6/14/2009

A glimmer of hope on stopping a complete government takeover of medical care

Sen. Joe Lieberman clearly announced this weekend that he will oppose a public health insurance option for consumers. The news at least raises slightly the probability that there could be a successful filibuster of legislation that includes that option. Bloomberg reports that Lieberman:

"said he opposes the creation of a government-run health-insurance option that would compete with private insurers as a part of a health-care overhaul because it would increase costs for taxpayers. . . . .

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12 Comments:

Blogger Pundit said...

Please enlighten us on how any of the major proposals constitute a "complete government takeover of medical care."

6/15/2009 11:40 AM  
Blogger John Lott said...

Dear Pundit:

If you watch the broadcast of the CSPAN discussion from Sunday morning, you will get my argument. The bottom line is that they are setting up a system that will quickly move to single payer health care. Just look at the $313 billion that Obama wants to cut from Medicaid and Medicare reimbursement. The government is good at "saving" money by simply reimbursing Medicare and Medicaid providers for less than their cost. It is essentially a tax that the government imposes -- a tax that doctors and hospitals pay for staying in business. But this tax raises doctors and hospitals' costs, forcing them to charge private patients more. In the short run, these higher costs will force more people out of private insurance and into Obama’s proposed government provided insurance. In the longer run, as fewer and fewer people carry private insurance disappears and there is no one to pay this tax, there will be fewer and fewer hospitals and doctors practicing medicine.

6/15/2009 6:51 PM  
Blogger Pundit said...

It seems to me that your theory is based on a slippery slope argument... a simple "If X then Y then inevitably Z" formula, but the reality is more complicated.

Your central argument is wrong. Medicare reimbursement does not raise hospital or physician costs. Operational inefficiencies force hospitals costs to be higher than they need to be. There are recent studies that show that hospitals can improve quality and shorten length of stay and lower costs. The Hospital Quality Incentive Demonstration Project which has been ongoing for about six years now has shown this. Medicare's involvement in HQID and other quality initiatives has forced healthcare providers to be accountable for quality and safety in ways that private payors never
have. And obviously the industry has completely failed to effectively self-regulate in cost,quality, or safety.

The existence of a government run program would not force all private insurance out of business... private plans still exist in most (in not all) countries that have a so-called "single-payor" system. Has the US Postal Service forced other parcel-delivery services out of business? Obama has explicitly stated that he intends for private plans to still exist and compete.

Your argument also depends on the mistaken notion that private payors pay anything close to the charges that hospitals bill for. They don't... private payors, just like Medicare, pay a fraction of the so-called "cost" of care.

American healthcare got spoiled during the days of cost-plus reimbursement, rather like a glutton that overeats and complains of a tummy ache. Eventually, prospective payment and other managed care tactics were implemented (by both government and private payors)to try to contain costs. Government payors are hardly alone in only paying a fraction of physician and hospital charges. So what happens? After crying about the pain of having to do more belt-tightening, and insisting they can't live through another cut, the hospitals and physicians manage to uncover more and more waste that could be eliminated.

Yes, Medicare cuts spending per patient, but so do all of the private payors. Attempts to contain costs are not unique to government plans, which actually run with lower overhead costs than private plans. In addition, if Medicare could negotiate drug prices, the way private payors can, there would be additional cost containment.

Healthcare as an industry, particularly hospital-based healthcare, has been incredibly mismanaged and is probably 20 years behind other industries in learning how to use technology to streamline the care process and in using even simple Lean techniques to remove waste and rework.

Something else to consider... hospitals and physicians do not constitute the full extent of medical care... device, drug, and durable medical equipment manufacturers, nursing homes, home health care, hospice, diagnostic and outpatient centers, etc. are all part of healthcare, something that is typically ignored in discussions of healthcare proposals.

6/15/2009 10:21 PM  
Blogger John Lott said...

