Myth Busters Series: What Have We Learned So Far?
In the course of a mere twenty years — from the early 1970s to the early 1990s — public policy whipsawed the American health care system endlessly back and forth at enormous cost in dollars and lives and no noticeable benefit.
It began with a massive national system of health planning designed to do precisely the wrong thing — reduce services at a time of growing demand due to the advent of Medicare and Medicaid. This was predicated on a bumper sticker slogan, “A Built Bed is a Filled Bed,” that was certifiably wrong both in theory and in practice. Health planning failed and was soon repealed.
Then we moved on to all-payer hospital rate setting at the state level that was adopted by thirty states despite the lack of evidence that it could work in anything but the highest cost locations. These, too, were repealed in all but one state (Maryland) because the regulations were “incomprehensible” according to one supporter and failed to work.
But most states retained some form of Certificate of Need regulations, which even the Department of Justice and Federal Trade Commission said failed to contain costs and were seriously anti-competitive. But that is exactly why the American Hospital Association supported these laws — they did not want to risk having to compete against more efficient rivals.
Then large employers got behind “business coalitions on health” that were based on the idea that sharp-penciled business executives could make doctors practice medicine more efficiently. Ultimately these efforts simply added yet another level of bureaucracy to a system that was already for too bureaucratic and did little to solve the problems of efficiency or cost.
Then the “policy community” discovered the “problem” of uncompensated care. After endless fretting and worrying about this new crisis, nothing happened and the level of uncompensated care, which was always a trivial amount of money, did not change a whit. When first discovered uncompensated care accounted for 6% of hospital costs and 13 years later it was still only 6% of hospital costs.
But the discovery of Uncompensated Care led to another discovery — the uninsured. Now here was an issue that would keep the policy community well-employed for decades and be the rationale for an entire bevy of new programs and initiatives. Yet over the course of the next two decades the level of non-insurance barely changed, in spite of all those programs. When it was first measured in 1987 about 84% of the population was insured and 16% uninsured. Twenty years later it was still 84% and 16%.
Of course, to effectively discuss the problem of the uninsured, policy makers would have to know something about insurance. Unfortunately, they learned just enough of the terminology to be dangerous. They completely misunderstood the meaning of ideas such as “risk pooling” and “adverse selection.”
But they had all the information they thought they needed to tell insurance companies how to run their businesses. They began by endorsing “mandated benefits,” which substituted the judgment of politicians for the buyers and sellers of health insurance in deciding what should and should not be covered in a health insurance policy. Over time over 2,000 specific laws would be enacted by the states. These laws did a lot to raise the price of coverage and make insurance less affordable, but the politicians were never blamed for these added costs. Only insurance companies were blamed.
But mandates did not address the “great problem” of the uninsured, so some progressive states went further. They adopted universal health programs of one sort or another. These programs were adopted with great fanfare by politicians and hailed by publications like the New York Times as great breakthroughs. But one-by-one they all failed and were repealed. In some cases they were never actually implemented or in other cases were repealed only after much damage, but the only thing truly “universal” about them was failure.
Then the states set out to “reform” their insurance markets, and once again ended up not “reforming” them but destroying them. See our posts on the NAIC small group reforms and the more ambitious individual market reforms in New Jersey and other states.
We haven’t yet mentioned The Federal HMO Act or ERISA because these laws wouldn’t have much impact on the market until the mid-1990s, but we will be getting to them in future posts.
All of this was done in a mere twenty years. All of it failed, but only after creating much turmoil and doing real damage to the health care system, the economy, and the lives of families. It all adds up to the greatest experiment in social engineering of our lifetimes.
You may have noticed in this sorry saga that all of it was pushed by academics and politicians, and all of it was imposed upon hospitals, doctors, employers, and insurance companies. Who is missing? The patient/consumer/employee/taxpayer.
All of it was a clash between powerful elite interests who simply used concern for “the folks” as an excuse to gain power. Nobody in this story trusted the people to make their own decisions or control their own destinies.
The pretext of their activities was to control health care costs, improve health care quality, and ensure access to health care services. All of this effort failed to have any impact whatsoever on any of that. The nation would have been better served had none of this happened.
Good post. How do we turn the Titanic around? Or do we let it hit the iceberg and sink?
The premise of Greg’s article is correct. Merely tweaking a dysfunctional health care financing system doesn’t get us very far and sometimes has significant adverse consequences.
If we go back earlier than 1970, we see an example of an incremental program that didn’t turn out to be a myth after all in that it has been very effective – Medicare. It is true that Medicare needs some refinement to make it an even more effective program. Other nations have proven that you can provide comprehensive health care at a reasonable cost. We can make the appropriate changes in Medicare by using some of policies that have worked well in other nations. Then Medicare can blow away the myths by becoming an ideal program for all of us.
It looks like I have a lot of catch up reading to do, Greg. Good summary.
Until I do catch up on all your posts I have some biased opinions.
