Tuesday, October 27, 2009



What we have going on today in Congress is debate over a bill, the primary goal of which is to make health care affordable and accessible to average, working Americans. It won't.

Now don't get me wrong. The bill itself is filled with great, common sense ideas which all ought to be put into practice. Even the dreaded public option and insurance exchanges should have a positive effect. The bill also proposes some other cost saving ideas, from the creation of better electronic patient record keeping to the search, by experts, for more standardized tests and treatments.

Yet stepping back from the problem, I think its fair to say this bill virtually ignores the most significant issue, the basics of which are taught in every first level high school economics class. Bluntly, the problems we are experiencing in health care all go back to the elementary principles of supply and demand. And this pretty much goes against the accepted model of American economics. We have been taught that in all cases, when demand goes up, private industry responds by increasing supply. But for some reason, when it comes to health care, this law doesn't seem to be operating. What we have instead is a perpetual seller's market. For all sorts of reasons, this situation cannot, and won't, continue. The unnaturally high cost of health care, (17% of GNP - and climbing), is siphoning off money from the economy which is much needed for investment elsewhere. Sooner or later this is going to catch up to us as American industries continue to lose traction against international competitors. Steve, this goose of ours can only lay so many golden eggs, and we're running out of time.

As I've said so many times before, government and private enterprise can solve this problem by working together towards practical, attainable solutions. Heck, we all know what happened when government and private industry rolled up their sleeves and built the tools we needed to defeat the world's enemies in World War Two. Health care reform is going to be a tough nut to crack, but we can do this.

Before I offer up a plan, I want to break down the problem into smaller pieces:

First, we have the cartel like behavior of suppliers to restrict supply. I've mentioned before that the U.S. has one of the lowest, if not the lowest ratio of doctors to patients among developed countries. This is, frankly, shocking. Doctors in America simply make more on average than doctors in any other country. You don't have to be a rocket scientist to understand how this low ratio drives up the cost of health care. Of secondary importance to the issue of supply is the extraordinary cost of pharmaceuticals. In every case, right down the line, we pay more in this country - on the order of at least double - what consumers in other developed countries pay for the same drugs.

Second, we have what has become an essentially dysfunctional health insurance industry, the most glaring failure of which has been to mask the effect of limited supply, and government is acting as an accomplice. Here's the math. Health insurance companies are essentially pools of individual consumers who share risk. In effect, what happens is that healthy people thereby subsidize the care and treatment of unhealthy people. There's really nothing wrong with this concept, since no healthy person can ever know when he or she might suddenly become seriously ill and incur catastrophic medical bills. But the reality is that we are allowing insurance companies to stack the deck.

Today, health insurance companies insure profits by a two pronged strategy: increasing premiums (or raising deductibles - which is the same thing) and eliminating by one means or another the most costly (in terms of benefits) policy holders. Government acts as an accomplice, first, by providing Medicare for the most costly of potential consumers, and second, by subsidizing emergency medical care to those who are uninsured and cannot pay. Amazingly, Medicare is a non-deductible health insurance premium which young, healthy workers are required to pay for a class of individuals who are largely unemployed and substantially less healthy. Ultimately, Medicare and subsidized emergency care contribute in one way or another to the national debt. Or, to say this in another way, government relieves private health insurance companies of the responsibility for the most costly policy holders by converting the cost of their health care to debt, plain and simple.

So, to summarize this second point, what we have in place in this country is financial mechanism whereby health care suppliers are able to enjoy unnaturally high levels of compensation through 1, Higher premiums for health insurance, 2, government mandated contributions, and 3, debt. This situation cannot go on indefinitely.

Third, the population of the U.S. is growing older. The median age of the U.S. population has grown from about 33 years in 1990 to 37 years in 2008. Four years may not sound like a lot, but in terms of health care it is huge. I've shown in a previous post that older persons quite simply require more health care than younger ones. The increase in average age constitutes a double whammy. It increases demand while at the same time increasing the ratio of non-productive (retired) to productive individuals. Now you can't simply pass a law which magically makes people younger. But any version of reform out at least to account for this significant demographic.

Fourth, I hate to break the news to you, but we are in a recession. Fewer employed persons simply means that fewer people are enrolled in private health care plans, and employer provided health care insurance is the bread and butter of health care providers. It should therefore come as no shock to anyone that private insurance companies are protecting profits by ratcheting up premiums on a dwindling base of employed persons. And we are now beginning to see the self-defeating aspects of this situation. Economic recovery is being delayed in large part because potential employers are faced, not just with higher payrolls, but with the skyrocketing cost of employer funded health insurance.