Dear Pundit:

Thanks for the note. No, it is not a slippery slope argument. The forces for a pure socialized system would be created when the program was set up.

That said, I will say that the regulations over time have been set up to reduce the number of people who are insured and increase the demand for a socialist system.

6/15/2009 10:28 PM  
Blogger Pundit said...

You said

...regulations over time have been set up to reduce the number of people who are insured and increase the demand for a socialist system.

Are you actually suggesting that healthcare regulations have been imposed with the intended purpose of causing people lose insurance and force us into so-called "socialized" medicine?

That's an interesting statement, considering to last two massive pieces of healthcare legislation were passed with Republican approval. In 1996, the Republican Congress passed Health Insurance Portability and Accountability Act (HIPAA) which made sweeping changes to the industry, and in 2003, the Medicare Prescription Drug, Improvement, and Modernization Act (MMA) was passed and enacted by a Republican Congress and President.

Are you saying the Republicans want people to lose their health insurance and to socialize medicine?

6/15/2009 10:47 PM  
Blogger John Lott said...

Dear Pundit:

I have no idea what is going on in people's heads. All I can say is that the effect of their policies have been to consistently raise the price of private health insurance and that in turn has reduced the number of people covered. While Republicans as well as Democrats have tried to save money by reducing the amount that doctors and hospitals were reimbursed for medicaid and medicare and thus both are to blame for that, I was otherwise generally referring to the programs that Democrats have consistently advocated. Some Republican measures have also been problematic in raising the costs of private health insurance, but those impacts have been much rarer. Sorry, I have two deadlines to do tonight and it is already quite late.

6/16/2009 12:47 AM  
Blogger 1 said...

pundit says: "Are you saying the Republicans want people to lose their health insurance and to socialize medicine?"...

Hmmm, what do you do for news?

Considering you have access to the net how come you pundit haven't done any homework before asking these questions?

6/16/2009 9:27 AM  
Blogger Pundit said...

1,
If you bothered to read my post, you'll see I did my homework.

John makes the unsupported statement that "regulations over time have been set up to reduce the number of people who are insured and increase the demand for a socialist system."

I went back to the two most significant pieces of healthcare legislation (both of which added considerable cost burdens to healthcare providers) and noted that both were advocated and approved by Republicans.

If what John says is true (and I don't think it is, nor do I think he has adequately supported his assertions), then his own argument would indicate that Republicans want to move toward "socialized" medicine.

Yes, that's an absurd conclusion. And it's an absurd conclusion because the argument, provided by John, is wrong.

You might do some homework on the definition of "irony."

6/16/2009 12:25 PM  
Blogger John Lott said...

Dear Pundit:

When I wrote: "regulations over time have been set up to reduce the number of people who are insured and increase the demand for a socialist system," I did not say that every single regulation did this.
Second, you have never dealt with my original example that I offered: cost shifting through below cost payments by medicaid and medicare.

6/17/2009 8:14 AM  
Blogger Pundit said...

John,
You are right, I should have addressed your cost-shifting statement.

You said,

...But this tax raises doctors and hospitals' costs, forcing them to charge private patients more.

I've already addressed the issue with the "tax" statement, so I won't repeat myself. But as for charging private patients more? That's illegal and constitutes billing fraud if patients are charged differently based on their insurance coverage. There are a number of laws and regulations that prevent hospitals from using insurance coverage as a factor in how they provide care. EMTALA, for example, has been used to prevent hospitals from even collecting any insurance information before a medical screening is done. Yes, hospitals and doctors can increase the fee schedule overall, but again, no insurance plan pays 100% of the fee schedule. The tactic of raising the fee schedule to make up the difference faded out in the 1990s because providers with high fee schedules risk being excluded from managed care networks. Hospitals, especially not-for-profits (which are the vast majority of hospitals), do a large amount of charity care for people with no insurance.

As to "regulations over time have been set up to reduce the number of people who are insured and increase the demand for a socialist system" issue, I'd like to know which regulations you mean.

