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By Charlie Eisenhood
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Thursday, 09 July 2009 14:04 |
In today's round, the participants, in addition to responding to commenters and each other, were asked a question designed to challenge their arguments.
I asked each debater a different question, listed at the top of their post in italics.
This is the third round of the discussion. For the second round, go here. For the first round, go here.
 Todd Sandman serves as director of public and government relations for Presbyterian Healthcare Services, a New Mexico, not-for-profit healthcare system of hospitals, physicians and a health plan.
Moderator's question: Todd, in your first post, you noted your wariness of a public option because you said Medicare pays less than the cost of care. But Presbyterian is not required to accept Medicare patients. I'd like to point you to this blog post by Ezra Klein which argues that hospitals' "costs" are too high and that the acceptance of Medicare patients proves that. My question is: why does Pres accept Medicare if it loses Pres money?
Interesting question. In my previous posts, I’ve tried to give evidence that Medicare chooses the rates it will pay providers in an arbitrary and political way. It seems odd to me that the largest payer in the healthcare system picks an inadequate price and then we question the hospital on why we’re so expensive.
But I’ll take the question at face value. Why do we take Medicare if it doesn’t cover our costs? I guess the short answer is that Presbyterian chooses to serve Medicare patients despite the inadequacy of the reimbursement because we are a not-for-profit healthcare system that sees this as part of our mission. For 100 years, the reason we have existed is to improve health in communities across New Mexico.
If that sounds too much like “spin,” I apologize, but it is central to how we make these trade-offs and decisions in a complex healthcare system. For example, we provide behavioral health services at an annual loss, but these services are needed in the community. We provided $24.9 million in free care to patients who couldn’t afford it last year and we view that as part of the reason we’re here.
How can we do that? Hospitals and providers like Presbyterian have always been able to earn a margin in higher-reimbursement services or from private health plans that essentially balance out our costs across everyone we serve. I suspect we’re nearing a tipping point in this delicate balance as healthcare is becoming so expensive that this patchwork of payers may no longer hold. Part of the solution will be found in the issue at the heart of healthcare reform – that we need to provide health coverage to the uninsured. And it is certain that part of the solution is that hospitals and providers must do more to lower costs for patients and payers.
This will be a challenge for hospitals as they are high-cost facilities. We rely on high-skilled clinicians and professionals, we never close our doors, we need to invest in advanced technologies and equipment, and we have to be prepared to respond to a wide range of health needs at any moment. It is also interesting to note that because advances in medicine keep people alive longer, the patients who need a hospital today are more acutely ill than ever before.
That said, hospitals have to find a way to take costs out of our system. There’s no question that we can become more efficient. We’re hard at work on efficiency in our organization today. We’re using “Lean/Six Sigma” principles that have worked so well in manufacturing and engineering and applying these lessons to our hospital and clinics. It’s making a difference in reducing wait times, paperwork and more, but we have a long way to go. I think the other way hospitals and providers will become more efficient and affordable is in aligning the right incentives. Healthcare reform will bring “bundled” payments – a single payment to the multiple providers that treat the same patient in the same course of care – and this will encourage better collaboration and efficiency. I personally hope that healthcare reform will bring more pay for performance, to encourage hospitals and providers to focus on the outcomes for patients and not just the provision of service.
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I wanted to follow up on two separate items in yesterday's posts that described Medicare Advantage as an "overpayment" for insurance companies and implied that the private plans provide the same benefits as Original Medicare.
This is like saying that you "overpaid" for your pizza with three toppings when you compare it to the plain pizza. The reality is that Medicare Advantage plans offer more affordable and more comprehensive coverage for recipients than Original Medicare.
It is completely appropriate to have a policy debate on whether or not we want to have private plans in Medicare or what the right reimbursement levels should be, but we should begin that discussion with a common understanding of how Medicare Advantage and Original Medicare differ. Particularly when advocates talk about cutting $177 billion from a program that provides health care coverage to 69,000 New Mexicans and 10.2 million Americans, we should know exactly what it is that policy-makers are proposing to cut and what the impacts to seniors would be.
