One Doctor’s Orders for How To Really Fix Our System

By Arthur M. Feldman

Sunday, September 6, 2009

Washington Post – link to original

As a cardiologist and the administrator of a large practice that includes general internists and specialists, I spend much of my time trying to figure out how to provide care for a growing number of uninsured or underinsured patients. I also have to battle billion-dollar private insurance companies that don’t adequately cover patients with preexisting illnesses and often deny coverage for necessary treatments.

On a basic level, I’m with the president: Our health-care system needs to be changed so that all of my patients, and all citizens, have access to the care they need. But I don’t agree with how he wants to fix things. Most of my colleagues and I strongly oppose the health-care reform bills that Congress will take up again this week. The proposals leave enormous gaps unfilled.

Before President Obama addresses a joint session of Congress on Wednesday, I hope he will consider these 10 major reasons why I — and doctors like me — worry that the legislation on the table will leave us worse off.

1. Private insurance companies escape real regulation.

This is what makes my colleagues and me so cynical about the reform proposals. Every physician has insurance company horror stories: patients who went untreated because their carriers wouldn’t pay, endless hours on the phone to get administrators’ approval for necessary tests and mountains of paperwork to collect reimbursements. It will be hard for doctors to buy into health-care reform if insurance companies get a free pass.

2. We urgently need tort reform, but it’s nowhere to be seen.

Malpractice costs rise each year, as do the number of frivolous lawsuits. Our practice has seen a 10 percent increase in malpractice expenses this year. Sure, doctors make mistakes, and patients deserve fair compensation for their injuries and lost wages, but in this area of the law, physicians and hospitals are too often at the mercy of capricious juries.

When the president brought up the “fear of lawsuits” in his address to the American Medical Association in June, he got a huge response from the crowd. That’s because practically every doctor has a story about a jury that awarded huge damages to a plaintiff despite the absence of wrongdoing by the physician. The best from our practice group is the physician who was sued — even though he was out of town during the patient’s entire hospitalization. Without fixing these spiraling insurance costs and the legal environment that allows large payments in unjust suits, physicians will continue to practice expensive “defensive” medicine or simply leave states that do not enact tort reform.

3. “Prevention” won’t magically make costs go down.

Obama has called for disease prevention on a national scale, but that won’t be a cure-all. Louise Russell,, a researcher at Rutgers University, analyzed hundreds of studies on prevention and medical costs and found that, in general, prevention adds to costs instead of reducing them. That’s because it often means medication for hypertension and elevated cholesterol, and screening and early treatment for cancer. Unless Congress outlaws McDonald’s, cigarettes, alcohol and idleness and cleans up the environment, no amount of “prevention” will put a dent in the cost of keeping Americans healthy.

4. Reform efforts don’t address our critical shortage of health-care workers.

Many people believe that the fix for our physician deficit is simple: expand class sizes at existing medical schools and create new ones. Sorry, it’s not that easy. There is a cap on the number of federally funded training positions for newly minted M.D.s. It hasn’t changed since 1996. If the number of graduates of U.S. medical schools increases but the number of post-graduate training positions remains the same, we won’t have fixed the problem — we’ll have created a different one. Training programs will simply take more U.S. graduates and fewer foreign ones, and the total number of physicians trained each year will remain the same — too low. And foreign medical school graduates tend to practice in rural and underserved urban areas, the very places that need the most help.

5. We need more primary-care physicians — but we also need specialists.

Everyone is worried about the dwindling ranks of primary-care physicians. But we need more specialists, too. There are impending shortages in fields such as oncology, cardiology, general surgery and gastroenterology. An article in the American Heart Association’s journal Circulation noted that by 2020 there won’t be enough cardiothoracic surgeons to treat the growing number of American seniors. Surgery, the journal of the Society of University Surgeons, reported an expected shortage of 1,300 general surgeons in the United States by 2010. Few Americans will tolerate not having access to a specialist in an emergency or having care rationed because of a limited number of skilled physicians.

