View From Down Under

As part of their health care rebuttal, Republicans have focused on tort reform as a way to dramatically reduce costs.  As Senator Jon Kyl (R-AZ) said “Everybody knows that there is a huge amount of money that could be saved in health care delivery if we did something to reform this jackpot justice system.”  President Obama seems to agree, and has added some tort reform to his health care proposal – although stopping far short of what Republicans want.

The argument for tort reform is that  frequent malpractice claims and high awards have forced doctors into prescribing extra, and unnecessary, tests and procedures in order to reduce their potential exposure in a lawsuit.  Therefore reforming the malpractice system should reduce those unnecessary activities and reduce costs.

This assumes that these extra procedures are, in fact, unnecessary and add nothing to the value of health care received.  It also assumes that many malpractice claims are based on the desire of plaintiffs to ‘hit the jackpot’ and not on genuine malpractice.

Some on the left wing argue that this is far from proven.  Ezra Klein notes that Texas, which enacted tort reform in 2003, also has the city with the highest medicare costs per enrollee (McAllen).  Indeed Texas as a whole has one of the highest medicare reimbursement rates per enrollee, even adjusting for age, sex, and race.  (As a Texan who enjoys my vegetables battered and fried, I wonder if there is a bit of cultural self selection there).  So the link between tort reform and cost reduction looks tenuous.

In order for tort reform to have an impact on medical costs, it must either reduce the number (or type) of tests and procedures being prescribed, or reduce malpractice premiums (which would then be passed on to consumers).

This sounds like a theory that can be tested, and this afternoon I was wondering if there is any data which could tell us if tort reform has a meaningful impact on health care costs.

Turns out there is.  A recent study looked at the differences in tort reform enacted by various states and correlated that against the costs of employer sponsored health insurance plans over an eight year period.  They looked at four different kinds of tort reform:

• caps on pain and suffering awards;
• collateral source reforms (reducing payouts if plaintiffs have already received insurance or other payments);
• joint and several reforms (limiting ability of plaintiffs to sue a deep pocket for the full amount even if they are only partly at fault); and
• caps on punitive damages.

The authors concluded that the first three types of reform lowered insurance premiums of self insured plans by 1-2% (caps on punitive damages had no impact).  That sounds like a good outcome and should provide encouragement for further tort reform by the states.

However, for fully insured plans (HMOs) there was no decrease in premiums as a result of tort reform.  The authors conclude that HMOs are already doing a good job of monitoring care and avoiding unnecessary activities.

The Congressional Budget Office looked at this study as well as a number of other studies done in the last decade, and have concluded that enacting the four reforms above would likely reduce the total health care costs of the government by 0.5%.

It is not a silver bullet for solving the problems in the US health care system, but is definitely worth pursuing as part of any comprehensive reform.

Popularity: 17% [?]

As I have written before, the outcome of the health care summit was never in doubt.  The President staked out his position, and he apparently believes he has enough votes to get it through via reconciliation.  Republicans had a chance to state some alternatives and score some political points (with their supporters).  I’d be interested to see the ratings, but I would guess the Olympics drew more viewers.

The view from down under is that this kind of theatre is necessary to govern in the US, which is kind of sad in a way, and kind of scary in another.

One thing is clear, it is not about policy – only politics.  As Ezra Klein pointed out, if McCain had been elected, and a similar plan were in front of Congress (like the one McCain championed in his campaign), would Democrats support it?  Would Republicans?

Popularity: 24% [?]

President Obama is finally starting to show some much needed leadership on health care reform, inviting Democratic and Republican leaders to a health care summit, and promising to publish its own version of health care legislation in advance.  Obama challenged Republicans to do the same.

Despite the rhetoric from the White House, there is little hope that a bipartisan health care reform package will emerge from the process.

The last time the Republicans put forth their health care plan it was weak, marginal, and provided little other than tort reform.  It appeared to be a hasty answer to the charge that they were just being obstructive, and fortunately the plan sank into oblivion quite quickly.

Nonetheless, Republicans have deep differences with Democrats on what health reform means.  The Republican position on health care appears to be something like this:  we should let the ‘free market’ provide health care; but don’t cut Medicare (even though several Republican proposals do exactly that); and don’t remove the tax break for employee funded insurance (which would at least attempt to create a free market); and do allow interstate insurance programs (while continuing to allow wildly different state based standards); and ‘enhance’ the free market with a combination of vouchers, savings incentives, and tax credits.

