October 5, 2010
Health Care’s Uneven Road to a New Era By DAVID LEONHARDT
Consider what it would be like to have a health insurance plan that capped annual benefits at $2,000. For any medical care costing more than that, you would have to pay out of pocket.
Examples of care that costs more than $2,000 — and often a lot more — include virtually any cancer treatment, any heart surgery, a year’s worth of diabetes treatment and care for many broken bones. Even a single M.R.I. exam can cost more than $2,000. A typical hospital stay runs thousands of dollars more.
So does this insurance plan sound like part of the solution for the country’s health care system — or part of the problem?
A $2,000 plan happens to be one of the main plans that McDonald’s offers its employees. It became big news last week, when The Wall Street Journal reported that the company was worried the plan would run afoul of a provision in the new health care law. In response to the provision, McDonald’s threatened to drop the coverage altogether, until the Obama administration signaled it would grant some exemptions.
This episode was only the latest disruption that the health law seems to be causing. Also last week, the Principal Financial Group said it was getting out of the health insurance business, while other insurers have said they might stop offering certain types of coverage. With each new disruption come loud claims — some from insurance executives — that the health overhaul is damaging American health care.
On the surface, these claims can sound credible. But when you dig a little deeper, you often discover the same lesson that the McDonald’s case provides: the real problem was the status quo.
American families spend almost twice as much on health care — through premiums, paycheck deductions and out-of-pocket expenses — as families in any other country. In exchange, we receive top-notch specialty care in many areas. Yet on the whole, we do not get much better care than countries that spend far less.
We don’t live as long as people in Canada, Japan, most of Western Europe or even relatively poor Jordan. Misdiagnosis is common. Medical errors occur more often than in some other countries. Unique to the developed world, millions of people have no health insurance, and millions more, like many fast-food workers, are underinsured.
In choosing their health reform plan, President Obama and the Democrats eschewed radical changes, for better or worse, and instead tried to minimize the disruptions to the current system. Sometimes, Mr. Obama went so far as to suggest there would be no disruptions, saying that people could keep their current plan if they liked it. But that’s not quite right. It is not possible to change a system as huge, and as hugely flawed, as ours without some disruptions.
•
McDonald’s offers its hourly workers two different health care plans, which are known as “mini-med” plans. In one, workers can pay about $730 a year for benefits of up to $2,000. In the other, they can pay about $1,660 a year for benefits of up to $10,000, The Journal reported.
In a memo to federal regulators, McDonald’s executives argued that their version of health insurance “positively impacts” the almost 30,000 workers who are covered. And that’s true. A plan with a $2,000 or $10,000 cap can cover some modest health problems and is better than being uninsured.
But should the litmus test for American health care really be better than nothing?
Mini-med plans force people to drain their savings accounts for dozens of common medical problems. They also force hospitals to let some bills go unpaid, which drives up costs for everyone else.
Senator Charles Grassley, Republican of Iowa, has previously criticized AARP for marketing similarly limited plans to its members. “It’s not better than nothing,” Mr. Grassley argued, “to encourage people to buy something described as ‘health security’ when there’s no basic protection against high medical costs.”
Dr. Aaron Carroll, an Indiana University pediatrics professor who studies health policy, says of mini-med plans: “They’re great if you’re healthy, because you feel like you’re covered. But if you ever need them, they’re so skimpy, they provide very little.” Gary Claxton of the Kaiser Family Foundation adds, “They really just shouldn’t be considered health insurance.”
The plans’ skimpiness is the main reason they ran into legal jeopardy. Under the new law, most plans must spend at least 85 percent of their revenue on medical care, rather than administrative overhead. The McDonald’s plans aren’t generous enough to clear the hurdle.
At the same time, it’s probably unrealistic to expect McDonald’s to give workers decent health insurance. Many of those workers make less than $20,000 a year. A typical family insurance plan would raise their total compensation by more than half, destroying the McDonald’s business model.
The workers, for their part, cannot afford to buy insurance in the so-called individual market. Plans are even more expensive in that market, because it is dominated by people who desperately need insurance — which is to say, sick people.
This is where health reform comes in. It tried to solve the problem by creating what policy experts call a three-legged stool.
First, people will be required to buy insurance, to spread costs among the sick and the healthy. Second, insurers will be prohibited from cherry-picking only the healthiest customers, again to spread costs. Finally, the government will give subsidies to people, like McDonald’s workers, who can’t afford insurance on their own.
Germany, the Netherlands and Switzerland all use a system along these lines to cover everyone, largely through the private sector, for less money per person than this country spends.
The recent disruptions in our health insurance market are partly a result of the fact that the stool’s three legs were not built on the same timetable. Some of the insurance regulations, like the one on overhead costs, are starting to take effect. But the new markets for health insurance, known as exchanges, won’t be up and running until 2014. This timetable has its problems, and the Obama administration will probably need to grant some more temporary exemptions.
In 2014, however, the choice for McDonald’s workers will no longer be between a bad policy and no policy. Through the exchanges, they will be able to buy a real health insurance plan — one that covers cancer, heart attacks, surgeries, M.R.I.’s and hospital stays. Dr. Carroll notes that many families will end up paying less than they are now paying out of pocket and will get more access to care, too.
For insurance companies, these changes won’t be quite so positive. They will no longer be able to sell plans that devote 30 percent of revenue to salaries for their workers. They will not be allowed to compete over which company can come up with the most ingenious ways to say no to the sick. Their benefits and prices will become more public, thanks to the exchanges.
The health care overhaul that passed Congress is far from ideal, as I have written many times in this space. But it does represent progress.
The fact that it is beginning to disrupt the status quo — that some insurance policies will eventually be eliminated and some inefficient insurers will have to leave the market altogether — is all the proof we need.
E-mail: leonhardt@nytimes.com
Showing posts with label Reform. Show all posts
Showing posts with label Reform. Show all posts
Tuesday, October 05, 2010
Monday, June 07, 2010
Dubious Way to Prevent Fiscal Crisis By JOE NOCERA
Dubious Way to Prevent Fiscal Crisis By JOE NOCERA
So where were we?
Last November, when I took a temporary powder, the subject du jour — at least in this little corner — was financial regulatory reform. Today, eight months later (ouch!), as I return from my hiatus, the subject du jour is financial regulatory reform.
Back then, the question was whether Congress could muster the votes to even pass a reform bill. Health care dominated the body politic. Financial lobbyists were swarming. Senate Republicans were doing their foot-dragging thing. And so on.
Today, the question is a different one. Very soon, possibly as early as next week, House and Senate conferees will begin meeting to hammer out the compromises necessary to turn the bills they wound up passing in the interim into something President Obama can sign into law. There are plenty of differences between the House bill, which passed in December, and the Senate version that passed a few weeks ago, and there will be lots to haggle over in the conference committee. But broadly speaking, they’re not that different. They both contain a new consumer protection agency, and they both take the same general approach to everything from systemic risk to the ratings agencies.
And thus it’s not too early to ask: Will the bill that emerges from this conference do what it is intended to do? Will it prevent another crisis? Will it put an end to government bailouts? The painful answer is: probably not.
•
In the first place, there is nothing even remotely radical about anything in these bills. Nobody is suggesting setting up a new Securities and Exchange Commission, which reshaped Wall Street regulation when it was formed in 1934. Nobody is talking about breaking up banks the way they did in the 1930s with the passage of the Glass-Steagall Act. Nobody is even talking about a wholesale revamping of a regulatory system that so clearly failed in this crisis. “They are trying to attack the symptoms, instead of the basic issues,” said Christopher Whalen, managing director of the Institutional Risk Analyst. There is something oh-so-reasonable about these bills, as if Congress was worried that they might do something that would — heaven forbid! — upset the banking industry.
Credit derivatives? Banks will still be able to trade them, and peddle the most dangerous ones without using an open exchange. Credit rating agencies? Their wings are barely clipped. The consumer agency? It has potential, but it’s not nearly as strong as it should be. Too big to fail? Under the new regime, the banks will remain as big, and as interconnected, as ever. And just because the country is going to have a systemic risk council — consisting of the Treasury secretary and the top financial regulators — doesn’t mean the bills do anything to reduce systemic risk. They don’t.
If you drill down with me on a few provisions, you’ll see what I mean.
THE RATINGS AGENCIES Does anyone doubt that the willingness of the big three ratings agencies — Moody’s, Standard & Poor’s and Fitch — to slap AAA ratings on subprime junk played a huge role in the financial crisis? The shocking charges leveled this week at the Financial Crisis Inquiry Commission hearing by former Moody’s employees only reinforced the point. Moody’s analysts, they said, had knowingly handed out flawed ratings because top executives were pushing them to complete deals as fast as they could. They sold their souls for market share.
To solve this problem, Senator Al Franken of Minnesota inserted an amendment in the Senate bill that would end the practice of banks picking the agency to rate their securities; rather, an agency would be chosen at random, and the bank would be forced to accept its rating. But that is not the only problem — or even the primary one.
Ratings agencies are understaffed and underpaid. The best rating agency employees quickly gravitate to Wall Street. And the agencies have a long history of getting it wrong. Enron, WorldCom, Penn Central — the ratings agencies always seem to be a day late and a dollar short. Yet since the 1970s, the ratings agencies have been imbued with a special government status — Nationally Recognized Statistical Rating Organizations, they’re called — and a whole body of regulation has been written that revolves around ratings. Mutual funds, to cite one example, can hold only securities that have the highest investment-grade ratings.
The solution should be obvious, shouldn’t it? Just get rid of that special government status — and stop writing regulations that revolve around ratings. Believe it or not, S.& P. is in favor of such a solution. So why isn’t it in the bill? Because all those money market and pension funds much prefer the crutch provided by the ratings — that way, if anything goes wrong they can simply say “It was the rating agency’s fault.” And they’re the ones Congress listened to.
CONSUMER PROTECTION AGENCY The good news is that it hasn’t been completely gutted, despite the efforts of the Chamber of Commerce. The bad news is that it is a lot weaker than it ought to be. The “plain vanilla” option — showing consumers, for example, a 30-year-fixed mortgage alongside an option adjustable-rate mortgage — was tossed overboard long ago. A committee of bank regulators can veto any decision by the consumer agency. An astounding 98 percent of the nation’s banks — every bank with assets under $10 billion — are exempt.
And get this: the bill gives the Office of the Comptroller of the Currency the right to pre-empt state laws aimed at stopping predatory practices. This is the same regulator that used its pre-emption powers to moot laws passed by cities and states aimed at curbing the worst subprime excesses during the bubble. Not exactly confidence-inspiring.
“The consumer agency has some dings in it right now,” said Elizabeth Warren, the chairwoman of the Congressional Oversight Panel, who first broached the idea for the agency in an article she wrote as a law professor. “I think it still has what it needs to succeed, but it’s right at the edge,” she added. “If it is weakened any further, then it becomes a waste of time.”
DERIVATIVE REGULATION You’ve no doubt heard that the vast majority of derivatives will wind up on an exchange, where everyone can see their price and the risks can be toted up out in the open. Don’t get too excited. Most such derivatives will be products like interest rate swaps, which had no role in the crisis. Credit-default swaps, which played a major role in the crisis, are another story. In particular, the most complicated, one-of-a-kind — and most profitable — credit-default swaps will most likely stay in the shadows, which is exactly where the big banks want them to be. The profits the big banks make on these credit derivatives would drop substantially if these swaps were traded openly and, well, we can’t have that, can we? The banks actually argue that credit will be constrained if they are forced to put these swaps on an exchange. It’s like saying, if I can’t gouge you, I won’t lend to you. Nice little business model they’ve got there.
The bills try to come at these complex derivatives in other ways, primarily by clamping down on credit speculation and proprietary trading by banks. (That’s what the Volcker Rule is all about.) But I’m skeptical that the Volcker Rule will be effective, even if it becomes law, which appears likely. The line between what constitutes trading for one’s own account — proprietary trading — and what constitutes trading for one’s client, which would still be legal, is extremely murky. It is easy to imagine the banks classifying all sorts of activities as “servicing clients,” even if they happen to put lots of money in their own pockets.
Because credit-default swaps are a form of insurance — insuring against a default — they ought to be regulated like an insurance product, which would include walling them off from the rest of the bank and requiring that large amounts of capital be set aside to cover big potential payouts. But because that would inflict actual pain, it won’t happen. (The amendment introduced by Senator Blanche Lincoln of Arkansas into the Senate bill, which would have walled off derivative operations from the rest of the bank, has no chance of making it into the final bill.)
Perhaps the most troubling fact of all is that the bill will do very little to reduce systemic risk. Derivatives will still be a means of creating unacknowledged leverage in the system. Hedging activities between counterparties will still create immense interconnectedness. Capital — the greatest cushion of all against systemic risk — is barely mentioned in the bills; Congress is leaving that to an international body in Basel, Switzerland, that sets international capital standards — and didn’t exactly cover itself with glory with the rules it set prior to the financial crisis.
The bills’ supporters say that the new resolution authority will give regulators the tools to prevent future taxpayer bailouts. But let’s be honest: if a giant bank like Citigroup, with tentacles all over the world, most out of reach of United States regulators, were to become insolvent, you don’t think the Treasury Department would rush to bail it out? I do.
“When they say this is the greatest reform package since the 1930s, that is literally true,” said Simon Johnson, the co-author of “13 Bankers” and one of the leading critics of the United States response to the crisis. “But that tells you nothing. There haven’t been any reforms since the 1930s.”
Indeed, watching Congress struggle just to pass even these timid reforms gives one a greater appreciation for what Congress accomplished during the Great Depression. The current bills tinker with the status quo. The reforms in the 1930s actually forced banks to divest their investment banking divisions and outlawed all sorts of practices that were as common as selling credit-default swaps are today. No doubt the bank lobby of that era complained that their business would be ruined. But Congress went ahead and did it anyway.
I guess it’s easier to have a spine when you’re living through a Great Depression, and not just a Great Recession.
So where were we?
Last November, when I took a temporary powder, the subject du jour — at least in this little corner — was financial regulatory reform. Today, eight months later (ouch!), as I return from my hiatus, the subject du jour is financial regulatory reform.
Back then, the question was whether Congress could muster the votes to even pass a reform bill. Health care dominated the body politic. Financial lobbyists were swarming. Senate Republicans were doing their foot-dragging thing. And so on.
Today, the question is a different one. Very soon, possibly as early as next week, House and Senate conferees will begin meeting to hammer out the compromises necessary to turn the bills they wound up passing in the interim into something President Obama can sign into law. There are plenty of differences between the House bill, which passed in December, and the Senate version that passed a few weeks ago, and there will be lots to haggle over in the conference committee. But broadly speaking, they’re not that different. They both contain a new consumer protection agency, and they both take the same general approach to everything from systemic risk to the ratings agencies.
And thus it’s not too early to ask: Will the bill that emerges from this conference do what it is intended to do? Will it prevent another crisis? Will it put an end to government bailouts? The painful answer is: probably not.
•
In the first place, there is nothing even remotely radical about anything in these bills. Nobody is suggesting setting up a new Securities and Exchange Commission, which reshaped Wall Street regulation when it was formed in 1934. Nobody is talking about breaking up banks the way they did in the 1930s with the passage of the Glass-Steagall Act. Nobody is even talking about a wholesale revamping of a regulatory system that so clearly failed in this crisis. “They are trying to attack the symptoms, instead of the basic issues,” said Christopher Whalen, managing director of the Institutional Risk Analyst. There is something oh-so-reasonable about these bills, as if Congress was worried that they might do something that would — heaven forbid! — upset the banking industry.
Credit derivatives? Banks will still be able to trade them, and peddle the most dangerous ones without using an open exchange. Credit rating agencies? Their wings are barely clipped. The consumer agency? It has potential, but it’s not nearly as strong as it should be. Too big to fail? Under the new regime, the banks will remain as big, and as interconnected, as ever. And just because the country is going to have a systemic risk council — consisting of the Treasury secretary and the top financial regulators — doesn’t mean the bills do anything to reduce systemic risk. They don’t.
If you drill down with me on a few provisions, you’ll see what I mean.
THE RATINGS AGENCIES Does anyone doubt that the willingness of the big three ratings agencies — Moody’s, Standard & Poor’s and Fitch — to slap AAA ratings on subprime junk played a huge role in the financial crisis? The shocking charges leveled this week at the Financial Crisis Inquiry Commission hearing by former Moody’s employees only reinforced the point. Moody’s analysts, they said, had knowingly handed out flawed ratings because top executives were pushing them to complete deals as fast as they could. They sold their souls for market share.
