February 11, 2012
Even Critics of Safety Net Increasingly Depend on ItBy BINYAMIN APPELBAUM and ROBERT GEBELOFF
LINDSTROM, Minn. — Ki Gulbranson owns a logo apparel shop, deals in jewelry on the side and referees youth soccer games. He makes about $39,000 a year and wants you to know that he does not need any help from the federal government.
He says that too many Americans lean on taxpayers rather than living within their means. He supports politicians who promise to cut government spending. In 2010, he printed T-shirts for the Tea Party campaign of a neighbor, Chip Cravaack, who ousted this region’s long-serving Democratic congressman.
Yet this year, as in each of the past three years, Mr. Gulbranson, 57, is counting on a payment of several thousand dollars from the federal government, a subsidy for working families called the earned-income tax credit. He has signed up his three school-age children to eat free breakfast and lunch at federal expense. And Medicare paid for his mother, 88, to have hip surgery twice.
There is little poverty here in Chisago County, northeast of Minneapolis, where cheap housing for commuters is gradually replacing farmland. But Mr. Gulbranson and many other residents who describe themselves as self-sufficient members of the American middle class and as opponents of government largess are drawing more deeply on that government with each passing year.
Dozens of benefits programs provided an average of $6,583 for each man, woman and child in the county in 2009, a 69 percent increase from 2000 after adjusting for inflation. In Chisago, and across the nation, the government now provides almost $1 in benefits for every $4 in other income.
Older people get most of the benefits, primarily through Social Security and Medicare, but aid for the rest of the population has increased about as quickly through programs for the disabled, the unemployed, veterans and children.
The government safety net was created to keep Americans from abject poverty, but the poorest households no longer receive a majority of government benefits. A secondary mission has gradually become primary: maintaining the middle class from childhood through retirement. The share of benefits flowing to the least affluent households, the bottom fifth, has declined from 54 percent in 1979 to 36 percent in 2007, according to a Congressional Budget Office analysis published last year.
And as more middle-class families like the Gulbransons land in the safety net in Chisago and similar communities, anger at the government has increased alongside. Many people say they are angry because the government is wasting money and giving money to people who do not deserve it. But more than that, they say they want to reduce the role of government in their own lives. They are frustrated that they need help, feel guilty for taking it and resent the government for providing it. They say they want less help for themselves; less help in caring for relatives; less assistance when they reach old age.
The expansion of government benefits has become an issue in the presidential campaign. Rick Santorum, who won 57 percent of the vote in Chisago County in the Republican presidential caucuses last week, has warned of “the narcotic of government dependency.” Newt Gingrich has compared the safety net to a spider web. Mitt Romney has said the nation must choose between an “entitlement society” and an “opportunity society.” All the candidates, including Ron Paul, have promised to cut spending and further reduce taxes.
The problem by now is familiar to most. Politicians have expanded the safety net without a commensurate increase in revenues, a primary reason for the government’s annual deficits and mushrooming debt. In 2000, federal and state governments spent about 37 cents on the safety net from every dollar they collected in revenue, according to a New York Times analysis. A decade later, after one Medicare expansion, two recessions and three rounds of tax cuts, spending on the safety net consumed nearly 66 cents of every dollar of revenue.
The recent recession increased dependence on government, and stronger economic growth would reduce demand for programs like unemployment benefits. But the long-term trend is clear. Over the next 25 years, as the population ages and medical costs climb, the budget office projects that benefits programs will grow faster than any other part of government, driving the federal debt to dangerous heights.
Americans are divided about the way forward. Seventy percent of respondents to a recent New York Times poll said the government should raise taxes. Fifty-six percent supported cuts in Medicare and Social Security. Forty-four percent favored both.
Support for spending cuts runs strong in Chisago, where anger at the government helped fuel Mr. Cravaack’s upset victory in 2010 over James L. Oberstar, the Democrat who had represented northeast Minnesota for 36 years.
“Spending like this is simply unsustainable, and it’s time to cut up Washington, D.C.’s credit card,” Mr. Cravaack said in a February speech to the Hibbing Area Chamber of Commerce. “It may hurt now, but it will be absolutely deadly for the next generation — that’s our children and our grandchildren.”
But the reality of life here is that Mr. Gulbranson and many of his neighbors continue to take as much help from the government as they can get. When pressed to choose between paying more and taking less, many people interviewed here hemmed and hawed and said they could not decide. Some were reduced to tears. It is much easier to promise future restraint than to deny present needs.
“How do you tell someone that you deserve to have heart surgery and you can’t?” Mr. Gulbranson said.
He paused.
“You have to help and have compassion as a people, because otherwise you have no society, but financially you can’t destroy yourself. And that is what we’re doing.”
He paused again, unable to resolve the dilemma.
“I feel bad for my children.”
Middle-Class Blues
Mr. Gulbranson has tried several ways to make a living in the storefront he bought from his father in 1979. He ran a gift shop, then shifted to selling jewelry. Nine years ago, he moved the gold scales to the back and bought equipment for screen-printing clothing. Through it all, he has never made more than about $46,000 in a year.
Meanwhile, the cost of life — and of raising five children — has climbed inexorably.
“I used to go out and try to have a meal at Perkins, which is a restaurant here, and get out of the store with $5,” Mr. Gulbranson said. “And now it’s probably up to $10.”
In recent years he has earned so little that he did not pay federal income taxes, although he still paid thousands of dollars toward Medicare and Social Security. The earned-income tax credit is intended to offset those payroll taxes, to encourage people with lower-paying jobs to remain in the work force.
Mr. Gulbranson said the money covered the fees for his children’s sports leagues and the cost of keeping the older ones on the family’s car insurance.
“If we didn’t get these government things, then probably my kids could not participate in some of the sports they do,” he said.
Almost half of all Americans lived in households that received government benefits in 2010, according to the Census Bureau. The share climbed from 37.7 percent in 1998 to 44.5 percent in 2006, before the recession, to 48.5 percent in 2010.
The trend reflects the expansion of the safety net. When the earned-income credit was introduced in 1975, eligibility was limited to households making the current equivalent of up to $26,997. In 2010, it was available to families making up to $49,317. The maximum payout, meanwhile, quadrupled on an inflation-adjusted basis.
It also reflects the deterioration of the middle class. Chisago boomed and prospered for decades as working families packed new subdivisions along Interstate 35, which runs up the western edge of the county like a flagpole with its base set firmly in Minneapolis. But recent years have been leaner. Per capita income in Chisago excluding government aid fell 6 percent on an inflation-adjusted basis between 2000 and 2007. Over the next two years, it fell an additional 7 percent. Nationally, per capita income excluding government benefits fell by 3 percent over the same 10 years.
Mr. Gulbranson’s business struggled as other companies, particularly construction firms, stopped ordering logo-emblazoned shirts. In 2009, the family claimed the earned-income credit for the first time on the advice of their accountant, who was claiming it for herself. The share of local families claiming the credit climbed 33 percent between 2000 and 2008, the most recent year for which data are available.
To make extra money, Mr. Gulbranson refereed 40 soccer games on Tuesday and Thursday nights last fall. His wife sold clothes at equestrian events and air-brushed novelties at craft fairs, driving around the country with a one-ton trailer hitched to a 20-foot van.
Their difficulties, Mr. Gulbranson said, have made it hard to imagine asking anyone to pay higher taxes.
“I don’t think most people could bear to pay more,” he said.
Instead, he said he would rather give up the earned-income credit the family now receives and start paying for school lunches for his children.
“I don’t demand that the government does this for me,” he said. “I don’t feel like I need the government.”
How about Social Security? And Medicare? Can he imagine retiring without government help?
“I don’t think so,” he said. “No. I don’t know. Not the way we expect to live as Americans.”
A Starring Role
Bob Kopka and his wife often drive to the American Legion hall in North Branch on Thursday nights, joining the crowd gathered in the basement bar for the weekly meat raffle. Almost everyone present relies on the government to pay for their medical care.
Mr. Kopka, 74, has had three heart procedures in recent years. His wife recently had surgery to remove cataracts from both eyes.
Without Medicare, Mr. Kopka said, the couple could not have paid for the treatments.
“Hell, no,” he said. “No. Never. She would have to go blind.”
And him?
“I’d die.”
Few federal programs are more popular than Medicare, which along with Social Security assures a minimum quality of life for older Americans.
None are more central to the nation’s financial problems. The Congressional Budget Office projects that government spending on medical benefits, even taking into account the cost containment measures in the 2010 health care law, will rise 60 percent over the next decade. Then it will start rising even more quickly. The cost of caring for each beneficiary continues to increase, and the government projects that Medicare enrollment will grow by roughly one-third as baby boomers enter old age.
