A Closing Window (Part 2)

Since its conception, the little tag at the top of my website has read (and will continue to read):  “Documenting history as it happens.”  It has never been more true than with the broad context of health care reform and the specter of government intrusion.  So let me be clear about health care reform:  This is the moment of reckoning for our 44th President.  With Congress on August recess, he has the chance to bend the descending curve of his Presidency upward again by developing a coherent health care plan that offers solutions the American people can agree on; this is possible, contingent on whether he would be willing to abandon leftist ideology and embrace centrist reform that could save his Presidency.

That’s a big “if,” though.  He has two options here:  take the reins of this runaway stagecoach now; or wait for Congress to move, and if they pass an overly partisan bill, he could use his veto power when it hits his desk, insisting on something more moderate.  When wheeling and dealing with 16% of the American economy, and the lives of Americans, he may want to take a chance with the center, and fast.

Instead of listening to the center, though, the President (along with most of Congress and the Media) has tried to neutralize them.  When the Mayo Clinic was initially critical of Obama’s public option, the President paid a high-profile visit to the Hospital.  When the Congressional Budget Office estimated the Plan would cost more than a trillion dollars over ten years, and the CBO Director told Congress that you can’t save money on health care by simply providing insurance for everyone, the President paid him a little visit as well.  As I discussed at length in my last post, however, if neutralization doesn’t work for them, maybe marginalization will.

But they can’t marginalize historical data.  In 1966, the House Ways and Means Committee estimated Medicare would cost $12 billion a year by 1990; in 1990, however, Medicare cost $107 billion, nine times more than its estimate.  Since inflation from 1966 to 1990 was 303.4%, the cost should have been a little more than $48 billion with inflation.  Whether this is a testament to the federal government’s misreading of inflation or misreading the cost of Medicare, I don’t know, but now, we are supposed to simply believe this same government can 1) fix health care, and 2) give us an accurate costing of the proposed program.  As I’ve now cited thrice, the Lewin Group estimates 70 percent (over 100 million) of those with private insurance will accept the public option.  What’s that going to do to the cost estimates?

Americans are not as stupid as the White House thinks, nor do they accept their Soviet-based taxonomy.  Realizing the costs for the 1 trillion dollar public option will burden businesses, the Small Business and Entrepreneurship Coalition began a “Not On Our Backs” Health Care Petition.  In similar fashion, the U.S. Chamber of Commerce recently wrote the House Ways and Means Committee stating, “The Chamber strongly opposes ‘America’s Affordable Health Choices Act of 2009′ in its current form.”  Why would businesses be so wholly opposed to health care reform?

The American people see these trends and are in turn skeptical of government largesse.  When the President himself discusses his desire for a stealth, Trojan horse approach to a single-payer system (waaay back in 2003), people lash out, as America will not go for state-run health care.  Americans realize that while our current system is flawed, they are not ready to trade it in for a system with less access to care and poorer quality of service, bought with the sacrifices of a few.  State-run health care systems are historically overcrowded and underfunded; Americans want health reform that brings lower costs and greater access to care.  How can we get there from here?  Read on…

Lessons Learned?

States often provide the model for effective national governance; Ronald Reagan was successful as President because he learned what worked and what didn’t as governor of California.  The federal government would be wise to take note of California’s current tax-and-spend political culture.  Building government on the backs of businesses “crowds out” private industry, in the parlance of the Congressional Budget Office; that’s why the U.S. Chamber of Commerce opposes the bill!

With health care, there are a couple of states that have tried to provide universal coverage that can be used as examples.  Let’s look at two different programs, in Massachusetts and Tennessee, respectively.

MASS:  Susanne L. King, a Medical Doctor in Massachusetts, wrote in the Boston Globe, that “Spending for the Commonwealth Care subsidized program has doubled, from $630 million in 2007 to an estimated $1.3 billion for 2009, which is not sustainable.”  Furthermore, she says, “The Massachusetts Commonwealth Care program does not address the problem of insurance being connected to jobs.  For individuals, this means their insurance is not continuous if they change or lose jobs.  For employers, especially small businesses, health insurance is an expense they can ill afford.”

This provides two crucial points for discussion:  one about health care being tethered to employment, and a second about ways the government would budget for an unsustainable program.  I’ll cover the former later in this post, and the latter in my next post.  Dr. King points out in her article that while the program promised lower costs and increased access, it has achieved neither.  It’s no wonder, then, that a recent Rasmussen poll in Massachusetts found that only 26 percent of likely voters believe health care reform has been a success, only 21 percent believe it has made health care more affordable, and only 10 percent said health care has been getting better since their reform laws.