To solve this problem, Senator Al Franken of Minnesota inserted an amendment in the Senate bill that would end the practice of banks picking the agency to rate their securities; rather, an agency would be chosen at random, and the bank would be forced to accept its rating. But that is not the only problem — or even the primary one.
Ratings agencies are understaffed and underpaid. The best rating agency employees quickly gravitate to Wall Street. And the agencies have a long history of getting it wrong. Enron, WorldCom, Penn Central — the ratings agencies always seem to be a day late and a dollar short. Yet since the 1970s, the ratings agencies have been imbued with a special government status — Nationally Recognized Statistical Rating Organizations, they’re called — and a whole body of regulation has been written that revolves around ratings. Mutual funds, to cite one example, can hold only securities that have the highest investment-grade ratings.
The solution should be obvious, shouldn’t it? Just get rid of that special government status — and stop writing regulations that revolve around ratings. Believe it or not, S.& P. is in favor of such a solution. So why isn’t it in the bill? Because all those money market and pension funds much prefer the crutch provided by the ratings — that way, if anything goes wrong they can simply say “It was the rating agency’s fault.” And they’re the ones Congress listened to.
CONSUMER PROTECTION AGENCY The good news is that it hasn’t been completely gutted, despite the efforts of the Chamber of Commerce. The bad news is that it is a lot weaker than it ought to be. The “plain vanilla” option — showing consumers, for example, a 30-year-fixed mortgage alongside an option adjustable-rate mortgage — was tossed overboard long ago. A committee of bank regulators can veto any decision by the consumer agency. An astounding 98 percent of the nation’s banks — every bank with assets under $10 billion — are exempt.
And get this: the bill gives the Office of the Comptroller of the Currency the right to pre-empt state laws aimed at stopping predatory practices. This is the same regulator that used its pre-emption powers to moot laws passed by cities and states aimed at curbing the worst subprime excesses during the bubble. Not exactly confidence-inspiring.
“The consumer agency has some dings in it right now,” said Elizabeth Warren, the chairwoman of the Congressional Oversight Panel, who first broached the idea for the agency in an article she wrote as a law professor. “I think it still has what it needs to succeed, but it’s right at the edge,” she added. “If it is weakened any further, then it becomes a waste of time.”
DERIVATIVE REGULATION You’ve no doubt heard that the vast majority of derivatives will wind up on an exchange, where everyone can see their price and the risks can be toted up out in the open. Don’t get too excited. Most such derivatives will be products like interest rate swaps, which had no role in the crisis. Credit-default swaps, which played a major role in the crisis, are another story. In particular, the most complicated, one-of-a-kind — and most profitable — credit-default swaps will most likely stay in the shadows, which is exactly where the big banks want them to be. The profits the big banks make on these credit derivatives would drop substantially if these swaps were traded openly and, well, we can’t have that, can we? The banks actually argue that credit will be constrained if they are forced to put these swaps on an exchange. It’s like saying, if I can’t gouge you, I won’t lend to you. Nice little business model they’ve got there.
The bills try to come at these complex derivatives in other ways, primarily by clamping down on credit speculation and proprietary trading by banks. (That’s what the Volcker Rule is all about.) But I’m skeptical that the Volcker Rule will be effective, even if it becomes law, which appears likely. The line between what constitutes trading for one’s own account — proprietary trading — and what constitutes trading for one’s client, which would still be legal, is extremely murky. It is easy to imagine the banks classifying all sorts of activities as “servicing clients,” even if they happen to put lots of money in their own pockets.
Because credit-default swaps are a form of insurance — insuring against a default — they ought to be regulated like an insurance product, which would include walling them off from the rest of the bank and requiring that large amounts of capital be set aside to cover big potential payouts. But because that would inflict actual pain, it won’t happen. (The amendment introduced by Senator Blanche Lincoln of Arkansas into the Senate bill, which would have walled off derivative operations from the rest of the bank, has no chance of making it into the final bill.)
Perhaps the most troubling fact of all is that the bill will do very little to reduce systemic risk. Derivatives will still be a means of creating unacknowledged leverage in the system. Hedging activities between counterparties will still create immense interconnectedness. Capital — the greatest cushion of all against systemic risk — is barely mentioned in the bills; Congress is leaving that to an international body in Basel, Switzerland, that sets international capital standards — and didn’t exactly cover itself with glory with the rules it set prior to the financial crisis.
The bills’ supporters say that the new resolution authority will give regulators the tools to prevent future taxpayer bailouts. But let’s be honest: if a giant bank like Citigroup, with tentacles all over the world, most out of reach of United States regulators, were to become insolvent, you don’t think the Treasury Department would rush to bail it out? I do.
“When they say this is the greatest reform package since the 1930s, that is literally true,” said Simon Johnson, the co-author of “13 Bankers” and one of the leading critics of the United States response to the crisis. “But that tells you nothing. There haven’t been any reforms since the 1930s.”
Indeed, watching Congress struggle just to pass even these timid reforms gives one a greater appreciation for what Congress accomplished during the Great Depression. The current bills tinker with the status quo. The reforms in the 1930s actually forced banks to divest their investment banking divisions and outlawed all sorts of practices that were as common as selling credit-default swaps are today. No doubt the bank lobby of that era complained that their business would be ruined. But Congress went ahead and did it anyway.
I guess it’s easier to have a spine when you’re living through a Great Depression, and not just a Great Recession.
Sunday, February 28, 2010
The Cost of Doing Nothing on Health Care By REED ABELSON
February 26, 2010
The Cost of Doing Nothing on Health Care By REED ABELSON
“Hands off my health care,” goes one strain of populist sentiment.
But what if?
Suppose Congress and President Obama fail to overhaul the system now, or just tinker around the edges, or start over, as the Republicans propose — despite the Democrats’ latest and possibly last big push that began last week at a marathon televised forum in Washington.
Then “my health care” stays the same, right?
Far from it, health policy analysts and economists of nearly every ideological persuasion agree. The unrelenting rise in medical costs is likely to wreak havoc within the system and beyond it, and pretty much everyone will be affected, directly or indirectly.
“People think if we do nothing, we will have what we have now,” said Karen Davis, the president of the Commonwealth Fund, a nonprofit health care research group in New York. “In fact, what we will have is a substantial deterioration in what we have.”
Nearly every mainstream analysis calls for medical costs to continue to climb over the next decade, outpacing the growth in the overall economy and certainly increasing faster than the average paycheck. Those higher costs will translate into higher premiums, which will mean fewer individuals and businesses will be able to afford insurance coverage. More of everyone’s dollar will go to health care, and government programs like Medicare and Medicaid will struggle to find the money to operate.
Policy makers, in the end, may be forced to address the issue.
“It will break all of our banks if we do nothing,” said Peter V. Lee, who oversees national health policy for the Pacific Business Group on Health, which represents employers that offer coverage to workers. “It is a course that is literally bankrupting the federal government and businesses and individuals across the country.”
Even those families that enjoy generous insurance now are likely to see the cost of those benefits escalate. The typical price of family coverage now runs about $13,000 a year, but premiums are expected to nearly double, to $24,000, by 2020, according to the Commonwealth Fund. That equals nearly a quarter of the median family income today.
While some employers will continue to contribute the lion’s share of those premiums, there will be less money for employees in the form of raises or bonuses.
“It’s also cramping our economic growth,” said Frank McArdle, a consultant with Hewitt Associates, which advises large employers and reported on the need for change for the Business Roundtable, an association of C.E.O.’s at major companies. Spending so much on health care is “really a waste of people’s money,” Mr. McArdle said.
The higher premiums will also persuade more businesses, especially smaller ones, to decide not to offer insurance. More people who buy coverage on their own or are asked to pay a large share of premiums will find the price too high. It doesn’t take too many 39-percent increases, like the recent one proposed in California that has garnered so much attention, to put insurance out of reach.
“We have an affordability problem that is moving up through the middle class now,” said Paul B. Ginsburg, the president of the Center for Studying Health System Change, a nonprofit Washington research group.
While estimates vary, the number of people without insurance is expected to increase by more than a million a year, said Ron Pollack, the executive director of Families USA, a Washington consumer advocacy group that favors the Democrats’ approach. The Urban Institute, for example, predicts that the number of uninsured individuals will increase from about 49 million today to between 57 million and 66 million by 2019. The Democrats’ plan is expected to cover as many as 30 million individuals who now are uninsured.
There will be a cost in lives, too. Mr. Pollack’s organization estimates that as many as 275,000 people will die prematurely over the next 10 years because they do not have insurance. Even people with insurance will find their coverage providing much less protection from financial catastrophe than it does now. Individuals will pay significantly more in deductibles and co-payments, for example. “More and more families will experience huge debts and bankruptcies,” Mr. Pollack said.
Federal and state governments will also feel the squeeze. Medicare, the federal program for the elderly, is already the subject of much hand-wringing as its spending balloons. Medicaid, a joint program of the federal government and the states, is already struggling as states try to balance budgets hit hard by the economic downturn. Many states may be forced to cut benefits sharply as well as reduce financing for community health centers and state hospitals that serve the poor.
“I think we’ll just see the decline of public services,” said John Holahan, the director of the Health Policy Center at the Urban Institute.
Exactly how politicians, or anyone else, will react to the increasing pressures on the system is anyone’s guess. If the system actually collapses, could there be a movement to adopt a government-run system, something like Medicare for all, where the whole health care system would be much more heavily regulated?
Or maybe employers would take up the effort to figure out a better way of providing coverage.
The states may also step up their role. Some may try to follow the lead of Massachusetts, which overhauled its own insurance market for individuals and small businesses, while others may try a series of regulatory fixes. A state senator in New Hampshire, for example, recently introduced legislation that regulates hospital prices in a fashion similar to an approach favored in Maryland.
What seems unlikely, say policy analysts, is that Congress would try to pass anything nearly as ambitious as the bills that went through the House and Senate last year.
“If we fail this time, you’re not going to get this Congress to take this up on a big scale,” said Len Nichols, a health policy analyst at George Mason University who says he thinks the Democrats should go ahead and pass legislation.
But few policy analysts think Congress can afford to do absolutely nothing. Lawmakers are instead likely to try a series of smaller fixes, said Stuart Butler, a health policy analyst at the Heritage Foundation, a research group that favors market solutions over a larger government role.
After President Bill Clinton failed to get Congress to pass his health care bill in 1994, Republicans, who then had substantial victories in the House and Senate, worked with him to pass legislation like the health care privacy bill, a children’s health insurance program and the Balanced Budget Act, which contained significant changes to the Medicare program. Under President George W. Bush, the Republicans went on to pass a drug benefit under Medicare. “In the space of less than 10 years, you have several major bills,” Mr. Butler said.
If nothing passes now, Mr. Butler says he thinks Congress will tackle narrower areas, like insurance regulation, to make it easier for people with pre-existing medical conditions to find coverage, or maybe it will try another expansion of Medicaid or the children’s program.
But President Obama clearly prefers passage of a broader bill. In wrapping up Thursday’s session with lawmakers, he and other Democrats warned that an incremental approach was likely to provide too little relief to the people already feeling the effects of a broken system. “It turns out that baby steps don’t get you to the place that people need to go,” he said.
And even some people without a partisan point to make argue that the series of bills passed in the last 15 years have not made enough of a dent in slowing down medical costs. “We’ve had a lot of incremental reforms already,” said Mr. McArdle, the Hewitt consultant.
And many argue that putting off the inevitable has an additional cost. The Commonwealth Fund estimates that the nation would be spending hundreds of billions of dollars less than it does today if any of the health care legislation proposed by previous administrations had been enacted, assuming that they reduced costs by about 1.5 percentage points. If President Nixon’s plan had passed, the United States might be spending a trillion dollars a year less than it does now, and President Clinton’s plan would have reduced spending by some $500 billion a year.
“It makes a huge difference over a long period of time,” said Ms. Davis of the Commonwealth Fund.
The Cost of Doing Nothing on Health Care By REED ABELSON
“Hands off my health care,” goes one strain of populist sentiment.
But what if?
Suppose Congress and President Obama fail to overhaul the system now, or just tinker around the edges, or start over, as the Republicans propose — despite the Democrats’ latest and possibly last big push that began last week at a marathon televised forum in Washington.
Then “my health care” stays the same, right?
Far from it, health policy analysts and economists of nearly every ideological persuasion agree. The unrelenting rise in medical costs is likely to wreak havoc within the system and beyond it, and pretty much everyone will be affected, directly or indirectly.
“People think if we do nothing, we will have what we have now,” said Karen Davis, the president of the Commonwealth Fund, a nonprofit health care research group in New York. “In fact, what we will have is a substantial deterioration in what we have.”
Nearly every mainstream analysis calls for medical costs to continue to climb over the next decade, outpacing the growth in the overall economy and certainly increasing faster than the average paycheck. Those higher costs will translate into higher premiums, which will mean fewer individuals and businesses will be able to afford insurance coverage. More of everyone’s dollar will go to health care, and government programs like Medicare and Medicaid will struggle to find the money to operate.
Policy makers, in the end, may be forced to address the issue.
“It will break all of our banks if we do nothing,” said Peter V. Lee, who oversees national health policy for the Pacific Business Group on Health, which represents employers that offer coverage to workers. “It is a course that is literally bankrupting the federal government and businesses and individuals across the country.”
Even those families that enjoy generous insurance now are likely to see the cost of those benefits escalate. The typical price of family coverage now runs about $13,000 a year, but premiums are expected to nearly double, to $24,000, by 2020, according to the Commonwealth Fund. That equals nearly a quarter of the median family income today.
While some employers will continue to contribute the lion’s share of those premiums, there will be less money for employees in the form of raises or bonuses.
“It’s also cramping our economic growth,” said Frank McArdle, a consultant with Hewitt Associates, which advises large employers and reported on the need for change for the Business Roundtable, an association of C.E.O.’s at major companies. Spending so much on health care is “really a waste of people’s money,” Mr. McArdle said.
The higher premiums will also persuade more businesses, especially smaller ones, to decide not to offer insurance. More people who buy coverage on their own or are asked to pay a large share of premiums will find the price too high. It doesn’t take too many 39-percent increases, like the recent one proposed in California that has garnered so much attention, to put insurance out of reach.
“We have an affordability problem that is moving up through the middle class now,” said Paul B. Ginsburg, the president of the Center for Studying Health System Change, a nonprofit Washington research group.
While estimates vary, the number of people without insurance is expected to increase by more than a million a year, said Ron Pollack, the executive director of Families USA, a Washington consumer advocacy group that favors the Democrats’ approach. The Urban Institute, for example, predicts that the number of uninsured individuals will increase from about 49 million today to between 57 million and 66 million by 2019. The Democrats’ plan is expected to cover as many as 30 million individuals who now are uninsured.
There will be a cost in lives, too. Mr. Pollack’s organization estimates that as many as 275,000 people will die prematurely over the next 10 years because they do not have insurance. Even people with insurance will find their coverage providing much less protection from financial catastrophe than it does now. Individuals will pay significantly more in deductibles and co-payments, for example. “More and more families will experience huge debts and bankruptcies,” Mr. Pollack said.
Federal and state governments will also feel the squeeze. Medicare, the federal program for the elderly, is already the subject of much hand-wringing as its spending balloons. Medicaid, a joint program of the federal government and the states, is already struggling as states try to balance budgets hit hard by the economic downturn. Many states may be forced to cut benefits sharply as well as reduce financing for community health centers and state hospitals that serve the poor.
“I think we’ll just see the decline of public services,” said John Holahan, the director of the Health Policy Center at the Urban Institute.
Exactly how politicians, or anyone else, will react to the increasing pressures on the system is anyone’s guess. If the system actually collapses, could there be a movement to adopt a government-run system, something like Medicare for all, where the whole health care system would be much more heavily regulated?
Or maybe employers would take up the effort to figure out a better way of providing coverage.
The states may also step up their role. Some may try to follow the lead of Massachusetts, which overhauled its own insurance market for individuals and small businesses, while others may try a series of regulatory fixes. A state senator in New Hampshire, for example, recently introduced legislation that regulates hospital prices in a fashion similar to an approach favored in Maryland.
What seems unlikely, say policy analysts, is that Congress would try to pass anything nearly as ambitious as the bills that went through the House and Senate last year.
“If we fail this time, you’re not going to get this Congress to take this up on a big scale,” said Len Nichols, a health policy analyst at George Mason University who says he thinks the Democrats should go ahead and pass legislation.
But few policy analysts think Congress can afford to do absolutely nothing. Lawmakers are instead likely to try a series of smaller fixes, said Stuart Butler, a health policy analyst at the Heritage Foundation, a research group that favors market solutions over a larger government role.
