Is There a Moral Case for ObamaCare?
There is considerable consternation on the political left these days over whether Barack Obama failed to make a moral case for his signature health legislation. See Ted Marmor (gated), writing in the Journal of Health Politics, Policy and Law, Austin Frakt’s responses here and here and other views here and here.
I’m sure many readers are astonished that the question is even asked.
After all, how can there be a moral case for a 2,700 page bill that was shaped and molded by self-seeking interests, with no more regard for principle than one would find in a game of musical chairs? Isn’t asking for a moral defense of ObamaCare sort of like asking what is the moral case for the IRS Code?
Even if you believe that some of us have a moral obligation to others in the matter of health care, what does that belief have to do with legislation in which costs and benefits are strewn about with all the care of a drunken sailor? Isn’t the Affordable Care Act (ACA) self-evidently immoral? Or at least amoral?
I generally try to avoid ethical discussions with my friends on the left for two reasons. First, with respect to actual legislation they seem incapable of distinguishing what really happened from their ideal vision of what should have happened. More fundamentally, I find that people on the left seem incapable of thinking rationally about the ethics of public policy.
I realize that’s harsh. But it’s true!
Take the first issue. Ted Marmor thinks that the most important ethical justification for ObamaCare is that it provides “affordable health care for every American.”
Here’s the problem: Nowhere in the ACA is there any guarantee at all that health care will be affordable. More importantly, there is no guarantee that it will be accessible. And if it’s not accessible, that means that millions will find that alternative avenues for seeking care are unaffordable. As I have argued before, it is very likely that we will spend close to $1 trillion over the next 10 years and leave the poorest and most vulnerable segments of our population with less access to care than they would have had without any reform at all.
Even if we agree with Marmor that everyone should have access to affordable care, that couldn’t possible justify the Affordable Care Act. Almost everybody already has access to affordable care! At last count, there were about 22,000 Americans with serious health problems who could not obtain health insurance because of a pre-existing condition. (See here and here.) The ACA has solved their problems by providing good coverage for the same premium healthy people pay. While this change is no doubt very important to the people affected, it is relatively trivial in the great scheme of things.
What cries out for moral justification are the mandates and regulations being forced on the other 300 million people. Why are they being forced to pay more, or allowed to pay less, than the true cost of their insurance? What moral principle can justify that?
Search the world’s ethical codes and you will have a hard time finding any that are consistent with a health reform that:
- Gives people in health insurance exchanges up to 10 times as much federal subsidy as people at the same income level getting insurance at work.
- Forces young people to pay two or three times the real cost of their insurance in order to subsidize older people who have more income and more assets.
- Takes from low-income seniors in order to provide subsidized health insurance for non-seniors who have higher incomes.
- Takes from people who use tanning salons and people who need crutches and wheelchairs and pacemakers and gives to … well …. who knows?
Then there is the second issue. What does it mean to think rationally about the ethical foundations of public policy? It means beginning with the moral principles governing individual behavior (What do I owe you? What do you owe me?) and then deriving the implications for a proper political relationship.
Think of the long line of thinkers on the “right” (Locke, Nozick, Epstein, etc.) who have contributed to a rich literature defining, defending and promoting property rights, freedom of exchange and freedom of contract. Add to that the great body of work we call the “common law.” It is almost exclusively focused on who owes what to whom, given that we are all equal before the law and each of us has a right to pursue his own interests.
I know of nothing on the “left” that even begins to approach this level of seriousness.
Some might point to John Rawls and his theory of justice. Because of a quirky assumption, Rawls concludes that a just society is one organized to maximize the wellbeing of the least well off. As an economist, I can assure you that doesn’t mean socialism. In fact, if you consider the least well off indefinitely into the future (and it’s impossible to justify excluding them), Rawls’ theory implies an extreme form of capitalism — one that maximizes economic growth. Minus the quirky assumption, Rawls’ theory implies garden variety utilitarianism of the type embedded in neoclassical welfare economics.
In saying that the political left is virtually bankrupt when it comes to connecting personal ethics to public policy, I invite readers to prove me wrong. Show me a leftwing treatise on ethics that tells me what I owe, to whom I owe it, why I owe it, and why government should enforce the transfer. Who knows, if the treatise is convincing, I might just pay up voluntarily.
But I don’t think you can find such a work.
Bottom line: when it comes to the ethical foundations of public policy, on the left there is just no there, there.
I really like this post. It is a thoughtful response to a lot of gibberish.
I’m an economist rather than a philosopher. As a result I find the argument to be illogical that society somehow has a moral obligation to supply a complex service largely free of cost (outside of the market system). Of course, I find the whole concept of collective morality in the absence of individual morality to be problematic. If something is a moral obligation collectively, it must also be a moral obligation individually.
Obama care is not amoral. It is immoral. Words have precise meanings.
Thanks again for boiling everything down to factual, understandable terms. Another winning article!