TENN:  According to Tennessee Representatives Blackburn and Roe, TennCare was a public option plan designed to achieve those two critical goals of lowering costs while expanding coverage.  With the emergence of a public insurance option, “private businesses dropped coverage for their employees and forced them onto state rolls,” thereby overshooting projected costs.  This real-life example supports the aforementioned forecast for a similar federal system by the Lewin Group.

What do you do when the bill comes in, and you are overcharged?  According to the Representatives, “Benefits were slashed and reimbursement rates for doctors and hospitals were reduced.  Ultimately, 170,000 people were cut from the program.  Since they weren’t being paid, fewer physicians could afford to accept TennCare patients.  So while a TennCare card guaranteed you access to care, it did not guarantee the availability of care.”  Budgetary restraints in the health care sector result in rationing, the consequences of which will be discussed in full on my next post.

I will admit that a state’s program will be significantly different than any federal system; states have to balance their budgets (somewhat), as they cannot (legally) print their own money.  Nor can they simply tax their way to budget neutrality, as California found out, and the federal government is finding out now.

Let me do something different and give credit where credit is due:  I like the White House’s idea, albeit a liberal one, of establishing an Independent Medicare Advisory Council, or IMAC, to act as a “Supreme Court” for health care in America, without the threat of an impending government takeover.  This, of course, establishes another bureaucracy, but it is an example of governance, and not business, in the health care sector.  Both the Congressional Budget Office and health care experts agree on the efficacy of the proposed program.  Although “modest” in the amount of savings it would generate, this is a first step on the path the President should pursue.

Let me suggest some other ways to reduce costs and increase access to care.

Three Proposals

So, void of any special interests, I provide three proposals to correct the course of our health care system; these do not “fix” health care, nor provide that ever-elusive free coverage (that someone else pays for), but instead, provides a little more breathing room for individuals.

1 – Eliminate the difference between employer-provided health care and individually-purchased health care. Losing a job is even more devastating when you lose your employer-provided benefits.  Simply extending COBRA coverage is not a good answer, as this quick fix is unsustainable.  If we are to learn anything from our current Great Recession, it should be this lesson.

Currently, employer provided benefits are tax-deductible to the employer and non-taxable to the employee, while individually-purchased health care is not.  This is the issue that Obama criticized Senator McCain for during the campaign, saying McCain proposed ”taxing health benefits for the first time ever … taxing health care instead of fixing it.  We can’t afford John McCain.”  Now, the Administatration is considering to do just that.

While everyone’s looking to tax those benefits to net some funds for the public option, I propose the opposite; make individually-purchased health insurance tax deductible.  This would immediately lower the cost of health insurance to the individual.  Normally, this is not available until health insurance exceeds 7.5% of your salary.

Government currently provides the incentive for employers to provide health insurance under the veiled assumption that it’s free.  Not so.  Give money to people, and let them choose their own health insurance.  This provision would also force the federal government to do what states have to do; live within their means.

2 – Provide state pools for insurance. This is, essentially, what the much-discussed Wyden-Bennett bill does.  It should be noted that this bill calls for ideological sacrifices from both sides.  According to the Congressional Budget Office, the proposal “requires individuals to purchase private health insurance and to establish state-run purchasing pools and a system of Federal premium collections and subsidies to facilitate those purchases.”  Conservatives balk at such a requirement, naturally.  The bill, however, is projected to cover 99% of Americans, and the CBO states “that the proposal would be roughly budget-neutral in 2014,” and after 2014, “the proposal would tend to become more self-financing and thereby would reduce future budget deficits or increase future surpluses.”  This, however, is something that perks conservative ears.

This bill consists of a restructuring of  the health insurance system, with the CBO noting “most health insurance premiums that are now paid privately would flow through the federal budget.”  Like I said, it calls for sacrifices, replacing a tax exclusion with a fixed income tax deduction.  The bill, however, does two significant things:  lowers costs and increases access.  It also achieves the highly popular goal of offering Americans the same health care choices members of Congress have.

Since Peter Orszag, the President’s Director of the Office of Management and Budget, was then CBO Director and author of the cited opinion, I don’t understand why the Obama Administration hasn’t adopted it as their own, especially since the revised bill is stronger, and now has 12 sponsors, 6 Republican, and 6 Democrat, making it a truly bipartisan effort.  Instead, Obama has called the plan “radical,” saying in theory, those plans work, but,  ”The problem is, we have evolved partly by accident into an employer-based system.” A “radical restructuring” would meet “significant political resistance,” Obama said, and “families who are currently relatively satisfied with their insurance but are worried about rising costs … would get real nervous about a wholesale change.”