After President Bill Clinton failed to get Congress to pass his health care bill in 1994, Republicans, who then had substantial victories in the House and Senate, worked with him to pass legislation like the health care privacy bill, a children’s health insurance program and the Balanced Budget Act, which contained significant changes to the Medicare program. Under President George W. Bush, the Republicans went on to pass a drug benefit under Medicare. “In the space of less than 10 years, you have several major bills,” Mr. Butler said.
If nothing passes now, Mr. Butler says he thinks Congress will tackle narrower areas, like insurance regulation, to make it easier for people with pre-existing medical conditions to find coverage, or maybe it will try another expansion of Medicaid or the children’s program.
But President Obama clearly prefers passage of a broader bill. In wrapping up Thursday’s session with lawmakers, he and other Democrats warned that an incremental approach was likely to provide too little relief to the people already feeling the effects of a broken system. “It turns out that baby steps don’t get you to the place that people need to go,” he said.
And even some people without a partisan point to make argue that the series of bills passed in the last 15 years have not made enough of a dent in slowing down medical costs. “We’ve had a lot of incremental reforms already,” said Mr. McArdle, the Hewitt consultant.
And many argue that putting off the inevitable has an additional cost. The Commonwealth Fund estimates that the nation would be spending hundreds of billions of dollars less than it does today if any of the health care legislation proposed by previous administrations had been enacted, assuming that they reduced costs by about 1.5 percentage points. If President Nixon’s plan had passed, the United States might be spending a trillion dollars a year less than it does now, and President Clinton’s plan would have reduced spending by some $500 billion a year.
“It makes a huge difference over a long period of time,” said Ms. Davis of the Commonwealth Fund.
Friday, December 25, 2009
Tidings of Comfort By PAUL KRUGMAN
December 25, 2009
OP-ED COLUMNIST
Tidings of Comfort By PAUL KRUGMAN
Indulge me while I tell you a story — a near-future version of Charles Dickens’s “A Christmas Carol.” It begins with sad news: young Timothy Cratchit, a k a Tiny Tim, is sick. And his treatment will cost far more than his parents can pay out of pocket.
Fortunately, our story is set in 2014, and the Cratchits have health insurance. Not from their employer: Ebenezer Scrooge doesn’t do employee benefits. And just a few years earlier they wouldn’t have been able to buy insurance on their own because Tiny Tim has a pre-existing condition, and, anyway, the premiums would have been out of their reach.
But reform legislation enacted in 2010 banned insurance discrimination on the basis of medical history and also created a system of subsidies to help families pay for coverage. Even so, insurance doesn’t come cheap — but the Cratchits do have it, and they’re grateful. God bless us, everyone.
O.K., that was fiction, but there will be millions of real stories like that in the years to come. Imperfect as it is, the legislation that passed the Senate on Thursday and will probably, in a slightly modified version, soon become law will make America a much better country.
So why are so many people complaining? There are three main groups of critics.
First, there’s the crazy right, the tea party and death panel people — a lunatic fringe that is no longer a fringe but has moved into the heart of the Republican Party. In the past, there was a general understanding, a sort of implicit clause in the rules of American politics, that major parties would at least pretend to distance themselves from irrational extremists. But those rules are no longer operative. No, Virginia, at this point there is no sanity clause.
A second strand of opposition comes from what I think of as the Bah Humbug caucus: fiscal scolds who routinely issue sententious warnings about rising debt. By rights, this caucus should find much to like in the Senate health bill, which the Congressional Budget Office says would reduce the deficit, and which — in the judgment of leading health economists — does far more to control costs than anyone has attempted in the past.
But, with few exceptions, the fiscal scolds have had nothing good to say about the bill. And in the process they have revealed that their alleged concern about deficits is, well, humbug. As Slate’s Daniel Gross says, what really motivates them is “the haunting fear that someone, somewhere, is receiving social insurance.”
Finally, there has been opposition from some progressives who are unhappy with the bill’s limitations. Some would settle for nothing less than a full, Medicare-type, single-payer system. Others had their hearts set on the creation of a public option to compete with private insurers. And there are complaints that the subsidies are inadequate, that many families will still have trouble paying for medical care.
Unlike the tea partiers and the humbuggers, disappointed progressives have valid complaints. But those complaints don’t add up to a reason to reject the bill. Yes, it’s a hackneyed phrase, but politics is the art of the possible.
The truth is that there isn’t a Congressional majority in favor of anything like single-payer. There is a narrow majority in favor of a plan with a moderately strong public option. The House has passed such a plan. But given the way the Senate rules work, it takes 60 votes to do almost anything. And that fact, combined with total Republican opposition, has placed sharp limits on what can be enacted.
If progressives want more, they’ll have to make changing those Senate rules a priority. They’ll also have to work long term on electing a more progressive Congress. But, meanwhile, the bill the Senate has just passed, with a few tweaks — I’d especially like to move the start date up from 2014, if that’s at all possible — is more or less what the Democratic leadership can get.
And for all its flaws and limitations, it’s a great achievement. It will provide real, concrete help to tens of millions of Americans and greater security to everyone. And it establishes the principle — even if it falls somewhat short in practice — that all Americans are entitled to essential health care.
Many people deserve credit for this moment. What really made it possible was the remarkable emergence of universal health care as a core principle during the Democratic primaries of 2007-2008 — an emergence that, in turn, owed a lot to progressive activism. (For what it’s worth, the reform that’s being passed is closer to Hillary Clinton’s plan than to President Obama’s). This made health reform a must-win for the next president. And it’s actually happening.
So progressives shouldn’t stop complaining, but they should congratulate themselves on what is, in the end, a big win for them — and for America.
OP-ED COLUMNIST
Tidings of Comfort By PAUL KRUGMAN
Indulge me while I tell you a story — a near-future version of Charles Dickens’s “A Christmas Carol.” It begins with sad news: young Timothy Cratchit, a k a Tiny Tim, is sick. And his treatment will cost far more than his parents can pay out of pocket.
Fortunately, our story is set in 2014, and the Cratchits have health insurance. Not from their employer: Ebenezer Scrooge doesn’t do employee benefits. And just a few years earlier they wouldn’t have been able to buy insurance on their own because Tiny Tim has a pre-existing condition, and, anyway, the premiums would have been out of their reach.
But reform legislation enacted in 2010 banned insurance discrimination on the basis of medical history and also created a system of subsidies to help families pay for coverage. Even so, insurance doesn’t come cheap — but the Cratchits do have it, and they’re grateful. God bless us, everyone.
O.K., that was fiction, but there will be millions of real stories like that in the years to come. Imperfect as it is, the legislation that passed the Senate on Thursday and will probably, in a slightly modified version, soon become law will make America a much better country.
So why are so many people complaining? There are three main groups of critics.
First, there’s the crazy right, the tea party and death panel people — a lunatic fringe that is no longer a fringe but has moved into the heart of the Republican Party. In the past, there was a general understanding, a sort of implicit clause in the rules of American politics, that major parties would at least pretend to distance themselves from irrational extremists. But those rules are no longer operative. No, Virginia, at this point there is no sanity clause.
A second strand of opposition comes from what I think of as the Bah Humbug caucus: fiscal scolds who routinely issue sententious warnings about rising debt. By rights, this caucus should find much to like in the Senate health bill, which the Congressional Budget Office says would reduce the deficit, and which — in the judgment of leading health economists — does far more to control costs than anyone has attempted in the past.
But, with few exceptions, the fiscal scolds have had nothing good to say about the bill. And in the process they have revealed that their alleged concern about deficits is, well, humbug. As Slate’s Daniel Gross says, what really motivates them is “the haunting fear that someone, somewhere, is receiving social insurance.”
Finally, there has been opposition from some progressives who are unhappy with the bill’s limitations. Some would settle for nothing less than a full, Medicare-type, single-payer system. Others had their hearts set on the creation of a public option to compete with private insurers. And there are complaints that the subsidies are inadequate, that many families will still have trouble paying for medical care.
Unlike the tea partiers and the humbuggers, disappointed progressives have valid complaints. But those complaints don’t add up to a reason to reject the bill. Yes, it’s a hackneyed phrase, but politics is the art of the possible.
The truth is that there isn’t a Congressional majority in favor of anything like single-payer. There is a narrow majority in favor of a plan with a moderately strong public option. The House has passed such a plan. But given the way the Senate rules work, it takes 60 votes to do almost anything. And that fact, combined with total Republican opposition, has placed sharp limits on what can be enacted.
If progressives want more, they’ll have to make changing those Senate rules a priority. They’ll also have to work long term on electing a more progressive Congress. But, meanwhile, the bill the Senate has just passed, with a few tweaks — I’d especially like to move the start date up from 2014, if that’s at all possible — is more or less what the Democratic leadership can get.
And for all its flaws and limitations, it’s a great achievement. It will provide real, concrete help to tens of millions of Americans and greater security to everyone. And it establishes the principle — even if it falls somewhat short in practice — that all Americans are entitled to essential health care.
Many people deserve credit for this moment. What really made it possible was the remarkable emergence of universal health care as a core principle during the Democratic primaries of 2007-2008 — an emergence that, in turn, owed a lot to progressive activism. (For what it’s worth, the reform that’s being passed is closer to Hillary Clinton’s plan than to President Obama’s). This made health reform a must-win for the next president. And it’s actually happening.
So progressives shouldn’t stop complaining, but they should congratulate themselves on what is, in the end, a big win for them — and for America.
Monday, December 14, 2009
EPT. OF MEDICINE TESTING, TESTING The health-care bill has no master plan for curbing costs. Is that a bad thing? by Atul Gawande
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DEPT. OF MEDICINE
TESTING, TESTING
The health-care bill has no master plan for curbing costs. Is that a bad thing? by Atul Gawande
DECEMBER 14, 2009
In medicine, as in agriculture, efficiency cannot be achieved by fiat.
ost is the spectre haunting health reform. For many decades, the great flaw in the American health-care system was its unconscionable gaps in coverage. Those gaps have widened to become graves—resulting in an estimated forty-five thousand premature deaths each year—and have forced more than a million people into bankruptcy. The emerging health-reform package has a master plan for this problem. By establishing insurance exchanges, mandates, and tax credits, it would guarantee that at least ninety-four per cent of Americans had decent medical coverage. This is historic, and it is necessary. But the legislation has no master plan for dealing with the problem of soaring medical costs. And this is a source of deep unease.
Health-care costs are strangling our country. Medical care now absorbs eighteen per cent of every dollar we earn. Between 1999 and 2009, the average annual premium for employer-sponsored family insurance coverage rose from $5,800 to $13,400, and the average cost per Medicare beneficiary went from $5,500 to $11,900. The costs of our dysfunctional health-care system have already helped sink our auto industry, are draining state and federal coffers, and could ultimately imperil our ability to sustain universal coverage.
What have we gained by paying more than twice as much for medical care as we did a decade ago? The health-care sector certainly employs more people and more machines than it did. But there have been no great strides in service. In Western Europe, most primary-care practices now use electronic health records and offer after-hours care; in the United States, most don’t. Improvement in demonstrated medical outcomes has been modest in most fields. The reason the system is a money drain is not that it’s so successful but that it’s fragmented, disorganized, and inconsistent; it’s neglectful of low-profit services like mental-health care, geriatrics, and primary care, and almost giddy in its overuse of high-cost technologies such as radiology imaging, brand-name drugs, and many elective procedures.
At the current rate of increase, the cost of family insurance will reach twenty-seven thousand dollars or more in a decade, taking more than a fifth of every dollar that people earn. Businesses will see their health-coverage expenses rise from ten per cent of total labor costs to seventeen per cent. Health-care spending will essentially devour all our future wage increases and economic growth. State budget costs for health care will more than double, and Medicare will run out of money in just eight years. The cost problem, people have come to realize, threatens not just our prosperity but our solvency.
So what does the reform package do about it? Turn to page 621 of the Senate version, the section entitled “Transforming the Health Care Delivery System,” and start reading. Does the bill end medicine’s destructive piecemeal payment system? Does it replace paying for quantity with paying for quality? Does it institute nationwide structural changes that curb costs and raise quality? It does not. Instead, what it offers is . . . pilot programs.
This has provided a soft target for critics. “Two thousand seventy-four pages and trillions of dollars later,” Mitch McConnell, the Senate Minority Leader, said recently, “this bill doesn’t even meet the basic goal that the American people had in mind and what they thought this debate was all about: to lower costs.” According to the Congressional Budget Office, the bill makes no significant long-term cost reductions. Even Democrats have become nervous. For many, the hope of reform was to re-form the health-care system. If nothing is done, the United States is on track to spend an unimaginable ten trillion dollars more on health care in the next decade than it currently spends, hobbling government, growth, and employment. Where we crave sweeping transformation, however, all the current bill offers is those pilot programs, a battery of small-scale experiments. The strategy seems hopelessly inadequate to solve a problem of this magnitude. And yet—here’s the interesting thing—history suggests otherwise.
t the start of the twentieth century, another indispensable but unmanageably costly sector was strangling the country: agriculture. In 1900, more than forty per cent of a family’s income went to paying for food. At the same time, farming was hugely labor-intensive, tying up almost half the American workforce. We were, partly as a result, still a poor nation. Only by improving the productivity of farming could we raise our standard of living and emerge as an industrial power. We had to reduce food costs, so that families could spend money on other goods, and resources could flow to other economic sectors. And we had to make farming less labor-dependent, so that more of the population could enter non-farming occupations and support economic growth and development.
America’s agricultural crisis gave rise to deep national frustration. The inefficiency of farms meant low crop yields, high prices, limited choice, and uneven quality. The agricultural system was fragmented and disorganized, and ignored evidence showing how things could be done better. Shallow plowing, no crop rotation, inadequate seedbeds, and other habits sustained by lore and tradition resulted in poor production and soil exhaustion. And lack of coördination led to local shortages of many crops and overproduction of others.
You might think that the invisible hand of market competition would have solved these problems, that the prospect of higher income from improved practices would have encouraged change. But laissez-faire had not worked. Farmers relied so much on human muscle because it was cheap and didn’t require the long-term investment that animal power and machinery did. The fact that land, too, was cheap encouraged extensive, almost careless cultivation. When the soil became exhausted, farmers simply moved; most tracts of farmland were occupied for five years or less. Those who didn’t move tended to be tenant farmers, who paid rent to their landlords in either cash or crops, which also discouraged long-term investment. And there was a deep-seated fear of risk and the uncertainties of change; many farmers dismissed new ideas as “book farming.”
Things were no better elsewhere in the world. For industrializing nations in the first half of the twentieth century, food was the fundamental problem. The desire for a once-and-for-all fix led Communist governments to take over and run vast “scientific” farms and collectives. We know what that led to: widespread famines and tens of millions of deaths.
The United States did not seek a grand solution. Private farms remained, along with the considerable advantages of individual initiative. Still, government was enlisted to help millions of farmers change the way they worked. The approach succeeded almost shockingly well. The resulting abundance of goods in our grocery stores and the leaps in our standard of living became the greatest argument for America around the world. And, as the agricultural historian Roy V. Scott recounted, four decades ago, in his remarkable study “The Reluctant Farmer,” it all started with a pilot program.
n February, 1903, Seaman Knapp arrived in the East Texas town of Terrell to talk to the local farmers. He was what we’d today deride as a government bureaucrat; he worked for the United States Department of Agriculture. Earlier in his life, he had been a farmer himself and a professor of agriculture at Iowa State College. He had also been a pastor, a bank president, and an entrepreneur, who once brought twenty-five thousand settlers to southwest Louisiana to farm for an English company that had bought a million and a half acres of land there. Then he got a position at the U.S.D.A. as an “agricultural explorer,” travelling across Asia and collecting seeds for everything from alfalfa to persimmons, not to mention a variety of rice that proved more productive than any that we’d had. The U.S.D.A. now wanted him to get farmers to farm differently. And he had an idea.
Knapp knew that the local farmers were not going to trust some outsider who told them to adopt a “better” way of doing their jobs. So he asked Terrell’s leaders to find just one farmer who would be willing to try some “scientific” methods and see what happened. The group chose Walter C. Porter, and he volunteered seventy acres of land where he had grown only cotton or corn for twenty-eight years, applied no fertilizer, and almost completely depleted the humus layer. Knapp gave him a list of simple innovations to follow—things like deeper plowing and better soil preparation, the use of only the best seed, the liberal application of fertilizer, and more thorough cultivation to remove weeds and aerate the soil around the plants. The local leaders stopped by periodically to confirm that he was able to do what he had been asked to.