6. We have to streamline drug development and shake up the Food and Drug Administration.

Creating and producing new drug therapies in the United States is a nightmare. Regulatory hurdles, disorganization and a lack of leadership at the FDA, as well as burdensome conflict-of-interest policies, have made the drug-approval process grindingly slow. At the same time, development costs are close to $1 billion per drug. Federal regulations are so convoluted that most clinical trials are now performed outside the country — taking billions of dollars out of the U.S. economy and making it harder for American patients to be first in line for new treatments.

7. We can’t fund health-care reform by cutting payments to doctors.

This isn’t about one doctor looking out for his bottom line. It’s about physicians being able to provide the accessibility and quality of care that their patients want. The Centers for Medicare and Medicaid Services has proposed increasing payments to primary-care physicians by approximately 6 percent while lowering payments for many specialists, including cardiologists and oncologists, by as much as 20 to 40 percent. These drastic recommendations were based on a questionable American Medical Association physician survey showing that expenses for cardiology and oncology practices dropped precipitously over the past five years — a finding that defies logic. If these cuts are approved, the American College of Cardiology estimates that 40 percent of the cardiology practices in Florida will go bankrupt. We need to pay for performance, not automatically reduce fees for procedures that patients have come to expect.

8. We can’t forget about research.

Every modern treatment for human disease is related in some way to research at U.S. academic medical centers — much of it supported by the National Institutes of Health. These include new treatments for cancer, devices to prevent sudden cardiac death and medications that save the lives of patients having heart attacks.

However, decreased federal funding for research over the past six years has threatened to decimate a generation of young scientists and the cures they could discover. While the stimulus package provided $10 billion for NIH-supported research, the allocation was for only two years. The health-care reform legislation provides no information about the level of research funding after 2011.

9. Cutting reimbursements could shut some hospitals down.

Proponents of the current reform legislation know that no one wants their local hospital to close. So the White House’s initial call to pay for health-care reform through cuts of more than $200 billion in hospital reimbursements over the next decade was scary. Obama sought to reassure people in June, explaining that “if more Americans are insured, we can cut payments that help hospitals treat patients without health insurance.” But there is no data to support this promise. It is unlikely that the homeless, the mentally ill, the substance abusers or the illegal immigrants who now receive their care in “safety net” hospitals will carry any form of health insurance. Grady Memorial Hospital, one of the premier public hospitals in the United States, which has cared for the underserved residents of Atlanta for more than a century, would probably have closed its doors had it not been for a $200 million gift from a local benefactor.

10. We need to improve the quality of care.

Obama has said that “if doctors have incentives to provide the best care instead of more care, we can help Americans avoid the unnecessary hospital stays, treatments and tests that drive up costs.” This is an overly simplistic view of what is needed. Poor care clearly costs more money. However, as the Institute of Medicine has pointed out, poor quality of care can be divided into three types: underuse of care, misuse of care and overuse of care. While eliminating misuse and overuse will decrease the cost of care, correcting problems from underuse will actually increase costs.

I have a close view of the limitations of our current health-care system. Not just with my patients, who are often unable to afford the care they need, but also in the plight of a young colleague. He was diagnosed with an aggressive form of lung cancer and sought treatment at a nationally renowned Boston cancer center. Most people with lung cancer undergo expensive chemotherapy and radiation therapy, but even those aggressive measures have a limited effect on long-term survival. His physicians discovered that he had a type of cancer that might respond to a new drug in clinical testing, provided free by the pharmaceutical company sponsoring the research. Although the cost of his care is far less than that of traditional chemotherapy, his insurance company refused to pay for it because it is “experimental.”

But he has been lucky. His friends and colleagues have helped support his treatment, and wherever possible his doctors have provided free care. His cancer has responded dramatically to the drug, he has suffered no side effects, and he is back at work full-time.

