All three volumes focus on Johnson’s ambition for power and leadership. Master of the Senate begins with the history of the Senate and its role in our Constitutional structure as the place where dramatic political and social change goes to die – by design. Even after Senators were directly elected, the longer terms, the rules of the Senate, the [...]]]> I am almost done with Robert Caro’s Master of the Senate, his magnificent biography of the years Lyndon Baines Johnson served in the United States Senate. This is the third volume of his-yet unfinished biography of the life of LBJ. This work in progress is now approximately 2500 pages long and has not even covered the years where LBJ was Vice-President and President.

All three volumes focus on Johnson’s ambition for power and leadership. Master of the Senate begins with the history of the Senate and its role in our Constitutional structure as the place where dramatic political and social change goes to die – by design. Even after Senators were directly elected, the longer terms, the rules of the Senate, the role of seniority, committee chairmanships, the ease of filibuster, and the difficulty of cloture have made the Senate a unique institution.

Caro focuses mostly on two developments in the years between 1948 and 1960 before Johnson was elected Vice-President. First, was his meteoric rise as the first (and possibly last) Senate Majority Leader to wield true power. Second, was his burning ambition to be the first Southerner to be elected President since the Civil War.

These two developments combined in Johnson’ epic struggle to pass the Civil Rights of Act of 1957. Out of burning ambition, but also a complicated attitude toward race that was different than most Southern Senators, Johnson wanted, needed, some, any, civil rights legislation to lay the foundation for a run for the White House in 1960. Passing such legislation meant a weak enough bill so the Southern Bloc (his bloc as Caro makes clear in detail) wouldn’t filibuster, and yet enough of a bill that the Republicans, Northern liberals, and Western Democrats could support. To ensure passage, and no filibuster, Johnson had to stitch together a coalition that had never been successfully created on civil rights from the Jim Crow era on.

Caro lays out the cajoling, wheeling, dealing, strong arming, and compromising in the fight for the civil rights bill as well as the complicated linkages between the civil rights bill and other legislation to obtain LBJ’s winning coalition. Among other things, Johnson brokered a deal between Western Democrats who wanted public power and conservative Southern Democrats who wanted the most watered down civil rights bill possible. The Southerners voted for a public power bill they had previously opposed, but did not filibuster the emerging civil rights bills once key changes were made. The Southerners opposed the bill on the floor and voted against it, but would never used the one weapon which could have killed it entirely. The Western Democrats got their public power (at least in the Senate) and supported watering down the civil rights bill which would not hurt them politically back home in that era. Northern Democrats eventually were reconciled to the fact that some bill was better than nothing and Southern Democrats were reconciled to the fact that some bill was inevitable.

Does this remind you of anything currently going on in the Senate? We are seeing the same type of struggle now play out in the Senate over health care reform. Only a fraction of the sausage making is taking place in public, but the same issues of power, leadership, and strategy seems to be unfolding. Some bill, any bill, will probably ultimately pass. Obviously Harry Reid is no LBJ, but the demographics of the House, Senate, and White House are different enough that something is likely to emerge.

But the issues of power, leadership, and strategy remain. Is some bill better than no bill? Is this the first step to more comprehensive reform down the road? Is the watering down of the public option to build coalitions within the Democratic Party, and perhaps a couple of Republicans, leadership, weakness, or just rent seeking? While we will never know, what would LBJ have done on health care, and will we ever see the likes of him as a legislative leader again?

***
Thanks to Danielle, Dan, and the rest of Concurring Opinions for the chance to blog for the month of October. I look forward to the new group of guest commentators for November including my Loyola-Chicago colleague Mike Zimmer.

As Congressional committees have begun to specify exactly how “competition” among insurers would lower costs, they’ve realized that we need to do a lot more than increase regulatory scrutiny and add insurers to the mix. Rather, just as Medicare took care of elderly persons unlikely ever to be profitably covered by private insurers, a new option is needed to address the needs of impoverished or sick citizens [...]]]> It’s now official—even Senate leaders are attaching a public option (albeit one with an opt-out) to their proposed health reform bill. Dan Balz of the WaPo asks “What brought the public option back to life?” While Balz focuses on the chess game of Washington politics to explain the public option’s resurgence, I detect deliberative democracy at work.

As Congressional committees have begun to specify exactly how “competition” among insurers would lower costs, they’ve realized that we need to do a lot more than increase regulatory scrutiny and add insurers to the mix. Rather, just as Medicare took care of elderly persons unlikely ever to be profitably covered by private insurers, a new option is needed to address the needs of impoverished or sick citizens unlikely ever to pay profitable premiums to Aetna, Cigna, and their ilk.

Why wasn’t this apparent earlier? I think that closer scrutiny for a proposal to repeal the “antitrust exemption” for insurers has led to more serious consideration of what competition can and cannot do in the health care industry. As antitrust expert Tim Greaney explains, “the Supreme Court has narrowly interpreted McCarran-Ferguson requirement that only the ‘business of insurance’ is exempt; hence insurers’ actions vis a vis providers are not exempt.” Lack of antitrust enforcement—and the market competition it’s supposed to bring—can’t fully explain insurers’ failures here. Some commentators believe that application of antitrust laws to physicians and hospitals in the mid-1970s may even have spurred the development of a “medical-industrial complex” capable of displacing professional norms with profit-driven practices.