I’m an actuary, not a moralitarian, BUT….
How can it be moral to regulate the health of 308 million people in order to force 21 million more people into a third party payer plan when history has shown that they do not want it.
You have laid down the gauntlet brilliantly, John! Socialism is evil, and we would be obligated to oppose it for that reason even if it did have economic advantages (and it doesn’t).
You ask for a left wing treatise on the ethics of a government role in transfer, but let’s go one better and choose a right wing treatise, F.A. Hayek’s “The Road to Serfdom”:
“There is no reason why, in a society which has reached the general level of wealth ours has, (the certainty of a given minimum of sustenance) should not be guaranteed to all without endangering general freedom; that is: some minimum of food, shelter and clothing, sufficient to preserve health. Nor is there any reason why the state should not help to organize a comprehensive system of social insurance in providing for those common hazards of life against which few can make adequate provision.”
This is an excellent piece. I noticed a long time ago that liberals routinely resort to arguments about “fairness” in justifying their policy prescriptions, but they *never* define what they mean by “fair.” The same goes for “morality.” There may be solid moral principles for government intervention in the marketplace, but I have not seen them articulated rationally and clearly. As John says, a proper treatment must begin with some principles from which the policy prescriptions are derived. Furthermore, any proper moral justification for public policy must deliver the goods, not just make some people feel good about themselves. To arrive at credible policy conclusions, it must take into account general equilibrium outcomes and the reality of government failure, neither of which liberal proposals ever seem to do. Most (all?) liberal arguments about morality, as they now stand, are nothing more than half-baked excuses for policies that make some people feel good even though they harm the supposed beneficiaries (e.g., the minimum wage) or that crassly enrich some at the expense of others (e.g., the minimum wage).
The biggest problem trying to discuss public policy with avowed lefties is that they refuse to grant the presumption of good will: You think the way you do because you are selfish and have a devious, self-serving agenda. Not much basis for rational discourse there!
As for the manifest absurdity of Obamacare as public policy, check out Walter Russel Mead’s critique of another big government fantasy, the global warming treaty (http://blogs.the-american-interest.com/wrm/2011/06/27/the-failure-of-al-gore-part-deux/). It’s an elegant, unrebuttable demolition job, and every concept applies just as much to Obamacare.
Finally, rights-talk is all very fine, but the political reality is that Americans will not accept a system that requires them to step over the bodies of ailing individuals who could be cured if they had access to health care. It is impossible to fully square a circle containing that demand and the equally real products of moral hazard implicit in any policy aimed at meeting it. The key word there may be “fully” – politics and moral hazard mean we can never create a perfect balance, but we can surely do a helluva lot better than the current system, and almost infinitely better than Obamacare.
Don – A government “role” in transfer is not the same thing as government enforcement of such a transfer. Hayek speaks of the state “organizing” but doesn’t say anything about actually doing the provision. Also, he was referring to true insurance situations, i.e., catastrophic – hence the reference to “…common hazards of life against which few can make adequate provision.” If only a few can make adequate provision, then we are not talking about run of the mill things, for which most people can, and do, make adequate provision. If a “reasonably” regulated free market can do a better job than the government in actually doing something, then the government role has been kept to its necessary minimum. We haven’t had such an environment in health care.
In our capacity of economist, we have nothing to say about the morality of public policy.
As citizens, of course, we can comment on morality as it derives from whatever theory of justice we favor.
There is no overarching theory of justice. Here as elsewhere, it is a matter of consumer choice.
So citizen Goodman is free to articulate his views on morality just as citizens McCanne and Marmor are free to articulate theirs.
@John Seater – Well said.
And thank you, Dr. Goodman, for another insightful post.
It will be interesting to see if the moral and philosophical arguments play a role at all in the 2012 election. As you noted Obama did not make the moral case. I think the Obama administration and the democratic majorities assumed it was implicit. It will be interesting to see where the election forces him to go in retoractive justification.
Interesting post, John and I agree that it’s a waste of time seeking the ethical or moral underpinnings of the Patient Protection and Affordable Care Act. I think you’re on a vaery slippery slope, however, when you posit that this ethical and moral blindness is solely a “disease” of the political left. If you take off your blinders, you will discover ample evidence of the affliction on the political right.
Having specialized in the health insurance business as a General Agent for 18+ years, I can say with conviction that Obamacare will NOT work. Already, clients of mine are suffering. Here’s a few examples:
1) Government mandated that children under the age of 19 not be imposed with pre-existing conditions. So…now there’s no permanent individual plan that I can write on children under the age of 19. Their rights have actually been removed!
2) Government created a ‘temporary’ high risk pool for those who can’t obtain insurance elsewhere due to pre-existing conditions. Problem is… in order to qualify, you must have not had insurance for the past 6 months. Aren’t those the people who NEED this insurance? And, the cost is over $500/month for one person….
3) Insurance rates have continued to rise at record levels, even after Obamacare was passed in March of last year.
