David Brooks' assumptions on Romney-Ryan health plan need explanation
The Kansas City Star
David Brooks is a really smart guy, and I always read his columns. But in his column today he avoided explanation of his major assumptions about the Romney-Ryan plan to reform Medicare.
Brooks starts with some numbers. He said the Urban Institute says the average couple in 2010 paid $109,000 in Medicare taxes during their working years but will get $343,000 in benefits. Rough on and unfair to the grand kids, he says.
But what Brooks doesn’t make clear is whether the figures are indexed to inflation. After a quick trip to the Urban Institute’s web site, I couldn’t readily find their assumptions. But the Medicare dollars I contributed in 1970 are worth a bunch more in today’s dollars. Medicare still needs help, Mr. Brooks, but please explain whether my 1970 Medicare contribution is being adjusted to inflation. Then talk to me about the burden on the grand kids.
But then Brooks says the Romney-Ryan plan for Medicare wouldn’t harm seniors because they get a choice between traditional Medicare and private insurance plans that Romney-Ryan propose. In one sentence he identifies the most significant problem: “Voucher plans may save money, but perhaps by shedding the sickest customers.”
But that’s all Brooks says about this problem, too, giving no space at all to explain why this isn’t going to happen. But it will happen, because it happens today with all private insurance companies. Insurance companies don’t want sick patients because they cost a lot of money. The companies won’t advertise their Medicare product in zip codes with a lot of poor people, who tend to have higher illness rates. The companies may be legally obligated to sell to anyone who inquires, but it would be a game of hide and seek.
The result of this little game would be that Medicare would absorb the high cost patients, making Medicare costs uncompetitive relative to private insurers. Eventually, anyone who wanted traditional Medicare would have to pay the difference between the Medicare amount the government allows and the amount needed to buy the government’s Medicare policy.
Over time, Medicare would cease to exist except as a voucher to pay for private insurance, and at that time the costs of private policies would rise dramatically. And then the government would be pressured to limit the amount of the voucher, making seniors pay the difference. This is the original Ryan plan for Medicare arrived at through gamesmanship.
In my view, none of the plans now before the public will do much to reduce costs, including Obamacare and either version of the Ryan plan for Medicare. And for a very simply stated reason. They all avoid addressing the most expensive but politically explosive problems confronting health care today, and they attempt, feebly, to reduce health care costs indirectly through insurance programs.
Here are several major problems of both Democrat and Republican plans:
First, there are estimates that 25% of Medicare costs are spent in the last few months of the subscriber’s life. Any talk of pulling the plug on Grandma is met with demagoguery. Democrats are accused of creating death panels, and Republicans who want to voucherize Medicare are portrayed as running Grandma off a cliff in her wheel chair.
But the reality is that lots of money is spent on desperate or perhaps heroic measures to forestall the end of life, and politicians can’t deal with the dilemma because the public isn’t ready to make hard choices. As a society, we have to decide whether we’re willing to go all out to save lives by paying the taxes necessary to do this. We want the best health care money can buy for seniors, and we don’t want to pay for it. This isn’t the politicians’ fault. It is the public’s.
The second major reason for exploding health care costs for citizens of all ages is that we now have access to highly technical and highly expensive procedures and drugs that didn’t exist thirty or forty years ago. We have organ transplants, cardiac bypass surgery, obesity surgeries, expensive medications, all manner of costly radiography, machines for sleep apnea, new cancer treatments etc. etc. etc. We also have a population that is overweight and diabetic, requiring ongoing (expensive) care for chronic conditions. If health insurance covered only procedures and medications available in 1970, insurance would be cheap.
A third reason reason that health care costs aren’t controlled by insurance reform is that insurance companies don’t have direct control over costs. Health insurance reform can’t control costs any more than house insurance reform can control the costs of fire damage. Sure, there can be some cost savings by having insurance companies compete with each other by being more efficient with their own systems and by reducing profits, but insurance companies don’t control the cost of expensive equipment, such as CT scanners or heart valves. Insurance companies can also try to reduce doctors’ fees by contracting with the doctors for lower fees in exchange for volume patient referrals, but this has already been done, and the savings are already in the system.
Some related thoughts about Obamacare and health care generally:
Obamacare is primarily a reform of health insurance, not health care. Obamacare tries to bring more people into the system, getting everyone to pay something thereby relieving hospitals of some of their costs of uncompensated care of the uninsured. It’s estimated that people with insurance pay an extra $1,000 per year to cover the costs of the uninsured, but it remains to be seen whether requiring everyone to buy insurance will spread out costs and reduce costs of insurance.