However, I don’t want my patients to rely on luck. I want them to have insurance that will pay for their care, and I want to be able to offer new medications and the most sophisticated treatment. I want to be able to give preventive care as well as to monitor patients effectively if they develop diseases. I want to be able care for my patients in their homes, and I want to offer palliative care if it becomes necessary. I want them to be able to afford all this. In short, I want to see major reforms in health care — I just don’t want what is on the table.

Arthur.Feldman@jefferson.edu

Arthur M. Feldman is a cardiologist and chair of the department of medicine at Jefferson Medical College. He is the author of “Pursuing Excellence in Healthcare: Preserving America’s Academic Medical Centers.” He will be online to chat with readers Tuesday at 2 p.m. Submit your questions and comments before or during the discussion.

Healthcare reform: What it means to you – link to original article

With some of the highest healthcare costs in the United States, South Florida has a lot at stake in the current reform proposals.

BY JOHN DORSCHNER

JDORSCHNER@MIAMIHERALD.COM

Miami Herald August 16, 2009

 

As the national debate about healthcare reform intensifies, South Florida stands out as a place that has a lot to gain and a lot to lose, depending on the details hammered out by Congress next month. 

A lot to gain because the region has an unusually high percentage of uninsured and people who seek to buy insurance on the individual coverage market, which is often highpriced and unavailable to those with chronic diseases. The reforms are aimed at helping both of these groups get coverage they can afford.

A lot to lose because almost all experts say the only way the country can afford reform is to reduce its healthcare costs. The United States has the highest healthcare costs in the world, and South Florida is among the highest in the nation. Under reform, quite a few of the 218,000 healthcare workers in Miami-Dade and Broward could lose their jobs.

Healthcare leaders like Brian Keeley, chief executive of Baptist Health South Florida, says these two points are closely connected: The higher the costs get, the fewer businesses can afford coverage, which increases the number of uninsured, who often delay treatment until they are extremely sick and go to the emergency room.

There, they run up big bills they can’t pay for, and hospitals compensate by hiking rates for private insurance, causing more businesses to drop coverage, which increases the number of uninsured.

“This is a `death spiral,’ ” says Keeley.

“The system is totally unsustainable for all parties. Drug companies, insurance companies, the SEIU [Service Employees International Union], you talk about strange bedfellows — all agree something has to be done.”

With accusations flying in all directions and much confusion about the details in proposals Congress will be considering when it returns from its August recess, here is a quick primer about healthcare, dealing with the misconceptions and the realities: Where the system stands now, how it stacks up to other countries, what is being proposed and what changes mean for South Florida residents.

What we have now

The United States has a public/private mixture. Fifty-three percent get their insurance at work, according to the Kaiser Family Foundation; 27 percent have a government plan (Medicare for seniors, Medicaid for the poor); 5 percent buy on the individual market.

Fifteen percent have no insurance — 45 million in 2007 and thought by many to have risen to 50 million during the recession.

In South Florida, one million are uninsured. In Miami-Dade, 625,000 have no coverage — 30.9 percent of the population under 65. In Broward, it’s 408,000 — 27.1 percent of those under 65. This is Census Bureau data for 2006, which was just released. The numbers have likely increased during the recession.

In one sense, the United States already has universal healthcare. Under federal law, everyone in the country — including immigrants here illegally — must be treated in hospital emergency rooms.

Those unpaid hospital bills get passed on to people with insurance.

A study by Families USA released this week found that in the past 10 years, family healthcare premiums rose an estimated 3.7 times faster than earnings for Florida workers.

The one group that has a hard time passing on these costs are the public hospitals, because so many of their patients are poor or uninsured.

That’s why places like Jackson Health System are in dire financial shape, which is expected to get worse.

What other countries do

The rest of the industrialized world — Europe, Canada, Australia — essentially guarantees the right to basic healthcare, as it does the right to public education.

Many critics of reform point to problems in Canada, where patients often complain about long waits for elective surgery. But experts like Steven Ullmann, director of health policy programs at the University of Miami, say Canada’s system is essentially a government entity — unlike what’s being proposed in the United States.