The most obvious way that Medicare Advantage is more affordable for Medicare beneficiaries than Original Medicare is the out-of-pocket expenses. Original Medicare members pay 20% of their doctor or hospital bills, and the out-of-pocket cost for a hospital stay can be $1,068. Medicare Advantage members pay fixed co-pays, such as $50 for an emergency room visit or $250 for a hospital stay. When the Kaiser Family Foundation looked at the difference in annual out-of-pocket expenses in 2006, they found that the average original Medicare Advantage member paid $567 per year compared to the Original Medicare member who paid $1,114.
Beyond affordability, Medicare Advantage plans cover comprehensive health and wellness benefits that do not exist in Original Medicare. Medicare Advantage plans often include prescription drug coverage while Original Medicare members have to purchase it additionally. Medicare Advantage also includes fitness center memberships, no-charge annual wellness physician visits and other preventive services not covered by Original Medicare.
I don't think it surprises anyone involved in a Medicare Advantage plan that these members are more satisfied with their coverage, according to national surveys, than Original Medicare members.
When we casually dismiss Medicare Advantage plans as "windfalls" or overpayments, I think it's important to have a clear sense of just who would really feel the pain of the proposed $177 billion cuts to this program - the Medicare Advantage members who get more services for less money.
Vicki L. Perrigo, M.D., MACP, FAAD, recieved her bachelor's degree in Biology from the University of Southern California in 1972 and her M.D. from UC Davis in 1976. Ms. Perrigo did her Internal Medicine residency at UCI/Long Beach VA from 1976-1979 and her Dermatology residency at the University of New Mexico from 1980-1983. She is licensed to practice medicine in California and New Mexico.
Moderator's note: Dr. Perrigo submitted today's post before I asked her this question - Vicki, The Dartmouth Atlas (which Todd cited) notes that "There are islands of excellence in the sea of high cost mediocrity—hospitals and physician practices that are delivering high value health care that is less costly, more efficient, and produces better health outcomes." It refers to the Mayo Clinic and Kaiser Permanente, among others, as organizations that have cut costs while still offering effective care, often because they don't use expensive, technological procedures that might not lead to optimal outcomes when others are available. Atul Gawande, writing for the New Yorker, explains how the incentives for doctors are changed at these organizations. You argue that medical malpractice concerns are driving up the costs (and I'm not denying that they aren't a part of the problem), but don't these examples show that the bigger problems are the monetary incentives to order expensive care?
Regarding comments by M. Schneider - no one is saying that health care providers should not be held accountable for their work on behalf of their patients. As you know, none of us are perfect. Recognize, however, that in our society, ‘acceptable risk' is a part of life. Comparing medical mishaps with car mishaps leads to realizing that driving a car, unless you are ‘impaired', is a license to kill. Our country stands behind the concept of ‘acceptable risk' with regard to automobile accidents. We accept that over 40,000 people will die every year on the road, because we cannot imagine not using our cars. The people who cause those deaths, unless they are high on something, do not pay for the harm they have done. It's considered an accident, an unavoidable circumstance. They are not even arrested. They kill with impunity. Their insurance might kick in some compensation, but does that make up for the loss of life? No, it does not...but it is acceptable.
Why should accidents in the health care arena be handled any differently? Today, in 2009, people believe that there should not be risks in medicine-everything should be curable and fixable, preferably yesterday. What is our level of acceptable risk? We have to accept that great outcomes are not always achievable. I ask, though, what physician works with a patient in order to create a bad outcome? A less than perfect result is not the goal of the physician. If we have a cap on compensation for an unexpected outcome, the problem physicians can be weeded out through peer review and the rest of us can stop practicing defensive medicine. This will decrease health care spending and be the first step toward returning to a system where the patient and the physician have a relationship.
