It's also certainly not a foregone conclusion that the US will get a medical system "more like those medical systems that get better healthoutcomes for less money."
My theory is that we'll get a system just like Medicare expanded to cover more people. But Medicare doesn't get health outcomes for less money. The primary evidence about 30% inefficiency that people keep quoting are studies showing that in some places Medicare spends 30% more for equal outcomes.
I completely fail to grasp this magical argument whereby Medicare is unreformable now, but adding even more patients to the rolls will create the incentive for exactly the sort of cost-cutting reforms that people hated when the HMOs were doing them in the early '90s, and got laws passed to prevent.
I have asked this question a number of times, less pithily. Few wonks are even willing to acknowledge that expanding a program does not usually make it then easier to reform. Those who concede this fairly empirically well-established point offer a sort of hazy version of the old Marxist belief in "heightening the contradictions". Only a really nasty crisis can show people the need for change, so apparently what we need to do is make health care much, much more expensive in order to garner the political support for gut renovating the system. That's not exactly what they say, of course. They say that once "everyone's on board", we'll have to control costs, because the problems will be "too obvious to ignore". Or something similarly anodyne.
As far as I'm aware, the actual track record of heightened contradictions is pretty poor. The crisis tends to straggle on far longer than you thought possible, a large number of people suffer, and it turns out that you don't get the exciting new system you were hoping for, but whatever terrible idea looked most expedient during the crisis. See Argentina, Nation of.
Simply put, reformers want to engineer a crisis to justify reforms to "fix" a crisis. Orwellian.
Dear Mike,
It is not Orwellian. It is Machiavellian.
There are things to fix, but they will not find savings where they are looking. For all its systematic problems, the biggest solution for healthcare is ending agriculture subsidies.
What do I mean? Spend a week or two in Montreal, and then go see the people in the Ponderosa right over the NY border. Shocking contrast for thirty miles! (God the food was good though)
Spend a week or two in Montreal, and then go see the people in the Ponderosa right over the NY border. Shocking contrast for thirty miles!
ohmicron - sorry dude. The same could be said for Manhattan and anywhere north of Albany. It's a city vs. suburb/country thing.
You could say the same about Munich and some village in rural Bavaria.
Take your point, however, check out obesity rates in places like Columbus, OH. Very big city, in both meanings! They do walk a lot in Montreal, but the manner of eating and what they eat is much more sane, as well as the more rural parts of Quebec.
Not a perfect example on my part, but I bet the obesity rates in rural Germany are nowhere near what they are here. Original point stands..
Thanks Megan, for the kind words.
As a side note, I should add that I'm not completely convinced by the idea of a grand bargain, whereby "we need to pass this politically popular health coverage expansion in order to get the unpopular cost controls through." Sure, that may work to get the initial compromise passed, but I have grave doubts about it staying that way over the long run. The political pressure to ease up on the cost controls will be enormous. If we can't implement the cost controls in Medicare without the sweetener of expanded coverage, will we be able to maintain them in five or ten years on a much larger patient (and voter) population once the politicians no longer have that sweetener to mollify complaints?
I wonder though if that is the real danger? The thing that is so odd about health care in countries with single payer systems is that the public seems to be satisfied with them for the most part. I suspect that what happens is that people get used to what they are getting.
There will more than likely be no cost cutting, only curtailing increases. The real danger is that innovation will be choked off. People will get more or less the same care they get today but that level will not improve, new drugs and procedures will not be tried and developed, but people won't notice because you don't miss something that hasn't been invented.
People are dissatisfied with the government run systems because they have the outcomes and procedures available in the private sector to compare them to. The real effect of expanding the government sector and decreasing the size and autonomy of the private sector is that there will be less opportunity for comparisons that force innovation and improvement on the government sector. To the extent that it is innovation and improvement that drive the increases in costs, crowding out the private sector may ultimately be a "solution."
