The Bureaucrat between 50 million Americans and Health Care
As one of the 50 million Americans presently without health insurance, I'm sitting here, fingers crossed, hoping I don't get sick. So far, I've been lucky. As I observe politicians debate about how to best water-down reform of the health care system while acting as if they're actually doing something, one thing has become crystal clear: The US system of health care is insanely inefficient. .
Spending on health care in the US accounts for over 16% of GDP and continues to rise. Other advanced countries, like Japan and the UK, spend around 8%. Yet, they manage to insure their entire populations while providing measurably better results.
From birth (America ranked 24th out of 27 countries in infant mortality in 2005) to death (America ranked 24th out of 28 countries in life expectancy) Americans fare far worse than countries with government managed health systems. In between, medical costs for Americans are a factor in over 60% of personal bankruptcies. Medical errors kill upwards of 100,000 patients a year.
Is this "best health care system the world has ever known"? Maybe in the world of the Senator who said that - Alabama Republican Richard Shelby - and some of his colleagues, but not for the country as a whole.
If a study carried out by the McKinsey Institute is accurate, the system is monster of inefficiency that led them to conclude that "the United States spends $650 billion more on health care than might be expected given the country's wealth and the experience of comparable members of the (OECD)."
As put by health care economist Uwe Reinhardt, who referenced that same study in an op-ed in the Times:
One thing Americans do buy with this extra spending is an administrative overhead load that is huge by international standards...excess spending on administration would amount to about $120 billion in 2006 and about $150 billion in 2008. It would have been more than enough to finance universal health insurance this year.
When republican strategist Frank Luntz tells his benefactors to cry out in mock obstinance: "No Washington bureaucrat or healthcare lobbyist should stand between your family and your doctor" he ignores the fact that the political class itself, by failing to reorganize the healthcare system, IS that "bureaucrat". The only thing standing between 50 million uninsured Americans and a doctor is our weak-kneed government itself.
Since government managed healthcare has been hounded off the table as an entrée into socialism, the public option, if it's not compromised out of existence, is the only item still on the menu of market failure mitigation. President Obama says it could force the insurance companies to trim the fat of their own bureaucracies and discipline the system into greater efficiency. Maybe companies would then reconsider the value of the wild salaries paid to executives like Aetna's CEO Ron Williams who walked with $24 million dollars last year. I'm not sure what good Mr. Williams has done to deserve $92,000 a day for a year of five day work weeks, including vacations.
Unfortunately, real reform that brings the US cost structure in line with our OECD counterparts would inevitably bring the loss of jobs. You don't just squeeze out $650 billion in savings without eliminating jobs. That will cause real pain to those workers and should be a consideration if reform ever looks like it will evolve from talking point to effective policy. At least if reform is done right, those who do lose their jobs won't be sitting there without health insurance and hoping, fingers crossed, that they don't get sick.
When it comes to saving jobs, one of the last I want to save is that of the guy whose job it is to figure how to cancel the insurance coverage of people who need cancer treatment, kidney dialysis or heart surgery.
You can fire that guy today.
July 2, 2009 5:49 PM | Reply | Permalink
A typical collection of facts stripped of details in order to paint a misleading picture of what's going on.
1. The McKinsey report that you quote actually says that out of the $650 billion "above expected", full two-thirds come from outpatient care, including same day hospital visits. Same report says that $91 billion is attributable to administration costs (and $98 on cost of drugs). You falsely imply an exaggerated breakdown of this $650 billion. The report recommends the following solutions:
- reduce patient appetite for expensive drugs ("create an appropriate level of price sensitivity while equipping patients with the right information and incentives to enable them to become more value conscious consumers."
- "preventative efforts that present the largest opportunity to improve general health and thereby reduce costs"
- "cost inflation cycle resulting from high priced technologies while retaining the beneficial aspects of innovation in the U.S. health system"
- "address the misaligned incentives resulting from fee-for-service reimbursement, the predominant payment method for outpatient care."
2. Infant mortality as a concept typically doesn't mean infant death from preventable medical conditions. It means genetics, terminal illness, etc. As as posted elswhere, US has a slightly different counting system than many other countries. Infant mortality is an indicator of "health of the nation" status and has rather little to do with healthcare reform.
3. Yes, 62% of personal bankrupcies in 2007 were caused by health problems. But you conveniently omit the critical fact - 78% of filers HAD health insurance, including 60% who had private insurance.
4. Yes, the money that magically appeared at HELP is an indirect tax because employers will be required to cover up to 70% of premiums. And yes, it will cause lost jobs. And the system still won't cover everyone.
What stands between 50 million Americans and health insurance is cost.
