Installment #11. Please read posts starting at 8/25/09.

In Conclusion

The nation is not in the midst of a healthcare crisis. The bubonic plague would be a healthcare crisis. Right now the country is simply more aware of its painful situation. We have reached a point where we can do more for more people. The question is, "Can we do it affordably?" To make healthcare affordable means to reduce the need for it and to reduce the cost of it. Reducing the need is significantly in the hands of the individual through choices in lifestyle and seeking appropriate preventive and palliative care. Unfortunately, unless everyone does this, the cost benefit to the individual is lost in the pool of all those insured. The prudent person has better health, but not lower costs because less health-conscious persons use the savings. A personal financial incentive is currently missing.

Reducing healthcare costs requires a national initiative to truly systematize the process of healthcare to improve: standardization of records and insurance coverages, exchange of best practices, transparency of information regarding provider fees and success rates, affordable training for additional medical personnel to treat a growing and aging population. Just one example would be the creation of a linked database of provider healthcare records so that any provider, anywhere in the country could access complete and current patient information when needed. Persons with privacy concerns could opt out or could carry their information on a computer chip in their wallets or key chains. It will take big steps to solve a big problem. Small enhancements will not make a material difference.

Solving the problem of extending healthcare to the uninsured requires mandating coverage regardless of existing conditions, government subsidy of premiums for low-wage individuals and families, and increased free public clinics. Some of this already exists, but expanding it requires the willingness of everyone else to pay more taxes so that all citizens can access at least a reasonable level of care. Limits on public-paid care will be required. Free care does not mean unlimited care. The price of free care will be a ceiling either on individual treatments or lifetime benefits. The public purse is not bottomless. It is sustained by the tax paying generosity of fellow citizens and the nation’s need for productive functioning.

Behind much of this discussion has been the assumption that the money pie is relatively fixed and that we must allocate it to different items, including healthcare. If healthcare needs a larger slice, then something else will get less. Another viewpoint is to grow the size of the money pie – our national wealth as individuals created through our earnings. If everyone was wealthier, more people could afford healthcare. The government would have more tax revenue without raising tax rates and that could fund more public healthcare. Such an increase requires the nation to increase its productivity which rests on the skills of the workforce and the availability of capital for investment. Perhaps the way to more healthcare is through a better educated workforce.

Finding the right balance of the five Cs of cost, control, content, contribution, and compassion will not be easy or quick. Rushing a 1,000 page bill through Congress in six months does not look like the way to a workable solution. Political urgency can produce poor social engineering because importance and urgency are not the same thing. Only with a shared frame of reference, a willingness to be more logical than partisan, and to be more practical than political, will we be able to find a better way. Is Congress capable of this? We shall see.

As we look forward, it may be useful to look backward in history. Thomas Jefferson had this to say about government: "The government is best which governs least, because its people discipline themselves." And Alexis deTocqueville, a marvelous observer of America in the early 1800's, said: "The American Republic will endure until the day Congress discovers that it can bribe the public with the public’s money." The more things change, the more they are the same.

Postscript

Over the years, I have experienced a lot of the healthcare industry as a consumer. I have had extensive family dealings with doctors, hospitals, private insurers, Medicare, and TennCare. I’ve dealt with insured and uninsured situations. I have been an employee and a self-employed business owner. The cumulative medical bills I have seen easily reach six figures. I have witnessed good medicine and poor medicine – both for the same price. Getting good care does not always come easy, regardless of your insurance situation. There is ample room for improvement so that a healthcare dollar buys more.

What have I ultimately learned?

• Stay as healthy as you can.
• Stand up for quality care for your loved ones.
• Always be insured.

Healthcare Installment #10. Please start with post of 08/25/09.

The Effect of Lawsuits on Healthcare

It is unquestionable that lawsuits have an effect on the cost and practice of healthcare. What is hard to determine is the true extent of that cost. Better data might be developed with some dedicated research. This is particularly true for the cost of malpractice insurance for doctors, hospitals, nursing homes, etc. Less easy to quantify are the costs for additional treatment and testing done as "defensive medicine." Studies of this have been very limited and not easily generalized to the entire healthcare industry (Kessler-McClellan 1996, GAO 1999, CBO 2004). As a result, statistics cited by different groups vary widely.

What is obvious is the cost of settled lawsuits. These range from thousands to billions of dollars. Large drug makers are particularly susceptible to huge damage awards as their products are used by millions of people and class-action lawsuits result in billion dollar settlements. Large insurance firms also are hit with large pay outs. Some of these are the result of jury verdicts, while others are settlements to avoid ending up in court with unknown outcomes. Doctors are also targets for suits, but settlements are lower because their ability to pay is limited. Insurers are sued for failing to authorize treatments, some of which are unproven, or for failing to compensate doctors and hospitals fairly. Nearly everyone can be sued for something.

