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In an article in the Atlantic, James Fallows ponders if America is in decline and if so, is there anything we can do about it. One of the more revealing commentaries on America’s prospects comes from an American businessman living in China:
“We scream about our problems but as long as we have the immigrants, and the universities, we’ll be fine.”
Tags: Quotation
These set of links focus less on Healthcare and are instead more for my Economist readers.
Yesterday I game my evaluation of President Obama’s State of the Union Address. Today, I analyze the Republican Response.
All Americans agree, we need a health care system that is affordable, accessible, and high quality. Cheap and high quality, who wouldn’t agree with that proposition? Figuring out how to get there is the problem.
But most Americans do not want to turn over the best medical care system in the world to the federal government. Republicans in Congress have offered legislation to reform healthcare, without shifting Medicaid costs to the states, without cutting Medicare, and without raising your taxes. Republicans don’t want to turn over your medical care to the federal government, except in the cases of Medicare and Medicaid. The Republican message is philosophically incoherent: we don’t like big government healthcare programs except for one really big, really underfunded healthcare program called Medicare. This sounds like Bill Clinton in 1994, “I’m not going to let the government mess with your Medicare.”
We will do that by implementing common sense reforms, like letting families and businesses buy health insurance policies across state lines, and ending frivolous lawsuits against doctors and hospitals that drive up the cost of your healthcare. These policies will do little to significantly change the healthcare system. The reason Republicans propose allowing people to buy policies across state lines is to allow individuals to buy less regulated insurance products from other states. If this happens, healthy individuals will buy less expensive products from less regulated states and only sicker individuals will be left to purchase health insurance in the more regulated states. This will drive premiums up significantly for the sickest people, but decrease premiums for healthy individuals. This phenomenon is known as adverse selection. In addition, malpractice reform can help cut costs. There is evidence that the current malpractice system doesn’t work well. However, malpractice costs are a tiny fraction of overall healthcare costs. Limiting the malpractice liability of physicians could decrease cost by incentivizing physicians to decrease the use of defensive medicine. If these caps are implemented, however, patients who are severely injured through a physician’s negligent behavior will not be able to receive the full compensation they are due.
This foreign terror suspect was given the same legal rights as a U.S. citizen, and immediately stopped providing critical intelligence. As Senator-elect Scott Brown says, we should be spending taxpayer dollars to defeat terrorists, not to protect them. As a nation that believes in the civil rights of all individuals, it is important to give even accused terrorists the right to due process.
Tags: Current Events, Republican Response, Republicans, State of the Union
Below are healthcare-related excerpts from President’s Obama’s State of the Union Address with my comments afterward.
Now let’s be clear – I did not choose to tackle this issue to get some legislative victory under my belt. And by now it should be fairly obvious that I didn’t take on health care because it was good politics. True. Support for Obama’s health reform policies are hitting all-time lows.
The approach we’ve taken would protect every American from the worst practices of the insurance industry. Here, Obama may be referring to the fact that he wants to prohibit insurers from denying insurance coverage based on pre-existing conditions. In many cases this is a good thing. It is hard for people who have diseases to get insurance coverage, and when they don’t get coverage, they may forego necessary care. However, when insurance companies don’t deny coverage to individuals with pre-existing conditions, each person has an incentive NOT to buy health insurance until they come down with a serious disease. This way, you’ll save money on health insurance and when you decide to buy health insurance when you’re sick, it’ll cost the same as it does for healthy people.
It would give small businesses and uninsured Americans a chance to choose an affordable health care plan in a competitive market. The subsidies individuals would get to purchase nongroup insurance would help people purchase insurance for individuals who work for a business that does not offer a group plan. However, the small businesses generally oppose health reform.
It would require every insurance plan to cover preventive care. Most already do.
And by the way, I want to acknowledge our First Lady, Michelle Obama, who this year is creating a national movement to tackle the epidemic of childhood obesity and make our kids healthier. Although losing weight will generally improve your health, calling obesity an epidemic is a bit of a hyperbole.
