means the insurers who offer it can't "ration care based on who's sick and who's healthy" (which are the words you used describe the process of medical underwriting in the letter you sent me last week) - - just like the kind of policy your health insurance reform aims to achieve.

And something else - - this policy's "guaranteed renewable," which means that the insurer can't cancel the policy if the individual turns out to be a 'bad risk'. You're aiming for that, too. We've had these kinds of policies available in New York for the better part of 15 years. And there are lots of mandated benefits loaded in to the policy. And so it costs three times what an average person pays in other parts of the world.

So take a good look at that number ($3,260.74) because it's a number in your future: guaranteed issue and guaranteed renewability are both on your agenda, and they push up premiums for everyone who buys the policy. Are you going to mention that later on, or . . . ?

Oh I should mention that that number I gave you is the low figure, for an "HMO" option that requires use of a limited network of providers. If you want freedom to see providers outside of the network you can get that too, but your premium goes up to an average of $3,989.45 a month. Do you know what kind of car you could drive for 4 Gs a month Ms. DeParle? Yes, I bet you do.

It gets worse: a recent survey found that if we do nothing, over the next ten years, out-of-pocket expenses for Americans with health insurance could increase 35 percent in every state in the country.(2)

Geez, 35% is a big number and for the moment I'm going to take it at face value - - let's see what I've got to come back with . . .

Got it: 4% That's the average annual inflation rate for medical care (not insurance) over the previous ten years, according to January 2010 Bureau of Labor Statistics data.(2-2) If you don't believe me check my footnote.

Now what's 4% x 10 years . . . let's leave off the "fuzzy math" of compounding and just say 40%, shall we? It works out better for you anyway.

So if we do nothing, the cost of medical care paid out-of-pocket is going to keep on going up at the same speed it's been going up for the last ten years. Shocking!

But tell me, since your reform plan deals with health *insurance* reform, not health *care* reform, how exactly is it going to be any different if reform passes?

Before you answer that, let's actually take a look at your source. Page 8 points out that a 35% increase in out-of-pocket costs is actually a WORST CASE SCENARIO. You're not scare-mongering, are you Ms. DeParle?

Let's dig a little deeper. Page 8 also says this: "Individual and family spending on out-of-pocket premiums and medical care increases by the largest percentage in Nevada and Arizona, driven by population growth. It increases by the least in the District of Columbia due to its projected population decline." Does the President's health reform plan intend to bend the out-of-pocket cost curve by prohibiting population growth in Nevada and Arizona? That would be a very interesting kind of reform indeed.

Page 8 also says: "The next smallest increase in individual and family spending is in Massachusetts - - in this case because many who lose private coverage obtain public coverage, and because the baseline level of individual spending is relatively high, given their high private coverage rates under state health insurance reform." So what that means is that in states that have already enacted health reform the cost of doing nothing is . . . not so bad as it might be otherwise.

And page 9 of your source says this: "We recognize that health reform will be costly. If enacted, government expenditures will increase by more than shown here [in this report] because of increases in Medicaid enrollment and subsidies to low-income people."

So I'll translate yet again: if health reform is enacted, in is anticipated that more people will lose their private coverage, and end up in public plans.

And now since you used a worst-case scenario from this report, I'll borrow a worst-case scenario from it as well. It's on page 8 also: "In the worst case, all states would see their Medicaid/CHIP costs rise by more than 75% from 2009 to 2019. Half the states would face cost increases of more than 100 percent."

These are your source's words, Ms. DeParle, not mine: if health reform is enacted, government expenditures will increase by more than 75% over the next ten years, and in half the states will more than double.

Here's the last number I'll throw at you before we get back to your letter: $44,339,402,218. Forty-four billion dollars that New York spent on Medicaid in state fiscal year 2007. What will that number look like in 2019? At least $77 billion, possible more than $88 billion. And surely you know New York is having a difficult time writing checks these days, even without the additional burden of reform. Did you also know states are trying to *cut* Medicaid expenses, not increase them? If you think I'm fooling, you can read about it here.

