Smash-N-Grab, And No One Cares

So I was the victim of a property crime last night:

smash

 

 

 

 

 

 

 

It appears that some local ne’er-do-well decided that smashing my driver’s-side window and stealing my CD player sounded like a great way to spend the early morning hours of a cool, rainy Sunday.

Nothing else appears missing — just the radio.

On the bright side, though, no one cares, so it’s not like the serenity of any else’s Sunday has been ruffled. The Grand Rapids Police just want me to fill out an online form that may or may not be acted on by an officer (because, of course the perpetrator (a) didn’t leave prints, and (b) even if he did, he’s not in the system, so (c) performing a basic crime-scene investigation is a waste of time). My insurance company, Progressive Direct — the same people I’ve paid more than $3,000 in premiums to over the last few years — decided that my policy doesn’t cover vandalism of a stationary vehicle.

Detroit is just the canary in the coal mine: Institutions aren’t what they used to be, regardless of their ZIP code.

 

Meaningful Health Reform: Emphasize Cost Reductions First!

Recent debate about the constitutionality of the Patient Protection and Affordable Care Act — better known as Obamacare — spins along an interesting but ultimately incoherent central axis: Namely, that access to insurance marks the most significant problem requiring federal intervention within the health care sector.

You hear the lament from President Obama himself. In comments delivered last week in the Rose Garden, he said: “People’s lives are affected by the lack of availability of health care, the unaffordability of health care, or their inability to get health care because of pre-existing conditions.”

Read that again. Now pay attention to several rhetorical sleights-of-hand that too often pass unremarked:

  • “…the lack of availability of health care…” — except, what Obama really means is the lack of affordability of health insurance.  Health care is generally plentiful; in fact, access to it through emergency rooms is enshrined under EMTALA, and communities across the country sponsor government- or church-run free or low-cost clinics. The only places with a lack of specific services result from local problems — e.g., communities with runaway tort awards that makes malpractice insurance for specialties like OB/GYN cost prohibitive for practitioners.
  • “…their inability to get health care because of pre-existing conditions.” Well, no. Again, it’s insurance and not access that’s really under discussion. In any case, people forget that insurance is a financial hedge against a potential future problem. When that problem materializes, ongoing insurance no longer makes sense, as the risk you’re insuring against isn’t theoretical any more. (Hint: That’s why some insurance companies didn’t “insure” against pre-existing conditions, which is much like trying to buy collision insurance the day after you wreck your car.)

In fact, the major problem with the whole debate is the focus on insurance coverage instead of cost reduction. It’s not entirely clear why employer-provided health insurance should be the primary mechanism by which individual citizens gain entry into the high-cost health services market. Nor is it clear why it’s constitutional for the government to require insurance companies to engage in specific behaviors that creates a regulatory regime that later justifies massive market intervention. Justice Kennedy had it right when he asked whether it makes any sense to create commerce just to regulate it. Treating “health reform” as simply expanding the insurance pool fundamentally misunderstands the real problem with health care costs today.

Which is this: As a distressingly large number of patients remain almost entirely disconnected from the actual costs of the services they consume and because they services are covered by third-party payers, the tendency is for prices to increase well above the rate of inflation. This trend makes a degree of sense; if you are sick and directly pay for little or nothing for the care you receive, then of course you want every test, every procedure, every intervention. And why not? Not your dime, after all. Rhetorical emanations from the Progressive Left elevate medical care to the level of a civil right that shouldn’t require anyone to pay out-of-pocket for anything. In a climate where the average person pays little and some activists demand that they pay nothing, it’s not a surprise that most people don’t put a lot of thought into the real cost of the services they consume. And as any marketer will tell you, people want more when they’re not thinking about price — which is basically the same economic model as the iTunes app store and Redbox kiosks.

Funny thing about health care. Contra Obama, you don’t need insurance to access health services. You can pay out of pocket. Doctors and hospitals don’t require insurance before delivering care — you can simply write a check, swipe a credit card or even negotiate a payment plan. Indeed, routine care isn’t really that expensive. An annual physical for someone in good health may cost less than $250 with labs in many markets. And before the wage-and-price controls of World War II, employer-provided health insurance was unheard of. We survived before benefits packages; we can survive when those packages are de-emphasized.

