Monday, August 17, 2009
Killing Grandma
I definitely want to continue this discussion and plan to share a few more thoughts soon, but in the meantime I have to pass on this very interesting article from the Washington Post addressing the public fury expressed at some of the town hall meetings over the last few weeks. The title says it all: "In America, Crazy Is a Preexisting Condition."
Saturday, August 08, 2009
Thoughts on Health Care Reform
Let me first say that Veritas made an excellent commentary that addresses some very fundamental issues of health care reform and the ongoing debate. I agree that the current discussion is not being helped by fear mongering such as "socialized medicine" or "government-run health care" or "no one wants a bureaucrat between them and their doctor" (and the last would be different how from HMOs?). As Veritas points out, health care like so many other resources, is a limited resource and by definition is rationed in one form or another.
So how to do it? I heard an excellent segment recently on Fresh Air by Maggie Mahar. It's only 20 min long and well worth a listen. She highlights some of the reasons for skyrocketing costs of health care and offers some interesting solutions to at least part of the problem. A few of her points:
1) Like Veritas pointed out, going away from a fee-for-service approach vs. a lump sum payment might be one way to shift the focus to spending what is necessary and important for patient care rather than trying to make money. One perverse thought - might doctors/hospitals actually cut out certain tests or treatments in the interest of making more profit? Presumably this would be held in check by conscience as well as potential for lawsuits, but I wonder.
2) Making all insurance companies nonprofit. Another potential way to focus services on efficient, outcome based patient care rather than profit.
3) Increasing payments for primary care providers and reducing them for specialists. I certainly do see the inequity in salaries and reimbursements for procedures vs. primary care services. This may be one way to increase our supply and effectiveness of primary care providers.
I also wonder what happened to the discussion of malpractice lawsuit reform? I really like the idea of having a panel mediate such disputes and think this would go a long way towards bringing health care providers on board, even if it is a relatively small part of the cost of health care.
Speaking of the numbers, Henry Aaron has a very nice commentary in the New England Journal discussing the projected costs of the current health care bill as well as options to pay for it. This is well worth a read, and at some point Americans need to be better informed as to how we might pay for all this if we are going to do it. Adding to the deficit is really not an option at this point in my opinion. One option that has been put forth is making cuts to Medicare and Medicaid which Aaron shows to be one of the biggest areas of savings, though it remains unclear to me what these cuts would entail or mean.
On a more general note, I wonder if some (or much) of our increasing health care costs are due to lifestyle factors of Americans. Rates of obesity have skyrocketed along with its consequences of diabetes and cardiovascular disease. Perhaps we should really be targeting our funds towards prevention such as weight loss counseling and treatment and exercise programs. Reducing this burden would have tremendous effects on the long term health of Americans and I predict would go a long way towards lowering costs in the long run.
I really look forward to more discussion on this and feel like I have so much more to learn. It's a complicated issue but a very important one. And as Veritas points out, what we are doing now is simply not sustainable.
So how to do it? I heard an excellent segment recently on Fresh Air by Maggie Mahar. It's only 20 min long and well worth a listen. She highlights some of the reasons for skyrocketing costs of health care and offers some interesting solutions to at least part of the problem. A few of her points:
1) Like Veritas pointed out, going away from a fee-for-service approach vs. a lump sum payment might be one way to shift the focus to spending what is necessary and important for patient care rather than trying to make money. One perverse thought - might doctors/hospitals actually cut out certain tests or treatments in the interest of making more profit? Presumably this would be held in check by conscience as well as potential for lawsuits, but I wonder.
2) Making all insurance companies nonprofit. Another potential way to focus services on efficient, outcome based patient care rather than profit.
3) Increasing payments for primary care providers and reducing them for specialists. I certainly do see the inequity in salaries and reimbursements for procedures vs. primary care services. This may be one way to increase our supply and effectiveness of primary care providers.
I also wonder what happened to the discussion of malpractice lawsuit reform? I really like the idea of having a panel mediate such disputes and think this would go a long way towards bringing health care providers on board, even if it is a relatively small part of the cost of health care.