4) Government proposed that we insurance agents are not needed (therefore, not compensated like we were prior to Obamacare)to help clients surf through their choices. And, beginning in 2014, we could be out of business entirely! Interesting because even today, my clients need my help year round with renewal choices, claims challenges, adding/deleting employees or dependents, etc. And, it hasn’t been discussed that potentially 500,000+ insurance agents could end up on the unemployment part of the equation while 15,000 + IRS agents are added to monitor the new law!
Just like with good driver, bad driver concept with auto insurance, ultimately, the healthy will help to pay for the unhealthy with new health law. And, for those states who have tried Exchanges, their rates have gotten so high that people have abandoned the concept due to price.
Finally, & sorry for my rant, I’m not sure everyone understands that we’re going back to an HMO mentality requiring everyone to see a Primary Care physician prior to seeing any type of Specialist. Most people over the years have left HMOs because they didn’t like the control the Primary Care physician had over them. And, that’s what we’re going back to beginning in 2014?????
My vote is to repeal & replace with something that makes more sense for everyone and NOT just the unhealthy.
In response to Don McCanne’s quote of Hayek:
When Hayek wrote that in 1943, the world had little experience with health insurance at all, much less with market provision of health insurance. Today, we have lots of experience with the former and enough experience with the latter to know that markets “can make adequate provision” of health insurance for more than just a “few individuals.” In 1943, Hayek and his contemporaries also knew little about how health insurance affects the incidence of health “losses.” Today, we have lots of evidence to show that moral hazard is real and — as Hayek would predict — governments have only the bluntest of tools for dealing with it. Finally, universal-coverage schemes have come to consume such considerable shares of workers’ earnings, as well as other aspects of individual self-determination, that it is implausible to suggest that socialized medicine is compatible with individual freedom.
In short, Hayek was wrong here.
http://www.cato-at-liberty.org/anti-socialism-racism/
At the risk of being pedestrian, in my experience people of a Leftist bent see “the law” as almighty. So, something written into law is guaranteed to exist in fact, but if there is no law the thing in question does not exist.
The law “guarantees” a certain set of services to people on Medicaid, never mind that they can’t actually get those services. The job is done once the law is passed.
Similarly, there is no law that “guarantees” that a doctor will see me when I offer to pay cash. Ergo, I must be deprived of physician services even when I am receiving them.
Therefore, if we pass a law that says every American shall have access to affordable health care services, our work is done. And if we pass a law that says it shall always be warm and balmy in Washington DC on Inauguration Day, you can leave your overcoat at home. Guaranteed!
Greg,
The reason behind that is fairly simple. It used to really be perplexing, but i finally figured it out. They favor the government because they are usually indecisive, and since they cant make their own decisions, they prefer the almightly government make them
Chris, thank you for you “rant.”
@Jack McHugh
Good point. And isn’t it interesting that those who must pay for government welfare programs are presumed to be driven purely by selfishness if they oppose those programs, whereas those who get the benefits of those programs never are presumed to be driven by selfishness. Wanting to keep the fruits of one’s labor is selfish, whereas wanting to use the police power of the state to take the fruits of someone else’s labor is not selfish. Remarkable.
John, I noticed a CA Congressman is proposing that if the Federal Gov’t can force you to buy health insurance instead of shifting that potential burden to society, then they should also force people to buy Long term Care, disability coverage, and even Life insurance so as to not burden others. The many people on Medicaid nursing home benefits is a real drain on the taxpayer.
Home run, John. I posted on it and it is scheduled for about an hour from now at Econlog.
Dr. Reinhardt, please explain what you mean when you say “there is no overarching theory of justice.” Thanks.
The only federally funded public healthcare policy that even has a chance at feasibility is a single payer system that covers everybody that has a right to reside in this country. Expanded Medicare, paid for by taxpayers with the same coverage for everyone, and no private health insurance companies in play at all. The propaganda and misinformation surrounding this proposition blew it out of the water without one politician willing to give it the time of day. Why? Because it made sense, would have worked and nobody stood to make a bundle off of it. Instead we got lots of whining and hand wringing about “socialized medicine” which is not a part of single payer at all. Private doctors, hospitals and clinics, paid by a fund that every person with a job in this country pays into. I did the math and figured out that my Medicare tax would have to increase by 700% annually to equal what I paid in insurance premiums and deductibles every year. There is nothing morally sound about ObamaCare because just as John says it won’t cover the people who would most benefit from public healthcare. This monster was created by DC and the health insurance industry to shut people up and line pockets.
Jennie,
Are you quite sure you want to expand Medicare to everyone? Are you familiar with Medicare? Are you aware that there are different deductibles for Parts A and B and these total $1,294 per person? Are you aware that there is an unlimited 20% coinsurance responsibility for patients? Are you aware that there is virtually no Rx coverage in Parts A and B, and that you have to buy yet another policy (Part D) to cover that? Are you aware that almost everyone on Medicare also has to buy a private insurance policy to fill these and other gaps? Are you really quite sure that you want to ban private insurance, which is the only protection against these uncovered costs? Are you aware that your Medicare taxes pay for only a fraction of your coverage?