That they have been allowed to get away with this as a ‘policy’ is bemusing, to say the least.

To Democrats, health care reform means making sure all Americans, or as many as possible, have health insurance.  The rest of the Senate bill is basically trying to pay for this, with a number of pilot programs that will probably reduce costs over time but whose ultimate impact is unknown.

When you consider that most Republican voters are not opposed to expanding insurance cover (in fact it was part of John McCain’s campaign platform) yet Republican leaders passionately oppose the Senate bill, it becomes clear that what the right wing really wants is for the President to fail so they can replace him with Sarah Palin.

Let’s be clear, neither side is really proposing health care reform, and despite the rhetoric that this is an historic ideological battle, the reality is that both sides are talking about fairly minor changes to an insurance based system supplemented by government health care for the elderly and poor.

With his summit, Obama is making one last effort at appearing to be bipartisan before pushing through a health care bill.  He cannot afford to head into the next election with no health care bill passed, but also doesn’t want to be painted as part of an arrogant left wing that can’t negotiate with Republicans.

The view from down under is that it is past time for Obama to stop delegating to Congress, and time to provide clear leadership.  The promise to publish the White House plan, which will undoubtedly have support of Democratic congressional leaders, is a good first step in that it moves the plan from being a Pelosi plan or a Reid plan to being an Obama plan.

If the Republicans offer to negotiate for a better bill, the Democrats will have won the public debate and will have a comprehensive health care bill passed soon.  Of course, Republicans know this, and because of their past rhetoric their logical course of action is to continue to obfuscate, try to scare people (death panels part deux?) and do their best to block all legislation.

Which, ironically, will make the final bill much more of a left wing reform bill and therefore more likely to have real impact on both the cost and availability of health care in America.

Popularity: 35% [?]

The Senate finally passed a health care bill.  Next step is reconciliation with the House bill, but given the vote in the Senate (60-39) and the fact that the Senate is no longer majority rule but requires 60 votes to pass legislation, the final bill is likely to look very much like the Senate bill.  It’s also looking quite likely that a health care bill will be passed before Easter.

The bills have been watered down with compromises so much that much of the real reform the President wanted has been lost.  However, there is some substantial insurance reform: Extending coverage to millions of uninsured; restrictions on denying coverage; etc.

Perhaps the more important reforms longer term are the efforts in the Senate bill to control costs with provisions like pilot programs and bundled payments, and authorising the HHS secretary to implement reforms that will reduce costs longer term (without requiring legislation).  One major piece of cost control missing in the legislation is malpractice reform.  I believe the Republicans missed a golden opportunity for serious reform of medical malpractice.  A single Republican senator willing to back the plan if it included malpractice reform would have marginalized Joe Lieberman and Ben Nelson, and delivered a much stronger bill.

The view from down under is that the US health care system has committed itself to continue to be the world’s most expensive health care system, but the Senate attempts to ‘bend the curve’ are admirable.

Popularity: 69% [?]

The Congressional Budget Office now estimates the House bill would reduce the deficit by $138 billion over 10 years.  They estimate the Senate bill would reduce the deficit by $130 billion over 10 years.  The total cost over ten years is estimated at $890 billion for the House bill, and $600 billion for the Senate bill, with cost reductions and new taxes contributing a bit more.

This will be a surprise if you follow Charles Krauthammer, who says the bill will cost $1 trillion, or Sean Parnell (Sarah Palin’s replacement as the governor of Alaska) who estimates the cost at $2.5 trillion.  Of course, neither the Congressional Budget Office nor right wing commentators actually know the impact, so the argument is over whose assumptions to believe.  At least we’re no longer arguing about baby killing death panels.

The CBO estimates look at costs and income over a 10 year period.  Politicians know this, so the bills contain revenue raising initiatives that start immediately, with cost increases that don’t start for a few years – such as delaying insuring the uninsured for up to three years.  So the first few years are sharply positive, but once everything kicks in the impact is close to neutral or slightly negative.  It is a bit of legislative sleight of hand that tries to hide the cost by delaying benefits – which is wrong on both levels (but apparently a common trick used by both Democrats and Republicans for some time).

The CBO calculations are also only counting the cost to the government.  There should be further net cost reductions in the system, as the uninsured will be able to access health care more cheaply than going to emergency rooms, and insured Americans will no longer be directly subsidizing the uninsured through higher premiums.  However, these gains are likely to be overshadowed by continued escalation in health costs, which neither bill addresses with any vigour and in fact may make worse.