Speaking of the numbers, Henry Aaron has a very nice commentary in the New England Journal discussing the projected costs of the current health care bill as well as options to pay for it. This is well worth a read, and at some point Americans need to be better informed as to how we might pay for all this if we are going to do it. Adding to the deficit is really not an option at this point in my opinion. One option that has been put forth is making cuts to Medicare and Medicaid which Aaron shows to be one of the biggest areas of savings, though it remains unclear to me what these cuts would entail or mean.
On a more general note, I wonder if some (or much) of our increasing health care costs are due to lifestyle factors of Americans. Rates of obesity have skyrocketed along with its consequences of diabetes and cardiovascular disease. Perhaps we should really be targeting our funds towards prevention such as weight loss counseling and treatment and exercise programs. Reducing this burden would have tremendous effects on the long term health of Americans and I predict would go a long way towards lowering costs in the long run.
I really look forward to more discussion on this and feel like I have so much more to learn. It's a complicated issue but a very important one. And as Veritas points out, what we are doing now is simply not sustainable.
Thursday, July 30, 2009
"Rationing" Is Not "Socialism" But Is Essential for Cost Control
I hope to provoke a good discussion on the health care debate by sharing a few thoughts. Rather than focusing on specific provisions that may be in the legislation (particularly because Congress itself hasn't figured them out yet), I want to explore some more fundamental questions. In what I hope will be merely the first installment on this topic, this entry argues that rationing is an essential mechanism for controlling the cost of health care. Without effective rationing, health care costs would likely be far higher than they are now and will almost certainly overwhelm us within a few decades.
Opponents of reform efforts have argued that President Obama "will ration your health care," as though rationing is part of the scary socialist nightmare that some see lurking around the corner. Much more recently, Republican Senator Chuck Grassley of Iowa (whom some consider to be critical to any bipartisan deal) stated in an interview with NPR that we need to slow down the process because "we want to make sure that seniors don't get health care rationed." That is classic fear-mongering. The undeniable fact is that we have always had rationing of health care--we should be asking how to implement it in a fair and cost-effective way.
Peter Singer, a bioethics professor, recently wrote that "[h]ealth care is a scarce resource, and all scarce resources are rationed in one way or another." Traditionally, medical care was performed on a "fee-for-service" basis, and providers were rewarded for extending every feasible treatment under the circumstances, with little regard to cost--so long as the patient could pay. Even under a fee-for-service model, medical services are rationed: You get the level of care that you can afford. As Economics Professor Uwe Reinhard noted, "free markets are not an alternative to rationing. They are just one particular form of rationing." (In this article, John Butler discusses other forms of rationing besides price, including rationing by denial, rationing by delay, and rationing by dilution.)
Beginning in the late 1960s, the "managed-care revolution" injected a gatekeeper in between the doctor and the patient with the aim of keeping costs in check. All managed-care plans ration health care services through one mechanism or another. For example, many HMOs generally rely on "utilization management" (or "utilization review") to determine what treatments or services are covered under a patient's plan, using "medical necessity" as the touchstone. Whatever the method, managed-care organizations have to come up with some way to restrict health care services in order to bring down costs--otherwise, they are not "managing care" at all. As Justice Souter observed in Pegram v. Herdrich (a 2000 Supreme Court decision addressing the ability of a patient to sue her insurance company for allegedly breaching its fiduciary duty), "no HMO organization could survive without some incentive connecting physician reward with treatment rationing."
Even assuming that managed-care organizations have a beneficial role to play, it is obvious that they have not done enough. Health care spending in America is out of control. In a 2007 report, the Congressional Budge Office (CBO) found that per capita spending on health care has grown much faster than per capita GDP over the last four decades. In 1965, total health care spending was less than 6 percent of GDP. By 2007, it rose to 16 percent. Peter Orszag, the Director of the Office of Management and Budget (and formerly the Director of the CBO) testified that we spend nearly twice the amount spent per capita than France, Canada, and Germany--and nearly two-and-a-half times the amount spent in the U.K., Italy, and Japan.
And it is only going to get worse (and fast), unless we make some serious changes. The CBO projects that, absent dramatic legal reforms, we will spend 25 percent of GDP on health care costs by 2025 and 49 percent of GDP by 2082. For the visual learners among us, here is a graph reflecting the projecting spending on health care as a percentage of GDP:
In a 2008 report, the CBO found (and most analysts agree) that "the bulk of the long-term rise resulted from the health care system’s use of new medical services that were made possible by technological advances, or what some analysts term the 'increased capabilities of medicine.'" Other factors (such as aging of the population, the rising prevalence of obesity, administrative costs, and the practice of "defensive medicine") taken together "appear to explain less than half of long-term spending growth."