Now lets consider these problems and see if we can get beyond blind, political ideology to craft a plan which meets them head on.

I think the most important thing we should do is realize that things didn't get this way overnight and any solution is going to require time and patience. There are things we can and should do to provide immediate benefit. Perhaps the best way of looking at it is if the problem is that you don't have enough roads, you probably should start building more roads. But in the meanwhile, you should come up with ways of better utilizing the roads you already have. I've decided to establish 10 years as a suitable time scale for full implementation. This interval is essentially arbitrary and subject to revision, but at least a place to start. Also, I reject, totally, the notion that health care reform will in the long run require any increase of any kind in terms of government expenditure. This country is already spending a minimum of at least twice what other developed countries are spending per capita on health care, and those countries are providing universal care to boot. Any idea that health care reform is going to cost more money is, frankly, absurd. Now to specifics:

The first and primary goal of this plan would be to significantly increase the availability of certain health care resources by 2020. This goal addresses what I now consider to be the biggest obstacle to affordable health care, which are private, institutional policies, the main purpose of which is not to improve service but to restrict supply and therefore increase profits. In my view, government not only has the constitutional right, but the duty to enact legislation which prohibits or counteracts these policies and therefore levels the playing field to allow for fair competition and equal opportunities.

The short term strategy for increasing supply of health care resources would largely consist of better management of existing resources. The long term goal would be the actual increase of resources.

In the area of health care practitioners, I would institute the following short term strategies:

First, I would commission a blue ribbon panel to create a uniform, federal "scope of practice" certification system to replace the various hodgepodge of state boards of certification. The purpose of this would be twofold: 1, to expand the role in health care of certain professional grades currently certified beneath the level recognized as medical doctor, and 2, to allow for maximum "portability" of certification between the various states.

Second, I would legislate a uniform and liberalized system of certification with regards to foreign trained professionals. Currently, about 25% of all doctors who practice in the U.S. were foreign trained, but this figure could be much higher. The public's perception that foreign trained medical professionals are somehow inferior to Americans is simply not true. Doctors and other professionals who have already achieved certification in other countries should be allowed to immigrate to the U.S. and practice medicine with the fewest possible restrictions.

Third, I would create a federal information exchange. This office would be charged with the goals of 1, storing and providing access to detailed patient records, 2. providing immediate access to approved treatment options and regimes and 3. providing detailed, state of the art answers to raw, prompted diagnostic inputs. The importance of this exchange cannot be overstated. I've already noted previously the immense disparity between Medicare outlays in similar communities. Much of this stems from the truly Byzantine nature of the American practice. Doctors routinely specify duplicate and unnecessary tests. Furthermore, important advances in treatments and procedures trickle down through the system willy nilly. Medical professionals need immediate, up to date access to detailed patient histories and the latest treatments.

Long term strategies would include

First, quite simply, make a larger government financial investment in health care education resources.

Second, I would create a streamlined, goal based college curriculum which addresses the reality that medical practitioners should only be required to study and master the courses which are directly related to their professional career choices.

Third, and this is crucial, I would create a standard definition of "hospital" and thence forward require that all hospitals be required to furnish a minimum level of residency training for college graduates.

In the area of pharmaceuticals:

First, the FDA already has in place a perfectly rational and reasonable approval process for new medicines. My guess is that those who carp about how slow the process is, probably haven't carefully reviewed the process itself or made the effort to understand why each step is important and necessary. Literally hundreds of new drugs are submitted for approval every year, yet few are approved - and there are good reasons for this. Furthermore, you don't jump from the lab to human trials without first taking the elementary precautions to insure that a drug is safe enough to warrant this step. The idea that some private outfit could rush effective drugs to the market much faster is a total shibboleth. What exactly are the methods they would employ that the FDA doesn't already use? ESP?

Second, I would revise the laws relating to patent medicines. Rather than start the clock ticking on a patent when a drug is submitted for approval, I would start it on approval, and limit this patent period to a maximum of 5 years. I would also pass legislation designed to prevent drug manufacturers from gaming the system by filing multiple patents on slight variations of the same drug in order to push back the introduction of generics.

Third, I would allow Medicare, and any other provider for that matter, the power to bargain with both domestic and foreign producers to obtain the lowest possible price for prescription drugs.

