Checking the Health Reform "Reality Check"

The White House has published a FAQ to give people "the facts about the stability and security you get from health insurance reform," so I decided to check it out. Go read the FAQ, then come back here.

So, has the White house convinced you? It's all benefits and no costs, right?

Not really - first consider that there is currently no single bill being considered, so how does the White House know the "facts", when they haven't been decided yet? A 309-page amendment was added to the carbon cap-and-trade bill just a few hours before the vote - will the same thing happen to this bill? Will anyone have time to read the final health care bill, when there actually is one? Will the President post the bill for public review for 5 days as he promised, or should we judge this future, hypothetical bill based on the "facts" posted here? Keep in mind that this President also promised to have a bipartisan bill, and to have the entire debate over health care reform televised so we could hold Congress and the White House accountable.

Second, much of what is presented here as "fact" are statements about the future. Note the present tense used when they describe the FAQ - this is what "you get" from reform. Yes, before it's even written or passed, all of these things will come true! President Obama is a very gifted speaker, but I didn't realise he was a seer as well. Anyway, all legislation has unintended consequences, and people and businesses change their behavior under new laws, making many predictions look foolish in hindsight. So, this FAQ not only makes statements about a bill that doesn't exist yet, but it makes statements about the future effects of these future laws.

Also, consider that some of the statements in the FAQ contradict each other, contradict available evidence, or present idealistic benefits while distorting the associated costs. Here are some examples, in no particular order.

#1 -- Under the question: "Why should people with insurance pay to cover those who don’t have it? They are already paying for the uninsured," the FAQ says some of the uninsured are "younger, healthier people" and that bringing them "into the system will spread the risk."

However, spreading risk is not the same as reducing cost. If these "younger, healthier people" are working, they are already paying for Medicare through the FICA payroll tax. Under the current system, if they elect not to have insurance for whatever reason, they still pay this tax, but get no benefit. If the new system requires them to have insurance, they will still pay the tax, but the government or a private insurer will be giving them benefits. So, more people will have benefits, and the same money will be coming in. How does this lower the overall cost of health care when they are getting benefits they didn't get before? Even though these people are healthier, the cost of their health care benefits is not $0.

#2 -- In one part of the FAQ they say "With health insurance reform, we will also put treatment decisions back into the hands of doctors in consultation with their patients." In another part, they say "Health insurance reform must also encourage the kinds of reforms we know will save money in the long run: preventive care; computerized record-keeping; and comparative effectiveness studies to expose wasteful procedures and hospitalizations and give doctors the tools to make the right treatments for you." (emphasis mine)

The stated purpose of the comparative effectiveness studies is to determine which treatments are better and/or cheaper than comparable available treatments, then to tell doctors which ones to use. This is not putting treatment decisions in the hands of doctors - it is second-guessing the judgement of individual doctors dealing with individual patients, using a system that studies what works generally.

#3 -- In that same section, they mention preventive care as a cost-saving measure. I'm in favor of preventive medicine where it makes sense, but let's not pretend it's free. The CBO recently said that "although different types of preventive care have different effects on spending, the evidence suggests that for most preventive services, expanded utilization leads to higher, not lower, medical spending overall." In other words, an ounce of prevention is not always worth a pound of cure. You can read the CBO release, or other studies, but the main argument is that, in order to prevent one illness, you have to test many, many people that will not have the illness. Some counter this saying that testing will be "targeted", but how do you know who to target, prior to testing them? In addition, the mere act of testing often has negative side effects.

#4 -- The FAQ also says that "our incentives are perverse: Doctors are paid by the procedure, rather than for quality. We want reform that rewards quality of care not quantity of procedures. Having dozens of procedures doesn’t necessarily make you better."

Preventive care means that doctors will need to preform more tests in an attempt to identify future diseases. This will require that the doctors are "paid by the procedure, rather than for quality" because most of these preventive tests and screens will result in no improvement in care, and sometimes will result in harmful side effects. Talk about perverse incentives.

Also, Obama has ruled out malpractice reform, although the current malpractice status quo contains several "perverse" incentives. Our medical malpractice system encourages many of these "extra" procedures for the purpose of avoiding lawsuits. Charles Krauthammer of the Washington Post puts it this way: "An authoritative Massachusetts Medical Society study found that five out of six doctors admitted they order tests, procedures and referrals -- amounting to about 25 percent of the total -- solely as protection from lawsuits. Defensive medicine, estimates the libertarian/conservative Pacific Research Institute, wastes more than $200 billion a year."

