25.5.17

STILL SEEKING THOSE MISSING MARKETS.

Ronald W. Dworkin, M.D. prays there will be no more shenanigans in crafting a federal health insurance bill.  It's a long article that will reward careful study (and your own introspection.)  The author gets off to a good start.
When it comes to working with one person or a system composed of people, whether it is a small system like the doctor-patient relationship or a large system like health care, a doctor knows that theories must give way to practicalities, an acceptance of imperfections and impurities, and the natural give-and-take between people. Today, serious health care reform demands this sensible outlook as much as the doctor-patient relationship does. It demands skepticism, not ideology.
Perhaps the place to introduce skepticism is with the continued focus on insurance and liability and containing costs.
So much time and energy spent on new theories of health care delivery, so many papers published on the vital role of quality indicators and preventive medicine, so many conferences held on accountable care organizations, the Cleveland Clinic model, health savings accounts, and other delivery methods, and yet the [shares of health care expenditures among payment sources] have barely moved! Both progressive and conservative theories designed to revolutionize health care have proved ineffectual. All that has happened over the past four decades is that [total spending] has steadily grown bigger, in part from population growth, but also from the introduction of more services, drugs, and technologies, and the increase in prices—the same old story.

The most relevant change introduced by the ACA, at least for the average person, lies below the level of ideology: The ACA simply shifted the financial burden of health care from one group of working people to another. People who suffered in the past—for example, those with incomes just above the old Medicaid eligibility level—can now go on Medicaid. Some people working in small businesses are now eligible for government subsidies. Yet other working people have actually been hurt by the ACA. Young low-income families who in the past refused health insurance must now buy it, even though it comes with a $6,000 deductible, making it useless for most such people. But it’s either that or pay a fine.
It's either take out a second mortgage on the house to buy that premium, and still face the deductible, or take the tax penalty, which is smaller.  But nobody wants to face the messy reality that public provision of medical services in the absence of price discovery is going to involve tapping into a lot of tax money.  But the grand fiction goes on and on and on.
Moreover, people with slightly above-average incomes in the individual insurance market must now pay more to subsidize the more favorable position of those just below them. Many working people saw their hours cut, or their labor outsourced to contractors, so that employers would not have to pay for their health care. Some low-income working families became eligible for enormous subsidies on the ACA exchanges while similarly positioned families working in a different environment (for example, in fast food restaurants) were eligible for much smaller subsidies that were manifestly insufficient to cover their insurance costs. So it’s no wonder that people in this category positively hate the ACA.

Curiously (or not), the people who did well under the ACA are the people who always do well. These include the rich, because the rich can take any hit. The one hit the rich took, a new tax on dividends, hardly elicited a yawn from them. People working full-time for large businesses also continue to do well. Their Cadillac plans remain tax-deductible, with the implementation of a tax on part of their premiums continually postponed. In addition, large businesses retain their advantage in pooling risk. And the very poor continue to do well—they have Medicaid. The overall state of affairs today is thus not appreciably different from the 1980s or 1990s.
The overall state of affairs today is experienced rent-seekers continue to extract rents. Doesn't matter whether it's health insurance or weapons that the generals don't want, but defense plant workers and owners do.

But with the government already involved heavily in medical insurance, why not just invoke the Conrail Option and be done with it?
Since government today is already responsible for more than half the health care spending in the United States, and private health insurance only one-third, even economic conservatives must now ask themselves: Why fuss over that last third? Why not simply inject government into it and be done? Is it because private health insurance is a symbol of free-market capitalism? Why fuss over a symbol? Besides, for many low- and middle-income people, it’s a very expensive symbol.

The sheer existence of the private health insurance market allows for the practice known as “cost-shifting,” whereby people with private insurance pay more for their services to compensate for the low rate of reimbursement from Medicare and Medicaid. This hurts low- and middle-income people during their working years. Even more irksome, the co-existence of public and private insurance lets policymakers play games with low- and middle-income workers, with scattershot tax credits and subsidies hurting some workers to benefit others, depending on where they work and what businesses they work for, while the very rich and the very poor stand happily on the sidelines. Although the ACA exemplifies this, Congressman Paul Ryan’s recent plan did some of the same. Middle-income workers would have suffered less financial pain than they do now under the ACA, but the plan’s refundable tax credits would have been insufficient to cover the insurance costs of low-income workers earning too much to qualify for Medicaid. Either way, some working people always end up being sacrificed for the benefit of others. Such games have gone on now for almost four decades.

We should insist on no more games. A main benefit of a national health insurance system is that it would rely on direct progressive taxation for funding. A person making $30,000 a year pays less toward his or her health insurance than a person making $50,000 a year, independent of where he or she works, how many hours he or she works, or how generous his or her employer is. Such a system is easy to understand, transparent, and fair. The United States needs to move away from its current work-based insurance premium system, with its Byzantine maze of credits and subsidies (whether ACA subsidies or free-market-oriented “premium support”), and simply tax people’s incomes or investment streams directly to pay for their insurance, with the rich paying more than the poor.
"Some working people always end up being sacrificed for the benefit of others."  Yes.  The state is always and everywhere that grand fiction by which everyone attempts to live at the expense of everyone else.  Perhaps the way forward is to get the public funds, and the tax code, less involved, not more.  Back in October, I didn't yet know who got to manage Washington's policy failure.  Perhaps the best thing for the government to do is to go away.  Does Dr Dworkin really expect universal Medicare to lead to something other than the "low rate of reimbursement from Medicare and Medicaid?"  The sarlacc will continue to slowly digest you.