Spending on medical benefits will account for a larger share of the projected increase in the federal budget over the next decade than any other kind of spending except interest payments on the federal debt.
Medicare’s starring role in the nation’s financial problems is not well understood. Only 22 percent of respondents to the New York Times poll correctly identified Medicare as the fastest-growing benefits program. A greater number of respondents, 27 percent, chose programs for the poor. That category, which includes Medicaid, is slightly larger than Medicare today but is projected to add only half as much to federal spending over the next decade.
Medicare’s financial problems are much worse than Social Security’s. A worker earning average wages still pays enough in Social Security taxes to cover the benefits the worker is likely to receive in retirement, according to an analysis by the Urban Institute. Social Security is still running out of money because the program must also support spouses who do not work and workers who earn lower wages. But Medicare’s situation is even more dire because a worker earning average wages still contributes only $1 in Medicare taxes for every $3 in benefits likely to be received in retirement.
A woman who was 45 in 2010, earning $43,500 a year, will pay taxes that will reach a value of $87,000 by the time she retires, assuming the money is invested at an annual interest rate 2 percentage points above inflation, according to the Urban Institute analysis. But on average, the government will then spend $275,000 on her medical care. The average is somewhat lower for men, because women live longer.
Medicare is often described as an insurance program, but its premiums are not nearly high enough. In simple terms, Americans are getting more than they pay for.
But many older residents in Chisago say this problem belongs to younger generations. They paid what they were told; they want to collect what they were promised.
Some, like the Kopkas, have savings they can tap. Mr. Kopka still owns the landscaping business he started after leaving the Navy in the early 1960s. He and his wife own a three-bedroom home on three acres, valued by the county at $153,700. The mortgage is paid. They hope to pass the house to their children.
Others have nothing else. Barbara Sullivan, 71, moved last year to the apartments above the Chisago County Senior Center in North Branch. Waiting on a recent Friday for the hot lunch, which costs $3.50, she watched roughly 20 people play bingo for prizes including canned soup and Chef Boyardee pasta.
“Most of the seniors around here are struggling to make it,” she said.
She counts herself among them. She lives on $1,220 a month in Social Security benefits and relied on Medicare to pay for an operation in November.
She believes that she is taking more from the government than she paid in taxes. She worries about the consequences for her grandchildren. She said she would like politicians to propose solutions.
“We’re reasonable people,” she said. “We’re not going to say, ‘Give it to me and let my grandchildren suffer.’ I think they underestimate seniors when they think that way.”
But she cannot imagine asking people to pay higher taxes. And as she considered making do with less, she started to cry.
“Without it, I’m not sure how I would live,” she said. “With the check I’m getting from Social Security, it’s a constant struggle on making sure that I pay my rent and have enough left for groceries.
“I haven’t bought a Christmas present, I haven’t bought clothing in the last five years, simply because I can’t afford it.”
Keeping a Promise
Representative Cravaack often says he entered politics to lift the burden of debt from the shoulders of his two sons.
“I vision that I open up their backpacks and I put in a 50-pound rock and zip it back up again,” Mr. Cravaack told the Minnesota Freedom Council in October 2010. “And I say, ‘Sorry, son, you’re going to have to hump this the rest of your life.’ Because that’s exactly what we’re doing to our national debt right now to our children.”
Mr. Cravaack, a 53-year-old Navy veteran and a retired pilot for Northwest Airlines, was grounded by sleep apnea in 2007. He and his wife, an executive at the drug company Novo Nordisk, decided he would stay home with their sons. He soon became the first man to serve as president of the Chisago Lakes Parent Teacher Organization.
In August 2009, while driving the children to North Branch, he heard a talk radio host urging people to protest President Obama’s health care legislation. Mr. Cravaack and about two dozen others spent more than two hours the next day in Mr. Oberstar’s North Branch office before a staff member told them the congressman would not meet them. The rejection convinced Mr. Cravaack that Mr. Oberstar should be replaced. One of the other protesters, a woman who had taken her six children to the office, became Mr. Cravaack’s campaign scheduler.
Two weeks after speaking to the Freedom Council, he beat Mr. Oberstar by 1.6 percentage points, or 4,407 votes. Voters in Chisago, the southern tip of an expansive district, provided the margin of victory.
“We have to break away,” Mr. Cravaack told supporters, “from relying on government to provide all the answers.”
Mr. Cravaack has said he drew unemployment benefits during a furlough from Northwest in the early 1990s. He did not respond to several requests for an interview, nor to an e-mail with questions about his views and about whether his family has drawn on other benefits programs. This account is based on a review of his public statements.
Shortly after arriving in Congress, Mr. Cravaack voted with a vast majority of House Republicans for a plan to remake Medicare by providing money to its beneficiaries to buy private insurance. Senate Democrats have rejected that plan.
But Mr. Cravaack has also consistently said the government should not reduce its largest category of spending — benefits for the current generation of retirees. He also says he does not support cuts for people who will turn 65 over the next decade.
“If you’re 55 years and older, you don’t have to listen to this conversation because we have to keep those promises,” Mr. Cravaack told The Daily Caller last April. “People like myself, 52, if you’re 54 or younger, we’re going to have a conversation.”
Tomorrow, Tomorrow
The government helps Matt Falk and his wife care for their disabled 14-year-old daughter. It pays for extra assistance at school and for trained attendants to stay with her at home while they work. It pays much of the cost of her regular visits to the hospital.
Mr. Falk, 42, would like the government to do less.
“She doesn’t need some of the stuff that we’re doing for her,” said Mr. Falk, who owns a heating and air-conditioning business in North Branch. “I don’t think it’s a bad thing if society can afford it, but given the situation that our society is facing, we just have to say that we can’t offer as much resources at school or that we need to pay a higher premium” for her medical care.
Mr. Falk, who voted for Mr. Cravaack, said he did not want to pay higher taxes and did not want the government to impose higher taxes on anyone else. He said that his family appreciated the government’s help and that living with less would be painful for them and many other families. But he said the government could not continue to operate on borrowed money.
“They’re going to have to reduce benefits,” he said. “We’re going to have to accept it, and we’re going to have to suffer.”
One of the oldest criticisms of democracy is that the people will inevitably drain the treasury by demanding more spending than taxes. The theory is that citizens who get more than they pay for will vote for politicians who promise to increase spending.
But Dean P. Lacy, a professor of political science at Dartmouth College, has identified a twist on that theme in American politics over the last generation. Support for Republican candidates, who generally promise to cut government spending, has increased since 1980 in states where the federal government spends more than it collects. The greater the dependence, the greater the support for Republican candidates.
Conversely, states that pay more in taxes than they receive in benefits tend to support Democratic candidates. And Professor Lacy found that the pattern could not be explained by demographics or social issues.
Chisago has shifted over 30 years from dependably Democratic to reliably Republican. Support for the Republican presidential candidate has increased relative to the national vote in each election since 1984. Senator John McCain won 55 percent of the vote here in 2008.
Residents say social issues play a role, but in recent years concerns about spending and taxes have predominated.
Voters in the North Branch school district have rejected increased financing for local schools in each of the past three years. In 2010, the district switched to a four-day school week, striking Monday from the calendar to save money.
Some of the fiercest advocates for spending cuts have drawn public benefits. Many, like Mr. Falk, have family members who rely on the government. They often cite that personal experience as the reason they want to cut government spending.
Brian Qualley, 49, has a sister who survived a brain tumor but was disabled by its removal. The government pays for her care at an assisted-living facility. Their mother scrapes by on Social Security.
Mr. Qualley said that the government should provide for those who need help, but that too much money was being wasted. Mr. Qualley, who owns a tattoo parlor in Harris, north of North Branch, said some of his customers paid with money from government disability checks.
“They’re getting $300 or $400 tattoos, and they’re wearing nice new Nike shoes that I can’t afford,” he said, looking up from working a complicated design into the left leg of a middle-aged woman. “I guess I shouldn’t say it because it’s my business, but I think a tattoo is a little too extravagant.”
But Mr. Qualley said he did not want to reduce benefits for the current generation of retirees. Rather, he said his own generation should get less, because they have time to prepare. This is a common position among the young and healthy in Chisago.
Mr. Qualley said he was saving some money for retirement, although, he added, “I don’t have a 401(k) or anything like that.”
“I also have a job that I don’t necessarily ever want to — or have to — retire from,” he said.
What if his hands start to shake as he gets older?
“Actually,” he said, the electric needle falling silent in his hand, “it’s my shoulders and neck that bother me most.”
Safety in Numbers
Barbara Nelson has little patience for people who say they will not need government help. She considers herself lucky she has not, and obligated to provide for those who do.
