A Real Liberal Health Care Bill

Signing a bill that still won't cover everyone and will drive up costs.

I have wondered why liberals have allowed the Democratic party to destroy their good name over health care. If you look at the goals of liberals in the health care debate and then look at the result of the health care law, the two couldn't be further from each other. So I was thinking about the health care law I would pass if I were a liberal. These would be my liberal goals.

• Ensure everyone can afford health insurance.
• Ensure that those with pre-existing conditions are covered.
• Reduce the cost of health care to the average American.
• Ensure that any law doesn't reward corporations at the expense of taxpayers.
  

We might debate the wisdom of these goals; but if this were the liberal position, I could respect that. We could write a pretty simple health care law, not a 2700 page monster. The key policy prescriptions:

• Provide a federal subsidy for the "working poor" to buy health care if they lack it. Continue to use Medicaid for the rest of the poor.
• Make insurance portable between employers, so those with pre-existing conditions can keep their insurance when changing jobs.
• Provide a subsidy for those with pre-existing conditions, if they haven't already obtained insurance.
• Subsidize college education for doctors and nurses, reducing price by increasing supply.
  
• Limit the ratio of administrators to doctors at hospitals and reduce paperwork needed for doctors, reducing price by reducing cost.
  
• Create a special H-1B visa category for doctors, nurses, physicians assistants, and nurse practitioners, to increase the supply of providers, reducing price by increasing supply.
• Don't have an individual mandate or any of the other sops to various insurance and big pharma lobbies.
  
• Allow the re-importation of drugs from countries where price controls artificially reduce their cost of drugs at the expense of Americans, reducing the price of drugs.

Nowhere in this plan would a good liberal mess with what was already working for most Americans, who were generally happy with their insurance prior to the ACA.

When the dust settles on this statute, if it is not repealed, there will still be a significant portion of Americans who will lack health care coverage. Amazing. 2700 pages and the Democrats masquerading as liberals couldn't manage to cover all Americans for health care. They also increased the costs, and caused many Americans to lose their employer provided coverage. I await a liberal response as to how this furthers the ends envisioned by liberalism.

Managed Competition with Subsidies is not a Free Market in Health Care

Paul Krugman summarizes the leftist argument for socialized medicine in today's New York Times. He also cites a longer article by Ezra Klein purporting to prove that competition doesn't lower the cost of health care. Krugman's summary.

Patients by and large don’t have the information to evaluate medical treatments; in any case, they mainly buy insurance rather than medical care directly; and insurers profit not by providing the most cost-effective care, but by trying to insure people who won’t need care.

And it’s not as if market competition hasn’t been given a try; in this country it has been tried over and over, by politicians who won’t take no for an answer.

Ezra Klein cites any number of examples such as Medicare Advantage and Medicare Part D to show that the competition within those programs has not lowered costs.

These are misleading arguments that need rebuttal.

• In a free society, why is it a goal to spend less on health care? If we have rising levels of discretionary income, why wouldn't we choose to spend more on improving our quality of life?
  
• We conflate total costs with unit costs. An aging population is going to consume more health care, there is nothing to be done about the demographic curve. However, competition can reduce unit costs.
• Even if people have to make decisions about medical providers under emergency conditions, they do not make decisions about insurance plans that way. True competition between plans is stifled by Obamacare and so many other regulations.
• Even under emergency conditions, people make informed decisions about health care treatment. They can often decide which emergency room to visit and have information about who is best when they do so. During my last few emergency room visits, I arrived by private vehicle, in full possession of my faculties, as did over 90% of the other patients I saw there.
• If we had people paying significant out of pocket expenses, and they had better choices in health care providers, then an Angie's List for doctor's would spring up. Krugman thinks the average person as both ignorant and stupid, unable to learn for themselves. When the chips are on the line, I find people to be just the opposite, researching treatments and providers extensively.
• Competition has been slowly squeezed out of the market place ever since the introduction of Medicare and the insurance industry following all of Medicare's practices. It is a lie to say that any free market solution has been tried in the last three decades. Klein makes the classic leftist argument that when a quasi-competitive managed system that also involves government subsidies and regulation doesn't deliver cost savings, this is proof of the failure of free markets. It is not.

