The Incidental Economist

The following is a guest post by Dr. Bradley Flansbaum, Chief, Hospitalist Services at Lenox Hill Hospital in New York City.  He is a practicing physician with a strong interest in health policy and engages in advocacy work through the AMA, Society of Hospital Medicine (SHM), and the American College of Physicians (ACP).   He blogs at The Hospitalist Leader.

That line came from none other than Barack Obama at the Whitehouse Correspondents dinner this year, obviously lampooning the glass as half empty, 24/7 news cycle machine .  Normally, I accept the tabloid trough feed of the day, the presumed inspiration for the above laugh line, with my usual healthy sense of disdain or merriment.  However, a recent slew of postings commenting on the shift in Whitehouse and HHS messaging for the promotion of the new health law preoccupied and bothered me.  This type of commentary normally does not get under my skin.

I deliberated and was not sure what I found disturbing, the attacks, the methods of ACA promulgation by its architects, or whether the law itself was flawed, meaning is “is it as bad as they say it is?”

The root cause of the blitz is multifactorial.   As such, it is likely governing philosophy, conservative or liberal, that determines how you perceive and rank the motives.  On that short-list is the troubled economy, poor Whitehouse marketing, folks’ inability to appreciate the complexities of the law, or real gripes with the principles of reform, just to name a few.

The “new” selling points as outlined in the referenced memo are not minor changes as Igor Volsky or Kate Pickert posit.  They read like retractions and timidly portray the law as a less than strident advance.  Knowing the foundation for the less than ideal acceptance of PPACA (and for all you revisionists, remember how six months ago, the country would be “loving” it by now), is a combination of fear, unemployment, and everything mentioned above, I realized it was the attacks that still angered me.  I do not mean the demagoguery, the feeding of meat to the anti-ACA masses, or the snipes.  What I mean is the utter impossibility of anything McCain, conservatives, or the free marketeers could have put on the table enduring the same scrutiny at this juncture in time—and not the claptrap the GOP was pushing last minute.  I am talking a fully realized bill from the principled right.

I wish I could remember who said it, but a policy wonk stated there are four constituents of major importance you must get on board to move a bill forward:  1) the AMA, 2) the AHA, 3) AHIP, and 4) PhRMA/AdvaMed.  Lose one, and you can still move something through.  Lose two, and your dead.

I considered the republicans and the health care summit:  medical malpractice reform, buying across state lines with a Federalized, sensibly designed high-risk pool, consumer empowerment and transparency, etc., all concepts that might work—but with the right tools, safety nets, and oversight (I am a centrist, and not ideologically pure lest you think I am totally ACA adoring ).  Assuming they were in place, where would the advocates of this type of system be six months after passage?  Better yet, what kind of fakakta bill would they have gotten after their journey through the grinder?

Think malpractice reform, actualizing that, and how many pages that portion of the bill would encompass.  An important point the GOP overlooked, or failed to mention, was states oversee tort law and not the federal government.  Can you imagine that legislative headache and the machinations of standardizing anything resembling a national policy?

Even ignoring that, safe harbor creation with sensible use of evidence-based medicine to ameliorate defensive medical practice was also a big talking point.  To wit, a 5-10% reduction in the number of MRI’s, cardiac catheterizations, and unnecessary pathology specimens might be the end game if we minimize unnecessary practice.  Codify that however, and along with the savings, you will have the radiologists, cardiologists, and pathologists with a bit less pocket change.  The AMA, ACC, etc., will not be happy.  Minimizing assurance behaviors also reduces the need to admit diagnoses like chest and abdominal pain, which in turn reduces hospital volume and bed days.  Hospital margins are thin these days, and there is a reason hospitals pay their dues to the AHA.  Expect to hear about it, and keep in mind the most radical estimates of resource overutilization related to defensive practice are 15-20%.

On the delivery front, I recently read a brief from the American Enterprise Institute on the Utah exchange.  What they describe as sensible incremental reform with consumer empowerment, unleashing the forces of the free market that would be a model for national change, to me, is a trial that will play out for years as risk adjustment and quality measurement shake out.  It is not a bad idea, but they will make mistakes aplenty, and I assure you, critics would have a field day.  One man’s “rational evolution” is another man’s wrongheaded experiment.  That is another couple of hundred pages in the bill by the way.

