It’s Not Just Entitlements, The Real Issue: Controlling All Health Care Costs
The current cry to reduce Federal deficits and debt growth by reducing Medicare and Medicaid entitlements is totally missing the key issue: the need to moderate all health care inflation. This should be the time for a national debate on how to best tackle the underlying cost problem, for the sake of our future, the economy, and access to health care.
The June 13-19, 2009 Economist editorialized: “America has the most wasteful [health] system on the planet. Its fiscal future would be transformed if Congress passed reforms that emphasized control of costs as much as the expansion of coverage that Barack Obama rightly wants.”
Health reform failed to get an adequate handle on all health care costs. Now there are constant calls by various expert commissions and many in Congress for entitlement spending reductions. Such cuts will create enormous new problems by failing to address the underlying, real problem of health costs and inflation.
Cutting just Medicare and Medicaid without addressing the whole problem is like squeezing a balloon—the balloon starts looking very strange very fast. While it is difficult to tell how much cost-shifting may occur and it will vary from market-to-market, some Medicare and Medicaid cuts probably get passed through in higher costs to the private sector—hardly a helpful action. (Congressional Budget Office, December 2008, Key Issues in Analyzing Major Health Insurance Proposals, p. 116) Cuts that are too deep in Medicare will also end up causing providers to be reluctant to see seniors and people with disabilities—as happens all too often today in Medicaid. In time, quality may be threatened.
And Medicare and Medicaid are not particularly driving the problem of soaring health care costs. As various studies have shown, over the long haul, Medicare has probably inflated slightly less rapidly for a comparable package of services than the private sector has. Recent reports by the Medicare Payment Advisory Commission (MedPAC) show that high quality, efficient hospitals have made a little money on Medicare, while private insurers have often failed to control costs, and have paid less effective hospitals 132 percent of the costs of running an efficient hospital. (See, for example, MedPAC’s March 2009 Report to Congress, Section 2A.)
A Comprehensive Approach To Health Care Cost Containment
It is past time for a comprehensive solution to ensure the affordability of a fundamental need: access to health care. We should say that access to reasonably affordable health care is a basic national need, like access to clean water and air, and treat it like a regulated utility—like your water–where cost growth is kept within a reasonable range and where a reasonable quality service is widely available (but if you want to go buy Perrier, you can).
Instead of squeezing one part of the health care cost balloon (Medicare and Medicaid), we need an “all saver” system. Under this system, any provider in the health care sector which inflates its billings faster than the growth in the CPI plus, say, one percent (adjusted for changes in population, new technologies, increased productivity, and changes in the severity of the cases that provider treats) would owe a rebate of the excess amount to its customers—both private and public. If the rebate were not provided, that excess income would face a 100 percent tax. The Federal government could do this under the Commerce clause, or, to enable providers and patients to opt out, could require participation by those accepting payment from Medicare, Medicaid, and payers claiming tax-deductible medical expenses.
How would the plan work? Complicated? Yes, but soon very doable with today’s health information technology systems and the coding systems developed by Medicare and others. It would take several years to set the system up, but it would work like this. Let’s say a hospital in a base year of 2013 had $100 million worth of billings. If consumer inflation were 4 percent and if the system allowed another 1 percent (just because we do highly value health care and some extra growth is a reasonable choice), then in 2014, the hospital could bill $105 million. (Let’s assume that an expensive new technology is available that costs an extra $1 million, but let’s also assume that increase is coincidentally offset by a national increase in productivity of 1 percent that saves about $1 million.)
If the hospital bills its customers $110 million in 2014, yet those customers are no sicker or more complicated to treat than in 2013 (as proven by the audited billing codes or adjusted for coding creep), the hospital will owe its customers $5 million in rebates. If Medicare paid 40 percent of the bills ($44 million), it would receive back 40 percent of the $5 million excessive inflation ($2 million). If a large employer’s health plan paid 20 percent of the provider’s bills, it would get $1 million back, and so forth.