Until we decouple insurance from work and free up the insurance industry to provide plans with high deductibles and relatively high catastrophic caps, we are not going to get unit cost containment. Until the baby boomers leave the stage, we are going to see increases in health care costs, period.

Tea Party Health Care Reform

Calivancouver, a liberal commenter on this blog, has published his own health care plan, based on the idea that Obamacare was pretty much a sop to various special interests that included lobbyist insertion of provisions favoring industry. The end result was an unintelligible hash that undermines its own goals. I am paraphrasing here, so he can correct me in the comments. Suffice to say that liberals weren't terribly pleased with PPACA.

People are starting to think again about health care insurance reform because there is a good chance that the individual mandate will be struck down and found non-severable. I think we have the opportunity to propose reform that is truly market based, both on the insurance side of the equation and on the medical delivery side of the equation. My point of departure is the "Freedom Coalition Agenda," that I periodically update (which predates my tea party involvement). However, the debate over Obamacare has brought more detail into focus. Here is the plan that John Mackey of Whole Foods proposed, my comments in italics.

1. "Remove the legal obstacles that slow the creation of high-deductible health insurance plans and health savings accounts." Patients who have skin in the game and market knowledge will reduce costs faster than any government program.
   


2. "Equalize the tax laws so that employer-provided health insurance and individually owned health insurance have the same tax benefits."
   


3. Allow competition across state lines.
   


4. "Repeal government mandates regarding what insurance companies must cover."
   


5. "Enact tort reform."


6. "Make costs transparent."
   


7. "Enact medicare reform." Medicare policies that are mimicked by the private sector are strangling the medical profession.
   


8. Revise tax law to make it easier to donate to those without insurance.

To expand on these points.

1. The government could help lead this effort by reforming first Medicaid, by turning it into an insurance subsidy program for the poor. But the program would require those in the program to pay a high copay until a low catastrophic cap was reached. Such a system would create a market for a system where people have more incentive to shop for best value in medical care. This system could then be applied to Medicare.


2. The next big issue is that health care is tied to employment. My first impulse is to forbid the offering of insurance through employment, but that would make a conservative social engineer, instead of a liberal one. Removing the tax advantage would at least set a level playing field. To date, the portion of employee compensation that comes in the form of employer health insurance isn't taxed as compensation. This ties employees to their companies and needlessly. You would think that liberals would be opposed to a scheme where tax policy gives corporations leverage over employees. However, I dislike schemes whereby the government imposes on employee relations, so I will settle for leveling the playing field.


3. Interstate competition is not the norm in insurance. Surely the federal government has the right to "regulate" as in "make regular" this portion of interstate commerce, by insuring that any insurance offered for sale in a state would be available in the fifty states. Increasing competition will probably be opposed by the insurance industry, but freer markets benefit consumers.


4. One size never fits all. So mandating coverage should be banned. Insurance is always tricky business, even homeowner's insurance, as Road Dawg can attest to. Along with no mandates will be the need to enforce clear language in policies and communications with policy holders. I am a libertarian, but not so naive as to believe that some insurance companies won't try to wriggle out of agreements to save money. Court is expensive for individual consumers, so regulation that enforces good practices of transparency and clarity will be necessary. But regulation should always aim for simplicity and this also needs to be part of a reform package.
   


5. With regards to tort reform, we have seen positive results in Texas, where access to care increased after passage of reform.


6. Cost transparency is important to enable process improvement and allow patient choice. Most people don't know the true cost of a medical visit, even after the visit is over. Here again, Medicaid reform could lead the way, by insisting that patients receive better notice and understanding of their bill.


7. Medicare policies with regards to reimbursement are arcane and lead to huge misunderstandings on what is covered and unexpected bills. Transforming Medicare to save it for those who truly need it, into an insurance subsidy scheme, will get the government out of the rule writing business and free up insurance plans to compete.


8. Allowing Americans to donate to those who need health care insurance might make little difference, but maybe not. I see lots of do-gooder millionaires wanting to pay more taxes. Maybe they could pay for poor people's insurance in the interim.

