health care

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Health Care Price Bombshell

Well, now we know a little more. Or, perhaps, we just can confirm something we thought all along. Hospitals are very dangerous places for your wallet. Worse, the price you will be charged for a service appears to be almost randomly generated.

This is the message within the data released by the government today.

Medicare and Medicaid officials have access to an incredibly deep and wide database of prices charged for services from all across the country. They have now decided to make that list public. It makes for shocking reading.

The database made public contains prices for the one hundred most common services provided by hospitals and consequently billed to the government. The data includes billings from 3,337 hospitals in over 300 metropolitan areas.

It isn’t just the staggering cost of services, but is also the enormous variation of those costs. Within the thirty mile radius of the New York City metropolitan area hospitals bill anywhere between $99,690 and $7,044 for precisely the same thing – in this case treatment for a common respiratory ailment. That is an astonishing variation and cannot be defended on the basis of any kind of rational pricing scheme. And such ridiculous variation is common right across the country.

Something is very rotten in the way hospitals develop their prices. It certainly doesn’t seem to have much to do with the cost of a service.

There are a couple of thing that leap to mind immediately:

First, anyone who persists in imagining that our health care system does not need reform has to be willing to defend these hospital prices. They cannot base their defense on the supposed magic of the marketplace, because this enormous lumpiness within the pricing for identical services is exactly one of the telltale signs that the market isn’t working.

Markets depend on competition and transparency so that customers can choose the best option. Hospitals do not compete effectively – who truly chooses which hospital on the basis of comparative prices under normal circumstance let alone in an emergency? And, more to the point, how many customers have sufficient information to be able to decide whether the price they are being charged is reasonable? Hospital pricing is, apparently, disconnected from the cost of the service being provided and opaquely developed. So we have neither transparency nor effective competition.

This means that the market not only does not work, but that it cannot work. There is, and cannot be, any such thing as a market for health care in any credible sense of the word.

Hence the need for a new and different system altogether.

Second, today’s release reveals just how absurd hospitals are with respect to their customers. The only people who actually pay these random appearing prices are those most likely least able to pay them. Hospitals are knowingly driving people into bankruptcy because of their irrational pricing schemes. The uninsured constitute the largest percentage of what hospitals call “self-payers”. These are people who pay the bill they receive rather than relying on an insurance company. The prices hospitals charge appear to be more ‘opening bids’ than actual prices. Bids, that is, in an expected round of negotiations with insurance providers. So the uninsured are collateral damage in a war waged behind the scenes between sets of bureaucrats, neither of whom cares much about the actual cost of the services they are haggling over. Rather they are both trying to maximize the cash flows to their respective shareholders, with the actual cost base of healthcare being merely an elastic, and evidently minor, consideration along the way.

Real live markets, especially the ones right wing economists and politicians like to laud, don’t work that way at all.

It will be interesting to watch as hospitals scurry to defend themselves and – potentially – react to today’s news. This data delivers a blow to free market advocates. Let’s see how the ‘market’ works its magic now that there’s more information available. Prices should converge. Some might rise and others fall. My prediction is that hospitals will shuffle things to try to keep the same amount of cash flowing in. In which case change will come slowly, if at all.

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Health Care – Quick Note

I won’t be adding much for a day or two, but I want to point you all to a damning report. Damning, that is, of the state of American’s health.

When compared with a large group of other advanced industrialized nations the US performs really badly. Appallingly might be a more apt term. It ranks last in:

  • infant mortality and low birth weight
  • adolescent pregnancy and sexually transmitted infections
  • HIV and AIDS
  • drug-related deaths
  • obesity and diabetes
  • heart disease
  • chronic lung disease
  • disability

This despite spending twice as much as any other country on health care. Clearly we aren’t getting a return on our money. In fact we are pouring down the drain. The facts don’t lie: the American health care system broke down long ago. It just doesn’t deliver the goods. All it does is to enrich the health care industry. It drains our economy. And it doesn’t seem to be able to deliver any credible service.

The state of our health is not all due to our rotten health care system however. Some of it is simply our addiction to violence. We kill each other at an alarming rate. With guns a lot of the time. For the record: 695 people, including plenty of children, have been killed by guns in the US just in the four weeks since the school shooting in Connecticut. Then there’s the death toll from bad driving. Cars and guns. It’s the American way. To die.

The damage is particularly acute for young people. The US only does well comparatively with its very old. Once a person gets to their late 70’s the life expectancy here rockets to the top. Medicare actually works.

Which is why, naturally, the Republicans want to cut back on it. Our government provided health care system is running rings around our very expensive and technologically shiny private system.

Who would ever have thought that?

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Down The Fiscal Rabbit Hole

A few quick things on the current hyperventilation regarding the so-called ‘fiscal cliff’.

It isn’t a cliff.

