The Non-Reform Health Care Bill

In the dark of night, appropriately, the Senate last night voted to end debate on its health care reform bill, bringing it to a floor vote. From Commentary magazine comes the following assessment of what will be voted on:

The non-reform health-care bill does, to the disgust of liberals, make insurance companies very happy. The government is coercing customers to buy the companies’ products under penalty of prosecution and fine. The non-reform health-care bill does, to the horror of seniors, slash $500B out of Medicare with no conceivable alternative other than rationing to meet its new budget. The non-reform health-care bill does, to the delight of trial lawyers, do nothing to reform the tort system or the problem of defensive medicine. And the non-reform health-care bill does, to the chagrin of deficit hawks, do nothing to bend the cost-curve or cut the deficit. (James Capretta explains: “For starters, as CBO notes, the bill presumes that Medicare fees for physician services will get cut by more than 20 percent in 2011, and then stay at the reduced level indefinitely. There is strong bipartisan opposition to such cuts. Fixing that problem alone will cost more than $200 billion over a decade, pushing the Reid plan from the black and into a deep red.”) Finally, the non-reform health-care bill will, to the embarrassment of good-government types, in all likelihood get passed through a combination of bribery and secrecy, with virtually no time for thoughtful consideration.

On every level it \'s a policy train wreck.

Not to mention that it pushes many of the uninsured into Medicaid, in a massive expansion of a program which is bankrupting the states, and which very few physicians can afford to take due to abysmal reimbursement rates which do not come close to covering expenses. The 22% Medicare fee cuts to physicians — one of the many accounting gimmicks thrown in to make this bill appear to be financially viable — will, if enacted, lead to a mass exodus of physicians from Medicare as well. Universal insurance coverage (which this bill does not even achieve) does not equal universal access, as we are about to discover to our horror and dismay.

I am doing my best to be sanguine about things over which I have no control, but it is difficult to watch the death of a profession and a superb health care system, to advance the partisan agenda of the power-hungry crooks and cronies who make up our current government. Revulsion is not too strong a word.

We will live to rue the day this disaster passes into law.

UPDATE: From the WSJ:

The rushed, secretive way that a bill this destructive and unpopular is being forced on the country shows that “reform” has devolved into the raw exercise of political power for the single purpose of permanently expanding the American entitlement state. An increasing roll of leaders in health care and business are looking on aghast at a bill that is so large and convoluted that no one can truly understand it, as Finance Chairman Max Baucus admitted on the floor last week. The only goal is to ram it into law while the political window is still open, and clean up the mess later.

***

• Health costs. From the outset, the White House’s core claim was that reform would reduce health costs for individuals and businesses, and they’re sticking to that story. “Anyone who says otherwise simply hasn’t read the bills,” Mr. Obama said over the weekend. This is so utterly disingenuous that we doubt the President really believes it.

The best and most rigorous cost analysis was recently released by the insurer WellPoint, which mined its actuarial data in various regional markets to model the Senate bill. WellPoint found that a healthy 25-year-old in Milwaukee buying coverage on the individual market will see his costs rise by 178%. A small business based in Richmond with eight employees in average health will see a 23% increase. Insurance costs for a 40-year-old family with two kids living in Indianapolis will pay 106% more. And on and on.

These increases are solely the result of ObamaCare --above and far beyond the status quo --because its strict restrictions on underwriting and risk-pooling would distort insurance markets. All but a handful of states have rejected regulations like “community rating” because they encourage younger and healthier buyers to wait until they need expensive care, increasing costs for everyone. Benefits and pricing will now be determined by politics.

As for the White House’s line about cutting costs by eliminating supposed “waste,” even Victor Fuchs, an eminent economist generally supportive of ObamaCare, warned last week that these political theories are overly simplistic. “The oft-heard promise ‘we will find out what works and what does not’ scarcely does justice to the complexity of medical practice,” the Stanford professor wrote.

• Steep declines in choice and quality. This is all of a piece with the hubris of an Administration that thinks it can substitute government planning for market forces in determining where the $33 trillion the U.S. will spend on medicine over the next decade should go.

This centralized system means above all fewer choices; what works for the political class must work for everyone. With formerly private insurers converted into public utilities, for instance, they’ll inevitably be banned from selling products like health savings accounts that encourage more cost-conscious decisions.

Unnoticed by the press corps, the Congressional Budget Office argued recently that the Senate bill would so “substantially reduce flexibility in terms of the types, prices, and number of private sellers of health insurance” that companies like WellPoint might need to “be considered part of the federal budget.”