If a provider did not want to participate, they could insist on only after-tax cash customers, and individuals would be free to use such doctors and hospitals.
Changing The Debate
Instead of focusing on Medicare/Medicaid cuts, Congress should be debating ideas of how to moderate all health care spending while minimizing interference in the practice of medicine. The plan I’ve described is just one option, and of course it would have to be adjusted to deal with many complexities. For example:
- How could the plan be made fair to new doctors and facilities with one-time extra start-up costs and no history of billings?
- How could the plan use quarterly payments or rolling averages to avoid many providers shutting down in December?
- How could society encourage further innovation, perhaps by offering more inflation for drugs certified as breakthroughs by the Food and Drug Administration?
- What cosmetic-type services could or should be exempt?
- What MedPAC-like advice and constitutional governance would be best?
Of course, if over the next decade reforms such as electronic medical records, comparative effectiveness research, and new bundling of the way we pay for services sufficiently ‘bends’ the spending curve downward, this system could be suspended. But it is doubtful those changes will do enough, and it is time to act on a comprehensive solution.
Incidentally, slowing all health care inflation would not only save enormous amounts in Medicare and Medicaid; over time it should achieve huge extra CBO/Joint Tax scorable savings, because the private sector and individuals will claim less in tax-deductible expenses for health care.
Budget reform that gets a handle on all health care inflation will solve most—or at least the toughest–of the ‘entitlement and future debt problems facing the nation. The entitlement problem is overwhelmingly a Medicare problem, driven not so much by more seniors or an aging population as by constantly soaring per capita costs of care. If we try to solve the entitlement problem just by cutting Medicare and Medicaid, we will destroy those programs. We need a total solution, because soaring health care costs are distorting the economy and our future as a successful nation.
Now is the time for this debate.
By: William Vaughan, Health Affairs Blog, Originally published March 3, 2011
Mr. Obama’s Health Care Challenge-The Ball Is In Your Court GOP
President Obama had a splendid idea this week. He challenged governors who oppose his health care reforms, most of whom are Republicans, to come up with a better alternative. He has agreed to move up the date at which states can offer their own solutions and thus opt out of requirements that they oppose, like the mandate that everyone buy health insurance and that most employers provide it.
Let as many states as possible test innovative approaches to determine which works best.
The president told the nation’s governors on Monday that he supported a bipartisan bill — sponsored by Senators Ron Wyden, Democrat of Oregon, Scott Brown, Republican of Massachusetts, and Mary Landrieu, Democrat of Louisiana — that would allow states to fashion solutions right from the start of full-scale reform in 2014, rather than waiting until 2017, as the law requires.
The catch is that a state’s plan must cover as many people as the federal law does, provide insurance that is as comprehensive and affordable, and not increase the deficit. That won’t be easy for the governors to accomplish, and House Republicans seem unlikely to pass the bill to let them try. They would much rather repeal the reform law — or have it declared unconstitutional by the Supreme Court — than join Mr. Obama in improving it.
The decision to set the date at 2017 was based on a desire to get the reform elements up and coverage greatly expanded before allowing states to start changing the law. There also were concerns that the early start would be more costly. That’s because the states would be given money for alternatives equal to the cost of insuring their citizens under health care reform. Without three years of experience to get firm figures, those block grants would probably be set too high.
Neither rationale still seems compelling. It would be wasteful to require states to set up exchanges and other elements of the reform only to abandon them for an alternative system three years later. The pending bill would wisely allow states to submit proposals in the near future and, if approved, put them into effect in 2014.
Alternative approaches might include replacing the mandate to buy insurance with a system to automatically enroll people in health plans, reformulating tax credits for small businesses and low-income individuals to encourage near-universal coverage, adopting such liberal approaches as a single-payer plan or a public option, and even moving all or part of the enrollees in Medicaid into new health insurance exchanges. These would all have to be done without driving up the federal deficit or reducing benefits, affordability and coverage.
