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Medicare’s Administrative Cost — The Last Word, I Hope

Medicare’s Administrative Cost — The Last Word, I Hope →

Here is a brief review of the literature: Robert Book discovered that reported Medicare’s administrative costs per patient (not as a percentage of the bills) were actually higher than private insurance. A Milliman study concluded that when all costs are considered (including the cost of tax collection) Medicare’s cost as a percent of total spending is 66% higher than private insurance. Ben Zycher concludes that a government run system would have higher administrative costs than a private system. And Tom Saving and I showed (based on CBO numbers) that Medicare has not been more successful that the private section in holding down costs — as Krugman, Robert Reich and others have claimed.

This entry was tagged. Healthcare Policy

To Protect Medicare, Reform It

To Protect Medicare, Reform It →

Veronique de Rugy is worried that Romney / Ryan's talk about "protecting Medicare" means that they won't really push to reform it.

The only way to ensure that Medicare is there “for my generation, and for my kids and yours,” reform it. If when Representative Ryan says “protect” and “strengthen” he means “reform Medicare,” great. Reform can take many forms, obviously. But, then we can believe Ryan when he says “ladies and gentlemen, our nation needs this debate. We want this debate. We will win this debate.”

She lays out all of the reasons why Medicare desperately needs to be reformed, if it's to survive at all. It's worth a read, especially if you're not convinced about the necessity of reforming Medicare.

Classic Krugman (The Problem with Medicare)

Classic Krugman (The Problem with Medicare) →

Yuval Levin fact checks a Paul Krugman column about Paul Ryan's speech and about Medicare reform. Yuval demonstrates (with copious links to evidence) all of the ways in which Paul Krugman is wrong about Medicare, wrong about Ryan's plan. It's the best single summary of everything wrong with Medicare that I've seen yet—and it explodes quite a few myths about Medicare's affordability, sustainability, and efficiency.

Here's a small taste.

To begin with, many of Medicare’s most significant administrative costs are just covered by other federal agencies, and so don’t appear on Medicare’s particular budget, but are still huge costs of the program. The IRS collects the taxes that fund the program; Social Security collects many of the premiums paid by beneficiaries; HHS pays for a great deal of what you would think of as basic overhead, but doesn’t put it on the Medicare program’s budget. Obviously private insurers have to pay for such things themselves. Medicare’s administration is also exempt from taxes, while insurers pay an excise tax on premiums (which is counted as overhead). And private insurers also spend a great deal of money fighting fraud, while Medicare doesn’t. That might reduce the program’s administrative costs, but it greatly increases its overall costs. Some administrative costs save money, after all: The GAO has estimated that a $1 investment in pre-payment review of claims, for instance, would save $21 in improper Medicare payments.

It's worth reading the entire thing. Especially if you think Medicare doesn't need to be changed.

Compensation under profit maximization

Compensation under profit maximization →

Austin Frakt, at The Incidental Economist, leads his readers through an exercise demonstrating that total employee compensation is a mix of salary and healthcare benefits. He demonstrates that if healthcare costs went away, employers would have to offer a higher salary.

Of course, the reverse is also true: if health insurance gets more expensive, employers will offer a lower salary (or just postpone raises indefinitely). Salary stagnation, then, is an artifact of increasing health insurance costs, not a sign of a poor economy.

Rising Health Care Costs are No Mystery

Rising Health Care Costs are No Mystery →

One issue that does not get enough attention is the prosaic act of shopping.   I spend my own money, and I care about price.  I spend someone else's money, I don't give a rip.  Josh Cothran did a visualization of who is spending health care money.  Just look at the 1960 and 2012 charts, and pay particular attention to the orange "out-of-pocket" number.  Another way to rewrite these charts is to say consumers care about prices for spending in the orange band only.

Also, healthcare providers only care about your happiness to the extent that you're paying them. If you're not paying out of pocket, they don't care whether or not you're happy with your healthcare.