Don't say I didn't warn you.   "Adverse selection and information asymmetries are undoubtedly present in markets for medical care, and yet the insurers and advisory boards strike me as imperfect, and possibly worse, replacements for price discovery." Don't say I didn't see this coming.  "Does anybody seriously expect that Wal-Mart-like methods to bend down the cost curves are going to work any better because it's Washington optimizing against the marginal factor cost schedule?"  Not then.  Not now.  "Medicare and Medicaid have attempted to restrict provider payments while expanding their enrollments, and as a result providers have greatly reduced their access to new patients from both systems. The Veterans Administration has wait times for its clinics that stretch out so long as to have resulted in patient deaths, along with rampant corruption to hide failures and protect the bureaucrats at the expense of the patients."

I concur with Dr Dworkin in part, and dissent in part, with what follows.
If conservatives have won any argument over the past century it is that the private sector is usually more efficient and consumer-friendly than government is. I believe the private health insurance system should remain for these reasons. Instead of receiving their monies from a mixture of employers, employees, individuals, non-profits, and indirect government subsidies, private insurance companies can get them directly from the government, through taxes.

Precedent exists for this. The full-time Federal workforce hasn’t actually increased all that much over the past two decades. What has increased is the enormous number of subcontractors who perform government tasks. Private health insurance companies will simply become one more (albeit giant) contractor for the Federal government.

Nor does government’s role as check-cutter for the insurance companies necessarily risk inefficiency. Again, a century’s worth of experience has shown that government programs involving nothing more than cutting checks to stable populations (for example, Social Security sending money to seniors) work reasonably well. It is when government involves itself in the delivery of services, or in social engineering, that trouble arises. The insurance companies represent a kind of stable population.
I agree that breaking the employment-health insurance bundle is a good thing, particularly after we've seen the so-called Affordable Care Act give employers incentives to break the bundle with part-time jobs.  But to turn insurance companies into subcontractors?  Think about one more (albeit giant) nest of rent-seekers.  And cutting checks?  Yes, The "Social" "Security" administrators are good at cutting checks.  Their Congressional paymasters are not so good at keeping the program funded.  And sure, the Medicare bureaucracy appears to make do with fewer administrators than the private insurance sector, but by Dr Dworkin's own admission, the private insurance sector have to justify the cost-shifting that keeps all the practitioners from telling Medicare and Medicaid to stuff it.  Think about your own experience with health practitioners in the States.  Provide your insurance information, then see the doctor.  Some time later, a statement arrives from the insurer.  Top line: what clinic billed insurer.

Next line: Discount the insurer negotiated with the clinic.  There may be a formula for this, although the formula might be based on the past month's Medicare and Medicaid traffic, walk-in traffic from uninsured people, and the earned run average of the Cub pitching staff.  Nobody knows what the list price is, anyway.

Below that:  how much of it the insurer paid.  Again, there may be a formula for this, but there might be some legerdemain at work, and you need a degree in forensic accounting to work through the various line items to sort out what entries go in deductible and what entries involve out-of-network.  Railroad car-hire rules are the epitome of clarity compared to all this.

That gets to what you owe.  And nowhere in any of this have you been given the opportunity to comparison-shop in the first place.

Until there are more trade-tested betterments, there will be shenanigans.
Health care is accessed via insurance, which is all about money. The problem with this approach shows up when policymakers must decide which economic issue to tackle first: the insurance problem or the health care cost problem? The choice on both sides of the political spectrum has typically been to solve the insurance problem first (meaning, decrease the number of uninsured) and then to control costs afterward. This is not surprising, since expanding insurance makes voters happy, while controlling costs through restrictions makes voters unhappy. We saw this during the 1990s, when managed care brought down the rate of increase in health care costs, but only temporarily, as patients (meaning voters) started to complain.

It is easy to understand politically why the Obama Administration approached the problem this way. But it is still the wrong approach. Health care costs should be brought under control first, or at least simultaneously, making the method by which we insure people—national health insurance versus private insurance—less important, since without cost control rationing is inevitable either way. And while controlling costs has an obvious economic component, it also has an equally important non-economic component. A serious personnel problem exists in medicine, begging for resolution. Once resolved, the potential cost savings are enormous. Then again, it must be resolved correctly, because otherwise patient lives will be endangered.
Sorry, controlling costs by fiat is not the same thing as controlling costs through trade-tested betterments.  I'm going to take two sentences out of a long and confusing passage from Dr Dworkin's essay, and propose a different direction.  "Disarray always arises when a system loses its core. No one knows who is in control, and so different people move in to take it."  But nobody knows how to make a pencil, or supply Paris with food, and yet I am able to keep pencils in the house by picking up pencils others have left on the floor, and Paris is known for its restaurants.  Perhaps the error is in hoping for Someone In Authority to manage the system.
Where would you be, inhabitants of Paris, if some cabinet minister decided to substitute for that power contrivances of his own invention, however superior we might suppose them to be; if he proposed to subject this prodigious mechanism to his supreme direction, to take control of all of it into his own hands, to determine by whom, where, how, and under what conditions everything should be produced, transported, exchanged, and consumed? Although there may be much suffering within your walls, although misery, despair, and perhaps starvation, cause more tears to flow than your warm-hearted charity can wipe away, it is probable, I dare say it is certain, that the arbitrary intervention of the government would infinitely multiply this suffering and spread among all of you the ills that now affect only a small number of your fellow-citizens.
And there, Dr Dworkin, is where you find yourself, where there has been plenty of arbitrary intervention by the government in the delivery of health care.  Is it that crazy to suggest that the Authority Figures back off and let emergence find a way?

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