Ullmann and many others say a better comparison is the Netherlands, where employers and individuals pay into the system. People choose among private insurers. Costs are regulated.

The bottom line: The Dutch live to 80, on average, for an average annual healthcare cost of $3,383, according to the World Health Organization. In the United States, it’s 78 years of life for $6,714.

Most Dutch doctors have their own private practices. A survey sponsored by the Commonwealth Fund of patients with chronic diseases found that 60 percent in the Netherlands say they can get a same-day appointment with a doctor when they’re sick. Only 26 percent in the United States said they could.

Ninety-nine percent of those patients in the Netherlands said they have a doctor that they usually see, compared with 82 percent in the United States.

Even so, many are not entirely satisfied with their system: 46 percent of the Dutch want fundamental changes, and 9 percent say the system needs a complete overhaul.

In the United States, Commonwealth reported, 46 percent want fundamental changes, 33 percent demand a complete overhaul.

Much of the dissatisfaction may be based on not getting everything we want: Unlike buying, say, a television, healthcare in the industrialized world works through a third party: Patients get treated and providers get paid — by a third-party insurer.

As Keeley puts it: “We all want the very best healthcare — and we want someone else to pay for it.” In such a system, neither patients nor providers worry much about costs.

 

In Europe, governments generally have price controls. In the United States, private and government insurers have tried to control costs — generally without success.

Plans for reform

The proposals now before the House and Senate are complex. Some highlights:

• In all proposals before Congress, private health plans provided by employers will remain the fundamental form of insurance for most Americans. One key issue creating bitter debate is whether to add a “public plan” — a government alternative to compete with private insurers.

• Most proposals require all Americans to have health insurance. Individuals who can not afford the premiums could be eligible for subsidies, a provision that will cost billions. This would enlarge the insurance pool — and make private insurers happy. In return, the insurers promise not to reject people because of preexisting conditions, although this provision would be phased in slowly over time.

• One of the biggest uncertainties: What happens to small businesses. Should businesses of a certain size be forced to provide insurance or pay a tax? How big a tax? If there was a public plan, many small businesses might be better off paying a tax and putting their employees in a public plan, where a large risk pool would spread costs.

Some small-business owners that don’t provide coverage,like Miriam Vilariño of Las Vegas Cuban Restaurants, warn that one proposal — a payroll tax of 8 percent for companies that don’t offer insurance — could destroy the family business.

• How to pay for all this? This is the toughest part: Proposals include new taxes on the wealthy, and/or businesses that don’t offer healthcare, and/or insurers that offer “Cadillac plans,” which offer unusually rich benefit packages.

But what makes a Cadillac? Laurie Amber, a South Miami lawyer, worries that her $1,700-a-month policy might qualify, even though it includes a $2,000 deductible. “We really have a bare bones. It’s just expensive.” Expensive because healthcare in South Florida tends to cost far more than elsewhere.

Cutting costs

Republicans and Democrats agree that any reform must be funded in part by cutting costs. But they say that doesn’t mean denying care or simply cutting payments to doctors or hospitals.

Dartmouth researchers and the Midwest Business Group on Health have said about 30 percent of current health spending is completely wasted — duplicative or unnecessary tests, too many trips to specialists, too much reliance on expensive drugs when cheaper generics could do just as well.

Dartmouth studies show that South Florida is a poster child for such high costs: A Miami senior costs Medicare twice as much annually as a senior in Minneapolis, but lives no longer and gets no healthier.

“That difference is so big that if you got rid of it, you could afford to lease a Lexus 400 for every senior in Miami,” says Becky Cherney of the Florida Health Care Coalition. Of course, policy makers want the money saved to help the uninsured, not another car program.

One major issue lost in the present debate: With or without reform, Medicare is in financial trouble. “At the year 2013, Medicare starts going broke,” warns Tommy Thompson, George W. Bush’s secretary of Health and Human Services.