Mere promotion of competition, without more, also creates other dangers. Enforcing antitrust laws aggressively against insurers, while failing to balance that effort with similar scrutiny of providers, could lead to even higher health care costs. Do we really expect piecemeal antitrust enforcement, played out in fragmented and uncoordinated courts, to manage such balance? It is often the case that both providers and insurers are concentrated, powerful, and earning supracompetitive profits (whatever “supracompetitive” means in a realm so thoroughly marbled with regulation, subsidy, and barriers to entry).

Insurers are competing in many markets—they’re just frequently doing so in ways that are socially unproductive. As I have noted before, there are effective competitive strategies for insurers that reduce social welfare overall. Given that the average insured stays in a plan for less than three years, the marketplace rewards insurers who put hurdles in front of expensive preventive care, or scramble to drop those with extensive medical needs. It also exacerbates the coverage crisis that necessitates health reform in the first place.

Genuine health reform will provide incentives for insurers to do things that actually improve individual and public health—programs such as transparent physician rating, preventive and chronic care programs, and intensive data analysis to promote evidence-based medicine. Like the V.A., a public option can be ordered to do such things. Moreover, it can be required to cover the costly or unprofitable individuals that private insurers won’t touch. The government might “require” private health insurers to do the same, but I would not count on overwhelmed regulators to enforce such laws adequately.

Sadly, even when competition is exposed as an empty vessel, our language of discussing health care tends to gravitate back to it as an ideal. Fortunately, Daniel Callahan’s recent essay on the “common good” as a justification for health reform provides a richer vocabulary of evaluation. Callahan has no illusions about transforming the current debate with a new language of moral evaluation, but his words are worth pondering:

I have not painted a hopeful picture about the common good in American health care. That simply does not seem possible. An abiding suspicion of government, a belief in the free market as an engine of prosperity (and thus, by an illogical leap, as an engine of good health care), and the majority’s fear that they may lose the benefits they already have—all this leaves little room for an embrace of the common good. Solidarity, the value behind European health-care systems, seems to me the best basis for universal care, better than justice or rights. But the sense of solidarity required for serious health-care reform cannot be wished into existence. . . .

Suffering, disease, and death are our common lot. They ought to be dealt with as our common problem. It is a shame that the kind of empathy and mutual support that Adam Smith understood to be a requirement of morality have not, in our culture, been extended to health care—extended to one another in the recognition that we all have bodies that go awry and fail. Instead we are offered a consumer model, a national Walmart of medical choice where we are all sharp-eyed purchasers getting the best possible deal for ourselves. A construal of the common good as the freedom of consumers to get what they want, indifferent to the fate of others, is a cheap substitute for the real thing.

Callahan is too pessimistic about the viability of an appeal he’s helped craft. As Catherine Arnst has argued, a moral case for health reform–as either compassion for others or self-interest properly understood–is essential in current debates. Even the most self-centered person can imagine losing a job, a spouse, or another source of insurance. It seems paradoxical to expect the very companies that deny such coverage to offer it under government fiat. A public option is a logical response to our market—and moral—failure to separate the experience of illness from anxiety over potential financial ruin. As the Health Care Experts Bureau at Campaign for America’s Future recognizes, a public option is the key to demonstrating that the same commitments to cost containment, universality, and basic fairness evident in Medicare can be brought to Americans not presently served by the private insurance industry.

X-Posted: HRW.

The LAPD obtained a warrant to search a licensed medical marijuana facility. The LAPD did not, however, tell the judge that the place to be searched was licensed. The search proceeded. Around 209 pounds of marijuana, 21 pounds of hashish, and 12 pounds of marijuana oil were seized along with $186,416.00. The facility wanted the money back, but it had been turned over federal law enforcement and forfeiture proceedings were started. If forfeited, the city stood to gain about 80 percent of the money. The Ninth Circuit The Ninth Circuit’s ruling (pdf) has the full details. This passage seems to sum up [...]]]> The Ninth Circuit just issued an opinion about the interplay between state law enforcement, federal law enforcement, the Fourth Amendment, and state law.

The LAPD obtained a warrant to search a licensed medical marijuana facility. The LAPD did not, however, tell the judge that the place to be searched was licensed. The search proceeded. Around 209 pounds of marijuana, 21 pounds of hashish, and 12 pounds of marijuana oil were seized along with $186,416.00. The facility wanted the money back, but it had been turned over federal law enforcement and forfeiture proceedings were started. If forfeited, the city stood to gain about 80 percent of the money. The Ninth Circuit The Ninth Circuit’s ruling (pdf) has the full details. This passage seems to sum up the problem and the way in which the LAPD erred.

