Health Care on Life Support

From the Wall Street Journal, on the passage this weekend of health care legislation in the House:
 

The bill is instead a breathtaking display of illiberal ambition, intended to make the middle class more dependent on government through the umbilical cord of “universal health care.” It creates a vast new entitlement, financed by European levels of taxation on business and individuals. The 20% corner of Medicare open to private competition is slashed, while fiscally strapped states are saddled with new Medicaid burdens. The insurance industry will have to vet every policy with Washington, which will regulate who it must cover, what it can offer, and how much it can charge.

We have little sympathy for the insurers, or for that matter most of the other medical providers who signed on to this process only to claim now to be appalled by the result. The insurance lobby --led by Aetna CEO Ron Williams --made the Faustian bet that it could trade new regulations for more new subsidized customers who would face a tax penalty if they didn’t buy their insurance. The Pelosi bill includes the regulation but guts the tax penalty because it’s unpopular. Insurers will thus have to cover more sick people with fewer dollars, as healthy folk opt out of coverage until they are sick…

Unless the Senate has an epiphany of common sense, Americans will be paying the bills for this willful exercise for generations to come.

Historic moment: you are witnessing the demolition of America’s health care system, and the crippling of its economy for generations to come. When the public wakes up from their slumber to discover what “universal coverage” looks like in the flesh, it will be far too late to undo the disaster.

Best make an appointment to see your doctor now — you may not have many opportunities left…

Confessions of a Health Care Rationer

Over at First Things, you will find an excellent article on the topic of rationing in health care, written by a clinical oncologist now working for the insurance industry in evaluating claims for medical necessity. Despite what would at first glance raise concerns about being an apologetic for the private insurance industry, this proves to be a well-balanced essay on the difficult choices in allocating scarce health care resources wisely. It is well worth your time to read in its entirety:
Confessions of a Health Care Rationer

It \'s a mistake to think of health care as a right. It is not a right; it is a good. Freedom of speech, by contrast, is a right, as is freedom of religious belief. They are privileges that inure to individuals as a consequence of the primordial right, free will. That is why we see them as inalienable. The exercise of these rights does not depend on any action of government, but rather on its inaction. Government may not legitimately interfere with their exercise, but nothing mandates that the government provide us with printing press or chapel.

All modern societies ration health care. A wise society considers the options and chooses a method of doing so which best conforms to its values and capabilities. Thus we come to the terrible question we would so very much like to avoid: How shall we ration health care? How shall we explicitly ration it? So noxious a question is this, so offensive in its tacit assumptions and implications, that most politicians and wishful thinkers will deny that we need to address it at all. They will argue that the fundamental problem is one of distribution, not one of unmeetable demand. They will argue, with more enthusiasm than evidence, that an emphasis on preventive care would substantially reduce aggregate demand. Some will say we must reduce the role of government; others will argue that we should augment it. If only we will adopt their plan --they \'ll say --waste, fraud, and abuse will be abolished. There will be chicken --or at least chicken soup --in every pot, and a vaccine in every arm. People love honesty, but they hate the truth. To frankly acknowledge and address the ineluctable reality of healthcare rationing is not merely to touch the proverbial third rail of American politics; it is to lie across the tracks in front of the onrushing train.

Check it out.

Turning Back the Clock

Pocket WatchIn the past few months, I have delivered quite a bit of free care–by my estimation, nearly $15,000 worth. The type of care varied from routine office visits to major cancer surgery, from elective infertility treatments to reconstructive surgery and trauma. For me, this is not a problem, but a privilege–I have been blessed a great deal in life in so many ways, and giving of my time and skills has rewards which far outweigh any financial renumeration that might otherwise be received. I am also certain that this is not unusual for other physicians. In a 2002 study by the Center for Studying Health System Change (HSC), nearly 72% of physicians provided charity care, although the percentage had declined somewhat from previous years, especially in practices with a high percentage of managed care. Ethically, the large majority of physicians feel a strong responsibility to provide needed care to those who cannot afford it.

Such care is typically provided to the uninsured, and while free to the patient it is not free to provide. The physician must still pay rent, malpractice premiums, staff salaries and benefits, office and medical supplies, and other expenses of sustaining a practice to deliver this care. As reimbursements to providers from both private and federal health insurance decline, and practice expenses rise, there are increasing financial pressures on physicians to limit their delivery of charity care.

Furthermore, even having federal health care coverage–Medicare, and especially Medicaid–is no assurance of access to health care, as reimbursement rates slip well below the costs of providing care to these patients, forcing growing numbers of practices to close their doors to new patients with such coverage. The current system — politically-charged, burdened by bloated bureaucracies and burgeoning regulations, is increasingly unable to cope with this spiraling crisis. Tight budgets exacerbate the problem, as lawmakers respond to increasing costs with further cuts in reimbursements. So access to health care by the poor, whether federally-covered or uninsured, is declining at a significant rate. The system as it stands is unfixable, as there is no political will for the kind of radical structural overhaul needed to repair it.