The year 1903 proved to be the most disastrous for cotton in a quarter century, because of the spread of the boll weevil. Nonetheless, at the end of the season Porter reported a substantial increase in profit, clearing an extra seven hundred dollars. He announced that he would apply the lessons he had learned to his entire, eight-hundred-acre property, and many other farmers did the same. Knapp had discovered a simple but critical rule for gaining coöperation: “What a man hears he may doubt, what he sees he may possibly doubt, but what he does himself he cannot doubt.”
The following year, the U.S.D.A. got funding to ramp up his activities. Knapp appointed thirty-three “extension agents” to set up similar demonstration farms across Texas and into Louisiana. The agents provided farmers with technical assistance and information, including comparative data on what they and others were achieving. As experience accrued, Knapp revised and refined his list of recommended practices for an expanding range of crops and livestock. The approach proved just as successful on a larger scale.
The program had no shortage of critics. Southern Farm Magazine denounced it as government control of agriculture. But, in 1914, after two years of stiff opposition, Congress passed the Smith-Lever Act, establishing the U.S.D.A. Cooperative Extension Service. By 1920, there were seven thousand federal extension agents, working in almost every county in the nation, and by 1930 they had set up more than seven hundred and fifty thousand demonstration farms.
As Daniel Carpenter, a professor of government at Harvard, points out, the demonstration-farm program was just one of a hodgepodge of successful U.S.D.A. initiatives that began as pilots. Another was devoted to comparative-effectiveness research: experimental stations were established—eventually, in every state—that set about determining the most productive methods for growing plants and raising livestock. There was a pilot investigation program, which, among other things, traced a 1904 fruit-decay crisis in California to cuts in the fruit from stem clippers and the fingernails of handlers (and, along the way, introduced modern packing methods industry-wide). The U.S.D.A.’s scientific capabilities grew into the world’s greatest biological-discovery machine of the time.
The department invested heavily in providing timely data to farmers, so that they could make more rational planting decisions. It ran the country’s weather-forecasting system. And its statistics service adopted crop-reporting systems from Europe that allowed it to provide independent crop forecasts—forecasts that, among other things, dramatically reduced speculation bubbles. (In 1927, Republicans, prompted by aggrieved New York speculators, managed to prohibit the U.S.D.A. from releasing the forecasts; the program was reinstituted three years later, following an outcry from farmers.) The department continuously updated its storehouse of technical assistance, so that when new technologies arrived—new hybrid varieties, new kinds of fertilizer, new forms of mechanization—farmers were able to make use of them more swiftly and effectively. The U.S.D.A. established an information-broadcasting service. A hundred and seventeen commercial and forty-six military radio stations carried crop reports; printed reports were distributed to fifteen million farmers a year. It also introduced a grading system for food—meat, eggs, dairy products, and fresh fruits and vegetables—to flag and discourage substandard quality.
What seemed like a hodgepodge eventually cohered into a whole. The government never took over agriculture, but the government didn’t leave it alone, either. It shaped a feedback loop of experiment and learning and encouragement for farmers across the country. The results were beyond what anyone could have imagined. Productivity went way up, outpacing that of other Western countries. Prices fell by half. By 1930, food absorbed just twenty-four per cent of family spending and twenty per cent of the workforce. Today, food accounts for just eight per cent of household income and two per cent of the labor force. It is produced on no more land than was devoted to it a century ago, and with far greater variety and abundance than ever before in history.
This transformation, though critical to America’s rise as a superpower, involved some painful dislocations: farms were consolidated; unproductive farmers were winnowed out. As the historian Sally Clarke, of the University of Texas at Austin, has pointed out, it’s astonishing that the revolution took place without vast numbers of farm foreclosures and social unrest. We cushioned the impact of the transformation—with, for instance, price supports that smoothed out the price decline and avoided wholesale bankruptcies. There were compromises and concessions and wrong turns. But the strategy worked, because United States agencies were allowed to proceed by trial and error, continually adjusting their policies over time in response not to ideology but to hard measurement of the results against societal goals. Could something like this happen with health care?
here are, in human affairs, two kinds of problems: those which are amenable to a technical solution and those which are not. Universal health-care coverage belongs to the first category: you can pick one of several possible solutions, pass a bill, and (allowing for some tinkering around the edges) it will happen. Problems of the second kind, by contrast, are never solved, exactly; they are managed. Reforming the agricultural system so that it serves the country’s needs has been a process, involving millions of farmers pursuing their individual interests. This could not happen by fiat. There was no one-time fix. The same goes for reforming the health-care system so that it serves the country’s needs. No nation has escaped the cost problem: the expenditure curves have outpaced inflation around the world. Nobody has found a master switch that you can flip to make the problem go away. If we want to start solving it, we first need to recognize that there is no technical solution.
Much like farming, medicine involves hundreds of thousands of local entities across the country—hospitals, clinics, pharmacies, home-health agencies, drug and device suppliers. They provide complex services for the thousands of diseases, conditions, and injuries that afflict us. They want to provide good care, but they also measure their success by the amount of revenue they take in, and, as each pursues its individual interests, the net result has been disastrous. Our fee-for-service system, doling out separate payments for everything and everyone involved in a patient’s care, has all the wrong incentives: it rewards doing more over doing right, it increases paperwork and the duplication of efforts, and it discourages clinicians from working together for the best possible results. Knowledge diffuses too slowly. Our information systems are primitive. The malpractice system is wasteful and counterproductive. And the best way to fix all this is—well, plenty of people have plenty of ideas. It’s just that nobody knows for sure.
The history of American agriculture suggests that you can have transformation without a master plan, without knowing all the answers up front. Government has a crucial role to play here—not running the system but guiding it, by looking for the best strategies and practices and finding ways to get them adopted, county by county. Transforming health care everywhere starts with transforming it somewhere. But how?
We have our models, to be sure. There are places like the Mayo Clinic, in Minnesota; Intermountain Healthcare, in Utah; the Kaiser Permanente health-care system in California; and Scott & White Healthcare, in Texas, that reliably deliver higher quality for lower costs than elsewhere. Yet they have had years to develop their organizations and institutional cultures. We don’t yet know how to replicate what they do. Even they have difficulties. Kaiser Permanente has struggled to bring California-calibre results to North Carolina, for instance. Each area has its own history and traditions, its own gaps in infrastructure, and its own distinctive patient population. To figure out how to transform medical communities, with all their diversity and complexity, is going to involve trial and error. And this will require pilot programs—a lot of them.
Pick up the Senate health-care bill—yes, all 2,074 pages—and leaf through it. Almost half of it is devoted to programs that would test various ways to curb costs and increase quality. The bill is a hodgepodge. And it should be.
The bill tests, for instance, a number of ways that federal insurers could pay for care. Medicare and Medicaid currently pay clinicians the same amount regardless of results. But there is a pilot program to increase payments for doctors who deliver high-quality care at lower cost, while reducing payments for those who deliver low-quality care at higher cost. There’s a program that would pay bonuses to hospitals that improve patient results after heart failure, pneumonia, and surgery. There’s a program that would impose financial penalties on institutions with high rates of infections transmitted by health-care workers. Still another would test a system of penalties and rewards scaled to the quality of home health and rehabilitation care.
Other experiments try moving medicine away from fee-for-service payment altogether. A bundled-payment provision would pay medical teams just one thirty-day fee for all the outpatient and inpatient services related to, say, an operation. This would give clinicians an incentive to work together to smooth care and reduce complications. One pilot would go even further, encouraging clinicians to band together into “Accountable Care Organizations” that take responsibility for all their patients’ needs, including prevention—so that fewer patients need operations in the first place. These groups would be permitted to keep part of the savings they generate, as long as they meet quality and service thresholds.
The bill has ideas for changes in other parts of the system, too. Some provisions attempt to improve efficiency through administrative reforms, by, for example, requiring insurance companies to create a single standardized form for insurance reimbursement, to alleviate the clerical burden on clinicians. There are tests of various kinds of community wellness programs. The legislation also continues a stimulus-package program that funds comparative-effectiveness research—testing existing treatments for a condition against one another—because fewer treatment failures should mean lower costs.
There are hundreds of pages of these programs, almost all of which appear in the House bill as well. But the Senate reform package goes a few U.S.D.A.-like steps further. It creates a center to generate innovations in paying for and organizing care. It creates an independent Medicare advisory commission, which would sort through all the pilot results and make recommendations that would automatically take effect unless Congress blocks them. It also takes a decisive step in changing how insurance companies deal with the costs of health care. In the nineteen-eighties, H.M.O.s tried to control costs by directly overruling doctors’ recommendations (through requiring pre-authorization and denying payment); the backlash taught them that it was far easier to avoid sicker patients and pass along cost increases to employers. Both the House and the Senate bills prevent insurance companies from excluding patients. But the Senate plan also imposes an excise tax on the most expensive, “Cadillac” insurance plans. This pushes private insurers to make the same efforts that public insurers will make to test incentives and programs that encourage clinicians to keep costs down.
Which of these programs will work? We can’t know. That’s why the Congressional Budget Office doesn’t credit any of them with substantial savings. The package relies on taxes and short-term payment cuts to providers in order to pay for subsidies. But, in the end, it contains a test of almost every approach that leading health-care experts have suggested. (The only one missing is malpractice reform. This is where the Republicans could be helpful.) None of this is as satisfying as a master plan. But there can’t be a master plan. That’s a crucial lesson of our agricultural experience. And there’s another: with problems that don’t have technical solutions, the struggle never ends.
ecently, I spoke with the agricultural extension agent for my home town, Athens, Ohio. His name is Rory Lewandowski. He is fifty-one and has been the extension agent there for nine years. He grew up on a Minnesota dairy farm, and got a bachelor’s degree in animal science and agronomy from the University of Minnesota and a master’s degree in agronomy from the University of Wisconsin. He spent most of his career in farm education, including eight years in Bolivia, where, as a volunteer for the Mennonite Central Committee, he created demonstration farms in an area where the mining economy had collapsed.
I had a vague childhood memory of the extension office, on West Union Street, near downtown Athens; kids in my school used to go to 4-H meetings there. But I had no idea what the agent really did. So I asked Lewandowski. “I just try to help make farming better in Athens County,” he said.
Athens is a green, hilly county at the edge of the Appalachian Mountains, and the farms there are small—an average of a hundred and fifty acres, Lewandowski said. There are six hundred and sixty of them, with, he estimated, as many as a hundred kinds of produce and livestock. His primary task is to help farmers improve the productivity and quality of their farms and to reduce environmental harm. A hundred years after Seaman Knapp, the difficulties have changed but they haven’t gone away.
I’d caught Lewandowski in his office on a Saturday. He routinely puts in sixty-five to eighty hours a week at his job. He has a five-week small-ruminant course for sheep and goat producers; a ten-week master-gardener course; and a grazing school. His wife, Marcia, who has written two knitting books, handles registration at the door. He sends out a monthly newsletter. He speaks with about half the farmers in the county in the course of a year.
Mostly, the farmers come to him—for guidance and troubleshooting. He told me about a desperate message that a farmer left him the other day. The man’s spinach plants had been afflicted with downy mildew and were collapsing. “He said he was going to lose his whole crop by the weekend and all the markets that he depended on,” Lewandowski said. He called the farmer back and explained that the disease gets started with cooler temperatures and high humidity. Had the farmer been using overhead watering?
Yes, he said, but he had poked around the Internet and was thinking about switching to misting.
Not a good idea. “That still leaves too much moisture on the leaf,” Lewandowski said. He recommended that the farmer switch to drip irrigation, and get some fans in his greenhouse, too.
The farmer said that he’d thought about fans but worried that they would spread the spores around.
They will, Lewandowski said. “But you need wetness on the leaves for four to six hours to get penetration through the leaf cuticle,” he explained. If the plants were dried out, it wouldn’t be a problem. “You’ve got to understand the biology of this,” he said to me.
He doesn’t always understand the biology himself. He told me about a beef farmer who had been offered distiller’s grain from a microbrewery, and wanted to know whether he could feed it to his cows. Lewandowski had no idea, but he called the program’s beef extension expert and got the answer. (Yes, with some limits on how much he put in a ration.) A large organic farm called with questions about growing vegetables in high tunnels, a relatively new innovation that the farm had adopted to extend its growing season. Lewandowski had no experience with this, but an extension agent in Wooster, Ohio, was able to supply information on what had worked best elsewhere.
“You have to be able to say, ‘I don’t know, but I can figure that out for you,’ ” Lewandowski said.
If he could change one thing about farming in Athens, I asked, what would it be? “Grazing management,” he said. “Think about how the grass grows in your lawn. A grass plant needs at least a few days after a mowing to grow.” If you mowed your lawn every day, the grass would become thin and patchy. That’s what happens when farmers leave their animals out in one big pasture—which is what most small farmers do—or rotate them too slowly. In his grazing school and in demonstrations, he asks farmers to keep their animals in a given area for only a few days, then move them to a section where the grass is eight inches tall and has reached its highest nutrient value. This way, the pastures won’t erode, and the cattle will grow better, yielding higher-quality meat and more of it. The technique requires discipline, though, and extra work, and farmers have been slow to give it a try.
I asked him if he has had any victories. All the time, he said. But he had no illusions: his job will never end.
ynicism about government can seem ingrained in the American character. It was, ironically, in a speech to the Future Farmers of America that President Ronald Reagan said, “The ten most dangerous words in the English language are ‘Hi, I’m from the government, and I’m here to help.’ ” Well, Lewandowski is from the government, and he’s here to help. And small farms in Athens County are surviving because of him. What he does involves continual improvisation and education; problems keep changing, and better methods of managing them keep emerging—as in medicine.
In fact, when I spoke with Lewandowski about farming in Athens, I was struck by how much it’s like the health-care system there. Doctors typically work in small offices, with only a few colleagues, as in most of the country. The hospital in Athens has less than a tenth the number of beds that my hospital in Boston has. The county’s clinicians could do much more to control costs and improve quality of care, and they will have to. But it will be an ongoing struggle.
My parents recently retired from medical practice in Athens. My mother was a pediatrician and my father was a urologist. I tried to imagine what it would be like for them if they were still practicing. They would be asked to switch from paper to electronic medical records, to organize with other doctors to reduce medical complications and unnecessary costs, to try to arrive at a package price for a child with asthma or a man with kidney stones. These are the kinds of changes that everyone in medicine has to start making. And I have no idea how my parents would do it.
I work in an academic medical group in Boston with more than a thousand doctors and a vastly greater infrastructure of support, and we don’t know the answers to half these questions, either. Recently, I had a conversation with a few of my colleagues about whether we could accept a bundled payment for patients with thyroid cancer, one of the cancers I commonly treat in my practice as a surgeon. It seemed feasible until we started thinking about patients who wanted to get their imaging or radiation done elsewhere. There was also the matter of how we’d divide the money among the surgeons, endocrinologists, radiologists, and others involved. “Maybe we’d have to switch to salaries,” someone said. Things were getting thorny. Then I went off to do an operation in which we opened up about a thousand dollars’ worth of disposable materials that we never used.
Surely we can solve such problems; the reform bill sets out to find ways that we can. And, in the next several years, as the knowledge accumulates, I suspect that we’ll need our own Seaman Knapps and Rory Lewandowskis to help spread these practices county by county.
We’ll also need data, if we’re going to know what is succeeding. Among the most important, and least noticed, provisions in the reform legislation is one in the House bill to expand our ability to collect national health statistics. The poverty of our health-care information is an embarrassment. At the end of each month, we have county-by-county data on unemployment, and we have prompt and detailed data on the price of goods and commodities; we can use these indicators to guide our economic policies. But try to look up information on your community’s medical costs and utilization—or simply try to find out how many people died from heart attacks or pneumonia or surgical complications—and you will discover that the most recent data are at least three years old, if they exist at all, and aren’t broken down to a county level that communities can learn from. It’s like driving a car with a speedometer that tells you only how fast all cars were driving, on average, three years ago. We have better information about crops and cows than we do about patients. If health-care reform is to succeed, the final legislation must do something about this.