There are also some provisions in Obamacare to encourage preventive care and to reward outcomes rather than pay for procedures. And it seems likely that encouraging people to get preventive health care will achieve savings by reducing costs for more expensive treatments that occur when disease isn’t caught early.
But let’s suppose this approach is successful. The likely good consequence is that people will live longer. The other likely consequence is that these people will also live longer while on Medicare and will eventually face the same end of life health care costs that Medicare struggles with already. The total costs to Medicare will increase, not decrease.
But there is a deeper philosophical problem in the Obamacare effort to reward outcomes and not costs, and that is that professionals can’t easily control outcomes by themselves. As a practicing psychologist, I am only too aware that I can make all kinds of suggestions to people, but if they don’t follow the suggestion, there is often little I can about it. Medical doctors can prescribe medication, but they can’t be present to make the patient take it. Doctors can encourage people to lose weight to avoid developing diabetes, but they can’t be there to chide the patient for eating a bowl of ice cream. The emphasis on rewarding outcomes makes the professional responsible for the patient’s behavior.
Obamacare also creates Accountable Care Organizations (ACO’s), which try to create a more efficient delivery of medical services by creating teams of professionals who collaborate on patient care. It’s a noble thought. But, it’s not as if paying for outcomes hasn’t already been tried. We already have Health Maintenance Organizations HMO’s). And years ago, insurance companies experimented with “capitation,” giving primary care doctors flat annual fees for a patient’s care. The capitated rate was based on actuarial data on expected costs of various illnesses. This system ended up discouraging doctors from referring patients to specialists because payment for the specialist came out of the capitation fund. The system also made doctors less willing to see patients for small problems because the doctor received no extra compensation above the already allocated capitation. Patients complained that they got poor service.
A fee for service system is a good system for paying doctors in cases where the patient is reasonably responsible. The doctor gets paid for good effort and the patient is responsible for following recommendations. It is probably true that the system breaks down when patients don’t follow advice or when doctors cheat, but that’s true in any system. Patients usually stop going to incompetent doctors who don’t help them feel better regardless of whether they pay out of pocket or through insurance.
As already noted, the Ryan plans and Obamacare try to reduce costs by encouraging competition among insurance companies. Brooks thinks this may help control costs. But it’s not as if there hasn’t been any competition already between insurance companies. Some regions of the country have only a few insurance carriers, but most major areas are served by several, presumably competing, insurance carriers.
And not all of this competition has produced good medical results. In psychiatric care, very few hospitals today offer long-term treatment because insurance won’t pay for much more than stabilization with drugs of suicidal thoughts or psychotic illnesses. Psychiatrists and psychologists with experience in long-term treatment are at or near retirement, and younger mental health professionals have had no contact with long-term programs, in the unlikely event that funding should ever again become available.
So we are left with inadequate options to treat seriously ill people, many of whom end up in jails and prisons for various preventable offenses. The costs of health care are not eliminated but are often shifted to the criminal justice system.
Here in Kansas City we’ve seen the city close its municipal jail and send inmates to a crowded county jail, pending the development of a regional jail. Heard anything about that regional jail lately? And now the county is closing McCune Home for juvenile delinquent youth in order to save money.
What is happening is that people with serious mental health and behavioral problems are not receiving psychiatric care and are being shifted to a criminal justice system that continues to shut down programs. What do you think will be the result of all this.
Many of the problems in our health care system defy rational examination. We have solid evidence that providing good mental health treatment reduces physical illness and even death rates. But despite this evidence, it is difficult to provide good behavioral treatment in the criminal justice system, and also difficult to make mental health providers an integrated part of health care teams.
Mental health services are often “carved out” of overall benefit packages in many insurance systems, and this fragmentation often results in a second class status for these services. Medical doctors and insurance company executives seem just to not believe the research arguing against this fragmentation.
There are other mysteries in the American health care system. We prize high-tech, high drama medical interventions and we pay “procedure” doctors very well. Primary care doctors generally do not fare as well as other specialists, though it is clear that good primary care will improve public health. We’ll do better with more primary care doctors but that won’t happen when the pay differential is so great. Why can’t we do what the evidence says will work.
Health care costs in America far surpass the per capita health care costs of other industrialized countries and achieve no better outcomes overall. Most of the health care systems in other parts of the world do not achieve their reduced costs through “market based” remedies. Yet that is the panacea Mr. Brooks thinks will work here.