Anyway, overly simplified I know, but you get the idea.  You can fill in the blanks with just about anything conceptually related to health care, left or right and it would all be a jumble 180 days after passage.

In the end, we would have a mash up that the minority–Pelosi and Reid, would describe as a “gargantuan 2000 page failure of the American people that the GOP rammed down our throats!”  Suddenly, a rapacious left would rise up and engage in the same behavior as the conservative detractors I am criticizing now.

My point is that as Aaron and Austin have stated many times on this blog, whether we get to the Promised land with a value-added tax, value-based purchasing, or vouchers is immaterial—as long as it is equitable, fair, and it works.  However, no matter what passed, at this stage, frankly, we would be, and are, stuck with a helluva problem, and opponents need to know their Shangri-La version of PPACA would be no charmer either.  Talk is cheap, and they would be in a similar pickle.

Regardless, I do not worry about repeal or defunding, but I do have concerns about resistant states where the messaging is ugly, and individuals push back and prolong implementation.  Len Nichols said it best: “reform is a participation sport.”  Do not forget PPACA is now law, and there are opportunities for reach outs and change.  Obfuscation and bluster will only hurt most of the folks in this country who are paying gobs (or not) for a system badly in need of repair.  At some point, I hope we can move on begrudgingly, begin to compromise, and make the darn thing work…warts and all.

PS–If you are speculating as to whether we will ever perform a wart-ectomy, this segment is a nice primer on potentially finding a cure.

The following has been cross posted at The New Republic’s Citizen Cohn.

Earlier this week Jennifer Haberkorn reported in Politico that Republicans plan to use their expected mid-term political mandate to choke off funding for provisions of the Affordable Care Act.

Republicans would be able to deny funding only to the pieces of the law that require money from Congress. Doing so could create “Swiss cheese” out of the legislation, with some portions of the law already being funded and others not. …

The nonpartisan Congressional Budget Office estimated that Congress controls $115 billion over 10 years to cover the cost of the agencies implementing the law, as well as funding for programs and grants that have a specified funding amount in the law.

Make no mistake, repeal by purse strings could create a mess. The law has many moving parts that act together to create a sensible, complete whole. And implementing a piece of legislation as complex as the ACA requires fully funding the agencies that oversee it. So, this strikes me as the most politically viable, serious attack on health reform.

I’ve thought as much for a while. Back in December 2009 I wrote,

To the extent we hear more about health reform it will be for one reason: the money. While the legislation may be internally balanced so it scores as deficit reducing, it will not be viewed as monolithic once it passes. It has both spending and savings. Could we keep the savings and gut the spending? Sure.

Who would do that, and why? Answers: Republicans, for tax cuts. While the former are out of power, that won’t last forever. And the latter are always popular. This reform will be attacked. Things may quiet down, but this is not the end of it. Money has a way of drawing attention and a crowd.

The combination of “savings” created by failing to fund implementation and tax cuts is likely to appeal to the Republican base. Keep in mind that the ACA does very little for the broad middle-class of voters who are covered in the large-group market. In these hard economic times, such voters may prefer some money in their pockets than additional spending on a program for which they expect little benefit. (Of course losing one’s job jeopardizes one’s insurance so the ACA really does add a meaningful layer of protection for all Americans.)

So, I worry about this. The legislation may be Democratic sausage, but I prefer it to the Swiss cheese the Republicans intend to dish up.

Taking on faith that John Chait’s interpretation of the reporting is accurate, it seems that Republicans have announced a plan to filibuster the first vote on the financial regulation bill and then fold. Something seems fishy about that plan.

Now that the Democrats know the Republicans are planning to defect after the first vote, why on Earth would they compromise? Moreover, what is the point of taking the hit by filibustering reform in the first place? It could work, in theory, if you could bluff the Democrats into thinking the GOP might hold the line indefinitely. But I’m pretty sure the Democratic party has access to articles published in Politico, which means the jig is up. So now the Republicans are trying to bluff in poker when they and their opponent know they have the weaker hand, and their opponent has heard them admit that their strategy is to bet for a couple rounds and fold before the end. Why not just cut their losses now? This makes zero sense.

