One Doctor's Bad Advice
One of the great things about articles that appear on the opinion pages of the Wall Street Journal is that facts rarely get in the way of conservative ideology – even when those facts are making front-page news. A case in point is today’s op-ed by David Gratzer, a physician and health policy expert at the Manhattan Institute, which gives President Bush some advice about the upcoming State of the Union.
The advice to Bush goes like this: Rather than simply talk about ways to help working-age Americans get more affordable health care, as recent press stories have suggested the president will do in his speech, he should use the occasion to make the case for reforming the entire Medicare program, as well, turning it into what would basically be a voucher scheme. “Instead of today's one-size-fits-all Medicare structure,” Gratzer explains, “seniors [would] choose among competing private plans.”
Hmmm. Seniors choosing among competing private plans. Where have we seen that recently?
Someplace … on the tip of my tongue … oh, right, the new prescription drug benefit.
The new prescription drug benefit is administered by private insurance plans from which seniors and other Medicare beneficiaries must choose. In fact, it was designed by some of the very same people who want to transform Medicare along the lines that Gratzer suggests, with the very explicit goal of encouraging that transformation in the long run.
Now, this would be the same prescription drug benefit that has recently caused chaos among some of the sickest and most vulnerable people in America, who found themselves with no working drug coverage on January 1. This would also be the same prescription drug benefit that has thoroughly confused seniors to the point where – as Kate has pointed out below – only a relatively small fraction have signed up.
And, of course, this would be the same prescription drug benefit that has lots of likely problems still waiting to emerge. Just wait until some of the plans start altering their formularies, which they are allowed to do with just 60 days notice, while seniors are prohibited from changing plans.
Gratzer seems virtually oblivious to this situation, acknowledging the present complications only briefly at the end when he says “the cool reception to his new prescription drug benefit may present an opportunity, since many seniors want the coverage but are hesitant on Plan D.” But perhaps that’s because talking about the problems would require Gratzer to explain them, which might force him to admit that the program’s very design – the one Gratzer would have us impose on the rest of Medicare – is a part of the problem.
Choice has not empowered Medicare beneficiaries, the way people like Bush and Gratzer have always said it would. It has overwhelmed and confused them. More important, putting drug coverage in the hand of private insurers rather than the government has not improved the availability of drugs – which, after all, is the whole point of the program. Quite the contrary, private health plans spend more on administrative overhead than the government does. They don’t have the same bargaining leverage with the pharmaceutical industry. And, thanks to some behind-closed-door lobbying, they were able to get their hands on billions in extra taxpayer subsidies that might otherwise have gone to some better purpose.
So if Gratzer ignores all of this, what does he say about Medicare? He spends a good deal of time talking about what an awful program Medicare is. But this isn’t particularly convincing either. Gratzer suggests, for example, that Medicare recipients have a severe physician access problem: “According to a new study by the Center for Studying Health System Change, nearly 30% of American physicians will not accept new Medicare patients,” Gratzer writes.
Uh, not exactly. Turns out Gratzer dropped a word: “all,” as in “all Medicare recipients.” In fact, according to the actual report, while 72.9 percent of physicians now accept “all” new Medicare patients, an additional 14 percent are accepting “most” and another 9.7 percent are accepting “some.” It turns out that just 3.4 percent are seeing no new patients.
Those are pretty good numbers. Perhaps they help explain why beneficiary satisfaction with Medicare far exceeds satisfaction with private insurance.
Of course, the truly relevant question here is whether transforming Medicare into the kind of system Gratzer envisions would improve physician access. The answer is almost surely “no,” since the likely result of a choice-based system is that most people would end up in some form of managed care, which achieves much of its financial savings by restricting beneficiaries to networks of approved providers.
Actually, we don’t even have to speculate about this. Conveniently, the same report on physician availability compares how open doctors are to new patients with private insurance. And guess what? It’s actually harder for privately insured patients to get into doctors than it is for Medicare patients. And while it’s only a slight difference, barely significant in statistical terms, it certainly puts to rest this silly notion that physician access is a severe problem in Medicare.
(Note: That doesn’t mean it’s not an isolated problem in a few places, particularly rural areas. But handing Medicare beneficiaries over to private insurers, which typically struggle to create viable physician networks in sparsely populated areas, would likely make this situation worse.)
I could go on and get into some of these issues about the paperwork problems Gratzer raises and the long-term financial issues around Medicare. Or I could mention that while Gratzer does raise a few good issues, like the way Medicare payments skew the profitability of different services, there’s no reason his system would handle this problem any better. But this has already gone on too long for a blog entry, so I’ll stop now.
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John, Nice catch but this isnt exaclty the first time that a majori newspaper has printed this loon's lying and/or altering the data to make his point. After all he's also the author of this little pearl which apparently equates the recent supreme Court ruling in Canada allowing private insurance as being the same as abolishing the entire canadian health system. Funny that even the new Conservative government there was at pains to stress that it was keeping the system in tact in its recent campaign. Funny too that an older, cheaper and bigger fully socialized medicine system in the UK has also had private insurance as a component forever.
Mind you the concept of being a "health policy expert at the Manhattan Institute" is something of a contradiction in terms.