Fourth, I would use government's already considerable resources to find and make available new drugs to be produced, marketed and paid for on a royalty basis by private companies. We already have billions invested in taxpayer funded universities and other institutions like the CDC. Why not use this resource to make new discoveries at little or no additional cost to the taxpayer?

All of the preceding ideas are pretty much aimed at increasing supply. Now I know that as a result, whole plane loads of doctors and nurses from other countries aren't going to immediately start touching down at airports, schools aren't going to churn out fresh graduates like so many Kewpee Dolls, and miracle drugs aren't going to descend from the heavens on chariots of fire. And even the short term goals won't have any substantial effect overnight. But at least its a start at fixing what amounts to the root of the problem.

Now we turn to private insurance companies.

My purpose here is not to create a laundry list of all the unethical shenanigans which private insurers are being accused of in the news these days. Some of the things they have been doing are unconscionable. But, bless their little black hearts, what they have been doing is only what comes naturally to private enterprise, which is make the most money they possibly can, by any means possible. Like it or not, that's the American Way. How many poor people do you think, ourselves included, dream of hitting the lottery and then buying a Lamborghini or mansion on the beach - instead of donating the money to charity? Everyone of us I think.

So if private insurance companies are a bunch of greedy little bastards, why not see if we can get these little bastards working for us?

First, I would void the exception health insurance companies currently enjoy from the anti-monopoly laws which apply to all other industries.

Second, I would pass legislation which allows for fair competition among health insurance companies across the country.

Third, I would review and strengthen contract law to prevent denial of coverage based on unrelated technicalities.

Fourth, I would created government managed, semi-private insurance pools where small businesses can band together and use the resulting increase in scale to bargain for lower cost and better coverage. Sam's Small Engine Repair, which consists of Sam and a couple of employees, could then enjoy the same bargaining power which companies like General Electric do.

Now we consider "The Public Option".

We've talked about this one before Steve. The public option, as currently envisioned, is something of a club with which government intends to knock some sense into private insurers. I really don't have a problem with that idea. Private health insurance companies have certainly earned a trip to the woodshed. But just getting insurance companies to make less money is a little short sighted. What we really need is private insurance companies to start taking each other to the woodshed, thereby saving us all a lot of sore arm muscles. Wouldn't you just love to see United Health, Wellpoint, Aetna and Humana going after each other hammer and tongs in a four way throw down? I know I would.

If we are successful in passing legislation which results in fair and honest, across the board competition among health insurance companies, the public option becomes rather a mute point, don't you think.

I think we've pretty much agreed that our private option would involve the provision of actual services to citizens who are unable to pay the full price, for whatever reason, for essential medical care. Since this post has run on so long already I won't backtrack at this point and list all the useful ideas we both have come up with to use existing, government managed resources to meet this goal. But in a nutshell, I would simply combine all related government agencies, such as Medicare, Medicaid, SCHIP and others, into one, hopefully streamlined bureaucracy. Level of service would thereafter be dispensed according to level of entitlement and ability on the part of enrollees to compensate government for services received.

Beyond that, you mentioned in your post a lot of rather Draconian policies which I totally reject, but I will hold my tongue until the Professor has certified both of our posts.

Now last, on the graying of America.

First, we need to start looking for better ways to take care of the elderly. The simple truth is that Americans are getting older. Having just crossed over the 60 year mark myself, I'd be lying if I said this issue is not of great personal interest to me. This country owes its elderly (holding up my hand!) the highest possible quality of life we can provide. But somehow, we must engage in a fresh, honest national dialogue on exactly what the nature of that quality of life should be and how we go about attaining it. I have in mind all sorts of ideas. But most all of them begin with the idea that elderly people need to be considered a precious resource rather than a burdensome liability. And all this crap about "death panels" is not only unhelpful, but entirely misses the point. Personally - when I get to the end of my life, I am sure I'd trade 6 years of lying in bed, waiting to die, for 6 months of worthwhile contribution to society. And I rather think most elderly Americans feel the same.

In my home town there is a free clinic which is staffed by volunteers. All the doctors and nurses who work there are individuals who have previously retired. And what a strikingly positive example that is. AARP estimated that in the year 2000 there were in this country 250,000 retired physicians over the age of 55, and this doesn't even count other professionals such as nurses and administrators. Why couldn't we design, as part of our plan for reform, a national service corp of previously retired volunteers to help out with our public option? That's just one idea. And we can use a lot more like it.

Sorry for the length of this post - but you shamed me into it. Enjoy...


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