Getting our medical communities, town by town, to improve care and control costs isn’t a task that we’ve asked government to take on before. But we have no choice. At this point, we can’t afford any illusions: the system won’t fix itself, and there’s no piece of legislation that will have all the answers, either. The task will require dedicated and talented people in government agencies and in communities who recognize that the country’s future depends on their sidestepping the ideological battles, encouraging local change, and following the results. But if we’re willing to accept an arduous, messy, and continuous process we can come to grips with a problem even of this immensity. We’ve done it before. ♦
ILLUSTRATION: FRANCESCO BONGIORNI
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DEPT. OF MEDICINE
TESTING, TESTING
The health-care bill has no master plan for curbing costs. Is that a bad thing? by Atul Gawande
DECEMBER 14, 2009
In medicine, as in agriculture, efficiency cannot be achieved by fiat.
ost is the spectre haunting health reform. For many decades, the great flaw in the American health-care system was its unconscionable gaps in coverage. Those gaps have widened to become graves—resulting in an estimated forty-five thousand premature deaths each year—and have forced more than a million people into bankruptcy. The emerging health-reform package has a master plan for this problem. By establishing insurance exchanges, mandates, and tax credits, it would guarantee that at least ninety-four per cent of Americans had decent medical coverage. This is historic, and it is necessary. But the legislation has no master plan for dealing with the problem of soaring medical costs. And this is a source of deep unease.
Health-care costs are strangling our country. Medical care now absorbs eighteen per cent of every dollar we earn. Between 1999 and 2009, the average annual premium for employer-sponsored family insurance coverage rose from $5,800 to $13,400, and the average cost per Medicare beneficiary went from $5,500 to $11,900. The costs of our dysfunctional health-care system have already helped sink our auto industry, are draining state and federal coffers, and could ultimately imperil our ability to sustain universal coverage.
What have we gained by paying more than twice as much for medical care as we did a decade ago? The health-care sector certainly employs more people and more machines than it did. But there have been no great strides in service. In Western Europe, most primary-care practices now use electronic health records and offer after-hours care; in the United States, most don’t. Improvement in demonstrated medical outcomes has been modest in most fields. The reason the system is a money drain is not that it’s so successful but that it’s fragmented, disorganized, and inconsistent; it’s neglectful of low-profit services like mental-health care, geriatrics, and primary care, and almost giddy in its overuse of high-cost technologies such as radiology imaging, brand-name drugs, and many elective procedures.
At the current rate of increase, the cost of family insurance will reach twenty-seven thousand dollars or more in a decade, taking more than a fifth of every dollar that people earn. Businesses will see their health-coverage expenses rise from ten per cent of total labor costs to seventeen per cent. Health-care spending will essentially devour all our future wage increases and economic growth. State budget costs for health care will more than double, and Medicare will run out of money in just eight years. The cost problem, people have come to realize, threatens not just our prosperity but our solvency.
So what does the reform package do about it? Turn to page 621 of the Senate version, the section entitled “Transforming the Health Care Delivery System,” and start reading. Does the bill end medicine’s destructive piecemeal payment system? Does it replace paying for quantity with paying for quality? Does it institute nationwide structural changes that curb costs and raise quality? It does not. Instead, what it offers is . . . pilot programs.
This has provided a soft target for critics. “Two thousand seventy-four pages and trillions of dollars later,” Mitch McConnell, the Senate Minority Leader, said recently, “this bill doesn’t even meet the basic goal that the American people had in mind and what they thought this debate was all about: to lower costs.” According to the Congressional Budget Office, the bill makes no significant long-term cost reductions. Even Democrats have become nervous. For many, the hope of reform was to re-form the health-care system. If nothing is done, the United States is on track to spend an unimaginable ten trillion dollars more on health care in the next decade than it currently spends, hobbling government, growth, and employment. Where we crave sweeping transformation, however, all the current bill offers is those pilot programs, a battery of small-scale experiments. The strategy seems hopelessly inadequate to solve a problem of this magnitude. And yet—here’s the interesting thing—history suggests otherwise.
t the start of the twentieth century, another indispensable but unmanageably costly sector was strangling the country: agriculture. In 1900, more than forty per cent of a family’s income went to paying for food. At the same time, farming was hugely labor-intensive, tying up almost half the American workforce. We were, partly as a result, still a poor nation. Only by improving the productivity of farming could we raise our standard of living and emerge as an industrial power. We had to reduce food costs, so that families could spend money on other goods, and resources could flow to other economic sectors. And we had to make farming less labor-dependent, so that more of the population could enter non-farming occupations and support economic growth and development.
America’s agricultural crisis gave rise to deep national frustration. The inefficiency of farms meant low crop yields, high prices, limited choice, and uneven quality. The agricultural system was fragmented and disorganized, and ignored evidence showing how things could be done better. Shallow plowing, no crop rotation, inadequate seedbeds, and other habits sustained by lore and tradition resulted in poor production and soil exhaustion. And lack of coördination led to local shortages of many crops and overproduction of others.
You might think that the invisible hand of market competition would have solved these problems, that the prospect of higher income from improved practices would have encouraged change. But laissez-faire had not worked. Farmers relied so much on human muscle because it was cheap and didn’t require the long-term investment that animal power and machinery did. The fact that land, too, was cheap encouraged extensive, almost careless cultivation. When the soil became exhausted, farmers simply moved; most tracts of farmland were occupied for five years or less. Those who didn’t move tended to be tenant farmers, who paid rent to their landlords in either cash or crops, which also discouraged long-term investment. And there was a deep-seated fear of risk and the uncertainties of change; many farmers dismissed new ideas as “book farming.”
Things were no better elsewhere in the world. For industrializing nations in the first half of the twentieth century, food was the fundamental problem. The desire for a once-and-for-all fix led Communist governments to take over and run vast “scientific” farms and collectives. We know what that led to: widespread famines and tens of millions of deaths.
The United States did not seek a grand solution. Private farms remained, along with the considerable advantages of individual initiative. Still, government was enlisted to help millions of farmers change the way they worked. The approach succeeded almost shockingly well. The resulting abundance of goods in our grocery stores and the leaps in our standard of living became the greatest argument for America around the world. And, as the agricultural historian Roy V. Scott recounted, four decades ago, in his remarkable study “The Reluctant Farmer,” it all started with a pilot program.
n February, 1903, Seaman Knapp arrived in the East Texas town of Terrell to talk to the local farmers. He was what we’d today deride as a government bureaucrat; he worked for the United States Department of Agriculture. Earlier in his life, he had been a farmer himself and a professor of agriculture at Iowa State College. He had also been a pastor, a bank president, and an entrepreneur, who once brought twenty-five thousand settlers to southwest Louisiana to farm for an English company that had bought a million and a half acres of land there. Then he got a position at the U.S.D.A. as an “agricultural explorer,” travelling across Asia and collecting seeds for everything from alfalfa to persimmons, not to mention a variety of rice that proved more productive than any that we’d had. The U.S.D.A. now wanted him to get farmers to farm differently. And he had an idea.
Knapp knew that the local farmers were not going to trust some outsider who told them to adopt a “better” way of doing their jobs. So he asked Terrell’s leaders to find just one farmer who would be willing to try some “scientific” methods and see what happened. The group chose Walter C. Porter, and he volunteered seventy acres of land where he had grown only cotton or corn for twenty-eight years, applied no fertilizer, and almost completely depleted the humus layer. Knapp gave him a list of simple innovations to follow—things like deeper plowing and better soil preparation, the use of only the best seed, the liberal application of fertilizer, and more thorough cultivation to remove weeds and aerate the soil around the plants. The local leaders stopped by periodically to confirm that he was able to do what he had been asked to.
The year 1903 proved to be the most disastrous for cotton in a quarter century, because of the spread of the boll weevil. Nonetheless, at the end of the season Porter reported a substantial increase in profit, clearing an extra seven hundred dollars. He announced that he would apply the lessons he had learned to his entire, eight-hundred-acre property, and many other farmers did the same. Knapp had discovered a simple but critical rule for gaining coöperation: “What a man hears he may doubt, what he sees he may possibly doubt, but what he does himself he cannot doubt.”
The following year, the U.S.D.A. got funding to ramp up his activities. Knapp appointed thirty-three “extension agents” to set up similar demonstration farms across Texas and into Louisiana. The agents provided farmers with technical assistance and information, including comparative data on what they and others were achieving. As experience accrued, Knapp revised and refined his list of recommended practices for an expanding range of crops and livestock. The approach proved just as successful on a larger scale.
The program had no shortage of critics. Southern Farm Magazine denounced it as government control of agriculture. But, in 1914, after two years of stiff opposition, Congress passed the Smith-Lever Act, establishing the U.S.D.A. Cooperative Extension Service. By 1920, there were seven thousand federal extension agents, working in almost every county in the nation, and by 1930 they had set up more than seven hundred and fifty thousand demonstration farms.
As Daniel Carpenter, a professor of government at Harvard, points out, the demonstration-farm program was just one of a hodgepodge of successful U.S.D.A. initiatives that began as pilots. Another was devoted to comparative-effectiveness research: experimental stations were established—eventually, in every state—that set about determining the most productive methods for growing plants and raising livestock. There was a pilot investigation program, which, among other things, traced a 1904 fruit-decay crisis in California to cuts in the fruit from stem clippers and the fingernails of handlers (and, along the way, introduced modern packing methods industry-wide). The U.S.D.A.’s scientific capabilities grew into the world’s greatest biological-discovery machine of the time.
The department invested heavily in providing timely data to farmers, so that they could make more rational planting decisions. It ran the country’s weather-forecasting system. And its statistics service adopted crop-reporting systems from Europe that allowed it to provide independent crop forecasts—forecasts that, among other things, dramatically reduced speculation bubbles. (In 1927, Republicans, prompted by aggrieved New York speculators, managed to prohibit the U.S.D.A. from releasing the forecasts; the program was reinstituted three years later, following an outcry from farmers.) The department continuously updated its storehouse of technical assistance, so that when new technologies arrived—new hybrid varieties, new kinds of fertilizer, new forms of mechanization—farmers were able to make use of them more swiftly and effectively. The U.S.D.A. established an information-broadcasting service. A hundred and seventeen commercial and forty-six military radio stations carried crop reports; printed reports were distributed to fifteen million farmers a year. It also introduced a grading system for food—meat, eggs, dairy products, and fresh fruits and vegetables—to flag and discourage substandard quality.
What seemed like a hodgepodge eventually cohered into a whole. The government never took over agriculture, but the government didn’t leave it alone, either. It shaped a feedback loop of experiment and learning and encouragement for farmers across the country. The results were beyond what anyone could have imagined. Productivity went way up, outpacing that of other Western countries. Prices fell by half. By 1930, food absorbed just twenty-four per cent of family spending and twenty per cent of the workforce. Today, food accounts for just eight per cent of household income and two per cent of the labor force. It is produced on no more land than was devoted to it a century ago, and with far greater variety and abundance than ever before in history.
This transformation, though critical to America’s rise as a superpower, involved some painful dislocations: farms were consolidated; unproductive farmers were winnowed out. As the historian Sally Clarke, of the University of Texas at Austin, has pointed out, it’s astonishing that the revolution took place without vast numbers of farm foreclosures and social unrest. We cushioned the impact of the transformation—with, for instance, price supports that smoothed out the price decline and avoided wholesale bankruptcies. There were compromises and concessions and wrong turns. But the strategy worked, because United States agencies were allowed to proceed by trial and error, continually adjusting their policies over time in response not to ideology but to hard measurement of the results against societal goals. Could something like this happen with health care?
here are, in human affairs, two kinds of problems: those which are amenable to a technical solution and those which are not. Universal health-care coverage belongs to the first category: you can pick one of several possible solutions, pass a bill, and (allowing for some tinkering around the edges) it will happen. Problems of the second kind, by contrast, are never solved, exactly; they are managed. Reforming the agricultural system so that it serves the country’s needs has been a process, involving millions of farmers pursuing their individual interests. This could not happen by fiat. There was no one-time fix. The same goes for reforming the health-care system so that it serves the country’s needs. No nation has escaped the cost problem: the expenditure curves have outpaced inflation around the world. Nobody has found a master switch that you can flip to make the problem go away. If we want to start solving it, we first need to recognize that there is no technical solution.
Much like farming, medicine involves hundreds of thousands of local entities across the country—hospitals, clinics, pharmacies, home-health agencies, drug and device suppliers. They provide complex services for the thousands of diseases, conditions, and injuries that afflict us. They want to provide good care, but they also measure their success by the amount of revenue they take in, and, as each pursues its individual interests, the net result has been disastrous. Our fee-for-service system, doling out separate payments for everything and everyone involved in a patient’s care, has all the wrong incentives: it rewards doing more over doing right, it increases paperwork and the duplication of efforts, and it discourages clinicians from working together for the best possible results. Knowledge diffuses too slowly. Our information systems are primitive. The malpractice system is wasteful and counterproductive. And the best way to fix all this is—well, plenty of people have plenty of ideas. It’s just that nobody knows for sure.
The history of American agriculture suggests that you can have transformation without a master plan, without knowing all the answers up front. Government has a crucial role to play here—not running the system but guiding it, by looking for the best strategies and practices and finding ways to get them adopted, county by county. Transforming health care everywhere starts with transforming it somewhere. But how?
We have our models, to be sure. There are places like the Mayo Clinic, in Minnesota; Intermountain Healthcare, in Utah; the Kaiser Permanente health-care system in California; and Scott & White Healthcare, in Texas, that reliably deliver higher quality for lower costs than elsewhere. Yet they have had years to develop their organizations and institutional cultures. We don’t yet know how to replicate what they do. Even they have difficulties. Kaiser Permanente has struggled to bring California-calibre results to North Carolina, for instance. Each area has its own history and traditions, its own gaps in infrastructure, and its own distinctive patient population. To figure out how to transform medical communities, with all their diversity and complexity, is going to involve trial and error. And this will require pilot programs—a lot of them.
Pick up the Senate health-care bill—yes, all 2,074 pages—and leaf through it. Almost half of it is devoted to programs that would test various ways to curb costs and increase quality. The bill is a hodgepodge. And it should be.
The bill tests, for instance, a number of ways that federal insurers could pay for care. Medicare and Medicaid currently pay clinicians the same amount regardless of results. But there is a pilot program to increase payments for doctors who deliver high-quality care at lower cost, while reducing payments for those who deliver low-quality care at higher cost. There’s a program that would pay bonuses to hospitals that improve patient results after heart failure, pneumonia, and surgery. There’s a program that would impose financial penalties on institutions with high rates of infections transmitted by health-care workers. Still another would test a system of penalties and rewards scaled to the quality of home health and rehabilitation care.
Other experiments try moving medicine away from fee-for-service payment altogether. A bundled-payment provision would pay medical teams just one thirty-day fee for all the outpatient and inpatient services related to, say, an operation. This would give clinicians an incentive to work together to smooth care and reduce complications. One pilot would go even further, encouraging clinicians to band together into “Accountable Care Organizations” that take responsibility for all their patients’ needs, including prevention—so that fewer patients need operations in the first place. These groups would be permitted to keep part of the savings they generate, as long as they meet quality and service thresholds.
The bill has ideas for changes in other parts of the system, too. Some provisions attempt to improve efficiency through administrative reforms, by, for example, requiring insurance companies to create a single standardized form for insurance reimbursement, to alleviate the clerical burden on clinicians. There are tests of various kinds of community wellness programs. The legislation also continues a stimulus-package program that funds comparative-effectiveness research—testing existing treatments for a condition against one another—because fewer treatment failures should mean lower costs.
There are hundreds of pages of these programs, almost all of which appear in the House bill as well. But the Senate reform package goes a few U.S.D.A.-like steps further. It creates a center to generate innovations in paying for and organizing care. It creates an independent Medicare advisory commission, which would sort through all the pilot results and make recommendations that would automatically take effect unless Congress blocks them. It also takes a decisive step in changing how insurance companies deal with the costs of health care. In the nineteen-eighties, H.M.O.s tried to control costs by directly overruling doctors’ recommendations (through requiring pre-authorization and denying payment); the backlash taught them that it was far easier to avoid sicker patients and pass along cost increases to employers. Both the House and the Senate bills prevent insurance companies from excluding patients. But the Senate plan also imposes an excise tax on the most expensive, “Cadillac” insurance plans. This pushes private insurers to make the same efforts that public insurers will make to test incentives and programs that encourage clinicians to keep costs down.
Which of these programs will work? We can’t know. That’s why the Congressional Budget Office doesn’t credit any of them with substantial savings. The package relies on taxes and short-term payment cuts to providers in order to pay for subsidies. But, in the end, it contains a test of almost every approach that leading health-care experts have suggested. (The only one missing is malpractice reform. This is where the Republicans could be helpful.) None of this is as satisfying as a master plan. But there can’t be a master plan. That’s a crucial lesson of our agricultural experience. And there’s another: with problems that don’t have technical solutions, the struggle never ends.
ecently, I spoke with the agricultural extension agent for my home town, Athens, Ohio. His name is Rory Lewandowski. He is fifty-one and has been the extension agent there for nine years. He grew up on a Minnesota dairy farm, and got a bachelor’s degree in animal science and agronomy from the University of Minnesota and a master’s degree in agronomy from the University of Wisconsin. He spent most of his career in farm education, including eight years in Bolivia, where, as a volunteer for the Mennonite Central Committee, he created demonstration farms in an area where the mining economy had collapsed.