David Brown of the Washington Post recently wrote an article examining the changes in treatment for coronary heart disease. He observed that the chance of dying from a heart attack has dropped from 30-40 percent in the 1960s to about 6 percent today. But the price for that improvement has been hefty. Over that same period, "the charges for treating a heart attack marched steadily upward, from about $5,700 in 1977 to $54,400 in 2007 (without adjusting for inflation)." Furthermore, according to that article only about half of the improvements in outcome can be attributed to increased spending on medical care; the other half "is the result of a more favorable 'risk profile' for Americans--less smoking, lower cholesterol, better blood pressure."
Rationing care (on some other basis besides price) is the only feasible way to control costs. It is also necessary in order for President Obama to accomplish his other stated objectives for health care reform--including "assuring affordable, quality health coverage for all Americans." As Dr. Arthur Kellermann observed in a recent interview with NPR, "in contrast to other wealthy countries, we don't ration medical care on the basis of need or anticipated benefit. In this country, we mainly ration on the ability to pay. And that is especially evident when you examine the plight of the uninsured in the United States."
I wholeheartedly agree with Professor Singer that "[t]he debate over health care reform in the United States should start from the premise that some form of health care rationing is both inescapable and desirable. Then we can ask, What is the best way to do it?" There are no easy answers, but we will certainly never escape the crushing burden of health care costs unless we begin to discuss the tough questions, like:
(1) What is the minimal level of care to which all individuals should be entitled?
(2) Assuming that "medical necessity" is not an effective standard in containing health care costs, what standard should we use?
(3) Should we consider how much longer a patient is likely to live, even if the treatment is successful?
(4) Who should decide in particular circumstances whether a specific course of treatment should be allowed?
Hopefully we can have a great exchange of ideas on these and other questions here. I encourage everyone who reads this to participate, either by posting entries, making comments, or sending emails. Together, we can save the world before bedtime!
Opponents of reform efforts have argued that President Obama "will ration your health care," as though rationing is part of the scary socialist nightmare that some see lurking around the corner. Much more recently, Republican Senator Chuck Grassley of Iowa (whom some consider to be critical to any bipartisan deal) stated in an interview with NPR that we need to slow down the process because "we want to make sure that seniors don't get health care rationed." That is classic fear-mongering. The undeniable fact is that we have always had rationing of health care--we should be asking how to implement it in a fair and cost-effective way.
Peter Singer, a bioethics professor, recently wrote that "[h]ealth care is a scarce resource, and all scarce resources are rationed in one way or another." Traditionally, medical care was performed on a "fee-for-service" basis, and providers were rewarded for extending every feasible treatment under the circumstances, with little regard to cost--so long as the patient could pay. Even under a fee-for-service model, medical services are rationed: You get the level of care that you can afford. As Economics Professor Uwe Reinhard noted, "free markets are not an alternative to rationing. They are just one particular form of rationing." (In this article, John Butler discusses other forms of rationing besides price, including rationing by denial, rationing by delay, and rationing by dilution.)
Beginning in the late 1960s, the "managed-care revolution" injected a gatekeeper in between the doctor and the patient with the aim of keeping costs in check. All managed-care plans ration health care services through one mechanism or another. For example, many HMOs generally rely on "utilization management" (or "utilization review") to determine what treatments or services are covered under a patient's plan, using "medical necessity" as the touchstone. Whatever the method, managed-care organizations have to come up with some way to restrict health care services in order to bring down costs--otherwise, they are not "managing care" at all. As Justice Souter observed in Pegram v. Herdrich (a 2000 Supreme Court decision addressing the ability of a patient to sue her insurance company for allegedly breaching its fiduciary duty), "no HMO organization could survive without some incentive connecting physician reward with treatment rationing."
Even assuming that managed-care organizations have a beneficial role to play, it is obvious that they have not done enough. Health care spending in America is out of control. In a 2007 report, the Congressional Budge Office (CBO) found that per capita spending on health care has grown much faster than per capita GDP over the last four decades. In 1965, total health care spending was less than 6 percent of GDP. By 2007, it rose to 16 percent. Peter Orszag, the Director of the Office of Management and Budget (and formerly the Director of the CBO) testified that we spend nearly twice the amount spent per capita than France, Canada, and Germany--and nearly two-and-a-half times the amount spent in the U.K., Italy, and Japan.