Agreed. Though it isn’t necessary to appeal to game theory, this is an illustration of some game-theoretic ideas. After all, game theory is really just common sense with logic. But, in case the logic is lost on any Republicans (or Democrats), it isn’t hard to find a good review.

Oh, let’s see, it turns out I wrote one in a post on the War of Attrition game.

If you know with certainty that your opponent will fold [early] … then it is rational for you to fight because you will win. … However, if your opponent intends to fold in any round then it is only sensible for him to do so in round 1. Why pay [the costs of a] fight only to fold later? …

Hence, if either player is not willing to fight forever he should fold in round 1. If the other player knows this to be the case, the other player should fight. It turns out these are the two pure strategy Nash equilibria (game theory jargon) in this game: (1) you fight, your opponent folds in round 1 and (2) you fold, your opponent fights in round 1.

Is this really so hard to understand?

No illusions please: This bill will not be repealed. Even if Republicans scored a 1994 style landslide in November, how many votes could we muster to re-open the “doughnut hole” and charge seniors more for prescription drugs? How many votes to re-allow insurers to rescind policies when they discover a pre-existing condition? How many votes to banish 25 year olds from their parents’ insurance coverage? And even if the votes were there – would President Obama sign such a repeal?

We followed the most radical voices in the party and the movement, and they led us to abject and irreversible defeat.

… [I]t’s Waterloo all right: ours.

That’s David Frum (h/t Tyler Cowen). I agree with every word in his post. Sometimes governing a little is a good idea.

I’ve been hyper-busy today and not able to keep up 100% with all the SOTU spin and interpretation. Nevertheless, at the risk of repeating something someone else has said and I failed to read (yet), I’ll toss in my two cents about the way Obama handled health care in the speech.

On the one hand, policy wonks (myself included) would have loved for him to give a crystal clear signal of what direction he wants Congress to go. My preference would have been for him to say, “To the House: pass the Senate bill. To the Senate: work with the House to amend it.” That’s clear enough. That’s the policy approach.

On the other hand, there’s the political. Obama wants to (and did) set the stage for the midterm campaign claim that Republicans have brought nothing serious to the table. That’s why he said (I’m paraphrasing), “If you’ve got a good idea on health reform, send it to me.” Of course, unless Republicans are actually willing to vote for anything, all the politically feasible ideas that make any policy sense have already been offered. We know what they are. There really isn’t any other way to go from here except in the direction the House and Senate have already gone.

So, the expectation on the part of Obama and the Democrats is that Republicans won’t offer any serious alternatives, and won’t vote for anything. We all heard Obama ask for their ideas and help. If the GOP doesn’t turn up a good idea that they’ll actually vote for then that prepares the ground for accusing them of politically motivated obstructionism.

Notice, Obama can’t simultaneously invite new ideas and also command Congress to pass existing legislation. Or, he can do that but not in the same speech. In not giving the House and Senate marching orders he made a choice away from highlighting policy and in favor of the political. That’s natural given the nature of a SOTU address in an election year. A political event calls for political tactics. And that’s exactly what was delivered.

A comment on a prior post reminded me to return to an idea that has been on my mind for some time.

Readers cannot fail to have noticed that a few of my recent posts have been critical of Republican senators’ tactics with respect to health reform. At the time I wrote those posts I was aware that some might choose to interpret them as partisan attacks. They are not. There is a difference between political criticism and partisan rhetoric. It is possible to critique the conduct of Republican senators in their participation, or lack thereof, in the health reform debate without condemning all things Republican.

Of course, there is no way to prove that one is free of bias, even to oneself. Perhaps the closest thing to observable evidence is some kind of balance in one’s writing. Long-time readers will know that I’ve commented favorably on  some elements of Medicare Part D legislation (passed by a Republican congress and signed by a Republican president), and I have also been critical certain elements of Democratic health reform legislation, just to give a few examples.