“Catastrophes happen in life,” she said, sitting in a coffee shop in Taylors Falls. “To be so arrogant that you think it won’t happen to you, that somehow you’re going to be one of the special ones, I disagree with that.”
Ms. Nelson, 61, who describes herself as a centrist Democrat, also dismisses the claim that people cannot afford to pay more taxes.
“Anyone who can come into a coffee shop and buy coffee is capable of paying more,” she said. “If someone’s life can be granted, in terms of adequate health care, if that means I give up five cups of coffee a month, that is a small price to pay.”
Gordy Peterson, 62, who has used a wheelchair for 30 years since a construction accident, has reluctantly reached a similar conclusion.
“I’m a conservative,” he said by way of introducing himself. He built his own house before his injury and paid for it in cash. He still thinks the government should operate that way. He never intended to depend on federal aid and said he sometimes felt guilty about it.
But for the last three decades, he has received a regular check from the Social Security disability insurance program, and Medicare has helped to pay his medical bills.
“Here I’m getting money, and everybody is struggling,” he said. “Even though it ain’t no cakewalk for me.”
Mr. Peterson used a workers’ compensation settlement to buy a farm that he managed with his brother-in-law, who is mentally handicapped and also on government disability.
“He was my legs, and we worked it,” Mr. Peterson said.
They grew corn, soybeans and rye, and even kept steers for a while. In good years they earned enough to live on. In bad years they lived on the government’s checks. Life would have been very difficult without them, he said.
Mr. Peterson, an easygoing man who looks down when he thinks and smiles sheepishly when he offers an opinion, looked down after completing the story of his own dependence on the safety net.
“It’s hard to beat up on the government when they’ve been so good to you,” he finally said. “I’ve never really thought about it, I guess.”
Lately, the government has been very good, indeed. The county, with federal financing, bought a corner of Mr. Peterson’s farm to build a new interchange for Interstate 35. He used the money to open a gas station at the edge of the farm in 2008 to serve the traffic that rolls off the new ramp. The business is prospering, and he no longer worries that he will need to depend on Social Security.
“But you can’t take that away,” he said. “My own sister has only Social Security. That’s all. That’s all she’s going to have. And if you take that away from her, Christ, she’d be a street person. I don’t think we can cut them off on that.”
How about higher taxes?
Maybe a little higher, he said. Maybe.
“I’m glad I’m not a politician,” he said. “We’re all going to complain no matter what they do. Nobody wants to put a noose around their own neck.”
Showing posts with label Health. Show all posts
Showing posts with label Health. Show all posts
Sunday, February 12, 2012
Most Expect to Give More Than They Receive, Poll FindsBy ALLISON KOPICKI
February 11, 2012
Most Expect to Give More Than They Receive, Poll FindsBy ALLISON KOPICKI
A majority of Americans say they expect to pay more in federal taxes over their lifetime than they will ever receive in benefits from the government, according to a recent New York Times poll. At the same time, the taxes Americans pay today are not keeping pace with the growing costs of government.
Medicare is the program projected to add the most to federal spending over the next decade, likely increasing the government’s annual budget deficits. But only one in five Americans surveyed named Medicare as the fastest-growing benefits program. From a number of choices, 27 percent identified programs for the poor, 17 percent said unemployment benefits and programs, 14 percent said Social Security and 5 percent named veterans’ benefits. Twenty-two percent named Medicare.
Most Americans realize that the taxes they pay during their working years may not be enough to cover either their Medicare or Social Security benefits. But a majority of those surveyed, 55 percent, also said they would pay more in taxes than they would ever get back from the government in benefits.
In follow-up interviews, some respondents said that was because their tax dollars were also paying for government programs that did not benefit them directly, like foreign aid, the military and assistance for the poor. Some also said government waste contributed to their pessimism.
Majorities of Americans also say Social Security and Medicare will not be there for them when they reach retirement. Nearly three-fourths of those under 45 do not expect Medicare to provide benefits for them, and more than two-thirds of these younger Americans said Social Security would not have money available for their retirement years.
That pessimism is another likely reason that 6 in 10 Americans under the age of 45 said the taxes they pay over their lifetime would exceed the benefits they would receive.
Those who currently receive benefits from the government were more likely than others to say their taxes would match what they receive in benefits.
To keep Medicare solvent, a majority of Americans favor raising taxes or premiums rather than reducing benefits. When asked to choose just one proposal to reduce the program’s deficit, 37 percent said they supported higher taxes on current workers, and 22 percent supported increasing the premiums paid by current recipients. Just 16 percent supported reducing benefits for future recipients, and 8 percent endorsed reducing benefits of current Medicare recipients.
Eighty-five percent agreed that increasing taxes on the wealthy should play a role in reducing the overall federal deficit, and three in five said it should play a major role. Seventy percent also favored raising taxes on all Americans, although only 32 percent said this should play a major role.
And 56 percent favored cuts in Medicare and Social Security; only 20 percent said this should play a major role.
The poll was conducted from Dec. 14 to 18 among 992 adults nationwide and has a margin of sampling error of plus or minus three percentage points.
Most Expect to Give More Than They Receive, Poll FindsBy ALLISON KOPICKI
A majority of Americans say they expect to pay more in federal taxes over their lifetime than they will ever receive in benefits from the government, according to a recent New York Times poll. At the same time, the taxes Americans pay today are not keeping pace with the growing costs of government.
Medicare is the program projected to add the most to federal spending over the next decade, likely increasing the government’s annual budget deficits. But only one in five Americans surveyed named Medicare as the fastest-growing benefits program. From a number of choices, 27 percent identified programs for the poor, 17 percent said unemployment benefits and programs, 14 percent said Social Security and 5 percent named veterans’ benefits. Twenty-two percent named Medicare.
Most Americans realize that the taxes they pay during their working years may not be enough to cover either their Medicare or Social Security benefits. But a majority of those surveyed, 55 percent, also said they would pay more in taxes than they would ever get back from the government in benefits.
In follow-up interviews, some respondents said that was because their tax dollars were also paying for government programs that did not benefit them directly, like foreign aid, the military and assistance for the poor. Some also said government waste contributed to their pessimism.
Majorities of Americans also say Social Security and Medicare will not be there for them when they reach retirement. Nearly three-fourths of those under 45 do not expect Medicare to provide benefits for them, and more than two-thirds of these younger Americans said Social Security would not have money available for their retirement years.
That pessimism is another likely reason that 6 in 10 Americans under the age of 45 said the taxes they pay over their lifetime would exceed the benefits they would receive.
Those who currently receive benefits from the government were more likely than others to say their taxes would match what they receive in benefits.
To keep Medicare solvent, a majority of Americans favor raising taxes or premiums rather than reducing benefits. When asked to choose just one proposal to reduce the program’s deficit, 37 percent said they supported higher taxes on current workers, and 22 percent supported increasing the premiums paid by current recipients. Just 16 percent supported reducing benefits for future recipients, and 8 percent endorsed reducing benefits of current Medicare recipients.
Eighty-five percent agreed that increasing taxes on the wealthy should play a role in reducing the overall federal deficit, and three in five said it should play a major role. Seventy percent also favored raising taxes on all Americans, although only 32 percent said this should play a major role.
And 56 percent favored cuts in Medicare and Social Security; only 20 percent said this should play a major role.
The poll was conducted from Dec. 14 to 18 among 992 adults nationwide and has a margin of sampling error of plus or minus three percentage points.
The Numbers Behind the ArticleBy ROBERT GEBELOFF and BINYAMIN APPELBAUM
February 12, 2012
The Numbers Behind the ArticleBy ROBERT GEBELOFF and BINYAMIN APPELBAUM
The article and graphics package about government benefits draws heavily on figures tabulated by the Bureau of Economic Analysis, a branch of the Commerce Department that serves as a scorekeeper for the nation’s economy.
The bureau tracks economic activity at the local, state and national levels. The Times used data from 2009, the most recent year for which the bureau has published local figures, but the picture has not changed substantially over the past two years. The most recent national figures, for 2011, show Americans still get 18 percent of their income from government benefits.
The bureau calculates that last year Americans received $8.4 trillion from work (about 65 percent of income), $2.2 trillion from investments (17 percent), and $2.3 trillion in cash, medical services and other government benefits.
Benefits are distributed through more than 50 programs ranging from the giants — Social Security, Medicare and Medicaid — to the $40 coupons the government issued to people with old televisions so they could buy digital converter boxes.
Tracking benefits is not an exact science, particularly at the county level, because some federal programs report distributions only by state. Tricare, which provides medical benefits for veterans and the dependents of active-duty personnel, is one such program. The bureau of analysis estimates that 75 percent of its county-level data is drawn from actual tabulations, while the rest is based on statistical estimates.