Some issues that are not really settled, but requiring discussion. The popular reasons for the health care law could be boiled down to two issues. First, there are many uninsured Americans. Second, many people with pre-existing conditions can't get health insurance. Dissatisfaction with one's own insurance was not an issue. My proposal:

1. The uninsured. It turns out that this group is not as big of a problem as one might think. The widely quoted number of uninsured of 46 million people vastly overstates the problem. Previous posts on the subject here and here. The actual number of poor uninsured citizens is closer to 8 million people. The simplest and least intrusive answer is to provide them a subsidy to buy health insurance. Further, this should be done at the state level. Even if done at the federal level it is a far better answer than the bill passed.


2. Pre-existing conditions. The best answer is to guarantee health care portability, in the same manner that we guarantee phone number portability when we change carriers. This would eliminate the tying employees with difficult health problems to their jobs. Ditto for their dependents. As we move to a system in which individuals pay for their own insurance, because it is not tied to their job, then this problem becomes moot. Children who are on their parents plans should be given the opportunity to convert that plan to their own personal plan as well. This would solve most but not all of the issues with pre-existing conditions. There are already programs such as SSDI to cover those with incapacitating disabilities, although that system also needs reform.

There are a few ancillary issues to deal with. First, Calivancouver likes emergency rooms, as an example, not as a place to visit. We do not refuse treatment at emergency rooms, but not everyone pays, driving up the price for the rest of us. If the reforms I suggest work out, only those with enough money to afford insurance but who don't carry it would become a problem, along with illegal aliens. For those who can pay, we might modify financial regulation to make sure that hospitals have the ability to collect from those who chose not to carry insurance, including head of the line in bankruptcy proceedings. Illegal aliens will have to be the subject of another discussion, as I have previously discussed the need for a comprehensive plan that includes enforcing the border.

The other issue is end of life care. This is where insurance transparency becomes paramount. People are going to have to make tough trade offs between paying higher fees that will cover expensive life extending treatments and thinking through what they leave to their heirs. This is a tough subject, but there is no free lunch. Someone is going to pay for expensive end of life care, we must as well budget for it now.

Sorry this ran long, but I think it necessary to put together real solutions that sustain liberty and keep government size to a minimum. The left's solutions usually fail, but often we have not put together our own policies, so we just get the next leftist solution after the last one fails. After Obamacare is rescinded, whether through the courts or elections, getting to work on real health insurance reform will become necessary. Best get thinking about it now.

Free Markets and Health Care

In the debate over health insurance solutions, there seems to be a belief on the left that healthcare is somehow fundamentally different from other goods and services that we might purchase. Calivancouver had this to say in response to my suggestion that prices are dropping and quality rising for cosmetic surgery and vision correction.

Might I point out that those are not government-provided, nor should they be, because they are elective. You can shop around for boobjobs and lasik surgery, plan them in advance, and weight the costs and benefits like any other good.

You don't shop around for emergency surgery. You might not even be conscious.

WC points out that the insurance you purchase before the emergency room visit would be better off under free market conditions. But I would go further. All sorts of medical procedures are expensive but not unaffordably so and aren't performed under emergency conditions. In my own personal experience, I have had physical therapy and a steroid injection for neck pain that were definitely non-emergencies. If I was paying out of pocket, I would have had a wider choice of providers and would have shopped around on both price and quality. Why wouldn't free market pressure for those medical services produce improvements as well.

Frankly, I was appalled by the massive bureaucracy associated with the injection, for which I did not receive anesthesia. I literally came into contact with a dozen people besides the doctor who performed the procedure. It seemed that at least two of them were solely concerned with insurance and payment issues and another three were all about legal release forms and triple checking what I disclosed in terms of medical history, presumably so that the doctor wouldn't get sued.

Fighting the Good Fight in Minnesota

You may have seen the news that the Minnesota government has been shut down over the lack of a budget. Democrat-Farm-Labor (DFL) governor Mark Dayton (pouty-faced) has rejected the budget from the Republican run legislature, calling it draconian. The dispute is pretty simple. The Republicans want to hold the line on the budget and the governor does not. The cause of most of the budget woes come from increases in the Health and Human Services budget, which was previously papered over.