Reform critics say that Medicare’s problems are a good reason why Congress should not add another “public plan.”

Politics of reform

In the past month, the rhetoric of the debate has escalated so much to include even an accusation that the government is planning “death panels” to decide who should live and who should die.

There’s nothing like that in the proposed legislation. Ullmann says the fear comes from a benign provision that, if a senior wants a consultation with her doctor about end-of-life decisions, insurance should pay for this.

But with more than a thousand pages of proposals, there’s the possibility for a lot of argument. Insurers don’t want a public plan. Big Pharma is preparing to spend millions on ads supporting reform — as long as the government doesn’t set drug prices.

The intensity of the debate has clearly split voters. A Gallup Poll conducted about the time of the “death panel” accusation found that 35 percent of the nation wants Congress to pass a reform bill when it returns from its August recess, 36 percent recommend a vote against and 29 percent have no opinion.

Talk of controlling costs has many frightened. A Gallup Poll last month showed 42 percent of those over 65 believed reform will “worsen medical care in the United States.”

Many critics have concerns not about what is in the legislation, but implications about what the reform could lead to later: A public plan could open the door to “socialized medicine.” Cost controls might lead to euthanasia.

The healthcare coalition’s Cherney, who has read the entire 1,000-page House bill, says euthanasia is nowhere in the legislation. “There’s a lot of misconceptions out there.”

She says the thick package has many valuable provisions — such as the government helping doctors pay for converting their offices to electronic records.

But Ullmann at UM says the “very complex” proposal “by itself causes anxiety about what might be hidden in there.” He suggests that policymakers may have erred by including too many details. “There’s something to be said for that old saying: Keep it simple, stupid.’ says the “very complex” proposal “by itself causes anxiety about what might be hidden in there.” He suggests that policymakers may have erred by including too many details. “There’s something to be said for that old saying: Keep it simple, stupid.’

By Philip K. Howard

Friday, July 31, 2009

Washington Post – link to original article

Health-care reform is bogged down because none of the bills before Congress deals with the staggering waste of the current system, estimated to be $700 billion to $1 trillion annually. The waste flows from a culture of health care in which every incentive is to do more — that’s how doctors make money and that’s how they protect themselves from lawsuits.

Yet the congressional leadership has slammed the door on solutions to the one driver of waste that is relatively easy to fix: the erratic, expensive and time-consuming jury-by-jury malpractice system. Pilot projects could test whether this system should be replaced with expert health courts, but leaders who say they want to cut costs will not even consider them.

What are they scared of? The answer is inescapable — such expert courts might succeed and undercut the special interest of an influential lobby, the trial lawyers. An expeditious and reliable new system would compensate patients more quickly and at a fraction of the overhead of the current medical justice system, which spends nearly 60 cents of every dollar on lawyers’ fees and administrative costs.

Even more compelling, expert health courts would eliminate the need for “defensive medicine,” thereby helping to save enough money for America to afford universal health coverage.

Defensive medicine — the practice of ordering tests and procedures that aren’t needed to protect a doctor from the remote possibility of a lawsuit — is ubiquitous. A 2005 survey in the Journal of the American Medical Association related that 93 percent of high-risk specialists in Pennsylvania admitted to the practice, and 83 percent of Massachusetts physicians did the same in a 2008 survey. The same Massachusetts survey showed that 25 percent of all imaging tests were ordered for defensive purposes, and 28 percent and 38 percent, respectively, of those surveyed admitted reducing the number of high-risk patients they saw and limiting the number of high-risk procedures or services they performed.

Defensive medicine is notoriously hard to quantify, but some estimates place the annual cost at $100 billion to $200 billion or more. Quantification is difficult because defensiveness is now embedded in the culture of American health care; it’s hard to separate the financial incentives from the distrust of justice. Yet every physician, and most patients, can give examples. In a recent letter to the Wall Street Journal, a Texas doctor described how, since being unsuccessfully sued in 1995, he has “doubled and tripled the number of tests and consultations that I order.”