With so large a chunk of the economy and medical practice itself in Washington’s hands, quality will decline. Ultimately, “our capacity to innovate and develop new therapies would suffer most of all,” as Harvard Medical School Dean Jeffrey Flier recently wrote in our pages. Take the $2 billion annual tax --rising to $3 billion in 2018 --that will be leveled against medical device makers, among the most innovative U.S. industries. Democrats believe that more advanced health technologies like MRI machines and drug-coated stents are driving costs too high, though patients and their physicians might disagree.

“The Senate isn’t hearing those of us who are closest to the patient and work in the system every day,” Brent Eastman, the chairman of the American College of Surgeons, said in a statement for his organization and 18 other speciality societies opposing ObamaCare. For no other reason than ideological animus, doctor-owned hospitals will face harsh new limits on their growth and who they’re allowed to treat. Physician Hospitals of America says that ObamaCare will “destroy over 200 of America’s best and safest hospitals.”

• Blowing up the federal fisc. Even though Medicare’s unfunded liabilities are already about 2.6 times larger than the entire U.S. economy in 2008, Democrats are crowing that ObamaCare will cost “only” $871 billion over the next decade while fantastically reducing the deficit by $132 billion, according to CBO.

Yet some 98% of the total cost comes after 2014 --remind us why there must absolutely be a vote this week --and most of the taxes start in 2010. That includes the payroll tax increase for individuals earning more than $200,000 that rose to 0.9 from 0.5 percentage points in Mr. Reid’s final machinations. Job creation, here we come.

Other deceptions include a new entitlement for long-term care that starts collecting premiums tomorrow but doesn’t start paying benefits until late in the decade. But the worst is not accounting for a formula that automatically slashes Medicare payments to doctors by 21.5% next year and deeper after that. Everyone knows the payment cuts won’t happen but they remain in the bill to make the cost look lower. The American Medical Association’s priority was eliminating this “sustainable growth rate” but all they got in return for their year of ObamaCare cheerleading was a two-month patch snuck into the defense bill that passed over the weekend.

The truth is that no one really knows how much ObamaCare will cost because its assumptions on paper are so unrealistic. To hide the cost increases created by other parts of the bill and transfer them onto the federal balance sheet, the Senate sets up government-run “exchanges” that will subsidize insurance for those earning up to 400% of the poverty level, or $96,000 for a family of four in 2016. Supposedly they would only be offered to those whose employers don’t provide insurance or work for small businesses.

As Eugene Steuerle of the left-leaning Urban Institute points out, this system would treat two workers with the same total compensation --whatever the mix of cash wages and benefits --very differently. Under the Senate bill, someone who earned $42,000 would get $5,749 from the current tax exclusion for employer-sponsored coverage but $12,750 in the exchange. A worker making $60,000 would get $8,310 in the exchanges but only $3,758 in the current system.

For this reason Mr. Steuerle concludes that the Senate bill is not just a new health system but also “a new welfare and tax system” that will warp the labor market. Given the incentives of these two-tier subsidies, employers with large numbers of lower-wage workers like Wal-Mart may well convert them into “contractors” or do more outsourcing. As more and more people flood into “free” health care, taxpayer costs will explode.

• Political intimidation. The experts who have pointed out such complications have been ignored or dismissed as “ideologues” by the White House. Those parts of the health-care industry that couldn’t be bribed outright, like Big Pharma, were coerced into acceding to this agenda. The White House was able to, er, persuade the likes of the AMA and the hospital lobbies because the federal government will control 55% of total U.S. health spending under ObamaCare, according to the Administration’s own Medicare actuaries.

Others got hush money, namely Nebraska’s Ben Nelson. Even liberal Governors have been howling for months about ObamaCare’s unfunded spending mandates: Other budget priorities like education will be crowded out when about 21% of the U.S. population is on Medicaid, the joint state-federal program intended for the poor. Nebraska Governor Dave Heineman calculates that ObamaCare will result in $2.5 billion in new costs for his state that “will be passed on to citizens through direct or indirect taxes and fees,” as he put it in a letter to his state’s junior Senator.

So in addition to abortion restrictions, Mr. Nelson won the concession that Congress will pay for 100% of Nebraska Medicaid expansions into perpetuity. His capitulation ought to cost him his political career, but more to the point, what about the other states that don’t have a Senator who’s the 60th vote for ObamaCare?