Irritating Things (Healthcare)

Irritating Things (Healthcare) →

John Goodman talks about what irritates him, in healthcare policy discussions.

It’s impossible to have a rational discussion about health policy when one side of the argument is irretrievably deceitful. Here are some things I find irritating, to say the least:

  • A White House that claims the way to control health care costs is to follow “evidence-based” guidelines, doing only procedures that are cost effective.
  • A White House that then uses taxpayer dollars to promote procedures that are not evidence-based or cost effective for blatantly political reasons.
  • A sycophantic press corps and fellow-traveling health policy bloggers who either remain silent or actually apologize for this hypocrisy.

‘They’ll Just Lie’

‘They’ll Just Lie’ →

On Saturday, the Obama campaign released this ad attacking the Romney Medicare proposal. The ad doesn’t walk some sort of narrow line between misleading and deceiving, it’s just simply a pack of lies from top to bottom.

Yuval Levin provides his own analysis of a recent Obama campaign ad, related to Medicare reform.

Fact-Checking Obama's Campaign Ad About Romney's Proposal for Medicare Reform

Fact-Checking Obama's Campaign Ad About Romney's Proposal for Medicare Reform →

on Saturday, the Obama campaign came out with a new ad, approved by the President, claiming that Mitt Romney’s Medicare plan could require seniors to pay $6,400 more a year for health insurance. That claim is not only false, but brazenly and incontrovertibly so. Indeed, almost everything in the ad is wrong except for the phrase “I’m Barack Obama, and I approved this message.”

Democrats making things up about Republican reform plans? I'm shocked, simply shocked!

Health Premiums Up $3,000 Under Obama; He Had Vowed $2,500 Cut

Health Premiums Up $3,000 Under Obama; He Had Vowed $2,500 Cut →

During his first run for president, Barack Obama made one very specific promise to voters: He would cut health insurance premiums for families by $2,500, and do so in his first term.

But it turns out that family premiums have increased by more than $3,000 since Obama's vow, according to the latest annual Kaiser Family Foundation employee health benefits survey.

I must say, that's a totally unexpected result after increasing government regulations.

EconTalk: David Autor on Social Security Disability Insurance

EconTalk: David Autor on Social Security Disability Insurance →

David Autor of MIT talks with EconTalk host Russ Roberts about the Social Security Disability Insurance (SSDI) program. SSDI has grown dramatically in recent years and now costs about $200 billion a year. Autor explains how the program works, why the growth has been so dramatic, and the consequences for the stability of the program in the future. This is an illuminated look at the interaction between politics and economics and reveals an activity of government that is relatively ignored today but will not be able to be ignored in the future.

Some interesting facts.

  • Disability insurance includes both a monthly cash payment as well as access to Medicare.
  • The disability rolls have more than doubled in in the last 13 years, from 1.2 million people to 2.9 million people.
  • Divided by the number of U.S. households, we're spending more than $1500 per U.S. household, on disability insurance.
  • By law, the program is biased on favor of people making disability claims. It's comparatively easy to get disability and very, very hard to prove that someone either no longer needs disability or that they made a fraudulent claim in the first place.
  • Law firms helping people get disability are entitled to 25% of the disability back benefits. Each year, the Social Security Administration pays out more than $1 billion to these law firms.
  • In 1984, SSDI consumed 5% of all Social Security revenues. In 2004, SSDI consumed 10% of all Social Security revenues. It now consumes all of the dedicated SSDI revenue and is cutting into the general Social Security revenue. At the current rate of expenditure, the SSDI trust fund will be exhausted within 5 years.

It looks like SSDI is something that we need to start thinking about reforming as well, as it grows increasingly more expensive to maintain.

Would Democrats Block a Republican Plan for Universal Coverage, Out of Spite?

Would Democrats Block a Republican Plan for Universal Coverage, Out of Spite? →

Avik Roy dives into the recent history of healthcare reform and details the bipartisan plan that the Democrats killed, in order to pass a partisan plan of their own.