The results are the most comprehensive available data on county-level economies, widely used by government planners and academic researchers. But The Times’s county-level data, which is based on the government’s, are estimates and subject to estimation errors, particularly in counties with small populations.
Another issue: How to treat payments that the government makes on behalf of beneficiaries, like Medicare payments to hospitals. The bureau counts such payments as income for the beneficiaries, because it reflects the value of the service they received. Some researchers caution that this method creates the misleading impression that a person has become very wealthy when in fact the person has become very sick. And while the ability to gain access to treatment is a form of wealth, it is conditional. No one would have access to the money without being sick.
The Bureau of Economic Analysis also differs from some other federal agencies in counting tax credits, like the earned income credit, as a form of income. The Congressional Budget Office, for example, treats such credits as a reduction in taxes paid. In this case the difference does not affect the total amount of income.
The question is whether money paid to the government and then returned in the form of a tax credit should be treated as income from the original source, or from the government. The budget office methodology yields a lower estimate of the share of income from benefits.
Notwithstanding these differences, the bureau data are broadly consistent with other analyses of the distribution of government benefits, and of the trend toward increased dependence.
The budget office is a second major source of the data cited in the story. The Times in particular relied on its projections of future federal spending and revenues, which were updated in January. The nonpartisan office is widely respected, but its forecasts incorporate a host of assumptions — from the pace of growth to the whims of Congress. Take these, too, with grains of salt.
The estimate of the share of benefits going to low-income households is from a budget office study published last fall. The figures cited come from an analysis of the Current Population Survey by the Census Bureau, which is known to under-report participation in some benefits programs, a problem that has worsened in recent years. The budget office concluded, however, that the effect on its calculations was small, in the neighborhood of a single percentage point.
The Census Bureau also estimates the share of Americans living in households that get benefits. These data, from its sporadic Survey of Income and Program Participation, are drawn from a smaller sample than the Current Population Survey, but are gathered more carefully and therefore regarded by experts as more accurate in tracking the flow of benefits.
All dollar figures in the story were converted to 2011 dollars using the inflation index maintained by the Federal Reserve Bank of St. Louis rather than the widely quoted Consumer Price Index, because the St. Louis index is based on gross domestic product, which experts regard as a more relevant baseline for comparing changes in the level of government spending.
The Numbers Behind the ArticleBy ROBERT GEBELOFF and BINYAMIN APPELBAUM
The article and graphics package about government benefits draws heavily on figures tabulated by the Bureau of Economic Analysis, a branch of the Commerce Department that serves as a scorekeeper for the nation’s economy.
The bureau tracks economic activity at the local, state and national levels. The Times used data from 2009, the most recent year for which the bureau has published local figures, but the picture has not changed substantially over the past two years. The most recent national figures, for 2011, show Americans still get 18 percent of their income from government benefits.
The bureau calculates that last year Americans received $8.4 trillion from work (about 65 percent of income), $2.2 trillion from investments (17 percent), and $2.3 trillion in cash, medical services and other government benefits.
Benefits are distributed through more than 50 programs ranging from the giants — Social Security, Medicare and Medicaid — to the $40 coupons the government issued to people with old televisions so they could buy digital converter boxes.
Tracking benefits is not an exact science, particularly at the county level, because some federal programs report distributions only by state. Tricare, which provides medical benefits for veterans and the dependents of active-duty personnel, is one such program. The bureau of analysis estimates that 75 percent of its county-level data is drawn from actual tabulations, while the rest is based on statistical estimates.
The results are the most comprehensive available data on county-level economies, widely used by government planners and academic researchers. But The Times’s county-level data, which is based on the government’s, are estimates and subject to estimation errors, particularly in counties with small populations.
Another issue: How to treat payments that the government makes on behalf of beneficiaries, like Medicare payments to hospitals. The bureau counts such payments as income for the beneficiaries, because it reflects the value of the service they received. Some researchers caution that this method creates the misleading impression that a person has become very wealthy when in fact the person has become very sick. And while the ability to gain access to treatment is a form of wealth, it is conditional. No one would have access to the money without being sick.
The Bureau of Economic Analysis also differs from some other federal agencies in counting tax credits, like the earned income credit, as a form of income. The Congressional Budget Office, for example, treats such credits as a reduction in taxes paid. In this case the difference does not affect the total amount of income.
The question is whether money paid to the government and then returned in the form of a tax credit should be treated as income from the original source, or from the government. The budget office methodology yields a lower estimate of the share of income from benefits.
Notwithstanding these differences, the bureau data are broadly consistent with other analyses of the distribution of government benefits, and of the trend toward increased dependence.
The budget office is a second major source of the data cited in the story. The Times in particular relied on its projections of future federal spending and revenues, which were updated in January. The nonpartisan office is widely respected, but its forecasts incorporate a host of assumptions — from the pace of growth to the whims of Congress. Take these, too, with grains of salt.
The estimate of the share of benefits going to low-income households is from a budget office study published last fall. The figures cited come from an analysis of the Current Population Survey by the Census Bureau, which is known to under-report participation in some benefits programs, a problem that has worsened in recent years. The budget office concluded, however, that the effect on its calculations was small, in the neighborhood of a single percentage point.
The Census Bureau also estimates the share of Americans living in households that get benefits. These data, from its sporadic Survey of Income and Program Participation, are drawn from a smaller sample than the Current Population Survey, but are gathered more carefully and therefore regarded by experts as more accurate in tracking the flow of benefits.
All dollar figures in the story were converted to 2011 dollars using the inflation index maintained by the Federal Reserve Bank of St. Louis rather than the widely quoted Consumer Price Index, because the St. Louis index is based on gross domestic product, which experts regard as a more relevant baseline for comparing changes in the level of government spending.
Even Critics of Safety Net Increasingly Depend on It JEREMY WHITE, ROBERT GEBELOFF, FORD FESSENDEN, ARCHIE TSE and ALAN McLEAN Source: Bureau of Economic Analysis
Thursday, July 07, 2011
How Health Insurance Affects Health
By DAVID LEONHARDT In the nearly year and a half since Congress passed the health care overhaul, one of the main purposes of the bill — to provide health insurance to people who lack it — has often been lost in the debate. Instead, supporters and opponents of the bill have argued over whether the bill is constitutional, and they’ve argued over whether the bill will cut medical costs more or less than the Congressional Budget Office projects.
Those are obviously important issues. But so is the fact that, unlike any other rich country in the world, the United States has tens of millions of people who do not have health insurance and therefore go without some forms of medical care.
A new study being released today, by some of the country’s top health economists, aims to estimate the effects of not having health insurance — and the effects are large.
The researchers used a lottery that the state of Oregon conducted in 2008 to determine who would become eligible to apply for a limited number of Medicaid slots. The researchers compared the health outcomes of those who won the lottery (many of whom then received insurance) and those who did not (who were more likely to remain uninsured).
The researchers have followed the subjects for only a year so far, so the paper has some clear limitations. But it nonetheless suggests that having health insurance substantially improves health. Expanding insurance does not save society money — as some advocates of preventive medicine have claimed — but it does appear to make people mentally and physically healthier.
The authors point out that the insurance in question — Medicaid — is the same one that many uninsured people will receive as part of the health care law. For that reason, among others, the paper suggests that the law is likely to improve the health and well-being of many of the uninsured.
Katherine Baicker — one of the authors and a Harvard economist who served in President George W. Bush’s administration — wrote the following to me, via e-mail:
Excerpts from the study, which my colleague Gina Kolata writes about today, follow:
Those are obviously important issues. But so is the fact that, unlike any other rich country in the world, the United States has tens of millions of people who do not have health insurance and therefore go without some forms of medical care.
A new study being released today, by some of the country’s top health economists, aims to estimate the effects of not having health insurance — and the effects are large.
The researchers used a lottery that the state of Oregon conducted in 2008 to determine who would become eligible to apply for a limited number of Medicaid slots. The researchers compared the health outcomes of those who won the lottery (many of whom then received insurance) and those who did not (who were more likely to remain uninsured).
The researchers have followed the subjects for only a year so far, so the paper has some clear limitations. But it nonetheless suggests that having health insurance substantially improves health. Expanding insurance does not save society money — as some advocates of preventive medicine have claimed — but it does appear to make people mentally and physically healthier.
The authors point out that the insurance in question — Medicaid — is the same one that many uninsured people will receive as part of the health care law. For that reason, among others, the paper suggests that the law is likely to improve the health and well-being of many of the uninsured.