UPDATE 2: from Robert Samuelson, WaPo:

These fears are well-grounded. The various health-care proposals represent atrocious legislation. … So Obama’s plan amounts to this: partial coverage of the uninsured; modest improvements (possibly) in their health; sizable budgetary costs worsening a bleak outlook; significant, unpredictable changes in insurance markets; weak spending control. This is a bad bargain. Health benefits are overstated, long-term economic costs understated. The country would be the worse for this legislation’s passage. What it’s become is an exercise in political symbolism: Obama’s self-indulgent crusade to seize the liberal holy grail of “universal coverage.” What it’s not is leadership.

Samuelson argues that the uninsured will receive better care because more of them are covered. Of course, that is only true if they can actually get to see a physician who accepts their Medicaid coverage, which is already an enormous problem, and will certainly grow worse. I suspect they may actually receive better care now, uninsured, than they will covered under Medicaid.

No Death Panels Needed

Over at Big Government, we get a glimpse of where ObamaCare will take us: Health Care \'s Coming Heart Attack – A Pre-Obama Care Death Panel?

I am writing of the Obama Administration \'s – regulatory decision – to go ahead with a massive cut in Medicare payments to cardiologists. I emphasize that this is a regulatory decision because it was not made by the Congress legislatively (not that that would be ok) but, instead, it was made by the massive Health and Human Services Department of the US Government. Given the limited resources of the Medicare budget, in order to increase payments to general practitioners (in an effort to attract more such doctors – a good idea), bureaucrats needed to gore somebody \'s ox and cardiologists were chosen (a horrible idea).

The decision to do so is astonishing.

Keep in mind that the very purpose of health care is to improve the health and therefore the lives of Americans. The cardiologist community has been wildly successful in that endeavor. Although heart disease remains the #1 killer of Americans, the mortality rate for heart attacks has plummeted. For instance, the post-heart attack, 30-day mortality rate decreased from 18.9 percent in 1995 to 16.1 percent in 2006 and the in-hospital mortality rate decreased from 14.6 percent to 10.1 percent.

Further, between 1994 and 2006, the mortality rate among women 55 and under who suffered a heart attack dropped an incredible 52.9%. For men in that same age group the drop was 33.3%. According to the author of the mortality study that determined those latter figures: “It appears that risk factors, which may be controlled through prevention efforts, are very important in driving these mortality reductions.”

Given those figures, it is hard to argue with the success of cardiologists who sit on the forefront of heart care and heart disease prevention – unless, of course, you are a government bureaucrat.

Rather than pouring more dollars into an obviously successful branch of medicine that is saving lives (the ultimate purpose of health care?), the Obama Administration is going ahead with a plan to cut nearly $1.5 billion from Medicare payment to cardiologists. Obama is doing so by such devices as literally eliminating reimbursement for certain services and/or reducing the amount they will pay for others. Case in point, cardiologists have been able to bill for an extended first visit with Medicare patients to get their history and to recommend a course of treatment. As of January 1, 2009 [2010 – ed.] – no longer.

What is being referred to here is Medicare’s decision to eliminate consultation service codes as of Jan 1 2010. These codes are almost exclusively used by specialists, and pay substantially better than standard visit codes, reflecting the higher complexity of care typically involved in specialty care. It is not just the cardiologists who are affected by this administrative change in Medicare payment — it is all specialists: oncology (cancer treatment), infectious disease, pulmonary, surgical specialties such as orthopedics, urology, ENT, neurosurgery, cardiac surgery, etc. etc. They are betting on a premise already proven false: that preventive medicine through primary care will reduce costs.

Specialty care is more expensive because specialists care for the sickest and most complex patients. When you are having your acute MI, you need a cardiologist, not a family practice physician. Specialty care is where the vast number of advances in American medicine have taken place — the advances which give us the best results in the world in cancer treatment, heart disease, and surgical advances such as laparoscopy and other minimally invasive procedures.

The inevitable outcome of these changes are that Medicare patients will have reduced access to specialists, as specialists increasingly are unable to afford taking a loss on every Medicare patient they see due to reimbursements which fall below their costs of providing care. They will by necessity reduce the number of Medicare patients specialists see, or force them to stop seeing Medicare patients altogether, resulting in longer waits to see a specialist and regional shortages of care in these areas. One does not need “death panels” to make policy changes which restrict care to the elderly and disabled; quiet bureaucracy works every bit as well, with the added advantage of plausible deniability.

Welcome to the new millennium in health care. Hope you enjoy your government-run universal health care.

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.