Lawsuits and their settlements have very mixed effects. On the one hand, they compensate persons or families who have been truly harmed by poor medical practices. There is such a thing as bad medicine and doctors, hospitals, and insurers who provide it should pay a price. Classic stories like amputating the wrong leg, leaving surgical instruments in the patient, neglecting to turn patients to prevent sores, generally poor cleanliness leading to infection, etc. all show why lawsuits are needed. Conversely, piling people onto class-action suits where they have not personally suffered injury, but have merely taken a suspect drug, does not help the case for suing. Neither does the fact that some legal jurisdictions are favored by attorneys because of their inclination to be sympathetic to any claimant and to award large settlements. There is no "equal justice" because it varies widely from state to state. Ironically, the plaintiffs who receive the settlement may get only about half after paying for attorney and administrative fees. Thus, part of the cost of healthcare is not for medical care at all, but for legal expenses.

There is ample evidence that the legal costs of medicine are affecting both its price and its practice. The increasing cost of malpractice insurance is passed along in the form of higher bills to patients. Doctors admit to ordering tests just in case they might get sued. Some doctors, particularly obstetricians who find themselves sued more often, simply stop practicing or move to locales where their malpractice premiums are significantly lower by a factor of one-half or more. The result is no one to deliver babies in some locations. Doctors also stop prescribing drugs that are subject to lawsuits, even though the original benefit of the drug is unquestioned and may be highly appropriate for specific patients. Drugs whose overall medical benefits outweigh their side effects are forced off the market because of the high costs of legally defending them. Anyone can sue a drug company regardless of the merits of the suit and it costs the company money to defend itself. There are no penalties for meritless suits. Part of the cost of a drug is for its legal defense, or the defense of other drugs made by the manufacturer.

Unfortunately for all concerned, when a suit goes to trial, the jury may not be equipped to understand the case presented to it. Medicine, and the science behind it, is complex. Juries are made up of jurors who may have had one biology course in high school. That is hardly sufficient preparation for understanding complex surgeries or drug testing procedures. This can make it very difficult to weigh the conflicting claims of adequate science versus personal injury. The human cost may be all too real compared to the abstractness of the scientific testimony. Worse yet, juries may not be able to distinguish real science from "junk science." Junk science often alleges causation when the only connection is casual association. The debate over mercury in vaccines as a cause of autism represents this problem. Science is not perfect so that what seems true today may be replaced by a better understanding tomorrow and that also casts doubt on every case.

The fact that the medical profession has not done a particularly good job of weeding out poor providers or bad practices contributes to the number of lawsuits. Self policing by doctors, hospital agencies, and the drug industry are necessary, but apparently not sufficient. The fact that Pfizer was hit with a $2.3 billion fine by the government for unlawful drug promotion practices only reinforces negative perceptions of the profit motive within the healthcare industry.

There is little doubt that reining in the excesses of the legal system with regard to healthcare suits and settlements would lower the costs of insurance premiums and probably the use of some diagnosis and treatment procedures. Just how much that would save is uncertain. A good step in healthcare reform would be to study the situation to see what was being spent and what could realistically be saved before suggesting how to save it.

Healthcare Installment #9. Please start with post of 08/25/09.

Nationalizing / Socializing vs. Privatizing Health Care

In basic terms, "nationalizing" healthcare means having the government as the single payer that reimburses services provided by private providers. Private enterprise still runs the service sector. "Socializing" healthcare means the government owns the healthcare facilities and its employees (doctors, nurses) are on the government’s payroll. Failure to distinguish between the two leads to a lot of confusion about the extent of the government’s involvement in healthcare. To make matters worse, both can be referred to as "universal" healthcare. For example, Medicare is a nationalized system for post 65 yr. olds who can go to virtually any private provider. The Veterans Administration healthcare system is a socialized system – veterans go to a VA hospital. Some foreign countries have nationalized systems and some have socialized ones which complicates comparisons.

Persons advocating nationalized or socialized care have probably not read the newspapers in countries with those systems. Those papers report complaints about the problems inherent in such systems. Healthcare appears better on the other side of the border, regardless of which side you stand on. The more healthcare is "free," the more it will be used and the more difficult it can be to get. Private, for-profit practices spring up to fill a void in nationalized countries the way free clinics fill an opposite void in a private healthcare country. "Free" systems end up adding copayments.