And it is only going to get worse (and fast), unless we make some serious changes. The CBO projects that, absent dramatic legal reforms, we will spend 25 percent of GDP on health care costs by 2025 and 49 percent of GDP by 2082. For the visual learners among us, here is a graph reflecting the projecting spending on health care as a percentage of GDP:
In a 2008 report, the CBO found (and most analysts agree) that "the bulk of the long-term rise resulted from the health care system’s use of new medical services that were made possible by technological advances, or what some analysts term the 'increased capabilities of medicine.'" Other factors (such as aging of the population, the rising prevalence of obesity, administrative costs, and the practice of "defensive medicine") taken together "appear to explain less than half of long-term spending growth."
David Brown of the Washington Post recently wrote an article examining the changes in treatment for coronary heart disease. He observed that the chance of dying from a heart attack has dropped from 30-40 percent in the 1960s to about 6 percent today. But the price for that improvement has been hefty. Over that same period, "the charges for treating a heart attack marched steadily upward, from about $5,700 in 1977 to $54,400 in 2007 (without adjusting for inflation)." Furthermore, according to that article only about half of the improvements in outcome can be attributed to increased spending on medical care; the other half "is the result of a more favorable 'risk profile' for Americans--less smoking, lower cholesterol, better blood pressure."
Rationing care (on some other basis besides price) is the only feasible way to control costs. It is also necessary in order for President Obama to accomplish his other stated objectives for health care reform--including "assuring affordable, quality health coverage for all Americans." As Dr. Arthur Kellermann observed in a recent interview with NPR, "in contrast to other wealthy countries, we don't ration medical care on the basis of need or anticipated benefit. In this country, we mainly ration on the ability to pay. And that is especially evident when you examine the plight of the uninsured in the United States."
I wholeheartedly agree with Professor Singer that "[t]he debate over health care reform in the United States should start from the premise that some form of health care rationing is both inescapable and desirable. Then we can ask, What is the best way to do it?" There are no easy answers, but we will certainly never escape the crushing burden of health care costs unless we begin to discuss the tough questions, like:
(1) What is the minimal level of care to which all individuals should be entitled?
(2) Assuming that "medical necessity" is not an effective standard in containing health care costs, what standard should we use?
(3) Should we consider how much longer a patient is likely to live, even if the treatment is successful?
(4) Who should decide in particular circumstances whether a specific course of treatment should be allowed?
Hopefully we can have a great exchange of ideas on these and other questions here. I encourage everyone who reads this to participate, either by posting entries, making comments, or sending emails. Together, we can save the world before bedtime!
Wednesday, March 25, 2009
The Outrage Game
As a follow-up to last week's post, Joe Klein has a fine column on the AIG bonus outrage:
There is a real crisis out there. It has existed for a while. It has been spreading slowly as factory after factory has shut down, as the gap between rich and poor ballooned, as the rich found ways to get richer betting on exotic financial instruments with all the economic substance of a roulette wheel, as the middle class found it harder to pay for college, for health care, for gasoline.A bunch of people on Wall Street engaged in high-stakes gambling with a lot of other people's money and the reputations and stability of financial institutions that had endured for many decades. They amassed personal fortunes that the rest of us could scarcely imagine while burning down their firms and taking the entire global economy down with them. That's outrageous. That is un-fucking-believably outrageous. That a CEO at AIG who had been installed by the federal government to clean up the mess (along with some folks in the Treasury Department) decided it wasn't worth fighting in court over $150m in bonuses that the company was contractually obligated to pay--that's not outrageous.
But most of the anger we see and hear comes from people who are paid to be angry, on cue, on cable television--as opposed to people with actual grievances. Suddenly, the White House press corps goes barking mad over the AIG Bonuses. It is said that the bonuses are an aspect of the bust that the "public" can understand; in truth, the bonuses are an aspect of the bust that reporters can understand. Suddenly, the Obama Administration has a "crisis." The President has to go on television and act as if he's angry, even though he knows these bonuses are the tiniest outcropping of outrageousness.
