Sunday, May 2, 2010

Sir Isaac Newton and Health Care Reform

Whistleblower readers know of my deep skepticism that the promises of Obamacare will be realized. As time goes on, my skepticism sinks deeper. The health care reform (HCR) legislation that was passed with reconciliation guarantees more taxes, more access to care for the uninsured and more government control of health care. But it fails in its promise to bend the cost curve, or does it? Perhaps, I’m being unfair and need to adopt a more literal approach to the president’s promise of cost control. President Obama’s program does bend the curve, but does so in the wrong direction. He wouldn’t be the first Democratic president in recent memory to engage in a public demonstration of linguistical gymnastics.

If health care costs continue to rise, can we expect to hear the president lecture us in 2012 during his reelection compaign with his finger wagging

“I kept my promise to bend the cost curve, and I did.”
This past month, a national and respected health care organization reported that under the president’s plan, health care costs would increase by $311 billion through the year 2019, despite the administration’s promise of cost reduction. Who made this scurrilous allegation? Was it the rabblerousing tea partiers again? Was it Sarah Palin firing up the bible belters? Were these rantings from a resurrected vast right wing conspiracy? Try again. The pessimistic projection was issued by Medicare’s chief actuary, an agent of the federal government, and not a fringe group of hyperventilating fringe partisans. So, to those who want to shoot the messenger here, you may be aiming at your own patron.

The American people agree with the government’s new analysis. An April 2010 Gallup poll reported that a solid majority of Americans believe that HCR will cost the government too much money and doesn’t address fundamental cost issues sufficiently. Is Gallup just another GOP tool like the Medicare actuary, or were we duped that HCR would really save us money?

I am not faulting the president because health care costs will continue to rise. I am chastising him and his minions for dismissing the rest of us who claimed that his plan would only bend the cost curve further in the same direction. Saving HCR dollars is tough because it violates natural law. Let’s consider the situation in Newtonian terms.

Here are Newton’s 3 Laws of Health Care Motion.
  • A health care system at rest tends to remain at rest.
  • For HCR to accelerate, it requires an external force which has more mass than the Federal government.
  • For every action applied to the health care system, there will be an equal and opposite reaction.
In other words, there is tremendous inertia in the system. Costs will be very challenging to rein in because every cost has a powerful constituency supporting it. Every example of an unnecessary medical test or wasteful medical spending represents someone else’s income. Proposals that include decreasing physician reimbursement, lowering insurance premiums, reducing medication prices, tort reform, medical rationing, increasing patients’ financial responsibility for their care and comparative effectiveness research will all be met with an equal, or perhaps greater, reaction against them.

What stakeholder in the system will fall on his sword to serve the greater good?

I suppose that Newton would support the notion that health care reform in motion tends to remain in motion. But, where is it taking us? We were told that our destination will be a promised land, but will it be a black hole instead?


  1. Lots of references to findings but no links. And as I recall, the CBO found that healthcare reform will in fact save money. And in any event, we're already seeing the end of denial of coverage for pre-existing conditions and the end of recission (cancelling the policy because you got sick)---including the Wellpoint scheme of immediately finding some reason---any reason---to cancel policies of women who developed breast cancer. And, of course, young people (who nowadays have trouble finding jobs) can remain on their parents' policy until age 26.

    Those are all good things due to healthcare reform. You might think about the impact of those changes for a while---along with the 30 million additional people who now have health insurance and can see the doctor without waiting for some free clinic gathering (which attract thousands).

    You don't like any of this?

  2. LG,

    Thanks for commenting. Here's a link for you to review.
    Regarding the 30 million or so who will become insured, it won't be as easy for them to see a physician, as you suggest. We don't have sufficient primary care resources as it is. Additionally, half of these folks will become part of the Medicaid system. Many physicians cannot afford to see them because the reiumbursement is absurdly low. Medicaid is also share between the federal government and the states, and the latter are already in the red. So, I like the objective, but can't fathom yet how we get there.

  3. Krugman, NY Times, March 11

    The second myth is that the proposed reform does nothing to control costs. To support this claim, critics point to reports by the Medicare actuary, who predicts that total national health spending would be slightly higher in 2019 with reform than without it.

    Even if this prediction were correct, it points to a pretty good bargain. The actuary’s assessment of the Senate bill, for example, finds that it would raise total health care spending by less than 1 percent, while extending coverage to 34 million Americans who would otherwise be uninsured. That’s a large expansion in coverage at an essentially trivial cost.