Katherine Baicker — one of the authors and a Harvard economist who served in President George W. Bush’s administration — wrote the following to me, via e-mail:
There has been a great deal of uncertainty about how much of a difference Medicaid makes to enrollees. Some argued that Medicaid isn’t ‘good’ insurance coverage and that a Medicaid card doesn’t get enrollees much access to care. Others argued that the uninsured already have access to care through the emergency room, clinics, or charity care.The authors also point out that the benefits of health insurance aren’t only medical. They’re financial too, as is the case with other forms of insurance. Here’s another author, Amy Finkelstein (an M.I.T. economist who has written for The Wall Street Journal opinion pages and whom I’ve written about), also via e-mail:
Our study shows that gaining access to Medicaid matters on a number of different dimensions, including increased access to and use of health care.
Health insurance isn’t just about access to health care – it’s also about protection from financial ruin. This point isn’t often discussed in the debate about health insurance expansions, but the reduction in financial strain that we found was substantial. This is important for enrollees, but it is also important for the providers who see fewer of their bills go unpaid.Besides Ms. Baicker and Ms. Finkelstein, the paper’s authors include Jonathan Gruber (an M.I.T. economist, who has advised the Obama administration) and Joseph Newhouse (a Harvard economist who designed and ran the famous RAND Health Insurance Experiment in the 1970s and ’80s). The other authors are Sarah Taubman, Bill Wright, Mira Bernstein, Heidi Allen and members of the Oregon Health Study Group.
Excerpts from the study, which my colleague Gina Kolata writes about today, follow:
About one year after enrollment, we find that those selected by the lottery have substantial and statistically significantly higher health care utilization, lower out-of-pocket medical expenditures and medical debt, and better self-reported health than the control group that was not given the opportunity to apply for Medicaid.
The increase in hospital admissions appears to be disproportionately concentrated in the approximately 35 percent of admissions that do not originate in the emergency room, suggesting that these admissions may be more price sensitive.
[W]e find that insurance is associated with improvements across the board in our measures of self-reported physical and mental health, averaging two-tenths of a standard deviation improvement. These results appear to reflect improvements in mental health and also at least partly a general sense of improved well being; they may also reflect improvements in objective, physical health, but this is more difficult to determine with the data we now have available.
[I]nsurance is also associated with an increase in compliance with recommended preventive care. We look at four different measures of preventive care: blood cholesterol checks, blood tests for diabetes, mammograms, and pap tests. …[T]he results indicate … a 20 percent increase in the probability of ever having one’s blood cholesterol checked, a 15 percent increase in the probability of ever having one’s blood tested for high blood sugar or diabetes, a 60 percent increase in the probability of having a mammogram within the last year (for women 40 and over), and a 45 percent change in the probability of having a pap test within the last year (for women).
[Our] calculation suggests that insurance is associated with a $778 (standard error = $371) increase in annual spending, or about a 25 percent increase relative to the implied control mean annual spending.
First Study of Its Kind Shows Benefits of Providing Medical Insurance to Poor By GINA KOLATA
First Study of Its Kind Shows Benefits of Providing Medical Insurance to Poor By GINA KOLATA
When poor people are given medical insurance, they not only find regular doctors and see doctors more often but they also feel better, are less depressed and are better able to maintain financial stability, according to a new, large-scale study that provides the first rigorously controlled assessment of the impact of Medicaid.While the findings may seem obvious, health economists and policy makers have long questioned whether it would make any difference to provide health insurance to poor people.
It has become part of the debate on Medicaid, at a time when states are cutting back on this insurance program for the poor. In fact, the only reason the study could be done was that Oregon was running out of money and had to choose some people to get insurance and exclude others, providing groups for comparison.
Some said that of course it would help to insure the uninsured. Others said maybe not. There was already a safety net: emergency rooms, charity care, free clinics and the option to go to a doctor and simply not pay the bill. And in any case, the argument goes, if Medicaid coverage is expanded, people will still have trouble seeing a doctor because so few accept that insurance.
Until now, the arguments were pretty much irresolvable. Researchers compared people who happened to have insurance with those who did not have it. But those who do not have insurance tend to be different in many ways from people who have it. They tend to be less educated and to have worse health habits and lower incomes, said Dr. Alan M. Garber, an internist and health economist at Stanford. No matter how carefully researchers try to correct for the differences “they cannot be completely successful,” Dr. Garber said. “There is always some doubt.”
The new study, published Thursday by the National Bureau of Economic Research, avoided that problem. Its design is like that used to test new drugs. People were randomly selected to have Medicaid or not, and researchers then asked if the insurance made any difference.
Health economists and other researchers said the study was historic and would be cited for years to come, shaping health care debates.
“It’s obviously a really important paper,” said James Smith, an economist at the RAND Corporation. “It is going to be a classic.”
Richard M. Suzman, director of the behavioral and social research program at the National Institute on Aging, a major source of financing for the research, said it was “one of the most important studies that our division has funded since I’ve been at the N.I.A.,” a period of more than a quarter-century.
In its first year of data collection, the study found a long list of differences between the insured and uninsured, adding up to an extra 25 percent in medical expenditures for the insured.
Those with Medicaid were 35 percent more likely to go to a clinic or see a doctor, 15 percent more likely to use prescription drugs and 30 percent more likely to be admitted to a hospital. Researchers were unable to detect a change in emergency room use.
Women with insurance were 60 percent more likely to have mammograms, and those with insurance were 20 percent more likely to have their cholesterol checked. They were 70 percent more likely to have a particular clinic or office for medical care and 55 percent more likely to have a doctor whom they usually saw.
The insured also felt better: the likelihood that they said their health was good or excellent increased by 25 percent, and they were 40 percent less likely to say that their health had worsened in the past year than those without insurance.
The study is now in its next phase, an assessment of the health effects of having insurance. The researchers interviewed 12,000 people — 6,000 who received Medicaid and 6,000 who did not — and measured things like blood pressure, cholesterol and weight.
The study became possible because of an unusual situation in Oregon. In 2008, the state wanted to expand its Medicaid program to include more uninsured people but could afford to add only 10,000 to its rolls. Yet nearly 90,000 applied. Oregon decided to select the 10,000 by lottery.
Economists were electrified. Here was their chance to compare those who got insurance with those who were randomly assigned to go without it. No one had ever done anything like that before, in part because it would be considered unethical to devise a study that would explicitly deny some people coverage while giving it to others.
But this situation was perfect for assessing the impact of Medicaid, said Katherine Baicker, professor of health economics at the Harvard School of Public Health. Dr. Baicker and Amy Finkelstein, professor of economics at M.I.T., are the principal investigators for the study.
“Amy and I stumbled across the lottery in Oregon and thought, ‘This is an unbelievable opportunity to actually find out once and for all what expanding public health insurance does,’ ” Dr. Baicker said.
They had just a short window of time. Within two years, Oregon found the money to offer Medicaid to the nearly 80,000 who had been turned down in the lottery.
As an economist, Dr. Finkelstein was interested, among other things, in whether Medicaid did what all insurance — homeowner’s, auto, health — is supposed to do: shield people from financial catastrophe. Almost no one had even tried to investigate that question, she said.
“It is shocking that it is not even in the discourse,” Dr. Finkelstein said.
The study found that those with insurance were 25 percent less likely to have an unpaid bill sent to a collection agency and were 40 percent less likely to borrow money or fail to pay other bills because they had to pay medical bills.
Dr. Finkelstein said she had thought that the people were so poor to begin with that they just did not spend very much out of pocket on medical care when they did not have insurance. “Yet look at the results,” she said.
Dr. Baicker interviewed people for Part 2 of the study and was impressed by what she heard.
“Being uninsured is incredibly stressful from a financial perspective, a psychological perspective, a physical perspective,” she said. “It is a huge relief to people not to have to worry about it day in and day out.”
Tuesday, June 07, 2011
What Your Taxes Do (and Don’t) Buy for You By BRUCE BARTLETT
June 7, 2011, 6:00 am
What Your Taxes Do (and Don’t) Buy for You By BRUCE BARTLETT
Bruce Bartlett held senior policy roles in the Reagan and George H.W. Bush administrations and served on the staffs of Representatives Jack Kemp and Ron Paul.
Last week I showed that total taxes at the federal level — individual and corporate income taxes, payroll taxes and so on — are at a 60-year low as a share of the broadest measure of income, the gross domestic product.
Some readers took issue with my failure to include state and local taxes in the calculation. I have now done that, using data from the Organization for Economic Cooperation and Development, which represents the major developed countries. Among its most important responsibilities is the collection of internationally comparable data on a wide variety of topics, including taxes and health care spending.
The table below shows total taxes, including state and local government taxes, as a share of G.D.P. in 2008, the latest year for which there is complete data. The table makes clear that the United States has very low taxes by international standards.