“We were given about $1.5 billion in stimulus dollars last time to help us weather the storm,” said Sen. Kathy Sheran, a Mankato Democrat who serves on the Senate Health and Human Services Committee.

Good to know the stimulus dollars were going to productive ends, like putting off the day of reckoning for state budgets. Meanwhile, the health care costs that make up 79% of the HHS budget in Minnesota are going up. The Republicans are right to come to grips with this reality, or it will consume future budgets with nothing but tax increases forever. From the same article:

Under current policies, the spending just for Medical Assistance would increase to $9.7 billion and would consume 79 percent of the HHS budget.

About half of the jump in costs is due to the aging population, which is creating an ever-growing number of elderly citizens in need of care, and growth in the number of low-income Minnesotans eligible for state-provided medical insurance, according to a nonpartisan legislative fiscal analyst. The other half of the skyrocketing price of Medical Assistance is inflation in the cost of medical services.

If Republicans wanted to be really bold, they might propose an insurance voucher plan to reign in these costs. Between rising costs to carry on business as usual, and the weight of increased pension obligations, we can anticipate more such fights in other states.

Interestingly, even some Democrats seem to be taking the issue of state spending seriously, even as their union supporters grumble about being betrayed. The math is inexorable. States that have kept government in check like Texas and Indiana are going to grow as businesses relocate. Reminds you a little of Atlas Shrugged, perhaps? (Shane, that's for you.)

"Lies, Damned Lies and Statistics" and Obamacare

So the lies used to sell Obamacare are coming back to haunt it. Yet Obama thinks that more salesmanship is needed to make the bill popular. The latest lie to be exposed was the exclusion of the so called "doc fix" that caused the CBO scoring of Obamacare to come in at under a $1 trillion price tag and be labeled as reducing the deficit. The use of this statistic to score health care was clearly a lie, as Obama is now calling on the House and Senate to pass a bill that will restore the cuts in physician medicare pay that were passed under the Obamacare bill. Clearly, the Democrats never had any intention of allowing a 21% cut in payments to doctors treating medicare patients.

Apparently, the Senate is now going to pass a bill that extends unemployment and avoids the medicare payment cut until November, after the elections I presume. Great, that puts the issue in the hands of a lame duck Congress. There's some leadership for you. I believe that the doc fix shouldn't get passed, because it was a part of Obamacare. Are the Democrats going to hail the fact that they've already repealed part of their own health care legislation? Except for the fact that so many seniors would be hurt by a sudden change in the rules, I would say that Obama deserved the crap sandwich he was getting over this issue.

A little more depth on the doc fix issue from HotAir.

And how about this whopper




Here is how we are getting started on the transition process discussed.

Under the annual dollar limit provisions of PPACA governing group plans (taking effect for plan years beginning Sept. 23, 2010), "Limited Benefit Medical" health plans will not meet the new standards established by the law. (Beginning in 2014, annual dollar limits are fully prohibited under the new health care law.) Except for action by the HHS secretary to make exception for these plans or clarify the law, 1.4 million workers may be without their "mini-med" plans.

Thanks for nothing.

Health Care Reform that isn't

There are a number of conceptual and semantic difficulties in discussing "health care reform" in the United States. First, we seem to have lost sight of the fact that the overall outcome we desire, is a healthier population. The current Democrat proposals do nothing to make us healthier and in fact could make us sicker, because they will decrease the wealth of the nation and there is a clear connection between living longer and being wealthier. Consider this equation:

Health Care Insurance ≠ Health Care ≠ Health.

Health care reform purports to increase the health of Americans by increasing health care insurance. But health care insurance is not actually insurance, does not increase care and does not make us healthy. How could this be? First, most insurance policies, like your auto insurance, only pay off rarely, and then with considerable deductibles and paperwork. Health insurance pays for every visit to the doctor, it is not really insurance at all, but a way to subsidize treatment costs. Subsidize? Yes, because the insurance you are using either has a favored tax treatment, if funded by your employer, or is directly funded by the government if you are using Medicare, the VA, Medicaid, etc. But we can't really call this insurance. True insurance would be look something like having to reach $5000 per year in out of pocket expenses before it would kick in. This is important because cost containment is never going to happen without politically unacceptable rationing, or getting the consumer involved through the magic of the free market.