As Jeffery S. Flier, dean of the Harvard Medical School, explains in a great article in the Wall Street Journal:  “I find near unanimity of opinion that, whatever its shape, the final legislation that will emerge from Congress will markedly accelerate national health-care spending rather than restrain it.”  This is a result of the insurance based system obfuscating the cost of health care, and this lack of transparency means there are no individual incentives to control or even check health care costs.  Both the House and Senate bill do nothing to change those incentives.

Unfortunately, the very act of insuring the uninsured (however equitable it may be) will have as one consequence the reduction of the only group of people who actually have a keen stake in controlling their own medical expenses.

No matter what form the final bill takes, or even if it passes at all, one thing is clear:  the US will continue to enjoy the world’s most expensive health care system for many years to come.

Popularity: 41% [?]

There is no doubt the US health care system needs reform.  Costs are high relative to outcomes, outcomes are very unevenly distributed, the cost of health insurance is greater than the average mortgage.  Perverse incentives create perverse results.

But the US political system appears to have lost all capacity for meaningful reform.  The bills currently being debated are not much reform at all, and look likely to add to the overall cost and inefficiency of the system.

Part of Barack Obama’s campaign platform was comprehensive health care reform.  So after his inauguration and passing the economic stimulus package, the President called on Congress to develop a health care reform proposal to make coverage affordable to all Americans.  It seems odd that the President would not propose his own plan (like the one he campaigned on), instead of delegating that to Congress.  However, the last time a President proposed a health care reform plan (Bill & Hillary Clinton), the process was handled so poorly and the results so roundly criticized it kept health care off the legislative agenda for nearly 20 years.  Obama wants a bill passed, and the only way to do that in the current political environment is to let Congress figure out what it can pass, and sign it.

Congress responded with some grand rhetoric and then slipped back into their normal, self serving process of getting themselves re-elected.

The result will be a bill that adds more bureaucracy to the process, and does not address many of the important problems.  The current bills do nothing to control costs or improve quality.  There is plenty of data available to suggest that major reforms can improve both cost and quality.  For example, the evidence is fairly clear that a tax funded system is less expensive and with better health outcomes than an insurance funded system.  But of course that is “socialism”, despite the fact that it works well in almost every capitalist country in the world.

The only thing worse than passing this legislation is not passing it.  Reducing the number of uninsured is an important and worthwhile change, with positive flow on effects for all Americans.  If the final bill does not pass both houses of Congress, not only will millions of American continue to lack affordable medical care, but it will likely have the disastrous effect of once again pushing any health care reform out another 20 years.

The view from down under is that meaningful health care reform in the US will require one of two things to happen first: either the US political process is itself reformed; or the health care system reaches an unbearable crisis point.

The saddest thing is the amount of unnecessary human suffering that will occur before that happens.

Popularity: 46% [?]

House Republicans have, finally, produced an alternate health care plan.  Though I have not read it, there are some provisions that appear quite sensible – limits on malpractice awards, for example.

What strikes me is that the proposal was introduced only when it looks likely the Democratic bill (in some form) will become law, and therefore the Republican alternative is unlikely to have much impact on the final form of the bill.

If the Republicans and Democrats had actually worked together, I believe the resulting legislation would have been better than either plan alone.  Instead, Democrats tried to bludgeon legislation through without (much) compromise, and Republicans resorted to disrupting town hall meetings and frightening citizens with nonsense about ‘death panels’.

The whole sordid process highlights the perverse incentives in Congress.  Crafting legislation to improve the lives of citizens is a secondary consideration to getting re-elected.

Republicans who try to work with the Democrats on valuable compromises are labelled by right wing activists as traitors, communists, and numerous names I won’t repeat.  They are called “RINOs” (Republican in name only) and targeted in their home districts by Political Action Committees funding right wing opponents.   Democrats are, frankly, behaving like bullies now that they are in nominal control of both houses of Congress, and seem more intent on payback than progress.

Credit to Olympia Snowe, R-Maine, who said this about her decision to support a compromise health care plan:  “When history calls, history calls, and I happen to think that the consequences of inaction dictate the urgency of Congress to take every opportunity to demonstrate its capacity to solve the monumental issues of our time.”

Whether she made the right call or not I’ll leave for you do decide, but the intention is admirable.

Popularity: 24% [?]