Organization for Economic Cooperation and Development
When Americans see these data they are usually incredulous that Europeans submit to such seemingly oppressive tax levels. Conservatives, in particular, tend to view freedom as a fixed sum: the bigger government is as a share of G.D.P., the less freedom there is for the people (if government consumes, say, 40 percent of G.D.P., then people are only 60 percent free).
The late Milton Friedman popularized this idea, but even he thought that freedom would not be seriously threatened in Western democracies until government spending reached 60 percent of G.D.P. We are far away from that “tipping point,” as he called it; in 2010, total federal, state and local government spending amounted to 36 percent of G.D.P.
American conservatives tend to ignore the composition of spending; to them, just about all spending is equally bad. Europeans don’t have this attitude because their governments provide them with benefits from which all residents gain.
First is cash allowances that almost all families with children receive. We have something similar, the earned-income tax credit. Because it is part of the tax code, it reduces the tax burden; in Europe such programs are part of the budget and thus raise spending. Moreover, the earned-income tax credit benefits only low-income workers; in Europe, family allowances benefit virtually all families with children.
The impact on the tax burden can be dramatic if one views family allowances as negative taxes. For example, in Luxembourg, an average married worker with two children pays a nominal income tax rate of 16.5 percent (including state and local income taxes), while an American in the same situation would pay 5.2 percent. But once family allowances are subtracted from the Luxembourg worker’s income-tax payment, the effective tax rate falls to just nine-tenths of 1 percent.
More importantly, almost every other country has some form of national health insurance that covers, on average, 72 percent of all health costs. The comparable figure in the United States is 46.5 percent, and almost all of that is accounted for by Medicare and Medicaid, which largely benefit the elderly and the poor.
Average American workers must pay for health care out of their pockets, or through their employers in the form of lower wages. Europeans prefer to pay higher taxes and get government health care for every resident in return.
Conservatives universally believe that whenever the government provides a service it will be vastly more costly than if the private sector does so. This is why they support the plan offered by Representative Paul D. Ryan, Republican of Wisconsin and chairman of the House Budget Committee, to essentially privatize Medicare. Conservatives believe competition will drive down health costs for the elderly.
But O.E.C.D. data show that Americans pay vastly more for health care than the residents of any other major country. In 2008, we paid 16 percent of G.D.P. in total health care costs, public and private combined. The people with the next heaviest health care burden were the French, who paid 11.2 percent of G.D.P. Indeed, at 7.4 percent of G.D.P., the governmental share of health spending in the United States is about the same as total health care costs in many other countries, including (as a percentage of G.D.P.) Luxembourg (6.8 percent), Israel (7.8 percent), Japan (8.1 percent), Britain (8.4 percent) and Norway (8.5 percent).
In other words, if we had a health care system like those in most developed countries, we could, in effect, give every American an increase in their disposable income of 8 percent of G.D.P. – about what they pay in federal income taxes – and have health care no worse than they have in Britain or Japan. It would be like abolishing the federal income tax in terms of allowing people to spend more of their income on something other than health care.
Because most people have little more choice about medical spending than they do about the taxes they pay, one can think of the two as being similar in nature. In the table below, I have added private health care spending as a share of G.D.P. to the tax data in the table above. This puts the United States and other countries on the same footing, by accounting for the fact that they get health care mostly through government while Americans mostly pay for it themselves.
Organization for Economic Cooperation and Development
As one can see, the burden of taxes plus private health care spending substantially equalizes the loss of disposable income in the United States and other countries, because we pay 8.6 percent of G.D.P. for health care over and above what the government pays, whereas those in other major countries pay an average of just 2.3 percent of G.D.P. out of their pockets.
Looking at taxes alone, the burden in the United States is 25 percent below the O.E.C.D. average, but including the additional health costs Americans pay, the United States is just 4.7 percent below average.
In short, a substantial portion of the higher tax burden that Europeans pay is really illusory. They are really just paying their health insurance premiums through their taxes rather than through lower wages, as we do.
Middle-class Europeans also get cash benefits from government that offset much of the tax burden in a way that the United States offers only for the poor. There may be reasons why it is better not to subsidize every family with children and not provide government health insurance for every citizen. But the idea that Europeans are enslaved by high taxes, as most American conservatives believe, is just nonsense.
What Your Taxes Do (and Don’t) Buy for You By BRUCE BARTLETT
Bruce Bartlett held senior policy roles in the Reagan and George H.W. Bush administrations and served on the staffs of Representatives Jack Kemp and Ron Paul.
Last week I showed that total taxes at the federal level — individual and corporate income taxes, payroll taxes and so on — are at a 60-year low as a share of the broadest measure of income, the gross domestic product.
Some readers took issue with my failure to include state and local taxes in the calculation. I have now done that, using data from the Organization for Economic Cooperation and Development, which represents the major developed countries. Among its most important responsibilities is the collection of internationally comparable data on a wide variety of topics, including taxes and health care spending.
The table below shows total taxes, including state and local government taxes, as a share of G.D.P. in 2008, the latest year for which there is complete data. The table makes clear that the United States has very low taxes by international standards.
Organization for Economic Cooperation and Development
When Americans see these data they are usually incredulous that Europeans submit to such seemingly oppressive tax levels. Conservatives, in particular, tend to view freedom as a fixed sum: the bigger government is as a share of G.D.P., the less freedom there is for the people (if government consumes, say, 40 percent of G.D.P., then people are only 60 percent free).
The late Milton Friedman popularized this idea, but even he thought that freedom would not be seriously threatened in Western democracies until government spending reached 60 percent of G.D.P. We are far away from that “tipping point,” as he called it; in 2010, total federal, state and local government spending amounted to 36 percent of G.D.P.
American conservatives tend to ignore the composition of spending; to them, just about all spending is equally bad. Europeans don’t have this attitude because their governments provide them with benefits from which all residents gain.
First is cash allowances that almost all families with children receive. We have something similar, the earned-income tax credit. Because it is part of the tax code, it reduces the tax burden; in Europe such programs are part of the budget and thus raise spending. Moreover, the earned-income tax credit benefits only low-income workers; in Europe, family allowances benefit virtually all families with children.
The impact on the tax burden can be dramatic if one views family allowances as negative taxes. For example, in Luxembourg, an average married worker with two children pays a nominal income tax rate of 16.5 percent (including state and local income taxes), while an American in the same situation would pay 5.2 percent. But once family allowances are subtracted from the Luxembourg worker’s income-tax payment, the effective tax rate falls to just nine-tenths of 1 percent.
More importantly, almost every other country has some form of national health insurance that covers, on average, 72 percent of all health costs. The comparable figure in the United States is 46.5 percent, and almost all of that is accounted for by Medicare and Medicaid, which largely benefit the elderly and the poor.
Average American workers must pay for health care out of their pockets, or through their employers in the form of lower wages. Europeans prefer to pay higher taxes and get government health care for every resident in return.
Conservatives universally believe that whenever the government provides a service it will be vastly more costly than if the private sector does so. This is why they support the plan offered by Representative Paul D. Ryan, Republican of Wisconsin and chairman of the House Budget Committee, to essentially privatize Medicare. Conservatives believe competition will drive down health costs for the elderly.
But O.E.C.D. data show that Americans pay vastly more for health care than the residents of any other major country. In 2008, we paid 16 percent of G.D.P. in total health care costs, public and private combined. The people with the next heaviest health care burden were the French, who paid 11.2 percent of G.D.P. Indeed, at 7.4 percent of G.D.P., the governmental share of health spending in the United States is about the same as total health care costs in many other countries, including (as a percentage of G.D.P.) Luxembourg (6.8 percent), Israel (7.8 percent), Japan (8.1 percent), Britain (8.4 percent) and Norway (8.5 percent).
In other words, if we had a health care system like those in most developed countries, we could, in effect, give every American an increase in their disposable income of 8 percent of G.D.P. – about what they pay in federal income taxes – and have health care no worse than they have in Britain or Japan. It would be like abolishing the federal income tax in terms of allowing people to spend more of their income on something other than health care.
Because most people have little more choice about medical spending than they do about the taxes they pay, one can think of the two as being similar in nature. In the table below, I have added private health care spending as a share of G.D.P. to the tax data in the table above. This puts the United States and other countries on the same footing, by accounting for the fact that they get health care mostly through government while Americans mostly pay for it themselves.
Organization for Economic Cooperation and Development
As one can see, the burden of taxes plus private health care spending substantially equalizes the loss of disposable income in the United States and other countries, because we pay 8.6 percent of G.D.P. for health care over and above what the government pays, whereas those in other major countries pay an average of just 2.3 percent of G.D.P. out of their pockets.
Looking at taxes alone, the burden in the United States is 25 percent below the O.E.C.D. average, but including the additional health costs Americans pay, the United States is just 4.7 percent below average.