But people won't get needed treatment, some will argue. I don't think so. The average person is the best judge of their need for treatment. But stupid people will spread disease by not getting their flu shots, the left will argue. Not when they are already priced at $5 to $30.

Second, health care insurance doesn't increase the care delivered, because of two factors. In the relentless pursuit of cutting costs through bureaucracy, health care insurance makes the doctor's visit more expensive, because of the added staff needed. Second, both private insurance and medicare and medicaid all seek to drive down costs. This has the effect of decreasing the supply of health care available as doctor's opt out of medicare or choose to retire earlier to avoid the bureaucratic pain.

Finally, health care treatment doesn't necessarily make us healthier. Yes, treatment is often needed, but healthier life styles are often far more important to good health. But we don't pay to keep people healthy, only for obtaining treatment, and further, through a system that only pays out when people get sick. What a perverse set of incentives. I'm not saying that people get sick on purpose, but these incentives can't help but encourage the overuse of resources and discourage preventive activity.

I consider my own behavior. I have learned from experience that no doctor is going to help me once I get a cold or the flu. These are viruses that just have to run their course. As a result, when I think I might be exposed, or I start to feel like I might be getting sick, I take action. I get more rest, I gargle, I use zinc and vitamin C. (I don't care if you say the zinc and C don't work, in my experience, they work for me.) I am not always fully successful, but I reduce how long I am sick or avoid it altogether.

Think how much simpler health care would be for all Americans if most visits to the doctor were on a cash basis. Doctor's visits would be involve less waiting, no pesky insurance forms to fill out. Doctor's fees would be lower, no need to hire so many accountants and staff to navigate the labyrinth of the billing process. If you thought you were approaching your catastrophic cap, you could ask the provider for a summary of your costs for the year. (I know this is possible, because I carry no dental insurance, but use a flexible spending account. If I get behind in my claims, the dentist's office helps me catch up.) Finally, you might start shopping around for care, the same way you shop around for a good plumber or mechanic, going on line and looking at doctor's ratings and fees. This would have the free market goodness of driving poor doctor's out of business and improving the performance of the merely mediocre.

What about that whole "increasing health" thing? Hey I'm in the Tea Party, can't we all just take a little responsibility for that ourselves?

Unless we reform health insurance, starting with medicare and medicaid, we will never make progress on building a better health care system in this country.

The Bioethics of Innovation

Behind the rhetoric of containing health care costs are assumptions about the ethics of who gets treatment that need to be challenged. First it is assumed that the high cost of health care is due to growth in the use of and advances in technology. Second, there is a belief that this creates an ethical dilemma by putting advanced care out of the reach of those unable to afford it. However, this turns out to not be true when the evidence is examined. Reason magazine discusses work by economist Frank Lichtenberg on the relationship between technological innovation, life saving and costs.

Key findings from the study as reported by Reason:

Lichtenberg's key finding is that life expectancy increased faster in states that more rapidly adopted advanced diagnostic imaging techniques, newer drugs, and attracted an increasing proportion of doctors from top medical schools.

Second, and this is best quoted from the abstract of Lichtenberg's paper, "States with larger increases in the quality of diagnostic procedures, drugs, and physicians did not have larger increases in per capita medical expenditure." In other words, we find no correlation between increased use of advanced technique and the cost of care.

These findings are important because there are those like bioethicist Daniel Callahan, who explicitly desire the reduction of innovation in our health care system. Some of the ideas of Callahan and his ilk leak into the debate over the shape of the health care system. In his new book Callahan argues that ethical considerations require us to limit innovation. However, when we look at the actual facts this appears not to be so. Here is the money quote from Callahan:

"Cutting the use of technology will seem wrong—even immoral—to many."

Of course it is immoral, because it doesn't contain costs anyway.

Further, think about which world would be the better one to live in. In one, an initially expensive cure for leukemia is found, but costs hundreds of thousands of dollars as it is initially perfected. At first, only the wealthy can afford the treatment and 21,000 Americans die from leukemia the first year after the treatment is proved effective. There is a public outcry, but even as that outcry is building, the cost of treatment drops. Eventually, the cost of treatment comes down to tens of thousands of dollars, and insurance plans start to cover it, but only after the stockholders of the biotech firm that invented the treatment became very rich from the patents. This certainly to unfair and horrible of a world to contemplate.