Moreover, I’ve been writing about a weakness in Democrats’ health reform approach that Republicans are likely to exploit. By design it does not disrupt the employer-based insurance system upon which most middle class, fully-employed individuals rely. As such, most of the ways it might improve the health care system will not be immediately apparent to middle class voters. In fact, were I to consider my own narrow interests I might not support health reform or those who championed it. If health insurance premiums do not stabilize for the working middle class it will be hard for most of them to appreciate its benefits. This is a weakness of the legislation and a source of political risk for Democrats.

Nevertheless, I do support this reform because I do not focus on my own narrow interests. My morality is of the Rawlsian persuasion. I imagine, as Rawls did, a society in which

no one knows his place …, his class position or social status, nor does anyone know his fortune in the distribution of natural assets and abilities, his intelligence, strength, and the like… The principles of justice are chosen behind a veil of ignorance.

Thus, I view the reforms we’re likely to get as favorable, despite their imperfect origins. Though it relies on an understanding of politics, this is neither a political statement nor a partisan perspective. It stems from my personal philosophy. That it shines a more favorable light on Democrats than Republicans at the moment is merely a consequence, not a motivation.

I still agree with Matt Yglesias and Aaron Carroll, both of whom find the my scenario of a Republican rollback of health reform provisions unlikely, even if it is more likely than repeal. The key to its implausibility is the 60 votes it would take in the Senate. That’s the nature of filibuster politics. As long as that’s still the game, I think health reform is safe. (Of course one can contemplate budget reconciliation and changes to the filibuster rules…Let’s not go there now.)

But that doesn’t mean the threat of rollback isn’t important. It is. As I wrote before, perhaps the biggest political risk of health reform’s passage is not to the statue but to the party that backed it. Republicans may not be able to repeal or rollback anything, but they can gain seats campaigning as if they can and will. Their plausible pitch, which I outlined in my prior post, is to the middle class. Wouldn’t it be better for the middle class, Republicans might argue, if they had access to cheaper insurance (never mind it would cover less) along with some tax cuts paid for by allowing the low-income subsidies to gradually erode in real terms?

In fact, as a campaign tactic, one doesn’t even need to explain how to pay for the tax cuts. A simple message of the type, “This reform doesn’t do much for the middle class. Obama and the Democrats are taking your money to pay for a new wasteful entitlement. Wouldn’t you like it back?”

On the campaign trail it may not even matter if this makes any sense. Although, the fact that it doesn’t is exactly how liberals and progressives should attack it. If health reform is debated at all, this is how I expect the debate might go.

I’m in agreement with Matt Yglesias and Aaron Carroll that chances of health reform being repealed are exceedingly slim. But that doesn’t mean it can’t be watered down to a far less ambitious scale. As I wrote before, money attracts a crowd, and there’s a lot of money in health reform that some would like to use for other purposes.

What I think is more likely than repeal, though by no means certain or even highly probable, is an erosion of the low-income subsidies in real terms, perhaps tied to a change in the minimum level of coverage required. A Republican congress and president might pass such changes along with a tax cut. It is very likely that Republican candidates will campaign on it.

I could see the whole thing being spun as middle class assistance: options for cheaper insurance and a lower tax bill, albeit with subsidies for the poor that don’t keep up. Since the poor aren’t a big constituency this strikes me as at least plausible.

Another wrinkle that could make this work is a weaker mandate that includes exemptions when the premium-to-income ratio is above a threshold. Put it all together and you’ve got a gradual erosion of health reform: worse insurance, less low-income assistance, fewer individuals covered, a weaker mandate. That’s not repeal, but it would make a mockery of the hard-won reforms. Watch for it.

By now the Republican strategy is clear. They will attempt to obstruct and drag out the process of moving health reform legislation every way possible. I guess the thinking is to maximize the chances of a health reform train wreck that would occur if one Democratic Senator changes his or her mind or is unable to vote (e.g. due to illness).

One of the next steps in the Republican strategy is to object to the appointment of conferees (h/t Kevin Drum). As Brian Faughan explains,

The objection will not eliminate the possibility of a conference; Democrats can resort to a fallback. They can propose a motion to appoint conferees, which is subject to filibuster. It would likely require 3 separate cloture votes to pass the motion to appoint conferees.