Reaction among Republican governors has been mixed. The vast majority are focused on their immediate need to reduce Medicaid spending to help close their budget gaps, not on fashioning alternatives for 2014. For the near-term budget problems, the administration is already advising states on ways to reduce Medicaid costs and the president asked the governors to form a bipartisan group to work on further cost-reduction.
The president’s new olive branch is not apt to change the legal arguments over whether the mandate in the reform law is constitutional. But it can’t hurt to bring forcefully to everyone’s attention that there are alternatives to the mandate if states want to pursue them. Republicans ought to rise to the challenge.
By: The New York Times-Editorial, Published March 1, 2011
Repeal, Restrict and Repress: GOP Running Amok
Republican state lawmakers, emboldened by their swollen ranks, have a message for minorities, women, immigrants and the poor: It’s on!
In the first month of the new legislative season, they have introduced a dizzying number of measures on hot-button issues in statehouses around the country as part of what amounts to a full-throttle mission to repeal, restrict and repress.
It wasn’t supposed to happen like this.
As Reuters pointed out this week, in the midterms, “Republicans gained nearly 700 state legislative seats and now have their largest numbers since the Great Depression, according to the National Conference of State Legislatures.”
Judging by the lead-up to those elections, one could have easily concluded that the first order of business on Republicans’ agendas would be a laserlike focus on job creation and deficit reductions to the exclusion of all else. Not the case.
As MSNBC and Telemundo reported recently, at least 15 state legislatures are considering Arizona-style immigration legislation. If passed, four of the five states with the largest Hispanic populations — California, Texas, Florida and Arizona — would also be the most inhospitable to them.
As Fox News Latino recently reported, state legislatures are poised to break the record on the number of immigration measures and resolutions introduced this year, having already introduced 600 by the end of last month. For comparison, 1,400 were introduced in total last year, according to a report issued last month by the state legislatures’ group. A record number of those laws were enacted.
And, according to the State Legislators for Legal Immigration, which was founded by State Representative Daryl Metcalfe, a Republican of Pennsylvania, lawmakers from 40 state legislatures have joined the group that last month unveiled “model legislation to correct the monumental misapplication of the 14th Amendment of the U.S. Constitution.”
On another note, Republicans in Kentucky, Missouri, Nebraska and Oregon are pushing legislation that would require drug testing of welfare recipients.
This despite the fact that, as the American Civil Liberties Union rightly pointed out, the policy is “scientifically, fiscally, and constitutionally unsound.” Other states have considered it but deemed it not feasible or impractical. In Michigan, the only state to implement it, only a tenth of those tested had positive results for drugs and only 3 percent had positive results for hard drugs, which the A.C.L.U. points out is “in line with the drug use rates of the general population.”
Most importantly, the Michigan law was struck down as unconstitutional, with the judge ruling that the rationale for testing people on welfare “could be used for testing the parents of all children who received Medicaid, State Emergency Relief, educational grants or loans, public education or any other benefit from that state.”
Despite all this, these states are pushing ahead because the made-for-the-movies image of a crack-addicted welfare queen squandering government money on her habit is the beef carpaccio of red meat for spending-weary, hungry conservatives.
On the gay rights front, Republicans in Iowa, Indiana, West Virginia and Wyoming (where Matthew Shepard was tortured to death) are pushing constitutional amendments to ban same-sex marriage.
Republican Rick Snuffer, a freshman delegate from Raleigh, W.Va., turned logic on its head when arguing for that state’s amendment. He chided Democrats’ pro-choice position, and reasoned that, “They don’t want you to choose your definition of marriage, so they’re not really pro-choice. If they’re pro-choice, let the people choose their definition of marriage.” So let me get this straight. To be pro-choice, one has to submit to the tyranny of the majority, which may seek to restrict the rights and choices of others?
