Wednesday, September 30, 2009


519 words

Public discussion of medical reform may have gotten more intelligent lately, but the legislation making its way through Congress has become increasingly outlandish. Recent reductions in the proposed fines for individuals who do not buy insurance totally undermine the purpose the fines were intended to serve. If all individuals are not required to get insurance it will be impossible to require insurers to sell policies without regard to preexisting conditions, an essential part of any reforms.

The legislation currently on the table will take our intolerable situation in medicine and make it even worse. It creates a hodgepodge of employer mandates, individual mandates (with exceptions!), taxpayer-funded subsidies, taxes on medical equipment, providers, and even on some insurance plans. We should not even be considering anything this complicated!

If we are going to require that everybody be insured, why not just go for a taxpayer financed single-payer system and be done with it? This would simplify life, minimize complexity, and eliminate all of the transaction costs involved in privately purchased insurance. (Putting the private insurance companies out of business should not be a deal-breaker. Life is tough. After enduring the bankruptcy of airlines, auto companies, and banks, we should not hesitate to put the insurance companies out of their misery if it is what the public welfare requires.)

President Obama’s unwise promise that taxes would not be raised on the vast bulk of the population has forced him to take a single-payer system “off the table” and to deny the obvious fact that compulsory purchase of private insurance is also a tax increase.

A single-payer system would require that taxes be increased on the general population, since there are not enough rich people to finance such a system no matter how much they are soaked. But increased taxes to support a single-payer system might command widespread public support since they would be offset by reductions in the payments people now are making to medical providers and insurance companies.

A powerful educational campaign would be necessary to convince people to support such a general tax increase. Such a campaign cannot succeed overnight. It would have to overcome the unfortunate fact that most people have no idea how much medical insurance is already costing them since a large percentage of the money is being paid on their behalf by employers, reducing the amount they would otherwise pay as wages. This misperception of what insurance is already costing us in reduced wages is probably the single biggest impediment to fixing our current problems.

Time will be needed to build the public understanding and support that will allow Congress to enact a single-payer system. The highest priority now must therefore be to prevent the current legislative proposals, which could permanently block real reforms, from being enacted. The obvious way to do this is for supporters of a single-payer system to join with conservative opponents of any real reforms to form a majority against the current proposals.

Coalitions of strange bedfellows are common enough in politics, for better or for worse. This is one time when such a coalition will be a really good idea.

Thursday, September 3, 2009


563 words

We are told that one reason medical system reforms are needed is that medical costs are increasing so rapidly.

“Medical costs”, however, is an ambiguous term. “Costs” may refer to the total amount of money (or percentage of the GDP) being spent on medical care each year in the United States. Or “costs” may refer to how much is charged for a specific medical procedure such as an MRI, a colonoscopy, installation of a filling, or delivery of a baby.

The percentage of GDP going to medical care is up to 16% and rising. But there is no way to know how much of the GDP ought to be spent on medical treatments. As the population ages and new medical treatments and technologies are invented, it would not be surprising if total costs were to increase. This type of increase in medical costs is therefore not inherently alarming.

If the costs of specific medical procedures are increasing, however, this is something we really need to be concerned about.

There can be no doubt that the costs of many procedures are going way up. A few years ago I found an old receipt indicating that my grandfather, a dentist, had put in a filling back in the mid-1930s for $1. Adjusting that figure for inflation, the current charge for a filling would be about $14.

The hospital bill when our daughter was born in 1969 recently turned up. My wife and our new daughter were in the hospital six days. The total bill was $471.22. (We paid $47.50 and our insurance paid the rest.) If the real (constant dollars) price for delivering a baby hadn’t increased the charge today would be $2,733.27 (but only if mother and daughter stayed in the hospital for six days).

Typical charges for having a baby in 2009 at the Corvallis hospital average between $5,000 and $6,000 but may sometimes be as much as $8,000 according to a hospital official. (This does not include doctors’ fees, which was also the case with our hospital bill in 1969.) And this is assuming mother and baby are only in the hospital two days. .

Hospitalization to have a baby----a specific procedure----now costs at least twice as much (in constant dollars) as it did in 1969.

The breakdown of costs in our 1969 bill gives further food for thought. Back then the daily charge for a hospital room (including private room surcharge and “routine nursing”) was $33.64, or $195.42 in 2009 dollars. The 2009 daily charge for a private or semiprivate room at the Corvallis hospital is $1,357, or seven times as much.

One would expect the costs of specific services and procedures to remain about the same (after adjusting for inflation) or even decrease thanks to efficiency improvements, improved technology, and economies of scale. But instead in many cases these costs have greatly increased. Somebody needs to figure out why this is and what might be done about it.

Perhaps too much attention is now being paid to the costs of medical insurance and too little to the costs of the medical services and procedures for which insurance pays. If the costs of the procedures can be gotten under better control, insurance premiums will reflect this fact and themselves become more manageable, whatever insurance system we then have.

[This article has appeared in the Portland Oregonian, The Detroit Free Press, The Adrian (Michigan) Daily Telegram, and elsewhere.]