In short, a substantial portion of the higher tax burden that Europeans pay is really illusory. They are really just paying their health insurance premiums through their taxes rather than through lower wages, as we do.
Middle-class Europeans also get cash benefits from government that offset much of the tax burden in a way that the United States offers only for the poor. There may be reasons why it is better not to subsidize every family with children and not provide government health insurance for every citizen. But the idea that Europeans are enslaved by high taxes, as most American conservatives believe, is just nonsense.
Tuesday, October 05, 2010
Health Care’s Uneven Road to a New Era By DAVID LEONHARDT
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
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
Sunday, October 03, 2010
Health Care’s Lost Weekend By PETER ORSZAG
October 3, 2010
Health Care’s Lost Weekend By PETER ORSZAG
Doctors, like most people, don’t love to work weekends, and they probably don’t enjoy being evaluated against their peers. But their industry can no longer afford to protect them from the inevitable. Imagine a drugstore open only five days a week, or a television network that didn’t measure its ratings. Improving the quality of health care and reducing its cost will require that doctors make many changes — but working weekends and consenting to quality management are two clear ones.
That’s why an effort at New York University Langone Medical Center to institute both of these changes is so important. If it succeeds, it will help point the way to the health care system of the future.
First, weekends. It’s never good to be hospitalized, but you really don’t want to be hospitalized on a weekend. There are fewer doctors around, and people admitted on Saturdays and Sundays fare relatively poorly.
One study in 2007 found, for example, that for every 1,000 patients suffering heart attacks who were admitted to a hospital on a weekend, there were 9 to 10 more deaths than in a comparable group of patients admitted on a weekday. The weekend patients were less likely to quickly receive the invasive procedures they needed — like coronary artery bypass grafts or cardiac catheterization.
It’s not just a safety issue but, for less life-threatening medical problems, also a matter of convenience. Wouldn’t it be nice to be able to schedule your elective surgery on a Saturday if you wanted? Most hospitals don’t offer that option.
And then there are the economics of a $750 billion-a-year industry letting its capacity sit idle a quarter or more of the time. If hospitals were in constant use, costs would fall as expensive assets like operating rooms and imaging equipment were used more fully. And if the workflow at existing hospitals was spread more evenly over the entire week, patients could more often enjoy the privacy of single-bed rooms.
N.Y.U.’s first step toward seven-day service has been to keep certain functions going all weekend, like radiology study interpretation, magnetic resonance imaging and elective cardiac surgery. The cancer center also now provides some treatments on weekends. And some procedures, like elective Caesarean sections, are offered on Saturdays. So far, the doctors involved are on board.
A second innovation is quality assessment and management. As the saying goes, if you can’t measure it, you can’t manage it — or improve it. That’s why the federal government is now making key investments to encourage hospitals, clinics and doctors to adopt health information technology and report statistics on quality of care.
Robert Grossman, the dean and chief executive of N.Y.U. Langone, has gathered data from around the medical center into a “management dashboard.” This allows him to monitor not only financial information like operating margins and cash balances but also detailed quality data on individual doctors like 30-day hospital readmission rates and the number of infections associated with invasive procedures.
The patterns he has been able to discern this way have been eye-opening. The dashboard data revealed, for instance, that on any given day a disproportionately small number of eligible patients were discharged before noon, so that many people were kept in the hospital longer than necessary. Further analysis revealed a key reason: several routine procedures that some patients need before leaving, like the insertion of central catheters, were not performed in the morning. The medical center has since begun to offer the procedures earlier, and the percentage of discharges before noon has increased significantly.
So far, so good. But will these initiatives become a permanent part of the culture? And if the strategies do survive, how much difference can they make in the cost and quality of care?
N.Y.U. has historically not stacked up that well in cost comparisons with other hospitals. The Dartmouth Atlas of Health Care, which tracks data on regional variations in Medicare costs, suggested that from 2001 to 2005 a Medicare beneficiary’s care at N.Y.U. during the final two years of his life cost taxpayers more than $100,000 — roughly twice the cost at America’s most efficient hospitals.
The Dartmouth data also indicate that the N.Y.U. patients received no clear benefit for the higher cost. They saw, on average, more than 14 different doctors, compared with fewer than 10 for patients at the most efficient hospitals. But the extra visits did not seem to produce better outcomes. In fact, seeing more doctors may have caused harm, as patients ran the risk of side effects and complications from additional tests, treatments and medicines.
N.Y.U. will know that its innovations in weekend operations and doctor assessment are working if, in time, they help improve the cost-effectiveness of care. If they do, it’s important that any practices found effective be adopted widely. Better ways of spreading such innovations will be the focus of my next column. In health care, experimentation is the mother of improvement.
Peter Orszag, the director of the White House Office of Management and Budget from 2009 to 2010 and a distinguished visiting fellow at the Council on Foreign Relations, is a contributing columnist for The Times.
Health Care’s Lost Weekend By PETER ORSZAG
Doctors, like most people, don’t love to work weekends, and they probably don’t enjoy being evaluated against their peers. But their industry can no longer afford to protect them from the inevitable. Imagine a drugstore open only five days a week, or a television network that didn’t measure its ratings. Improving the quality of health care and reducing its cost will require that doctors make many changes — but working weekends and consenting to quality management are two clear ones.
That’s why an effort at New York University Langone Medical Center to institute both of these changes is so important. If it succeeds, it will help point the way to the health care system of the future.
First, weekends. It’s never good to be hospitalized, but you really don’t want to be hospitalized on a weekend. There are fewer doctors around, and people admitted on Saturdays and Sundays fare relatively poorly.
One study in 2007 found, for example, that for every 1,000 patients suffering heart attacks who were admitted to a hospital on a weekend, there were 9 to 10 more deaths than in a comparable group of patients admitted on a weekday. The weekend patients were less likely to quickly receive the invasive procedures they needed — like coronary artery bypass grafts or cardiac catheterization.
It’s not just a safety issue but, for less life-threatening medical problems, also a matter of convenience. Wouldn’t it be nice to be able to schedule your elective surgery on a Saturday if you wanted? Most hospitals don’t offer that option.
And then there are the economics of a $750 billion-a-year industry letting its capacity sit idle a quarter or more of the time. If hospitals were in constant use, costs would fall as expensive assets like operating rooms and imaging equipment were used more fully. And if the workflow at existing hospitals was spread more evenly over the entire week, patients could more often enjoy the privacy of single-bed rooms.
N.Y.U.’s first step toward seven-day service has been to keep certain functions going all weekend, like radiology study interpretation, magnetic resonance imaging and elective cardiac surgery. The cancer center also now provides some treatments on weekends. And some procedures, like elective Caesarean sections, are offered on Saturdays. So far, the doctors involved are on board.
A second innovation is quality assessment and management. As the saying goes, if you can’t measure it, you can’t manage it — or improve it. That’s why the federal government is now making key investments to encourage hospitals, clinics and doctors to adopt health information technology and report statistics on quality of care.
Robert Grossman, the dean and chief executive of N.Y.U. Langone, has gathered data from around the medical center into a “management dashboard.” This allows him to monitor not only financial information like operating margins and cash balances but also detailed quality data on individual doctors like 30-day hospital readmission rates and the number of infections associated with invasive procedures.
The patterns he has been able to discern this way have been eye-opening. The dashboard data revealed, for instance, that on any given day a disproportionately small number of eligible patients were discharged before noon, so that many people were kept in the hospital longer than necessary. Further analysis revealed a key reason: several routine procedures that some patients need before leaving, like the insertion of central catheters, were not performed in the morning. The medical center has since begun to offer the procedures earlier, and the percentage of discharges before noon has increased significantly.
So far, so good. But will these initiatives become a permanent part of the culture? And if the strategies do survive, how much difference can they make in the cost and quality of care?
N.Y.U. has historically not stacked up that well in cost comparisons with other hospitals. The Dartmouth Atlas of Health Care, which tracks data on regional variations in Medicare costs, suggested that from 2001 to 2005 a Medicare beneficiary’s care at N.Y.U. during the final two years of his life cost taxpayers more than $100,000 — roughly twice the cost at America’s most efficient hospitals.
The Dartmouth data also indicate that the N.Y.U. patients received no clear benefit for the higher cost. They saw, on average, more than 14 different doctors, compared with fewer than 10 for patients at the most efficient hospitals. But the extra visits did not seem to produce better outcomes. In fact, seeing more doctors may have caused harm, as patients ran the risk of side effects and complications from additional tests, treatments and medicines.
N.Y.U. will know that its innovations in weekend operations and doctor assessment are working if, in time, they help improve the cost-effectiveness of care. If they do, it’s important that any practices found effective be adopted widely. Better ways of spreading such innovations will be the focus of my next column. In health care, experimentation is the mother of improvement.