Hayek got this wrong because health spending was about 2 or 3 percent of GDP when he wrote it and he believed that health insurance was not subject to moral hazard. I.e. people do not get cancer because they want to exploit free care! He was not writing about first-dollar coverage of medical expenses but a safety net for catastrophes.
Hayek did not realize that the welfare state would metastasize. Hayek was conserned with the government owning the means of production: steelworks, coal mines, railroads, etc.
Interestingly, commercial insurers in the old days did not want to write health insurance because they thought it would be very subject to moral hazardm contra Hayek. So, Blue Cross & Blue Shield started up as non-profits offering community-rated group policies (Cunningham & Cunningham, The Blues, Dekalb, IL, Northern Illinois University Press, 1997).
In the U.S., insurance companies initially avoided writing medial insurance. In 1919, a trade magazine, The Insurance Monitor, wrote, “…the opportunities for fraud [in health insurance] upset all statistical calculations…. Health and sickness are vague terms open to endless construction. Death is clearly defined, but to say what shall constitute such loss of health as will justify insurance compensation is no easy task.”
Greg, you did not mention the tens of trillions of dollars in net present value of future payments (unfunded liabilities) already in place, which would multiply under the expansion of Medicare.
Wouldn’t Keynes’ work qualify as serious?
How moral is it to keep a large group at the bottom of the economic ladder by providing incentives to stay there? The declining exchange subsidies produce a margin tax rate of about 60% for individuals making $30k/yr. Where is the moral imperative to encourage people to achieve and keep more of their own earnings? Give me an example of a liberal city government that has advanced the long term wellbeing of its downtrodden and their children?
Jennie – why do you not realize that any form of “single payer” will require a “universal provider” or at least a “universal payment schedule” to go along with it? How would your Utopian (by the way, an alternative meaning for Utopia as opposed to “ideal” place is “no” place – that is what you will get here) pay providers? Like Medicare and Medicaid do? You will have no providers after a while, at least none who you will want to go to, and you are suggesting that private insurance be essentially outlawed, so you will create a huge black market in “illegal” medical services. You can more or less guarantee coverage, you can’t guarantee care, access to care, and especially not access to high quality care. Rationing will exist in one form or another. Egalitarian/statists would rather everyone be restricted to a miserable, mediocre level of care (except for themselves, of course, as the pigs of Animal Farm), than allow some people of means be able to have any better care than the poorest. The thing is, if you allow the liberty of a free market to exist within both provider pricing/provision of care, and within the arena of financial vehicles for direct and catastrophic insurance of care, you can generate a surplus of social good that allows even the poorest to receive a more than acceptable minimum level of care than you get by forcing everyone into a statist, top down control system. Health care and health care financing is organic, and bottom up, and every time someone tries to do otherwise it fails, or it robs the society of significant liberty. Oh, there is so much more just, well, wrong, with what you said, but I have to stop somewhere.
Well, there is consequentialism and liberalism, each with their own branches, along with communitarianism.
These are all theories of justice with quite different implications for health-care policy.
One of these does not dominate any other in terms of validity.
Each must be respected in its own right.
It is why I get along so well with folks at the Cato Institute. Their theory of justice is different from the one I prefer, but I respect them.
I meant my previous comment as a response to Woody.
I have a client with dual citizenship in Canada & US. Here’s a classic example of what’s to come: Her 3 year old fell and hit her head. She complained of a headache for over 48 hours. The wait time under ‘Universal Healthcare’ in Canada for an MRI was 5 months…not believed to be necessary, according to doc there. They got on a plane & scheduled next day MRI here in US. How will we feel when we too have this kind of wait time? They are as upset about Obamacare as many of us are. They know what’s to come!
Chris,
I left Canada because my wife was crippled by a 2 year wait for surgery in Canada, and my son suffered head trauma and could not get a PET or CT scan. I now bring dozens of Canadians to the US per year for care. I have one client who has a left to right shunt due ot a hole in his heart, and he is perfectly willing to pay $12,000 for open heart surgery in the US. Left in Canada he would die.
They call it “Moral”
Going back to the title regarding “Is there a moral case…?” – regardless of your answer, many of the medical students I work with believe there is. That is how they think and FEEL. Furthermore, they believe that people and particularly “the rich” ought to be taxed to pay for it. However, on deeper questioning, I quickly find that they are not aware of the implications for the economy, nor the effects Obamacare might have on future quality and innovation.
John, cudos to you for having the courage and conviction to write this article. Not only are the political left bereft of any moral or ethical standing relative to the passage of PPACA for the reasons you express, but for many other reasons as well.