And what HELP is doing is splitting spending into direct and indrect taxes, the go-to liberal answer to any problem.
July 2, 2009 6:36 PM | Reply | Permalink
Having insurance is not the same thing as having healthcare. People who have insurance declare bankruptcy because the insurance is totally inadequate to their healthcare needs, something they don't find out till they need it.
As for infant mortality, it's also a measure of an inequity in income, inadequate social services, and the lack of paid maternity leave. I'm working right now with a pregnant gal whose husband lost his job so she will need to return to work 4 weeks after delivery because she cannot afford to go without income. At least she has health insurance and he can take care of the baby.
July 2, 2009 8:03 PM | Reply | Permalink
"Having insurance is not the same thing as having healthcare."
- I don't understand what you mean by that, can you explain?
"As for infant mortality, it's also a measure of an inequity in income, inadequate social services, and the lack of paid maternity leave"
- 40% of infant mortality in the US occurs within the first day of life. The major causes are low birth weight and prematurity, and congenital malformations. Norway has one of the lowest infant mortality rates in the world. If you include weight at birth (which is criteria of most OECD countries for reporting, but not in the US), then their infant survival rate is almost identical to ours. Racial diversity, teen pregnancies and environment also play a role, of course.
July 2, 2009 8:33 PM | Reply | Permalink
I'm too lazy to find the link but there was a front page piece in the NYT this week of what I'm talking about - a guy who had Aetna insurance that covered virtually nothing. Some of these insurance policies are pretty much a scam. Of course, I suppose you can say the people lie to themselves about what they're buying but then they probably don't have a clue how much heart surgery costs. He had two heart procedures which cost in the 6 digits and he and his wife are bankrupt.
Insurance is insurance. It may cover your expenses it may not. You may not understand the fine print, but before you receive the treatment you need someone else is going to look at that fine print and if the treatment is expensive, e.g., a transplant, you may not get the treatment. It's not healthcare. It may just be a document that convinces the treatment center that you do not qualify for healthcare. Almost nothing in the smoke and mirrors about "reform" addresses what kind of care anyone is going to receive. I could well be on the side of the Republicans on this one if the bill is as bad as I think it's going to be.
Low birth weight is often due to lack of prenatal care.
July 2, 2009 9:23 PM | Reply | Permalink
OK, got it and I agree with you.
What would help is to have a federally-mandated fact sheet included with every policy, in the style of nutrition information that we have on food. To explain in bold type and bullet-point system what specifically is covered (or what's not covered).
It's clear that people have to know what they are buying from a source that's less complicated than our wonderful government-operated tax code.
July 2, 2009 9:35 PM | Reply | Permalink
Here ya go, bluebell.
July 3, 2009 3:01 AM | Reply | Permalink
The US has the least generous family leave policy of any OECD country except for Australia.
On page three of this OECD publication, there is a chart that shows how the US compares.
http://www.oecd.org/dataoecd/45/26/37864482.pdf
So much for family values.
July 2, 2009 8:42 PM | Reply | Permalink
Interesting that Norway, with its "one of the lowest infant mortality rate in the world" has a shorter maternity leave period than the US.
Or do you think their mortality rates are explained by the fact that it's fully paid for?
Or maybe it's not so relevant to infant mortality but relevant for puffing and drama?
July 2, 2009 8:53 PM | Reply | Permalink
The OECD chart is not as clear as it could be. It does say that Norway has close to one year of "parental leave" which is mostly paid, plus six weeks of paid "paternity leave" for the father. The only chart on which the US appears is the one labeled "maternity leave" which says that the US offers 12 weeks of unpaid leave.
July 2, 2009 10:13 PM | Reply | Permalink
Yes, the chart also defines "maternity leave" and "parental leave" as two separate categories.
"Maternity leave" is a pregnancy leave and recommended by ILO convention to be at least 14 weeks. US has 12 weeks, Norway has 9 weeks.
"Parental leave" is an unpaid leave of absence during which your employment is protected. It exists in Norway, Spain and others but doesn't exist in US, UK, Switzerland, Sweden, Japan, France, etc.
What's the point of all this?
I believe you were looking for facts to support bluebell's suggestion that infant mortality may be called by short maternity leave in the US??
July 2, 2009 10:24 PM | Reply | Permalink
Thank you for your comments. Yes cost is the big issue. The larger conclusion of the McKinsey study was that it costs the US $650 billion more than it should given the better performance at lower cost of the systems of other advanced countries. The gap between where we could be and where we are is $650 billion dollars wide.
