The Dreaded Public Option

Steve,

Calling your attention to a 122 page report from the McKinsey Global Institute. In case you don't know (I didn't), McKinsey and Company is one of the world's largest management consulting companies. They can hardly be labeled as politically liberal or "anti-business". Among their alumni are 70 past and present Fortune 500 CEO's, as well as, of all people, Bobby Jindal. I'm e-mailing you a copy of the report: "Accounting For The Cost Of U.S. Health Care: A New Look At Why Americans Spend More", but you can retrieve that and most of their other reports on various subjects by simply registering at the McKinsey site.

The McKinsey report has a lot of nice things to say about health care in this country. Many of the conclusions they draw are intuitive. If I can say this without sounding ideologically motivated, it would appear that no issue better illustrates the disparities in American society than health care. Our hospitals, medical professionals, research facilities and researchers are the best in the world. All of this translates to the finest health care available.Yet when measured in terms of overall performance for society as a whole, we are behind every other industrialized nation.

Once again, the reasons for this can be arrived at intuitively. Although we do, in the form of Medicare, Medicaid and SCHIP, offer massive programs of "socialized medicine", health care in this country for most people of working age is generally subject to the same free market principles of supply and demand which characterize any other product. Thus, the health care industry here is more oriented towards profits than elsewhere. Higher profits in the industry provide more investment for world class health care for individuals at the high end of the income spectrum, and lack of affordability for individuals at the low end.

My sense is that the real losers in this equation are probably not the ordinary "victimized" classes which social progressives usually point to in debates over social inequalities. Medicaid, SCHIP, AFDC and the like are programs aimed at taking care of that class defined as impoverished, which is disproportionately represented by minorities and single parents.

The real losers in my view are working stiffs like my youngest son. Evan has a job as a manager of a local (franchise) restaurant and under the circumstances makes a decent living. In fact, he makes just enough that he doesn't qualify for most government hand-outs. Yet, probably like millions of Americans like him, he is caught in a virtual Cache 22. Since he doesn't have health insurance, almost any extended illness would wipe him out. And, if he goes out in the market and buys insurance, the only kind he can really afford would have such high deductibles and co-pays that such an illness would wipe him out anyway. So, again like millions of Americans like him, he bets his own health in a game of roulette. Since he is young and relatively healthy, there is a good chance he will come out OK. But thousands, if not millions of Americans in his situation will not be so lucky.

Now I think it best we stay away from arguments about how much profit those involved in health care are entitled to. The whole idea of placing artificial limits of the right of free enterprise to make money runs counter to the spirit of the constitution on which our whole society and system of government are based.

For instance, I really like Al Frankin, but I doubt if he ever looked at a contract negotiated by his agent and said: "Hey, I shouldn't be making that much money! Tell them to pay me less...". On the basis of fairness, does it really make any difference if the contract is for cracking jokes or health insurance? I think you can assume any entertainer out there preaching against the sinful profits of insurance companies would scream bloody murder at the idea that government should limit what they can charge so that more people can enjoy their performances.

My vision of health care reform does not include health care savings based on government engineered restrictions on profits. And let's face it, the concept of a "public option" is considered by many conservatives to be a veiled attempt at just that. To wit: government offers health insurance to citizens based on a cost which does not include profit, simply because they don't have shareholders to satisfy with quarterly dividends. Government thereby enjoys a tremendous competitive advantage. This forces private insurers to cut costs by cutting services, which makes them even less attractive to prospective shoppers. Let's take a look at Japan...

The Japanese system of health care produces enviable results. From an article in the Washington Post:

"Half a world away from the U.S. health-care debate, Japan has a system that costs half as much and often achieves better medical outcomes than its American counterpart... The Japanese visit a doctor nearly 14 times a year, more than four times as often as Americans. They can choose any primary care physician or specialist they want, and surveys show they are almost always seen on the day they want. All that medical care helps keep the Japanese alive longer than any other people on Earth while fostering one of the world's lowest infant mortality rates."