Not at all. It is a roll out of a series of things that have cumulative effect, but which can be undone over a sensible timeframe. There is no sudden drop-dead moment when the lights go out. Yes, the Bush tax increases come into effect. And note my language: this is a tax increase imposed on us by the Republicans under George Bush. It is the offset to his disastrous tax cut. So it is an increase. Moving on: that increase hits everyone on January 1st. But since its impact will be on the amount deducted from incomes, its full impact will accumulate through the year. Households will react to the loss of purchasing power at different times throughout 2013, so there is no single moment when the impact smashes into GDP. There is no cliff, but there is a steady slide.

All that cash withdrawn from paychecks will suck demand from the economy. That means that sometime in 2013 we will most likely head into recession. This is what vexes business and is why it now has found its anti-austeirty voice. I find this amusing for the simple reason that by getting into a tizzy over the loss of demand big business has declared its allegiance to Keynes. Anyone who worries about the impact of a rise in taxes on GDP, and concludes that such an impact will be the loss of demand and hence will lead to contraction, is a Keynesian. Pure and simple. Notice also that this position implies that big business is not concerned that the deficit is too high. Postponing tax increases means the deficit will go up, not down. Since that’s what big business is now calling for, they are actually arguing that the deficit might be too small, not too large. Nice huh?

No it isn’t possible to raise revenues and lower tax rates at the same time. At least not if narrowing the deficit is your goal. Tax rates are already too low. Especially on high income earners. Rates need to go up. We have defunded government, we have not expanded it. We can afford what we spend once we get rid of that defunding effort. Our social programs have not suddenly become too much of a burden, we have deliberately stopped paying for them.

This was, of course, a long term strategy driven by the right and not opposed by a compliant left. Both parties sat at the table when the game was played. One wanted to eliminate entitlements by defunding them and then crying about our inability to pay for them; the other was too timid to fight back. Indeed, under Clinton, the so-called left actually added to the defunding momentum.

Oh and all this talk about raising revenues through closing loopholes is daft. Each loophole is well defended by an army of lobbyists – usually the people who bought Congress to put the loophole there in the first place – so it isn’t credible to imagine we will close many, if any. Besides the biggest loopholes are those that fund the middle class: the antiquated subsidy of home owners via the tax credit in mortgage interest, and the deduction they get for state, local, and property taxes. These aren’t listed as outlays in the budget because no one wants to embarrass the middle class by showing how much welfare gets pumped into it each year. So they are buried in the budget reports and called ‘tax expenditures’. Any drive to raise revenues without raising rates will have to do away with such things. Thus middle class taxes will go up significantly. The ruse of keeping tax rates down is simply so that the Republicans can save face with their rabid base. Taxes are going up one way or another.

One last thing: the fear mongering talk about ‘cliffs’ is designed to make it difficult to defend entitlements. It also means that debate will be truncated. In that fervid atmosphere mistakes will be made, which is why we all ought to slow things down and avoid hyperbole. In the midst of such an artificial crisis things like Social Security become sitting ducks. Already we are hearing talk about raising the retirement age again. This is because life expectancy has risen way beyond what it was when the program was introduced. Alan Simpson of Simpson-Bowles notoriety is a major advocate of such a move. He has been an outspoken opponent of entitlement programs since his election it Utah. Of course he doesn’t have to worry. His twenty years in Congress earned him lifetime health benefits and a full pension. He just thinks other sought to work longer and harder to get what he has. Sounds fair, right?

Let’s think twice though. This is because much of the increase in life expectancy is an illusion.

Yes we live longer on average. But much of the increase in overall life expectancy comes as a result of better care for infants, making life expectancy at birth much higher than it used to be. But it is that portion of life beyond retirement that we ought focus on, and which represents the actuarial problem, so gains made for infants are irrelevant. When we focus this way, we find that the gain is much less, indeed for low wage earners the gain is minimal. So the increase in retirement age from 65 to 67 has already solved a considerable part of the problem – such as it is – and little more is needed. The actuaries calculating the retirement age saw this coming as far back as 1946. And in the revamp of 1985 they nailed it. What they missed, though, is the inflation of incomes. The payroll tax funding the program has a cap of around $110,000. Incomes above that level are free of payroll tax. Adjusting for the underestimate of the impact of inflation on incomes by removing that upper cap or raising it significantly is all that is needed to solve the program’s minor difficulties.

Medicare is a whole different issue. There the problem is the lack of cost control and low productivity in the health care industry. Bending the trajectory of future cost increases is the primary goal, and, parenthetically, the last year or two have seen major strides in that direction – health care cost have risen more slowly, so we need not panic.

And this ought be our theme throughout: no panic. There is no cliff. The world will not end if we don’t hammer out an urgent bargain. We can afford to be sensible on this one. So don’t listen to the hyperventilating pundits. They’re the ones who called the election close. They were wrong then. They’re wrong now.

Stay calm.

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Romney and Health Care

Could he be more stupid?

Not only is Mitt Romney the architect of Obamacare via the system he invented for Massachusetts, and mightily reviled by the right wing for it, but he is also a huge fan of all things Israeli. As you all know it is essential that any candidate for president in the US abandon all objectivity and instead throw themselves fully behind Israel no matter what the consequences. And Romney has gone further than most. He has embraced the Israeli health care system, the results of which he has praised to the rafters.

