Having posted extensively about health care on this blog, and being motivated to improve government by the dismal work I saw going on in Congress, I took it upon myself to run for Congress in 2010. I knew that I couldn't philosophically be a Democratic candidate and the Republican party apparatus already had a favorite. Therefore, since I am an independent person anyway, I ran as one.
With the tiniest bit of research, it is easy to discover that independents do not get elected to the U.S. House. Thus, I knew from the outset that expecting to win would be delusional on my part. As a result, I directed my efforts to setting forth items for the voting public to consider as essential to good government. My primary campaign tool was my campaign web site (which is now gone).
My other aim was to visit the election process from the candidate's side of the ballot and learn more for myself about how campaigns and elections really work. Just how hard is it to run for national office? I succeeded more with this task than getting the issues before the public. Here's what I discovered.
It's not that hard to get on the ballot. In my case, it took 25 registered voter signatures on a petition form. The election people were very friendly and made a big point of saying to get extra signatures because not everyone who thinks they are registered really is. It does take some personal courage to ask people to sign your petition. You do need to think about your campaign finances. If you keep your spending and your fund raising each under $5,000 you do not trigger the reporting requirements of the Federal Election Commission. Go over those amounts and you are in for a mountain of disclosure about your personal and campaign finances. I opted to stay well under the trigger. But, as you will see shortly, if you do, you will never win.
As an independent 'You don't get no respect.' All the press coverage and speaking invitations go to the two major party candidates. I suppose if I had pushed, I might have gotten on some platforms with them because some other independents did. The League of Women Voters (praise be upon them) invited me to two of their forums, a Tea Party group to one, and a college radio station to one. Chambers of Commerce ignored me despite the fact that I belong to one outside my district and am a small businessman. Go figure.
Voters buy the brand. It seems to be a foregone conclusion that independents have nothing to offer, or what they are offering is too extreme to be electable. Voters, therefore, pay attention to the two main candidates after the primaries are over. If you want to get elected, you must go through one of the two parties to get there almost without exception. Despite the recent push by the Tea Party, there is no organized alternative to the Democrats and the Republicans.
Money buys office. I am sad to say this, but it takes loads of money to get your message out. Whether it is flyers, roadside signs, or TV ads, unless you are willing to be a heavy spender, you aren't in the race. That translates into something else. It means that either you invest your personal fortune (e.g., Meg Whitman in CA), or you raise lots of contributions or both. In the former case, only the rich can run for office. In the later case, only the well-connected, or the soon-to-be-beholding can run for office. Translation: national public office is out of the reach of the average person (local office is not). We might like to pretend it is not, but the presence of 170 lawyers in the U.S. House would suggest the odds are against it.
You gotta have an ego. This is not necessarily a bad thing. Serious campaigning requires a lot of time and energy. You've got to want the office and you've got to believe you are the best person for it. Plus, you've got to take some hammering from the opposition. In my race that never got out of hand, but in some other local races it was disgustingly nasty. Really low ball stuff. If you beat your spouse, cheat on your taxes, default on your loans, or toss trash out your car window, plan on it coming out. The one good thing about being a lowly independent is that no one cares enough to dig and dish dirt on you - not that there was any, mind you.
Voters are concerned with the immediate, press-fed concerns of the day. It does not matter that the current hot buttons like immigration, term limits, etc. are not as serious as longer term issues like oil shortages and fiscal failure of the government. The voters get hyped up over pet peeves and popular concerns. Some of the ones who get hyped get active and this election that took the form of the Tea Party. The energy was great and some of the concerns well founded, but worries about 2nd amendment rights (gun control) and a return to a late 1700's government really did not serve the forward progress of the nation. The big issues of tomorrow just don't catch on compared to the popular issues of today. The one big exception this election was fiscal responsibility. What I project this to mean is that we will have government by crisis and not by foresight. The mounting debt, Social Security and Medicare, oil supplies and prices, global warming, etc. which are major long-term issues won't be acted upon until it is literally too late. That's so scary even I don't want to think about it.
