Ross Douthat, writing in the New York Times, describes an alternative approach to medical reform, and in the process has some acid comments about the legislation currently pending in Congress. A very interesting article!
Douthat's key paragraph summarizes the proposal well:
"But there’s another path, equally radical, that’s more in keeping with the traditional American approach to government, taxation and free enterprise. This approach would give up on the costly goal of insuring everyone for everything, forever. Instead, it would seek to insure Americans only against costs that exceed a certain percentage of their income, while expecting them to pay for everyday medical expenditures out of their own pockets."
Monday, October 19, 2009
Sunday, October 18, 2009
Another complication in medical billing
It's not just airlines and banks that are hitting unwary customers with "fees" in order to make their prices seem more reasonable. Now some medical offices are tacking on "facility fees" for a visit to the doctor. See this interesting article that ran in the Washington Post.
Since it is often impossible to find out ahead of time what a doctor or hospital visit is going to cost, medical offices and hospitals can't be doing this to make their services seem cheaper to people who are reading the right hand side of the menu. But it certainly complicates our efforts to understand medical costs.
Since it is often impossible to find out ahead of time what a doctor or hospital visit is going to cost, medical offices and hospitals can't be doing this to make their services seem cheaper to people who are reading the right hand side of the menu. But it certainly complicates our efforts to understand medical costs.
A First Comment on T.R. Reid's The Healing of America
I just finished reading The Healing of America by T.R. Reid last night. The book has been much praised and much discussed, and I recently broke down and bought a copy after rising only from 21st to 18th in the waiting list for it at the Corvallis Public Library.
Reid compares the medical and insurance systems in a number of industrialized countries and proposes that the U.S. draw on their experience in designing reform legislation here. This is such a no-brainer that one would think even Congress might think it is a good idea. But ....
No doubt I will comment further on this book, especially after I finish reading an older work that examines the unsuccessful efforts to reform the U.S. during the Clinton administration. But for now I just have one observation:
Reid claims that "every developed country except the United States has designed a health care system that covers every resident." (Page 237) As a result of email discussions I recently had with a former student of mine at Adrian College now living in Taiwan and a classmate at Willamette and Johns Hopkins now living in France, I do not believe that Reid is correct here.
Lisa, who lives in Taiwan with her family reported that their daughter "had surgery to have a deviated septum fixed and because she was no longer a dependent was not covered by insurance and cost us 1700 USD for the surgery and the 3 day hospital stay. " Of course this sounds pretty good compared to $1357 a day for 3 days at our local Corvallis hospital, plus whatever the surgical fees would have been here. But clearly not all residents are covered by the Taiwan insurance system.
Maureen, living in Paris with her husband, reported that they are not covered by the French system and had to furnish proof before they were allowed to live there that they have insurance from the U.S. She also noted how hard it is to get their American insurance to pay for anything. (They are both retired, but Medicare does not pay for treatment abroad, so they are relying on insurance from their former employers.)
Despite this criticism, Reid's book is exceptionally interesting and useful and I urge anybody interested in health care reform to read it without undue delay.
Reid compares the medical and insurance systems in a number of industrialized countries and proposes that the U.S. draw on their experience in designing reform legislation here. This is such a no-brainer that one would think even Congress might think it is a good idea. But ....
No doubt I will comment further on this book, especially after I finish reading an older work that examines the unsuccessful efforts to reform the U.S. during the Clinton administration. But for now I just have one observation:
Reid claims that "every developed country except the United States has designed a health care system that covers every resident." (Page 237) As a result of email discussions I recently had with a former student of mine at Adrian College now living in Taiwan and a classmate at Willamette and Johns Hopkins now living in France, I do not believe that Reid is correct here.
Lisa, who lives in Taiwan with her family reported that their daughter "had surgery to have a deviated septum fixed and because she was no longer a dependent was not covered by insurance and cost us 1700 USD for the surgery and the 3 day hospital stay. " Of course this sounds pretty good compared to $1357 a day for 3 days at our local Corvallis hospital, plus whatever the surgical fees would have been here. But clearly not all residents are covered by the Taiwan insurance system.
Maureen, living in Paris with her husband, reported that they are not covered by the French system and had to furnish proof before they were allowed to live there that they have insurance from the U.S. She also noted how hard it is to get their American insurance to pay for anything. (They are both retired, but Medicare does not pay for treatment abroad, so they are relying on insurance from their former employers.)
Despite this criticism, Reid's book is exceptionally interesting and useful and I urge anybody interested in health care reform to read it without undue delay.
Thursday, October 1, 2009
Outstanding Medical Reform Analysis From Washington Post
This columnist has done a great job of analysis and of writing. I urge everyone to read it and spread it around to friends.
http://gazettetimes.com/news/opinion/columnists/article_372d5e9e-ae5b-11de-ba33-001cc4c002e0.html
http://gazettetimes.com/news/opinion/columnists/article_372d5e9e-ae5b-11de-ba33-001cc4c002e0.html
Wednesday, September 30, 2009
MEDICAL REFORM: TIME FOR A "STRANGE BEDFELLOWS" COALITION
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.