Uhhh… Obama called something radical, and is worried about change?  Is he hitting the pipe again??  Nevertheless, twelve senators have signed on to the plan, and with some making it a make-or-break issue, I think we’ll see the Wyden-Bennett bill again, after the August recess.

3 – Drop the distinction between states for purchasing insurance. This is another plan John McCain proposed during the campaign that was subsequently ignored.  As I said in my last post, there are rougly 1300 different insurance plans to choose from nationwide; the problem is, they’re divvied up by state, and current law does not allow taking plans across state lines.  Insurance is expensive in some states ($4000 a year in New Jersey), and cheap in others ($1500 a year across the Delaware River, in Pennsylvania).

Why?  Does that make any sense?  Drop the regulation and allow people the choice of buying insurance in another state.  Representative John Shadegg from Arizona has been pushing this idea for years.  This proposal has garnered conservative support as it would lower costs while increasing options, and would be relatively easy to implement.  While we’re at it, government mandates on what insurance companies must cover should be dropped.  This nonmarket intervention has caused insurance costs to skyrocket.

Healthy Solutions

The leading method available to bend the costs associated with health care – with a singular, nonmarket intervention - is tort reform.  With all the money circulating, and health care costs rising faster than inflation, somebody must be getting rich from all of this.  Columnist Charles Krauthammer, M.D., sums up this situation best, drawing on his personal experience, so I’ll let him do it here:

This is not about politics?  Then why is it, to take but the most egregious example, that in this grand health-care debate we hear not a word about one of the worst sources of waste in American medicine:  the insane cost and arbitrary rewards of our malpractice system?

When a neurosurgeon pays $200,000 a year for malpractice insurance before he even turns on the light in his office or hires his first nurse, who do you think pays?  Patients, in higher doctor fees to cover the insurance.

And with jackpot justice that awards one claimant zillions while others get nothing — and one-third of everything goes to the lawyers — where do you think that money comes from?  The insurance companies, which then pass it on to you in higher premiums.

But the greatest waste is the hidden cost of defensive medicine:  tests and procedures that doctors order for no good reason other than to protect themselves from lawsuits.  Every doctor knows, as I did when I practiced years ago, how much unnecessary medical cost is incurred with an eye not on medicine but on the law.

Comprehensive tort reform would make all lawsuits more legitimate, and would have the secondary effect of lowering health care costs.  However, with a quick glance at the majority party, and their strong connections to the legal community, I would guess such tort reform is unlikely in the 111th Congress.

Other methods of cost controls are available to employers themselves; there are other viable methods to provide a flexible and proper health care plan for their employees, like encouraging Health Savings Accounts (the way Whole Foods does), or simply by rewarding healthy behavior (the way Safeway does, which they claim can lower America’s health care costs by 40% if broadly implemented).  The answer does not necessarily have to be for the government or the insurance companies to provide the capital.

I’m not going to harp on overall health concerns, or preventive care.  If you want to work out, go for it.  If you want to eat, drink, smoke, and die early, I don’t have much of an issue with that, as long as you don’t hurt me or mine.  The problem with this, of course, is that the costs for a few drive up health care costs for everyone.  That’s what insurance is all about, though.  The primary flaw with health insurance, however, is that it provides insurance for all health-related issues.  Costs for health insurance would be cheaper if it emulated car insurance.  Think about it; normal car insurance doesn’t cover tire rotations, new wiper blades, oil changes, or basic maintenance.

I believe, likewise, health insurance should not cover the sniffles or a backache.  When these problems get above a certain threshold, I believe insurance should kick in.  This is commonly called “catastrophic insurance.”  Such plans would lower the costs of health care for everyone associated with that insurance company, but regulations, as discussed before, dictate what insurance must cover.  Simply drop the regulation, and let the free market decide.

Faced with all these options to do something worthwhile, America now waits for realistic action from the White House.  It’s reminiscent of the crucial moment during the Iraq War (waaay back in 2006) when President Bush ordered the Surge.  He ended up being right, and although I questioned the efficacy of its execution, I thought it was the right thing to do (those of you who talked to me about it then will remember that).  I questioned Bush’s judgment, but never his motive.  Things have certainly changed with this Administration; now, I question intent.

In my next post, I’ll take a look at the darker, more sinister side of Obamacare, which is almost as scary as the freaking bats living behind the shutters on the windows of my house.

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