Hence, a bipartisan health-care agenda at the federal level will necessarily look quite different than one at the state level. If liberals had bothered to ask, they could easily have elicited bipartisan support for a proposal that did the following: (1) set up the Obamacare exchanges for those under 400% of FPL; (2) applied the Ryan reforms to Medicare and Medicaid (or, alternatively, folded in Medicare and Medicaid acute-care into the PPACA exchanges); (3) equalized the tax treatment of employer-sponsored and individually-purchased insurance; and (4) not increase taxes or the deficit.

It’s Not About Contraception

It’s Not About Contraception →

I like the way Sheldon Richman explains the difference between freedom and compulsion, between negative liberty and positive liberty.

Here's the bottom line.

What we have in this debate is a clash not between two liberty interests, but rather between two rights-claims – one negative (genuine), the other positive (counterfeit). All that is required for the exercise of a negative right (to self-ownership and, redundantly, liberty and one’s legitimately acquired belongings) is other people’s noninterference. (“When we say that one has the right to do certain things we mean this and only this, that it would be immoral for another, alone or in combination, to stop him from doing this by the use of physical force or the threat thereof,” writes James A. Sadowsky, S.J.) But the fulfillment of positive rights requires that other people act affirmatively even if they don’t want to — say, by providing products or paying the bills. If one person’s freedom depends on the infringement of someone else’s freedom, the first claim is illegitimate. To hold otherwise is to reject the principle of equality.

This controversy is not about contraception. It’s about freedom versus compulsion.

And here's the part that's been driving me nuts for two weeks now. There are too many smart people repeating this line. Are they really that dumb? Or do they just think that everyone else is?

How exactly was the liberty to use contraception jeopardized by the Catholic exemption? In no way would a woman’s freedom in this respect be infringed simply because her employer was free to choose not to pay for her contraceptive products and services.

Yet advocates of Obamacare insist on conflating these issues. They repeatedly portray opposition to forced financing of contraception as opposition to contraception itself. (Alas, some conservatives have encouraged this conflation.) Must the difference really be spelled out?

Why Medicaid Is No Longer a Voluntary Program

Why Medicaid Is No Longer a Voluntary Program →

In 1986, Congress passed EMTALA, making it a federal crime to transfer a patient from one hospital/emergency room to another for financial reasons. It compels hospitals to render care, even without any compensation.

... But EMTALA did more. It killed the voluntary nature of the Medicaid system.

... Today, if Arizona decided to leave Medicaid and resume its pre-Medicaid system, it couldn’t do so. EMTALA would prevent it from functioning. EMTALA specifically bans any hospital from transferring patients for financial reasons. Arizona’s pre-Medicaid system depended upon the transfer of indigent patients from private centers into its indigent health system, thus relieving private hospitals and providers from the burden of constantly providing uncompensated care.

States should be free to design their own systems and innovate, instead of all being forced into the same rigid mold.

Despite Its New Diet, Virginia State Government Is Fatter Than Ever

Despite Its New Diet, Virginia State Government Is Fatter Than Ever →

A. Barton Hinkle examines the Virginia state budget and determines that increased Medicaid spending is the big reason that the state government has had to cut the budget in recent years.

To hear some folks tell it, budget cuts in Virginia over the past three to four years have been so savage it’s a miracle there’s any state government left. We long ago cut out all the fat and hacked through the muscle; now we’re sawing deep into bone. Localities are scared stiff that the state will stiff them come January. And it’s only going to get worse. Gov. Bob McDonnell has had state agencies prepare plans cutting 2 percent, 4 percent, and 6 percent from their budgets. The stories have grown numbingly familiar.

Still: The general fund has grown roughly $1 billion from last fiscal year to this one. That represents about a 6 percent hike. So why is the governor asking agencies to plan for cuts?

