Friday, July 24, 2009

Obama , Health Care, and Reality

Today, we learned that the House and Senate will not complete their work on the
Administration's Health Care proposals before the summer recess.

Commentators and other are suggesting that perhaps now is the time to pull back and "regroup" and rethink what to do next.

Mr. President, that's good advice. You need to remember that this is only the end of the first round, not the end of the fight.

But in the drive for "universal coverage" , let's understand why we're doing this - to REDUCE COSTS.

Mr. President, I think we can all agree that the current system is totally out of control. Health Care now constitutes one-sixth of the economy - up from one eighth of the economy just ten years ago.

To put this in perspective, this is a bigger share of the economy than either the auto companies or the banks you've just bailed out. And, if things are left unattended, we can see both the Health Insurers and Big Pharma lining up for a bailout as well.

What's worse is the fact that the BIGGEST driver of these increased costs is the complete breakdown of the cost controls on Medicare. While health care costs overall have increased six times faster than wages and eight times faster than the Consumer Price Index, Medicare costs have increased even faster. This isn't just out of control - it's the Mother of all Train Wrecks waiting to happen.

You are right - something has to be done. But what must not be done is more "business as usual".

The cosmetic tinkering at the margins that is likely to emerge from Congress is not going to get the job done.

Here, at a minimum, is what you have to do:

1) Get everyone into the pool. Everyone is familiar with the plight of the uninsured. But the uninsured aren't just low-wage workers or the unemployed - most are, in fact, young, healthy, employed workers
who "opt out" of employer-provided health plans to raise their take-home pay.

This has to stop. What you can do right away is make enrollment in employer-provided plans mandatory, or pay a Health Care Tax equal to the employee contribution. This will help get everyone in - and paying.

When folks literally have "skin in the game ", they are more likely to pay attention to the issue.

2) A Public Option. Your "Health Insurance Exchange" is a good idea -
but without a publicly-provided health care option, there will be no rational basis for comparison.

To abandon the field to the for-profit Health Insurers is to let the rent-seekers have complete control of the market.

In some states - Nevada, for example - only one or two of these rent-seekers have virtual total control of the health insurance market. A choice between two collusive for-profit providers is no choice at all.

A "public option" on the table keeps these folks honest. And why do I call the Health Insurers rent-seekers? Because that's what they are.

When you are under pressure from Wall Street for ever-increasing earnings, there's only one way to do this if you are a Health Insurer. And that is to raise prices and deny coverage at the same time.

That's what the economists call "rent-seeking". That means abandoning your role as a payer of benefits and becoming a path-blocking middleman focused on keeping as much of the premium dollar as you can legally get away with. And that's exactly what has happened.

Don't believe me? Just ask anyone you know who has suffered a catastrophic
illness or injury how THEIR experience with their insurance company was.
End of story.

3) Reform Medicare. Medicare now resembles nothing so much as an attempt to provide Cadillac care at Chevrolet prices. And as we now know, that can't be sustained for very long - if ever.

Medicare right now is based on an old-fashioned "fee-for-service" model.

And because the reimbursement rates are so low, there's every incentive for
providers to load up the tab with every possible test and procedure.
Even Part A and Part B supplements (hospitalization and drugs) paid for by the
enrollee don't help much.

Three things need to happen with Medicare to control costs - Capitation, Controlled Access, and Compensation for Outcome . What this means over time is transitioning to an HMO model.

Politically, it's going to be a tough sell. Seniors are organized. They vote.
And Grandma is used to seeing the same doctor she's seen for the last thirty years.

But then, we didn't elect you to do the easy things.
We elected you to do the tough things we couldn't do for ourselves.
And admittedly, this is one of the toughest.

But the good news is, there's a way to do it. You counterbalance the influence
of the retired elderly by adding some additional players to the pool.
You should immediately drop the eligibility age for Medicare from 62 to 55,
and then each year over the next five
drop the age limit one year until
eligibility is age 50.

This will add a cohort of working middle-age people to the Medicare pool
who are, for the most part, used to HMO/PPO plans and are relatively healthy.
You can no doubt come up with
financial and tax incentives to get them to
switch. It won't work for everyone - but for working empty-nesters, it
might be just the thing.

With a large enough pool of people in the system, you would finally have
a constituency for real change.

Finally you've got to grasp two big thorn bushes - not mere nettles - to
really make change happen. You've got to take on Big Pharma and
Big Tort Law.

One of the first things Congress did in reworking your proposal was to
deny Medicare the right to bargain directly with Big Pharma for the
lowest possible prices for name-brand drugs. This was nothing more
than a corrupt bargain between dollar-laden lobbyists and cash-hungry

Big Pharma knows what happened when Canada and all the other
industrialized nations negotiated for "lowest possible prices".
Their profit margins went down in those markets from the exorbitant
to the merely reasonable.

That's why gouging the American market is a matter of
financial necessity - Wall Street will not keep the investor dollars
rolling in and the stock prices up otherwise.

Eighty billion dollars in "soft-dollar" concessions over the next ten
years is not enough,. And you have the whip hand on this.

If you were Franklin Delano Obama, you'd get price concessions
right now - or you'd immediately revoke their patents and hand them
over to others willing to manufacture on government contract.
After all, it's what the Canadians did - and if you look at their prices and
formularies, they're much like ours - only cheaper.

Big Pharma - like any "Big" entity, listens to persuasion - but responds to threats.

And remember, what a government gives (patents, etc.), it can also take away.

Last, you've got to take on the Malpractice Lawyers. They are among the
biggest financial contributors to Democratic members of Congress.

And, you're a lawyer yourself. You know that the whole Tort and Malpractice
area needs drastic and immediate reform.

The way to do this is to take Medical Malpractice out of the court system and make it like Workmen's Compensation. Workmen's comp made it possible for employers not to be sued for workplace injuries. A Federal Malpractice Compensation Board might do the same for doctors, who, through no fault of their own, are obliged to either practice costly defensive medicine, get out of certain specialties, or avoid serving certain geographical areas.

Get where we're going with all this? To achieve reform, everyone's going to
have to give up something. Certain people's taxes may have to go up -
some types of care may have to be rationed - and the fattest for-profit
players may have to be brought into line.

But advanced societies are starting to regard health care as a public good -
like schools, roads, police and fire protection.

And public goods are things that a for-profit Capitalist system isn't
necessarily very good at delivering.

If matters are left unchecked, what we're heading towards is a society where
the Rich, the Connected, and subsidized Elderly have care - and the rest of
us are sick, uninsured, uncared for and nonetheless getting stuck with the bill.

That's not a recipe for National unity and cohesion.

- The Thinking Nationalist

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