There is another fallback in the form of the so-called ping-pong. The House could opt to skip a conference and just vote on the Senate bill. Doing so would eliminate the possibility of making changes to the Senate bill, some of which could be beneficial. Thus, one of the consequences of the Republican strategy is to put the Senate in charge of health policy. Much of the House wrangling over the issue will have been for naught (aside from political spillover effects). So much for the two-chamber legislature (paging Founding Fathers).

There could be a few things done in conference that would improve health reform legislation. Put an emphasis on few.  There really is very little political wiggle room on most things. Where there is some room it isn’t clear the likely outcome of a conference would be to dramatically improve things. (I’ll just refer back to the Kevin Drum piece I’ve already cited twice above.)

But here is one thing: the so-called Senate free-rider provision. That’s the Senate’s no-good-very-bad (and complicated) version of the House’s employer pay-or-play “mandate.” As far as I can tell it’s still in the Senate bill and the manager’s amendment [pdf] doesn’t alter it. I’ve covered it in detail in earlier posts (on both Senate and House employer provisions). It’d be a good thing if the House version prevailed. Without a conference I am not aware of any way it could.

That’s just one possible consequence of Republican obstructionism. From a tortured process comes a twisted policy. The sausage factory is replete with horrors. A few bits of grizzle end up in the links.

Circumstances that disappoint or enrage offer the opportunity for a form of fight or flight response that is at least metaphorically, if not physiologically, related to that provoked by a mortal threat. I face such situations from time to time, and I’m sure you do too: your religious or social group heads in a direction you dislike, a new policy at work disrupts a comfortable equilibrium, a neighbor disturbs the peace. How do you respond?

One choice is to disengage, to walk away. To do so would seem to offer the hope of escape, but very often it does not. It guarantees that the situation will evolve without your influence. You’ve taken away your own power, ceded it to those who are willing to do the work of improvement. Sometimes you pay a heavy price.

Take health reform. Republicans walked away relatively early and a few vocal liberals/progressives threatened to do so at the end. Ultimately, it seems many (but not all) of the latter will be on board but the former will not. (Even Olympia Snowe, one of the only Republicans who seemed to engage in good faith, wishes to kill the bill with delay.) The difference between the the left and the Republicans has been one of fight or flight. The left engaged in a fight to improve the bill. Republicans turned away.

In terms of shaping policy, the cost of Republican flight will be high. As Jonathan Chait wrote this weekend,

The Republicans eschewed a halfway compromise and put all their chips on an all or nothing campaign to defeat health care and Obama’s presidency. It was an audacious gamble. They lost. In the end, they’ll walk away with nothing. The Republicans may gain some more seats in 2010 by their total obstruction, but the substantive policy defeat they’ve been dealt will last for decades.

More galling still, the legislation the Republicans wish to defeat will provide tremendous assistance to many residents of their states. After all, uninsurance rates are highest in the South, and lack of insurance is relevant to mortality and morbidity. Republican flight has been disappointing, even insulting. It is one thing to disagree with the opposition; it is another to refuse to participate in the solution to a collective (fiscal) threat.

Meanwhile, though they did not get everything they wanted (no public option, for example), the participation of the left in the health reform debate has been laudable and significant. Ezra Klein provides one concrete example, among many:

The original Senate bill barred insurers from imposing “unreasonable” annual caps on spending. This [latest Senate] bill bars them from imposing any annual caps on spending. That’s thanks, in large part, to the left, which attacked that weakness ferociously.

Looking forward, the outcomes of future debates over the evolution of health policy will be shaped in large part by those who choose to participate. There will be much work to do, even after health reform 2009/2010 becomes law. Republicans appear unwilling to do that work. They seem committed to the political expedient of flight and will likely continue to campaign against reform. That strategy may yet work politically and for a time. The extent to and duration for which it does is up to those who’ve engaged substantively in debate so far.

As the spotlight on health reform fades, will the left fade too or keep up the fight? I hope they fight, and I hope the right joints them. Compared to flight, it’s the courageous and mature response. It’s also optimistic and necessary.