To really get health spending under control, we need to get consumers actively engaged in what health services they receive. The first step involves tort reform — physicians need to be free to recommend the various tests and procedures that are medically indicated without worrying about the lawsuits that lead to expensive “defensive medicine.” A regime that pre-screens medical malpractice claims against a board of physician advisers may well cut off the spigot of dollars flowing from the largess of a medically unskilled jury.

The second step requires patients to have financial skin in the game. Instead of taking refuge in free-lunch insurance programs, health insurance should more accurately reflect the original concept of risk mitigation that undergirds insurance programs as a whole. The best solution — and one that seems to work in hospitals across the country — lets consumers elect high-deductible plans that cover catastrophic illnesses but require patients to front the money for most low-dollar costs up to a specific threshold. These plans generally cost less and make patients think twice about demanding unnecessary care when the funds come directly from their own pockets.

Put differently: If get a nasty head cold, do you tough it out or do you make a trip to the doctor and demand antibiotics (even though antibiotics don’t work on viruses)? With free-lunch insurance, you’ll visit the doctor, get your scrip, maybe offer a token amount as a co-pay, and move on. If you knew you had to pay for the office visit and the drugs, would you bother? Probably not. You would only seek medical services when you believed you really needed them. The Washington Post recently addressed the trend of higher-deductible plans. Although the story may be faulted for assuming that it’s an outrage that people should actually pay for what they use, otherwise the account presents a fairly well-balanced summary of the trend away from gold-plated coverage and more toward consumer-driven health care.

The researchers at RAND Corporation’s health unit have complied extensive and diverse statistics about the long-term trends in health services; the publication is well worth perusing. The reasons for today’s exploding cost model are many, but some of the major contributors include:

  • Increased regulatory burden by governments that drives up costs by as much as 25 percent of the entire sector
  • Increased cost of ancillary services unrelated to the provision of care (e.g., marketing departments, education teams, etc.) — a 2003 New England Journal of Medicine study suggested that administration alone costs more than $700 for every inpatient visit
  • Increased utilization of expensive services like MRIs that may not be clinically warranted but protect the ordering physician from malpractice claims if the patient isn’t happy with his treatment, may raise costs by 5 to 9 percent
  • Cost-shifting from protected patients to non-protected patients — case in point: because Medicare or Medicaid reimburse at less than actual costs, the “gap” is made up in higher prices for everyone else, to the tune of more than $6 billion per year
  • Fixed infrastructure costs — primarily IT — drive up institutional expenses, which are then passed along to patients
  • HMOs and other insurers negotiate separate contracts with providers, and if one insurer gets a sweeter deal patients covered by a different provider may make up for it with higher prices

Health reimbursement theorists look at medical care as a three-legged stool of costs, quality and access. There’s a relationship among these variables: As costs increase, access declines. As quality increases, costs increase. Radically increasing access will make costs skyrocket.

That’s the fundamental problem with Obamacare — it emphasizes increasing access to free- or low-cost medical care, but as costs increase, there’s no obvious payer. Hence the “individual mandate.” If everyone pays into the system, then free-lunch coverage for everyone becomes a more viable option. Without a mandate, there just isn’t enough money to fund all the services that will be demanded at free-lunch prices by the U.S. population. And a single-payer solution won’t fix the problem. The dollars have to come from somewhere, and if individual consumers of health services have zero personal incentive to responsibly align their utilization against their genuine medical need, the system as a whole will suffer from significant and costly inefficiencies that make the entire infrastructure unworkable in the long run.

To really fix the problems with today’s health care market, we should focus on cost reduction. If costs go down, premiums will go down and access will naturally increase. And while we’re at it, we should scrap the antiquated WWII-era model of financing health services through “insurance” and instead open the market to actual costs borne by actual people.

Disclaimer: The writer is an experienced revenue-cycle analyst for a large Midwestern health system. The opinions expressed in this blog post reflect only the writer’s opinions and do not speak for, imply or endorse any position on behalf of the health system.