The alternate world is one in which the research never happens because no venture capital was available to the biotech firm, because innovative new treatments are under strict cost control to limit health care's share of GDP. In fact, if you lived in this second alternative world, you would never be aware of the alternative.

Which world do you want?

Talking With Liberals About Health Care

Most of my discussions with self described liberals on the health care debate founders on the subject of "health care as a right." I admit that this infuriates me, but I wonder why it is such a strongly held belief. I actually have not found a cogent answer from the left on this subject. But trying to understand so that I can persuade leads me to conclude that health care is viewed as a right, because it is something that people could needlessly die without, but are incapable of providing for themselves. Food and water would then be rights as well, under this logic, but normally in America, people can get enough to eat. But this still presents an opportunity to argue against the statist grab for control of the entire industry. Just as food is necessary for survival, we only provide food stamps to those in need. So too should our approach to health care be minimalist, providing emergency services to all, our present policy in fact, and some sort of health insurance assistance to those truly too poor to buy their own health care. I haven't tried out this line of reasoning with anyone yet. What do you think?

Free Markets and Health Care

Republicans shot themselves in the foot last week on the health care when Senator Jim DeMint said that health care would be Obama's Waterloo. It allowed Obama to portray them for the narrow minded political operatives they are. I guess going from the majority party to irrelevance in a few short years wasn't good enough. However, our side needs a plan that will be both popular and helpful in solving some of the problems with health care financing (let me be clear it is financing not health care itself that is being changed). I offer an alternative, but first this quote from the Ludwig von Mises Institute:

It's true that the U.S. health care system is a mess, but this demonstrates not market but government failure. To cure the problem requires not different or more government regulations and bureaucracies, as self-serving politicians want us to believe, but the elimination of all existing government controls.

So what's to be done? The two issues that Obamacare purports to solve are the rising cost of health care and the lack of coverage for 46 million Americans. (By the way that last number includes 11 million illegal aliens, why aren't the Republicans all over that?) Over at Carpe Diem, Professor Perry has documented that the costs of elective cosmetic surgery have been totally contained, in fact they have risen less than inflation. The obvious lesson is that folks with "skin in the game" help control costs. This is economics 101, a subject Obama clearly flunked, or more likely, was never taught. It seems that the best health insurance scheme would be to have plans that give money back to the beneficiary for not using the insurance. Alternatively, perhaps the first $3000 dollars, or pick some other number, of medical expenses are paid out of pocket. After that insurance kicks in to cover catastrophic conditions, with some sort of copay upt to a limit to discourage bad behavior.

With respect to the uninsured, the 46 million number is a vast exageration. But that is actually good news, it means that the problem can be solved with much less pain and market distortion than Obamacare proposes. I would propose that we just put together a health insurance subsidy for those with less than poverty line income, a little like the earned income tax credit works today. But even the poor need "skin in the game" too, or they will overwhelm the system. So such a subsidized system should require large initial out of pocket expenses until a catastrophic cap is hit or some way to reward those who did not use their insurance. Further, the government should not be providing the insurance, only the subsidy, it would still be up to the poor to purchase their own policy. This will keep the feds out of the insurance business. I know this still costs some money, but not nearly what Obamacare will cost and it will be far more effective.

There are certainly other changes needed. We need more doctors and should allow as many to immigrate as want to. Many ailments do not require one to visit a doctor, other health care providers work just as well. I know this from military medicine, where the vast majority of my prescriptions over the years came from Nurse Practicioners or Independent Duty Corpsmen. Frivolous medical malpractice lawsuits remain a problem; Texas showed the benefits of cleaning up that mess. This package of reforms could bring real relief to Americans while not endangering the free market that has made American health care so advanced.

I think it is important to have free market solutions as ready alternatives. People are conservative and generally don't want radical change but they also are unhappy with the present system. Given the choice between change and the status quo, I think change is going to win. Friends of liberty need to offer a better change.

Reason.tv's Nick Gillespie offers this half a loaf solution that reinforces some of my themes.