This is exactly the kind of thinking that the shapers of the Constitution worried about. A quick read of the Federalist Papers would help Mr. Snuffer understand just how concerned they were about the danger posed by majority rule to personal freedom.
Republicans in New Hampshire have filed bills to overturn that state’s same-sex marriage law, even though, according to a recent WMUR Granite State Poll, the state’s residents want to leave the law in place by a majority of more than 2 to 1, and when asked which were the most important issues the State Legislature should address, “almost no one mentioned dealing with hot-button social issues such as gay marriage or abortion.” I guess that “let the people choose” argument only works when the people agree with the Republican position.
A Republican state representative in Utah has even gone so far as to introduce a bill that would bar same-sex couples from drafting wills.
According to The News and Observer in North Carolina, Republicans are considering severely narrowing or repealing the state’s recently enacted Racial Justice Act, which allows death-row inmates to use statistics to appeal their cases on the basis of racial discrimination.
Two studies of the death penalty in the state have found that someone who kills a white person is about three times as likely to be sentenced to death as someone who kills a minority.
And in Wisconsin, Republicans are pushing a bill that would repeal a 2009 law that requires police to record the race of people they pull over at traffic stops so the data could be used to study racial-profiling.
Furthermore, abortion rights advocates are now bracing for the worst. NARAL Pro Choice America is now tracking 133 proposed bills thus far this legislative season, and that’s just the beginning. Donna Crane, the policy director of the group, said earlier this month that thanks to the gains by conservatives in the Nov. 2 election, “2011 will be a banner year for anti-choice legislation in the states.”
Richard Gephardt once said, “Elections have consequences.” He was right, and the consequences of the last election could well be a loss of liberty, choice, access and avenues of recourse for many. Brace yourselves. It’s on!
By: Charles M. Blow, Op-Ed Columnist, The New York Times-February 11, 2011
Do Republicans Really Oppose Making Health Care Insurance Cheaper?
The health-care debate has a cyclical nature, and I don’t want to keep writing the same posts over and over again. So rather than write a whole new piece on the GOP’s rediscovery of the Congressional Budget Office’s estimate that the health-care law will reduce the labor supply (which they recast as “destroying jobs”), I’ll just link to the long post I did on the subject in January.
In case you don’t want to click over, though, the short version is this: If you make health-care insurance cheaper and make it harder for insurance companies to deny people coverage, then a certain number of people who would like to leave the labor force but can’t afford or access health-care insurance without their job will stop working.
To understand why, imagine a 62-year-old woman who works for IBM and beat breast cancer 10 years ago. She wants to retire. She has the money to retire. But no one will sell her health care under the status quo. Under the health-reform law, she can buy health care in an exchange because insurers can’t turn her away due to her history of breast cancer. So she’ll retire. Or imagine a 50-year-old single mother who wants to home-school her developmentally disabled child but can’t quit her job because they’ll lose health care. The subsidies and the protections in the Affordable Care Act will give her the option to stop working for awhile, while under the old system she’d need to stick with her job to keep her family’s health-care coverage. That’s how health-care reform can reduce the labor supply. If either case counts as a destroyed job, then so does my winning the lottery and moving to Scotland in search of the perfect glass of whiskey.
Moreover, this would happen for any health-care reform that reduced costs and improved access. So when Republicans say that they want a better health-care reform bill that does even more to reduce costs, they’re calling for legislation that, according to them, would “destroy” even more jobs than the Affordable Care Act. If they’re against all legislation that might destroy jobs in this way, then they’re against making health care cheaper. In fact, by that logic, we could just jack the price of health-care insurance up and make it easier for insurers to turn individuals away. Then even more people would have to stick with their employers. Job creation!