I think it's a fair question to ask, how do other nations survive with whatever cost controls are in place? Is it the nature of their political systems? Is it some cultural phenomenon that exists everywhere but the U.S.? Is it intertia - where since its what they have they can't muster the will to change it just as as much as most Americans hate the system, they fear the changed version even more?
From Betsy McCaughey, Bloomberg:
'The goal, Daschle’s book explained, is to slow the development and use of new medications and technologies because they are driving up costs. He praises Europeans for being more willing to accept “hopeless diagnoses” and “forgo experimental treatments,” and he chastises Americans for expecting too much from the health-care system.'
It's important to remember that AIDS was a hopeless diagnosis not too long ago. The five-year survival rate of Leukemia has quadrupled since the 1960s.
From the Telegraph:
'Elderly people suffering from dementia should consider ending their lives because they are a burden on the NHS and their families, according to the influential medical ethics expert Baroness Warnock.'
You have to understand that those pushing this, the Nomenklatura of both the Democrat AND the Republican Parties assume that they, their children, and their grandchildren will always have access to "special" clinics, doctors, treatments, and be able to go to the head of the line. Just like the politicians of the Canadian Liberal Party jumped lines or got government paid health care here rather than suffer through the system they forced on everyone else.
Suffering, and dying early, is for the little people and their children; not for their betters. Once you realize that, it explains the willingness to inflict national health care on us. Tom Daschle and his family will never have to wait in line for health care.
Subotai Bahadur
But that's what the reformers' arguments are ALL based on--misinformation and magical thinking. The misinformation part comes when they do and say anything at all to discredit, dismiss, or distract attention away from cost estimates for reform, almost all of which warn of new government spending in excess of $1.3 trillion. The magical thinking part comes when they breezily predict huge cost savings from technology, Medicare and Medicaid restructuring, public plan efficiencies, private insurance concessions, etc. When asked for specifics, or when reminded that government's track record on health care efficiency sucks, their response is to re-state--with more emphasis--their belief in Obama's ability to "change the dynamics" of government bureaucracy.
The Argentina example calls to mind a question I've had recently:
What would happen if the US simply defaulted on all its' debt like Argentina did?
They seem to have escaped relatively unscathed. Yes, I know the country is a basket case, but I don't hear about their creditors trying to recover their money in news reports on the country.
Is the US simply "too big to fail" and Argentina wasn't? Is it that Chinese would be more willing to take aggressive action to recover their assets in a way western lenders were unwilling to do with Argentina? I'd love to hear thoughts on this.
A lot of imperialism was really international debt collection.
Our costs of borrowing would soar. Maybe that would be a good thing? Like cutting up our own credit cards?
What would happen if the US simply defaulted on all its debt like Argentina did?
China would take Taiwan as a down payment on the default, and,
a few years later, when the crash had crippled our military,
would be looking hungrily at Hawaii.
You think not ?
China is an authoritarian, disciplined, long-term planner;
None of their representatives to the Foreign devils say
anything spontaneous, so, three quotes:
Why, yes, we intend to do quite a bit of business with Europe,
after their people get used to a considerably lower standard
of living.
Oh come now, do you really think the US will risk a nuclear
exchange that would trade Taiwan for Los Angeles ?
9/11 was terrible, but after the way you have treated the
rest of the world for so long, what did you expect ?
As someone, somewhere, quietly pointed out, US power is primarily
economic, not military; If we lose that power, the rest of the world
will not be kind to us.
Come to that, the same is true of the US vs its states:
"The New Republic of Texas is Galt's Gulch; Get on down !
You're assuming that China still has resources to pay for it's military. Almost all of it's money is made off of the US. If the US defaulted, this would probably cause a rather large market crash in the US, along with wiping out large chunks of the Japanese and European stock exchanges at a minimum, to say nothing of the fact that Japan would probably default as well. Not to mention that defaulting would almost certainly end up putting Republicans in power for a while at the federal level, and they are much more likely to cut domestic costs than military spending.