A recent poll had some interesting data on the divisive nature of the health care debate. When about 1000 people were asked if they supported or opposed the health care proposal, results were pretty evenly split: 52% in favor, 48% opposed.

But when you throw party identification into the mix:

Talk about your stark contrast! 84% of democrats support, 88% of republicans oppose.

The poll then asked: Do you think the majority of the public favors or opposes health care reform? Before looking at the chart below, remember it’s pretty evenly split (52/48).

The democrats underestimate the amount of opposition, but the republicans really missed this one badly. 73% of them think the majority of Americans oppose reform. Makes you think the republicans are only listening to other republicans.

One final chart, without further comment. The question is: If Congress passes and the President signs a health care reform bill, do you think:

Popularity: 10% [?]

In reading a recent article in Time magazine about the rise of the ethical consumer, I came across the results of a recent poll commissioned by the magazine which asked:  “Are you willing to pay more in federal taxes to provide universal health-care coverage for all Americans?”

The result: 50% said yes, 46% said no, 5% don’t know/no answer (yes, it adds to 101%, but presumably that is a rounding error).  In my mind, this really illustrates the polarisation of opinion on this topic. 

So I thought I’d see if I could find some data on whether people are better off paying taxes for universal health care or not.

Health care is an extraordinarily complicated subject, which may be one of the things that makes it interesting.  There is no real ability to do controlled studies on health care systems.  Things like culture, climate, genetics, diet, and so forth, can make a big impact in health care outcomes regardless of the system of health care delivery, and these things can also change over time.

However, I did come across a fascinating bit of research by Adam Wagstaff at the World Bank.  He looked at a number of OECD countries that had moved from tax-funded to insurance funded systems, or vice versa, from 1960 to 2006.  The conclusions were quite clear.  “…(social health insurance) systems, on balance, have certain characteristics that make them more expensive than tax financed systems, do no better in terms of most health outcomes … may do worse in respect of outcomes that require strong population-level public health programs (such as breast cancer), and do worse in terms of encouraging informal labor markets and discouraging employment.”

I don’t believe most Americans truly understand the cost of their health care system.  The cost they pay in terms of higher unemployment and lower wages (since employers are required to pay higher health insurance premiums) as well as the direct cost of health insurance, out of pocket expenses, and of course, the taxes to pay for Medicare and Medicaid (estimated at 18% of the total federal budget in 2009).

Popularity: 10% [?]

It’s now springtime in the southern hemisphere and the flu season is winding down.  As the northern hemisphere flu season starts to kick into gear, a look at the experience down under may provide some visibility into what the US can expect this winter.  A fact not lost on the US government, who produced their own report on the topic. 

When the southern hemisphere flu season was starting up back in May, the forecasts were grim – including expectations of 6,000 to 10,000 swine flu deaths in Australia alone, football games and other large gatherings cancelled, even Parliament could be shut down (which might have had its own appeal).  

Now the season is nearly over, and swine flu has just not lived up to its billing.

South America seemed to have been particularly hard hit, and Brazil currently has the highest number of deaths from swine flu in the world.   This is likely to be a reflection of its relatively large population, rather than a particular statement about the virulence of the flu in Brazil or the quality of its health care system.  Other South American countries were also hit quite hard.

In Australia, 165 people have died of the swine flu so far, and there are about 300 still in hospital.  Virtually all of these deaths were people with chronic health conditions.  Pregnant women were also hit hard by the flu, and some of the most tragic stories from the season involve these otherwise healthy young women.  But for the most part, the symptoms of swine flu were quite mild.  We are told that many of us would have had it and not known.

Two things make this flu a bit different to most:  the rate it spreads, and the people it targets.  At one point, over 90% of flu cases presented in Melbourne were swine flu.  In Sydney, the number was over 80% at its peak.  The pressure on the hospitals was enormous, with some hospitals cancelling all elective surgeries in order to free up beds for swine flu victims.  And unlike other flu strains, most of the victims of swine flu were young.

However, to keep it in perspective, there are typically about 2500 deaths in Australia each year from influenza.  Ten years from now if you look at a graph of deaths per year from flu in Australia, the swine flu epidemic is unlikely to be noticed.

There is every reason to believe the swine flu experience in the northern hemisphere this winter will be similar – lots of infections, not many deaths.

The northerners are quite lucky in one respect.  An effective swine flu vaccine is expected to be ready in time for the season – a luxury us in the south did not have.

Popularity: 5% [?]