Our approach…would reduce costs and premiums for millions of families and businesses. And according to the Congressional Budget Office – the independent organization that both parties have cited as the official scorekeeper for Congress – our approach would bring down the deficit by as much as $1 trillion over the next two decades. Cost will decrease for some people. Those who are newly eligible for Medicaid will see lower health insurance premiums. Those who receive subsidies to buy health insurance will see lower premiums. However, the taxpayer will have to cover this cost. Thus, there will be winners and losers if health reform passes. The Medicare cost cuts the Obama is proposing are small in comparison with the fast rate of growth of overall Medicare spending. Further, political pressure will make it difficult to actually enact these cuts. Although Obama may claim the health reform will decrease federal spending, insurance companies believe health reform will increase health care costs. I’ve already stated my belief that the cost-cutting measures in the health reform bills are meager.
As temperatures cool, I want everyone to take another look at the plan we’ve proposed. There’s a reason why many doctors, nurses, and health care experts who know our system best consider this approach a vast improvement over the status quo. Providers should support health reform. In general it expands the number of people with insurance (i.e., it expands their potential market). Further, because there is little cost cutting, doctors and nurses should see an increase in profits. Doctors and nurses may also believe that health reform is good for their patients, but without a doubt it will benefit the provider’s pocketbook.
Do not walk away from reform. Not now. Not when we are so close. Let us find a way to come together and finish the job for the American people. In other words: “Please pass health reform. Pretty please!”
Starting in 2011, we are prepared to freeze government spending for three years. Spending related to our national security, Medicare, Medicaid, and Social Security will not be affected. But all other discretionary government programs will. A spending freeze sounds like a great idea to reduce the debt. However national security (21%), Medicare & Medicaid (23%), Social Security (21%), other mandatory spending (10%) and interest on the debt (8%) make up most of the federal budget. This leaves only 17% of the budget which is not under a spending freeze. That is like saying, “Yeah, I’ll keep living in this house I can’t afford and driving this car I can’t afford, but when I go to Taco Bell I’ll get the regular taco instead of the taco supreme.” That is not the way to financial security. Additionally, some of the discretionary programs will be cut but others will receive increased funding. Obama even campaigned against spending freezes in the election.
More importantly, the cost of Medicare, Medicaid, and Social Security will continue to skyrocket. That’s why I’ve called for a bipartisan, Fiscal Commission, modeled on a proposal by Republican Judd Gregg and Democrat Kent Conrad. Read: “I know it’s not a good idea politically to cut Medicare, Medicaid or Social Security. So instead I’ll call for a commission to write a report that gets ignored a year from now.”
We are helping developing countries to feed themselves, and continuing the fight against HIV/AIDS. Feeding the poor and helping those with AIDS are important goals. They are also goals that few people would oppose politically.
Conclusion: Overall, Obama has proposed nothing new on health reform, but has just asked nicely for Congress to pass it. He has imposed a spending freeze on 17% of federal budget while letting entitlements continue to gobble up more and more of worker’s incomes through taxes. There is no solution to the impending budget shortfalls for Medicare and Social Security. To sum up, on the health care front it’s more of the same.
Tags: 2010, Health Reform, Obama, Spending Freeze, State of the Union
The latest edition of the Cavalcade of Risk is up at Wisdom from Wencypoo’s Mental Wastebasket.
Tags: CoR
“The Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) requires the Department of Health and Human Services (DHHS) to develop a plan that will transition Medicare payments into a VBP [value based purchasing] program for physician and other professional services that is based on efficiency and the quality of services provided. The Act also requires the DHHS to disseminate informational reports to physicians using episode groupers and/or per capita measures.”
One way to implement VBP is to evaluate physicians based on episodes of care. Episodes of care aggregate claims information to construct episodes. These episodes are supposed to represent a homogeneous unit of care for a given type of treatment or disease. A paper by Thomas et al. (2009) however, has found some problems with how episodes are constructed. For example:
Slides and a “backgrounder” from a CMS listening session on “Defining an Episode Logic” are also available.
Accountable Care Organizations (ACOs) are the latest rage in the health policy world. The question is, what are ACOs. The Urban Institute’s Kelly Devers and Robert Berenson try to answer the following question: “Can Accountable Care Organizations Improve the Value of Health Care by Solving the Cost and Quality Quandaries?”