And how does Japan do this?

"It does so by banning insurance company profits, limiting doctor fees and accepting shortcomings in care that many well-insured Americans would find intolerable... ...As a result, most Japanese doctors make far less money than their U.S. counterparts. Administrative costs are four times lower than they are in the United States, in part because insurance companies do not set rates for treatment or deny claims. By law, they cannot make profits or advertise to attract low-risk, high-profit clients.... ...There are shortages of obstetricians, anesthesiologists and emergency room specialists because of relatively low pay, long hours and high stress at many hospitals..."

Although I must admit I get a guilty pleasure at the prospect of doctors putting more effort into medicine than they do golf, this kind of government control over the rights of a certain economic class to earn all they are capable of earning is absolutely foreign to our way of life. Perhaps it works for the Japanese, but it won't work here, and for obvious reasons. Once you allow government to regulate the livelihood of persons in one industry, where do you stop? I mean, wouldn't it be nice if plumbers were required by law to charge less? How about electricians, or for that matter, auto mechanics? Who wouldn't be tickled to death to see government slap a healthy fine on the next service tech who charges $600.00 for a measly set of brakes? And what's up with that twenty bucks for a movie and a bucket of popcorn anyway? Don't get me started on that.

If we're going to reform health care to make it more affordable and accessible to all citizens, we're going to have to do it within the realities of the American economy. Is there a way out of this? And, is a Public Option a singularly regressive approach, as many Republicans in Congress are arguing?

You can go here for an excellent summary of why health care costs are so much higher in this country than they are in other developed countries. This is a site jointly operated by Mark Hoofnagle (a general surgery resident), Chris Hoofnagle (a professor at U.C. Berkley) and "PalMD"(an medical internist). In their blog they list what they consider to be the 7 main causes of excessive costs:

1. An excess of cost in administration far out of line with most countries around the world.

2. Pharmaceutical costs - especially due to the effects of direct to consumer advertising (DTCA) encouraging use of more expensive, newer drugs (which is only allowed in the US), Medicare part D which forbids collective bargaining for lower drug prices, and a broken patent system that allows drug makers to patent and charge more for non-novel medications.

3. The absence of a universal system that prevents risk-sharing, and causes the uninsured to avoid treatment until problems are more critical, and more expensive.

4. Excessive reimbursement of physicians for procedural skills, rather than cost-saving physician roles such as primary care and family practice that emphasize early diagnosis and proper management of disease.

5. Excesses of cost caused by "defensive medicine". While torts themselves don't cause a great deal of monetary damage, the culture they create is one of paranoia in physicians who make decisions with lawsuits in mind, rather than the interests of patients and society

6. The excessive costs in ICU care, especially at the end of life, which may also be reduced by better EMRs with recording of living wills, and public information campaigns designed to inform people about the pain, invasiveness and futility of "doing everything" in the elderly.

7. The absence of an electronic medical record that is universal which causes redundancy in testing as patients see new doctors who then order redundant tests because sharing of information is so inefficient.

Now I would consider the Hoofnagle's and PalMD to be political progressives. Yet nowhere do they point to "excessive profits" as a cause of excessive health care costs in this country. Which by itself is instructive.

Now, repeating what I said in an earlier post, I think we do need a public option - but not one which has the purpose of simply forcing private insurers to reduce profits. The public option which I would advocate is one which includes that demographic of Americans who, like my son, are caught in the middle. More and more I am convinced that the most rational mechanism would be the creation of Individual Health Care Accounts (IHCA's) which I suggested in an earlier post.

IHCA's would not represent a new tax, rather a combination of existing taxes and the creation of funds which would give citizens more control over how those funds are spent. In my next post I'm going to explore exactly how much IHCA's would accumulate per citizen and how they could be augmented by individual contributions. I will be rolling up my sleeves and getting down to brass tacks.

Later dude...

-Chris