In an effort to put the past year's debate over health insurance reform into perspective, we're launching "Health Reform by the Numbers," an online campaign using key figures, like $1,115, to raise awareness about why we can't wait any longer for reform. We'll be sending out a new number every day.

I hope you include some of my numbers too. But I'm pretty sure you won't. While we're paused, let's talk about another number. You suggest that a 35% increase in out-of-pocket expenses is intolerable. Two researchers from the Heritage Foundation recently pointed out that "when Medicare was created in 1965, patients paid 52 percent of health-care expenditures out of pocket, on average. This fell to only 15 percent by 2005."(3-3) Not coincidentally, as out-of-pocket shares fell, medical inflation increased. Because the third-party payor/fee-for-service structure inherently supports wild price increases on the supplier side. So would it be so bad if the out-of-pocket prtion of expenses were to increase? Maybe not so bad as you want to paint it.

$1,115 is more money than what many Americans pay for rent or mortgage.

Yes, just think how unreachable $3,260 must feel! Almost makes me want to move out of New York! (More on that later.)

But there's more to the problem than just numbers.

I should say so. You haven't even begun to touch on the ideological shortcomings of your reform proposal.

Take Leslie Banks, an American mom with a daughter in college. In January of this year, she received a notice from her health insurance provider that her plan was being dropped. To keep the same benefits, the premiums for her and her daughter would more than double. Leslie was told by the insurance company that there was nothing she could do -- it was an across-the-board premium hike. If she paid the same monthly premium amount as before, the deductible would increase from $500 to $5,000, and she and her daughter would no longer have preventive care or prescription coverage.

Good on you. Now let's take a look at Jeff Romoff, CEO of the University of Pittsburgh Medical center. In 2007, Mr. Romoff made $3.95 million dollars, a 20% increase over the previous year. Executives at the Cleveland Clinic and Chicago's Northwestern Memorial Hospital made even more - - $7.5 million and $16.4 million, respectively. These figures are based on an IRS report which found that "the average CEO received $490,000 in total compensation in 2006, and that top executives at 20 of the larger hospitals in the IRS survey received an average of $1.4 million." (4-4) How come Obama isn't railing against greedy hospital executives? Doesn't anyone think that paying a hospital executive $16.4 million dollars in one year is "obscene"?

Incidentally, I don't. I think Mr. Romoff is entitled to every penny the University of Pittsburgh's governance body approves for his salary. If they are foolish enough to do it, it's on their shoulders. I include it here to illustrate the silliness of trotting out an anecdote in support of an argument. Let's just call health reform "Leslie's Law," shall we? I mean, who can argue against something so benign as "Leslie's Law"?

It's important to raise awareness about numbers like $1,115 and stories like Leslie’s because skyrocketing health care costs impact all of us. So take a moment to forward this email to your family, friends and online networks.

I also feel it's important to raise awareness but unlike you I don't think that doubling Medicaid budgets and forcing people into public plans is the proper solution to the problem. The health care crisis will continue so long as third-party-payors continue using a fee-for-service reimbursement model to pay for health care. You can spread out costs by forcing more people to buy insurance, you can chip a half percent or so the premium costs by beating up on "greedy health insurer CEOs," but the bottom line is that care costs more. If care costs go unaddressed, it won't matter how much you spread out the pain of paying: it will be too painful. Yet you don't say so in your pitch for reform. Just who the hell do you think you're fooling?

With all of us working together, we'll send the message loud and clear -- the time is now for health insurance reform. It's time we made our health care system work for American families and small businesses, not just insurance companies.

You just had to sneak that line about insurance companies in there, didn't you? So much for showing up without slogans.

By the by, when the pain of paying for other people's medical expenses gets too much, people who can afford to do so leave.

Let's get it done.

Didn't Larry the Cable Guy say that once?

I'm really looking forward to tomorrow's number. What could it be?