Thoughts on the "With What" Part of "Repeal and Replace"

Diagnosis: Miserable Failure.
Yuval Levin’s analysis of Obamacare is a cogent but brief summary of the problems arising out of the newly passed Patient Protection and Affordable Care Act. His review is merely one of thousands, from both sides of the political spectrum, that tears apart the new law.
Concerns about Obamacare are as substantial as they are plentiful:

  • The new law does very little to reduce costs — indeed, it is likely to increase them substantially in the long run, because of the “trick” in delaying the provision of benefits against the immediate collection of tax revenues in order to bring in a 10-year cost of less than $1 trillion.
  • The expected revenues (e.g., Medicare cuts and the long-delayed tax on “Cadillac plans”) are almost surely not going to be imposed because of a lack of Congressional fortitude, which will add to significantly higher long-term federal deficits and unsustainable growth in state liabilities for Medicare and Medicaid recipients.
  • The law is internally incoherent: It was designed to accommodate a public option, which was later stripped, but the context of the law does not adequately reflect the removal of the public option.
  • The most serious barriers to public access to health care are not addressed.
  • The law creates perverse incentives to dump employees from company benefit plans into private exchanges, but the exchanges are unlikely to materialize as intended because it would be financial suicide for an insurance company to enter the private market under the current Obamacare regulations.

Conservative activists are pushing the “repeal and replace” mantra. Whether this goal is politically feasible is too early to tell — realistically, repeal cannot happen until after 2012, assuming Obama doesn’t win a second term. In terms of public discourse, three years is an eternity.  Some options, like refusing to fund the development of Obamacare if the GOP takes the House this fall, are on the table, but any opposition strategy could backfire horribly. Only a crystal ball will show whether the public’s zeal for repeal will survive the test of time.
That said, the question remains of what the “replace” part of “repeal and replace” might look like.  Some conservatives have offered incremental reform options that are essentially tweaks to the current system. Although there is a degree of prudence to this, there is also a danger — the current system’s whole approach is methodologically flawed.  Employer-paid comprehensive health insurance is simply a dead end, and propping up the system’s inevitable collapse seems dangerously short-sighted.
So if I could blow up the system and impose a new health-care industry by fiat, it would look like this:

  1. Employers would get out of the health-insurance business altogether. There is absolutely no reason that my boss needs to help me pay for a doctor’s visit.  Employer-provided insurance is a relic of World War II, when business first offered benefits packages as a way of getting around Roosevelt’s wage and price controls. Although the people tended to like these benefits, as a matter of pure reason, there is no justification for keeping employers in the middle of a person’s relationship with their doctors.  None whatsoever.  And freeing individuals from the perceived need to stay in a job with benefits may improve employee portability and risk-taking and encourage entrepreneurship.
  2. Routine well-care and ordinary medical expenses are solely the responsibility of individual citizens. We sometimes forget that insurance is a risk-adjusted method for protecting a person against possible loss. In a health context, however, we use insurance to handle things that have very little to do with risk mitigation, a practice that is borderline irrational and shifts the financial burden from those who are high-cost consumers of health services to those who are low-cost consumers (after all, you pay the same premium as your coworker even if your annual insurance billings total $100 and hers totals $15,000). In a perfect world, people will attend to their routine medical needs just like they attend to things like hygiene and clothing and auto repairs, none of which require an employer or governmental subsidy — and if they don’t, then this reflects a disordered prioritization of expenses by the consumer and not a systemic problem requiring an expensive public fix. Especially if we impose meaningful tort reform, to limit malpractice claims to situations that a team of physician advocates (instead of a lay jury) agree rises to the level of gross malpractice, the cost of services like annual physicals, immunizations, and diagnostic radiology will plummet and be affordable across the board.  To assist with individual cost management, a person could open a health savings account, accessed at the point of service by a debit card, funded with pre-tax voluntary contributions from payroll, so that even routine care doesn’t require a direct out-of-pocket cash outlay. Side note:  To those who are concerned about costs … what about costs for people who overpay?  In the last five years, I have paid more than $8,000 in insurance premiums while collecting less than $3,000 in total benefits.  Economically, it would have been significantly cheaper for me to forego insurance and pay for everything out-of-pocket, but if all the healthy and self-reliant did that, then those seeking insurance under the current system would have astronomically high premiums.  Hence the need for Obamacare’s “individual mandate” — it shifts costs to people like me, from people who go to the doctor every time they get a sniffle.  How, exactly, does forcing the healthy to subsidize the unhealthy pass social-justice muster? Under what ethical paradigm does forcible charity become an intrinsic public good?
  3. Health insurance is available, voluntarily, to protect against genuine catastrophic risk.  These plans will be more consistent with genuine insurance coverage, insofar as they have nothing to do with routine well-care and everything to do with protecting against major loss from serious, unexpected injury or unforeseen acute medical conditions.  Trauma risks (e.g., getting hit by a car) could be covered in full, with a fairly low annual premium to reflect the relative infrequency of major traumas.  Protection against clinical risks like strokes or heart attacks would also be available for optional purchase — a risk-adjusted model based on factors like behavior or family history would be more expensive, but may be an option that some would prefer to purchase.  Actual prices would be based on an actuarial assessment of a person’s likelihood of loss, relative to the total pool of covered lives, in accordance with free-market principles.  Allowing companies to offer insurance across state lines is a good first step toward building the right kinds of pools that would make true catastrophic care comprehensive but inexpensive in an open, personal market.
  4. State or community programs will manage risk-adjusted chronic-disease populations.  A major question within the health-care industry today is how to best manage people who have long-term chronic conditions like cancer or diabetes or HIV.  There is no right answer.  Some people respond well to ongoing medication, others to diet and exercise modification. Some people need ongoing dialysis or expensive drug therapies.  These are things that contribute to insurance costs. However, a registry-based program that allows teams of specialists including doctors and nurses and community health workers to engage with patients in a comprehensive manner to address all aspects of their chronic condition is a step in the right direction. The question, however, is cost:  Who pays?  A chronic condition is not an insurable condition, but it’s also not clear that it’s appropriate that the rest of society subsidizes treatment costs, particularly for conditions that are largely the result of lifestyle choices.  One option: Registries.  Allow people to sign up for programs to treat their condition at low or no cost, with actual costs borne by drug companies or community non-profits or even local or state governments. Hospitals and physician practices could receive tax incentives for contributing to registries, because there is a public interest in managing chronic conditions before they become major (and expensive) health crises.  The market could work its magic with registries.  For example, a leukemia registry may be funded by pharma companies that actively solicit patients to engage in drug research.  Or a diabetes registry in one state may be funded by a health-focused private foundation that thinks it has a better option for disease management and is willing to fund a demonstration project that is applicable across the country (Gasp! Federalism! Diversity in programming!  Oh, l’horreur!)
  5. Local communities could provide well-care subsidies for low-income families.  Yes, we all want to make sure babies, including poor ones, get proper treatment and immunizations.  To that end, local communities could provide health clinics to assist low-income families cover costs.  Churches could pool donations with local foundations to hold a free-clinic day every few months, for example.  Or county governments could operate basic clinics for families with incomes below a certain level.  There are many options for assisting low-income populations short of a massive, mandatory, one-size-fits-all social-welfare scheme.

The bottom line:  We must inculcate the attitude that the only person responsible for my health is me.  Not the government, not my boss, not an insurance company.  Me.  Health care is a routine part of life, and the provision of health insurance as an employer-provided benefit to so many for so long has led some people — mostly on the Left — to conclude that the government has an affirmative duty to keep people healthy.  This assumption is patently absurd, but it persists, and any viable repeal-and-replace program must convincingly show an average citizen how self-responsibility provides greater flexibility and lower cost than the chimera of Obamacare or the siren song of universal single-payer insurance.

Some readers of this blog are aware that the author is affiliated with a West Michigan-based hospital. The comments in this posting reflect only the author’s perspective and should not be considered a reflection on the hosptial’s perspective, nor a statement offered in the author’s capacity as a hospital employee.

