• The State of the Health Reform Debate

    I am back from a great vacation in Orlando with the family, during which I dropped further out of the health policy ‘debate’ than I have been since the Spring of 2009. I followed favorite blogs, commentators and news sources via twitter, mostly taking in the big picture while waiting in line at Theme Parks. My conclusion is that we are having the same discussions over and over again. This may be obvious to others, but only came into full relief for me when I pulled back a bit from the fray and decided that I was not going to answer anything I read with a post, no matter what.  After a full year of health reform discussion, then a full year of repeal and replace talk, the release of a variety of long term fiscal plans from different groups with health policy aspects, the release of the Ryan budget, and then the President’s response, we are here on health reform:

    • We say that we need to do something about health care cost inflation
    • We are opposed to any policy that might actually have a chance of working

    There is very little actual health policy debate going on, just people talking past one another. We are in need of a political compromise on how to expand insurance coverage so that we can then try and address health care costs. We will never take on the hard work of addressing health care costs so long as any reform plan is that of one party or the other. That is because the last step of any successful cost reduction policy will be that someone will get less care than they would have, and/or a provider will get paid less than they would have, as compared to the status quo. This will be dreadfully hard. It is much easier to say the other side’s ‘hard things’ are impossible while my ‘hard things’ will work no problem than it is to develop a compromise plan. If there is no breaking of the health reform log jam over the next several weeks as part of some sort of wide ranging fiscal compromise, the 2012 election is just going to be fought out along the lines of ‘I am not as bad as the other guy.’ Depressing.

    • Gross oversimplification.

    • Don,

      It is absolutely not true that “the last step of any successful cost reduction policy will be that someone will get less care than they would have, and/or a provider will get paid less than they would have, as compared to the status quo”. This is because about one-third of all healthcare expenditures in the U.S. are wasted on administrative overhead expense – a figure that dwarfs comparable expenses in other countries. It’s a source of enormous economic inefficiency. The good news is that addressing this particular problem (if our political and economic leaders would simply recognize it!) would save massive amounts of money – allowing both patients and providers to be made better off simultaneously.

      • Doug- You might want to read what Aaron wrote on this. While I would also love to blame the administrators, and they are partially responsible, the problem is broader.


        @Don- You are so right. However, I think that in this case our politicians merely reflect the attitudes of the public. No one wants to pay more taxes. Everyone wants the services. Electoral politics dominate, but once elected trying to pass any plan risks losing the next election.


        • Steve,

          Thanks so much for the link, and it’s valid as far as it goes. But (and it’s a big but), the McKinsey study makes the common error of only measuring and discussing the administrative costs incurred by insurers and the government on their own behalf. Much, much higher costs result as the system responds to administrative overhead expenses forced on them by both the government and private insurers. From an accounting perspective these costs are counted in what sound like direct patient care activities such as “hospital costs” and “physician fees”. But these costs and fees would be far, far lower if the excess cost of regulation and unnecessary paperwork were removed. As an example, physicians alone spent nearly 30% of their gross income of on administrative overhead, plus a full 5 weeks per year of their own working hours doing nothing but administrative paperwork. Not all of this is unnecessary, of course, but our total admin overhead burden is 4x the equivalent in Canada. About 13% of physician gross income is spent solely on billing and insurance-related correspondence. The McKinsey study doesn’t count these expenses in their “administrative expense” numbers. The total impact of this wasted expense is a huge part of what’s wrong with healthcare. In the course of researching my book I found that it should be possible to save over $570 billion annually, just by tackling both administrative overhead and the inefficiencies that it inflicts on other players in the system. The completely artificial procedure-based RBRVS system is an excellent example. Not only does it incur massive paperwork costs for providers and hospitals, but it results in inefficient choices being made about which treatments to recommend and how to price them. You can add this to the “waste” category in that a different, market-based pricing system would allow doctors to earn more while patients pay less. No terribly tough decisions are required for everyone to be better off. It’s just that our political leaders don’t seem to be aware that this situation exists, nor does the media seem to be particularly interested in reporting on it.

      • Doug,

        The money you speak of goes somewhere. It’s someone’s income (many people’s). So Don’s statement, which you quoted, is fine (not that we should be happy about it!).

        • Austin – here too I must respectfully disagree. While you are absolutely right in that the money goes somewhere, reducing administrative overhead expense does not in itself result in patients receiving fewer goods and services, nor clinicians being paid less. Instead, the savings gained come from the economic hides of the over 5 million people who are employed in non-clinical and administrative positions within the healthcare system. Thus, “the last step of any successful cost reduction policy” will be that many people take a financial hit, but patients and clinicians need not be among them. (Unless one is arguing that all of those newly unemployed administrators will lose their health coverage!)

    • As Austin says, even getting rid of waste reduces someones income. Of course some spending reductions could hurt the health of patients. We might rightly desire to reduce waste but be less desirous of cuts that would harm patients, but both will be hard. And when in doubt, we seem to believe that more is better in health care.

      @steve, I agree that politicians mostly represent the ambivalence or even delusion that the public displays on the matter of costs (let’s spend less in the abstract, but be opposed to policies that might actually work).