Monday, March 23, 2009
Financial Regulation
I'm somewhat perplexed by this blog post by Richard Posner on financial regulations. Posner argues that there should be no new financial regulations until the current recession has bottomed out. There is a basic intuitive support for this argument in that additional regulations could limit risk-taking and drive up the cost of lending at a time when the federal government is desperately trying to encourage new lending. But Posner's position is focused primarily on uncertainty in the marketplace. He writes:
Any regulatory initiatives at this time will simply increase the already great uncertainty in which the financial industry is operating; and as Keynes pointed out, anything that increases uncertainty in a depression causes hoarding, which can in turn precipitate a deflation likely to deepen and protract an economic downturn.His point is well taken, but I think he gets the matter of uncertainty backwards. The uncertainty Posner appears to be worried about is already priced into the market. The one thing that investors are not uncertain about at this point is that there will be new financial regulations. I don't think anyone doubts that at this point. The uncertainty is about what those regulations will be. The sooner the government can spell that out, the sooner this uncertainty will be diminished. The additional benefit is that the financial crisis has severely undermined public confidence in the banking system, and if the new regulations are well-crafted (or at least are broadly perceived to be), they can begin to restore some confidence. And in any case, when it comes to the Obama administration and Democratic congressional leaders, all of these concerns may be secondary to the fact that there is huge public support for financial regulations at present, leading to a desire to strike while the iron is hot.
Friday, March 20, 2009
You Are Outraged Because We Say You Are
Thanks to Al Giordano for writing this column so that I don't have to.
Whenever executive salary and bonus caps have been discussed in the context of the various bailouts and rescue packages, I have supported any draconian measure that legislators have been willing to contemplate. I think it would be difficult to overstate the moral and ethical culpability of these executives and traders in this financial disaster. And if that means they quit their jobs, big deal. There are plenty of unemployed financial workers who would be happy to have them.
But this drama over the AIG bonuses leaves me cold. I just can't bring myself to give a shit about it. Given the context we talking about here, it is small potatoes and completely unsurprising. The mad rush of media personalities and politicians to trump one anothers' expressions of outrage, on the other hand, inspires a fairly visceral reaction in me (nausea). There are few things more pathetic than the panic of a politician who suspects that he or she may be missing a populist moment, and their willingness to dive head first off a cliff in hopes of landing on the bandwagon. And I can't help but suspect that if there were real populist outrage over this it would have taken longer to build and longer for the press to pick up on it. When the media goes into full-on shrieking populist outrage mode the moment it hears about the story, it rather seems like it's the media that's outraged more than the populace.
Whenever executive salary and bonus caps have been discussed in the context of the various bailouts and rescue packages, I have supported any draconian measure that legislators have been willing to contemplate. I think it would be difficult to overstate the moral and ethical culpability of these executives and traders in this financial disaster. And if that means they quit their jobs, big deal. There are plenty of unemployed financial workers who would be happy to have them.
But this drama over the AIG bonuses leaves me cold. I just can't bring myself to give a shit about it. Given the context we talking about here, it is small potatoes and completely unsurprising. The mad rush of media personalities and politicians to trump one anothers' expressions of outrage, on the other hand, inspires a fairly visceral reaction in me (nausea). There are few things more pathetic than the panic of a politician who suspects that he or she may be missing a populist moment, and their willingness to dive head first off a cliff in hopes of landing on the bandwagon. And I can't help but suspect that if there were real populist outrage over this it would have taken longer to build and longer for the press to pick up on it. When the media goes into full-on shrieking populist outrage mode the moment it hears about the story, it rather seems like it's the media that's outraged more than the populace.
Tuesday, March 10, 2009
Further Developments in the War on IPTV
A few weeks ago I noted that the networks shut down Boxee's efforts to deliver their content to viewers' TVs via Hulu's streaming web service. I speculated there as to why the networks would not want to play ball with Boxee. There is no question, on the other hand, why the cable companies are frightened of pure IPTV services, and it should come as no surprise that they are actively looking for ways to wall off content from them. Comcast and Time Warner are attempting to lock up cable TV content for online distribution (more details here). This content will be transmitted over the Internet in the same manner that a pure IPTV service would transmit it. The catch is that it will only be available to people who also subscribe to the cable companies' TV service.