Example: the concept of “moral” social intervention in the development of interventional legislation like PPACA presupposes that the process is “fair to all concerned and to all who are impacted” by the legislation. This is a fundamental test of the ethics of any legislation. So lets examine the PPACA legislation based on this most basic concept of fairness.
This legislation is funded primarily by SENIORS who have paid into the Medicare system their entire life while paying for their portion of their commercial insurance through their employer…and by HOSPITALS who have been self funding all of the non-insured, self-pay patients that enter their ER’s for years and years.
Is there any benefit to SENIORS from this legislation to justify their burden of funding the bill? I can’t think of any and I am in the business. What about HOSPITALS? It is possible to extrapolate that the additional insured that result from this legislation will cause the volume of unfunded ER and hospital care to decrease, thus benefiting hospitals somewhat.
However, the truth is that the mandate to cover 32 million additional citizens without any incentives to educate and enable additional caregivers will cause very long waiting times in doctors offices and ER’s; thus causing huge access to care problems and pricing pressures which will hit hospitals very hard and force many into early closure. Its a simple supply/demand equation; when the demand for medical care far exceeds the supply of medical professionals to deliver the care, the medical professionals can and do command huge wage increases and this will cause significant upwards pricing pressures on hospital services, which, in turn will cause uncompensated care in the ER’s to actually increase even more!
Since there is obviously NO benefit to SENIORS or Hospitals, it is flat unethical to foist this totally unvetted legislation upon seniors and hospital providers in order to fund it.
I submit to you that I have been in the business of managing Medicare and Medicaid physicians and the care delivered to the beneficiaries thereof for over 15 years now and I am totally confident that PPACA will systematically destroy our healthcare delivery system. The saddest part of this legislation is that the very people who are currently disenfranchised through our current system will continue to suffer because of access to qulaity and timely care issues. Yes, they will have insurance benefits, but they will not be able to acccess quality and timely care. This is unethical and deceitful. It is immoral to suggest that 32 million people will now enjoy access to care like the rest of us with commerical insurance when, in fact, the opposite is true because of the supply/demand equation; basic economics 101. Those of us with commercial insurance who already have a Medical Home will continue to have access to quality and timely care and our care may even get better as a result of Concierge care delivery. The rest of the population whose PPACA insurance coverage pays at Medicaid rates will be flat out of luck. Mark my words! PPACA MUST BE REPEALED!
The current Medicare Advantage system is working extremely well at reducing the cost of care and improving the general healh and well being of the seniors who are a part of this system. This is well documented. My own company has proven this for our seniors under our management. We are an integrated delivery network of doctors who share financial risk with health Plans. The government would be well advised to encourage participation in this existing Medicare Advantage system and to allow the private sector to take care of the uninsured through the promotion of intrastate commerce and provision of state risk pools for working people with pre-existing conditions. Let the states figure this out and encourage them to do so at the federal level through federal incentives.
Dr. Goodman & Dr. Reinhardt: As economists, I wonder if you could answer these 2 questions: (1) What is the inherent value of private health insurance? That is, what marginal benefit does private insurance confer vis-a-vis a public program like Medicare, in terms of access, quality, choice or cost-effectiveness? (2) If the whole point of having insurance is to efficiently mitigate the financial consequences of catastrophic illness or injury, why would any rational person want to pay a premium for private insurance that siphons off a substantial portion to pay for the insurer’s profit (as well as its administative expenses required to generate that profit) when a public program could perform the insurance function for less cost?
@ Jennie Fiedler – Hooray! I agree completely.
@James:
There are two major differences between private and public insurance programs having to do with the incentive and information problems.
For-profit enterprises have a residual claimant (someone who is able to get some cut of value they create–things that lower cost while providing enough value to keep attracting customers). Medicare does not have anyone with the incentive to reduce waste and ensure that individuals get the most value for their money. This problem is exacerbated by the fact that payment is separated from the problem. It is especially exacerbated by the fact that a Medicare manager has strong incentive to increase their department’s budget (see Niskanen), leading them to encourage waste. Also note that existing regulations, taxes and subsidies to private insurance plans weaken market forces making existing insurance perform more poorly than would happen in a free(er) market.
The information problem is a more subtle point, but perhaps more important in the long run. A planning board is fundamentally unable to gather the relevant information that a market constantly makes available and useful. Information about who wants what, under what circumstances, and how much they want it, on the demand side and who can provide that, under what circumstances, at what cost on the supply side. A great deal of this information is literally only available through the act of buying and selling on a market (see Hayek on “The Use of Knowledge in Society”).
In short, acknowledging that there is no free lunch, the institutional qualities of government solutions give them a stark disadvantage over market solutions. This is especially true if we are concerned with the health care industry we will face in 20 years.
@James
There is a significant problem the fundamental assumptions underlying your premises, as demonstrated with your last sentence: “…when a public program could perform the insurance function for less cost.” Public programs haven’t, won’t, and can’t provide the insurance function or any other function better than the market. There isn’t a government program around which couldn’t be done better and more efficiently than through markets. Thank you, @Rick, for your great insight.