1. What we have now is not insurance> I don’t know what it is, but it is not insurance. It appears to function like pre-paid, inexpensive medical care, for both anticipated and unanticipated expenditures. Plus the market, such as it is, is distorted by the way some get a tax break on the premium price through employer provided insurance.
No wonder it is such a mess. If there were an insurance product that was more like an indemnity product, then maybe the beneficiary would be a more interested party, taking his compensation and shopping around.
2. As to uncompensated care, there is a difference between how institutional providers, mostly not-for-profit hospitals, and private practice physicians are treated by again the tax code. Docs largely have to eat the losses, and as was referenced above by someone, as things have gotten tighter, docs are trying to avoid hospital staff positions that require taking these patients.
While in general I favor a true flat tax, if there are to be deductions/write-offs then maybe there should be some means to allow this for truly indigent care.
By the way, are you familiar with the lodge system of medical care in this nation a hundred years or so ago?
To believe that Medicare should be the paradigm is risible. Let me suggest that when there is an agreement between 2 entities, one to be served and the other paid, then there is a meeting of the minds and the exchange is made. If a third party is involved to support and indemnify one party from significant, unanticipated outlays, that is also arranged on a mutually agreed upon, contractual basis. But when you get onto Medicare or any other governement program, you become a budget item, your individuality and humanity are lost and you must fit into the budget or you are “cut”. The last thing I would want is to be assigned a number and told how much I can draw down on the general budget. I would rather pay my way to maintain my health, and pay into a pool to share the risk of catastrophic need; this way I make the decisions and they are not imposed on me.
Good post! Mandated benefits are a good example of a policy that is misdirected. Proponents call them consumer protections but mandated benefits really protect the providers of the mandated service.
“Who is missing? The patient/consumer/employee/taxpayer”
This is the quintessential statement of fact that captures everything that is wrong with our healthcare system and indeed, our entire government. When did the do-gooder types decide that the U.S. population was incapable of self-determination in seeking, procuring and evaluating personal medical care? Half of our problems arise from government or even professional imposed “standards of care” that conspicuously omit subjective patient response, compliance and satisfaction with care.
It is simply a myth that every person who seeks medical care expects “the best” no matter the cost or expects everything to be done no matter the side effects. More than anything, patients want comfort and control when faced with a chronic or acute medical problem. Both are goals with wide ranging definitions that varies tremendously from one person to the next and are the determinants of patient satisfaction–a measure that does not need to necessarily correlate with a person’s objective medical blueprint.
A one size fits all simply does not work in medical care and until we allow people to take personal responsibility for their own healthcare and allow healthcare providers/suppliers to meet those needs unshackled to government, the future of healthcare will continue its decline. Top down does not work in healthcare.
Once again, I applaud Greg for subjecting the health care system to the scrutiny it deserves.
Greg’s myth busters series reports that most of the attempts to reform health care have been ineffective at best and counterproductive at worst. I agree with most of his observations and conclusions.
However, I take exception to the role of business coalitions for health. Having helped to create and organize them into what is now called the National Business Coalition for Health, I am admittedly bias. But the record shows that, first, that no cost was added to the system as a result of their creation and actions, and, within a few years of their formation, the rate of health cost inflation decreased below double digits for the first time in 20 years. So, if nothing else, it had a sentinel effect. Plus it was and remains for the most part a private sector initiative, so no taxpayer dollars were involved.
(More on coalitions and the role of employers in a later post. I’ll wait for Greg’s remarks on ERISA.)
Now that Greg has nailed every stakeholder — except consumers, even though many have over utilized services because of third party payment — as culpable for the system’s failure to be cost effective, I’m wondering what his solution is.
Seems to be: everybody sets up a health savings account and insures for only catastrophic events and everything will be fine. At least, the marketplace will create bona fide supply and demand…and health policymakers can seek employment that actually benefits society.
But let me ask some questions:
* If none of the reforms that have been discredited were enacted, would spending on health care in the U.S. be less or more than it is now: twice as much as the runner up country …and with less favorable results when measured by key indicators of health and medical outcomes?
* Should people have to choose between food and medical care…even if the number of people who have to hasn’t changed over time?
* If uncompensated care is so small a percentage of the health care bill, why do doctors, hospitals, and health insurers/plans say they have to have to charge ever higher rates to stay profitable, citing UC as a major reason?
* Should consumers/insurers have to (re)pay for mistakes made by providers?
* And if government-funded programs don’t work, who’s in favor repealing Medicare and Medicaid and the Veterans Administration health program?
There are other questions — hat imply the need for some level of government intervention) — but the over riding issue is can the free market system alone produce the healthiest population ( I assume we all agree that is the ultimate objective) …bearing in mind that free markets operate via competition and, by definition, competition creates winners and losers?
Who wants to go on record as saying to the patient who needs care but has run out of coverage and money: “Sorry, you lose.”?
