Obamacare: Killing Healthcare to Save It
To listen to President Obama discuss health care as he did last week in Virginia is to receive a well informed lesson on the problems of any health care system in the world and some unique American issues: It is all very expensive, some people do not receive needed care, there are administrative burdens in the system, quality could be improved, and costs are rising faster than growth in supporting revenue. There is no health care system in the world where the aforementioned five issues are not a problem. But making a diagnosis is not the same as coming up with the right therapy. He has identified problems but he has done so in an extremely superficial manner and this has led to proposed therapies that have virtually no chance of curing the patient.
The proposals put forward are only designed to fix one of the five problems- that some people do not receive needed care. The question of who these people are and why they have limited access to care is one that does not lend itself to quick or easy analysis.
They are not the poor and they are not the elderly. Those groups are cared for under current government programs of Medicare and Medicaid.
They are not the very young (<18 years) for they are now eligible to be covered under a government program, SCHIP.
They are those with moderate incomes (around $45,000/year) who do not receive employer funded care and who have decided that they cannot afford to pay for care themselves. This represents some 10% of the American people. Of these 30 million, some 25 to 50% are between jobs so the number is quite fluid. Some are young people who simply are unwilling to pay for any health insurance, even the kind that would guarantee payment for some catastrophic illness or accident. So the issue is about some 5- 10 million people who lack health insurance and really have a serious problem affording health insurance.
There are some 290 million or so Americans for whom the health care insurance system would have to change to accommodate the other 10-20 million according to proposed plans. Wouldn’t it be easier just to design a plan for the 10-20 million? The President is proposing changes for everyone. Why is that?
He says the reason to change the whole system is to control costs but in fact the only solid plans put forth are to guarantee health insurance for most of the uninsured, not to do anything at all to control costs.
The growth in health care costs in virtually every industrialized country is about at the same growth rate as in the U.S., so every country is grappling with the problem no matter how it finances health care. But our system is much more expensive than all other systems, for example about 50% more per capita than Canada so it looks like his diagnosis of excess costs is valid. But it is necessary to understand why our system is expensive to identify the right therapy. It really has to do mostly with the availability of technology in this country. Every time a patient needs an MRI done for back or knee pain, the actual cost of the image produced is the cost of the electricity that runs the machine- a few pennies. The reason the test is expensive is that the machine itself can cost millions of dollars and a crew of people need to run it and maintain it. These are called fixed costs and they are present whether the machine is used to take any images at all on a given day. But we have excellent access to MRI machines in virtually every hospital in the United States. There is little or no waiting for access to an MRI.
“Reducing unnecessary tests”, one of President Obama’s therapies for our health care “ills”, will only reduce costs if we get rid of the MRI machine and the people that run it. Shutting off the machine for a week or a month or a year will not save those fixed costs unless the people go and the payments to the bank that financed the machine go away too. That is how Canada does it. Less technology so less costs. That is why it takes 18 months to get a hip replacement in Canada. Less access is the real face of rationing.
Whether the population is content with these limits is a function of whom you ask. Individuals with greater health literacy will likely seek greater access to technology and care. In fact, even in countries like Great Britain, the more affluent utilize more services in the National Health Service than do the poor. But make no mistake, a key mechanism to reduce costs is to reduce access to care and to technology. Perhaps not to all care like emergencies, but to plenty of care like hip replacements, elective cardiac bypass surgeries, and screening tests like mammographies.
How about his other cost saving plans? Electronic medical records? Good idea but they are expensive to create, expensive to maintain, and have the potential to reduce errors and to save money but this has never been proven to occur in places where the electronic records are installed. They are probably a good thing to have but will not necessarily save money.