While there may have been probable cause to search UMCC for a violation of federal law, that was not what the LAPD was doing. Nothing in the documents prepared at the time the warrant was obtained from the state court or in the procedure followed to obtain that warrant supports the proposition that the LAPD thought it was pursuing a violation of federal law. Instead, it sought a warrant from a state court judge, though, as the District Court found, it lacked probable cause for a state law violation and failed to inform the state court judge of relevant facts that supported the conclusion that UMCC was not in violation of state law. The LAPD, a city agency, never initiated the process of seeking a federal search warrant from a federal magistrate or indicated that it was pursuing a violation of federal law.

I defer to Fourth Amendment scholars as to whether this ruling makes sense. Nonetheless, it seems that the federal government’s new policy might mean that state or local government that wants the federal government involved in going after medical marijuana facilities will have to persuade the federal government that a facility is not complying with state law. That requirement seems to match what the Ninth Circuit is saying state and local law enforcement groups should do with state judges in the first place.

1) Increase productive competition in health care? Everyone talks about “increasing competition” among insurers and providers, but there are many ways to compete. Hospitals and doctors can game the reimbursement system. Insurers may not directly discriminate against the sick, but can find other ways to keep high-risk patients out of their plans, as even the most market-oriented health policy experts realize: [...]]]> House and Senate leaders will soon have to reconcile several different versions of health reform bills. The bills are complex, but some simple principles should guide the process of integrating them into a final product. As the press reports on a whirlwind of proposed laws, we need to ask of any particular proposal: Does it . . .

1) Increase productive competition in health care? Everyone talks about “increasing competition” among insurers and providers, but there are many ways to compete. Hospitals and doctors can game the reimbursement system. Insurers may not directly discriminate against the sick, but can find other ways to keep high-risk patients out of their plans, as even the most market-oriented health policy experts realize:

[T]o avoid patients with costly, complicated medical conditions, health plans could include in their networks relatively few doctors who specialize in treating those conditions, said Mark V. Pauly, professor of health-care management at the University of Pennsylvania’s Wharton School.

Both the Netherlands and Switzerland have already experienced problems in this area, even though the Netherlands has implemented risk-adjustment methods (which attempt to deter such “cherrypicking” and “lemondropping”) far more serious than anything proposed in current bills in the US. As Karen Pollitz has repeatedly argued, we’re going to need a much greater investment in insurance regulation to make any reform bill work.

2) Make it easier for uninsured or underinsured individuals to buy coverage? Many of the proposals for allocating and awarding subsidies for coverage sound exceedingly complex. We’re hearing about serious limitations on access to exchanges, subexchanges, burdensome “free rider” provisions, etc. Any particular provision may sound good in the abstract, but taken as a whole they could become an obstacle course that makes obtaining insurance coverage a miserable and exasperating experience for those supposedly aided by reform. During the second Bush administration, hundreds of thousands of children eligible for subsidized health insurance were not enrolled because states failed to make enrollment convenient enough for time- and cash-strapped parents. As Liebman and Zeckhauser remind us, “we must design systems for mere mortals, not the people who inhabit the models of traditional economists.” What seems easy to one of DC’s privileged elite can be very hard for an overworked mom or minimum wage-earning service worker.

I believe that the main reason a solid 2/3 to 3/4 of the country supports a public option is because it is a straightforward, transparent way to provide a backstop of health insurance for everyone. If Congress both rejects a public option and makes subsidies for private insurance as complex as the tax code, health reform risks becoming a model case of government failure. Last week’s negative votes on Rockefeller’s strong and Schumer’s weak public options could easily become a “you broke it, you bought it” moment for centrist Democrats and Republicans on the Senate Finance Committee.

3) Fairly distribute the burdens of reforming the health care system? This is the tax and finance question, and it promises to generate some epic battles on Capitol Hill. However the Senate Finance proposal ultimately evolves, it will be in tension with a House of Representatives that sees progressive taxation as a foundation for financing reform. The Baucus proposal to tax “high end”/Cadillac/”gold-plated” health plans may seem progressive, but it promises to gradually engulf even normal plans. While David Leonhardt offers some good economic arguments for such a tax, policymakers should be guided by Leonhardt’s observations on the propriety of taxing those at the very top of the income scale, who have disproportionately benefited from economic trends and tax cuts of the past decade.

4) Provide incentives for long-term cost-saving and preventive medicine? Comparative effectiveness research is a crucial tool for focusing pharmaceutical research on drugs that save lives. We have a shortage of primary care doctors vis a vis specialists. Reimbursement systems are too easy to game. Insurance markets are concentrated and need more competition and transparency. Any bill that ignores these problems (or fails to empower HHS or another agency to address them) can’t lead to truly sustainable universal coverage.

The health reform fight has been bruising, disappointing, and frustrating for many who care about health policy. Many unwise assumptions are already baked into leading bills. In the Senate, ostensibly Democratic lawmakers are promoting what are essentially Republican ideas and granting enormous subsidies to industries that may well betray them at the next electoral cycle. Nevertheless, there remain many opportunities for improving the final product at the beginning of the end of the legislative process.

