Some Thoughts on Health Care

Everyone had a good laugh when President Trump suddenly announced that “no one knew how difficult health care was going to be” but it may be (unintentionally) the most truthful thing he ever said. Obamacare was a partial solution that reduced the rolls of the uninsured by raising the numbers in Medicaid, creating state exchanges for some, and requiring health insurance for young, healthy individuals who did not want it (or “taxing” them, per the Supreme Court). The Republican’s AHCA is so full of holes in barely merits consideration.

The problems of Obamacare are obvious.  Greatly increasing the number of people on Medicaid without increasing the number of doctors accepting Medicaid reimbursement meant theoretical health care, if at all, for many of the poor and sick. State exchanges turned out to be successful as long as federal reinsurance for providers and federal subsidies for consumers were guaranteed to continue to increase indefinitely. And counting young, healthy people as “insured” with a product they never wanted is a unique approach to accounting. So if all this was pretty predictable, why did the Obama administration try it? Why didn’t they go for a single payer option? Federalize healthcare? And why are the Republicans so unprepared to replace Obamacare, if they knew it wouldn’t work and had seven years to prepare to replace it?

“Facts are stubborn things,” as John Adams once said, and here are several facts about health care in America that must be faced directly if we are ever to make any real progress.

  1. Insurance is not health care. Offering insurance where no health care providers participate is a sick joke. This is the challenge of enlarging Medicaid any further. It was also the challenge undermining the state exchanges, where health care providers are leaving because they can’t make enough profit to justify being in the market. Unless you are willing to “draft” our existing health infrastructure into federal service, you have to address the profit motive, and health care supply and demand. Doctors and hospitals (even non-profits) are a limited resource. Those who still desire to federalize health care need look no further than the VA for a probable outcome, and the TSA for a worst case scenario.
  2. More Americans get their health care through their work…still. Many policy types hate this fact, and it does cause the complication that those who lose their jobs also lose their health care. But it is a stubborn fact that can not be ignored, and should not be changed just because it is inconvenient to the good ideas of policy makers. Health care has been, and remains, one of the various benefits employers use to attract employees.
  3. Appeals for empathy are part of the problem, not part of the solution. Attempts to portray any new idea or policy as “killing grandma” simply ensure nothing will change. Hard cases like the “Jimmy Kimmel” challenge are a case in point. To remind, Kimmel’s newborn son had a congenital heart condition who required emergency surgery to survive. He cited this case as an example of the horror awaiting the poor who don’t have their children born at expensive, private hospitals. Perhaps he is unaware of the Emergency Medical Treatment and Labor Act (EMTLA) of 1986, which requires public hospitals to provide life-saving emergency medical care without payment/insurance. So his hard case is already covered in law. Such appeals only provide more smoke and heat, but rarely shed any light.
  4. Americans are unwilling to adopt healthy lifestyles, and unwilling to accept anything that smacks of health care rationing. This is my most debatable “fact,” but one I think most would admit. Too many American’s approach to health seems to be “leave me alone to eat and drink as I like and do no exercise, but be there with a wonder drug when something goes wrong. If things get worse, continue trying to make me better or just keep me alive no matter what.” In some respects, this is like the economic concept of inelastic demand, in that the health consumer wants the best regardless of cost. Unfortunately, this results in poor health outcomes, elevated costs, and a miracle pill mentality.
  5. Insurance is a tool that covers catastrophe, period. The concept is you get insurance to cover unforeseen costs which would otherwise be unpayable. If you try to use insurance for more than that, you are misusing the tool, which will backfire. Car insurance covers your catastrophic loss, or repairs if your car is damaged and unusable. It does not cover fuel, or oil changes, or new tires. These are all good things to have for your car, but not for insurance to cover. Why should health insurance cover routine or non-emergency health care issues?

Here is where those facts lead, pointing to the beginning of a solution:

  1. Accept that many Americans will work, and most will get their health care through their jobs. Do not fight this legacy: treat it as a feature, not a bug. Plug the gap that exists when people leave a job by allowing them to continue their previous insurance at a greatly reduced rate for a period of one year (maximum, not extendable), with the government picking up most of the insurance tab, like a low-cost version of COBRA. This would also facilitate workers changing jobs and careers, which would enhance mobility. The federal government should also establish certain minimum standards for work-provided health insurance, so it does not turn into a bare bones offering which ends up sending workers to emergency rooms for treatment.
  2. Promote policies which increase access to health care. Remove limitations on health care provided across state lines. Enhance tuition assistance for medical professionals, including reimbursing student debt for those who agree to work in high-need areas or accept Medicaid reimbursement. Provide tax breaks to groups sponsoring wellness and walk-in clinics addressing preventive medicine and routine care. None of these is a panacea, but they are a start at getting more points-of-service for more people.
  3. Establish a national, catastrophic health insurance program. Everyone is automatically enrolled, but this is the ultimate safety net for those who are one day healthy and the next day near death, as well as those with lingering, debilitating conditions. If you have private insurance or can afford to cover your own costs, you are welcome to do so. Run it as an offshoot of Medicaid, with strict rules on what is covered and how service is rationed.  Yes, I said it, rationed. Even those who laud health care in Canada or the UK must admit they ration care.
  4. Attack health care cost inflation. Limit the opportunity to sue for medical malpractice and the potential damages, perhaps by direct legislation or placing a significant tax on law firms which profit from the same. Slap a windfall tax on excessive profits for health care providers, medical professionals, or pharmaceutical companies; they can avoid this tax by providing low- or no-cost goods/services to poor Americans. Incentivize average Americans to make full use of preventive care by offering a generous tax credit to those who complete a set of routine tests/services (blood test, flu shots/immunizations, blood pressure, physical, etc.,) annually. Consider additional incentives in the form of government payments into health savings accounts for those who address significant health issues (lose 40 lbs, get $ in your HSA). Empower hospital emergency room physicians to reject non-emergency cases; penalize Americans who use emergency rooms for such care by withdrawing their HSA incentives. The emphasis here is to get Americans to try to stay healthy, mitigating future costs for treatment/prescriptions.
  5. Incentivize states to be the laboratories for new health care policies.  Given all the preceding recommendations, there are still gaps for people out of work with health care issues that are neither life-threatening or debilitating. Different states may want to address that gap in different ways. Provide states with block grants that reward programs which identifiable health outcomes (not outputs). Encourage other states to copy successful programs, and defund programs which do not produce such outcomes. If California wants to provide single-payer for its residents, good for them; maybe we can all learn something from that.
  6. Bury, once and for all, the notion of a US-wide single payer system. Countries which have such systems are struggling to pay for them, they ration care, and they have poor deployment of innovative medicine.  While the existing US system is sometimes described as heartless and Darwinian, it still produces the greatest array of medical and pharmaceutical innovation in the world. The trick is to retain the benefit of such innovation, while finding a way to reduce the uneven access to good health care at a reasonable cost. Single payer is not the way there.

I have not submitted these concepts to the CBO for a cost estimate, but there is much here to chew on, and I believe it could be tweaked to come in at a reasonable cost. The status quo pre-Obamacare was morally unacceptable; the status quo today with Obamacare is financially unacceptable.  The Republicans attempt to repeal and replace Obamacare is DOA mostly because they tried to do it through an obscure Congressional process known as “reconciliation” which limits what could be in the legislation. You can not fix a comprehensive issue with a limited tool kit. The Republicans need to leave Obamacare alone, fully funded as-is for the next two years, and start over with a complete re-work. During those two years, the successes and problems of Obamacare will be evident to even the most ardent partisan, and can inform the development of a bipartisan way forward.

3 thoughts on “Some Thoughts on Health Care”

  1. So how do we get your well thought out ideas to those who could do something about the problem–and then how do we get those people to put politics aside and get on with improving an increasingly serious problem?

    1. On the first point, feel free to forward them to your representatives in Congress. On the second point, all we can do now is pray!