And indeed the Israeli system is a paragon of low cost efficiency with spending limits set per person, hard negotiation over prices, and great pressure on doctors to provide value for money.

It is also a government run single payer system.

It is the very antithesis of the US system. And is the kind of evil government intrusion into private lives that the modern Republican party so despises.

In other words, in his zeal to endorse all things Israeli as he chases the American Jewish vote, Romney has lauded the anti-christ of health care systems.

It will be fun to watch him walk this back. Has there ever been a more inept candidate? Not even Bush was this dumb.

I never thought I would say that.

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Health Care Reform

Well that was a shock.

Although, perhaps, not as much of a shock that some people are suggesting. After all during the oral arguments in court Chief Justice Roberts did gently float that tax wheeze he relied upon to support the liberal justices in upholding the law. So we had a hint this might be the result. But that hint became lost, as so much is nowadays, in the welter of extremist rhetoric subsequent to the court arguments.

What now?

Some folk on the left have already – in typical fashion – sought to find reasons for being pessimistic. One line making the rounds is that Roberts pulled a neat trick. By arguing the way he did he handed Obama a temporary victory, but he also toughened the interpretation so-called commerce clause of constitution thus making future grand government plans more difficult to pass muster. I don’t buy this. Health care reform is a major piece of legislation. It will gradually settle into becoming a centerpiece of our social fabric. In contrast, the commerce clause has been invoked in opposition to relatively minor or incidental legislation. So toughening that clause versus allowing massive legislation to stand is hardly a great trade-off, and certainly not a great strategic win.

The Affordable Care Act, to give Obamacare its proper name, is deeply flawed. It is a kluge. Its roots are in the Republican Party’s efforts to prevent the most obvious and effective way to legislate cheaper health care. A simple extension of Medicare to everyone is the best solution to our spiraling health care cost crisis, but that prospect so scared and infuriated the right that they spent years coming up with alternatives. The ACA is based on the Romney legislation in Massachusetts, and Romney’s legislation was based on one of those Republican alternatives to universal Medicare. So the ACA is, essentially, a Republican plan. This, of course, is something the Tea Party and its extreme confreres want us not to realize.

My preference is still single payer insurance. Something along the lines of universal Medicare would do just fine.

But ACA it is.

The voting public has, in poll after poll, given a very negative verdict on the ACA. I suspect this is more a function of the effectiveness of Republican criticism and the ineffectiveness of Obama’s defense of it. One of the great and continuing criticisms of Obama that I have repeated here often enough – perhaps too often – is that he seems incapable of explaining what he’s doing. His message is inevitably swamped by a subsequent title wave of vitriolic and often inconsistent propaganda. He has failed repeatedly to use his position to get his point of view across. Indeed on more than one occasion he appears to have caved into the vitriol before even attempting to promote legislation. The stimulus of 2009 is a good example of such weakness.

Nonetheless he has now won a major battle on the ACA, and will now be forced to explain himself for the next four months as the Republicans, as they are now bound to do, make health care reform a central issue of the election.

So, is the upholding of the ACA actually a benefit for the Republicans? After all, as I just mentioned, it polls very badly whenever put to the public. No. I don’t think so.

The Republicans are now faced with a significant dilemma. If, as they have already started to do, they move the ACA onto center stage for the election they run the risk of downplaying or marginalizing the economy. And the economy is a much larger immediate threat to Obama than health care reform. The public is saturated, and probably fed up with, health care debate. But it is now settled law. By putting it back on the agenda so forcibly the Republicans could appear to be fixated about the past rather than being forward looking. It would leave the Democrats to make all the positive moves with regard to the economy and would simply highlight the constant negativism that has pervaded the Republicans during the Obama administration and which is voters have grown tired of. Don’t forget that despite the apparent unpopularity of the ACA, Congress generally is even more in the voter’s bad books.

As for the ACA itself. With the central plank of Republican opposition undermined, by a conservative justice no less, it will survive. There ins no chance it will be tossed out by a Romney administration, despite all the brave promises now being made. The Democrats may lose control of the Senate this year, but they will not disappear sufficiently that they cannot block repeal. More likely is that a number of revisions will make their way into law and I would argue that the cumulative effect of such revisions will improve rather than debilitate the law. This is because, over time, voters will see more benefit from the reform and will start to vote to support it. This is the trajectory followed by Social Security and Medicare. I see the ACA going the same route.

So, while Republicans will continue to hate – perhaps that’s an understatement – the ACA, they will become increasingly powerless to get rid of it. Opposition to it will become, along with Social Security and Medicare, an iconic measure of right wing ideological rectitude, but little more.

This does not mean that the next few months and years will be any more quiet than the last few. Indeed the election will now be even more hate filled and extreme. But health care reform stands.

Which means that a whole lot of average Americans won something very important. And that maybe, just maybe, we have a chance to get our health care system back from its current low status and accomplishment.

It would be nice if our health care system were about health and not simply profit. We have a shot at that now.

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