Thoughts on the “With What” Part of “Repeal and Replace”

Diagnosis: Miserable Failure.

Yuval Levin’s analysis of Obamacare is a cogent but brief summary of the problems arising out of the newly passed Patient Protection and Affordable Care Act. His review is merely one of thousands, from both sides of the political spectrum, that tears apart the new law.

Concerns about Obamacare are as substantial as they are plentiful:

  • The new law does very little to reduce costs — indeed, it is likely to increase them substantially in the long run, because of the “trick” in delaying the provision of benefits against the immediate collection of tax revenues in order to bring in a 10-year cost of less than $1 trillion.
  • The expected revenues (e.g., Medicare cuts and the long-delayed tax on “Cadillac plans”) are almost surely not going to be imposed because of a lack of Congressional fortitude, which will add to significantly higher long-term federal deficits and unsustainable growth in state liabilities for Medicare and Medicaid recipients.
  • The law is internally incoherent: It was designed to accommodate a public option, which was later stripped, but the context of the law does not adequately reflect the removal of the public option.
  • The most serious barriers to public access to health care are not addressed.
  • The law creates perverse incentives to dump employees from company benefit plans into private exchanges, but the exchanges are unlikely to materialize as intended because it would be financial suicide for an insurance company to enter the private market under the current Obamacare regulations.

Conservative activists are pushing the “repeal and replace” mantra. Whether this goal is politically feasible is too early to tell — realistically, repeal cannot happen until after 2012, assuming Obama doesn’t win a second term. In terms of public discourse, three years is an eternity.  Some options, like refusing to fund the development of Obamacare if the GOP takes the House this fall, are on the table, but any opposition strategy could backfire horribly. Only a crystal ball will show whether the public’s zeal for repeal will survive the test of time.

That said, the question remains of what the “replace” part of “repeal and replace” might look like.  Some conservatives have offered incremental reform options that are essentially tweaks to the current system. Although there is a degree of prudence to this, there is also a danger — the current system’s whole approach is methodologically flawed.  Employer-paid comprehensive health insurance is simply a dead end, and propping up the system’s inevitable collapse seems dangerously short-sighted.

So if I could blow up the system and impose a new health-care industry by fiat, it would look like this:

  1. Employers would get out of the health-insurance business altogether. There is absolutely no reason that my boss needs to help me pay for a doctor’s visit.  Employer-provided insurance is a relic of World War II, when business first offered benefits packages as a way of getting around Roosevelt’s wage and price controls. Although the people tended to like these benefits, as a matter of pure reason, there is no justification for keeping employers in the middle of a person’s relationship with their doctors.  None whatsoever.  And freeing individuals from the perceived need to stay in a job with benefits may improve employee portability and risk-taking and encourage entrepreneurship.
  2. Routine well-care and ordinary medical expenses are solely the responsibility of individual citizens. We sometimes forget that insurance is a risk-adjusted method for protecting a person against possible loss. In a health context, however, we use insurance to handle things that have very little to do with risk mitigation, a practice that is borderline irrational and shifts the financial burden from those who are high-cost consumers of health services to those who are low-cost consumers (after all, you pay the same premium as your coworker even if your annual insurance billings total $100 and hers totals $15,000). In a perfect world, people will attend to their routine medical needs just like they attend to things like hygiene and clothing and auto repairs, none of which require an employer or governmental subsidy — and if they don’t, then this reflects a disordered prioritization of expenses by the consumer and not a systemic problem requiring an expensive public fix. Especially if we impose meaningful tort reform, to limit malpractice claims to situations that a team of physician advocates (instead of a lay jury) agree rises to the level of gross malpractice, the cost of services like annual physicals, immunizations, and diagnostic radiology will plummet and be affordable across the board.  To assist with individual cost management, a person could open a health savings account, accessed at the point of service by a debit card, funded with pre-tax voluntary contributions from payroll, so that even routine care doesn’t require a direct out-of-pocket cash outlay. Side note:  To those who are concerned about costs … what about costs for people who overpay?  In the last five years, I have paid more than $8,000 in insurance premiums while collecting less than $3,000 in total benefits.  Economically, it would have been significantly cheaper for me to forego insurance and pay for everything out-of-pocket, but if all the healthy and self-reliant did that, then those seeking insurance under the current system would have astronomically high premiums.  Hence the need for Obamacare’s “individual mandate” — it shifts costs to people like me, from people who go to the doctor every time they get a sniffle.  How, exactly, does forcing the healthy to subsidize the unhealthy pass social-justice muster? Under what ethical paradigm does forcible charity become an intrinsic public good?
  3. Health insurance is available, voluntarily, to protect against genuine catastrophic risk.  These plans will be more consistent with genuine insurance coverage, insofar as they have nothing to do with routine well-care and everything to do with protecting against major loss from serious, unexpected injury or unforeseen acute medical conditions.  Trauma risks (e.g., getting hit by a car) could be covered in full, with a fairly low annual premium to reflect the relative infrequency of major traumas.  Protection against clinical risks like strokes or heart attacks would also be available for optional purchase — a risk-adjusted model based on factors like behavior or family history would be more expensive, but may be an option that some would prefer to purchase.  Actual prices would be based on an actuarial assessment of a person’s likelihood of loss, relative to the total pool of covered lives, in accordance with free-market principles.  Allowing companies to offer insurance across state lines is a good first step toward building the right kinds of pools that would make true catastrophic care comprehensive but inexpensive in an open, personal market.
  4. State or community programs will manage risk-adjusted chronic-disease populations.  A major question within the health-care industry today is how to best manage people who have long-term chronic conditions like cancer or diabetes or HIV.  There is no right answer.  Some people respond well to ongoing medication, others to diet and exercise modification. Some people need ongoing dialysis or expensive drug therapies.  These are things that contribute to insurance costs. However, a registry-based program that allows teams of specialists including doctors and nurses and community health workers to engage with patients in a comprehensive manner to address all aspects of their chronic condition is a step in the right direction. The question, however, is cost:  Who pays?  A chronic condition is not an insurable condition, but it’s also not clear that it’s appropriate that the rest of society subsidizes treatment costs, particularly for conditions that are largely the result of lifestyle choices.  One option: Registries.  Allow people to sign up for programs to treat their condition at low or no cost, with actual costs borne by drug companies or community non-profits or even local or state governments. Hospitals and physician practices could receive tax incentives for contributing to registries, because there is a public interest in managing chronic conditions before they become major (and expensive) health crises.  The market could work its magic with registries.  For example, a leukemia registry may be funded by pharma companies that actively solicit patients to engage in drug research.  Or a diabetes registry in one state may be funded by a health-focused private foundation that thinks it has a better option for disease management and is willing to fund a demonstration project that is applicable across the country (Gasp! Federalism! Diversity in programming!  Oh, l’horreur!)
  5. Local communities could provide well-care subsidies for low-income families.  Yes, we all want to make sure babies, including poor ones, get proper treatment and immunizations.  To that end, local communities could provide health clinics to assist low-income families cover costs.  Churches could pool donations with local foundations to hold a free-clinic day every few months, for example.  Or county governments could operate basic clinics for families with incomes below a certain level.  There are many options for assisting low-income populations short of a massive, mandatory, one-size-fits-all social-welfare scheme.

The bottom line:  We must inculcate the attitude that the only person responsible for my health is me.  Not the government, not my boss, not an insurance company.  Me.  Health care is a routine part of life, and the provision of health insurance as an employer-provided benefit to so many for so long has led some people — mostly on the Left — to conclude that the government has an affirmative duty to keep people healthy.  This assumption is patently absurd, but it persists, and any viable repeal-and-replace program must convincingly show an average citizen how self-responsibility provides greater flexibility and lower cost than the chimera of Obamacare or the siren song of universal single-payer insurance.

Some readers of this blog are aware that the author is affiliated with a West Michigan-based hospital. The comments in this posting reflect only the author’s perspective and should not be considered a reflection on the hosptial’s perspective, nor a statement offered in the author’s capacity as a hospital employee.