Few wonks are even willing to acknowledge that expanding a program does not usually make it then easier to reform.
In many cases, you can end up with diseconomies of scale. But in this case, expanding the pool brings in cheaper customers over which to amortize the costs.
Still, the real issue is with costs. A system that can't control the pricing will produce few results.
Is the US simply "too big to fail" and Argentina wasn't? Is it that Chinese would be more willing to take aggressive action to recover their assets in a way western lenders were unwilling to do with Argentina?
US defaults would destroy the dollar's reserve status and create high inflation. Argentina isn't too large to fail because of its high default risk.
The US must maintain a perfect repayment record. Anything short of that would be disastrous.
Then we'd better get serious about cutting the deficits. Something like 11% of the budget goes to interest on the national debt already.
In many cases, you can end up with diseconomies of scale. But in this case, expanding the pool brings in cheaper customers over which to amortize the costs.
I keep hearing that, but it really does nothing to actually lower costs; it just spreads them to other people, raising costs for people who would otherwise be paying less. The cost of medical upkeep on a seventy-something diabetic smoker isn't any lower because a twenty-something Olympic swimmer is forced into the same pool (so to speak).
Worse, the reality is that "expanding the pool" and reducing the perceived costs of health care to the most expensive patients actually decreases the overall incentives for cost cutting. Moreover, there are likely to be disincentives at both ends of the scale. Those who need a lot of care will have less reason to look for bargains and encourage innovations in health care delivery because they will see less of the costs.* At the same time, those who really need almost no care will see that they are paying a relative fortune for health care and figure that they are paying anyway, so why not use it more and shop around less when they do? Those healthy-but-uninsured folks who now call doctor's offices and ask about the cost for an office visit before making an appointment won't bother anymore. Tweaking the system so that fewer people directly see the costs of health care is a poor prescription for cost containment.
(* In a basic economics sense, non-colocation of costs and benefits is already probably the biggest factor in high health care costs. Insurance provides "buffet-style" health services, wherein the consumer - or the employer - pays up front and then doesn't perceive costs and has little reason to self-limit consumption, to shop around, or to pressure providers to innovate. That pressure comes primarily from insurance companies, who 1) can only push so far before it looks like they are denying care to their customers and 2) have their own incentives limited because they pass along their costs anyway as premiums.)
I wonder what the people having the grassroots health care meetings are thinking given that both houses have already crafted bills that are winding their way through. What will end up in whatever final bill passes (if one does) will depend on horse-trading in Congress, NOT the results of people all over the country having health care discussions in their living rooms. And the horse-trading in Congress is where the inefficiencies begin to creep into the system...
You'd like prefer Vladimir Putin, Stalin being unfortunately unavailable.
This seems as good a place to post my comment as any. How can a system hope to control costs when the pricing structures are opaque and in many cases seem actively designed to obfuscate the issue?
For example, my wife and I were trying decide how much to set aside in our HSA at the beginning of the year. Since our baby is due in July it made sense to put aside enough to cover all the co-pays, etc. So we called the hospital to find out how much a typical delivery/hospital stay would cost. They told us that it depended on who was actually paying the bill. So we called our insurance company, who told us only that we were responsible for 20% of the actual cost. "What's the actual cost?" we asked. And they wouldn't tell us.
Without pricing transparency, there is little hope for competition to succeed in driving down costs.
This is spot on. I have an HSA as well, and I am amazed at how opaque the system is when one tries to be an intelligent consumer. Fun game: question any bill at a hospital rigorously. Odds are you'll see a discount for no reason than they can explain. Also, my (former) doctor freaked out when I tried to get an answer for how much a test would cost. It turned out he could code it four different ways, and each code had a different cost - for the same test!
One thing the government could do to make health care more efficient: mandate transparent pricing of all medical services. Require an up front, binding estimate just like you get at an auto shop, with required disclosure of all additional cost before the work is done.