What about preventive care? Another good thing but also not necessarily a cost saver. Certainly some vaccines save huge amounts of money but other screening tests lead to increased costs because one has to screen everyone to prevent disease. Take the PSA test. Something like 80% of men develop prostate cancer but it is the cause of death in about 4-6% of men. So just finding a positive test and performing surgery on everyone with a positive test will be enormously costly to prevent the few from dying of prostate cancer. Again, depending on your point of view, a good thing, but not a cheap thing. There are many effective screening tests and avoiding terrible disease is a wonderful outcome, but not a major cost savings approach.
So where are the savings to be gained? Cut payments to hospitals and physicians? OK but that is not likely to help in the access problem, is it? Less revenue to hospitals means fewer people to staff the clinics, the equipment, the pharmacies, etc.
What about cutting payments to the insurance companies that provide health insurance? Commercial insurance companies, if they are efficient, typically pay 80 to 85% of their revenue to medical claims. So we have about 15% of their revenue that does not pay for health care and could be savings to the system. However, since about 50% of health care spending is in Medicare and Medicaid, and since those programs have a 3% overhead, that leaves about 4.5% of health care spending that would go away if all the insurance companies disappeared tomorrow and if Medicare or some other government program were the only payer. That could happen but the President promised us that we could keep our health insurance if we liked it and since polls show that most Americans are content with their health insurance, it is hard to see how we would save more than 1% or so on administrative costs with the current proposals unless the actual cost of health care goes down. The latter must mean less access to physicians or to technology.
And make no mistake, despite the President’s statement that “more health care is not better health care”, less spending on health care does indeed mean lower quality of care. Based on the recent research of Dr. Richard Cooper of the Wharton School of the University of Pennsylvania, “based on broad measures of health system quality and performance, states with more total health spending per capita have better-quality care. This fact contrasts with a previous finding that states with higher Medicare spending per enrollee have poorer-quality care. However, quality results from the total funds available and not from Medicare or any single payer. Moreover, Medicare payments are disproportionately high in states that have a disproportionately large social burden and low health care spending overall. These and other vagaries of Medicare spending pose critical challenges to research that depends on Medicare spending to define regional variation in health care.” President Obama’s quoting a New Yorker article as justification for decrying regional variations in health care and Medicare costs is amateurish.
Dr. President Obama’s makes the point that health care spending will bankrupt the nation as a 37 trillion dollar deficit is looming by the end of the century. But that deficit is in the Medicare and Medicaid programs!! That is the single payer plan that is his real endgame, as he stated in the campaign. So a single payer, government run health insurance plan as Medicare is constituted cannot be our salvation.
We do need a new system given the long term cost projections and there are models like Kaiser Permanente, Geisinger Health Care, and others that provide high quality and somewhat lower cost. They are still pretty expensive but if their approaches were instituted widely, we could probably control costs a bit better and over the very long run maintain our system without drastic limitation of access. But it will take many years and much local experimentation to achieve this goal. The Commonwealth Fund polled individuals in several industrialized countries to find out how they felt about their health care system. The results were the same across the countries polled. They mostly felt that the health care system was in trouble and needed to be fixed. But what bothers people in each country is quite different. Here our problem is cost although availability of primary care physicians is an ongoing source of frustration. In other nations, it is mostly access to technology and specialty care but rising costs are seen everywhere (mostly to accommodate new technology if it becomes available in other countries).
There is no panacea for health care. The President has diagnosed several problems with our health care system but his cures are off the mark. If our national goal is to assure all Americans have health insurance, and we focus on the 10 -20 million people who have fallen through holes in the safety net, then we need about 200 billion dollars to pay for their insurance. That is a 2 trillion dollar 10 year plan. If we want to lower health care costs by that amount, let’s get started. But to do it right does not mean a bill before the August recess. It means a long term plan that must include some means testing of entitlements, some hope that research produces therapies that really do lower costs of chronic illness, and some tackling of our current system of piecemeal reimbursements for most medical care.
And by the way, the province of Quebec has recently allowed some private health care insurance to exist. Leave it to the French(-Canadians)! They do not like to wait either.