I had a vague childhood memory of the extension office, on West Union Street, near downtown Athens; kids in my school used to go to 4-H meetings there. But I had no idea what the agent really did. So I asked Lewandowski. “I just try to help make farming better in Athens County,” he said.
Athens is a green, hilly county at the edge of the Appalachian Mountains, and the farms there are small—an average of a hundred and fifty acres, Lewandowski said. There are six hundred and sixty of them, with, he estimated, as many as a hundred kinds of produce and livestock. His primary task is to help farmers improve the productivity and quality of their farms and to reduce environmental harm. A hundred years after Seaman Knapp, the difficulties have changed but they haven’t gone away.
I’d caught Lewandowski in his office on a Saturday. He routinely puts in sixty-five to eighty hours a week at his job. He has a five-week small-ruminant course for sheep and goat producers; a ten-week master-gardener course; and a grazing school. His wife, Marcia, who has written two knitting books, handles registration at the door. He sends out a monthly newsletter. He speaks with about half the farmers in the county in the course of a year.
Mostly, the farmers come to him—for guidance and troubleshooting. He told me about a desperate message that a farmer left him the other day. The man’s spinach plants had been afflicted with downy mildew and were collapsing. “He said he was going to lose his whole crop by the weekend and all the markets that he depended on,” Lewandowski said. He called the farmer back and explained that the disease gets started with cooler temperatures and high humidity. Had the farmer been using overhead watering?
Yes, he said, but he had poked around the Internet and was thinking about switching to misting.
Not a good idea. “That still leaves too much moisture on the leaf,” Lewandowski said. He recommended that the farmer switch to drip irrigation, and get some fans in his greenhouse, too.
The farmer said that he’d thought about fans but worried that they would spread the spores around.
They will, Lewandowski said. “But you need wetness on the leaves for four to six hours to get penetration through the leaf cuticle,” he explained. If the plants were dried out, it wouldn’t be a problem. “You’ve got to understand the biology of this,” he said to me.
He doesn’t always understand the biology himself. He told me about a beef farmer who had been offered distiller’s grain from a microbrewery, and wanted to know whether he could feed it to his cows. Lewandowski had no idea, but he called the program’s beef extension expert and got the answer. (Yes, with some limits on how much he put in a ration.) A large organic farm called with questions about growing vegetables in high tunnels, a relatively new innovation that the farm had adopted to extend its growing season. Lewandowski had no experience with this, but an extension agent in Wooster, Ohio, was able to supply information on what had worked best elsewhere.
“You have to be able to say, ‘I don’t know, but I can figure that out for you,’ ” Lewandowski said.
If he could change one thing about farming in Athens, I asked, what would it be? “Grazing management,” he said. “Think about how the grass grows in your lawn. A grass plant needs at least a few days after a mowing to grow.” If you mowed your lawn every day, the grass would become thin and patchy. That’s what happens when farmers leave their animals out in one big pasture—which is what most small farmers do—or rotate them too slowly. In his grazing school and in demonstrations, he asks farmers to keep their animals in a given area for only a few days, then move them to a section where the grass is eight inches tall and has reached its highest nutrient value. This way, the pastures won’t erode, and the cattle will grow better, yielding higher-quality meat and more of it. The technique requires discipline, though, and extra work, and farmers have been slow to give it a try.
I asked him if he has had any victories. All the time, he said. But he had no illusions: his job will never end.
ynicism about government can seem ingrained in the American character. It was, ironically, in a speech to the Future Farmers of America that President Ronald Reagan said, “The ten most dangerous words in the English language are ‘Hi, I’m from the government, and I’m here to help.’ ” Well, Lewandowski is from the government, and he’s here to help. And small farms in Athens County are surviving because of him. What he does involves continual improvisation and education; problems keep changing, and better methods of managing them keep emerging—as in medicine.
In fact, when I spoke with Lewandowski about farming in Athens, I was struck by how much it’s like the health-care system there. Doctors typically work in small offices, with only a few colleagues, as in most of the country. The hospital in Athens has less than a tenth the number of beds that my hospital in Boston has. The county’s clinicians could do much more to control costs and improve quality of care, and they will have to. But it will be an ongoing struggle.
My parents recently retired from medical practice in Athens. My mother was a pediatrician and my father was a urologist. I tried to imagine what it would be like for them if they were still practicing. They would be asked to switch from paper to electronic medical records, to organize with other doctors to reduce medical complications and unnecessary costs, to try to arrive at a package price for a child with asthma or a man with kidney stones. These are the kinds of changes that everyone in medicine has to start making. And I have no idea how my parents would do it.
I work in an academic medical group in Boston with more than a thousand doctors and a vastly greater infrastructure of support, and we don’t know the answers to half these questions, either. Recently, I had a conversation with a few of my colleagues about whether we could accept a bundled payment for patients with thyroid cancer, one of the cancers I commonly treat in my practice as a surgeon. It seemed feasible until we started thinking about patients who wanted to get their imaging or radiation done elsewhere. There was also the matter of how we’d divide the money among the surgeons, endocrinologists, radiologists, and others involved. “Maybe we’d have to switch to salaries,” someone said. Things were getting thorny. Then I went off to do an operation in which we opened up about a thousand dollars’ worth of disposable materials that we never used.
Surely we can solve such problems; the reform bill sets out to find ways that we can. And, in the next several years, as the knowledge accumulates, I suspect that we’ll need our own Seaman Knapps and Rory Lewandowskis to help spread these practices county by county.
We’ll also need data, if we’re going to know what is succeeding. Among the most important, and least noticed, provisions in the reform legislation is one in the House bill to expand our ability to collect national health statistics. The poverty of our health-care information is an embarrassment. At the end of each month, we have county-by-county data on unemployment, and we have prompt and detailed data on the price of goods and commodities; we can use these indicators to guide our economic policies. But try to look up information on your community’s medical costs and utilization—or simply try to find out how many people died from heart attacks or pneumonia or surgical complications—and you will discover that the most recent data are at least three years old, if they exist at all, and aren’t broken down to a county level that communities can learn from. It’s like driving a car with a speedometer that tells you only how fast all cars were driving, on average, three years ago. We have better information about crops and cows than we do about patients. If health-care reform is to succeed, the final legislation must do something about this.
Getting our medical communities, town by town, to improve care and control costs isn’t a task that we’ve asked government to take on before. But we have no choice. At this point, we can’t afford any illusions: the system won’t fix itself, and there’s no piece of legislation that will have all the answers, either. The task will require dedicated and talented people in government agencies and in communities who recognize that the country’s future depends on their sidestepping the ideological battles, encouraging local change, and following the results. But if we’re willing to accept an arduous, messy, and continuous process we can come to grips with a problem even of this immensity. We’ve done it before. ♦
ILLUSTRATION: FRANCESCO BONGIORNI
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Read more: http://www.newyorker.com/reporting/2009/12/14/091214fa_fact_gawande?printable=true¤tPage=all#ixzz0atRyfR1w
Wednesday, November 11, 2009
Economic Scene Falling Far Short of Reform By DAVID LEONHARDT
November 11, 2009
Economic Scene Falling Far Short of Reform By DAVID LEONHARDT
WASHINGTON
Reduce the growth of health care costs. Bend the curve. Find the game changers. Reform the delivery system.
Yawn.
Health care reform has always had two main goals. The first — insuring the uninsured — carries grand overtones of social justice. The second — making the health care system more efficient — can seem abstract, technocratic and a bit nerdy.
Just listen to Rahm Emanuel, President Obama's chief of staff. He recently dismissed critics who say the current bills don't do enough to change health care by referring to them as "the executive board of the Brookings Institution" and "people sitting in the shade at the Aspen Institute." The goal, Mr. Emanuel told my colleague Sheryl Gay Stolberg, is to pass a bill through Congress, not to figure out what the ideal bill may look like.
Certainly, a bill that can't pass Congress won't help anyone. But I think it's important to step back and understand precisely what health experts mean when they argue for reforming the delivery system.
It is not simply about bending the curve, or slowing the growth, of Medicare's projected spending. It's also about preventing thousands of needless deaths from hospital infections. It's about making sure you get the best cancer treatment, even when that treatment is not the most profitable one. It's about keeping health costs from denying most families a decent pay increase, as has happened in recent years.
Making the medical system more efficient is, in short, about saving lives and giving Americans a long overdue raise. It is arguably the single most important step that the federal government could take to improve people's lives.
And the bill that the House of Representatives passed last weekend simply does not get it done.
That is not a judgment based on some civics class ideal, either. The House bill falls far short when compared with a bill that passed the Senate Finance Committee last month. It also fails to live up to Mr. Obama's campaign proposals and recent speeches. As Representative Jim Cooper, a Tennessee Democrat, told me: "The president and the White House have been much better than Congress on these issues. The Congressional challenge is to live up to presidential rhetoric."
You can argue, however, that these comparisons are actually reason for optimism — that the very existence of the Senate Finance bill suggests that Congress still has a good chance to live up to the challenge.
Jonathan Gruber, an economist who helped devise the universal coverage plan in Massachusetts, says the Senate's version of health reform does considerably more to control costs than he expected. A panel of experts led by Mark McClellan, a doctor and economist who used to run Medicare (and now happens to work at the Brookings Institution), concluded that the Senate Finance bill would help "slow long-term spending growth while building the high-value health care system our nation urgently needs." That panel also suggested some smart changes to the bill.
All along, Mr. Obama's aides have said they knew that Congress might pass bills with serious flaws. The White House strategy was to stand back and work with Congressional leaders to fix those flaws once the legislation entered its endgame.
The endgame is here.
•
For anyone who cares about reducing medical costs and improving outcomes, there are probably six big issues to follow in the coming weeks. Let's take them one at a time:
THE EASY STUFF Each year, about 100,000 people die from preventable infections they contract in a hospital. When 108 hospitals in Michigan instituted a simple process to prevent some of these infections, it nearly eliminated them.
If Medicare reduced payments for the treatment of such infections, it would give hospitals a huge financial incentive to prevent them. The Senate bill takes a small step in this direction by cutting payments to hospitals with high infection rates by 1 percent. The House bill merely requires hospitals to report their rates publicly. There are also other basic patient safety areas in which the bills can do much better.
WHAT WORKS? Earlier this year, I used prostate cancer as an example of how our fee-for-service medical system leads to higher costs and worse outcomes. There are a handful of possible treatments for early-stage prostate cancer, and the fastest-growing are the most expensive. But no one knows which ones work best.
Modern medicine is full of such uncertainty. Again, the federal government could make a big difference here by giving Medicare a moderate amount of money for research, which would pay for itself many times over. The stimulus bill began paying for such research, but the health reform bills fail to pick up where the stimulus leaves off.
A FED FOR HEALTH Twice a year, an outside advisory board sends Congress a list of suggestions for Medicare payment rates, based on the available evidence. Congress generally ignores them, in deference to the various industry groups that oppose any cuts to their payments.
We already have a wonderful model for how to avoid such interference. It's called the Federal Reserve. The Fed is charged with setting interest rates based on economic conditions, not politics. The Senate bill would create such a commission for Medicare. Unfortunately, it initially applies to doctors and home health care providers but not hospitals, thanks to a deal between the hospitals and the White House. It expands to include everyone in 2019. The House bill has no such commission.
Whether one ends up in the final bill will be a good test of Mr. Obama's endgame leadership.
THE MCALLEN PROBLEM Both bills would create some promising voluntary programs meant to reward doctors and hospitals that provide good care rather than more care. But the doctors and hospitals providing the most expensive, wasteful care — like those in McAllen, Tex., described by Dr. Atul Gawande in a recent New Yorker article — surely will not sign up for these programs.
And the language in the current bills suggests that Medicare officials cannot make the programs mandatory without new legislation from Congress, which is an invitation for lobbying from places like McAllen. Giving Medicare the authority to expand even a single successful program would be a big improvement.
CHOICE Last week, the Democratic leaders in Congress sent out another e-mail message bragging that for people who didn't like their insurance, health reform would provide "affordable choices for you that can't be taken away." That isn't true. The bills would do nothing to expand the choices of people with employer-provided insurance.
Senator Ron Wyden, an Oregon Democrat, has been obsessively trying to change this — to give even a small slice of people with the most expensive employer plans a chance to buy insurance on the exchange for small businesses and the uninsured. It's not yet clear if he will succeed.
THE CADILLAC TAX Along with the Medicare commission, this tax is the biggest single difference between the Senate and House versions. Right now, health insurance — unlike income — is not taxed, effectively creating a subsidy for the costliest plans and health care providers. Labor leaders have helped persuade the House to keep the tax exclusion intact, largely because many of the most generous insurance plans are held by older unionized workers, who, in turn, have a lot of influence in their unions.
But the tax exclusion is terribly costly for the rest of us. If it were to disappear, employers would have an incentive to sign up for well-run insurance plans, leaving more money available for workers' salaries. If the Senate's tax on so-called Cadillac plans were enacted, the average household would be making an additional $1,000 every year (in today's dollars) by 2019, according to an analysis of Congressional estimates by Mr. Gruber. In my house, $1,000 a year counts as real money.
Are Congress and the White House likely to succeed on all six of these issues? Of course not. But if the final bill were just moderately better than the Senate Finance version, it would be a major victory. Even that Senate bill, as it is, would be worth celebrating. It has the potential to reduce cost growth significantly and to improve health — in spite of all the recent criticism on those counts.
And if the final bill ends up looking like the House bill? Well, then the criticism will have been far too tame.
E-mail: leonhardt@nytimes.com
Economic Scene - House Health Care Bill Fails to Live Up to Its Goals - NYTimes.com (15 November 2009)
http://www.nytimes.com/2009/11/11/business/economy/11leonhardt.html?sq=david%20leonhardt%20falling%20far%20short&st=cse&scp=1&pagewanted=print
http://snipurl.com/t8yvr
Monday, November 09, 2009
Medical Industry Grumbles, but It Stands to Gain By DUFF WILSON and REED ABELSON
November 9, 2009
News Analysis
Medical Industry Grumbles, but It Stands to Gain By DUFF WILSON and REED ABELSON
For any industry, there has to be at least some good news any time Congress votes to expand the market by tens of millions of customers.
But the business world found plenty to complain about Sunday, as it assessed the House bill that would make sweeping changes in the health care system and extend insurance coverage to millions more Americans.
Insurers do not like the provision to create a new government-run insurance program. Drug makers oppose billions of dollars in rebates they would have to give to the government over 10 years. Makers of artificial hips, heart defibrillators and other medical devices are not particularly happy about the proposed 2.5 percent tax on their products.
And employers large and small oppose rules that, for many of them, would make health care coverage — long a job benefit — become a federally mandated obligation.
That is why, as attention now shifts to the Senate, where Democratic leaders are trying to merge two bills into one, virtually every business group with a stake in the outcome will be hoping to strike at least a slightly better deal than they found in the House version.
And they may indeed get a break from the Senate, where the need for Democrats to compromise to win 60 votes may ensure a more business-moderate outcome.
And yet, many analysts said on Sunday that even the House bill was not as bad for business as many in the health care industry might have feared when the overhaul effort began many months ago.
"All industries stand to gain from this legislation," Steven D. Findlay, senior health policy analyst with Consumers Union in Washington, said in an interview. "They're going to continue to fight their narrow issues and get the best that they can get. But all of them are aware they stand to gain significant new business and new revenue streams as more Americans get health coverage and money flows into the system for them."
Of course, new revenue streams apply only to companies in the business of selling medical goods and services. To employers required to provide worker health benefits or else, in many cases, pay some sort of financial penalty, the House legislation offers little to cheer about.
Employer groups complained on Sunday that the House bill would impose insurance obligations while doing little to rein in the medical costs that help drive premiums higher year after year. In fact, those groups argue, the bill's creation of a government-run insurance program, which may pay doctors and hospitals less than private insurers do, could end up shifting even more medical costs to the private insurance system that employers use.
"This won't just hurt business, it will hurt millions of workers who have coverage through their employers," said John J. Castellani, president the Business Roundtable, a group of chief executives of some of the nation's biggest companies.
And the National Federation of Independent Business, representing many small businesses, said it was furious with the legislation. Susan Eckerly, senior vice president of the federation, attacked mandates, which she called punitive, and "atrocious new taxes." The legislation, she said, was "a failed opportunity to help small-business owners with their No. 1 problem — skyrocketing health care costs."