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(1) Kaiser Family Foundation, Employer Health Benefits 2009 Annual Survey.
(1-1) http://www.ins.state.ny.us/hmorates/pdf/Albany.pdf
(2) Bowen Garrett, John Holahan, Lan Doan, and Irene Headen for the Robert Wood Johnson Foundation and Urban Institute, The Cost of Failure to Enact Health Reform: Implications for States
(2-2) Bureau of Labor Statistics
(3-3) Bending the cost curve in the wrong direction, Salt Lake Tribune, March 5, 2010
(4-4) Hospital CEO Pay Comes Under Scrutiny, published at bnet.com., March 5, 2009

What About Health Care Costs?

If someone magically came up with a way to run a health insurance company for free (no employee costs, no building rent, no supplies, no software licensing fees) everyone with health insurance under that company would see something like a 15% discount (13% if you believe health insurers' numbers, 25% if you believe the U.S. Senate Commerce Committee numbers) for the first year. That would be the extent of the reduction.

Health care costs, on the other hand, rise 4% each year. So somewhere between three and six years, whatever gains had been got by running the health plan for free would be eliminated. And yet the medical inflation trend would continue unabated. Health care consumers would be right back to unsustainable costs, with no help in sight and another 4% price hike on the horizon each successive year.

That is why Obama called health care costs the biggest threat to our nation's balance sheet. Eliminating health insurers entirely makes for nice theatrics but in reality accomplishes little to benefit health care consumers.

In an article in the Salt Lake Tribune, two researchers from the Heritage Foundation point out that:

Today's health-care system is fraught with perverse incentives that generate artificially increased spending. But nothing in the House- and Senate-passed health bills, or in the president's plan, would reduce these incentives. And some provisions would make them worse.

In most fields, such as computers and cell phones, new technology usually increases quality and reduces prices. Health care prices, though, often go the opposite way. Not always; drug prices drop when generics replace brand-name drugs, and expensive drugs sometimes replace even-more-expensive surgical interventions. But often, new health technologies increase prices. Why? Health-care prices are determined by a bureaucratic process that prevents competition from driving prices down.

They conclude that the current proposals would bend the health care cost curve, but in the wrong direction.

Advocates of the current reform proposals say that free markets are what got us into the current health care crisis. I say phooey. Our current state is nothing of a free market.

A successful "up" vote on health reform would be a pyhrric victory for Americans who actually work and pay for their health care. They will feel momentarily better for having struck a blow against "evil" health insurers. They will soon find the gains erased and subsumed in the inexorable rise of health care costs. More importantly, lawmakers will have squandered the opportunity to address health reform in a meaningful way while the attention and will to do so were in place.

Macy Foundation Recommendations on Primary Care Reform

Recently the Macy Foundation held a conference on issues concerning the delivery and payment of primary care services. The conference was co-chaired by two professors at Duke University and included 49 participants representing a broad range of views on primary care.

The conference report makes some astute observations, including the following:

We are facing an economic situation in which the current rate of rise of medical cost is unsustainable, and this situation is exacerbated by an aging population with higher care needs and expectations. These events have created a climate in which it is necessary and appropriate to question the models of care and health professions education on which we have relied.

I agree with this wholeheartedly. Among other recommendations submitted by the panel, this one makes the most sense:

. . . state and national legal, regulatory, and reimbursement policies should be changed to remove barriers that make it difficult for nurse practitioners and physician assistants to serve as primary care providers and leaders of patient-centered medical homes or other models of primary care delivery.

This is a simple and straightforward example of how mundane - - some might say pedestrian even - - changes in existing laws could support profound changes in health delivery and reimbursement. Sure, changing licensing laws is not as flashy as a hatching a "national plan." But in effect, rolling back laws instead of creating new ones would provide room for primary care providers to come up with different delivery models to meet patient needs without sacrificing quality. I don't know exactly what that model would look like, and neither does anyone in Congress. Which is why the model itself should not be legislated, but need only be given space to grow.

The health care market is suggesting that there are better and cheaper ways to delivery primary care. Laws and regulations stand in the way. Those laws should be changed.