The FAQ acknowledges that "right now roughly 100,000 Americans die every year from medical errors, which, in many cases, were the result of treatments that were wrong for them." Without malpractice reform the number of unneccesary procedures might go up, not down, as doctors continue to practice defensive medicine, in addition to newly-required preventive measures.

The astronomical costs of malpractice insurance is also forcing many doctors out of practice altogether leading to doctor shortages in some fields, including obstetrics. See my other post on "Malpractice Nonsense" here.

#6 -- "We are also committed to creating a pathway for the approval of generic biologic drugs...It is important to make generic versions of these drugs available as soon as possible. " However, "A U.S. House committee, voting 47-11, approved an amendment that would give brand-name makers of biologic drugs 12 years of exclusivity, dealing a setback to efforts by President Barack Obama and consumer groups to open the market to generic drug makers sooner," according to a WSJ article.

Is this just because the pharmaceutical companies are greedy and evil? No - why would they invest billions of dollars in developing a drug if the government will not allow them to recover that cost? "Amgen said in a recent statement that "without a fair and sustainable cycle of investment and returns in innovative R&D, biotech discovery will be stifled." Either someone will pay for ongoing innovation, or innovation will decrease. No matter how clever the legislation might be, Congress can't write the massive cost of developing a new drug out of existence.

#7 -- "The savings being proposed from Medicare won’t harm patient care. In fact it will improve it." The FAQ follows this with a non sequitor - nearly the entire section has to do with fraud, waste and financial issues, rather than ways patient care will be improved. Reducing fraud may reduce the cost of care, but it doesn't make the care better. The points in this section that are related to increasing quality of care - biologic drug availability and preventive care - are dubious (see my points #3 and #6).

#8 -- "Health Insurance Reform will prevent insurance companies from denying coverage because you have a pre-existing condition; prevent them for canceling coverage because you get sick; ban annual and lifetime limits on coverage..."

While I can't disagree that this is a good idea, and that, ideally, reform should include some of these items, everyone must recognize that the reason these practices exist is to cut cost - which is a major goal of health care reform. How can eliminating these same practices also cut cost?

#9 -- "Resources that are devoted to health care cannot be used to provide the other goods and services that Americans want, including education, investment, and infrastructure."
Following this logic, perhaps our government should have reformed health care before pushing through the massive $787 billion stimulus package, which includes many "education, investment, and infrastructure" projects, in addition to many pieces of health reform that were piled in?

#10 -- "The majority of the initiatives that would pay for reform will come from cutting waste, fraud, and abuse within existing government health programs."

Advocates of a broader public health plan have argued that Medicare's adminstrative costs are far lower than those of private insurers. If this is true, then there would not be much "waste, fraud and abuse" to cut out.

On the other hand, those against a private plan argue this is fuzzy math, or that these costs are lower because Medicare doesn't do enough to combat fraud and abuse. Estimates of fraud and abuse costs vary, but a 2005 study by the GAO indicated that the government doesn't even allocate enough people and resources to detecting fraud and abuse to come up with a reasonable estimate. However, "even a rate as low as 3 percent would mean a loss of almost $4.6 billion in federal funds in fiscal year 2003...roughly the amount that the federal government spent in fiscal year 2003 on the State Children’s Health Insurance Program."

So, if the government really wants to combat this, it will not be free, and it will require increased coordination with states. It will take several years for the "savings" to materialize.

Also, this type of reform is very difficult politically. For example, in some states, once a person qualifies for Medicaid under "means testing", they can continue on the program until they notify the state that they no longer want it. So, people can, and do, stay on Medicaid indefinitely. One way to "reform" this would be to make everyone undergo "means testing" again and re-enroll. Now pretend you are a politician trying to sell that idea in a town-hall meeting.

#11 -- "Adding more people to a broken system will only cost us more in the long run." Agreed - so fix the system, then work on expanding coverage to the uninsured. Don't try to cram it all through in one massive bill that nobody understands and that is full of hope and promise.

Obama's decision to do it all at once reveals his cynicism that the U.S. Congress can only get such difficult legislation done by not letting "a crisis go to waste". But, I thought Obama's brand of politics was supposed to be above petty things like cynicism?