When you run for office you become popular with two groups. The first are the election sign printers. You'll get postcards aplenty from them. The second are all manner of organizations with surveys they want you to fill out. Many of these are poorly-concealed attempts to force you to either adopt their position or look like a jerk. The one good one was from VoteSmart and I answered it.
It may turn out that you are no dumber than the other guys. If you are a novice seeking office, you might think that your competition has a head start on you regarding the issues. Think again. If you do some research on important topics, you can stand tall when you talk. As an example, the Democratic candidate did not seem to know the difference between the annual deficit and the accumulated debt of the government. This wasn't his first time running for the seat. (In all fairness, I never put the question directly to him, but his remarks suggested this was true.)
I'll leave it at this for now. Maybe I'll have more reflections later. Pose a question in the comments if you are curious about something specific.
Saturday, November 6, 2010
Thursday, February 18, 2010
In Debt in a Big Way
By now, most of us know that debt is a problem for our country. The first obvious sign was when the savings rate dropped to zero in 2005. That meant consumers were spending more than they were making. The trend had been downward for quite some time. The dip below zero was the cough of the canary in the coal mine. (For non miners, canaries were used to test for lethal levels of ordorless gas in mines - if the bird died, it was time to get out quickly.) The drop in the savings rate was accompanied by the rise in people taking on mortgage debt they could not afford. That led to the really big crisis in the housing market and the subprime loan disaster with its consequent foreclosure binge. The effects of that are still lingering despite government attempts to help home owners renegotiate mortgages. After one year in operation, about 0.2% of the $75 billion to help that happen has been deployed in the market. So much for government help for homeowners.
In the press lately is the government's debt level. It has been escalating dramatically. It was driven upward in the Bush years by ill-conceived tax cuts and two "off-the-books" wars. To the new administration's credit, they have moved the cost of war back on the books where it belongs. The debt continued to grow with the TARP program to bail out the banks who help bring us the mortgage fiasco (egged into it by Congress and the Community Reinvestement Act provisions and administration). Most recently, it has been further compounded by the stimulus bill, aka, the American Recovery and Reinvestment Act (ARRA). Add to this a decline in tax revenues from the deprecession and the deficit situation worsens. In the past ten years we have gone from a budget surplus to continually escalating government deficits. The national debt has tripled from $4 trillion to $12 trillion. Sadly, the trajectory upward looks to be continuing.
The federal government is now feeling some of the pressure that state governments have felt. Many state governments are required by their state constitutions to maintain a balanced budget or a surplus -- no deficit spending. As a result, they must cut expenditures (services) or raise taxes. The newly elected governor of New Jersey is on a crusade to do this with a venegence necessary to save his state. California seems to keep dancing around its equally hard facts of fiscal life. Many states have survived the last year or so due to the stimulus funds provided to them by the federal government. This is so brutally ironic that it seems unthinkable.
The states cannot run a deficit. The feds can. The feds create a deficit and give the money to the states. This is back door deficit financing for the states. It is beyond absurd. All this money needs to be recovered at some point from the taxpayers. It matters not if it comes from state or federal taxes with the exception that the different taxation systems may redistribute who ultimately pays the lion's share.
The ultimate meaning of all this is that the government has been living beyond its means just like the overmortgaged homeowners were. The size of the debt is about to become like the little puppy who grows up to be the 150 lb dog that pulls the owner down the road. The government's answer is to keep on running deficits. All this does is postpone the inevitable and guarantee the payback will be bigger and harder tomorrow than it is today. More and more it appears our choice will be between a depression today or an all-out collapse in the not-so-distant future. This is not a problem for our grandchildren, it is our problem now.
Tack onto this the huge amount of the budget consumed by Social Security and Medicare and the problem expands even more. The influx of baby boomers into these two programs will place demands on them they are unable to meet financially. This becomes an economic perfect storm. The government cannot practically fund these programs at their current levels for the incoming recipients (even without the added pressure of current and future deficit spending). Given the lack of retirement savings rampant in the USA, it looks like the next 30 - 40 years will see the return of "poor old folks" who move in with their children to survive. We will go from "boomerang kids" to "boomerang grandparents."