X-Posted: HRW.

In December 2005, I was on a group biking tour of California wine country when I got going too fast on a steep downhill, couldn’t quite make it around a sharp left turn, went off the road, and fell over. My last thought as I went down was, “oh, this won’t be so bad, I’ve slowed down considerably.” The next thing I remember is being loaded onto a stretcher. I have no memory of anything in between, but [...]]]> Now that the last of the congressional health care bills has been unveiled, and the health care debate is in full swing, it seems like an opportune time to reprint this post from February 2007, in which I describe my own encounter with the American health care system:

_______________

In December 2005, I was on a group biking tour of California wine country when I got going too fast on a steep downhill, couldn’t quite make it around a sharp left turn, went off the road, and fell over. My last thought as I went down was, “oh, this won’t be so bad, I’ve slowed down considerably.” The next thing I remember is being loaded onto a stretcher. I have no memory of anything in between, but I’m told that after my friends revived me (I was out for about a minute), I tried to get back on the bike and had to be restrained. Thank heavens, I was wearing a helmet.

An ambulance took me to the hospital. I looked like something out of a horror movie (photos here), but in the end the only real damage was that I broke one small bone in my left hand, which the doctors taped up. My ribs were pretty sore, but the doctors couldn’t quite tell whether any were broken. They thought not, but since there’s no treatment for ribs anyway, they didn’t bother to make certain. The hospital did a CAT scan, and the doctors said, oh, there might be some bleeding in your brain, we’d better keep you overnight. So I stayed overnight (in a semi-private room), and then the next morning, they did another scan and said, no, everything’s fine, that first scan must have been a false positive, go home. They did another scan in there somewhere to check for broken bones. And they gave me some pain medication and cleaned me up generally. And that was it. No surgery or anything like that.

So. Three scans, pain medication, tape for the broken bone in my hand, and not quite 24 hours in the hospital. Go ahead and take your wildest guess how much that would cost.

Most people have guessed something like $3,000 or $5,000 or maybe $10,000 at the most. That was their wildest guess. The bolder guessers have picked $12,000 or $15,000. I think the highest guess was $20,000.

How about $45,000? In your wildest imagination, could you ever guess that that would be the bill? Well, it was. For some reason the bill reflected an “out of state adjustment” for my insurance plan of about -$11,000, which brought the total down to $34,000, but $45,000 is what the hospital thought the services should cost. And bear in mind, that was just the hospital. That’s before the doctors and the ambulance.

$45,000! And there was nothing wrong with me! I broke one bone in my left hand! I didn’t even need surgery! What if there had been something wrong? What if I’d really had some bleeding in my brain or something else that required surgery? Would the bill have been $245,000?

I am reminded of all this because I have just received the bill for the amount I actually have to pay. My insurance company, perhaps understandably, was a little skeptical about this bill and kicked it back and forth with the hosptial for over a year. It was somewhat unnerving to have a $34,000 bill hanging over me all that time, even though I knew I wouldn’t have to pay all of it. Based on what I thought I knew about my insurance plan, I guessed that the insurer would disallow about half the bill (its usual practice) and then I would have to pay 20% of what remained, in other words about $3,400. For some reason that I didn’t understand (but am certainly not complaining about), that’s not how it worked. The insurer actually forked over a little over $31,000 ($31,112.81 to be exact), and my share came to a bit less than $2,000. I felt like I’d gotten off easy. Of course, with the doctor bills and the ambulance bill it all came to somewhat more — my total was $3,169.40. My insurer kicked in a total of $32,526.69, making the grand total $35,631.99.

Man! If you’ve ever wondered whether there’s a health care crisis in this country, let me tell you, there is. I understand now what people mean when they say that most people are just one accident or bad illness away from bankruptcy. Imagine if I didn’t have insurance! The hospital would be coming after me for $45,000. Combined with the other charges, the total amount the medical system would be seeking from me would be $48,235.35.

For one broken bone! OK, they had to check whether there was anything worse, but still! If this is what one broken bone costs, what does a serious medical problem cost?

How do people without insurance manage? There are almost 50 million of them, you know. I presume most of them don’t have the odd $50,000 that they can just throw at a medical bill. I guess they just pray to stay healthy.

I lead a highly privileged existence. I have a good job that provides good health benefits, and I could afford my share of the costs of this accident. But even I was unnerved by the stunning cost of just falling off your damn bike.

Fortunately, I’m just a law professor. It’s not my job to fix the health care system, and no one could expect me to know how to do it. But boy, if it is your job, you’d better get cracking. There’s a crisis.

My hand still hurts. Always wear your helmet.