January 26, 2006 3:48 PM | Reply | Permalink
Insurers know they cannot make enough on Medicare subscribers.
That is why the new Part D drug benefit was written as it was with millions for the carriers.
January 26, 2006 9:23 PM | Reply | Permalink
Insurers know they cannot make enough on Medicare subscribers. Crissie
Why? Well, one reason is that to keep its Medicare costs down, the government has reduced reimbursement rates to a point at which they are significantly below "market" costs and fees.
There's no outcry from providers, currently, because the shortfall in doctors' and hospitals' incomes is made up by "overcharging" non-Medicare patients. And there's no outcry from these patients, currently, because their costs are paid by their employers.
Gratzer's argument is that a health care system with a single payer would act just as the present Medicare payer has and would regularly lower reimbursement rates. But then, there would no health system users outside the system to pass the shortfall to or to act as a system safety valve. He concludes that under this sort of monetary stress on doctors and hospitals services would deteriorate.
Is he wrong? Why?
January 26, 2006 9:55 PM | Reply | Permalink
Actually, providers make a great outcry about low Medicare reimbursement rates, because they also pull down the amount private insurers are willing to pay. Increasingly, providers can't pass the costs on to the uninsured, because medical debts have driven the uninsured into the poorhouse; they are declaring bankruptcy at record rates or otherwise just defaulting on payment. For some hospital chains, uncollectible debt now represents a record 15% of their total outstanding accounts, and the percentages just keep rising. This is the system that works so well? Looks an awful lot to me like the system is deteriorating already.
Of course, a lot of this discussion is speculative, because hospitals do not disclose why they charge what they do for their services. The system is almost entirely opaque, and therefore defies thorough analysis.
Single payer reduces inefficiencies in the system, which frees up more money for reimbursement. Wait times for elective surgery in countries with single-payer systems are longer than here, but emergency and preventive care is better, resulting in healthier populations, greater life expectancy, higher survival rates for infants, and so on.
Gratzer isn't just wrong, his argument is also immoral. He's basically saying, we should allow some people to be gouged, driven into bankruptcy, or be denied access to any health care at all just so other people (who are richer already) can live a little better.
January 26, 2006 10:20 PM | Reply | Permalink
Single payer reduces inefficiencies in the system, which frees up more money for reimbursement. linden
This makes sense to me as an initial effect. I think the change to no-fault automobile insurance, also, eliminated inefficiencies (lawyers, for one), and there was an initial savings and reduction in premiums. After some time, though, these savings vanished.
Some state governments, unable to continue to maintain the savings, began controlling premiums. Ultimately, even with other insurance lines being profitable, insurance companies left these states, and only large premium increases kept insurance available.
As to Gratzer's political/economic argument, the fact that the current system isn't able to fully gouge the uninsured wouldn't seem to be an answer to his claim that the government as single payer will have to respond to taxpayers by holding down reimbursement rates. And that services will, then, deteriorate.
In the event I was responding to the Medicare program as an example of the benefits of a single-payer plan often used by proponents. People often overlook how much the current Medicare plan is subsidize by non-Medicare payers and overlook the fact that with a single payer plan, these geese will no longer be there for the plucking. They'll all be enrolled in the single payer plan.
January 26, 2006 10:46 PM | Reply | Permalink
The Immoral Dr. Gratzer
Not necessarily. There may be solutions to the health crisis short of a governmental single-payer plan.
For example, we know that a huge portion of our society-wide health expenses pay for Medicare eligible patients. Suppose the government were to fully fund Medicare, the necessary revenue coming, initially, from reversing the Bush tax cuts. Add to that the elimination of employer sponsored health insurance and an increase in corporate tax rates.
The result would be much lower insurance costs for non-Medicare patients, something most might be able to afford.
And finally, the legislation of a "living wage" in the form, perhaps, of a much higher EITC in amount and threshold -- a part of the increase being, then, available to people to buy insurance.
And before this evening howsomever immoral, I didn't even know Dr. Gratzer existed.
January 26, 2006 11:09 PM | Reply | Permalink
The NYT today -
"Savings Accounts for Health Costs Attract Wall St."
It seems banking lobbyists are already gearing up to push the HSAs in something called the HSA Council. One detail I found that may be useful in defeating the awful HSAs and holding out for real coverage will be tying the HSA plan to the Medicare D fiasco - where HSAs were initially authorized in 2003.
But the key point is this from Business Times: "Current HSA enrollees are more cost-conscious, but they also are more likely to avoid or delay needed care, according to a recent survey conducted by the Employee Benefit Research Institute and the Commonwealth Fund. HSA enrollees also are less satisfied with their health plan than people with traditional insurance, the survey found."
Because avoiding needed care and being less satisfied is what the people want!
January 27, 2006 2:28 AM | Reply | Permalink
We spend an enormous amount of money (and time and aggravation) dealing with intermediaries in the health care system as it stands. Doctors hate the system Patients hate the system. Employers hate the system. That's pretty much a slam dunk case for the system not working well.
