• Priceless: Chapters 12-14

    Chapter 12 of John Goodman’s book Priceless is about patient safety and the malpractice system. This is not an area I have thought much about. If I’ve posted even once on the subject, it wasn’t memorable. So, no comment from me on Chapter 12.

    In Chapter 13, it seems John advocates eliminating tax exclusion of employer-sponsored health insurance, in favor of a refundable tax credit. Though this is a worthy idea, it seems to contradict content of earlier chapters in which he argued for expanding the tax exclusion beyond the group market. I think I understand what’s really important to John, that all insurance be treated equally in the eyes of the IRS. However, by seeming to switch how he prefers to see this done and by not emphasizing his main principle, he risks confusing the reader. It is a bit hard to follow his thread.

    John is right that crowd-out of private insurance by Medicaid is high: typically, for every two new Medicaid enrollees, one or more (but not as many as two) individuals leave private coverage. (Estimates found via the links here.) In light of this, Medicaid is far more expensive to taxpayers than it appears. Were it made even more generous, that would make it even more costly. However, system-wide (including the substitution of private for public spending), Medicaid expansion costs less (in dollars).

    It’s good to see this:

    The system described above would not be perfect. Far from it.

    Chapter 14 is about Medicare. I know from emails John thinks major reform of the program is politically unlikely. I agree. I’m still going to push back on and flag a few things.

    As we have seen, the Affordable Care Act uses cuts in Medicare to pay for more than half the cost of expanding health insurance for young people, but it contains no serious plan for making Medicare more efficient.

    I disagree that the ACA has no serious provisions for making Medicare more efficient. To be sure, it does have provisions that just cut payments in crude ways. But it also has many that are aimed at efficiency. One can be skeptical that they will work. Maybe that’s what John means by “no serious plan.” He doesn’t find them serious. But many health policy experts do. I think they’re worthwhile experiments, provided we’re willing to consider some new things if they fail. Some of John’s ideas could be among those new things, as could premium support.

    A key problem with the ACA’s reform of Medicare is that it only applies to Medicare. For that reason, the big cuts it promises are not likely to stick. Medicare beneficiaries’ experience cannot deviate too far from that of consumers in the commercial market. It isn’t that the ACA went too far. It didn’t go far enough. Or, if you don’t like the direction the ACA went, pick another one (like John’s). Either way, long term you can’t just reform Medicare. You have to address the whole system. That’s also a good basis for predicting the ACA was not the last major reform.

    John’s presentation of figures that show what people get back from Medicare is less than what they put in is very different from what I’ve seen elsewhere (PDF). I don’t have time to figure out why, so I’m just flagging it. Perhaps I am misunderstanding something.

    John summarized some of the premium support proposals that have been made. A ton on this by me is on this blog (premium support, competitive bidding).

    John offers a solution to Medicare’s woes that includes a dizzying array of options and components. I’d have to spend more time, and perhaps read his more detailed paper (PDF), to understand it enough to comment more fully. I noticed he is proposing government risk-adjustment, something I thought he disliked. Again, confused. I wonder if he’s aware of my market-based risk adjustment idea. Also, I didn’t notice any discussion of the cognitive limitations of much of the Medicare beneficiary population. This is likely to be a chief concern among many defenders of the traditional program and, so, something John will need to address if he hasn’t already.

    Chapter 15 will be covered tomorrow. Other posts in the series here.

    @afrakt

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    • Keep up the good work.

      I have two points to make:

      The international experience with risk adjustment is that it does not save a nickel.In order for the insurance companies with healthy people to transfer money to the insurance companies with sicker people,
      ALL insurance companies have to receive a large amount of premium.
      I believe this is the Dutch experience exactly.

      and

      Traditional Medicare remains an uncapitated, self reporting claims-based systems,

      If a new board lowers the reimbursements in one set of treatments, then providers will shift their claims to any treatment that is not reformed. It has happened over and over again.

      There are ways to cut Medicare spendimg, but ‘dinking around’ with fee schedules is not one of them. George Halvorson has been saying this for almost 20 years, as has Joseph White.

    • Can you reform a complex system by running pilot programs and “copying what works”? We’ve been trying that in education for 25 years with no success. Why would I expect it to work in health care?

      The Congressional Budget Office (CBO) has said in three consecutive reports that these projects are not working as planned and are unlikely to save money. See here:

      http://www.cbo.gov/sites/default/files/cbofiles/attachments/WP2012-02_Nelson_Medicare_VBP_Demonstrations.pdf

      The Medicare actuaries don’t take any of this seriously either. They highlight instead the suppression of provider fees, telling us that squeezing the providers in this way will put one-in-seven hospitals out of business in the next eight years, as Medicare fees fall below Medicaid’s:

      http://abcnews.go.com/images/Politics/OACT_memo_on_financial_impact_100423.pdf

      See the graphs in this post of mine and tell me if you think this will ever happen:

      http://healthblog.ncpa.org/whats-wrong-with-the-health-care-media/

    • Austin, you write — “I disagree that the ACA has no serious provisions for making Medicare more efficient. To be sure, it does have provisions that just cut payments in crude ways. But it also has many that are aimed at efficiency. One can be skeptical that they will work. Maybe that’s what John means by “no serious plan.” He doesn’t find them serious. But many health policy experts do. I think they’re worthwhile experiments, provided we’re willing to consider some new things if they fail”

      This is where your earlier call for evidence-based policy is important. I can’t think of any of these ACA ideas that have not been already tried without success. If there are some I would love to hear about them.

      It may be true, as you say, that many health policy experts support these ideas, but “health policy experts” also tend to become attached to ideas regardless of the evidence.

      If we were just experimenting in a laboratory we could tweak an idea here and there and see if the results improve, but here we are toying with people’s lives. I think we need a whole lot more confidence in our experiments before we inflict them on large populations.

      • Some people view the VA as evidence of a successful integrated delivery system. There are others. Is replication possible? Not everywhere, I am sure. But anywhere? Maybe.

      • I realized I should say one more thing about this. I’ve long written that we need not choose between the ACA’s reforms and other, more market-based approaches. What is wrong with letting FFS Medicare, the public option, be run according to the ACA (IPAB and all) while letting beneficiaries choose alternatives on a level playing field? If the ACA-guided Medicare is a catastrophe, people will choose something else. Those who wish to see the public option remain viable will lobby for changes. I really don’t care how it turns out. But I do have ideas about what a complete proposal that accomplishes this should look like: http://theincidentaleconomist.com/wordpress/what-a-complete-medicare-premium-support-proposal-would-include/

        I’m comfortable adding to that list much of what John advocates in terms of more flexible insurance options with HSAs, and the like.