The book, "Comeback America" presents a good picture of what is happening to our debt and what can happen to our country because of it. It will be painful to reign in spending, but many Americans must radically change their view of government from the omnipotent overseer and benefactor of the populace, to a barebones protector of state security, personal freedom, and facilitator of fair-handed commerce. We simply cannot afford the government we have because we have been buying it on credit.
In the press lately is the government's debt level. It has been escalating dramatically. It was driven upward in the Bush years by ill-conceived tax cuts and two "off-the-books" wars. To the new administration's credit, they have moved the cost of war back on the books where it belongs. The debt continued to grow with the TARP program to bail out the banks who help bring us the mortgage fiasco (egged into it by Congress and the Community Reinvestement Act provisions and administration). Most recently, it has been further compounded by the stimulus bill, aka, the American Recovery and Reinvestment Act (ARRA). Add to this a decline in tax revenues from the deprecession and the deficit situation worsens. In the past ten years we have gone from a budget surplus to continually escalating government deficits. The national debt has tripled from $4 trillion to $12 trillion. Sadly, the trajectory upward looks to be continuing.
The federal government is now feeling some of the pressure that state governments have felt. Many state governments are required by their state constitutions to maintain a balanced budget or a surplus -- no deficit spending. As a result, they must cut expenditures (services) or raise taxes. The newly elected governor of New Jersey is on a crusade to do this with a venegence necessary to save his state. California seems to keep dancing around its equally hard facts of fiscal life. Many states have survived the last year or so due to the stimulus funds provided to them by the federal government. This is so brutally ironic that it seems unthinkable.
The states cannot run a deficit. The feds can. The feds create a deficit and give the money to the states. This is back door deficit financing for the states. It is beyond absurd. All this money needs to be recovered at some point from the taxpayers. It matters not if it comes from state or federal taxes with the exception that the different taxation systems may redistribute who ultimately pays the lion's share.
The ultimate meaning of all this is that the government has been living beyond its means just like the overmortgaged homeowners were. The size of the debt is about to become like the little puppy who grows up to be the 150 lb dog that pulls the owner down the road. The government's answer is to keep on running deficits. All this does is postpone the inevitable and guarantee the payback will be bigger and harder tomorrow than it is today. More and more it appears our choice will be between a depression today or an all-out collapse in the not-so-distant future. This is not a problem for our grandchildren, it is our problem now.
Tack onto this the huge amount of the budget consumed by Social Security and Medicare and the problem expands even more. The influx of baby boomers into these two programs will place demands on them they are unable to meet financially. This becomes an economic perfect storm. The government cannot practically fund these programs at their current levels for the incoming recipients (even without the added pressure of current and future deficit spending). Given the lack of retirement savings rampant in the USA, it looks like the next 30 - 40 years will see the return of "poor old folks" who move in with their children to survive. We will go from "boomerang kids" to "boomerang grandparents."
The book, "Comeback America" presents a good picture of what is happening to our debt and what can happen to our country because of it. It will be painful to reign in spending, but many Americans must radically change their view of government from the omnipotent overseer and benefactor of the populace, to a barebones protector of state security, personal freedom, and facilitator of fair-handed commerce. We simply cannot afford the government we have because we have been buying it on credit.
Tuesday, November 10, 2009
What are we fixing with healthcare reform?
The House has passed its healthcare reform bill. The Senate has one out of committee. The two don't match. Why can't the members of Congress agree on what to do?
One reason is that we have apparently rushed to "reform." Reform what? Who has been the voice to ask "What is the problem?" or "What are the problems?" or even "What should the ideal future look like?"
Instead, it seems like individuals have their pet peeves with items under the umbrella of healthcare. We need tort reform? That's a fix. What's the problem and its cause? Some would say that lawsuits are too costly and drive up malpractice insurance costs. Ah, here is a cause for the problem lurking below the solution. How about another problem? We must reduce unnecessary medical procedures. Oops, that's another fix. What's the problem? Is it fear of lawsuits causing doctors to cover their unclothed hospital behinds (a problem every patient can relate to)? Ah, yes, another cause pokes it heiny out. But wait, is it the real cause? What about the poor coordination and information sharing among medical providers that causes duplicate testing ("We only trust 'our lab'"). Do we have more than one cause for the same problem? If so, which solution do we use, or do we need multiple solutions? Are these even the top priority problems? No. They are merely easy examples of what seems to be a non-systematic approach to the entire issue.