While you point out that some of this cost gap results from "consumer appetite for expensive drugs", most of it comes as a result of the way our system is organized. (One of the reasons we have an appetite for certain drugs, and partly why they are so expensive, is that Big Pharma spends big money for prime time TV advertising to spur that appetite). If the free market is the most efficient way of running a system, why does our system not measure up? Has the "free market" failed to live up to it's billing as the star model of economic efficiency in the case of US health care?
Those who cry "socialism" at the mention of the single payer plan (used by such "socialist" heathens as the UK, Japan and Canada) or the public option now bouncing around DC, ought to admit they are defending market failure.
July 2, 2009 9:39 PM | Reply | Permalink
I don't know why everyone is pretending that we have a market-driven health insurance industry. Josh Marshall called it a collection of mini-monopolies, which clearly isn't very market oriented.
Health insurance is regulated by a federal law, which delegates it to state level. The rest is here:
http://tpmcafe.talkingpointsmemo.com/talk/blogs/gregorzap/2009/07/medical-tourism.php#comment-3516304
There is no need to admit the market system failed. It simply hasn't been tried.
As for appetite for expensive drugs - we have an appetite for expensive things in general. iPhones are over $300 and everyone has one. It's a bigger problem of wanting to ensure you get the best possible. Patent limits are the solution, to have generic alternatives, not the socialized "public option".
July 2, 2009 9:48 PM | Reply | Permalink
July 2, 2009 10:01 PM | Reply | Permalink
:-)
Let's play a game, you will counter anything I ever say with "this is an even stronger argument" for government-run system...
:-)
July 2, 2009 10:14 PM | Reply | Permalink
:) Let's pretend you don't understand my point. If people with healthcare insurance still comprise the majority of filers for bankruptcies in the US, then there is something dreadfully wrong with the health insurance products being touted as meaningful instruments for providing payment for medical expenses while protecting clients from financial calamity. In fact they have failed to insure those afflicted persons from financial destitution as a result of a medical ailment. It would be just as easy to forgo insurance altogether, and go bankrupt without bothering to send all those insurance premium payments in month after month. Now there's a plan that might have a positive impact on administrative overhead. :)
July 2, 2009 10:33 PM | Reply | Permalink
You have a perfectly reasonable point about problems with insurance, people buying lower costs policies to their own detriment etc.
I get all that.
What I don't get the need to pretend that the best way to fix the problem with this industry is to actually replace the industry altogether.
It's equivalent to saying: if your basement is leaking, you need to tear down your house and build a new one, my friend.
July 2, 2009 11:02 PM | Reply | Permalink
... people buying lower costs policies to their own detriment etc.
But Lalo, you are so wrong. People that are bankrupted include the ones that paid extra for coverage such as out of network care. It seems as though at least 18 major insurance companies, including Aetna, where the CEO made $24M last year, were using databases to figure the “usual, customary, and reasonable” payments for services rendered. These two "data benchmarking" products were made and sold by Ingenix, Inc, a wholly owned subsidiary of UnitedHealth Group, a large insurance company. The data was sent in by insurers who then turned around and bought the product after it had been scrubbed. No conflicts of interest in this enterprise, are there?
So, bottom line, patients paid more for their health care insurance and then paid more out of their pockets when they used it. To the tune of billions, which included 'contributions' from more than 2 million military and federal employees. Grassley is not happy, I hear.
Do you work in the insurance industry? So far, I haven't seen a thing to recommend it and 100 reasons to ditch it for our own good.
July 3, 2009 5:06 AM | Reply | Permalink
No, it's more like saying you need to fire the SOB that you overpaid when he built your leaky basement, and hire someone who has demonstrated that he knows how to do it right, like this Canadian guy I know.
July 3, 2009 9:45 AM | Reply | Permalink
Actually, the 62% number comes from Elizabeth Warren, whose work has been thoroughly and authoritatively debunked. She's a hack.
See, for instance:
http://business.theatlantic.com/2009/06/elizabeth_warren_and_the_terrible_horrible_no_good_very_bad_utterly_misleading_bankruptcy_study.php
Hardly the only person pointing it out. But McArdle is at least amusing. It's amazing how many people still take Warren's manipulations as serious scholarship.
July 3, 2009 1:50 PM | Reply | Permalink
McArdle is a hack.
She is the only one, BTW.