This sure sounds like a classic example of excessive “command and control” regulation where a “standards” based regulation would serve everyone better.  If an insurer will [...]]]> The New York Times reports today that people who suffer from ALS (Lou Gehrig’s disease), and who require a technological device to assist them with speaking, may be able to get their insurers to spend $8,000 for a Medicare-approved, dedicated computer that has all functions other than speech assistance disabled, but they can’t get an insurer to spend $450 on an iPhone with a speech app.  Medicare won’t approve iPhones because they can be used by people who aren’t ill.  (Strictly speaking, it’s up to private insurers to decide what to do, but many of them follow Medicare’s lead, according to the article.)

This sure sounds like a classic example of excessive “command and control” regulation where a “standards” based regulation would serve everyone better.  If an insurer will cover specific device at a certain costs, I’m hard pressed to understand why the insurer and its patients won’t be better off if the insurer approves any cheaper device that performs the same function.  Could this be some of the “waste, fraud, and abuse” that President Obama hopes to squeeze out of the health care system?

I suppose insurers are afraid of fraudulent claims by patients who really just want free iPhones.  But with a cost difference of over $7,500, insurers could spend a couple of thousand dollars investigating each claim and still come out way ahead.

Or are we just offended at the thought that insurance would buy a sick person something that everyone wants anyway?  I don’t know how many patients need this kind of device, but if we could save $7,500 apiece I’d be happy to get over my annoyance.

Health care system X is a bad system because it kills people.

In support of this assertion, we are then treated to a set of anecdotes about how this or that person died as a result of this or that health care system break down.  Hence, we see critics of Obama’s proposals trotting out horror stories about how NHS bureaucracy resulted in the death of this or that Briton’s loved ones.  Likewise, we see supporters of health care reform unearthing heartbreaking stories of how the American patchwork of private insurance and Medicare or Medicaid killed off dad or mom.  My question is, [...]]]> As the debate over health care reform slogs on, a particular kind of argument has become quite familiar.  It goes something like this:

Health care system X is a bad system because it kills people.

In support of this assertion, we are then treated to a set of anecdotes about how this or that person died as a result of this or that health care system break down.  Hence, we see critics of Obama’s proposals trotting out horror stories about how NHS bureaucracy resulted in the death of this or that Briton’s loved ones.  Likewise, we see supporters of health care reform unearthing heartbreaking stories of how the American patchwork of private insurance and Medicare or Medicaid killed off dad or mom.  My question is, “So what?”

My point in this post is not to argue the merits of this or that proposal.  I’ve got opinions on those things, but I’ll save them for another time.  Nor do I want to create some kind of equivalence between all health care systems.  America’s strikes me as exceptionally expensive and inefficient.  Rather, I want to make a much simpler point:

All health care systems kill people.  All of them.

They do this for three reasons.  First, death is not ultimately preventable.  We all die, although in the United States in particular we seem loath to acknowledge this fact let alone let it influence how we think about health care spending.  Second, and perhaps more importantly for our purposes, things always breakdown.  Even a system designed by smart people of good will will, for time to time, go horribly wrong and do something stupid.  Unfortunately, this holds true in health care, where the stakes are high, and the forces of entropy and stupidity can kill.  Finally, nobody has ever been willing to spend infinite resources to eliminate every preventable death.  Every day we all engage in behavior that creates some non-trivial likelihood of death because the costs of doing otherwise are prohibitively high.  Using automobiles is an obvious example, but a moments reflection will multiply them.  The unvarnished truth is that we necessarily are willing to let people die preventable deaths.

As a result, I find myself unmoved by the stories of grandma killed off by the NHS or dad left to die by an insurance company. Health care systems kill people.  So what? Can we start having a real discussion?

Rebecca Dresser of Washington University in St. Louis employs personal [...]]]> I just started teaching the Law of Death and Dying for the umpteenth time.  I’ve always more or less been a part of the cadre of (former in my case) hospital lawyers who advocate for everyone to have an advance directive so that doctors know what they’re supposed to do when you’re incompetent and life and death decisions must be made.  Innumerable studies suggest the Advance Directive experiment hasn’t worked, but we haven’t come up with anything better, and in certain populations (those for whom death in the next decade is a statistical probability due to age or diagnosis), they can help with decision-making.  The war in Iraq has caused me to become much more skeptical about Advance Directives.

Rebecca Dresser of Washington University in St. Louis employs personal identity theory to oppose exclusive reliance on  advance directives, arguing that the competent, functioning person who decides what health care she should receive, say, fifteen years hence is not the same person to whom these directives will apply.  That is, that the person now in a nursing home with Alzheimer’s Disease  who no longer recognizes his wife or children but seems basically content , is not the same “person” who executed the Advance Directive a decade or two ago with a dread of incompetence.

I have tossed my students into this debate every year.  Last year, I unequivocally took the position that Dresser is right, to the consternation of most of my students.  The prior semester, one of my (somewhat older) students was preparing to ship out to Iraq with his National Guard unit. That he enrolled in Death & Dying his semester before deployment was a remarkable thing to me, but I went with it, and we talked quite a bit about advance directives for soldiers. I even toyed with the idea of training law students to assist my student’s unit in preparing their own Advance Directives – this war’s soldiers are much more likely than those of prior wars to return home brain-injured – their torsos are pretty well protected by armor, but they still lose limbs, and the many soldiers who would previously have died are returning home with brain injuries.