… For example: From fiscal 2008 to fiscal 2012, general-fund outlays for the Department of Medical Assistance Services (that’s the one responsible for administering Medicaid and the state’s Children’s Health Insurance Program) have grown 35 percent. General-fund revenue hasn’t grown anything like that, so the difference has to come from the pockets of other programs.

Huh. Maybe we really should talk about reforming Medicaid.

Medicaid Takes Up More of State Budgets, Analysis Finds

Medicaid Takes Up More of State Budgets, Analysis Finds →

Education used to make up a bigger share of state spending. When the association first began compiling the report in 1987, elementary and secondary education made up the biggest share of state spending, and higher education the second-biggest share. Medicaid surpassed higher education as the second-biggest state program in 1990, and in 2003 it became largest state program for the first time. Since then it has vied with schools for the biggest share of state spending, but for the past three years it has been in the lead, with an increasing margin.

Maybe it's time to consider reforming Medicaid? Before it eats up state budgets completely? And maybe we could do it without demonizing the one party that's willing to talk about it? (Hello, Congressman Paul Ryan.)

New York Bans Mandatory-Mail-Order Pharmacy Plans

New York Bans Mandatory-Mail-Order Pharmacy Plans →

Some health plans require you to fill your prescriptions through mail order pharmacies. Some patients don't like that requirement. In New York State, that requirement will soon be a thing of the past.

The bill barred insurers or employers from forcing patients to use mail-order plans for prescription drugs, except for plans negotiated by unions. Instead, consumers would be guaranteed the choice of having their prescriptions filled either through mail-order or at the local drugstore, without any added copayments or fees.

So, at a time when health plans are under tremendous pressure to cut premiums (or at least to raise them as little as possible), the Governor is going to raise health plans' costs? Not exactly.

But the governor signed both bills late Monday on the condition that the Legislature would retroactively amend them to require retail pharmacies to accept the same reimbursement rates for drugs as mail-order pharmacies.

Oh, okay. The Governor is going to force small mom-and-pop stores to lose money on every prescription that they fill. Yeah, that's going to work out well.

There's absolutely no good way to fulfill this requirement without raising somebody's costs. The patient's preference for locally filled prescriptions is more expensive. By rights, patients should pay for that preference. Instead, the Governor is looking to make someone else pay instead. That's always a bad idea and this is going to end up back-firing.

Complex Systems, Part II

Complex Systems, Part II →

John Goodman finishes his analysis of complex systems. This time, he considers the policy implications of the fact that healthcare is a complex system.

  • Complex Systems Cannot Be Managed from the Top, Down
  • The Core Components of Complex Systems Cannot Be Copied
  • Choosing Public Policies for Complex Systems
  • Public Policy Lessons

Most people in health policy do not understand complex systems. They really don’t understand social science models either. As a result, when they advocate or enact public policies, they are almost always oblivious to the inevitability of unintended consequences. The idea that a policy based on good intentions could actually make things worse is beyond their comprehension.

Speaking as someone who works in healthcare: yup. Every time healthcare people get together in large numbers, I see the belief that they can figure out a master plan, using the power of good intentions to make everything better. (Usually, of course, without using any evil profits either.)

Do We Really Spend More and Get Less?

Do We Really Spend More and Get Less? →

If we ignore the fake prices that typify the American health care experience, it's clear that the U.S. uses fewer resources to deliver health care than any other developed nation.

The concept of opportunity cost allows us to see that if we don’t trust spending totals in the international accounts, there is another way to assess the cost of health care. We can count up the real resources being used. Other things equal, a country that has more doctors per capita, more hospital beds, etc., is devoting more of its real income to health care than one that uses fewer resources — regardless of its reported spending.

On this score, the United States looks really good. As the table below (from the latest OECD report) shows, the U.S. has fewer doctors, fewer physician visits, fewer hospital beds, fewer hospital stays and less time in the hospital than the OECD average. We’re not just a little bit lower. We are among the lowest in the developed world. In fact, about the only area where we “spend” more is on technology (MRI and CT scans, for example), as is reflected in the second table.