A few years ago, I was not allowed to have minor knee surgery at an orthopedic hospital unless I went through a comprehensive “pre-operative examination.” There was no financial incentive to the hospital because this pre-operative exam was to be done elsewhere. As it turned out, I had recently endured all those tests in my annual physical. But the orthopedic hospital would not accept month-old test results, nor even an explicit waiver by me of any liability. The result was pure waste: more than $1,000 spent on wholly unnecessary tests.

Health-care professionals live the reality of defensive medicine every day. Do an online search of the phrase “defensive medicine,” and you will find scores of testimonials. But congressional leadership, amid all the talk of cost-containment, has assiduously avoided even mentioning the phrase.

Containing costs, as Rep. Jim Cooper (D-Tenn.) noted on “Face the Nation” recently, requires overhauling the culture of health-care delivery. Incentives need to be realigned. That requires a legal framework that, instead of encouraging waste, encourages doctors to focus on what’s really needed. One pillar in a new legal framework is a system of justice that is trusted to reliably distinguish between good care and bad care. Reliable justice would protect doctors against unreasonable claims and would expeditiously compensate injured patients. The key is reliability. Traditional “tort reform” — merely limiting noneconomic damages — is not sufficient to end defensive medicine, because doctors could still be liable when they did nothing wrong.

The shifts in legal structure required to contain costs are hard to “score,” using the terminology of the Congressional Budget Office. Only with experience can anyone quantify the real value of realigning incentives. But surveys and studies repeatedly confirm what every doctor knows — that they go through the day ordering tests and procedures that aren’t really needed.

As the nation debates health-care overhaul, not addressing defensive medicine would be a scandal, a willful refusal by Congress to deal with one of the causes of skyrocketing health-care costs. The real crisis here is not that health care is broken; people of good will could come together and create the conditions for rebuilding the incentive structure of health-care delivery. The real crisis is that Congress is broken, and that it answers to special interests instead of the needs of all Americans.

 

The writer is chairman of Common Good, a nonprofit legal reform coalition, and a partner with the law firm Covington & Burling LLP.

July 26, 2009

Chicago Tribune – link

Multiple health care proposals are being discussed on Capitol Hill, revised and refined into single proposals in the House and Senate. In the House, three committees have signed off on a reform bill, but the Energy and Commerce Committee has yet to produce its plan, which is likely to feature significant changes. House leaders would like the chamber to vote on a final bill before members leave for August recess. The Senate’s Health, Education, Labor and Pensions Committee has already passed its plan on a party-line vote. A competing plan from the Senate Finance Committee — which must figure out how to cover the cost of reform — is expected within the next two weeks. Once that occurs, the two proposals will be merged by Senate leaders. Below are comparisons of the House bill as it stands and the Senate Health Committee bill.

Senate Health, Education, Labor and Pensions Committee

Most individuals would be required to have qualifying health coverage, with some exceptions. Those who choose not to participate would face a tax penalty of at least 50 percent of the average annual premium cost of the basic plan.

Employers would be required to offer health coverage to workers and pay at least 60 percent of the premium, or pay $750 for each full-time employee not offered coverage. Businesses with 25 or fewer employees would be exempt.

Coverage for individuals and small businesses would be run through state-based “gateways” that would provide consumers with information to help them choose among qualified plans.

Strategies to improve health care services nationwide would include an annual national health care quality report card and the development of quality measures to assess results.

Total cost of the plan is about $1 trillion over 10 years, according to Congressional Budget Office estimates.

House Tri-Committee

Most individuals would be required to have “acceptable health coverage,” with some exceptions. Those who choose not to participate would pay a penalty of 2.5 percent of their modified adjusted gross income up to the cost of the average national premium for individuals or family coverage.