Another group, the Small Business Majority, praised the legislation but said the Senate needed to take more steps to lower costs.
Employers hope the final Senate legislation ends up looking more like the bill the Finance Committee passed, which does not require companies to insure their workers.
Meanwhile, the health insurance industry has been increasingly vocal about the emerging shape of the legislation, and it was sharply critical of the bill that passed on Saturday night.
"The current House legislation fails to bend the health cost curve and breaks the promise that those who like their current coverage can keep it," Karen M. Ignagni, the chief executive of America's Health Insurance Plans, the industry trade association, said.
The reference to a broken promise refers, in part, to people enrolled in privately offered Medicare Advantage insurance plans, which would lose federal subsidies under the House bill. Ms. Ignagni warned of cuts that would "force millions of seniors out of the program entirely."
But the promise reference also refers to the bill's provision of a new government-run insurance plan that would compete directly with the health plans offered by private insurers. The insurance industry has long opposed such a move and warns that it will eventually force many people with private insurance into the government-run program.
That "public option," as it is known, was also in the Senate health committee bill approved in July. And the Senate majority leader, Harry Reid, Democrat of Nevada, has also signaled that he intends to include some kind of public plan in whatever Senate legislation is reached.
But some observers say the House legislation is much less of a threat than the industry had feared. While insurers were worried that the government plan would be able to piggyback on the Medicare program in being able to demand lower prices than the private insurers get from doctors and hospitals, the House legislation does not give the government plan the same bargaining power as Medicare.
"The ability of that program to gain incredible market share and have the clout to severely undermine the market is minimized," Robert Laszewski, president of Health Policy and Strategy Associates, a consulting firm in Alexandria, Va., said in an interview.
Erik Gordon, a business professor and industry analyst at the University of Michigan, said insurers would find it difficult to price their new risks but might not be hurt too much by the competition — considering how many new customers they would have.
The drug industry expected harsh treatment from the House and got it. The bill would require drug makers to pay much more in rebates and discounts than in the $80 billion, 10-year deal that the industry struck in June with the White House and the chairman of the Senate Finance Committee, Max Baucus. The House bill tacked on $60 billion or so in rebates over 10 years, raising the total to around $140 billion.
But the White House and Mr. Baucus have said they will stay with their deal. It remains to be seen whether it survives the melding of Senate bills being directed by Mr. Reid.
"A good critic doesn't write his review at the end of the first act of a play," Ken Johnson, senior vice president of the pharmaceutical trade group the Pharmaceutical Research and Manufacturers of America, said in an interview. "We're hoping the second act is a lot better."
And while the House legislation allows direct government negotiation of Medicare drug prices — something specifically precluded in the Senate Finance bill — it does not allow Medicare to create a formulary, or list of limited drugs. Mr. Findlay, of Consumers Union, said that largely neutered Medicare's price-negotiating power, although it would represent a first step down the price-setting path that the industry is certain to fear.
In a victory for the biotechnology drug industry, the House bill would give biotech drugs, which can cost tens of thousands of dollars a year, protection from generic competition for 12 years.
Doctors were left holding a mixed bag. The American Medical Association supported the House legislation. But the doctors' group did not get its quid pro quo — the restoration of $210 billion in cuts to physicians' Medicare fees over the next 10 years, which were already scheduled before the current effort. Attempts in the House and Senate to restore those cuts have been set aside at least temporarily because the issue has been seen as a political distraction from the main health care overhaul effort.
Barry Meier and Andrew Pollack contributed reporting.
News Analysis - Medical Industry Grumbles, but It Stands to Gain From Overhaul - NYTimes.com (19 November 2009)
http://www.nytimes.com/2009/11/09/health/policy/09industry.html?sq=&st=cse&%2334;=&scp=1&%2334;Medical%20industry%20grumbles=&pagewanted=print
http://snipurl.com/tbdo0
Saturday, September 26, 2009
If Air Travel Worked Like Health Care by Jonathan Rauch
*
If Air Travel Worked Like Health Care by Jonathan Rauch
Fasten your seat belts -- it's going to be a bumpy flight.
by Jonathan Rauch
Saturday, Sept. 26, 2009
"Hello! Thank you for calling Air Health Care, the airline that works like the health care system. My name is Cynthia. How can I give you travel care today?"
"Hi. My name is Jonathan Rauch. I need to fly from Washington, D.C., to Eugene, Oregon, on October 23."
"Yes, I'd be happy to assist you with that. It does look like we can get you on a flight on January 23 at 1 p.m. or February 8 at 3 p.m. Which would you prefer?"
"Neither. I need to be in Eugene on October 23. As in, the 23rd of October."
"I'm sorry, we have nothing open on that date. You might try another carrier."
"I suppose I'd better. Who has availability?"
"I'm afraid I have no way to know that. I have no way to look into their systems."
"Who would know?"
"You can call them individually and ask. I'm sure you can find one."
"Look, I don't have time to call two dozen airlines. It's important that I get to Eugene on the 23rd. There must be something you can do."
"Well, it looks like maybe we could squeeze you in on October 26, if you don't mind departing Washington Dulles at 5:35 a.m."
"Good grief. All right, I suppose it will do."
"I'm sorry, sir, we don't use e-mail to transmit records and other personal or secure documents. We keep our records on paper."
"Great, thank you, I'll be happy to make that booking for you. That's one flight from Washington Dulles to Chicago O'Hare on October 26. Will there be anything else?"
"Wait, hold on. Chicago? I'm going to Eugene. It's in Oregon."
"Yes, sir. The Eugene portion of your trip will be handled by a western specialist. We'll be glad to bring you back from Chicago to Washington, though."
"You mean I have to call another carrier and go through all this again? Why don't you just book the whole trip?"
"Sorry, sir, but you do need to make your own travel appointments. We would be happy to refer you to some qualified carriers. May I have your fax number, please? Before I can confirm the booking, we'll need you to fill out your travel history and send that back to us."
"Cynthia, I have filled out my travel history half a dozen times already this year. I've told six different airlines that I flew to Detroit twice and Houston once. Every time I fly, I answer the same battery of questions. At least a dozen airlines have my travel history. Why don't you get it from them?"
"We have no way we could do that. We do not have access to other companies' records, and our personnel have our own system for collecting travel history."
"But 95 percent of these questions are always the same. Don't you know that every time I fill out one of these duplicative forms I increase the chance of error? Wouldn't it make more sense to hold my travel information centrally, so that everyone could see the same thing?"
"Sorry, sir, we have no capability for that, and we do need to have your travel history at least two weeks before you fly."
"I don't suppose I could fill out these forms online?"
"No, sir. The forms are only about 30 pages, though. Did you have that fax number, please?"
"I don't have a fax machine. No one faxes anymore. Just e-mail me the forms."
"I'm sorry, sir, we don't use e-mail to transmit records and other personal or secure documents. We keep our records on paper."
"What century is this? You think paper is secure?"
"We do keep all your travel records on low-acid paper and in fire-retardant file drawers. When someone needs access to your records, we make a photocopy and put them in the mail. Or fax. How many items of luggage were you wanting to bring?"
"Two."
"OK, good. We suggest you make luggage arrangements with Rapid Air Transport, though of course you're free to use any luggage company you like."
"Luggage company?"
"Yes, sir. You'll need to arrange baggage transport. Would you like a phone number for Rapid, or would you prefer to find your own baggage company? I'm sure Rapid would be pleased to work with you. All you need to do is sign the Personal Travel Records Release form. Where would you like me to mail that?"
"Release form?"
"Yes, sir. You'll need to sign and fax or mail that back to our Travel Records Department so that we can release your travel records to Rapid. Under the privacy rules, we're not authorized to tell them when or where you're flying without your written permission."
"I suppose I couldn't just e-mail you this permission, or grant it online?"
"No. Did you want a list of luggage carriers for your Chicago-Eugene leg?"
"Let me guess. Rapid doesn't operate out West. I have to find a separate luggage company for the second leg."
"Yes, sir."
"And they'll need more copies of all the same paperwork. And they'll ask me all the same questions. And I'll have to arrange to get my travel records to them by mail or fax. And I'll repeat all this nonsense five or six separate times between here and Eugene, because the providers aren't equipped to talk to each other and my records aren't digitized and no two providers use the same system."
"Yes, sir, that's right! Did you have a preferred fuelist, or did you want a reference for a company to provide jet fuel for your flight?"
"Fuelist. That would be a fuel specialist, I suppose."
"We can make a fuel arrangement for you, but please be advised that the fuelist's charge will be billed separately and you will be responsible for it. We'll need to know where to have that bill sent.
"May I have your flight-insurance information, please?"
"Millennium Travel Care, group number 068832, ID number RS-3390041B."
"I'm sorry, sir, we're not in Millennium Travel Care's provider network."
"You're listed on their website. It says you accept Millennium."
"We did until last week. If you like, you can pay out of pocket for your ticket."
"How much would that be?"
"Yes, sir, I'll be happy to get that price for you. That would be $17,885.70."
"What? For a flight to Chicago? Does anyone actually pay that?"
"I'm sorry, sir, I wouldn't know. I can tell you that different clients and insurers pay different rates. For individuals, the rate is $17,885.70."
"Oh."
"In a sane system, I would call an airline and it would give me a price for the whole trip, not just for one part of it."
"Plus tax. And fuel."
"Is anyone else cheaper?"
"Sir, again, I couldn't tell you that. Carriers don't have public rate sheets. Prices are privately negotiated, so there's really no way you could comparison shop."
"Oh."
"Did you want to go ahead, then?"
"No. I DO NOT WANT TO GO AHEAD. I do not want to go anywhere! I want to jump off a cliff!
"This system is insane. It is fragmented to the point of incoherence. Record-keeping is stuck in the 1960s. Communication is stuck in the 1980s. None of the systems talks to the others. Everyone reinvents the wheel at every stage of the process. There is no pricing transparency.
"In a sane, modern system, I wouldn't have to arrange each leg of my flight myself. I wouldn't have to fax documents around, find and juggle multiple providers, fill out again and again what are essentially the same forms every time I use a provider.
"In a sane system, I would call an airline and it would give me a price for the whole trip, not just for one part of it. It would sell me a safe round-trip journey, instead a series of separate procedures. It would have back-office personnel using modern IT systems to coordinate my journey behind the scenes. The systems and personnel would talk to each other automatically. At the press of a button, once I entered a password, they would be able to look up my travel history. We'd do most of this stuff online.
"In fact, Cynthia, I would be able to arrange a whole trip with a single phone call!"
"Sir. Please. Calm down and be realistic. I'm sure the system can be frustrating, but consumers don't understand flight plans and landing slots. Even if they did, there are thousands of separate providers involved in moving travelers around, and hundreds of airports, and millions of trips. Getting everyone to coordinate services and exchange information just isn't realistic in a business as complicated as travel."
"Yes. I suppose I'm dreaming."
"Was there anything else I could help you with?"
"No."
"My goal today was to provide you with outstanding service. Did I accomplish that?"
[click]
*
*
Cl
If Air Travel Worked Like Health Care by Jonathan Rauch
Fasten your seat belts -- it's going to be a bumpy flight.
by Jonathan Rauch
Saturday, Sept. 26, 2009
"Hello! Thank you for calling Air Health Care, the airline that works like the health care system. My name is Cynthia. How can I give you travel care today?"
"Hi. My name is Jonathan Rauch. I need to fly from Washington, D.C., to Eugene, Oregon, on October 23."
"Yes, I'd be happy to assist you with that. It does look like we can get you on a flight on January 23 at 1 p.m. or February 8 at 3 p.m. Which would you prefer?"
"Neither. I need to be in Eugene on October 23. As in, the 23rd of October."
"I'm sorry, we have nothing open on that date. You might try another carrier."
"I suppose I'd better. Who has availability?"
"I'm afraid I have no way to know that. I have no way to look into their systems."
"Who would know?"
"You can call them individually and ask. I'm sure you can find one."
"Look, I don't have time to call two dozen airlines. It's important that I get to Eugene on the 23rd. There must be something you can do."
"Well, it looks like maybe we could squeeze you in on October 26, if you don't mind departing Washington Dulles at 5:35 a.m."
"Good grief. All right, I suppose it will do."
"I'm sorry, sir, we don't use e-mail to transmit records and other personal or secure documents. We keep our records on paper."
"Great, thank you, I'll be happy to make that booking for you. That's one flight from Washington Dulles to Chicago O'Hare on October 26. Will there be anything else?"
"Wait, hold on. Chicago? I'm going to Eugene. It's in Oregon."
"Yes, sir. The Eugene portion of your trip will be handled by a western specialist. We'll be glad to bring you back from Chicago to Washington, though."
"You mean I have to call another carrier and go through all this again? Why don't you just book the whole trip?"
"Sorry, sir, but you do need to make your own travel appointments. We would be happy to refer you to some qualified carriers. May I have your fax number, please? Before I can confirm the booking, we'll need you to fill out your travel history and send that back to us."
"Cynthia, I have filled out my travel history half a dozen times already this year. I've told six different airlines that I flew to Detroit twice and Houston once. Every time I fly, I answer the same battery of questions. At least a dozen airlines have my travel history. Why don't you get it from them?"
"We have no way we could do that. We do not have access to other companies' records, and our personnel have our own system for collecting travel history."
"But 95 percent of these questions are always the same. Don't you know that every time I fill out one of these duplicative forms I increase the chance of error? Wouldn't it make more sense to hold my travel information centrally, so that everyone could see the same thing?"
"Sorry, sir, we have no capability for that, and we do need to have your travel history at least two weeks before you fly."
"I don't suppose I could fill out these forms online?"
"No, sir. The forms are only about 30 pages, though. Did you have that fax number, please?"
"I don't have a fax machine. No one faxes anymore. Just e-mail me the forms."
"I'm sorry, sir, we don't use e-mail to transmit records and other personal or secure documents. We keep our records on paper."
"What century is this? You think paper is secure?"
"We do keep all your travel records on low-acid paper and in fire-retardant file drawers. When someone needs access to your records, we make a photocopy and put them in the mail. Or fax. How many items of luggage were you wanting to bring?"
"Two."
"OK, good. We suggest you make luggage arrangements with Rapid Air Transport, though of course you're free to use any luggage company you like."
"Luggage company?"
"Yes, sir. You'll need to arrange baggage transport. Would you like a phone number for Rapid, or would you prefer to find your own baggage company? I'm sure Rapid would be pleased to work with you. All you need to do is sign the Personal Travel Records Release form. Where would you like me to mail that?"
"Release form?"
"Yes, sir. You'll need to sign and fax or mail that back to our Travel Records Department so that we can release your travel records to Rapid. Under the privacy rules, we're not authorized to tell them when or where you're flying without your written permission."
"I suppose I couldn't just e-mail you this permission, or grant it online?"
"No. Did you want a list of luggage carriers for your Chicago-Eugene leg?"
"Let me guess. Rapid doesn't operate out West. I have to find a separate luggage company for the second leg."
"Yes, sir."
"And they'll need more copies of all the same paperwork. And they'll ask me all the same questions. And I'll have to arrange to get my travel records to them by mail or fax. And I'll repeat all this nonsense five or six separate times between here and Eugene, because the providers aren't equipped to talk to each other and my records aren't digitized and no two providers use the same system."
"Yes, sir, that's right! Did you have a preferred fuelist, or did you want a reference for a company to provide jet fuel for your flight?"
"Fuelist. That would be a fuel specialist, I suppose."
"We can make a fuel arrangement for you, but please be advised that the fuelist's charge will be billed separately and you will be responsible for it. We'll need to know where to have that bill sent.
"May I have your flight-insurance information, please?"
"Millennium Travel Care, group number 068832, ID number RS-3390041B."
"I'm sorry, sir, we're not in Millennium Travel Care's provider network."
"You're listed on their website. It says you accept Millennium."
"We did until last week. If you like, you can pay out of pocket for your ticket."
"How much would that be?"
"Yes, sir, I'll be happy to get that price for you. That would be $17,885.70."
"What? For a flight to Chicago? Does anyone actually pay that?"
"I'm sorry, sir, I wouldn't know. I can tell you that different clients and insurers pay different rates. For individuals, the rate is $17,885.70."
"Oh."
"In a sane system, I would call an airline and it would give me a price for the whole trip, not just for one part of it."
"Plus tax. And fuel."
"Is anyone else cheaper?"
"Sir, again, I couldn't tell you that. Carriers don't have public rate sheets. Prices are privately negotiated, so there's really no way you could comparison shop."
"Oh."
"Did you want to go ahead, then?"