Part of the reason health care is a broken market is because the doctors don't want it to be transparent; it would be bad for their business if people actually knew how much stuff cost, which means there is no effective comparison shopping..
Ultimately, insurance is a bet with a bookie. This has certain consequences:
1) Any bookie must win greater than 50% of the dollar value of all his bets, or go out of business.
2) In healthcare amount of the payoff on any particular bet varies, some times wildly. Tbookie gets into trouble for trying to limit the payout on any particular bet.
3) No bookie willingly takes bets on races that have already run. In healthcare the law requires that they do so. (pre-existing conditions).
Health insurance might work better if it were structured more like term life insurance.
The earlier you start the lower your annual premium. The policy follows you, not your employer.
If you stop paying your insurance lapses. Unemployment benefits might include bridge payments. You get a bigger unemployment check if you started your insurance right out of school. A smart company might give a discount to old customers who restart a policy.
Payoff for any particular claim would be limited, and paid to the policy holder. If you blow the money on wine, women, and song and your condition kills you that's your problem, not the company's.
Any and all of this adds to the cognitive burden on people. I wonder if that isn't the real reason for much of the support for a government plan. People want to hand the problem over to the big guy. They imagine it will simplify their lives.
thenewguy11,
I have some experience with this. The answer is that the cost of even a "normal" delivery can vary widely depending on what range of "normal" things occur.
For example natural child birth would cost X. An unexpected c-section/epidural/baby needs to stay in NICU due to some abnormal labs could be 3X or 4X. But, an unexpected c-section or a baby with high bilirubin levels are all well within what a medical practioner would deem "normal." That is why they are relucatant to give you a number.
jmo3, this may be true for complicated, potentially open-ended procedures. At the same time, I can't get a straight answer from a doctor how much a simple, routine prescribed blood test will cost. The hospital can't tell me, the clinic can't tell me, the insurance company can't tell me. The only way to know the cost is after the bill gets processed through each actor, i.e. after the procedure has been done. Even then, I can get a different price by complaining after the fact that it was coded wrong by one of the actors. I can also get a better price by simply questioning the cost with the administering entity (which I have done numerous times.) No explanation is ever given; the bill simply drops by a random percentage.
HSA's are quite enlightening things. It is amazing how different medical bills look when each dollar you save is a dollar in your pocket (barring catastrophic issues.)
An analogy might be to flying. The equivalent system would be to pick your airline, flights and seat with no knowledge of pricing other than first class is generally more expensive than coach. you cannot find out your ticket price until a month after the flight concludes. How can a market ever be efficient in such circumstances?
Hazily I recall that "accentuating the contradictions" was Lenin's idea, not Marx's.
It might be overly cynical, but one thing I could see occurring is that if a public plan is widely-adopted and it refuses to cover certain expensive procedures, then we'd see less innovation occurring that would lead to the development of these procedures (since they wouldn't be profitable if most policies won't purchase them.) Thus you'd have the outcome that the public plan actually does cover what's available, because no one will make products that the public plan won't cover, which obviously contradicts the status quo wherein innovations are made that aren't aimed solely at adoption by our public healthcare schemes. The opportunity cost of lost innovation would be almost entirely invisible.
but one thing I could see occurring is that if a public plan is widely-adopted and it refuses to cover certain expensive procedures, then we'd see less innovation occurring that would lead to the development of these procedures
Perhapse not, as the only way private plans could charge more is if they offered access to better doctors/hospitals/and new more advanced procedures. People would be willing to pay for that.
Public plan would get you an open ward at County Hospital and a nurse dispensing generic drugs. Private would get you a semi-private room at the Mayo Clinic with a real doctor with the latest drugs and treatments.
thenewguy11:
Yeah, I've noticed the same from medical bills, even after the fact. After the birth of our first son, we continued getting oddball medical bills for several months, usually with nothing on them but the dates and some opaque codes to explain what they were for, usually from some out-of-state billing company, from multiple different providers for different pieces of the bill. It was almost impossible to determine which, if any, of those bills we actually owed any money on, and which were supposed to be included in our insurance. (And straightening them out took hours of phone time.)