But the more I learned about these  soldiers, the more convinced I became that at least for these very young adults leaving for Iraq, Dresser must be right.  There is no way an 18 year old transitioning from his high school foot ball field to boot camp, getting ready to ship out, is the same person as the injured and incompetent (otherwise the Advance Directive would be irrelevant) soldier returning to Walter Reed or a rehab institute.  While my experience with war and soldiers is pretty limited, I found myself unwilling to help the young men and women, many of whom are younger than our students, pre-plan what their treatment decisions were should they got blown up by an IED.

And of course, you can imagine the outrage of most of my students, almost none of whom ever conceived of the remote possibility they’d be plopped down in Iraq or Afganistan. But by rejecting Advance Directives for soldiers, I was refusing to respect their (my students as much as these soldiers) autonomy and constitutionally protected right of self-determination (actually, the constitutional jurisprudence is not so straightforward as they would have it).  To them, I was essentially arguing for a return to paternalism , upending the decades of progress by the adherence to the doctrine of informed consent and patient autonomy.

They are right.  I have become disenchanted with power we accord autonomy.  Sometimes other principles should prevail, and sometimes a decision is patently wrong or irrational or transient.  I can’t bring myself to aid an 18 year old who should be on a date at the movies prospectively decide whether he’s willing to live a life without legs, or imagine whether she can tolerate living with the consequences of brain injury.  My veteran student returned to school this semester.  I look forward to testing my new perspective on him.

* Stay informed. [The CDC website] will be updated regularly as information becomes available. * Influenza is thought to spread mainly person-to-person through coughing or sneezing of infected people. * Take everyday actions to stay healthy. o Cover your nose and mouth with a tissue when you cough or sneeze. Throw the tissue in the trash after you use it. [...]]]> The concern over swine flu is high and with reason. The CDC’s new report suggests that as many as 50% of Americans could be infected and 90,000 deaths may occur this flu season. The precautions that the CDC recommends are:

* Stay informed. [The CDC website] will be updated regularly as information becomes available.
* Influenza is thought to spread mainly person-to-person through coughing or sneezing of infected people.
* Take everyday actions to stay healthy.
o Cover your nose and mouth with a tissue when you cough or sneeze. Throw the tissue in the trash after you use it.
o Wash your hands often with soap and water, especially after you cough or sneeze. Alcohol-based hands cleaners are also effective.
o Avoid touching your eyes, nose or mouth. Germs spread that way.
o Stay home if you get sick. CDC recommends that you stay home from work or school and limit contact with others to keep from infecting them.
* Follow public health advice regarding school closures, avoiding crowds and other social distancing measures.

A news report on ABC today, however, suggests that this version of the flu may be more easily transmitted by contact. Another report notes an apparent oddity about trying to avoid close contact including kissing and the probably misunderstood claim that one should wear a surgical mask when close contact is necessary, for example while kissing.

So I wonder whether people will start to refrain from shaking hands. Some claim the handshake was a way of showing that one is not armed. The custom of shaking hands is strong and not shaking hands would probably not go over well. Still maybe embracing placing one’s hands together in a namaste position (see image) or the allegedly terrorist fist bump would be ways to greet folks and reduce the risk of spreading germs.

Image 1: WikiCommons; by Saptarshi Biswas; Creative Commons Attribution 2.0 License.

Image 2: Wikicommons; Public Domain

Bruce Vladeck: “The CBO’s track record in predicting the effects of health legislation is abysmal. Over the last two decades, the CBO has routinely overestimated the costs of expanded [...]]]> Back in 2007, wise wonks were already warning that the Congressional Budget Office could torpedo health reform. The CBO dealt Clintoncare a heavy blow by saddling it with huge cost projections — and failing to take into account the savings the program would realize for individual citizens and the private sector. Current CBO director Doug Elmendorf has been riding a wave of notoriety as an objective “referee” in an increasingly bitter reform battle. But as his office’s one-sided estimates enervate reform, it’s beginning to risk its reputation for impartiality. Consider the following observations about CBO’s work:

Bruce Vladeck: “The CBO’s track record in predicting the effects of health legislation is abysmal. Over the last two decades, the CBO has routinely overestimated the costs of expanded government health care benefits and underestimated the savings from program changes designed to reduce expenditures. Most recently, it overestimated the five-year cost of Medicare Part D — the prescription drug benefit — by more than 35%. Even more dramatically, the CBO’s estimates of the Medicare savings from the Balanced Budget Act of 1997 underestimated the impact, on average, by a full 100%. That’s right: In the BBA’s first three years, Medicare spending fell fully twice as fast as the CBO had projected.”

Timothy Stoltzfus Jost: “[A] moment’s reflection would lead one to realize that the CBO’s guess that [a reform proposal] would save [only] $2 billion is about as worthless as an estimate that a loaf of bread will cost $5.65 in 2019, or a gallon of gasoline $4.73. Indeed, the CBO admits as much, stating that it actually believed the proposal would save nothing, but “there is also a chance that substantial savings might be realized.” . . .[T]he media needs to stop reporting CBO reports as though they reflect the real costs of reform.”