It helps to keep in mind when making comparisons with other countries, the economic and political positions of those countries. The United States is the world’s leading democratic country, and as such, shoulders the burden for the defense of democracy. Whether or not you agree with U.S. policies, it nevertheless spends much more than other nations to extend an umbrella of protection over other democracies and to protect itself because it is the primary target of terrorists. Countries not devoting as much to national defense are able to use tax dollars/pounds/euros/yen for healthcare.

The move toward "N/S" healthcare (our term for nationalized and socialized) is driven in part by dissatisfaction with private healthcare insurance companies who control coverage payments. For-profit insurance companies, however, are not always the villains when they deny payment for certain types of healthcare. The insurance company serves all its members in two ways. The obvious one is by covering the cost of healthcare for members. The other is controlling the price the member pays for the insurance. Individually, we all want maximum payments for our bills. Collectively, we all want lower costs for our premiums. The two are not easily compatible. The insurance company is in the uncomfortable position of allocating the limited premium dollars to its members which inevitably means some limitations for some members. Many of these are spelled out in the policy and some are determined on a case-by-case basis.

While some premium dollars turn into profits for the insurers, it may not be a significant factor in the total cost to the consumer. For example, Healthcare Service Corporation (which operates Blue Cross Blue Shield programs in four central states) earned a profit of less than five cents on its premium dollar in 2008. This is not a remarkable level of profitability for any firm. Cutting the cost of operations of insurers by using simpler, standardized, industry-wide, electronic processes might achieve more cost reduction than arguing for lower levels of profitability. Cutting the salaries of the top executives in insurance firms is an example of administrative cost reduction. Unfortunately, while individual compensation packages may look large for a single person, the savings achieved is likely to be only a drip from the IV bag in terms of total costs.

Any time we join a group insurance pool for added protection against risk, we give up some of our individual control over the decisions for members of that pool. The policy lays out those limitations. It does not matter if the pool is government insurance or private insurance. Policy provisions are the rules governing pay outs regardless of whether they are administered by government bureaucrats or corporate bureaucrats. While private insurers have a profit to protect, government administrators are known to be unbending adherents to rules and regulations to avoid favoritism. In the end, one hardly seems better than the other. Persons who want complete coverage for all forms of healthcare will only get it by belonging to an insurance pool with very high premiums.

Coming to grips with the fact that a lifesaving treatment is cost prohibitive (from a societal point of view) when an individual’s life hangs in the balance is a problem many people would rather avoid than address, but it is central to the cost of healthcare. Economically speaking, who decides what care is given and received is determined by the combination of individual wealth and/or the policies of an insurance provider. The only way to keep your healthcare fate completely in your own hands is to have the money to pay for it yourself. Lobbying for the government to mandate total healthcare for everyone shifts the economic burden to the entire society through taxation, but that may be a tax burden too great for the society to bear for the benefits it receives. Medicare, as it currently operates, will not be able to sustain itself after 2019 according to a 2007 report by the Medicare Trustees.

Those who advocate for increased government involvement in healthcare bring pros and cons into the debate. A single-payer system such as Medicare offers some "systematizing" benefits that reduce administrative costs. However, any government program is subject to "corruption" by public and political pressures in a way no private plan is. An example of this is the addition of the prescription benefit to Medicare by Congress without any adjustment to the federal budget to pay for it. In short, to please the public, Congress added more debt to be paid in the future by the taxpayers. President Obama said exactly this in his town hall meeting in Colorado in August 2009.

When the government becomes a larger and larger participant in the healthcare marketplace as an insurer, it exerts pressure on the other insurers. One view is that this pressures private firms to hold down their costs. That may be true. Unfortunately, pitting private enterprise against government may not be a fair game because of inherent differences in the cost structure of each.

Increased government involvement in health insurance is the proverbial slippery slope. If instead of competing successfully with the government, private insurers fail, the government becomes the dominant insurer/purchaser. The market now has a monopoly purchaser of services who can dictate terms to the providers. This is called a "monopsony." Eventually the private providers work only for this one customer. At that point, it seems unnecessary to separate the insurer from the providers and in the name of efficiency, the government takes over the suppliers. At this point, "nationalized" healthcare becomes a "socialized," government paid, government run enterprise. Private suppliers exist on the fringe providing services to those individuals with the personal financial resources to buy their own supplemental care. This scenario is what opponents of expanded government dread. In it they see the rise of big government and the death of personal control of healthcare. The inability to predict this future makes proving or disproving this possibility nearly impossible and stymies the resolution of the healthcare problem.