And I've seen the same pattern many other times, for less complicated stuff--you go to the cardiologist for a stress test, and weeks later, some bill arrives from some out-of-state address demanding payment immediately on stuff you may or may not owe money on, and threatening to send you to collections over it if it's not paid quickly. Again, to straighten it out (if that is even possibe), you will spend hours on the phone, lots of it talking to some script-reading drone at the billing company or the insurance company. You don't have to be any kind of financial genius to see that the point of this kind of billing is that if you're old and sick or just too busy to deal with spending hours on hold, you will just pay. Or that the incorrect/fraudulent bills will end up being paid by your estate after you die of whatever it is that left you with $30K in fraudulent/incorrect/inflated medical bills.
I have this dark suspicion that without that kind of fraudulent/borderline fraudulent billing, a whole lot of the hospitals and physicians would be in a financial crisis.
For cryin' out loud, we have a single payer government health care system called Medicaid that has a 40% fraud and 'legal graft' rate from coast to coast! (Or at least on both of them.)
Not waste and inefficient procedures. Fraud and graft!
Why? Simple. No politician in New York or California ever gets a vote from denying medical benefits to anyone -- it only costs them votes. "Heartless politicians deny medical care to the poor..." The very same argument being used to beat up insurance companies in Congressional hearings today. Add to that all the money the politicians collect from the medical services providers -- hospitals, unions of health care workers, suppliers, etc.
That's an awful lot of political incentive against cost efficiency. Where is the incentive for it?
The result is obvious. Politicians block health care controls, even to the point of promoting what Tammany infamously called "legal graft" -- what sure looks like graft to the eye, but isn't against the law because that's how the rules are written by the rule-writers who benefit from the system.
If Orszag could just get the graft out of Medicaid (and Medicare too!) I'd be impressed.
But Orszag gave away the whole game in his reply to Postrel after she challenged him with "Show us the Medicare improvements first..."
He told her the AARP and thus the political system won't go along with waste-cutting measures unless they get more coverage first as a payment for it.
Think about that for a moment: The political system won't cut waste simply because it is waste, no matter the scale of it -- Orszag admitted it!
So, why would the political system do so after expanding coverage?
Best case: As part of a deal, coupled with expanded coverage Congress enacts some one-shot "efficiency improvements" that are undercut forever after.
More realistic and worst case: Coverage is expanded and then the politicians renege on the promise to enact even one-shot efficiency improvements. What is there to hold them to the promise, if their constituents and AARP don't want any benefits cut but only expanded coverage?
(Historical precedent: FDR enacted Social Security in 1935 in a funded model that he bragged was "actuarially sound and out of the Treasury forever". Full benefits weren't going to be paid for 30 years, and were to earn the federal bond rate on contributions. But Congress immediately afterwards -- and over FDR's veto -- turned SS paygo and gave then-seniors great multiples of what they paid in, causing the whole thing to go broke by 1983 and giving today's workers benefits worth less than they pay in as a result. Politicians get votes by handing out benefits to the voters of the day. Being economically efficient, and fiscally responsible for the long term, is against their interests.)
A cost-efficient health care system, like any cost-efficient system, requires strong incentives towards continuous efforts to improve efficiency. These incentives are just totally lacking in the political system. All the political incentives are the other way towards just making handouts.
When Spitzer was AG of New York why did he totally ignore the notorious massive graft in NYS Medicaid, which he was explicitly charged under the law to police, to pursue Wall Street instead, which was the jurisdiction of the SEC and Feds? Because that's how political incentives apply to government medical care programs.
Reality is this: Politicians will hand out medical benefits with no more efficiency retraints than today until the day arrives when they feel the pain of having to raise taxes to pay for them. Then they will apply "cost saving measures" by hacking the govt's health care budget with a meat cleaver from the top down -- making the whole system even less efficient than ever.