Employers would be required to offer health coverage to workers and pay at least 72.5 percent of the premium for single coverage and 65 percent for family coverage in the lowest-cost qualifying plan, or pay 8 percent of payroll into a health insurance trust fund (smaller employers would pay a reduced amount or nothing).

Individuals and employers would be able to buy coverage through a National Health Insurance Exchange with public and private health plan options. The public option would meet many of the same requirements as private plans and offer basic, enhanced and premium coverage options.

New agencies would be created to study the effectiveness of health care services and to identify and develop health care best practices. Increased Medicaid payments and Medicare bonus payments would be available to primary care providers to improve care coordination.

The total cost of the plan is about $1 trillion over 10 years, about half of which would be covered by Medicare and Medicaid savings, according to the CBO. The remainder would be covered by a surcharge paid by families with incomes above $350,000 and individuals with incomes above $280,000.

Other proposals

The Senate Finance Committee is considering a provision that would allow people ages 55-64 who otherwise wouldn’t qualify for Medicare to “buy in” to the program for a limited time.

Senate Finance Committee members are considering taxing insurance companies as a mechanism for funding the health care plan.

In terms of requiring employers to provide coverage, many Democrats and Republicans want to ensure in final language that small businesses are exempted from having to provide health care or pay a penalty.

Some on the Senate Finance Committee advocate establishing insurance cooperatives, run by and for the benefit of its members, rather than a government-run public option.

Conservative Democrats on the Energy and Commerce panel want rural health care providers to be reimbursed by the government at higher rates, which would help ensure all Americans have access to quality care. Also, the panel is considering an amendment that would have the Centers for Medicare & Medicaid Services monitor doctors, reporting back to them how the cost of their care compares to their peers.

Senate Finance Committee members have considered, but could reject, a proposal that would tax high-end insurance plans offered by employers, which would have the effect of taxing well-off Americans who choose premium care.

In the House, the floor for a surtax on income to pay for health care could be raised to $500,000 for individuals.

The Associated Press looks at some of Obama’s claims in his prime-time news conference

 

AP – link to original article

Wednesday, July 22, 2009

WASHINGTON — President Barack Obama’s assertion Wednesday that government will stay out of health care decisions in an overhauled system is hard to square with the proposals coming out of Congress and with his own rhetoric.

Even now, nearly half the costs of health care in the U.S. are paid for by government at all levels. Federal authority would only grow under any proposal in play.

A look at some of Obama’s claims in his prime-time news conference:

OBAMA: “We already have rough agreement” on some aspects of what a health care overhaul should involve, and one is: “It will keep government out of health care decisions, giving you the option to keep your insurance if you’re happy with it.”

THE FACTS: In House legislation, a commission appointed by the government would determine what is and isn’t covered by insurance plans offered in a new purchasing pool, including a plan sponsored by the government. The bill also holds out the possibility that, over time, those standards could be imposed on all private insurance plans, not just the ones in the pool.

Indeed, Obama went on to lay out other principles of reform that plainly show the government making key decisions in health care. He said insurance companies would be barred from dropping coverage when someone gets too sick, limits would be set on out-of-pocket expenses, and preventive care such as checkups and mammograms would be covered.

It’s true that people would not be forced to give up a private plan and go with a public one. The question is whether all of those private plans would still be in place if the government entered the marketplace in a bigger way.

OBAMA: “I have also pledged that health insurance reform will not add to our deficit over the next decade, and I mean it.”

 

THE FACTS: The president has said repeatedly that he wants “deficit-neutral” health care legislation, meaning that every dollar increase in cost is met with a dollar of new revenue or a dollar of savings. But some things are more neutral than others. White House Budget Director Peter Orszag told reporters this week that the promise does not apply to proposed spending of about $245 billion over the next decade to increase fees for doctors serving Medicare patients. Democrats and the Obama administration argue that the extra payment, designed to prevent a scheduled cut of about 21 percent in doctor fees, already was part of the administration’s policy, with or without a health care overhaul.