Here’s my stab at your questions:
1) There is no doubt that the cost of healthcare would be much lower had it not been supplanted by government and corporations. You can look at any other private industry and you will find the demand/supply/price mechanisms work just as theorized. The only reason people claim that healthcare is unique is because of its hybrid existence of essentially 1/2 public and 1/2 private for the last almost 50 years. And, look at technology, specifically, consumer technology–as technology disseminates, prices go down–except in medical care which uses the same chemicals, parts, materials as is used in every other manufacturing or consumer goods industry (excluding Rx drugs).
2) I know this will sound crass, but yes, people should have to choose between food and medical care and in fact, many people already place healthcare as a lower priority than just about everything else. However, this assumes there is access to low cost preventive healthcare, a free market for intermediate/urgent healthcare and tax incentives for providers and community volunteer associations to provide medical care to the needy.
3) “Uncompensated care” is a lobbyist/legislator talking point however, reimbursements for doctors and hospitals have been on the decline for a while and some hospitals/healthcare facilities located in inner cities do have higher than average levels of uncompensated care.
4) I’m definitely in favor of repealing Medicare/Medicaid and the VA and replace it with voucher systems to be used for actual healthcare and/or catastrophic healthcare premiums.
Hoads,
Your blind faith in the market seems to insulate you from policies that would distribute our health care resources more humanely.
Today Kaiser Health News has an article on Anascorp, a scorpion antivenin. It was developed in Mexico, with support of their government, and further studied here, also with the support of our government. The price for a single dose in Mexico is $100, but in the U.S. it is $12,000, and often three to five doses are required.
It is the LACK of government administered pricing that enables these outrageous prices in the United States.
Tell the parents of an uninsured child in Arizona who has just been stung by a poisonous species of scorpion that she must suffer because we have to protect our health care markets. Stand there and watch her develop a preventable “dramatic neuromotor syndrome and respiratory insufficiency that often necessitate intensive supportive care.”(NEJM) After all, the family has to make choices.
We have the resources and enough funds to provide comprehensive care for everyone. But we’ll never get there as long as we turn health care financing over to those who price it at whatever the market will bear.
Scorpion antivenin: $100 in Mexico, $12,000 in U.S.
http://www.pnhp.org/news/2011/november/scorpion-antivenin-100-in-mexico-12000-in-us
It’s not “blind faith”in the free market. It is trust in an economic system that has proven time and time again to be the most humane. most efficient. most advanced and most wealthy economic system in the history of the world. We, in fact, have not had “free market” healthcare since the advent of Medicare in 1965. Our healthcare system has gotten more expensive and less efficient since government stepped in and now we’ve reached the tipping point with Medicare where our birth rates declined since 1965 and we have less workers/beneficiary than is required to sustain the system. That’s the problem with central planning–an inability and lack of capability to predict the future and make adjustments as necessary to prevent calamities.
The problem with Anascorp as described above is multi factorial however, the crux lies within the federal government. 1) The FDA granted a 7 yr. license to one company 2)That company had to finance expensive FDA clinical trials and 3) the company knows it will be relying upon government to finance 40% of its product and 4) the private health insurers have yet to establish its reimbursement.
Also, treatment for that particular scorpion bite can still be treated symptomatically in the hospital. The company established its priced based upon the cost of a few day ICU event and priced its product below the cost of ICU treatment. So, every uninsured will receive treatment for the scorpion bite but some may be able to go home in a few hours instead of a few days.
If we had the money for comprehensive care for everyone, why is Medicare on the verge of bankruptcy? We’ve had almost 50 years how figure out how to administer government healthcare for a 20% subset of our population in a cost-effective manner and we’ve yet to figure out any other way other than wrestle control of the entire system and administer price and wage controls which are proven failures wherever they have been tried.
Jan,
Thanks for the comments.
On business coalitions, you are right that there was some effect on national health spending for about five years, though Coalitions probably had an insignificant effect compared to other things happening at the same time, like DRGs under Medicare and the wide spread revision of benefits to emphasize outpatient over inpatient care. If there is any evidence that coalitions themselves had much effect I haven’t seen it. But surely you remember all the seminars at the time teaching hospitals how to game DRGs by “upcoding” and “unbundling” services. Like all bureaucratic “solutions” it doesn’t take long for the market to get around them.
On your other questions, I do not see HSAs as the be-all-and-end-all. They are a teensy-weensy baby step in the right direction. My essential point is that every penny spent on health care comes from us as patients/employees/taxpayers. There is no other source.
Others may participate in health care as long as they add value. But employers, insurers, and government agencies have proven over the decades that they do not add value. They all subtract value. What they add is costs and inefficiencies.
My solution, then, is to give all the money back to us and let us decide how to spend it. We will very likely decide to spend some portion of our money to help the needy, but I doubt if we will continue to subsidize Warren Buffet’s health care. We will spend the money far more efficiently than all of the experts ever have. And we will spend it to get the best value for our dollar. We also are likely to spend some of our money on insurance coverage – but it should be insurance that we choose, not that is imposed on us by others.