Peter Orszag, the director of the White House Office of Management and Budget from 2009 to 2010 and a distinguished visiting fellow at the Council on Foreign Relations, is a contributing columnist for The Times.
Wednesday, March 10, 2010
What we can learn from Singapore's health-care model By Matt Miller
What we can learn from Singapore's health-care model By Matt Miller
Wednesday, March 3, 2010; 10:45 AM
We interrupt Washington's feud over the president's "way forward" for a brief word on a path not taken, courtesy of the only rich nation that boasts universal coverage with health outcomes better than ours while spending one-fifth as much per person on health care. Introducing (drum roll please): Singapore.
Yes, it's an island city-state of just 5 million people. Yes, it's more or less a benevolent dictatorship. And, yes, until recently, bringing chewing gum into Singapore could land you in jail. But Singapore, a poor country a few decades ago, now boasts a higher per capita income (when adjusted for local purchasing power) than the United States. And here's the astonishing fact: Singapore spends less than 4 percent of its GDP on health care. We spend 17 percent (and Singapore's somewhat younger population doesn't begin to explain the difference). Matching Singapore's performance in our $15 trillion economy would free up $2 trillion a year for other public and private purposes.
Do I have I your attention?
Today we can't find cash to recruit a new generation of great teachers, rebuild our roads and bridges, pay down the national debt, or invest in better airports, high-speed rail, a clean energy revolution or any of a hundred other things sensible patriots know we should do to renew the country. We can't do these things in large part because the Medical Industrial Complex vacuums up every spare dollar in sight. It's only slightly melodramatic to assert that if we could run our health-care system as efficiently as Singapore's, we could solve most of our other problems.
So how does Singapore do it?
In health circles it's always conservatives who bring up Singapore, because of the primacy it places on personal responsibility. According to Phua Kai Hong of the National University of Singapore, roughly one-third of health spending in Singapore is paid directly by individuals (who typically buy catastrophic coverage as well); in the United States, by contrast, nearly 90 percent is picked up by third-party insurers, employers and governments. Singaporeans make these payments out of earnings as well as from health savings accounts. The system is chock-full of incentives for thrift. If you want a private hospital room, for example, you pay through the nose; most people choose less expensive wards.
Conservatives are right: Singaporeans have the kind of "skin in the game" that promotes prudence.
But that's only half the story. There's also a massive public role. For starters, adequate savings for retirement and health expenses are mandated by government (employees must sock away 20 percent of earnings each year, to which employers add 13 percent). Public hospitals provide 80 percent of the acute care, setting affordable pricing benchmarks with which private providers compete. Supply-side rules that favor training new family doctors over pricey specialists are more extensive than similar notions Hillary Clinton pushed in the '90s. And in Singapore, if a child is obese, they don't get Rose Garden exhortations from the first lady. They get no lunch and mandatory exercise periods during school.
There's more (including an ample safety net for the poor), but you get the gist: Singapore achieves world-class results thanks to a bold, unconventional synthesis of liberal and conservative approaches. It's further to the left and further to the right than what President Obama or his foes now seek. The island's real ideology is pragmatic problem-solving. It works thanks to cultural traditions that let this eclectic blend flourish. The system is nurtured by talented, highly paid officials who have the luxury of governing for the long-term without being buffeted much by politics.
We obviously can't transplant Singapore's approach wholesale to the United States. But the reason we can't emulate even some of Singapore's success has to do with that iron law of health-care politics: Every dollar of health-care "waste" is somebody's dollar of income. As a stable advanced democracy, we're so overrun by groups with stakes in today's waste that real efficiency gains are perennially blocked.
Any hope for something better starts with tallying the price of today's paralysis. Think about that $2 trillion the next time you see states, citing budget woes, shut the door to college on tens of thousands of poor American students. Or when the next firm moves jobs overseas because health costs here are soaring. Or when the next bridge collapses. Thanks, Medical Industrial Complex!
We return now to our regularly scheduled political battle, which (no matter the outcome, according to some projections) will leave health costs headed to more than 20 percent of GDP by 2019.
Matt Miller, a senior fellow at the Center for American Progress and co-host of public radio's "Left, Right & Center," writes a weekly column for The Post. He can be reached at mattino2@gmail.com.
Wednesday, March 3, 2010; 10:45 AM
We interrupt Washington's feud over the president's "way forward" for a brief word on a path not taken, courtesy of the only rich nation that boasts universal coverage with health outcomes better than ours while spending one-fifth as much per person on health care. Introducing (drum roll please): Singapore.
Yes, it's an island city-state of just 5 million people. Yes, it's more or less a benevolent dictatorship. And, yes, until recently, bringing chewing gum into Singapore could land you in jail. But Singapore, a poor country a few decades ago, now boasts a higher per capita income (when adjusted for local purchasing power) than the United States. And here's the astonishing fact: Singapore spends less than 4 percent of its GDP on health care. We spend 17 percent (and Singapore's somewhat younger population doesn't begin to explain the difference). Matching Singapore's performance in our $15 trillion economy would free up $2 trillion a year for other public and private purposes.
Do I have I your attention?
Today we can't find cash to recruit a new generation of great teachers, rebuild our roads and bridges, pay down the national debt, or invest in better airports, high-speed rail, a clean energy revolution or any of a hundred other things sensible patriots know we should do to renew the country. We can't do these things in large part because the Medical Industrial Complex vacuums up every spare dollar in sight. It's only slightly melodramatic to assert that if we could run our health-care system as efficiently as Singapore's, we could solve most of our other problems.
So how does Singapore do it?
In health circles it's always conservatives who bring up Singapore, because of the primacy it places on personal responsibility. According to Phua Kai Hong of the National University of Singapore, roughly one-third of health spending in Singapore is paid directly by individuals (who typically buy catastrophic coverage as well); in the United States, by contrast, nearly 90 percent is picked up by third-party insurers, employers and governments. Singaporeans make these payments out of earnings as well as from health savings accounts. The system is chock-full of incentives for thrift. If you want a private hospital room, for example, you pay through the nose; most people choose less expensive wards.
Conservatives are right: Singaporeans have the kind of "skin in the game" that promotes prudence.
But that's only half the story. There's also a massive public role. For starters, adequate savings for retirement and health expenses are mandated by government (employees must sock away 20 percent of earnings each year, to which employers add 13 percent). Public hospitals provide 80 percent of the acute care, setting affordable pricing benchmarks with which private providers compete. Supply-side rules that favor training new family doctors over pricey specialists are more extensive than similar notions Hillary Clinton pushed in the '90s. And in Singapore, if a child is obese, they don't get Rose Garden exhortations from the first lady. They get no lunch and mandatory exercise periods during school.
There's more (including an ample safety net for the poor), but you get the gist: Singapore achieves world-class results thanks to a bold, unconventional synthesis of liberal and conservative approaches. It's further to the left and further to the right than what President Obama or his foes now seek. The island's real ideology is pragmatic problem-solving. It works thanks to cultural traditions that let this eclectic blend flourish. The system is nurtured by talented, highly paid officials who have the luxury of governing for the long-term without being buffeted much by politics.
We obviously can't transplant Singapore's approach wholesale to the United States. But the reason we can't emulate even some of Singapore's success has to do with that iron law of health-care politics: Every dollar of health-care "waste" is somebody's dollar of income. As a stable advanced democracy, we're so overrun by groups with stakes in today's waste that real efficiency gains are perennially blocked.
Any hope for something better starts with tallying the price of today's paralysis. Think about that $2 trillion the next time you see states, citing budget woes, shut the door to college on tens of thousands of poor American students. Or when the next firm moves jobs overseas because health costs here are soaring. Or when the next bridge collapses. Thanks, Medical Industrial Complex!
We return now to our regularly scheduled political battle, which (no matter the outcome, according to some projections) will leave health costs headed to more than 20 percent of GDP by 2019.
Matt Miller, a senior fellow at the Center for American Progress and co-host of public radio's "Left, Right & Center," writes a weekly column for The Post. He can be reached at mattino2@gmail.com.
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
GO BACKPRINT THIS PAGE
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
To get more of The New Yorker's signature mix of politics, culture and the arts: Subscribe now
Read more: http://www.newyorker.com/reporting/2009/12/14/091214fa_fact_gawande?printable=true¤tPage=all#ixzz0atRyfR1w
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
To get more of The New Yorker's signature mix of politics, culture and the arts: Subscribe now
Read more: http://www.newyorker.com/reporting/2009/12/14/091214fa_fact_gawande?printable=true¤tPage=all#ixzz0atRyfR1w
Subscribe to:
Posts (Atom)