      1. Pat:
        Interesting ideas, but I think you miss some of the the key points. I won’t go through all that you wrote but I have some thoughts on this.
        The ACA (Obamacare) has worked out well for many people, especially those in states where they have linked Obamacare with Medicaid. The major complaint is from those people (probably about 3 million of the 20 million plus who have Obamacare), i.e., those who do not get subsidies and where there is often only one provider. That could be fixed, but certainly not with this Congress, which right now (23 June 2017) wants to gut Obamacare and replace it with Trumpcare so they can give about billions in taxes back to the really wealthy—those taxes were used for subsidies. Is that unfair or correct? Depends on your point of view and how you view the US as a community. Plus, if you looked a few months ago at the rise in rates for the ACA, in some places, rates barely budged. The hue and cry over the ACA is mostly about those places where insurers have left and many are definitely leaving or raising their rates because Trump has been coy about whether or not the subsidies will continue. And those who did not get subsidies because they made too much (even if only by a dollar)—they are ones who are complaining rightly about cost. This could not have been fixed under Obama with a Republican Congress. The goal is to kill Obamacare, not make it work better.
        On the issue of having health care across state lines, see the following from the LA Times (http://www.latimes.com/business/hiltzik/la-fi-hiltzik-insurance-state-lines-20161114-story.html). You can have health care across state lines—it not forbidden in the ACA, but there are economic reasons for there being so little of it (emphasis added):
        The key is that healthcare is almost always delivered locally. Even if a Southern Californian’s insurer is located in, say, Idaho, his or doctors and hospitals are almost certain to be nearby. To provide coverage, Joe’s Insurance would have to make network deals with local providers in its new markets, creating its own local networks and agreeing on fees.
        The typical tradeoff in such deals is that Big Insurer A promises Hospital B access to its thousands of local enrollees, if Hospital B agrees to treat them at a preferential rate. Mayhew, who does this stuff for a living, tells us: “Insurers have leverage against providers when the insurer can credibly promise to direct a large number of covered lives to or from a particular provider. Providers have leverage when they don’t think that the insurer is bringing a lot of members.”
        Insurers entering a new state from far away will have no leverage because they’ll be building their customer base from scratch. They’ll be able to offer only minimal business to hospitals or doctors in their new state. They’ll have to pay premium rates to attract these providers, at least at first; yet to attract customers they’ll have to offer competitive premiums.
        Multi-state networks do exist in some places, chiefly metropolitan areas that span several states; an insurer in the Washington, D.C., market needs to offer a network of doctors and hospitals in the District, Maryland and northern Virginia, for example.
        Everywhere else, offering high reimbursements to sign up doctors and hospitals and low premiums to sign up customers is a formula for big losses. One could argue that such a loss-leader strategy might work in the long run, but big U.S. insurers such as Aetna and United Health have shunned the loss-leader game under Obamacare — they’ve pulled out of the market because they’re unwilling to sustain losses until it stabilizes. What makes anyone think they’d jump back in?
        We know the answer: They won’t. We know because the ACA already allows states to reach compacts with other states to allow cross-border insurance sales (compacts are essentially interstate treaties). Georgia, Maine and Wyoming have passed laws enabling such compacts. No other states have joined them, and not a single insurer has expressed any interest in taking advantage of them. According to the Urban Institute, Georgia’s law permits insurers to sell policies that have been approved in other states, and Maine’s law allows the sale of policies approved in Connecticut, Massachusetts, New Hampshire, or Rhode Island.
        On your point 3 on appeals to empathy, the case of Jimmy Kimmel is instructive. Yes, his kid would have gotten life-saving care with the ACA, but the following ongoing care could bankrupt a normal person. That is not considered emergency, though it might seem so to a parent.
        But with the ACA, smaller rural and community hospitals have survived, because the emergency care they give is no longer uncompensated, at least for those covered by the ACA. Many of these smaller hospitals and clinics will likely go bankrupt otherwise. The commonwealth Fund (http://www.commonwealthfund.org/publications/issue-briefs/2017/may/aca-medicaid-expansion-hospital-uncompensated-care) has noted that:
        Uncompensated care burdens fell sharply in expansion states between 2013 and 2015, from 3.9 percent to 2.3 percent of operating costs. Estimated savings across all hospitals in Medicaid expansion states totaled $6.2 billion. The largest reductions in uncompensated care were found for hospitals in expansion states that care for the highest proportion of low-income and uninsured patients. Legislation that scales back or eliminates Medicaid expansion is likely to expose these safety-net hospitals to large cost increases. Conversely, if the 19 states that chose not to expand Medicaid were to adopt expansion, their uncompensated care costs also would decrease by an estimated $6.2 billion.
        On point 2, yes most people get their health care through work, but letting people get decent health care without working for a company of the govt allows them to go out on their own and be more independent, even entrepreneurial. Some of this has taken place, but will decrease under the Republican plan, if enacted.
        Agree that healthy life styles matter, but some people just get sick at any age (cancers, heart problems, diabetes, etc.). What do we do about them, especially if their illness is not an emergency? If it is not, then they can get treatment but at enormous cost. Just look at the problems today of paying for insulin.
        I know you think that catastrophic insurance is what we really need. But there are lots of conditions short of catastrophy that many people cannot afford. Even co-pays are more than most people can pay. The Federal Reserve noted in 2015 that almost half of people surveyed could not easily come up with $400 for an emergency (https://www.federalreserve.gov/econresdata/2016-economic-well-being-of-us-households-in-2015-Economic-Preparedness-and-Emergency-Savings.htm) and many cited having health emergencies in the previous year. I note that even in Mexico, you shelled out about $400 for some procedures (and I hope you are doing well). Many people cannot do that easily. WE forget, having lived in the DC bubble
        Finally, states as laboratories for health care. Yes. That is how we got the ACA, originally developed in Massachusetts under Romney, when he governed as a technocrat.
        Any way, you and Judy keep well and enjoy Mexico. Sorry to have missed your going away ceremony.
        Best,

        Joel
        PS we have moved—now at 4312 Victoria Lane, Alexandria, VA 22304, just 2 miles from our old house.

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