THAT is health *care* reform. THAT is what will provide downward pressure on health *care* costs. THAT is what will actually address the "biggest threat to our nation's balance sheet." THAT is something that should get done.

I'm Not the Only One That Thinks The President's Bill Won't Cut Health Care Costs

People far smarter than I am don't think so either:

CBO expects the cost of the new entitlement spending aimed at coverage expansion in the Senate bill – the premium subsidies in the exchanges and the expansion of Medicaid -- to reach about $200 billion by 2019 and then grow at a rate of 8 percent every year thereafter. In other words, this new health entitlement spending is expected to escalate just as rapidly as Medicare and Medicaid have in the past. CBO does not expect the “delivery system reforms” in the Senate bill, which are mainly small initiatives and pilot programs, to amount to much of anything in terms of cost control.

Read the rest of the bad news at KaiserHealthNews.

And if I didn't say it enough yesterday, I'll say it again: President Obama thinks health care costs are the single greatest threat to our nation's balance sheet.

But nevermind that. Now the mantra is: "let's get it done."

Dissecting DeParle's Propaganda Letter on Health Reform

A letter from Nancy-Ann DeParle, Director of the White House Office of Health Reform, arrived in my in-box today. I've watched the health care reform debate (so called, even though the debate has had next to nothing to do with health "care" and everything to do with health "coverage") go on for the better part of a year and have largely kept my thoughts to myself. But as my childhood hero Popeye liked to say, "I've had all I can stands, and I can't stands no more!" Or to rephrase: "I'm mad as hell, and I'm not going to take this anymore."

So here is a reprint of Ms. DeParle's letter, interlineated with my responses.

Good morning,

It was, until now.

Democrats and Republicans agree -- the health care status quo isn't working for the American people.

Some would argue that Democrats and Republicans are not working for the American people either. But we're off on a tangent already, aren't we?

Health insurance is growing more and more expensive by the day. Too many of us can't afford it -- not middle class families, not businesses, not the Federal Government.

Well, let's slow down a minute there. Health insurance premiums are typically adjusted annually, so to say they're growing more expensive "by the day" is kind of a misstatement. I'll give you some leeway here to speak figuratively for the purpose of lending a sense of urgency to your message. But I'll have to think about whether that sense of urgency is justified, or whether it's intended to create a false sense or emergency so that people will be more comfortable with acting unwisely. After all, who is more vilified in pop movies: the person who makes a bad decision during an emergency or the person who can't make any decision at all?

Onward then: "Too many of us can't afford health insurance," you say. And my question in response is, who says how much is "too many?" Figures issued recently by the United Hospital Fund suggest that 41% of New York's uninsured are actually eligible for public coverage, but aren't enrolled. So it's not that they can't get health insurance, it's that they don't get health insurance. Perhaps they want other things instead. Are American citizens not permitted to forego health insurance? I venture to say here that you firmly believe no person who could get health insurance would forego it. And I say you are arrogantly supplanting your value system on someone else who may or may not hold to your point of view.

Also, I see here another propaganda technique you've deployed: "too many of *us*," you say. Really, you --- the Director of the White House Office of Health Reform --- can't afford health insurance? Please. I suppose you need more leeway to write figuratively here again. You don't really mean "us" because you yourself are not included in the group, so you must mean "you" or "them" but you write "us" to create a false sense of similarity. As if you were in "our" group. As if you were "just like us." I say go to hell.

And another thing, didn't this debate start out as health *care* reform? Your boss, the President, once said "By a wide margin, the biggest threat to our nation's balance sheet is the skyrocketing cost of health CARE." Now, reasonable minds might disagree with that statement, but it's what he said so I'll take it as a given that he actually believes it. So, Ms. Director of Health Reform, when are we going to start talking about the skyrocketing *costs* of health care? You know, how much it costs to go to the doctor, or have your tonsils out, or get an MRI? After all, I'm pretty sure the costs of health care are, in fact, "growing more and more expensive by the day."