On a personal note, to segmentis (for which firm do you work?), I no longer work for money, have no pocketbook, and care deeply for those who I still help. I have never been sued. You have no basis on which to be distressed. Also, please look at NPR's reporting of July 2:
Both doctors agree that more procedures and more tests being done have contributed to spiraling health care costs.
And, says Knaysi, not only has medicine gotten much more complex with "a huge menu of options" for testing and therapy, but the fear of lawsuits has become ingrained in both doctors' and hospitals' minds. He says that even during a 20-minute operation there will be three people in the operating room, and one of them is an RN entering data that could be used in a lawsuit.
"At the end of a 20-minute operation I've signed, dated ... my name 13 times and there's a nurse who has probably cranked out maybe 10 or 15 pages of printout. We don't even look at it; it's just there in case something happens," said Knaysi.
 Paul Gessing became the first full-time President of the Rio Grande Foundation in March of 2006. Since joining the Foundation, Gessing has been a prominent voice for limited government and individual liberties in policy areas including: taxes, health care, education, and transportation.
Moderator's question: Paul, you wrote, "Prices are useful information that enables us to discern the collective opinion of a given good or service. With massive government intervention already in the system, doctors are simply not able to compete on price and health care consumers are left without this valuable information." But how does the market deal with the problems of moral hazard, adverse selection, and the inelasticity of demand (i.e. consumers' insensitivity to price) for healthcare without, at a minimum, government oversight?
Our moderator has asked some specific questions that I will respond to first. Specifically, he wants to know how the market deals with the issue of moral hazard. For those who are not economists, moral hazard is the prospect that a party insulated from risk may behave differently from the way it would behave if it were fully exposed to the risk.
While markets are not perfect (humans are imperfect creatures, therefore anything involving humans is imperfect), markets do a much better job of dealing with moral hazard than does the government. An example of this relating to health care comes from author Malcolm Gladwell: "If your office gives you and your co-workers all the free Pepsi you want-if your employer, in effect, offers universal Pepsi insurance-you'll drink more Pepsi than you would have otherwise." The same is true for health care or any other good that is paid for by someone else.
Markets typically deal with this problem by asking individuals to bear the costs of services they desire. In a market system, insurance is purchased by the individual wanting to be covered and it is used only so that individual is protected from relatively rare and catastrophic events. We have certainly not adhered to that model in health care.
Adverse selection is another economics term that often comes up in these discussions. The term refers to a market process in which "bad" results occur when buyers and sellers have asymmetric information. This issue arises in the insurance industry to describe situations where an individual's demand for insurance (either the propensity to buy insurance, or the quantity purchased, or both) is positively correlated with the individual's risk of loss (e.g. higher risks buy more insurance), and the insurer is unable to allow for this correlation in the price of insurance.
The fact is that there is no simple way to deal with adverse selection 100% of the time. People who are higher risks will work very hard to become insured and pay lower rates than they should. Advocates of single payer care will simply argue that we should all be insured at the same level, but this does nothing to resolve the problem of adverse selection. Rather, if anything, it will simply subsidize adverse decision-making on the part of health care consumers.
Lastly, there is the issue of "inelasticity of demand." According to several reports I read online, the demand for health care is consistently found to be price inelastic. This means that demand for an antibiotic, for example, becomes highly inelastic when it alone can kill an infection resistant to all other antibiotics. Rather than die of an infection, patients will generally be willing to pay whatever is necessary to acquire enough of the antibiotic to kill the infection.
This means that people are willing to pay for health care. It also, in my mind, explains why Americans are willing to pay so much more in terms of their national GDP towards health care than are residents in other nations, simply because the average citizen of the United States is wealthier than those in other countries. Unlike many in the health care debate, I don't think spending lots of money on health care is necessarily a bad thing as long as the decision to spend that money is made by the people to whom that money belongs in the first place.