"No. I DO NOT WANT TO GO AHEAD. I do not want to go anywhere! I want to jump off a cliff!
"This system is insane. It is fragmented to the point of incoherence. Record-keeping is stuck in the 1960s. Communication is stuck in the 1980s. None of the systems talks to the others. Everyone reinvents the wheel at every stage of the process. There is no pricing transparency.
"In a sane, modern system, I wouldn't have to arrange each leg of my flight myself. I wouldn't have to fax documents around, find and juggle multiple providers, fill out again and again what are essentially the same forms every time I use a provider.
"In a sane system, I would call an airline and it would give me a price for the whole trip, not just for one part of it. It would sell me a safe round-trip journey, instead a series of separate procedures. It would have back-office personnel using modern IT systems to coordinate my journey behind the scenes. The systems and personnel would talk to each other automatically. At the press of a button, once I entered a password, they would be able to look up my travel history. We'd do most of this stuff online.
"In fact, Cynthia, I would be able to arrange a whole trip with a single phone call!"
"Sir. Please. Calm down and be realistic. I'm sure the system can be frustrating, but consumers don't understand flight plans and landing slots. Even if they did, there are thousands of separate providers involved in moving travelers around, and hundreds of airports, and millions of trips. Getting everyone to coordinate services and exchange information just isn't realistic in a business as complicated as travel."
"Yes. I suppose I'm dreaming."
"Was there anything else I could help you with?"
"No."
"My goal today was to provide you with outstanding service. Did I accomplish that?"
[click]
*
*
Cl
Saturday, September 12, 2009
The Wild Card By BOB HERBERT
September 12, 2009
Op-Ed Columnist
The Wild Card By BOB HERBERT
There’s a lot to appreciate in the latest incarnation of the Democrats’ Sisyphean-like campaign to overhaul the nation’s health care system. In the current environment, matters are growing worse almost by the hour.
Horrendous job losses and an economy that is in shambles are driving up the number of people without health insurance. “Every day,” said President Obama in his speech to Congress this week, “14,000 Americans lose their coverage.”
This is occurring at the same time that the immense baby boomer generation is approaching retirement age, the age when even under the best of circumstances the need for health care steadily rises.
Even those with health insurance frequently find themselves on shaky ground, worried that they will lose it if they lose their jobs or that the coverage will not meet their real-world needs.
So most Americans are prepared to listen when the Democrats try to make the case for changes that would, among other things, prevent insurance companies from denying coverage because of pre-existing conditions, prevent them from engaging in the perverse practice of canceling policies when the policyholder gets ill, put an end to arbitrary caps on annual or lifetime coverage and limit what policyholders could be charged for deductibles and out-of-pocket expenses.
When you factor in the explosive costs of health care, which are making American businesses less competitive and threatening to bankrupt the government, the case for reform would seem to be a slam dunk.
But there’s a wild card out there undermining the chances for real reform, and it’s not the crazies who have been disrupting health care forums or the disrespectful space cadet legislators like the South Carolina Congressman Joe (“You lie!”) Wilson. It’s the ordinary working men and women of America who are struggling with the worst economic downturn they have ever seen and who are worried that the big new plans that the Democrats have in store may not be in their best interests — and may not be affordable.
Many of those folks already have health insurance, and many voted for Barack Obama. But they’re scared to death now as the economy continues to hemorrhage jobs and the budget deficits unfolding before their eyes are being counted in the trillions.
To get meaningful health care reform this time around, the Democrats will have to get that constituency on board. They haven’t yet.
For one thing, the various proposals are not at all clear to the general public and the average citizen is clueless as to how any of them would be paid for. To say that people are skeptical is the grossest understatement.
When the administration talks about getting hundreds of billions of dollars in savings from Medicare to help finance health care reform, it sends a shudder not just through Medicare recipients (who like their coverage just fine and don’t want anyone tampering with it), but also through younger individuals concerned about elderly relatives on Medicare.
The president said in his speech that the savings would come from eliminating “hundreds of billions of dollars in waste and fraud” and the elimination of some unwarranted subsidies. But to the finely tuned ear of the general public, that’s exactly what politicians always say: We’re going to get rid of waste and fraud.
The administration would contend that this time will be different. One can understand why some will remain unconvinced.
The president also said, as he estimated the cost of his proposal at $900 billion over 10 years, that he “will not sign a plan that adds one dime to our deficits — either now or in the future.”
I’m sure he means it. But I have not spoken to anyone, either on Capitol Hill or elsewhere, who believes that is doable. Now it may be that the public should not be so worried about the deficits. They had to be jacked up to get the country through this terrible economic crisis. And health care reform — real reform — is essential if long-term deficits are to be brought under control.
But people are worried about it. And just saying that health care reform will not add to the deficits is not enough to allay those fears.
What’s missing from all the talk about reform is how the runaway costs of health care, and all the dire consequences associated with them, can be reined in without a strong public insurance option and other big-time cost-saving initiatives.
If the government requires everyone — or nearly everyone — to have health insurance, the insurance companies and the pharmaceutical industry will reap a bonanza. What the Democrats still have to make clear to ordinary working men and women is how this latest incarnation of health care reform will be cost effective and broadly beneficial to them and to their government.
Op-Ed Columnist
The Wild Card By BOB HERBERT
There’s a lot to appreciate in the latest incarnation of the Democrats’ Sisyphean-like campaign to overhaul the nation’s health care system. In the current environment, matters are growing worse almost by the hour.
Horrendous job losses and an economy that is in shambles are driving up the number of people without health insurance. “Every day,” said President Obama in his speech to Congress this week, “14,000 Americans lose their coverage.”
This is occurring at the same time that the immense baby boomer generation is approaching retirement age, the age when even under the best of circumstances the need for health care steadily rises.
Even those with health insurance frequently find themselves on shaky ground, worried that they will lose it if they lose their jobs or that the coverage will not meet their real-world needs.
So most Americans are prepared to listen when the Democrats try to make the case for changes that would, among other things, prevent insurance companies from denying coverage because of pre-existing conditions, prevent them from engaging in the perverse practice of canceling policies when the policyholder gets ill, put an end to arbitrary caps on annual or lifetime coverage and limit what policyholders could be charged for deductibles and out-of-pocket expenses.
When you factor in the explosive costs of health care, which are making American businesses less competitive and threatening to bankrupt the government, the case for reform would seem to be a slam dunk.
But there’s a wild card out there undermining the chances for real reform, and it’s not the crazies who have been disrupting health care forums or the disrespectful space cadet legislators like the South Carolina Congressman Joe (“You lie!”) Wilson. It’s the ordinary working men and women of America who are struggling with the worst economic downturn they have ever seen and who are worried that the big new plans that the Democrats have in store may not be in their best interests — and may not be affordable.
Many of those folks already have health insurance, and many voted for Barack Obama. But they’re scared to death now as the economy continues to hemorrhage jobs and the budget deficits unfolding before their eyes are being counted in the trillions.
To get meaningful health care reform this time around, the Democrats will have to get that constituency on board. They haven’t yet.
For one thing, the various proposals are not at all clear to the general public and the average citizen is clueless as to how any of them would be paid for. To say that people are skeptical is the grossest understatement.
When the administration talks about getting hundreds of billions of dollars in savings from Medicare to help finance health care reform, it sends a shudder not just through Medicare recipients (who like their coverage just fine and don’t want anyone tampering with it), but also through younger individuals concerned about elderly relatives on Medicare.
The president said in his speech that the savings would come from eliminating “hundreds of billions of dollars in waste and fraud” and the elimination of some unwarranted subsidies. But to the finely tuned ear of the general public, that’s exactly what politicians always say: We’re going to get rid of waste and fraud.
The administration would contend that this time will be different. One can understand why some will remain unconvinced.
The president also said, as he estimated the cost of his proposal at $900 billion over 10 years, that he “will not sign a plan that adds one dime to our deficits — either now or in the future.”
I’m sure he means it. But I have not spoken to anyone, either on Capitol Hill or elsewhere, who believes that is doable. Now it may be that the public should not be so worried about the deficits. They had to be jacked up to get the country through this terrible economic crisis. And health care reform — real reform — is essential if long-term deficits are to be brought under control.
But people are worried about it. And just saying that health care reform will not add to the deficits is not enough to allay those fears.
What’s missing from all the talk about reform is how the runaway costs of health care, and all the dire consequences associated with them, can be reined in without a strong public insurance option and other big-time cost-saving initiatives.
If the government requires everyone — or nearly everyone — to have health insurance, the insurance companies and the pharmaceutical industry will reap a bonanza. What the Democrats still have to make clear to ordinary working men and women is how this latest incarnation of health care reform will be cost effective and broadly beneficial to them and to their government.
Friday, September 04, 2009
Let's Get Fundamental By DAVID BROOKS
September 4, 2009
Op-Ed Columnist
Let's Get Fundamental By DAVID BROOKS
If I were magically given an hour to help Barack Obama prepare for his health care speech next week, the first thing I'd do is ask him to read David Goldhill's essay, "How American Health Care Killed My Father," in the current issue of The Atlantic. That essay would lift Obama out of the distracting sideshows about this public plan or that cooperative option. It would remind him why he got into this issue in the first place.
Goldhill's main message is that the American health care system is dysfunctional at the core. He vividly describes how the system hides information, muddies choices, encourages more treatment instead of better care, neglects cheap innovation, inflates costs and unintentionally increases suffering.
The essay is about the real problem: the insane incentives. Goldhill is especially good on the way the voracious health care system soaks up money that could go to education, the environment, economic development and a thousand other priorities. Health care, he writes, "simply keeps gobbling up national resources, seemingly without regard to other societal needs."
Then I'd ask Obama to go to the Brookings Institution Web site and read a report called "Bending the Curve: Effective Steps to Address Long-Term Health Care Spending Growth." This report was written by a bipartisan group of battle-tested experts, including Mark McClellan, David Cutler, Elizabeth McGlynn, Joseph Antos and John Bertko.
This report also focuses on the key issue: perverse incentives. It's got a series of proposals on how to restructure insurance markets, reorganize provider payments, change the way effectiveness-research findings are implemented and cap the employee tax deduction.
These aren't pie-in-the-sky ideas. The authors have combed through the bills that are already out there. They've taken good ideas that are now in embryonic or neutered form. They show how the ideas would work if fully implemented. We're not going to revolutionize 18 percent of the American economy overnight, but these proposals would put us on the path toward real reform.
We're not on that path right now. Several months ago, President Obama made a promise: People with health insurance would be able to keep exactly what they have.
We all understand why he made that promise. He wanted to reassure people who are happy with what they've got. He wanted to mollify the industries that have a vested interest in the status quo.
But Obama's promise sent the reform effort off the rails. It meant that efforts to expand coverage marched ahead, but efforts to fundamentally reform the system got watered down.
Instead of true reform we got a series of bills that essentially cement the present system in place. The proposals do not fundamentally challenge the fee-for-service system. They don't make Americans more accountable for their own health care spending. They don't reduce costs. They just add more people into the mess we've got.
The president made this promise to ease passage. But it ended up hollowing out the substance of the reform. And the political benefits didn't even materialize. Voters are still spooked by the costs, the centralization and the cuts they are sure will come.
If I had a magic hour with the president, I'd tell him this is his ninth-inning chance. He can stay on the current path. He might be able to pass some incremental bill that extends coverage. But he won't have tackled the fundamental problems that first drove him to this issue. He won't have cut health care inflation. He won't have prevented a voracious system from bankrupting the nation, defunding the schools, pushing down wages and impoverishing the young.
On the other hand, he can shift back to the core issue: the perverse incentives that make this system such a mess. He can embrace proposals—like the Brookings proposals or, more comprehensively, the Wyden-Bennett bill — that address the structural problems instead of simply papering over them.
This remains a politically risky strategy. There are many industries that have an interest in making sure health care spending rises to 20 percent of G.D.P., and then 22 and then 24. But the president's in political hot water already. He got there trying to dodge the hard issues. He might as well be there because he's fighting for something real.
There are many people telling him to go incremental. They're telling him to just enlarge the current system a bit and pay for it by pounding down a few Medicare fees. But did Barack Obama really get elected so he could pass the Status Quo Sanctification and Extension Act?
This is not the time to get incremental. It's the time to get fundamental. Reform the incentives. Make consumers accountable for spending. Make price information transparent. Reward health care, not health services. Do what you set out to do. Bring change.
Op-Ed Columnist - Let’s Get Fundamental - NYTimes.com (12 September 2009)
http://www.nytimes.com/2009/09/04/opinion/04brooks.html?sq=&st=cse&%2339;s%20Get%20Fundamental=&%2334;=&%2334;Let=&scp=1&pagewanted=print
http://snipurl.com/rrzgf
Op-Ed Columnist
Let's Get Fundamental By DAVID BROOKS
If I were magically given an hour to help Barack Obama prepare for his health care speech next week, the first thing I'd do is ask him to read David Goldhill's essay, "How American Health Care Killed My Father," in the current issue of The Atlantic. That essay would lift Obama out of the distracting sideshows about this public plan or that cooperative option. It would remind him why he got into this issue in the first place.
Goldhill's main message is that the American health care system is dysfunctional at the core. He vividly describes how the system hides information, muddies choices, encourages more treatment instead of better care, neglects cheap innovation, inflates costs and unintentionally increases suffering.
The essay is about the real problem: the insane incentives. Goldhill is especially good on the way the voracious health care system soaks up money that could go to education, the environment, economic development and a thousand other priorities. Health care, he writes, "simply keeps gobbling up national resources, seemingly without regard to other societal needs."
Then I'd ask Obama to go to the Brookings Institution Web site and read a report called "Bending the Curve: Effective Steps to Address Long-Term Health Care Spending Growth." This report was written by a bipartisan group of battle-tested experts, including Mark McClellan, David Cutler, Elizabeth McGlynn, Joseph Antos and John Bertko.
This report also focuses on the key issue: perverse incentives. It's got a series of proposals on how to restructure insurance markets, reorganize provider payments, change the way effectiveness-research findings are implemented and cap the employee tax deduction.
These aren't pie-in-the-sky ideas. The authors have combed through the bills that are already out there. They've taken good ideas that are now in embryonic or neutered form. They show how the ideas would work if fully implemented. We're not going to revolutionize 18 percent of the American economy overnight, but these proposals would put us on the path toward real reform.
We're not on that path right now. Several months ago, President Obama made a promise: People with health insurance would be able to keep exactly what they have.
We all understand why he made that promise. He wanted to reassure people who are happy with what they've got. He wanted to mollify the industries that have a vested interest in the status quo.
But Obama's promise sent the reform effort off the rails. It meant that efforts to expand coverage marched ahead, but efforts to fundamentally reform the system got watered down.
Instead of true reform we got a series of bills that essentially cement the present system in place. The proposals do not fundamentally challenge the fee-for-service system. They don't make Americans more accountable for their own health care spending. They don't reduce costs. They just add more people into the mess we've got.
The president made this promise to ease passage. But it ended up hollowing out the substance of the reform. And the political benefits didn't even materialize. Voters are still spooked by the costs, the centralization and the cuts they are sure will come.
If I had a magic hour with the president, I'd tell him this is his ninth-inning chance. He can stay on the current path. He might be able to pass some incremental bill that extends coverage. But he won't have tackled the fundamental problems that first drove him to this issue. He won't have cut health care inflation. He won't have prevented a voracious system from bankrupting the nation, defunding the schools, pushing down wages and impoverishing the young.
On the other hand, he can shift back to the core issue: the perverse incentives that make this system such a mess. He can embrace proposals—like the Brookings proposals or, more comprehensively, the Wyden-Bennett bill — that address the structural problems instead of simply papering over them.
This remains a politically risky strategy. There are many industries that have an interest in making sure health care spending rises to 20 percent of G.D.P., and then 22 and then 24. But the president's in political hot water already. He got there trying to dodge the hard issues. He might as well be there because he's fighting for something real.
There are many people telling him to go incremental. They're telling him to just enlarge the current system a bit and pay for it by pounding down a few Medicare fees. But did Barack Obama really get elected so he could pass the Status Quo Sanctification and Extension Act?
This is not the time to get incremental. It's the time to get fundamental. Reform the incentives. Make consumers accountable for spending. Make price information transparent. Reward health care, not health services. Do what you set out to do. Bring change.
Op-Ed Columnist - Let’s Get Fundamental - NYTimes.com (12 September 2009)
http://www.nytimes.com/2009/09/04/opinion/04brooks.html?sq=&st=cse&%2339;s%20Get%20Fundamental=&%2334;=&%2334;Let=&scp=1&pagewanted=print
http://snipurl.com/rrzgf
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