Insurance companies have too much control over health care decisions that should be left between a patient and their doctor.

Still on insurance, eh? So the strategy has become to pick the least sympathetic character in the health reform arena and pick on them? It would appear that way.

Out of curiousity, I have to ask - - when Medicare Advantage managed care plans conduct utilization review on behalf of the U.S. government are they exercising too much control over health care decisions that should be left betwen a patient and their doctor? When Medicaid managed care plans conduct utilization review on behalf of state governments are they exercising too much control over health care decisions that should be left between a patient and their doctor? Where is the federal plan to disengage from managed care, thereby restoring health care decisions to their "proper" place - - between the patient and the doctor? There aren't any? Well it *used to* be that way - - it was called Medicare fee-for-service and in the private sector was called a traditional "indemnity plan" and those models broke the banks of the government and employers, respectively, who paid for them and now both models are both virtually nonexistent. Is that what we're going back to?

They [health insurers] freely ration care based on who's sick and who's healthy; who can pay and who can't.

Oh, the dreaded "R" word - - rationing. Nice turnabout here, using the word that Republicans first threw at the Democrat's plan. I actually spent a long time trying to figure out what you are trying to get at in that sentence and I can't even venture a guess. Health insurers collect dollars ("premium") and then pay out expenses ("loss"); since the number of premium dollars is finite (i.e. limited) then in a way health insurers do "ration" payment. And I suppose that have to ration it based on who's sick and who's healthy, after all you want sick people to be able to get care and should worry less about health people. And I suppose they ration based on who can and who can't pay the premium; you can't pay out in loss dollars that you never received in premium. But maybe I'm misunderstanding your point, which really was just to throw out the word "ration" in the same sentence as "health insurers" and hope it sticks.

By the way, when do we start talking about what your boss called "the biggest threat to our nation's balance sheet - - skyrocketing costs of health care?" Not yet, it would seem.

On both sides of the aisle, we all agree that if we do nothing, the problem will just get worse. Now, after a long and wrenching debate, it's time to make a decision. Yesterday, President Obama called on the United States Congress to cast a final up or down vote on health insurance reform in the coming weeks and pledged to fight for it every day until that happens.

Well damn, let's boil some water so we can get on with delivering this baby, shall we? Let's not stop to ask - - *why* will the problem get worse if we do nothing? The White House message is the classic message of those who use their position for the purpose of abuse: YOU ARE IN TROUBLE AND YOU ARE POWERLESS, AND I'M THE ONLY ONE WHO CAN HELP YOU. Really, Ms. DeParle, do you think I haven't read "The Gingerbread Man"? But now the urgency begins to make more sense, doesn't it? Yes or no! Now! It's urgent! Decide! Don't think, ACT!

No, thanks. Health care transactions are 16% of all economic activity that occurs in our country, and is projected only to grow and grow. When you open the want ads, the first three pages are health care positions, and then there's half a page of tech jobs, and then a few service jobs. (I'm sure Ms. DeParle doesn't open the want ads, though, even though she's one of "us".) I don't want to monkey with that much of our economy in one chunk unless I'm certain that I've got the right answer. Are you certain, Ms. DeParle, that the President's proposal is the correct course? If so, you must be the smartest person in the universe.

To believe that there is a sense of urgency about health insurance reform (let's just call it that from now on, since it's clear we're not going to talk about costs) when so much is at stake is to buy into the Democrat theory that something - - anything - - is better than nothing. Yes, the current health model is a disaster in progress, but it's a long slow trainwreck of a disaster. There is time to make the correct decisions, be assured.

The President's final plan for health insurance reform puts control of health care where it belongs -- in the hands of American families and small businesses, not health insurance companies or government.

My goodness, but this line almost made me fall out of my chair. How on Earth does the current proposal even begin to accomplish this? What exactly is "control of health care" anyway? Are we not going to have health plans anymore to tell us what's covered and what's not? Actually, we'll have MORE people enrolled in such models.