We might be able to see these lower costs if we could only get some real price competition into the market.

This entry was tagged. Healthcare Policy

How Should Pediatricians Help?

After reading my last post on parenting and responsibility, two people raised the same objection: what about parents who don’t know about proper safety or about the resources that area available to them?

[T]here are many parents out there who are ignorant of the statistics on bike helmets, car seat, proper gun storage etc. AND many parents may not know that there are organizations to help needy families obtain safety items for free / reduced cost. If a doctor isn't allowed to ask questions, how can the information reach the parents who may need it?

It’s a fair question. How should society balance the desire to help people against the tendency to annoy people who don’t need help?

I think we need to start with respect. A pediatrician who questions parents, on their first visit, about their parenting skills risks appearing condescending and disrespectful. A pediatrician who claims that it’s his job to protect my children, implies that he doesn’t think it’s my job and that he doesn’t trust me to keep them safe.

I think the default assumption should be that parents are concerned about their children’s welfare and want to do what’s best. When a pediatrician starts by asking parents “do you do this?”, it communicates disrespect and distrust. From what I’ve read in recent articles, and from what pediatricians are defending, it seems that the normal approach is to grill parents with an invasive and potentially judgmental checklist:

  • Do you own a pool? Is it kept covered and locked when not in use?
  • Do you own a gun? If so, you shouldn’t. If you insist on doing so, here are the rules that you must follow so that your children don’t suffer from your obstinacy.
  • Do your children ride bikes? Do they wear helmets all of the time or do you actually want them to die?

Now, I’m well aware that doctors aren’t quite that confrontational and insulting when they’re talking to parents. On the other hand, that’s often how parents perceive their questions. Especially when they’re asking those questions without first getting to know them and without first learning what their level of parenting competency is.

What should they do instead? Well, riffing off of a comment from a nurse I know, how about a general presentation of what they can do to help?

Hi, I’m Doctor Smith, your daughter’s pediatrician. I hear that your daughter has an ear infection today. We’ll make sure you get some general antibiotics to clear that up as quickly as possible. Since this is the first time we’ve met, I’d like to tell you a little about what we do here at the office. Obviously, we’re here to help you anytime your children get sick or have an injury.

We’ll also help you to keep your children up to date on vaccinations and immunizations—the immunization schedules can be confusing, so don’t hesitate to ask if you have any questions. We’re also available to answer any questions you might have about general parenting topics. If you’d like, we can help you with understanding childhood nutrition, recommended diets, learning styles or disabilities, or other topics related to childhood development.

Surprisingly, the biggest risks your children face today aren’t from sickness or disease but from accidents. Nearly 30% of all childhood fatalities result from either motor vehicle accidents or drownings. We’d love to help you learn about the best way to prevent these accidents. We can talk to you about car safety, pool safety, bike safety, firearm safety, etc.

More than just medicine, we want to do everything we can to help keep your children safe. Is there anything you’d like help with today? If not, feel free to call or email the office anytime you have a question, day or night.

Beyond that, the doctor’s office could have posters prominently displayed, advertising proper safety or offering to counsel parents about safety. They could have posters and handouts, advertising local organizations that offer free / low cost car seats or safety devices. They could offer instructional DVDs (or link to online videos) that teach parents about proper safety and available resources.

There are many ways that pediatricians could offer help and resources without taking responsibility away from parents or without defaulting to a confrontational style of questioning. My post about parenting and responsibility wasn’t saying that pediatricians can’t offer advice. Far from it. The responsible parent will seek out advice from many sources. But there’s a large difference between solicited and unsolicited advice.

If you wait to be asked, you’ll communicate that you respect your patients and trust them to be responsible. If you freely give unsolicited advice, you risk communicating that you look down on your patients and don’t trust them to be responsible without your help.