In the free enterprise system, the role of government is to regulate the marketplace, not to be a participant in it. Virtually every entitlement program (Social Security, Medicare, etc.) costs more than projected when it was passed, grows with the addition of more benefits over time, and either leads to increased taxes or debt. Social Security, when passed, set 3% as the tax on personal wages and employers effective in 1948. Today that rate is 6.2%. Tennessee’s version of Medicaid (TennCare) began in 1994 with a budget of $2.6 billion. Ten years later it cost $8 billion – about one-third of the entire state budget. The number of insured parties remained fairly constant around 1.3 million persons, or about 1 in 4 residents. In 2005, the program went through massive change because of its unsustainable cost. Good intentions created mixed effects on the road to expanded healthcare.

Gains in administrative costs achieved in N/S healthcare systems, can be negated by the political expansion of benefits. We end up spending more than we save. For that reason, more direct government intervention in healthcare does not seem like a long-term, cost-effective solution. Finding ways to increase the efficiency and reduce the costs of private healthcare would seem to be a way to achieve the gains without the political problems.

Healthcare Installment #8. Please start with post of 08/25/09.

Immigration and Healthcare

A sore point with some taxpayers is the use of government funds to provide healthcare for immigrants. There are two kinds of immigrants – legal and illegal. Legal immigrants are supposed to be supported by their sponsors so that they do not need government healthcare. That has been government immigration policy since the founding of the republic. In practice, it does not always happen that way. Illegal immigrants, by definition, fail to meet that requirement.

The result is that less-educated, lower-earning immigrants (more illegal than legal) place a burden on healthcare because they cannot afford to pay for it themselves. The nation gets the benefit of cheap labor that lowers consumer prices, but at the cost of subsidizing some immigrants’ healthcare. It is unrealistic to expect sick immigrants not to want medical care and to get it if they can. We are all human. The solutions to this burden on healthcare costs are to clamp down on immigration or to help immigrants earn wages where they can pay for their own care. The former solution would appear to be much faster to implement than the later.

Paying for Healthcare

Solutions to the healthcare problem are many and varied and endorsed and denied by various groups. One reason for this diversity is the variation in the prices paid depending upon who does the paying. What you think may depend upon how you get and pay for your coverage. Here are some examples.

Uninsured individuals, who can least afford high prices, are charged the highest retail rate for services. (Some providers do give discounts to the uninsured, but not the equivalent to the discounts they give large insurers.) Uninsured people fall into four groups:

• Ones who pay their own way.
• Ones who get some form of government or charitable support.
• Ones who get service and simply do not pay for it.
• Ones who do without.

Insured parties get a better price, the savings being proportional to the influence of the insurer in the negotiation process (Medicare vs. Blue Cross Blue Shield).

• Employees of many larger employers have a larger portion of their premiums subsidized by the employer.
• Employees of small employers pay a larger percentage of a larger premium (more total dollars) because small employers lack the bargaining muscle to get lower premium rates.
• Self-employed persons pay the entire premium, providing they can find an insurer to cover them.

The end effect is that the same medical services are paid for at vastly different rates causing issues for both the providers trying to do the billing and the patients trying to pay the bills. Everyone from individuals, to employers, to insurers, to providers has incentive to shift the cost to the other parties in the process. This is the reason some people fear that companies would drop insurance coverage if the government offered an open-ended program. Unless maintaining insurance provides a competitive benefit by attracting better workers or retaining healthier ones, firms will transfer the cost of healthcare to the government, and thus the taxpayers. Cost and coverage still serve as incentives for employees to switch from smaller to larger employers.

So, who really pays what for healthcare?

• Individuals pay some or all direct costs and premiums depending upon their employment and insurance status.
• Employers pay a varying amount of premium charges.
• Taxpayers pay for those covered under government programs (Medicare, Medicaid).
• Contributors to charity pay for the indigent.
• Healthcare providers who donate services pay for the indigent.
• Healthcare providers who are not paid for billed services in effect make a charitable contribution to the non-payers.
• Users of healthcare providers pay "extra" to make up for those who do not pay at all (just like paying shoppers pay for shoplifters).　

The government acts a charitable intermediary on behalf of society to provide care for those unable to pay. Ultimately we pay directly as individuals for our own care, or indirectly through taxation, charitable giving, or "upcharging." for the care of others. Only people who pay no medical bills, pay no taxes, and give nothing to charities get truly free healthcare. Everyone else pays. The questions are:

• "Who should get charitable support?"
• "How much should they get?"
• "What is the fairest way to do so?"