Why? Because it follows from the only political incentives they feel: (1) Get votes by handing out more benefits; then (2) avoid losing votes by stopping tax increases with budget caps, enforced top-down.
Politicians have no incentive, zero, to deliver "cost efficiency" in medical care. That only cost them votes, so they effectively are against it. Look at Medicaid from New York to California. Orszag admitted it to Postrel!
Anybody who thinks this is wrong, explain the Medicaid fraud and graft rates in New York and California.
If Obama or Orszag says again that they can pay for full national health care with new cost efficiencies, tell them to just to eliminate this fraud and graft first. It ought to be easy! That's the lowest-hanging fruit there is!
If they can't do even that ... forget about it.
I have this dark suspicion that without that kind of fraudulent/borderline fraudulent billing, a whole lot of the hospitals and physicians would be in a financial crisis.
The thing about hospitals is, they aren't unitary institutions capable of presenting you with a unitary bill. They're more like general contractors who make you pay the subs yourself.
For a childbirth, you need to pay the OB, who isn't an employee of the hospital, but rather an independent contractor, or maybe an employee of an OB practice who has privileges. You need to pay the hospital, which owns the beds and pays the nurses. You need to pay the lab that does the bloodwork, which is unrelated to either. You may need to pay other entities, for example the anesthesiologist who does the epidural and a surgeon other than the OB if that's the person who does the c-section, or maybe a contractor who runs the gro-lamps they put the yellow babies under, etc.
It looks like one big business that should provide you with one big bill, but actually it's a minimum of 3 and quite possibly 5 or more businesses. So you get random independent bills. It's a stupid system but it's not really intended to defraud you.
Well, that's almost certainly what's going to happen. Sort of. The Chinese have been foolish enough to buy dollar-denominated bonds, so even though we won't technically default, it amounts to much the same thing if we pay them back in highly devalued dollars. Finance ministers in China and Japan are making noises about buying US bonds denominated RMB and Yen, since the writing is pretty clearly on the wall.
I suspect (though I don't know for sure) Argentina didn't have that option because their debt was denominated in US Dollars.
In terms of aggressive action... what are they gonna do? China's military is no match for that of the US.
The Chinese have been foolish enough to buy dollar-denominated bonds
The Chinese were waging economic warfare on their enemies before
there was such a place as Europe, much less the US of A.
They would be relatively stronger after our default, and none of us
would like how they exploited their new, but long-planned advantage.
I would love to see some sanity in billing and pricing. I know that it's impossible to predict how much some procedures will cost until after they are complete, however, any procedure that is done frequently will have some cost data that will at least give an idea of averages and extremes.
I wish that medical institutions would consolidate the billing. If THEY subcontract out services, then THEY should pay for them and present me with a unified bill. To extend the airline analogy, I do not get a bill for the airport, the catering services, the fuel service, cleaning the plane, etc... I buy a ticket and all of those expenses are taken out of the ticket price.
Honestly, I'd rather pay a bit more in administrative overhead and get one bill that I can easily understand and avoid the risk of paying bills that don't apply.
And EI, one problem with unified billing is that doctors don't want to be beholden to hospitals. We're forbidden to engage in collective bargaining, so why would anyone give up their ability to play each insurance company off against the others?
The cost of medical upkeep on a seventy-something diabetic smoker isn't any lower because a twenty-something Olympic swimmer is forced into the same pool (so to speak).
Incorrect. If you can control the breadth and depth of the pool, you then have the negotiation power to negotiate and control the cost.
There is a false assumption among the libertarian types that the costs are fixed. They aren't.
The costs are opaque and arbitrary, subject to change, and skewed to favor the industry that sets them. The insurers than leap in, adding their own costs while busily figuring out how to deny coverage to some customers, while avoiding others as customers entirely.
The cost structure could be reinvented and reduced if the control of it was removed from where it is now. There is nothing hallowed about the current pricing scheme.