The rush to fix a system that is suboptimal is overdone. The current system may be imperfect, but it is not on life support. It seems unbelievably optimistic that legislation hammered out in a matter of a few months will effectively deal with such a mammoth and complex issue as healthcare. Particularly when it is brought to us by the same body that cannot make Medicare financially viable in the near future.
Even the terminology belies the insufficiency in the approach. People talk about healthcare "reform." You can "reform" a lump of clay, but it is still clay. You can "reform" an alcoholic, but he is still an alcoholic. You can reform healthcare and simply substitute one symptom for another. What we need is healthcare "improvement." Reform can be worse than the current situation and still be reform. This isn't just picking on terminology, it goes to the whole perspective being applied to the effort.
Bob Corker, the senator from Tennessee, made a short statement on TV news. He correctly pointed out that the current bill is hugely deceptive in its costing. The revenue support portions are due to start immediately to pay for the program, while the actual program itself does not begin for four years. Ten years of revenue vs. six years of costs is blatant distortion of the operating costs for this legislation. How can any reasonable Congressperson subscribe to this mockery of intelligent administration? No one in business could do this without being labeled a fool or a liar. This is nothing short of political camouflage for fiscal irresponsibility of the worst order. And, if I have this correct, Congress will maintain its own independent healthcare coverage after they "reform" it for the rest of us. A dose of its own medicine might cause it to cough up a more realistic result for everyone. Tell your Congressperson you want Congress to participate personally in the reform by using the system it creates. While you are at it, ask them to list the problems they are fixing and the causes of those problems.
One reason is that we have apparently rushed to "reform." Reform what? Who has been the voice to ask "What is the problem?" or "What are the problems?" or even "What should the ideal future look like?"
Instead, it seems like individuals have their pet peeves with items under the umbrella of healthcare. We need tort reform? That's a fix. What's the problem and its cause? Some would say that lawsuits are too costly and drive up malpractice insurance costs. Ah, here is a cause for the problem lurking below the solution. How about another problem? We must reduce unnecessary medical procedures. Oops, that's another fix. What's the problem? Is it fear of lawsuits causing doctors to cover their unclothed hospital behinds (a problem every patient can relate to)? Ah, yes, another cause pokes it heiny out. But wait, is it the real cause? What about the poor coordination and information sharing among medical providers that causes duplicate testing ("We only trust 'our lab'"). Do we have more than one cause for the same problem? If so, which solution do we use, or do we need multiple solutions? Are these even the top priority problems? No. They are merely easy examples of what seems to be a non-systematic approach to the entire issue.
The rush to fix a system that is suboptimal is overdone. The current system may be imperfect, but it is not on life support. It seems unbelievably optimistic that legislation hammered out in a matter of a few months will effectively deal with such a mammoth and complex issue as healthcare. Particularly when it is brought to us by the same body that cannot make Medicare financially viable in the near future.
Even the terminology belies the insufficiency in the approach. People talk about healthcare "reform." You can "reform" a lump of clay, but it is still clay. You can "reform" an alcoholic, but he is still an alcoholic. You can reform healthcare and simply substitute one symptom for another. What we need is healthcare "improvement." Reform can be worse than the current situation and still be reform. This isn't just picking on terminology, it goes to the whole perspective being applied to the effort.
Bob Corker, the senator from Tennessee, made a short statement on TV news. He correctly pointed out that the current bill is hugely deceptive in its costing. The revenue support portions are due to start immediately to pay for the program, while the actual program itself does not begin for four years. Ten years of revenue vs. six years of costs is blatant distortion of the operating costs for this legislation. How can any reasonable Congressperson subscribe to this mockery of intelligent administration? No one in business could do this without being labeled a fool or a liar. This is nothing short of political camouflage for fiscal irresponsibility of the worst order. And, if I have this correct, Congress will maintain its own independent healthcare coverage after they "reform" it for the rest of us. A dose of its own medicine might cause it to cough up a more realistic result for everyone. Tell your Congressperson you want Congress to participate personally in the reform by using the system it creates. While you are at it, ask them to list the problems they are fixing and the causes of those problems.
