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Universal Healthcare: You're Soaking In It.

Links, Thoughts, and Open Thread
Posted by WhosPlayin on 2007/1/27 16:50:59 (6234 reads)

Yesterday at work, I got into a conversation with a more conservative colleague of mine, who with her husband, left the former Soviet Union to find a better life in America. She had seen my blog, and upon realizing I am a Democrat, she wanted to talk to me about the dangers of socialism and the welfare state. As a New Yorker, she feels soaked with taxes, and having lived under socialism, she doesn’t want to pay even higher taxes for what she feels is a group of lazy minorities who prefer not to work and pay for their own obligations.

For her, these issues hit home in a big way. She has seen the crowded emergency rooms and waited for 2 days in an emergency room in New York with her elderly mother who had a broken hand. Recalling socialism and rationing, she wanted to make it clear to me that this was not what she had come to this country for.

With apologies to anyone who thinks I’m about to use this space to go into some liberal rant defending the "grand idea" of socialized medicine, I’m going to try to impart here what I didn’t have a lot of time to explain to her, as I was on the way out the door to catch a flight. I like talking to conservatives, because it is a brilliant moment when you push away the liberal straw man and talk about real progressive ideas.

Frankly, I agreed with her to an extent, since I do not foresee this country ever truly benefiting from socialized medicine. In fact, the only folks you ever hear talking about socialized medicine are the conservative talking heads who would have a gullible audience believe that this is what Democrats and progressives really want.

As Americans, benefactors of a capitalist free market that has made us a nation of great wealth and prosperity, we know that the socialism of the former Soviet Republic is failed. It simply did not work, and its failure was miserable. By labeling universal healthcare as “socialist”, these pundits frame the subject so that you will reject it from the start. What they don’t tell you is just what the proposal for universal healthcare is.

What I tried to explain to my colleague is that we already pay for universal healthcare. It’s really that simple. We already pay for it, and it’s about time that we get it. You can talk about “welfare queens” who take an ambulance to the emergency room for a headache all you want. If they do it, we all pay for it. Look at your paycheck and your tax bill. Add in your health insurance deduction. Now look at your pharmacy receipts, your doctor bill deductibles and co-pays. Think about the amount that your employer contributes on your behalf for the insurance for you and your family, if you are that fortunate. Don’t forget to add in the portion of your state sales taxes, and your property tax that goes to pay for indigent healthcare through Medicaid. How about your Church? Does it contribute to charitable health care?

The fact is that you and I and American businesses are being soaked, and increasingly, we’re not even all that healthy. Further, there is much disparity in care, with rural and inner-city residents facing a lack of access at any price, or long waiting lines at county hospitals. Suburban residents with good insurance have hospital choice. Those without insurance go without care, until it’s too late. The fallout of our system is needless death, loss of productivity, personal bankruptcies, and hospitals facing solvency problems.

“Water everywhere, and not a drop to drink…” Why is this? Where is all of our money going? Certainly, it is not going to our vital healthcare providers. Don’t get me wrong – many doctors do quite well, but it has always been that way even before healthcare costs skyrocketed out of control. Increasingly our money has gone more and more to two primary profiteers, and if you’ve paid any attention to our economy at all, you already know them: pharmaceutical companies and health insurance companies.

So back to the subject at hand – what is "universal health care", and how is it not "socialism"? First, as reasonable Americans, we must admit that neither more government, nor an unfettered free market, nor more personal responsibility will solve this or any other problem facing our nation. What this problem will take is cooperation of a proactive and efficient government, responsible citizenry, and a responsive free market. First and foremost, what we all must do to the best of our abilities is to take responsibility for our own health – but that only can go so far. Each of us after all can only control our own behavior, and some of us are not so good at that.. Secondly, we must realize that the federal government – already the payer of 50% of all health care dollars – should consolidate our individual risks in the role of a single payer replacement for private insurance carriers. Thirdly, the private-sector health care providers freed from the enormous administrative burdens of keeping track of the thousands of individual health-care plans and reimbursement procedures must accept a fair and timely government payment for their services, and compete on the basis of their service, efficiency, and effectiveness.

Now, I realize that what I’ve just stated effectively eliminates most private health insurance, and therefore will drastically shrink that industry. Pardon me for a moment while I feign to wipe away a small tear. Don’t get me wrong, Many good people work for insurance companies, and they DO serve a good purpose or two – for which they profit handsomely. This profit and overhead needs to be shifted back into the provision of care.

What is it that insurance companies really do? Well, lets give them some credit where it’s due. Firstly, they serve as a means of spreading risk. Members of a group contribute their premiums, and in exchange, the insurance companies take on the catastrophic risk of financial ruin by hospital bills. Increasingly, they also take on the inflationary risk with the pharmaceutical industry. Most smart Americans wouldn’t think of going without this exchange of premiums for risk if they can at all afford it.