July 3, 2009 2:25 PM | Reply | Permalink
We are obviously not going to be tearing down the insurance industry anytime soon. That may have as much to do with the manner and degree the industry feeds into the financial sector as anything. If we keep the industry in place and fragmented, but regulate and enforce to bring the various insurers into some national norm, the overhead costs will be greater than having a single payer program administering health practices in the US. We also lack the economy of scale and if need be exclusion necessary to negotiate lower prices from suppliers. We also lack the comprehensive control needed to try and bring local and regional cost anomalies in this sector in closer to the national norms. On top of all this there is a philosophical argument that 'products' in this sector should not be treated as commodities to be brokered and manipulated into more profitable products at the expense of excluding those at a financial disadvantage. With corporations as the primary vehicle for delivering health insurance, such gaming of the system is to be expected, even inevitable. These same corporations made promises along the lines of extending coverage and discontinuing the practice of rescinding coverage in 92-93 and failed to deliver on all counts. If we need to regulate the industry that closely to ensure they at least make a stab at behaving in the public's interest, what in the end is that but another version of the 'socialization' the right proclaims it is so wary of?
July 2, 2009 11:34 PM | Reply | Permalink
I think it's remarkable that we would be willing to build a fully parallel system of health insurance, costing us a trillion bucks, and not change the regulation structure of the existing private industry.
No, strike that, not remarkble.
Stupid, irresponsible and criminal.
July 3, 2009 11:36 AM | Reply | Permalink
July 3, 2009 2:08 PM | Reply | Permalink
Why should the insurance industry act in the public interest? They aren't responsible to the public, they're responsible to the stockholders, the people like you and I who ponied up the money to allow them to pay claims in the first place while premiums were coming in.
Americans have rights under the Constitution (although I don't see any references to health care). The "public" does not. The "public interest" is a sham concept, because the public doesn't agree on what its interests are (that's why we vote on things).
July 3, 2009 3:45 PM | Reply | Permalink
I for one don't expect insurance companies to act in the public interest, hence my position in support of a government funded single payer system. I'd be happy if we did have a national referendum on healthcare reform so we could actually 'vote' on the issue rather than leave it up to the lobbyists to determine what shape reform takes.
July 3, 2009 4:15 PM | Reply | Permalink
"Promote the general welfare" -- look it up.
Our founding fathers were bright enough to know that they couldn't spell out everything the country would need forever, so arguments like "I don't see that anywhere in the Constitution" are specious.
July 5, 2009 4:42 PM | Reply | Permalink
No, what's specious is stating that "promote the general welfare" does what you say it does. Without getting into Constitutional law proper, I can make the following simple distinction:
1. Congress has, pursuant to the Constitution, the ability to "promote the general welfare" within the bounds of their powers, as they see fit.
2. This says nothing about the rights of the people to health care (or, for that matter, "general welfare").
A general empowerment clause provides that Congress has the power to do things, it does not provide that there is any right inherent in the people that Congress do, or not do, any particular thing. "Promot the General Welfare" doesn't move the ball; it doesn't say ought or oughtn't. It just says "can".
July 6, 2009 3:08 PM | Reply | Permalink
Surely many of you remember the military base closings? Those were done as part of the "peace dividend", reducing the amount of "defense spending" that was obviously wasteful, just as health insurance companies are wasteful. Those closings cost a lot of people their jobs. Here in my city the economy took a very big hit, that took years to recover from. But, we did it. And, the same will be the case if we close down the wasteful insurance companies.
July 3, 2009 12:16 AM | Reply | Permalink
I do remember this. When the navy left Newport RI the general tenor of opinion was disaster had struck. The navy moved out, tourism moved in, and Newport thrives The principal differences: less tattoo parlors, less shops altering uniforms, and a lot more drunks in plaid bermudas. :-)
July 3, 2009 1:21 PM | Reply | Permalink
Hey Hoppy and Amike: The base closings commission seemed like the best way to deal with a necessary wind-down when it came to the military.
With so many interests that profit from a healthcare system as inefficient as the US system is, we will need to find a way to spread the pain when it comes to deciding who will get cut out.
Here is how Obama put it in a letter to Congress back in early June. (link at end).
To identify and achieve additional savings, I am also open to your ideas about giving special consideration to the recommendations of the Medicare Payment Advisory Commission (MedPAC), a commission created by a Republican Congress. Under this approach, MedPAC's recommendations on cost reductions would be adopted unless opposed by a joint resolution of the Congress. This is similar to a process that has been used effectively by a commission charged with closing military bases, and could be a valuable tool to help achieve health care reform in a fiscally responsible way.
http://www.whitehouse.gov/the_press_office/Letter-from-President-Obama-to-Chairmen-Edward-M-Kennedy-and-Max-Baucus/
July 3, 2009 2:10 PM | Reply | Permalink
Actually, the base closing commission was a very nice way for Congress to pass the buck on something they'd never be able to agree on themselves. It worked like a charm, although they went nowhere near far enough in closing bases, especially overseas.
Of course, the (regional) reasons the BCC was useful have no application to medicare savings...
July 3, 2009 4:38 PM | Reply | Permalink