The goal of ACOs is to pay providers in a way that encourages them to work together, to pay providers in a way that does not encourage supplier induced demand, and to create an organization that is rewarded for providing high quality care. What kind of organizations are currently poised to evolve into ACOs. This chart evaluates the prospects.
One question is why doesn’t Medicare just use their current Medicare Advantage program to accomplish these goals. In the Medicare Advantage program, Medicare pays a lump sum to private insurers and holds them accountable for all the medical care the beneficiary needs. However, there are three main differences between ACOs and HMOs.
The physician-centered organization makes much sense to many policymakers because “the resources that flow from the decisions physicians make with patients account for a major portion of overall health care costs, regardless of where the care actually takes place.”
Medicare could pay ACOs with a “gainsharing” mechanism. In the gainsharing framework, the fee-for-service payment structure remains, but a portion of patient cost savings gets passed through to the physician. On the other hand, Medicare could institute a partial capitation scheme. This would be similar to Medicare Part D, where the prescription drug plans get a flat rate per person, but they also receive are involved in risk corridors, which “limit a prescription drug plan’s potential losses should the plan happen to experience much higher utilization and costs than expected.”
One problem with this framework is that physicians are good at treating patients, not at risk management. Thus, many physicians may get stuck with high-risk patients and some ACOs may become insolvent unless there are adequate Medicare risk adjustment payments.
Secondly, patients may see ACOs as HMOs in disguise. ”[I]f beneficiaries believe that ACOs are essentially tightly managed ‘HMOs in drag’ that are going to restrict their choices, undermine the doctor-patient relationship, and result in cheaper but lower-quality care, the concept will be met with skepticism, if not overt opposition.”
Other obstacles to ACOs include possible FTC and DOJ desires to quash ACOs on anti-trust grounds. Further, state governments may need to change laws related to insurance regulation as well as organizational and professional liability.
Tags: Accountable Care Organization, ACO, Medicare, Policy, Quality
Tags: Hilary Clinton, task force
From the CMS Office of the Actuary:
U.S. health care spending growth decelerated in 2008, increasing 4.4 percent compared to 6.0 percent in 2007, as spending growth slowed for nearly all health care goods and services, particularly for hospitals. Health spending growth for state and local and private sources of funds also slowed while federal health spending growth accelerated in 2008. Total health expenditures reached $2.3 trillion in 2008, which translates to $7,681 per person and 16.2 percent of the nation’s Gross Domestic Product (GDP). Despite slower growth in overall health expenditures, the share of GDP devoted to health care increased from 15.9 percent in 2007.
A detailed table of health expenditures by service type (e.g., hospital, physician services) can be found here.
Also interesting is the changes in spending by payor. While overall Medicaid expenditure growth decelerated between 2007 and 2008, the composition of expenditures changed significantly. Federal Medicaid spending increased by 8.4%, but state Medicaid spending actually decrease by 0.1%. A table providing more information on the changes health expenditures by payer is available here.
Tags: CMS, Excess Cost Growth, Growth Rates, National Health Expenditures, NHE, OACT, Statistics
Most economists focus on the concept of “economic efficiency.” The basic concept of economic efficiency is to maximize the overall resources available to society. However, often times economists ignore the importance of equity (i.e., the distribution of resources within a society).
Tyler Cowen reminds us that seeking economic efficiency blindly is not ideal, especially in the case of natural disasters as the one that hit Haiti. Below is an excerpt:
I still believe that foreign aid does not raise economic growth rates, on average. But aid can alleviate human misery, such as when a visiting doctor gives vaccines or hands out medicine. (In fact per capita income may fall, as a result, if some “weaklings” are kept alive.)…
Imagine U.S. troops liberating Buchenwald. Would any commentators say the following? ”Don’t give him that blanket, sell it to him!” “Hey buddy, get a job!” ”Moral hazard: they’ll just go get captured again.” etc. I don’t think so.
Tags: Efficiency, Equity, Haiti
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