But wait, there’s more. The insurance companies also play a role in controlling costs by establishing formularies, and policies of what is covered and not covered. For the most part, at least on paper, these policies and formularies serve to formalize and ratify the best practices with the most cost-effective health outcomes. At least that’s the theory of those that believe the free market is efficient, and congruent with the public good. It’s not always the case in real life. HMOs are especially notorious for denying needed care based on the medical opinions of case managers who are paid to control costs. On the other hand, you won’t find insurance companies paying for quack treatments and controversial methods without a sound basis in science and a proven track record.

On the other hand, because middle-class Americans with health insurance are insulated from often even knowing the true cost of their health care, providers and drug companies increase their prices more rapidly than inflation would normally allow because there is some lack of transparency. Insurance companies are largely ok with this, because it justifies higher premiums, and thus higher profit margins. Those of us with insurance have only to hear one of the many horror stories of the uninsured to be scared straight into renewing that policy. Indeed many of us will stay in jobs that we don’t much like because the thought of losing that health insurance and paying outrageous COBRA rates.

I hope that you will allow me a moment to put off the discussion of how to solve the drug cost problem, which is slightly complicated, and the problem of what to do with all of the folks who earn their livings processing health insurance claims and payments. Believe me, in my consulting practice, that industry has been financially good to me. We’re not going to make any rash moves to eliminate them overnight, but we will allow the market time to adapt.

Let me get back to my explanation of single-payer coverage. Medicare would be a modern-day example of single-payer coverage. It’s not a good example, but it’s an example nonetheless. Basically what you have is a single source (the government) setting [ostensibly] fair prices, and paying the medical bills of those covered. The people who are covered will be free to choose any healthcare provider willing to accept the payment. The payment rates, of course, would have to be set in good faith based upon the necessity of the providers to earn a fair profit. For very political reasons, the government has been unwilling to do that for Medicare, slashing payments to providers each year, even while costs increase. This has led to many physicians refusing new and even existing Medicare patients.

So if I’m trying to sell you on the idea of single-payer healthcare, why on earth would I bring up Medicare and then tell you that it has resulted in many providers ceasing participation? I was hoping you would ask. Really I was. Medicare is viewed by the conservative Republican leadership as an "entitlement" that needs to be phased out. They’ll never say that on the campaign trail though. No way – the senior vote is way too important. Their grand plan is for Medicare to simply fail. This will prove their assertion that government programs do not work. They’ll just fail to fund it properly, and keep cutting payments until gradually it becomes so worthless that seniors would rather just pay for a private policy. I could go on about this, and Social Security too, but that’s a different topic for a different day.

The point is that if we are to provide single-payer coverage, it is a massive paradigm shift that must be fully committed to, with no designs on undermining it. We would have to begin an orderly and planned shift of the burden of health care coverage from individuals, employers, charities, and states to the Federal government. Too fast, and the program would flounder and fail, while creating chaos for insurance company employees and insurance claims processing personnel for healthcare providers. Too slow, and you run the risk of employers dropping their health coverage before the plan can be fully extended to every American. This is where attention to details really matters. To do this, we would need the type of actuarial experience that large health insurers have, and combine it with wise tax policy such that the average American will pay no more in taxes after this is implemented than before.

Am I suggesting that universal coverage is free? Am I saying that we won’t have to raise taxes to pay for it? No, not really. But what I would say is that if we work it right, and work together on it with nobody trying to derail it, we can work it such that we have good healthcare, available to all, with little or no extra money out of our pockets. We might even gain efficiencies that can save us money, so that we spend a much smaller amount on healthcare per-capita while maintaining higher standards.

The savings would come from the elimination over time of the inefficiencies inherent to the process:
1. The profits necessary for private insurance companies to aggregate our risk and provide a higher-than-market rate of return for their investors
2. The need for so many personnel to process remittances.

What I learned during my time working for a medical office software company was that healthcare providers spend tons of money on getting affiliated with the various insurance companies, and subsequently processing transactions. Middlemen take a cut of every transaction through processing networks somewhat akin to those used by credit card companies. Everyone gets a cut of the ever-shrinking payments that doctors must accept from the insurance cartel.

Though the insurance industry has made steps at standardizing some of the processes, they’ve not made enough progress, and it still costs an inordinate amount of time and money to collect insurance payments. Insurance companies have every incentive to delay payment, make mistakes, refuse coverage, lose paperwork, and generally be uncooperative. I’ve even heard stories about certain companies that put a limit on the number of inquiries that can be made on one phone call.

Technology and willpower can make this problem disappear if the government will implement sensible electronic medical records and billing systems. President Bush has called for more electronic medical recordkeeping in his state of the union address. This point is one that is agreed to by all parties. The problem is in competing standards – a recurring problem when competing market interests dictate the standards. If the government could manage to use its power to find the best solution and begin making it available, we could start focusing on getting doctors paid promptly so that they and their staffs can shift their focus from how to make payroll and pay the bills to how they can competitively provide the best, most efficient and effective healthcare.

