Mort Zuckerman: And His Very Bad Analysis
Well, he may be a fine and upstanding fellow, but his views on health care reform are just shallow.
After having sung the praises of the Financial Times in the last day or two I suppose it was only natural that it would publish a clunker. It duly obliged in the form of an op-ed by the aforementioned Mort Zuckerman.
His point?
That Obama has it all wrong. The focus of health care reform should be exclusively on cost cutting and not at all on extension of coverage.
Zuckerman started off so strongly too. He pinpoints a critical weakness in the American system straight away: doctors and hospitals have no incentive to cut costs. On the contrary our system encourages never ending price increases. Doctors and other providers can layer in new costs whenever they feel like raising their incomes: whether it be through simple price increases or through prolonging treatments, or through the prescription of new and expensive tests. There is no negative feedback in the system, other than the greed of insurance companies, to put a brake on a permanent upward trend in costs.
As he illustrates this upward trend will only get worse as we discover new and even more expensive technologies. The trajectory of costs is not only upward it is accelerating. Disaster looms.
Up until this point Zuckerman is making sense. Medical providers are making too much money and have no incentive to reduce costs. In essence they are gaming the system to their own advantage just like those awful bankers who gamble and then ask for bailouts. In economics we call this ‘rent seeking’. The solution is to get the incentive structure re-aligned so that costs are controlled and price reductions are passed back to the consumer. This will mean that any income growth doctors achieve will have to come from improvements in efficiency and service quality rather than through simple increases in bulk. It’s called competition – a fine all-American concept, and not at all socialist!
Since I have talked about this issue here before I totally agree with Zuckerman on this issue.
Unfortunately he then vectors into a transparently ideological tour through right wing bete-noirs.
His attack is focused on extending care to the uninsured. He quotes the now discredited report by the Congressional Budget Office that suggested that the proposed Obama legislation would raise costs substantially but not extend coverage much at all. The implication being that we are being asked to pay for a very ineffective plan. That report was tossed out because it didn’t include any of the parts of the plan related to cost control or revenue increases because they had not yet been determined when the report was written. This meant that the CBO report was a very early and tentative draft at best. It was not at all definitive. Zuckerman follows the party line by ignoring this little detail. He thus undercuts his previous argument.
He then goes on a populist looking tirade against the objectives of the Obama plan: it’s all wrong. The objective should be to cut costs before extending coverage. That way no one will go bankrupt as a result of being sick, which is an all too common problem nowadays – inability to cover health care bills is the most common reason for bankruptcy in America, which is ridiculous and is a source of shame to us all. This venture into populism sounds very well until we think through what Zuckerman is really suggesting.
He says that costs are the real issue. No doubt about that, although coverage ranks right up there too. He attacks the medical profession, rightly for being entrepreneurial rather than medical: again a nice populist ring to it. He quotes surveys that show that cost is not associated with healthier outcomes: again very good stuff and very true.
But then he just stops.
He says that’s it.
That’s all we need: bash the doctors about, limit what they can do so they don’t game the system and that’ll be it. Mission accomplished [has any phrase ever been so tarnished as that one?].
The problem of simple cost cutting is never made clear: once we have put a collar on our doctors so they actually have to act like the business people they think they are, what incentive remains to extend coverage? None.
That’s great for the wealthy and those who are lucky enough to be employed and thus get their costs covered as an employer benefit, but what about the poor or the unemployed?
Zuckerman cares not a jot for them.
Nor does he see that this ever growing group is a great cost burden on the rest of us: we have to provide care to them via emergency rooms, which are very expensive. If Zuckerman were truly committed to cost control he would want to extend care so that those currently without coverage could avail themselves of cheaper services and thus reduce that burden on the rest of us.
So all that early bluster turns out to be simple smoke screen to mask the underlying argument: a more egalitarian system is wrong in Zuckerman’s mind. What we need is cost relief for the wealthy and the employed. To heck with the rest. They don’t count. After all they probably deserve to be unemployed and even might have chosen not to get insurance.
A more plain description of the standard right wing ideology could not be made.
And under the clever guise of an attack on costs.
Nice.
And very bad analysis.
Addendum:
For those of you who don’t know what I am referring to when I talk about studies regarding costs and outcomes: recent analysis of different parts of the US have shown clearly that the amount doctors charge for services has no bearing on the health care outcomes. For instance: people in parts of Texas pay way more for health care than is parts of Minnesota and get worse results. Likewise for Florida.
What these analyses show is that when doctors try to be ‘entrepreneurial’ they seem simply to drive up costs without providing any better results. Nor do they engage in open competition to drive down costs or provide better service. Since consumers of health care services are at a terrible disadvantage when they purchase those services: they have no medical background on which to base a critical discovery of the best provider, it is easy for doctors to game the system. Their competence has to be trusted. Unfortunately this leaves litigation after the fact as the only response for a consumer who received poor service. And litigation can be abused – lawyers want to game the system too. If doctors are serious about wanting to curb litigation costs they have to accept quality control in some other way.
But that’s for another post.