    And it gets better as we go further into the future: the Congressional Budget Office has just concluded, in a new report, that the arithmetic of reform will look better in its second decade than it did in its first.

    More at the link.

    But aside from all that, have you any opinion about incentivizing a trend to a bundled payment model (versus the fee-for-service model)? New reimbursement differentials are forthcoming, as I'm sure you already know.

    Or funding local health departments and clinics to an unprecedented degree?

    Or that part of reform addressing long-term care, formerly called the "CLASS Act"?

    Or ANY of the various features aimed at PERSUADING medical professionals to cut costs by their own volition, NOT DICTATING such trends as so much popular misinformation implies?

    If costs go up, they go up.
    I haven't seen anything to suggest that costs have ever, or will ever, go down.

    Several millions of people can now access medical attention that was not previously available. Is that a bad development???

    (I thought about the spinoff savings of IT standardization and EHR development, but that's from ARRA, not the new legislation.)

  4. And before I quit, that link you supplied makes oblique reference to Cuts in federal payments to private Medicare Advantage plans will “result in less generous benefit packages”...
    Darn right.
    I'm really sick of stuff like that that implies that MA, which costs taxpayers MORE than Medicaid, is in any way the same as Medicare. Phasing out Medicare Advantage is part of the cost savings as well but the insurance industry and others with axes to grind are deliberately conflating that overpriced private alternative with Medicare.

    The arithmetic is easy to grasp. Administrative costs for Medicare are under five percent but run two or three times as much for private insurance, which is why MA plans have been reaping a tax subsidy for kidnapping Medicare beneficiaries.

  5. John, let's take an aerial view. No major government initiative remains on budget. Despite the current data that assured it would save money, this won't happen. Anyone who's been reading newspapers for a while know that this is always the case. The costs will be several orbits higher than predicted and the overruns will be blamed on 'unforeseen' developments. This is especially true in HCR where there are no real cost cutting measures that sink deeply into the system. The public will still have a voracious appetite for care and the medical profession will provide it, especially since someone else is paying for it. Who wants to be the first to tell the public that they will no longer be permitted to drink at the 'well of unlimited medical care', or that they will have to pay some real $$$ for their care? Rationing is a radioactive word, but isn't that what's truly needed here? We cannot have access to every available medical benefit on demand, which remains our expectation. What thoughts do you have on curbing our collective insatiable appetite for medical care?

  6. You make good points, Dr. Kirsch.
    And yes, the operative word is "rationing."

    But rationing is precisely what has been in place all along, either in the form of "coverage" allowed or denied by private insurance or by "policies" of Medicare, Medicaid or other tax-funded sources. I don't shy away from either the word or the concept because I have seen and continue to see it first-hand.

    My years as a food service manager among the working poor made me painfully aware of a large group of hard-working people for whom meaningful health insurance and unemployment compensation are both topics they only hear about on television.

    And since my retirement eight years ago I have worked with the group from which the biggest part of the revenue stream for medical care flows, those in the final years of life. I have seen first-hand how rationing works. And your reference to "our collective insatiable appetite for medical care" is incompletely true.

    I have seen plenty of evidence of that appetite, from TV commercials for "free" motorized scooters and motorized chairs to bionic seniors who have received multiple joint replacements, pacemakers, and other wonders of modern medicine. But I also know about a large number of the working poor who live payday to payday without insurance, as well as mentally damaged individuals, geriatric cases classified as "custodial" and the children of poor families who routinely live without medical attention.

    You can believe me when I tell you that many of the "public" already knows they cannot "drink at the 'well of unlimited medical care', or that they will have to pay some real $$$ for their care." I know plenty of people for whom that reality is sharply defined.

    The public to whom you refer is likely to be that large group of hospital patients who can afford to pick up the phone and make arrangements any time they feel out of sorts. I have no problem with means testing for Medicare (just like Medicaid or the VA) as well as tax policies that stop favoring the high (i.e. costly) end of medical care.

    Interesting factoid: I just learned last week that Tricare rates have not changed since 1996 and copays for most common charges are under ten dollars. I am aware of retired military and private sector seniors with multiple redundant layers of coverage while others have none at all and are dependent upon Medicaid. The inequity of care among seniors is one of the hidden embarrassments of the system.

    You say to-mah-to, I say to-may-to.
    You say "coverage," I say "rationing."
    You say "public," I say which public to who are you referring?

    We both know where this is going.
    At the risk of being repetitious, I say again it is important to make a distinction between types of risk.