 

Beyond that, budget experts have warned about various accounting gimmicks that can mask true burdens on the deficit. The bipartisan Committee for a Responsible Federal Budget lists a variety of them, including back-loading the heaviest costs at the end of the 10-year period and beyond.

By Jeff Jacoby

Globe Columnist / October 19, 2008

Boston Globe – link

THE CHOICE you’ll have,” said Barack Obama during last week’s debate, as he told voters what to expect if John McCain’s health-insurance proposal becomes law, “is having your employer no longer provide you healthcare.

“Don’t take my word for it,” he added. “The US Chamber of Commerce, which generally doesn’t support a lot of Democrats, said that this plan could lead to the unraveling of the employer-based healthcare system.”

If only.

An end to employer-based health insurance is exactly what the American healthcare market needs. Far from being a calamity, it would represent a giant step toward ending the current system’s worst distortions: skyrocketing premiums, lack of insurance portability, widespread ignorance of medical prices, and overconsumption of health services.

With more than 90 percent of private healthcare plans in the United States obtained through employers, it might seem unnatural to get health insurance any other way. But what’s unnatural is the link between healthcare and employment. After all, we don’t rely on employers for auto, homeowners, or life insurance. Those policies we buy in an open market, where numerous insurers and agents compete for our business. Health insurance is different only because of an idiosyncrasy in the tax code dating back 60 years – a good example, to quote Milton Friedman, of how one bad government policy leads to another.

During World War II, federal wage controls barred employers from raising their workers’ salaries, but said nothing about fringe benefits. So firms competing for employees at government-restricted wages began offering medical insurance to sweeten employment offers. Even sweeter was that employers could deduct those benefits as business expenses, yet employees didn’t have to report them as taxable income. For a while the IRS resisted that interpretation, but Congress eventually enshrined the tax-exempt status of employer-based medical insurance in law.

Result: a radical shift in the way Americans paid for medical care. With health benefits tax-free if they were employer-supplied, tens of millions of Americans were soon signing up for medical insurance through work. As tax rates rose, so did the incentive to keep expanding health benefits. No longer was medical insurance reserved for major expenditures like surgery or hospitalization. Americans who would never think of using auto insurance to cover tune-ups and oil changes grew accustomed to having their medical insurer pay for yearly physicals, prescriptions, and other routine expenses.

We thus ended up with a healthcare system in which the vast majority of bills are covered by a third party. With someone else picking up the tab, Americans got used to consuming medical care without regard to price or value. After all, if it was covered by insurance, why not go to the emergency room for a simple sore throat? Why not get the name-brand drug instead of a generic?

Unconstrained by consumer cost-consciousness, healthcare spending has soared, even as overall inflation has remained fairly low. Nevertheless, Americans know almost nothing about the costs of their medical care. (Quick quiz: What does your local hospital charge for an MRI scan? To deliver a baby? To set a broken arm?) When patients think someone else is paying most of their healthcare costs, they feel little pressure to learn what those costs actually are – and providers feel little pressure to compete on price. So prices keep rising, which makes insurance more expensive, which makes Americans ever-more worried about losing their insurance – and ever-more dependent on the benefits provided by their employer.

De-linking medical insurance from employment is the key to reforming healthcare in the United States. McCain proposes to accomplish that by taking the tax deduction away from employers and giving it to employees. With a $5,000 refundable healthcare tax credit, Americans would have a strong inducement to buy their own, more affordable, insurance, rather than relying on their employer’s plan. As millions of empowered consumers began focusing on price, price competition would flourish. And as employers’ healthcare costs declined, most of the savings would return to employees as higher wages.

For 60-plus years, a misguided tax preference for employer-sponsored health insurance has distorted America’s healthcare market. The price of that distortion has been paid in higher costs, fewer choices, and mounting anxiety. The solution is to restore market forces by fixing the tax code, and liberating Americans from an employer-based system that has made everything worse.

 

Jeff Jacoby can be reached at jacoby@globe.com.