Just imagine for a moment that it’s your choice: you can stay with your favorite family doctor if you choose. You can travel anywhere in the U.S. and if you get sick or injured – go to whatever provider YOU choose. You don’t have to worry about the price. The government will have negotiated it, and it will be fair. You won’t have to pay. Your medical records will not be held hostage a thousand miles away in a paper folder somewhere. Instead, you might carry them on a chip in a smart-card in your wallet, with a backup available in a secure database near your home. You don’t have to worry about switching doctors each year when your employer has had to switch carriers (yet again) because Aetna or BCBS or ICFTY (Insurance Carrier For The Year) decided they could extort your employer for a few hundred bucks a month more per employee. Each December, you won’t have to worry about that dreaded corporate meeting where the "suits" come in and tell you how much more you’re going to have to pay. Parents in two-income families will not have to deal with whose insurance is “primary” for their kids, and having to deal with the companies trying to stick each other with the bill. Imagine being able to switch jobs without any fear that your children won’t be covered because you’re ready to change careers.

If the personal pragmatism of what I’ve just described isn’t enough, think of the public good that proper healthcare will do for us as a society. We can keep kids healthy with regular checkups and immunizations that don’t cost anything. Contagious diseases will spread less because people will see a doctor when they need to instead of trying to “tough it out”. People with chronic problems like diabetes, asthma, and hypertension will get the proper preventative medicine and case management they need, and have fewer episodes requiring expensive hospitalization. Decent hard-working people who earn low salaries and whose employers do not offer insurance will now be able to get the same level of treatment by doctors who will compete for their business. They will be able to get care for their children and retain their dignity. The elderly will be able to see a doctor and get a problem dealt with aggressively instead of a drawn-out process of months-long waits to see specialists while the conditions worsen.

If you’re still with me on this, you’re either a voracious reader or a masochist, but if you are a skeptic, and I would expect you to be – then I know you’ll have one of two questions:
1. How are we going to implement this?
2. What are we going to do about prescription drugs?

Which to tackle first… Well, lets go with drugs first, because it’s going to be the easiest to explain.

First, we must acknowledge something about the drug industry: it exists for the purpose of making a profit for the shareholders. It is a free-market business, and always will be. It is expensive to develop, test, patent, and gain regulatory approval for life-saving drugs. The pharmaceutical companies take a calculated risk on each drug, based on its market potential and chances for success. The development lifecycle for many drugs is 10 years or more. Though nobody owes these companies a profit, and they take risks willingly, we simply cannot have the government coming along and changing the rules so wildly that the investments they have made in their pipelines are cut off in fear, and we stop the process. If change is to be made, it must be made incrementally or it will fail by market forces.

In random order, here are some ideas for ways that we could get our own U.S. citizens better prices on drugs through government intervention and market forces:

• Under any government universal coverage plan, make a formulary similar to those that insurance companies use. Generics would be available provided without charge, patented drugs with the best cost-benefit ratios are available for a small co-pay, such as $10 to $15. Drugs which provide only limited additional effectiveness with a much higher cost would still be available, but the co-pay would be much larger unless it’s deemed medically necessary, for instance due to allergies or ineffectiveness of the more accepted drugs. The price of these would be negotiated as much as possible by the government, but ultimately, the patient would have to pay a much higher co-pay for it if that were what they wanted. This is no different than current private formularies.

• Use the power of the patent as a negotiating tool. There are several things we could do here:
o Stop the process of extending patents based on simple "time-release" formula extensions. This is ridiculous and costly. Simply coating the active ingredient with something or adding a common ion to the molecule to cause a slower release should not be worthy of a full term patent.
o Make licensing mandatory after the 15th year, so that other manufacturers can compete to produce the drug after paying fair royalties.
o Allow negotiations for price controls to include raising or lowering a patent’s term.

• Ban direct-to-consumer marketing. This would save billions per year, and those cost savings can be passed along. Drug marketing to consumers is just not helpful.

• Increase federal research dollars for finding new drugs based on true public health needs, which are sometimes at odds with what is profitable. Case-in-point: Erectile dysfunction drugs. There are any number of ailments for which there are not enough effective treatments because there is just no profit in it. When the government develops the drugs, then we the people hold the patent and can license it to multiple manufacturers for competitive pricing.

• Enforce more scientific integrity in the FDA so that dangerous drugs do not make it to market prematurely, just to end up in costly litigation where the only winners are attorneys.

I’m sure given the time I could think of more, but the key is that whatever we do here, and no matter how incrementally we do it, PhRMA will screech about how it’s going to mean the end of the industry. We must realize that this screeching is the sound of progress, and that it will not be as bad as they claim. They are invested in the status quo, and they are doing what they have to do. We must do what we have to do, because health is a public good.

Now to the issue of how to implement all of this: We must do it carefully, incrementally, and deliberately. We must do it with resolve, for it is a moral imperative. We must not allow either corporate shills or angry mobs to politicize the process. We must get the best and brightest minds in the healthcare industry and figure out the right sequence for implementing these measures so that the system and the free market have time to adjust without letting anyone fall through the cracks.

I wish that I could give you more, but I’ll be the first to admit that I just don’t have all the answers. What I’ve found in general though, is that the answers are often somewhere between the extremes – each of which have good points, but often fail to look further than the first obstacle. Stand with me in demanding that our leaders move on this. We’re already paying the costs. Now lets start getting what we’re paying for!

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