If you are a billionaire, you'll probably spend several million dollars for a life-saving operation that will extend your productive life by one year. This is not a bad thing. What is dangerous is if that billionaire - or anyone else - can pass that cost on to someone else as is the case with Medicare, a system that covers extremely wealthy seniors who can afford their own health care to the same levels as it does low-income seniors.
 Mario Burgos writes about local and national politics at his blog. He can also be frequently found hacking it up on a golf course. His hobbies include running an advertising agency, political consulting and growing a professional services firm, which provides project management support for construction, engineering and IT projects. Mario earned his B.A. from NYU and an M.S. from CalState Northridge. He resides in Cedar Crest with his first wife and their two sons, but has lived in more places than he count on one hand.
Moderator's question: I originally asked, "How can we change the incentive structure that leads to the use of expensive procedures that may not lead to optimal health outcomes?"
Mario, you answered, "There is only one way to significantly do this and that is at the consumer level. Something along the lines of health savings plans wherein individual consumer choices regarding the quality, quantity, and type of care they receive directly impacts the dollars in their pocket."
My question is similar to the one I asked Vicki. We know that doctors have an incentive to provide more expensive procedures (see the Gawande article referenced above) unless they are in an organization like the Mayo Clinic that focuses on outcomes and quality. Wouldn't trying to push more health systems to eliminate rewards for exorbitant care be better for society's welfare than forcing consumers to pay by the procedure, when they could be convinced that a more expensive procedure is necessary? (Again, inelasticity of health care demand).
Some of the comments that my post from yesterday generated revolved around how to deal with chronic illness and genetic dispositions to certain illnesses (i.e. heart disease, diabetes, etc.). Well, I know a little something about genetic disposition to disease. My family has more than it's fair share of both diabetes and heart disease. What does that mean? Well, it means that I take personal responsibility to minimize that risk. But, I also try to live my life to get the most out of everyday. Do I think my neighbors should pay increased taxes to add ten, fifteen or twenty years to my life? I do not. Like many things quality of life is more important than quantity.
According to an A.C. Nielsen Co. study, "the average American watches more than 4 hours of TV each day (or 28 hours/week, or 2 months of nonstop TV-watching per year). In a 65-year life, that person will have spent 9 years glued to the tube." Should we all be paying higher taxes so that individuals are able to get the medical treatment they need to watch television to the ripe old age of 74 instead of 65? It may sound harsh, but my feeling is we shouldn't. As we all know, death is a part of life. Part of the problem is that medical advances are making it possible to put off that part of life that scares many of us the most.
Now, let's look at the main thrust of my argument. Namely, that consumers need to take a more active role and personal responsibility when it comes to the type of care they receive. A glaring problem with The Dartmouth Atlas study and the Atul Gawande article in the New Yorker is that they place all the responsibility for change and elimination of costly unnecessary procedures on the medical providers and government directives. However, gone are the days where the only information on medical options available was from the mouths of doctors. Individuals who take an interest in their own life and health can through a simple Google search arm themselves with the information needed to make educated choices about their own treatment. The problem is that they lack the incentive to do so at the time of the "transaction" because someone else is seemingly paying the bill.
If the consumer had to write the check directly for the services, especially in the case of chronic care treatment, you would see a completely different paradigm develop. The burden of informed consent should be on the consumer of medical services, not the medical provider. There's a reason that in days of old, getting a second opinion was common practice.
 Barbara Wold has been providing news and opinion on local and national politics on the Democracy for New Mexico blog since 2004. She was the Democratic National Committee's official state blogger from New Mexico during the 2008 Convention in Denver, and is involved in Democratic Party politics and progressive grassroots activism.