This is a propaganda technique borrowed straight from George Orwell: call it whatever it's not. Make the censorship bureau a "Ministry of Truth." Hitler put "Work Makes One Free" over the gates to his concentration camps. This line about "putting control in the hands of American families" is the line that got me. It is the line that tells me the President is selling the American people a crock of shit, with a label on it that says "Honey." The current reform proposals will concentrate power in the federal government, will undermine the autonomy of the states, and will restrict the liberty of the citizens that make up the "American families" referenced here. And not just for today, but for generations at least. Honey indeed. How sweet.

So let's turn back for a second to my earlier question - - why should we believe that we are powerless to solve the problem on our own? Why hasn't the market solved the current crisis?

I venture an answer here: it can't. And it can't because the third party payor system has essentially been cemented into place by a complex series of laws and regulations, coupled with intertia and a generous dollop of fear. You can only escape it by not buying insurance at all, and the Democrats would even take that option away.

It's somewhere between difficult and impossible for payors to develop new reimbursement models that would damp off the incredible upward price pressure that a third party payor fee-for-service system creates. The fundamental mechanics of human decision-making make it easier to spend other people's money; this isn't just a mental state, it's the result of the physiological process of making a decision. A third party payor model *inherently* encourages overutilization by patients and overtreatment by providers. It inherently sets up the patient to be disastisfied with the level of coverage and inherently sets up providers to be disatisfied with the level of reimbursement. In both cases, it's always other people's money so it's too easy to want more.

The current proposals do nothing to return health care transactions to the two people who are actually involved in the transaction: the patient and the provider. In fact, the current proposals merely expand the current model and make it far less likely that we will ever get to the point where patients and providers alone truly make health care decisions together.

Remember - - and these aren't my words - - the biggest threat to our nation's balance sheet is the skyrocketing cost of health care. The current proposals do nothing to reduce health care costs. As soon as the Obama administration perceived that health plans could become the scapegoat of all that's wrong in the current health care crisis, "health care costs" fell right out of the dialog. Instead, it became all about "coverage."

"Greedy insurance executives" and "excessive insurer profits" at their worst take up a few pennies out of the health insurance dollar. "Health care costs," in contrast, are 75%-80% and as high as 90% of the health insurance dollar. Which might be more effective to focus on in making some meaningful progress in health reform? Imagine a salesman that walked up to your house, looked at your missing front door, and said, "You know, if you bought some new windows you could really snug up this place." If you buy the Obama proposal you are paying for new windows while ignoring your missing front door.

His proposal takes the best Republican and Democratic ideas and changes three main things about the current health care system:

• It ends the worst insurance company practices and outlaws discrimination against Americans with pre-existing conditions.


• It reduces costs for people with insurance and makes coverage more affordable for people without it today.


• It sets up a new competitive insurance marketplace where small business owners and families can shop for the insurance plan that works best for them, giving them the same buying power and insurance choices as all members of Congress.

Ms. DeParle: did you notice that New York required guaranteed issue, guaranteed renewable policies fifteen years ago? Did you further notice that government plans are available for families making multiples of the federal poverty limit? And did you further notice that New York's uninsured problem, while slightly less than the national average, persists?

Or perhaps you regard the problems you intend to address with your reforms as having been solved in New York, in which case, where is New York's exemption from the price tag for this so-called "reform"?

Health insurance exchanges, your third bullet point, could be neat. But having a fancy mart in which to look at policies you can't afford anyway isn't altogether helpful. At least not in my book.

I skipped over your second bullet point which is just flat out not true. Not even the budget director that your boss appointed thinks so.

The single greatest weapon that could be deployed against skyrocketing health care costs (in Obama's words, the "biggest threat to our nation's balance sheet") is the measured consideration of the American health care patient. But that's exactly who is carved out of all of the decisions under the present system. And that's exactly who is carved out of the more burdensome variation of the present system that Mr. Obama proposes.