Good intentions do not equal good results, and you are dealing with good intentions and high-sounding rhetoric. They are empty words. The entire bill in question was written by powerful special interest groups for the benefit of powerful interest groups. The result will be to impoverish the nation to make some politically connected parties very wealthy.
Very good!
@Rick,
Thank you for your detailed response. Can you please clarify for me how a for-profit insurer creates “value” while lowering cost AND preserving choice of provider? And, if Medicare as you say is wasteful of resources, why is it that Medicare’s medical loss ratio is so much higher than that of private insurance? Isn’t the excessive administrative costs for private insurance “waste”?
Patients with Medicare are free to visit almost any physician, outpatient clinic or hospital they choose. In other words, the financial barriers to choice under Medicare are much less than they are under a for-profit HMO. Isn’t the concept of unrestricted choice an inherent component of market-based economics?
Regarding Dr. Bryant’s comment, ask the young doctors if they, themselves, will appreciate the taxes they will pay since, if they are typical, they’ll be making $392,000 a year.
@James – The typically reported equivalent “loss ratio” for Medicare is misleading at best, and fraudulent when used by proponents of Single Payer. It has been shown repeatedly how the administrative “cost” allocated to Medicare is understated by leaving out substantial amounts of indirect costs not included in the government “accounting,” but included in the private comparisons. In addition, Medicare doesn’t perform half of the functions of the private insurer, it is essentially a check writer, that allows anywhere from 15-30% waste, theft, fraud, and abuse in payments and unnecessary benefits. I would gladly pay 5% more in administration to save even half that 15-30% back by utilizing even basic elements of fraud prevention, eligibility checking, and medical necessity. By the way, the most recent Sherlock Expense Evaluation Report says that for the Blue Cross/Blue Shield organizations overall, the administrative percentage is now at 9.2%. Even if you add a miserable profit margin of 4.8% to get to a total of 14% for an 86% “medical loss ratio,” that is pretty lean. It is not hard to get the “true” administrative cost for Medicare up to close to that 9.2% range, by the way, by recognizing that Medicare pays a much higher average claim amount per person than does private health insurance, which requires a lot less work. In other words, if you view admin costs as an amount per covered person, the Medicare costs soar, and private costs look a lot better. Besides, as stated above, the private companies are actually DOING something for their administrative fees because it isn’t OPM as it is for Medicare clerical flunkies who just sign blindly send out checks, and then sit back and collect pensions from tax payers. By the way, do you really believe Medicare patients can go to any provider they want? Not if they want that provider to accept assignment from Medicare. And the ones who go anyway, they do it probably because they have a private supplement policy or retiree health policy paying much of the balance bill. And the number of physicians who will accept Medicare payment, assuming they accept Medicare patients at all anymore, is falling weekly and will fall precipitously if the “doc fix” finally gets through Congress, which is the bedrock around which Obamacare expects to pay for itself.
How about this as a moral imperative: “The king will answer,”Verily I say unto you, inasmuch as ye have done it unto one of the least of these, ye have done it unto me” Matthew 25:40. John, i’m still not sure where you get this only 22,000 are without health insurance because i see on a daily basis patients who do not have health insurance or are under-insured and cannot get care. OUR SYSTEM IS NOT WORKING FOR AN INCREASING NUMBER OF PEOPLE (myself included). Other countries do a better job for less. Most of those countries use a system which you consider “lefty.”
Mr. Sweeney, where in the world did you get a figure of a typical doctor making $392,000 a year? You’ll find the real figure is less than half of that. That reminds me of the time President Obama said that a surgeon makes $25000 for amputation.
John said what had to be said concerning morality. If some of those who commented had read more of his work, I think they would understand.
I guess, according to Dr. Reinhardt, all the various ideologies are equally valid. So I can stop fretting over which is best.
Marguerite,
Please reread the 22K number. It is not what you say it is, not a total of uninsured people.
Appealing to Christ as a “left” moral writer might not be the best since using the bible would also assume he is going to return to the earth and lay waste people will burn and die. I did not think that was a “left” policy. Lets just call Christ politically “independent.” And this scripture is still missing these things: “Show me a leftwing treatise on ethics that tells me what I owe, to whom I owe it, why I owe it, and why government should enforce the transfer.”
Also one would then have to consider what he meant – render unto Ceasers what is Ceasars and render unto God what is Gods.
I think that since Christ was teaching people(individuals) how to behave and his expectations for them he was expecting us (individually) to take up the challenge of caring for the less-fortunate and poor. I don’t think he means that when an individual gets frustrated and tired of trying to do so it is now to time to force other individuals into doing this work.
What was the saying about those that performs alms to be seen of men. I read that and think of people who support policy to show everybody else how virtuous they are becasue they support it and you should be virtuous like me and therefore a law needs to be passed that forces virture. (Of course assuming you beleive this is virtuous)
Is the point of true Christianity to force people into being Christian or for people to choose to be Christian?
