Obama

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Obama Address to AMA

June 15, 2009 in Medicaid/Medicare | No comments

President Obama addressed the American Medical Association in Chicago today.  His goal was push through his health care reform agenda.  On Saturday, his Weekly Address also focused on health care reform.   What is this agenda and how will it be paid for?

 Obama wants a public health care plan for the uninsured.  The total cost of his proposed health reform is about $1 trillion (although some disagree with these estimates).  He has proposed a number of ways to raise this money.

Additional Revenues

  • Increasing taxes for high income Americans.  Whether you are for or against this likely depends on your income bracket and political leaning.
  • Ending the tax-deductibility of employer-provided health care.  I agree with this proposal.  Tax deductible health insurance gives individuals an incentive to purchase more generous health insurance packages with lower copays and deductibles.  Further, this deduction is much larger for high income individuals who not only have more expensive health plans, but who also have a higher income level.  Uninsured individuals should not have to pay more for health insurance than CEOs.  Opponents would say that the tax deductibility increasing the incentive to pool insurance at the employer level.  Although this is true, the cost benefits in terms of lower load factors almost always makes employer-provided health insurance a better deal than non-group, individually purchased plans.

 

Savings

Obama also has come up with $635 billion of additional “savings.”  These include:

  • Incorporate productivity adjustments into Medicare payment updates.  Read: pay doctors less.
  • Reduce subsidies to hospitals for treating the uninsured as coverage increases.  This means eliminating the DSH payments.  It makes sense that if most or all individuals are insured, then DSH payments can be drastically reduced.  I do wonder, however, whether immigrants (legal and illegal) will be eligible for the public insurance plan.
  • Pay better prices for Medicare Part D drugs.  This means negotiated lower prices with drug companies.  It would be preferable to significantly limit the duration of patents in order that generics can more quickly compete with patented medicine.  Further, shortening patent life will lead to new add-ons and innovations based on these patents.
  • Less Money for MRIs and CT scans.  Technically, Medicare will double ”the assumed utilization rate for calculating practice expense RVUs for the technical portion of reimbursement from 25 hours per week (50% utilization) to 45 hours per week (100% utilization).”  This means that Medicare that the equipment will be used more hours per week which reduces the price per scan.  One reason for the lower compensation, is because areas with more MRI machines and CT scanners do not have better health outcomes, only higher prices.
  • Cut Fraud and abuse; increase Medicare payment accuracy.  This is easier said then done.  Dr. Rich is skeptical that fraud programs will significantly cut healthcare costs.  He cites his own experience with anti-fraud programs.
  • Improve Quality.  Also easier said than done.  The Obama administration attempts to reduce hospital readmissions.  This may mean lower payments for patients who are readmitted to the hospital for the same disease.  If this is the case, hospitals may provide subpar care to patients who are re-admits or they may recode the patients as having a different disease to increase reimbursement.  The government also wants to expand the Hospital Quality Improvement Program. Because medical quality is so difficult to measure, some of these measures may be counterproductive.  

Presents for Physicians

The President propose two changes that doctors do like.

  • Less paperwork.  Simpler paperwork would help smooth the operation of physician offices, especially for physicians in smaller practices.  However, making the paperwork simple isn’t so simple.  The more transparent the paperwork, the less information the government has and the less they know about the procedures they are paying for.  Further, Obama claims to clamp down on physician fraud.  More fraud-fighting requires more–not less–paperwork.
  • Limits on malpractice claims.  Limiting malpractice claims will have little direct effect on health care costs. The indirect effect, however, could be large.  If physicians decide to do less tests and less precautionary medicine, this could significantly reduce health care costs.  Yet Barack Obama did say that “I’m not advocating caps on malpractice awards, which I personally believe can be unfair to people who’ve been wrongfully harmed…”

A final note

This leaves one question: is former Illinois senator Barack Obama a Green Bay Packers fan?  Probably not, but he did praise Green Bay as a place where health care costs are below the national average while excellent health care is available.

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Obama’s Address to Congress

February 25, 2009 in Current Events, Public Policy | No comments

While President Obama’s speech to Congress had many components, I’m going to focus on those related to health care.  I will also comment on the Republican response.

OBAMA ADDRESS

I applaud the President for specifically addressing the need for health care reform.

“…we can no longer afford to put health care reform on hold. We can’t afford to do it.”

Of course, Obama applauded his the health care changes made already (i.e., expanding SCHIP eligibility, and extending COBRA benefits).

The President mentioned the high cost of health care.  Health insurance premiums put a burden on small businesses.  Small businesses have smaller pooling groups and thus have higher average premiums than for large firms.  Further, if one employee gets has a catastrophic illness, this will have a large impact on health insurance costs for small businesses, but not for large.  Obama also mentions that many people file for bankruptcy due to large medical bills.