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
TWO DIFFERENT KINDS OF MEDICAL "COSTS"
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.]
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.]
Friday, July 17, 2009
Medical Reform Deal Breaker: Enforcement, Transaction Costs
528 words
(This article was published in the Corvallis, Oregon Gazette-Times on July16, 2009)
Congress seems to be moving towards a Massachusetts-style insurance system. Individuals will be required to purchase insurance and those who don’t will be fined. Insurers will be required to sell to all comers and cannot discriminate against pre-existing conditions.
A recent Wall Street Journal column noted that people in Massachusetts have been gaming the system. They pay for insurance just long enough to get thousands of dollars of medical care, then discontinue it and pay the nominal fine instead to save money. If they get sick again, they can once again sign up for insurance. This is like letting people carry no insurance on their houses, and then sign up for insurance after the house has burned down.
It might be possible to tweak the Massachusetts system to prevent such gaming, but this would not fix the more fundamental problems that any compulsion to buy insurance would have: enforcement costs and transaction costs.
To make purchase of insurance truly compulsory the fine for not being insured would have to be comparable to the costs of insurance----in other words, very high. A large, intrusive, and expensive governmental bureaucracy would be needed to administer such compulsion.
Transaction costs would fall directly on Americans as individuals. We would all have to choose between a large number of complex insurance policies with no way to make systematic comparisons of costs and benefits between them. It would be impossible for most of us to be sure exactly what coverage we were buying. We might benefit from expert advice, but advice would cost something, and there would still be the problem of deciding which expert to consult.
Insurance purchased household-by-household would inevitably cost more than insurance purchased on behalf of employees by businesses---retail costs are always higher than wholesale, and group bargaining is more efficient than individual bargaining.
Complexity and those transaction costs due to complexity might be reduced if insurance companies were restricted to offering only a few government-designed standard contracts, as is now the case for medigap policies purchased by many Medicare members, policy A, policy B, etc. This would help people understand what they are buying and shop for the best price.
But 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.
True, a single payer system would require a tax increase. But requiring people to buy insurance is also a tax increase, even though it doesn’t show up on our tax forms or in government budgets. And increased taxes would be offset by eliminating the premiums that we now pay directly, or indirectly when our employers write the insurance check.
The fact that a single-payer system would put the private insurance companies out of business (they could still sell other kinds of insurance) should not be a deal-breaker. Life is tough. A country which has survived the bankruptcy of airlines, auto companies, and banks should not hesitate to put the insurance companies out of their misery if it is what the public welfare requires.
(This article was published in the Corvallis, Oregon Gazette-Times on July16, 2009)
Congress seems to be moving towards a Massachusetts-style insurance system. Individuals will be required to purchase insurance and those who don’t will be fined. Insurers will be required to sell to all comers and cannot discriminate against pre-existing conditions.
A recent Wall Street Journal column noted that people in Massachusetts have been gaming the system. They pay for insurance just long enough to get thousands of dollars of medical care, then discontinue it and pay the nominal fine instead to save money. If they get sick again, they can once again sign up for insurance. This is like letting people carry no insurance on their houses, and then sign up for insurance after the house has burned down.
It might be possible to tweak the Massachusetts system to prevent such gaming, but this would not fix the more fundamental problems that any compulsion to buy insurance would have: enforcement costs and transaction costs.
To make purchase of insurance truly compulsory the fine for not being insured would have to be comparable to the costs of insurance----in other words, very high. A large, intrusive, and expensive governmental bureaucracy would be needed to administer such compulsion.
Transaction costs would fall directly on Americans as individuals. We would all have to choose between a large number of complex insurance policies with no way to make systematic comparisons of costs and benefits between them. It would be impossible for most of us to be sure exactly what coverage we were buying. We might benefit from expert advice, but advice would cost something, and there would still be the problem of deciding which expert to consult.
Insurance purchased household-by-household would inevitably cost more than insurance purchased on behalf of employees by businesses---retail costs are always higher than wholesale, and group bargaining is more efficient than individual bargaining.
Complexity and those transaction costs due to complexity might be reduced if insurance companies were restricted to offering only a few government-designed standard contracts, as is now the case for medigap policies purchased by many Medicare members, policy A, policy B, etc. This would help people understand what they are buying and shop for the best price.
But 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.
True, a single payer system would require a tax increase. But requiring people to buy insurance is also a tax increase, even though it doesn’t show up on our tax forms or in government budgets. And increased taxes would be offset by eliminating the premiums that we now pay directly, or indirectly when our employers write the insurance check.
The fact that a single-payer system would put the private insurance companies out of business (they could still sell other kinds of insurance) should not be a deal-breaker. Life is tough. A country which has survived the bankruptcy of airlines, auto companies, and banks should not hesitate to put the insurance companies out of their misery if it is what the public welfare requires.
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