Historically, charity care has always been a major component of the American health care system. While Europe tended to rely on government-established hospitals, in America hospitals were often funded and run by religious denominations or charitable trusts, driven by both educational and social motivation and a wariness of government control and intervention. This environment changed drastically under the influence of accelerating technology with its attendant costs, combined with the introduction of federally-funded health care — Medicare and Medicaid — in 1964. Since this time, institutional charity care has all but disappeared as a distinct entity, and individual charity care by physicians has also declined sharply.

The answer to this problem for many is more of the same: socialized medicine, single national payer, and other similar solutions. But as virtually all countries who have implemented such solutions have found, demand always exceeds supply, resulting in spiraling costs, long waits for basic services, and a heavy burden on national economies with growth-stunting high tax rates. Using government to solve such a widespread social problem is like feeding a horse to fertilize the grass: while it’s great in theory, the horse gets fatter while the grass gets thinner, ’til there’s nothing left but dirt and manure.

So here’s another proposal to consider: why not turn back the clock a bit, and create incentives for charity care? Let’s encourage physicians to see patients for free.

Nice trick, you say, how ya gonna pry those greedy bastards out of their Beamers long enough to see folks for nothing? Pretty simple, actually: by augmenting their natural inclination to care for their patients with financial incentives, rather than financial barriers.

The current system provides numerous barriers to providing care to the indigent. The federal-state partnership program for the poor, Medicaid, is a disaster in virtually every state. Reimbursement rates which do not even cover expenses; administrative snafus which delay payment and drive up billing costs; arcane and complex regulations enforced with punitive and often arbitrary discipline; the requirement for expensive in-house quality assurance programs to meet federal fraud and abuse and privacy standards: the list of liabilities is huge. Were it not for physicians’ natural desire to care for all patients who need it, no one would participate in Medicaid. And as the financial buffer of higher reimbursements from private carriers disappears, physicians are leaving the Medicaid program in droves.

It’s even worse financially when seeing the uninsured. While technically you can write off bad debt as a business expense, this involves repeatedly billing the patient who cannot pay–an expensive process from a staffing standpoint (it costs from $5 to $20 in total costs to send a single billing statement, depending on location), and is humiliating to the patient, who is likely already burdened by debt and harassed by collection agencies.

So here’s my thought: let’s cut out the middle man. Provide tax credits to physicians for charity care. Fund health care for the poor directly out of tax receipts.

Tax credits are preferable to bad debt deductions because they are used to directly reduce taxes, rather than taxable income. A $1 tax credit reduces your tax by $1, whereas a $1 deduction decreases it by $0.35, if you are in the 35% tax bracket, for example. If you’re a physician or other health care provider, and want to reduce your taxes, see more poor patients.

So how do you measure how much charity care a physician provides? Again, this is rather simple. All medical services are now quantified by a number called the relative value unit, or RVU. This value forms the basis for virtually all federal and private insurance reimbursement: multiply a medical service RVU by a conversion factor, and you get the dollar amount you will be paid. Computer software currently used for insurance billing almost always tracks these values, which are publically released annually by the government. Multiply the total RVUs for all charity care provided by another conversion factor, and you have your tax credit. All the components are already in place for this to work.

What about fraud? Well, fraud is a risk whenever there’s money involved in any business or profession, but the use of tax credits would be inherently limiting. The tax credits could be calculated at less than $1 for $1 of care provided, lessening the value for fraud purposes (but also lessening the incentive to provide charity). And once you’ve eliminated all taxes due, additional tax credits become worthless, making massive fraud scams much less likely. Documentation for care provided would also be necessary, of course, but physicians are already having to document care in excruciating detail for reimbursement.

On the patient side, a system of income verification would be needed, so that Daddy Warbucks doesn’t drop his health insurance and go seeking free health care. This does not need to be intrusive or complicated. The patient takes his 1040 and ID to an office to verify his or her income, and receives a health card color-coded by income strata, say, red for $10,000 or less, orange for $10,000 to $15,000, etc. Higher income patients should be asked to pay a modest copay for services, graduated by income level. But keeping it simple is key.

Oh, and one last thing: create a Good Samaritan exemption for malpractice. Barring gross negligence or malfeasance, physicians should be exempt from malpractice for charity care provided. Turning the charity care system into a malpractice lottery should not be an option; you should not financially benefit from that which you have received for free. To do otherwise will kill the system, and is unfair.

I believe this approach would begin to solve a host of problems in health care financing. Access to health care for the uninsured would increase quickly and dramatically. The administrative costs of the large bureaucracy now micromanaging indigent health care would drop significantly. Physicians could provide the care they are already motivated to give, relieved of the huge administrative burden of dealing with Medicaid, and would be provided some relief from malpractice fears and expenses.

There would be many challenges remaining in such a system, including hospital care and the cost of technology and prescription drugs. But the biggest hurdle would likely be inertia and the politics of class warfare: some would rather tax the rich than care for the poor. But it’s time to think outside the box in health care access and financing.. The costs of not doing so are unthinkable.