So what is Obama going to do about it?  Does he claim he can cure cancer?  Actually, yes.

“Our recovery plan will invest in electronic health records and new technology that will reduce errors, bring down costs, ensure privacy, and save lives.  It will launch a new effort to conquer a disease that has touched the life of nearly every American, including me, by seeking a cure for cancer in our time…and it makes the largest investment ever in preventive care, because that’s one of the best ways to keep our people healthy and our costs under control.”

Let’s look at Obama’s 3 suggestions:

  • EMR:  Electronic medical records (EMR) are of course a good thing.  The question is one of implementation.  If the government establishes one standard for electronic medical records, this will create a unified platform that can be used by all health care providers.   Sharing information across providers is essential.  However, there are privacy issues to be managed whenever a database is centralized.  Further, mandating one EMR standard will hinder the ability of innovators to improve the quality of the EMR.
  • Preventive Care.  Preventive care is generally a good thing, but I do not believe this is an important health reform issue.  First, preventive care will not reduce costs significantly and may even increase costs.  The Congressional Budget Office states that any gains from reducing obesity would be concentrated in the short and intermediate period “because some of the savings will be offset by increased longevity and the cost of disease that are most prevalent during old age.”  Secondly, if individuals are not getting preventive care and it is not saving money, then this does not seem to be a public policy issue.  An exception may be vaccines; however, since poor patients who can not pay for vaccines can get subsidized or free vaccines, the problem is one of education, not of health insurance.
  • Cure Cancer.  This idea will enrage the pro-cancer lobby.

Although President Obama realizes that “we must also address the growing cost in Medicare and Social Security,” he does not address how this will be done.

REPUBLICAN RESPONSE

Gov. Bobby Jindal’s comments related to health reform were the following:

“To strengthen our economy, we also need to address the crisis in health care. Republicans believe in a simple principle: No American should have to worry about losing their health care coverage, period. We stand for universal access to affordable health care coverage.

What we oppose is universal government-run health care. Health care decisions should be made by doctors and patients, not by government bureaucrats…if we put aside partisan politics and work together, we can make our system of private medicine affordable and accessible for every one of our citizens.”

Gov. Jindal theme was this: the government will help pay for your health insurance premiums, but does not support a single payer plan.  Although Gov. Jindal was vague, the Republican worldview might support a voucher system.  In a voucher system, individuals receive subsidies to buy private health insurance based on their income and illness level.  I believe that Republicans would oppose the creation of a public health insurance plan that could compete with private insurers (see 24 Feb 2009 post).

SUMMARY

Like most speeches, the Obama Address and Republican Response were long on rhetoric and short on details.  As all policy wonks know:

“Le bon Dieu est dans le détail” (God is in the details)

Gustave Flaubert

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Los Galácticos de Obama

December 16, 2008 in Current Events, Public Policy | No comments

At the turn of the century, the football (soccer) club Real Madrid began collecting some of the most famous players in the world. Termed los Galácticos by the media, the team included a stockpile all-world players such as Figo, Zidane, Ronaldo, Beckham, Michael Owen, Roberto Carlos, and Raúl.  

It seems Presdient-Elect Obama is trying to form his own team of Galácticos.   Obama has assembled an economic team with impressive resumes: Lawrence Summers (Harvard Ph.D., former Harvard president), Peter Orzag (London School of Economics, Ph.D.), Christina Romer (M.I.T, Ph.D.), Paul Volcker (Harvard, LSE, former Fed Reserve President).

Does this ensure success?   Not necessarily.  David Halberstam’s book, The Best and the Brightest, reveals that President Kennedy’s team of extremely intelligent, well-educated individuals still managed to make poor decisions during the Vietnam War.

On the other hand, Obama is also following President Lincoln’s “Team of Rivals” model.  Lincoln choose William H. Seward, Salmon P. Chase, and Edward Bates for cabinet positions even though each of them opposed his nominations.  Similarly, Obama has choosen Democratic rival Hilary Clinton as secretary of State, and has allowed Bush-appointee Robert Gates to continue as Secretary of Defense.

Will Obama’s choices for cabinet positions lead help lead the United States on the path to peace on prosperity?  Hopefully, they will at least do better than los Galácticos.

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Breaking News: A New President and a New Cavalcade of Risk

November 5, 2008 in Carnivals, Current Events | No comments

Barack Obama has been elected President of the United States.  Whether you are for or against Obama, this is a historic day.  It is the first time an African-American has been elected president.  Coverage of the election is below:

In other, only slightly less important news, My Wealth Builder is hosting the latest edition of the Cavalcade of Risk.

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Economists favor Obama

October 3, 2008 in Current Events, Economics - General | Permalink

The Economist magazine took a poll of academic economists working at NBER to see who they would vote for.  Barack Obama came out as the favorite.  Even though 46% of academic economists list themselves as Democrats compared to only 10% who claim to be Republican, Obama came out overwhelmingly ahead.