Many cable TV programmers are likely to jump at this opportunity, as they've never been able to survive on a purely ad-supported basis and rely on cable carriage fees for about half their revenue. And, of course, even on that basis many cable channels could not survive if they were not tied together in cable tiers with other more popular channels (this is what much of the fight over a la carte cable revolves around). In fact, ESPN got out ahead of this game by trying (with considerable success) to strong arm ISPs into paying for its exclusive online content in a system analogous to a cable carriage agreement. What's next, regulatory battles over a la carte Internet? Oh, Kevin Martin, where have you gone?
On the other hand, for any really successful cable channels, my guess is they could do better by going it alone. This move will necessarily limit their online audience (as big as Comcast and Time Warner are, there are a lot of folks on the Internet who are not Comcast/Time Warner subscribers [though Harold Feld suggests that all MVPDs will be in on this game--anticompetitive conspiracy anyone?]). Moreover, they will be stuck in the position of subsidizing the crappy cable channels just as they have been through cable tiering all along. And if the good channels all flee, this may end up to be a pointless endeavor for the cable companies.
Obviously this move creates one more hurdle for IPTV providers to jump before going head-to-head with cable and telco video services. But it also creates potential net neutrality questions. This article suggests that Comcast will not treat this content any differently from other traffic for the purposes for traffic management or bandwidth caps. But if they or any other ISP were to in any respect preference this traffic, I'm calling it right now: instant FCC smack-down. This is exactly the sort of thing that net neutrality is intended to prevent.
In fact, I think the existence of monthly bandwidth caps at all will soon become highly suspect in the FCC's view. The Comcast Order hinted that monthly caps might be an acceptable network management technique. But anyone who routinely uses an Internet connection to view high def video will chew through these caps (I've seen estimates that HD video requires 4-12GB/hr (depending largely on the type of content), meaning a 250 Gb cap will last between 20-60 hours spread across all PCs and TVs in the household). In essence, monthly caps can be utilized to preference a non-IP-based video service over IP-based competitors.
ps. As you might note from my links here and in the previous post, I've been enjoying Silicon Valley Insider's Dan Frommer on this topic. He seems to be the go-to guy for this stuff.
Many cable TV programmers are likely to jump at this opportunity, as they've never been able to survive on a purely ad-supported basis and rely on cable carriage fees for about half their revenue. And, of course, even on that basis many cable channels could not survive if they were not tied together in cable tiers with other more popular channels (this is what much of the fight over a la carte cable revolves around). In fact, ESPN got out ahead of this game by trying (with considerable success) to strong arm ISPs into paying for its exclusive online content in a system analogous to a cable carriage agreement. What's next, regulatory battles over a la carte Internet? Oh, Kevin Martin, where have you gone?
On the other hand, for any really successful cable channels, my guess is they could do better by going it alone. This move will necessarily limit their online audience (as big as Comcast and Time Warner are, there are a lot of folks on the Internet who are not Comcast/Time Warner subscribers [though Harold Feld suggests that all MVPDs will be in on this game--anticompetitive conspiracy anyone?]). Moreover, they will be stuck in the position of subsidizing the crappy cable channels just as they have been through cable tiering all along. And if the good channels all flee, this may end up to be a pointless endeavor for the cable companies.
Obviously this move creates one more hurdle for IPTV providers to jump before going head-to-head with cable and telco video services. But it also creates potential net neutrality questions. This article suggests that Comcast will not treat this content any differently from other traffic for the purposes for traffic management or bandwidth caps. But if they or any other ISP were to in any respect preference this traffic, I'm calling it right now: instant FCC smack-down. This is exactly the sort of thing that net neutrality is intended to prevent.
In fact, I think the existence of monthly bandwidth caps at all will soon become highly suspect in the FCC's view. The Comcast Order hinted that monthly caps might be an acceptable network management technique. But anyone who routinely uses an Internet connection to view high def video will chew through these caps (I've seen estimates that HD video requires 4-12GB/hr (depending largely on the type of content), meaning a 250 Gb cap will last between 20-60 hours spread across all PCs and TVs in the household). In essence, monthly caps can be utilized to preference a non-IP-based video service over IP-based competitors.
ps. As you might note from my links here and in the previous post, I've been enjoying Silicon Valley Insider's Dan Frommer on this topic. He seems to be the go-to guy for this stuff.
Subscribe to:
Posts (Atom)