The two I cited are notable because they are recent and because of the broad and long-lasting effects of them, particularly in their effect on cost. The Health Insurance Portability and Accountability Act (HIPAA), which I refered to in my earlier post, imposed several requirements on both insurance companies and on providers, driving both toward electronic billing system and requiring them to use standardized codes sets, forcing both groups to incur costs to adapt to the new requirements. There were also requirements related to the privacy, security, and use of medical records. In addition, there were new requirements about covering preexisting conditions. All of these arguably had the effect of driving up the cost of providing care and managing patient data and the cost of coverage.

The Medicare Prescription Drug, Improvement, and Modernization Act (MMA) was the biggest overhaul of Medicare since its inception in 1965. It created Medicare Part D, the drug benefit with the premium and copay structure that is far too complicated to get into here, and Congress specifically excluded obvious cost-saving measures. Again, this drove costs up, created dozens of plans to choose from, and a lack of standardization from plan to plan even in the language used to describe the plans.

6/17/2009 11:41 AM  
Blogger Martin G. Schalz said...

Any time costs are added to a business, those costs are passed onto the consumer. Be they taxes that are imposed upon said business, or higher operational costs brought about by government regulations.

John Lott; "...But this tax raises doctors and hospitals' costs, forcing them to charge private patients more."

Dr. Lott is correct. Whatever costs that are not covered by medicaid or medicare must be replaced in some fashion. Otherwise hospitals and or doctors would simply go bankrupt. The only source that exists to make up for the failure of the government to pay the true costs of caring for medicare/medicaid patients are those who can pay for the difference.

Somewhere, somehow, equilibrium will be achieved. If it cannot be achieved within a closed system, the system will fail. If it fails, a new system will take it's place.

6/17/2009 5:01 PM  
Blogger Pundit said...

John, I know this thread has gone on pretty long, but I appreciate your willingness to let this discussion go on. I think it's informative. I'm getting a better understanding of some of the opposition to Medicare and what you call "socialized" medicine, and I hope I am clearing up some misconceptions about healthcare.

Schalz,
That actually a much better explanation of John's "tax" than the one he gave, so thanks.

But there's a big difference between a tax and the way Medicare reimburses. A tax is a fee that is levied on income or purchases, a fee that you pay more of as get more of whatever the tax is levied on. Sorry, that's not a very good definition, but I'm trying to describe it so I can make the distinction clear. Basically, the more you consume or earn, the more tax you pay.. .it's a percentage of something, whether it's what you pay for a product or how many cars you own or how much income you earn. It's unavoidable and it grows as you have more of whatever it is that is taxed. Is that an acceptable (if awkward) working definition?

Medicare reimburses on a prospective payment system. Basically, it says, "We will pay you X to treat this condition. If it costs you more than that to provide treatment, well, you eat the difference. If it costs you less, then you get to keep the difference."

(There are some exceptions to this, such as those for very sick patients who have a long stay in a hospital-- those are called outlier payments-- but you get the idea.)

Prospective payment has driven healthcare to be more efficient. It used to be that providers could charge whatever their costs were plus some "reasonable" profit margin. This lead to outrageous inefficiency and medically unnecessary treatment. Just to give you some idea of how hospitals viewed their services, consider this... not that many years ago, degrees in Hospital Administration were given from hospitality programs. Yes, hospital CEOs were guys with degrees from hotel management programs!

Prospective payment has driven healthcare to look for ways to provide care efficiently.

Medicare reimbursement-- and reimbursement from most big payors-- is determined up front--before the service is provided. It's not a tax tacked on that increases the cost of doing business, it's an agreement by the purchaser to pay the provider a stated fee for the provider's services.

And by the way, no one forces providers to participate in Medicare.

We can debate whether the Medicare fee schedule is fair, but it's not a tax.

6/17/2009 7:36 PM  

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