This discussion has smart participants. Too bad it’s always John and his followers against “the Lefties”.
How about an ideology-free, pragmatic discussion of using ACO’s (existing law) to deliver quality care, massively drive down cost, and reward physicians who work smart and collaborate?
There is little time left to execute necessary cost reductions in healthcare. ACA provides a viable framework, despite the legislation’s many flaws. Let’s quit the bickering and get on with it !
Matt, we already did ACO’s in the form of HMO’s. They may not look exactly alike, but the incentives are just about the same.
Thanks, Al. But please humor me as I’m confused on one point. If I start an ACO on 1/1/12 for a Medicare population who’s annual healthcare cost in 09, 10, and 11 was $100 million and I drive that cost down to $90 million per year by 2015, adjusted for population aging, etc, and my deal with Medicare is to keep 75% of the savings, I’ve just made and incremental $7.5 m above my capitation for the year and saved the government $2.5 m. I’m unaware of a similar incentive as an HMO.
You are most welcome Matt,
I am looking at this from the perspective of the provision of health care though there are similarities regarding the payments as well. It is just that one has to look a little further than the wording and look at the results. In both cases the idea was that the government could save money (it ended up costing more) and the institution could benefit financially in the movement of money from care related activities to none care related activities.
What is the purpose of health care? To take care of patients that are ill. The incentive of the ACO and HMO are the same. To reduce the delivery of care. When one choses not to treat there frequently is no paper trail to show that necessary treatment was denied. Thus though some of the profits will come from smart management some of the profits, just like happened with Medicare HMO’s, came from gaming the system (cherry picking) and denying needed medical care.
The literature demonstrated that Medicare patients did worse with Medicare HMO’s than Medicare (Ware). Specific outcomes were shown to be worse with Medicare HMO’s than traditional Medicare. Denial of usual treatments was also seen with Medicare HMO’s.
You are now humored.
Matt, your comment that “the ACA provides a viable framework” reminds me of the poor soul who wants to fly so badly that he jumps off a 300 foot cliff because his best friend tells him that the powerful updraft next to the cliff will win over gravity! IOW’s, wishful thinking (very typical of liberal thought process)is not a prescription for meaningful reform.
You are right in saying that the concept of ACO’s could drive down costs, improve quality, and reward physicians who participate. Medicare Advantage PLans who have partnered with local physician-based risk sharing care management groups (ACO type organizations)have actually driven down costs significantly while improving the general health and well being of the seniors in these Medicare Advantage Plans. However, the reality is that there doesn’t appear to be a single physician group, hospital, or health plan who is willing to participate in the formation of an ACO under the current CMS guidelines. That should tell you all you need to know about the government’s current construct for ACO’s! The government needs to get out of the way and simply be an agent for empowerment and regulation of the existing private-based Medicare Advantage risk transfer system. This existing Medicare Advantage system works extremely well when the HMO partners with and shares risk with a local physician based care management group.
Al – Thoughtful response. Thanks. And thanks for not calling me a liberal. I agree with a lot of what you said. I also think it’s quite possible to deliver less care than we do today and spend less money without taking a hit on quality. But you need to be smart about it.
Larry – Last I heard was Medicare Advantage programs cost us all substantially more than straight Medicare so it’s good to hear that certain studies found they yield a quality pop. The CMS comment period concluded June 6 and the ACO guidelines are, as yet, in-published. If I were a physician group or a hospital I would wait for the rules to come out before I would form an ACO, too. The lack of an ACO at this early date does not tell me anything about their viability. Keep your good mind open, man! Careful not to generalize about how people think. From what I can tell, you think pretty clearly.
I think that the theory of justice that actually holds sway in Washington (their “revealed preference”, so to speak, not what they claim to believe) is that of Thrasymachus in Plato’s Republic (perhaps with a bit of Nietzsche thrown in). The structure of Obamacare (and its method of adoption) reflects this ethic pretty well.
Matt, thanks. You believe that it is possible to save money without reducing quality. So do I, lots of it, and I don’t think it is all that difficult except for the politics involved. We need government to step aside and let the market function while appropriate safety nets remain. There is a lot of dead weight. That dead weight isn’t physicians, the tools and those that are actively treating the patient. The dead weight is in the bureaucracy. Remove the bureaucracy and one will reach a tipping point where suddenly the prices fall.
Health policy in all nations can be seen as a process of bidding for voters.
George W. Bush expanded Medicare benefits for seniors with Part D and Medicare Advantage…….and not because of morality, but because seniors were (and are) a valuable voting bloc.
Government policy under Bush was indifferent to younger workers.
In fact the young are implicitly paying for the expansions of Medicare.
Whereas Obama is trying to re-establish a Democratic labor majority. So Obama is taking benefits away from seniors — to some extent — in order to reward his own voting bloc.