Maggie Mahar: “When I read Elmendorf’s testimony suggesting that the [House] bill wouldn’t bend the trajectory of federal health spending, I couldn’t help but wonder: Did he understand how the proposals in the 1,018 page bill dove-tailed with the excellent recommendations that the Medicare Payment Advisory Commission (MedPac) has made in recent years? Has Elmendorf read the lengthy MedPac reports?”

When respected experts like Maggie Mahar are wondering if Elmendorf has understood key literature in the area, something’s gone wrong at CBO. The media’s uncritical acceptance of his figures can only last as long as it fails to report the true complexity and uncertainty involved in both substantive reform and the do-nothing option that CBO’s handiwork is unintentionally advancing.

Of course, anyone familiar with Timothy Westmoreland’s work on CBO budget scoring would have been suspicious of its prognostications from the outset. As he noted in 2008:

The budget process systemically favors policies that let sick people die rather than incur future government-financed health costs [arising out of survivors' increased life expectancy]. Second, the process also structurally favors policies that keep expenses off the federal books by working through mandates rather than spending. Both of these problems should be addressed before the Congress considers universal coverage legislation.

The latter bias, toward mandates, systematically “fails to recognize financial benefits to non-government actors” that are realized via alternative routes to universal coverage. Even if a public health option saved citizens tens or hundreds of billions of dollars by competing with private insurers and driving down premiums, CBO couldn’t factor such a boon to our economy into its solipsistic calculations. (And don’t even think of asking it to quantitatively value the peace of mind and labor mobility such an option would generate.)

Despite all these shortcomings of the CBO numbers (and many forms of cost-benefit analysis generally), cost estimates will loom ever-larger in health care debates. As T.M. Porter’s book “Trust in Numbers” observes,

[Q]uantification grows from attempts to develop a strategy of impersonality in response to pressures from outside. Objectivity derives its impetus from cultural contexts, quantification becoming most important where elites are weak, where private negotiation is suspect, and where trust is in short supply.

Neverthless, Vladeck is right to argue that “instead of treating CBO estimates like the Ten Commandments, we should treat them like the informed wild guesses they actually are.” If CBO fails to advance such disclaimers itself, it risks ending up as discredited as the bailout wizards of Wall Street. CBO’s clinically depressive pessimism about health reform costs looks about as trustworthy as the manic assumptions of ever-rising home prices that fueled the banks’ bogus boom.

There are also legitimate worries about Elmendorf’s own possible political biases. Martin Feldstein, the director of the Council of Economic Advisers (CEA) under President Ronald Reagan, mentored him. Guess who came out today with a remarkably disingenuous opinion piece that simultaneously laments rising health costs and runs down the cost effectiveness research and government bargaining power necessary to rein them in? Even more astonishingly, Feldstein states that “there is already a very competitive private insurance market” — despite David Balto’s well-corroborated testimony that “few markets are as concentrated, opaque and complex” as private health insurance. If Elmendorf is still consulting with Feldstein on health matters, we have a lot to worry about — especially if he’s serious about cutting survivors’ costs.

Photo Credit: LongView, Fortune Teller.

Beneath all the sturm und drang about soaking the rich, the press should focus on three underlying realities. First, income and wealth vastly increased at the top of [...]]]> The usual suspects are alarmed by the House Health Reform Bill’s proposed surcharge on high income earners. As the NYT explains with some examples, “Starting in 2011, a family making $500,000 would have to pay $1,500 in additional income tax to help subsidize coverage for the uninsured. A family making $1 million would have to pay $9,000.” The surcharge rises with income, and over time, to hit 5.4% (by 2013) for households earning over $1 million annually. Households making between $280,000 and $500,000 per year would only face a 2% surcharge by 2013.

Beneath all the sturm und drang about soaking the rich, the press should focus on three underlying realities. First, income and wealth vastly increased at the top of the distribution over the past thirty years — in part because of corporate cost savings that included denial of health coverage to millions of workers. Second, inequality itself exacerbates the health care crisis, by fueling the allocation of medical care according to profit potential, not need. Third, inequality causes health problems, because societies grow “more dysfunctional, violent, sick and sad if the gap between social classes grows too wide.” The surcharge on the rich is not some random resentment inflicted by Frenchified Madame DeFarges on America’s John Galts. The surcharge will itself help address some of the problems health reform is designed to solve. I’ll unpack these thoughts in a series of posts this week.

Nevertheless, the surcharge is not progressive enough, and this should be the main message of liberals commenting on the House bill.

As David Leonhardt has observed in another context,

Today . . . the very well off and the superwealthy are lumped together [in the tax code]. The top bracket last year started at $357,700. Any income above that — whether it was the 400,000th dollar earned by a surgeon or the 40 millionth earned by a Wall Street titan — was taxed the same, at 35 percent. This change [from the past] is especially striking, because there is so much more income at the top of the distribution now than there was in the past.