It doesn't work well because all the incentives are screwed up. In a chimerical attempt to keep people from going to the doctor too often (who likes to go to the doctor), the system is devised to create barriers to treatment. This makes no sense from a public health perspective.
This is ironic. The people who thought up HMOs, guys like Alain Enthoven, envisioned improved health care at lower costs, because the HMO, responsible for the patient end-to-end, would have an incentive to focus on (cheap) preventative care. This hasn't happened because HMO rosters are unstable. Under a single payer plan, the way to minimize expenses would be to focus on preventative care. One can have one's doubts about whether a government agency would actually care to minimize expenses; Krugman's article today about the VA system cuts both ways. Today it's being run well, but, as he points out, that wasn't always the case.
Nonetheless, it's clear that introducing middlemen under the guise of competition has failed. US citizens spend more for worse health care than other people in the OECD. The places using single payer plans are clearly better off.
January 27, 2006 5:24 AM | Reply | Permalink
Ellen, who is going to sell me medical insurance, as an individual, if I have, say, diabetes or AIDS or cancer? Anyone with a chronic or expensive disease who becomes uninsured would simply be permanently uninsured and would go bankrupt buying medical care until they finally have to do without any.
January 27, 2006 5:54 AM | Reply | Permalink
It is the case that were we to canvass DRG payments for example- remember those? --by a given diagnosis, lets say quadruple bypass (4 vein CABG) we would find that negotiated fees in private insurance would be very close to the Medicare fee. (A little digging online will verify this for you.)
I found that a comparison of these fees and the "charges" is a real eye-popper. The average charge for this diagnosis comes in around two or three times what they accept from private as well public payers.
Remember, charges are the providers' list price not the discounted price they contract for. Providers write off the "adjustment" - difference bewteen charge and contracted discounted price.
You always wondered what "adjustment" meant, right?
Why does Gratzer believe that higher reimbursement is correlated to better quality of care? There is ample empirical evidence to the contrary. An early example of this is a study in which Johns Hopkins Medical Center provided the hightest level of care at the lowest price in the study.
Does writing an op-ed piece absolve the writer from doing his homework?
January 27, 2006 6:56 AM | Reply | Permalink
. . . negotiated fees in private insurance [are] very close to the Medicare fee. Crissie
I've done some looking and found this 2003 survey of physician fees done for the Medicare Payment Advisory Commission. It concludes that Medicare fees are 10-15% lower than private health plan fees (p. iv). I haven't found a survey of hospital fee differences, a significant omission since hospital expenses are, IIRC, much more than 50% of health care expenses.
As I think you mentioned non-negotiated fees are outrageously high. In the event there's a good deal of relief to be had by requiring Medicare to pay its fair share.
Re: Johns Hopkins. Are you sure that its Medical Center isn't being subsidized by income from its endowment? Most health care providers are not so fortunate.
January 27, 2006 8:11 AM | Reply | Permalink
It could work like automobile insurance, that is, high risk drivers are placed in an "assigned risk" pool and distributed to the carriers doing business in the state in proportion to their auto insurance revenues.
Fees for this type of insurance are limited by the state and usually result in a net loss to the carriers, or to put it differently since good drivers pay a bit more than their risk warrants, the high risk drivers' premiums are subsidized.
N.B. Good drivers bitch ("irresponsible no count accident prone drivers raising my costs"); presumably, healthy subsidizers wouldn't bitch at others' illnesses and diseases (smokers? the obese? alcoholics? those who didn't do radon remediation?)
January 27, 2006 8:25 AM | Reply | Permalink
Seems as though this proposal may be dead in the water, although the administration does not realize it yet.
January 27, 2006 8:39 AM | Reply | Permalink
And how many people simply break the law and drive without insurance because they can't afford it or are uninsurable? Many. But the stakes aren't as high for driving without car insurance as they are for living without health insurance.
Let me say the unsayable: health insurance companies are parasites that add no value to the health care system. We didn't always have them -- back when my parents had me, they paid for the entire childbirth and delivery in cash, and they could actually afford to. Now, I could never have afforded the bill for my kids' delivery.
There is no reason to preserve the role of health insurance. Plans that do are throwing away money to preserve inefficiency.
January 27, 2006 8:45 AM | Reply | Permalink
What you found in the 2003 MPAC survey is corrrect. This is why physicians who accept assignment (Medicare) are permitted to bill the beneficiary up to 15% over the accepted rate.
No, Hopkins cannot use its endowment to boost hospital revenue. If you are familiar with academic medical centers, you will understand that they live and die on clinical reimbursement and research revenues.
The study I referred to was done over 10 years ago. I apologize for not giving the link. I will check it out and see if I can find it for you. I recall it because at the time and today as well, it seemed counterintuitive. But if you know anything about institutions with high clinical standards, you find it reassuring.
January 28, 2006 7:37 AM | Reply | Permalink
I think a better way to combat this is to tie it to the social security reform that Bush had pushed so strongly. The reaction to that I believe would be similar. People's retirment and people's health insurance costs scare people. The fact that you will have to some how foot the cost for a procedure terrifies people. People didn't buy Bush's social security reform, they're not going to buy HSA's either.
January 29, 2006 10:16 AM | Reply | Permalink