Moderator's question: Barbara, you focused a lot of arguments yesterday on the supposedly low administrative costs of Medicare as compared to private plans. Ezra Klein (a pro-public option blogger) had a post yesterday disagreeing with the Krugman et. al. consensus that the costs are actually lower. A political scientist who focuses on health cares admin costs says at the end of the post, "The main question is why are health care costs going up at 2.4 percent a year faster than GDP? And most of the answers to that question have nothing to do with administrative costs. The answers are that we do more stuff and have more technology. Even if we could wring administrative savings out of the system, which I'm all in favor of and would be a good thing, we'd still be facing the question of how to slow the rate of cost growth." How does a public option slow cost growth any better than, say, a health insurance exchange that creates competition between private insurers?
Klein isn't convinced that Nobel-prize winning economist Paul Krugman and others are correct in placing a heavy emphasis on the ability of Medicare (and a public option) to hold down administrative costs. One problem Klein discussed is that there's no standard definition of "administrative costs." This is true, and it's emblematic of the difficulty involved in comparing data points generated within an incredibly large and complex health care system -- especially one that has no public option structured like the one being proposed.
I'm no economist, but it seems to me that spending on things like advertising, marketing, high CEO salaries and rewarding investors with profits would inevitably make private plan administrative costs (and thus total costs) higher -- without adding anything to the quality or scope of care provided. Cut out those cost centers and the price goes down regardless of how administrative costs are defined. It's just common sense.
I do agree with Klein when he says slashing administrative costs "will never be a panacea to the problems of the system." As Rick Kronick, a political scientist cited by Klein, said, a primary reason costs are rising is that we "do more stuff and have more technology." The question then becomes a matter of priorities, morality and values. As a culture, do we believe it's worth it to avail ourselves of the often amazing new technologies, procedures and protocols that are proliferating and increasing our lifespans? Or do we want to spend as little as possible -- sacrificing our quality and length of life to save a few bucks in taxes? Even more compelling is the question of whether our Western democratic values demand that we ensure that all of our citizens have access to the wonders of modern medicine, not just those who are at the high end of the economic scale.
I believe all of us should have access to the most effective treatments and care available -- just as citizens of every other Westernized democracy do. Health care is a necessity in today's world, not a luxury. I believe we can do that as well or better than other nations with universal care. If we nurture a universal system with adequate financial support and the application of effective management and treatment models, I have little doubt that we can create a system worthy of the 21st century.
With universal coverage and a public health care option we could finally test the various theories on ways to provide high quality care effectively and cost-efficiently.. As Klein suggests, the data now available often provide only a partial picture of how our system really works. There is convincing evidence to suggest a public option coupled with other improvements would drive down costs across the board -- but we can't be 100 percent sure on that point or many others unless we implement such reforms.
What we do know with 100 percent accuracy is that our current system is broken and costs are skyrocketing. Access to the system is nose-diving for millions of people (and thousands of employers) who are cut off from coverage or can't afford the ever-increasing co-pays and premiums charged by for-profit insurers. We need new incentives and new approaches to bolster wellness care, preventive medicine and diagnostic efficiencies. If we don't try something truly innovative, I don't see how we can make real progress on any these fronts.
We need a public option on a national scale to serve as a testing ground for new ways of providing care, structuring care, incentivizing care and involving patients in their care. Private insurers are, by law, compelled to put profits first. A public option would be free of that private-sector requirement -- allowing for more creativity and needs-based decision-making -- with a much greater focus on quality and putting patients first.
A competition between private insurers and a large, new public plan would help provide the large data bases we need to fine-tune the system. One big advantage of this approach is that people can keep their current coverage if they like it, or try the public option if they don't. Choice and flexibility is at its core. We'll all have more options and more control over the type of coverage we get.
We've tried Blue Cross/Blue Shield. We've tried HMOs and PPOs. We've tried an employer-based system based solely on private insurance. We still don't have the health care system we want at a price we can afford.
We know what doesn't work. Let's try to find out what does, based on elements of the health care systems of other advanced nations -- that have been providing universal care for many decades. On that score, I urge readers to check out a Boston Globe article recommended by a commenter on yesterday's thread. "Health Examples" examines the pros and cons of universal health care systems in other countries "whose insurance architecture and medical cultures more closely resemble the framework we'd likely create here."