    Managing medical risks are the specialty of medical pros.
    Managing financial risks are the specialty of insurance pros.
    Managing political risks are the specialty of elected representatives.

    These three risk management tasks are routinely conflated in most discussions, depending on whose ox is being gored. And a distinction must always be made between professional compensation (which should be as high as the market allows) and corporate profits (which should be subject to serious taxation as long as those profits derive from the delivery of medical care).

    Let a thousand boutique flowers bloom, both in insurance policies and private medical practices.
    But let's start getting real about who can or cannot afford a baseline of essential medical care.
    The time for that baseline to be clearly defined is long overdue.

  7. The new legislation is replete with centralized tools designed to impose pricing controls upon providers-- that is, tie provider payments to a barrage of negotiated payments, prospective payments, capitated payments, bundled payments, coding paradigms, fee schedules, and a vast array of conversion factors, productivity adjustments, geographic adjustments, relative values, and other hedge factors. The belief is that something resembling the true cost of goods and services will emerge from this maze. After all, this administrative approach to pricing worked really well in the Soviet Union. So did rationing.

    Moreover, let's adopt the following as guiding principles to pay for health care:

    - Insurance is the exclusive currency by which patients purchase goods and services offered by health care providers
    - Health care is only affordable if covered by insurance
    - The inability to obtain health insurance translates into a failure to access health care
    - The intrinsic value of health care is unique and therefore, cannot be entrusted to the free market

    Now that's what I call a progressive approach to health care!

  8. This was a big week for Newton. Quoted in the Whistleblower last Sunday,and now this.

  9. "I suppose that Newton would support the notion that health care reform in motion tends to remain in motion. But, where is it taking us? We were told that our destination will be a promised land, but will it be a black hole instead?"

    The entitlement road leads to Greece.

  10. Here's a possible outcome:

    When the dust settles there will be three levels of care, qualitatively. (1.) Baseline (2.) Supplemented and (3.) Boutique.

    Baseline care will be a safety net for those who for whatever reason do not qualify for the other two. Hard choices about rationing will have to be made, along with clear best practices for mental health, long-term and chronic conditions both congenital and developmental. Choices will have to be made regarding when sick or injured patients will be permitted to meet the angel of death. This conversation has yet to begin. By definition this level will be funded by taxes.

    Supplemented care will be whatever variant of private and public financial resources will be tapped to pay for care in this category. It will be more generous than Baseline care but will fall short of elective, questionable and/or futile practices that can only be affordable by the third level of care, Boutique.

    Boutique care will be the gated community of health care, accessible only by those with enough assets to pay, either from existing liquid assets or boutique insurance policies which serve this strata of patients in much the same way that they serve Level Two. (I'm not worried about the insurance industry because they have the actuarial tables on their side, like "the house" in a casino. Insurqance companies, like cats, will always land on their feet.)

    At the moment, Baseline needs are being met (or not) by a duke's mixture of local, state and federal "providers" ranging from excellent charitable attention from institutional sources (community hospitals, Veterans Health Services, Medicaid, others) to ER screening and tracking, neglect, blaming the victim, finger-pointing and denial of the challenge altogether.

    Supplemented care will continue as we now know it, but with shrinking redundancies as a river of revenue currently being collected as "premiums" gets closer scrutiny and pressure that some percent of insurance premiums will actually be applied to the delivery of medical care. (I am aware of a few people who are beneficiaries of multiple layers of coverage -- Medicare, Tricare, Veterans Health, and sometimes additional private insurance "just in case." This is great for the providers but breathtakingly inefficient management.)

    Finally, there will always be a market for those who want a personal doctor on retainer. Short of that extreme will be a well-heeled population willing and able to pay for cosmetic medical attention, hypochondria, those who "don't trust" just anyone with solid credentials and those wanting to keep themselves and/or their loved ones in a persistent vegetative state alive as long as science makes it possible.

    This is all pure speculation on my part and I don't expect it to materialize in my lifetime, and maybe not in the next generation. The conversation has only just started and too many people are still frozen in a state of denial.

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  12. Great analogy. You have made great points and I totally agree with you. If health care costs continue to increase, then more and more people would not be able to afford it. Instead of focusing on giving free health care to less fortunate people, the government should first focus on actually lowering health care costs. It would take a lot of time for health care to be free, so the government needs to focus on what's needed right now. It may be a bit out of context, but the government should think of ways on how to provide more jobs. This way more people would be able to afford health care costs and the tax they pay would be of big help to the government's funds. It's all in the cycle. People just need focus on what's important and more or easily attainable at the time.