What kinds of policies are actually available in the marketplace? State regulators will tell you. How much will they cost? State regulators will tell you, and if not them then federal regulators. Which policies will be offered to you? Your employer will tell you. Which doctor can you go to? The health plan will tell you. What services can you get? The health plan will tell you. How much does it cost? The health plan and your physician decide, and then keep the price secret from you. Can you opt out of this morass and just pay for the care you want? No, sir, no. That freedom is not yours.

Imagine a going to a place where you can review available options, weigh prices, ask questions, and decide not to buy if it's not what you need. You can do that if you want to buy a big-screen TV, but not if you want to make very important life-impacting decisions about your health care. I can find out more information about the service quality provided by a person selling antiques on eBay than I can about my family physician, or the surgeon that wants to cut open my back. I can see how many transactions that antique-seller has completed, his or her satisfaction rating, average time to ship, and I know what the price is going to be ahead of time. Not so in health care. In some cases no one knows these things; in other cases the numbers are known but they are confidential. But go ahead, ask that surgeon how many cases he's done and what his error rate is and how many complaints he's had, and see what kind of frosty response you get. Are antiques really more important than back surgeries?

The free market brought us eBay user ratings, Amazon book reviews, and built-to-order computers by Dell. In New York, you can't buy the coverage you want, you can only buy the coverage the State Insurance Department wants to allow payors to sell you, and the State Legislature has mandated that all policies must cover things like prostate cancer screening even if you are female and Pap smears even if you are male. By the way, the American Cancer Society just released a policy urging doctors to stop performing digital rectal exams as a cancer screening tool because they don't work. Think those New York docs are going to stop doing them? Nope, because when they do them they get paid - - the policy has to cover it. And because it's a law, insurers can't take it out of the policy even when the procedure has been discredited. That's what laws do - - they cement things in place.

And so in my libertarian mind I believe that laws should be reserved for areas that one does not perceive as having to change in any forseeable future.

Our health care delivery system? You bet I want it to change. I want it to change faster than any Congress can pass laws. I want my family physician to retool his practice so that it pays attention to me, not my insurer. I want going to the medical doctor to be more like going to my dentist, who relies primarily on direct payments, whose waiting room is empty, who uses hi-tech radiological images so I don't have to wait for x-rays, whose staff is friendly. Or like the plastic surgeon I went to once for a scar excision, whose website told me everything I need to know in advance, who saw me on time, who spent an unrushed half hour with me, who gave me free coffee for the 12 minutes I sat in the waiting room watching HD TV, and who quoted me a price on the first visit. All because they know that they need to deliver service that justifies the price they are asking me to pay. My family physician? Not so much - - I have no idea what it costs to visit him. In his mind and in my mind it's "free" (and no degree of Democratic propaganda can change that physiological truth) and so if the service is poor there's not much to complain about.

Incidentally, the price for the surgery dropped my jaw, in a favorable way. Does that ever happen when you are on the "medical" side?

We've debated the issue of health insurance reform thoroughly, not just over the past year, but over decades.

And so the "urgency" of health reform is here proved to be utterly manufactured. To paraphrase: "the debate . . . which has gone on for decades . . . MUST END RIGHT NOW!!" Must it really? Kathleen Sebelius' digging in to health insurer rate increases in a state in which she has no jurisdiction and can literally do nothing about it amounts to a desperate grab for traction in an otherwise untractionable position. It is intended merely to provide a backdrop for Ms. DeParle's dramatic intonation that "health insurance costs are going up every day."

It's time to make a decision about how to finally reform health care so that it works for America's families and businesses -- not just for insurance companies.

Whip away, Ms. DeParle, whip away. I have to look askance at anyone that believes there is a moral highground in the health reform debate or that - - conversely - - points to any one party as The Problem.

Let's get it done.

Let's get it done indeed.

In the current health care market, Medicare is about a third of spending and the remainder of the market tracks Medicare. Do we really want the price for services in a sector that will soon make up 20% of all economic activity in the United State to be determined by the government? There are examples of societies that have tried on centralized price control. You can find them in the history books.