Monday, October 5, 2009
The Role of Insurance
John posted a comment on Sept. 24 discussing insurance and this post is a result of his comment.
Does insurance siphon off money that could otherwise be used for providing direct health care services? Yes. Is this a bad thing? No. The cost of operating an insurance program consumes resources that could otherwise be used for other purposes. However, insurance exists for many things (cars, homes, businesses, etc.) for good reason. Health insurance is no accident, but a response to economic forces. Here's why.
The purpose of insurance is to minimize the cost to a single insured by sharing the risks and costs across a wider group of insureds. The insurance firm "bets" that only a fraction of the insureds will require payments to them, while the great majority of insureds will be paying in. It also bets that claims will be spread over time and not concentrated too heavily in a short period. By accumulating many small payments and building up a reserve, the insurance company can distribute a few large payments to handle claims. The more claims that are made and the higher the value of each one, the more income the insurance company needs to cover those claims. That gives rise to higher premiums. If you can belong to an insurance pool of individuals who file only a few small claims, then you can enjoy lower premiums. That explains why insurance companies want to exclude sick people (pre-existing conditions, dropped coverage, etc.). By eliminating potentially expensive claims, they control the premiums charged and hold onto other subscribers. Sounds harsh, but it is just basic business. It is why homeowners' insurance is not underwritten by some firms in hurricane-prone areas. It is why accident-prone drivers pay higher premiums. It is why smokers pay more for life insurance.
The risk inherent in health gives rise to the use of health insurance. If you could predict constantly good health, you would not need insurance. It is both the unpredictability (disease, accident, etc.) and the potentially high expense that causes us to seek protection through insurance. Insurance spreads the risk. In exchange for many "smaller" payments, you get the security of being covered if you experience a major expense.
It is true that adding an "extended" warranty for repairs to your regular "collision / comprehensive" auto insurance would increase the total premiums paid. This happens because the insurer must now cover more frequently occurring expenses. If you want to get more benefits, you pay more for them. If you have a problem-prone car, you should get the extra warranty. If you have a high-quality car, it is a waste of money. If you are healthy, buy coverage with a high deductible and save on the premiums.
Health, however, is not as predictable as auto repairs and typically more costly for major items. The cost of a major auto repair is usually under $3,000. While problematic, most auto repairs are manageable by most families. Not so for health repairs. The cost of repairing a heart versus repairing an engine is not even close. Only wealthy families could forego insurance and handle such expenses out-of-pocket. The rest of us seek shelter through insurance. Poor, uninsured, sick people either must find charity care, or live with their ailments.
Increasing insurance to cover more routine services and to cover the currently uninsured will cause an increase in payments to providers for increasd services. That increases costs. Only by increasing payments into the system (higher premiums and/or taxes), or by cutting costs across the entire process, can we cover the increased outlays. One suggestion is to cut $500 billion from the costs of Medicare and Medicaid in order to expand coverage. Is this realistic or wishful thinking? Because cost cutting projections often fail to materialize, expecting increases in rates is not unwarranted. Just as "there is no free lunch," there is no free healthcare.
There is criticism of the health insurance industry over their cost of operations, in particular salaries paid to top executives. Can insurers operate more efficiently? Probably. Are some execs getting paid unbelievable amounts? No doubt. Is wringing costs out of the insurance industry a good thing to do? Yes. How does that happen? Competition.
No matter how you arrange it, handling health care expenses for a large population will require insurance or its equivalent under a different name. Everyone will contribute to a pool that will be used to pay for those in immediate need of care. The more care dispensed (preventive in addition to curative), the more money must go into the pool. Call it insurance or call it an association or simply a pool, it will require administration to collect and distribute the funds. It will be defacto insurance in how it behaves. Unless everyone can pay their own way for all their health care costs over a lifetime, then , "Yes, Virginia, we will need an 'insurance' arrangement."
Tuesday, September 22, 2009
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?
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.
Thursday, September 10, 2009
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.
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.
Wednesday, September 2, 2009
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.
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.
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