Seventy percent of economists would rather work for Obama than McCain (compared to 10% for McCain).  Eighty percent of economists believe Obama has a better economic team.

“John McCain has professed disdain for ‘so-called economists’, and for some the feeling has become mutual,” says Erik Brynjolfsson, a professor at the Massachusetts Institute of Technology Sloan School of Management.

  • Note: The Healthcare Economist website has not endoresed either candidate

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Obama vs. McCain health care policies

August 18, 2008 in Current Events, Health Insurance, Public Policy | Permalink

Barack Obama and John McCain both believe that they know how to improve the American health care system. A policy brief by Michael Tanner has nice summary of the two candidates policies. I will review some of this paper today.

Obama’s general health care policy

Obama goal is to expand government provided health care and create a form of “managed competition” originally developed by Alain Einthoven. Obama supports expanding SCHIP and Medicaid eligibility. Although Obama does not support a health insurance mandate for adults, he does support a mandate for children and young adults (any one 25 or under). Obama’s goal to increase health care access, he would support a “pay-or-play” mandate. All but the smallest employers would be required to provide health insurance; those who didn’t would be compelled to pay into a national fund covering these uninsured workers. The mandate would likely require a minimum benefits package. Overall, Obama is pushing towards more government provided health care and more regulation.
McCain’s general health care policy

Compared to Obama, McCain is generally against more government participation and regulation. Instead of moving the U.S. to larger risk pools (e.g., government insurance, employer insurance) that are more severely regulated, McCain want to move the U.S. towards more individually provided health insurance. McCain’s main policy initiative is a $2,500 health insurance refundable tax credit for individuals ($5000 for families). The goal is to make health insurance more affordable, but make individuals incur the full cost of “better” health insurance at the margin. McCain is also considering risk-rating these vouchers so that individuals with severe health problems will receive a larger voucher. McCain would also allow individuals to buy health insurance from any state.

Side-by-side comparison

Obama McCain
Community Rating Yes No
Guaranteed Issue Yes No
Drug Reimportation Yes Yes
Expand SCHIP/Medicaid Yes No
Pay-or-play mandate Yes No
Government direct negotiations with drug companies? Yes No
End tax-exempt status of employer health insurance benefits? No, but capped Either eliminate or cap
Health Insurance Vouchers No Yes
Purchase out-of-state health insurance? No Yes
Allow non-traditional organizations to buy insurance (e.g., churches, professional organizations)? No Yes

Commentary

So whose health insurance plan is better? If you are in favor of more government involvement in health care, you should support Obama. In the Audacity of Hope, Obama states that “the market alone cannot solve our health care woes–in part because the market has proven incapable of creating large enough insurance pools to keep costs to individuals affordable, in part because health care is not like other products or services (when your child gets sick, you don’t go shopping for the best bargain).” While Obama’s proposals will decrease insurance choice, increase regulation, and increase public funding of healthcare, Obama’s proposals are likely more progressive than McCains and will create larger risk pools. Obama’s plan is likely much more expensive. Further, an employer mandate may lead to higher unemployment levels (see Baicker and Levy paper).
If you are in favor of less government involvement, McCain is your man. McCain rejects “coercion and the use of state power to mandate care, coverage or costs.” The voucher system is similar to the one proposed by Victor Fuchs, and fairly similar to the Swiss managed competition system. A shift to individual–rather than employer-provided–health insurance accompanied by a decrease in regulation should: 1) reduce health insurance costs, 2) increase employment relative to Obama’s plan, 3) give insurance companies the incentive to create innovative products, 4) give workers more choice of their health insurance plan, and 5) be more fiscally sound for the government.

On the other hand, McCain’s plan will be more regressive and can adversely affect the ability of individuals with pre-existing conditions to buy health insurance (unless risk rating the voucher payment occurs). The McCain plan can only be successful if risk pooling can occur on the individual level. This is happening in Switzerland, but in Switzerland there is a standard benefit package which makes shopping for insurance coverage easier.
Additional Comment

Both candidates have proposals with respect to improving how medical care is delivered. Increased preventive care, EMR, and P4P are all popular measures. However, the NEJM states “Our findings suggest that the broad generalizations made by many presidential candidates can be misleading. These statements convey the message that substantial resources can be saved through prevention. Although some preventive measures do save money, the vast majority reviewed in the health economics literature do not.” The ability of any President to directly affect the quality of medical care provided to the patient is likely small. P4P initiatives are good in theory, but since most of medical care involves unmeasurable outcomes, or outcomes which depend on multiple causal factors (e.g., the quality of medical care, baseline patient health, patient behaviors), it is very difficult to implement them on a large scale.

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