Let's not forget what effect this will have on costs. Just a few days ago Congress decided to hold off on a price cut for Medicare services. Do we need prices of medical services to come down? Yes, we do. Do prices under Congressional control ever come down? No, they do not.

Free markets are not perfect. But they are the best model anyone's yet come up with. And they do not guarantee that things will always stay the same. In fact, what you observe in the market place today is the free market coming to bear on the inefficient third party payor model. It is the agonal lurching of a system that should die and should be allowed to die. It has priced itself out of viability.

So let's see some "reform" proposals that actually give life to health care in the United States! Let's see some proposals that look towards the future, not ones that take a broken system and put it on life support and then sign a contract binding five future generations to the expensive prospect of keeping it alive. Just so a president can say he got something done.

Yes this is a crisis, friends, but not the one that it seems. This is a crisis far greater than whether grandma gets her CT scan. This is a question of whether the federal government GETS OUT OF THE WAY and lets the innovation of 280 million minds find out what health care is going to look like tomorrow. It is arrogance beyond measure to think that a few hundred people sitting in Washington can figure out the "one best way." America has never worked that way.

Find me an example where true market innovations have sprung lively from the enactment of federal statutes, and I'll be happy to change my mind. Microsoft wasn't legislated. Google wasn't legislated. Dell wasn't legislated. Apple wasn't legislated. eBay wasn't legislated. Twitter wasn't legislated. Amazon wasn't legislated. Nor did they operate in an environment where their product designs were regulated, their marketing plans preapproved by regulators, their pricing regulated, and their internal processes and procedures regulated, their relationships with vendors regulated, their ownership and governance structures regulated. They were given room to dream, and what they dreamed has brought untold value to Americans. When providers dream of different reimbursement models, lawyers tell them, "the law won't let you do it that way." When payors dream of innovative policies that better meet consumer demands, lawyers tell them, "the law won't let you do it that way." When patients dream of different ways of interacting with medical service providers, they find that no one is paying attention to them.

The government is not "causing" the current health care crisis - - it is the natural and predictable course of the existing model. But the laws and regulations that were intended to bring that system to heel have now ironically become its perpetuator - - by prohibiting the natural development of models that would take its place.

And so what to do?

"Climb on to my back, Gingerbread man, and I'll take you to the other side of the river."

"Thank you just the same," I say.

We have a choice - - the option of getting off the fox's back. If we let the fox carry us to deeper water, we'll have no other choice but to jump in to the maw. That is the real urgency with which the health insurance reform question should be viewed.

Let's take Scott Brown's advice and go back to the drawing board. Let's not go to the stakeholders like the American Association of Health Insurance Plans or the American Medical Association or the American Hospital Association or union groups or the AARP and ask them how we can improve things for THEM. Let's instead ask those players a simple question, "what is preventing you from responding to patient demands?" When the answer is laws or regulations, roll them back. When the answer is inertia, provide incentive. When the answer is momentum, provide a brake. The proposal for health care reform should create an open space for the inevitable innovation that will follow when given the chance. The current proposal is not so much open space as it is a careful script of How Things Will Be For The Next Fifty Years, and it will have to be that way, and it will have to proceed that way, until the bank is broken and our grandkids move to China because there's nothing left of the US economy.

So know this: my evaluation of health reform proposals moves from these principles: free markets; room for innovation; primacy of the patient. These things are utterly lacking from today's model. Anything that moves towards those principles, I like. Anything that moves away from them or that attempts to cement today's model in place, I dislike. And any representative of mine that votes for it will get a resounding NO from me the next time I see their name in a voting booth, and forever after that until they are gone.

It is time indeed to end the national health insurance debate. It is time to begin the debate that never happened, which is the national health care debate. And it is time to make room for a new system that will give patients the same benefits of technologies and knowledges that are ubiquitous in our society but that have failed to penetrate the health care sector because of its arcane reimbursement models.

It is time indeed.

Thank you for bearing through this diatribe til the end. Please share freely.