A main finding: "... in the course of a few dozen lengthy interviews, not once did I encounter an interview subject who wanted to trade places with an American. And it was easy enough to see why. People in these countries were getting precisely what most Americans say they want: Timely, quality care."
Let's try a new approach and see if we can get there too.
 Brian S. Colón is Chairman of the Democratic Party of New Mexico. Mr. Colón was raised in Valencia County. He received his Bachelor's Degree from New Mexico State University in 1998 and graduated from the University of New Mexico School of Law in 2001. In 2004, Mr. Colón was named Outstanding Young Lawyer of the Year by the New Mexico State Bar Association and one of New Mexico's Forty Under 40 Power Brokers by the New Mexico Business Weekly. He was elected to his first two year term as Chairman of the Democratic Party of New Mexico in April of 2007. He was re-elected without opposition to a second two year term in April 2009.
Moderator's question: Brian, you write, "A public plan is imperative in providing health care coverage to more Americans. Having at least one plan available in the market place that is not for profit will increase competition and drive down costs." But Pres. Obama's chief of staff Rahm Emanuel yesterday said, according to the WSJ's paraphrase, "It is more important that health-care legislation inject stiff competition among insurance plans than it is for Congress to create a pure government-run option." He advocated the use of a trigger mechanism that would only start a public plan if the market couldn't create enough competition on its own. Wouldn't this be an effective alternative?
I thought today I would directly comment on a few of the other presenter's posts as well as some thoughts left in the comments section. But first I will answer the question from our moderator, Charlie.
From the very beginning of this debate the White House has been very clear on their position on health care reform. Any reform must reduce the cost of health care, protect people's choice and provide quality health care for all Americans. The White House has also said that they strongly prefer a public option. What I think you see here in Mr. Emanuel's comments is the White House's willingness to put anything on the table. Mr. Emanuel did not say he prefers a trigger option he said the number one goal is to increase competition and they'll explore all options to make that happen, including a pure public option or potentially a trigger option.
The White House brought together Republicans, hospitals, insurance companies, doctors and others to hear their ideas. As the President has said in the past on a variety of ideas, he's interested in the best ideas to solve problems-regardless of from where those ideas come.
Personally, I believe a public option is imperative to lowering the cost of health care and covering more Americans. I ultimately believe the final legislation will have a strong public option.
Charlotte - You make two good points with regard to being certain that coverage cannot be denied to someone because of a preexisting condition and that insurance companies cannot cancel someone's insurance when they become sick. I disagree with your statement that Congress is "backing away" from strong reform. Legislation currently in the Senate provides for a public option and addressee the need to insure that those with preexisting conditions can get coverage and that those who become sick continue to have their insurance when they need it most.
Mario - Because you believe every proposal in Congress is a "mistake," do you have any suggestions on how to fix our health care crisis? The only positive suggestion I see in your post is health care savings account. That is not a viable option for low and middle income families. Many families have to decide between paying for insurance and paying their rent. The last thing they have laying around is money to put into a health care savings account.
Todd - I could not agree more with your statement that we must do more to reward preventative care. I am also pleased, as you point out, that President Obama funded research to move towards evidence based care. Eliminating unneeded tests and procedures will go a long way to reducing costs.
Paul - Your comments regarding "socialized systems" are the same old tired scare tactics that have prevented real reform in the past. I would ask you to take a look at the post from Christopher in the comments section. It seems his "government bureaucrats" in Japan are running a strong health care system. I would prefer a "government bureaucrat" running a not for profit health care system than an "insurance bureaucrat" running a for profit health care system any day.
Tomorrow will conclude this excellent discussion on City Seeker. I encourage you to post your thoughts in the comments section below.
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Last Updated ( Thursday, 09 July 2009 14:09 )
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