By: Ezra Klein-The Washington Post, February 11, 2011
Ineffective and Unfair: Conservatives Target Preventive Health Care for the Ax
It seems we’ve entered the season of shortsighted thinking. With 50.7 million uninsured Americans, Republicans are on a rampage to repeal the Affordable Care Act. Adding insult to injury, the most recent House Republican plan to cut the federal budget deficit this fiscal year took a scalpel to $10 billion in federal grants that provide health care to indigent women and children, slashing $2 billion in federal funding that is bound to have very expensive consequences.
Funding for community health centers will be cut in half by the Republican cuts. Sen. Orrin Hatch (R-UT), who was a co-sponsor of the legislation responding to President George W. Bush’s call to expand funding for these centers in 2008, says that “since 2001, additional funding has allowed health centers in more than 750 communities nationwide to provide care to about four million new patients. These centers provide affordable and quality care to at-risk Americans who otherwise might have to do without.”
He’s right on the mark. No health care costs will be avoided by cutting this $1 billion out of the budget because the absence of care doesn’t stop you from getting sick. It simply means you get sicker and you turn up at the emergency room or a hospital when your illness has progressed to the point that your care needs are exorbitantly expensive.
On top of this cut to care, which more often than not is the safety-net care for women and children, the proposals would also cut the maternal and child health block grant by 30 percent. This block grant pays for child immunizations and prenatal care for tens of thousands of women and children. It’s obvious that without access to immunizations more will have to be spent to care for kids sick with easily preventable illnesses.
And reducing access to prenatal care is both life-threatening and costly. A preemie baby’s health care costs are 10 times higher than a full-term, healthy-weight child, according to the March of Dimes. The organization estimates that the full lifetime health care costs for these fragile children hit the $17 billion mark. It’s simply penny wise and pound foolish to cut $199 million out of a program that has a proven track record of delivering health to babies and driving down America’s health care costs.
Among the programs slashed is one of the most efficient programs to improve child nutrition: the Women, Infants and Children program run by the Department of Agriculture. This program gives expectant mothers with very small children important tips on how to feed their children healthy meals. And it provides them with coupons to incentivize them to purchase the best foods for their children. Research shows that without this intervention the nutritional intake of these children would be higher in fats, salts, and sugars, according to a recent U.S. Food and Nutrition Services study.
Instead of spending $1,400 a month in extra medical care for an obese child, for just $41 per month this program shifts these young mothers and children into healthy eating patterns, says the Centers for Disease Control and Prevention. Clearly, the WIC approach is a useful and relatively cheap way to stem the rising tide of childhood obesity.
An unsurprising but equally shortsighted cut is the complete elimination of family-planning services. If you just listened to their sound bites, you would think these funds could be used for abortions. But we all know that’s not permitted. These federal funds make it possible for uninsured women and men to get access to critical contraceptive services, pregnancy counseling, and tests for sexually transmitted infections, cervical cancer screening, and other critical health screens. Without access to these health care services, the health care needs of these adults will not disappear.
Instead, these adults will end up with unintended pregnancies and preventable health conditions that could have been avoided had they had ready access to commonplace family-planning services and screenings. Indeed, every dollar spent on family-planning services saves taxpayers $4 in Medicaid-funded prenatal, delivery, and postpartum services alone, according to a recent study by the Guttmacher Institute.
The absurdity of these cuts to the block grant, community health care centers, and family-planning services is that none of this funding would be necessary if we had a fully functioning national health care system where every American had access to high-quality care.
Benjamin Franklin famously said, “An ounce of prevention is worth a pound of cure.” Millions more Americans will lose access to health care as a result of these cuts and as a result more will have to be spent to address the real health care consequences of these cuts. Franklin also invented bifocals so his aging colleagues could see the important documents they gathered to draft. Perhaps the Republican leadership needs to adjust their glasses so they more clearly see that $2 billion in cuts they propose to the health care services for poor women and children will cost the taxpayers billions more in unnecessary health care expenses.
By: Donna Cooper, Senior Fellow, Center for American Progress, February 10, 2011
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