The huge slip-up in the Obama strategy has been that his beneficiaries barely know that they are beneficiaries. If you interview the first one hundred working people you meet tomorrow and ask them if they are helped by ObamaCare, you will get a lot of blank stares. (and not because of dumbness……people will change jobs between now and 2014, their employer may or may not have 50 employees, income levels will fluctuate, etc etc. You could interview one hundred health policy grad students and still get a lot of blank stares.)
So in 2010, the seniors continued to vote Republican, and Democratic turnout was basically awful. Thus the resistance to ObamaCare is emboldened.
None of this is particularly moral. Franklin D. Roosevelt would be right at home here.
Bob Hertz- The Health Care Crusade
Matt – I am a little confused by your example of the ACO with the Medicare population at an experience based $100 million of expected, which I presume must be your “capitation.” Then how is it that you are getting to keep an extra $7.5 million “above my capitation?” Wasn’t it just a part of the differential between the $100 million you received, and the $90 million you got it down to? Or are you suggesting that they were going to give you only $90 million of capitation, but give you a bonus $7.5 million above that as 75% of the difference between “expected” and what you controlled it to? In the first case, I don’t understand why it is a good deal for you. In the second, how is it a good deal for the tax payer? The net savings is only $2.5 million, which I won’t sneeze at, but really. Now, the bigger question is, what will you do when I, as CMS, will only give you $90 million next year, since you have obviously proved that “appropriate, quality, effective” medicine practiced on this population should only really cost me that much?
Hi HD,
First, I’m no expert and I don’t work in Healthcare. I care primarily about a pragmatic and speedy approach to slowing down the growth rate of care delivery. It’s in my best interest and that of my kids. There’s a framework in place now, ACO’s, that might work. It took a long time to even get this. So I’m skeptical that something better will become law in time to avoid national bankruptcy. That said….
In my example, the $100m per year is the pre-ACO baseline spend based on Fee for service and zero collaboration. It goes to multiple unconnected providers. Then assume that I form an ACO of providers capable of meeting the care needs of the population. I invest in technology, leadership, care management, and start collaborating. After careful research and planning, we conclude we can deliver the same or better care to the population with decent margin for us for $90m. Under the forthcoming ACO rules, I should be able to reach a deal with CMS to give me a $90m capitation and a share of the savings, 75% in this example. I would share this $7.5m bonus with my investors and my ACO providers. Since I believe there is a lot of waste in the current system, and since I think I’d get better and better at this as time goes on, I would expect that I could continue to find shared savings in future years.
Matt, why do you want to repeat the same mistake? We had HMO’s that failed and caused harm to the elderly and poor that were sick? ACO’s follow the same incentives. There is a lot of talk in business circles about ACO’s because the government is pushing them along with a lot of money that follows. Businesses go where the money is and will promote those entities as long as they are profitable to them whether or not it is more costly to the nation financially or healthcare wise.
Mayo decided its excellent business plan didn’t work with the present structure of the ACO. That is because government is calling the shots. Government may change some of the rules, but that will only mean another good business plan will be down the drain. One shoe doesn’t fit all.
John: This is an excellent question to ask, as it is worrisome that Obama often expresses the idea of wealth transfer, as being a really good thing. Its implications are that the government must extract wealth from he who has, and determine who should get it, then give it to them. In other words, instrumentalizing that goal of “social justice” puts the government in the position of using the police state to bring about actions that substitute for the actions of private people.
But, I have another thought related to yours; isn’t there an anti-ethical framework set in motion when the law itself:
–is passed underhandedly
–requires private actions that individuals might not prefer to use their income for in preference to housing or food.
–implies that all citizens are equally capable of acquiring and managing insurance and that all residents, therefore, will someday be covered by insurance..
–equates insurance with access to care when the form and practices of government insurance reduce access..
–mandates rules for private companies that amount to a stimulus to go out of business.
In other words, all the flaws of the bill are real and are real moral issues; why does the government assume that it is acting in the public interest when it knowingly will set forces in motion that will destabilize the healthcare system without assuring that only good results will happen? They are playing with fire and don’t care, don’t have even the slightest idea about the externalities, nor any way of preventing them.
Fewer insurers will offer health coverage
Insurers will narrow their range of plans.
Employers will stop offering coverage and just pay the fine…
Employees will be on their own in the individual insurance market where they will be vulnerable to fraud…
and on and on…
Wanda J. Jones
Wanda J.Jones, In response to your comments, the monopoly that is the health racket controlled by insurance companies probably will offer less health coverage, narrow the range of plans, the employers are already screwing employees and not offering coverage because most companies are ran by greedy, greedy Republicans that screw over their workers with low pay scales, no raises, pentions that have been raided, and 401k’s that don’t get much of a match at all anymore. The GOP doesn’t want Universal Health Care…(Not ObamaCare…Right wingers) to get implemented fully so that Americans have a full taste of how they have been getting taken for a ride for 50 plus years.
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