The House’s top bracket for the surcharge is one million dollars, a slight improvement. But it is very hard for me to see why those who make that amount should be treated the same as those in the “Fortunate 400″–the 400 highest earning households which made, on average, more than $263 million apiece in 2006. As a Wall Street Journal article reports, “the group’s average income tax rate — calculated as income taxes paid as a percentage of adjusted gross income — fell to 17.2%. in 2006 from 18.2% the prior year. That’s down from a high of 29.9% in 1995.” The health care surcharge makes up less than half of that decline in taxes from 1995 to 2006.

In short, the next time a pundit screams “socialism” at a surcharge like the one proposed by the House, I’d recommend calmly agreeing, and pointing out that those at the very top of the income scale do indeed appear to be shirking their fair share of the fiscal burden. I’d also ask the pundit to take a look at these figures from Charles Morris’s The Trillion Dollar Meltdown:

Between 1980 and 2005, the top tenth of the population’s share of all taxable income went from 34 percent to 46 percent, an increase of about a third. The changing distribution within the top 10 percent, however, is what’s truly remarkable. The unlucky folks in the 90th to the 95th percentiles actually lost a little ground, while those in the 95th to 99th gained a little.

Overall, however, income shares in the 90th to 99th percentile population were basically flat (24 percent in 1980 and 26 percent in 2005). Almost all the top one-tenth’s share gains, in other words, went to the top 1 percent, or the top “centile,” who doubled their share of national cash income from 9 percent to 19 percent.

Even within the top centile, however, the distribution of gains was radically skewed. Nearly 60 percent of it went to the top tenth of 1 percent of the population, and more than a fourth of it to the top one-hundredth of 1 percent of the population. Overall, the top tenth of 1 percent more than tripled their share of cash income to about 9 percent, while the top one-hundredth of 1 percent, or fewer than 15,000 taxpayers, quadrupled their share to 3.6 percent of all taxable income. Among those 15,000, the average tax return reported $26 million of income in 2005, while the take for the entire group was $384 billion.

A truly progressive health surcharge would take that fractal inequality into account. But we may as well support the small step towards fairness that the House Bill represents.

PS: Conor Clarke has a good series on the surcharge here.

X-Posted: Health Reform Watch.

Economists have known for 45 years — ever since Kenneth Arrow’s seminal paper — that the standard competitive market model just doesn’t work for health care: adverse selection and moral hazard are so central to the enterprise that nobody, nobody expects free-market principles to be enough. To act all wide-eyed and innocent about these problems at this late date is either [...]]]> I’ve addressed the “ostrich economics” of Gregory Mankiw on this blog before. Mankiw’s “Pitfalls of a Public Option” is yet another contribution to the genre. Mankiw argues that no public option in insurance is necessary, since “We don’t need government-run grocery stores or government-run gas stations to ensure that Americans can buy food and fuel at reasonable prices.” Paul Krugman’s response:

Economists have known for 45 years — ever since Kenneth Arrow’s seminal paper — that the standard competitive market model just doesn’t work for health care: adverse selection and moral hazard are so central to the enterprise that nobody, nobody expects free-market principles to be enough. To act all wide-eyed and innocent about these problems at this late date is either remarkably ignorant or simply disingenuous.

Krugman actually understates just how unconventional the economics of health care can be. Given these divergences from standard market models, Brad Delong may well be right to say that even Friedrich Hayek could approve the idea of a public plan: it’s a way “to use the market as an institutional discovery mechanism.”

Of course, most modern-day Hayekists are more likely to take Mankiw’s view than Delong’s; namely, that “private insurers, lightly regulated to ensure that the market works well, would offer Americans the best health care at the best prices.” We have a sense of how concentrated the private insurance industry and providers are. What exactly does “light regulation” look like in that context?

One clue can be found in Reed Abelson’s excellent article in today’s NYT, Insured, but Bankrupted by Health Crises. The story of the Yurdins conveys just how risky such a market can be:

[M]any . . . people . . . have coverage so meager that a medical crisis means financial calamity. One of them is Lawrence Yurdin, a 64-year-old computer security specialist. Although the brochure on his Aetna policy seemed to indicate it covered up to $150,000 a year in hospital care, the fine print excluded nearly all of the treatment he received at an Austin, Tex., hospital. . . .

At St. David’s Medical Center in Austin, where he went for two separate heart procedures last year, the hospital’s admitting office looked at Mr. Yurdin’s coverage and talked to Aetna. St. David’s estimated that his share of the payments would be only a few thousand dollars per procedure.

He and the hospital say they were surprised to eventually learn that the $150,000 hospital coverage in the Aetna policy was mainly for room and board. Coverage was capped at $10,000 for “other hospital services,” which turned out to include nearly all routine hospital care — the expenses incurred in the operating room, for example, and the cost of any medication he received.

In other words, even the hospital couldn’t understand (or anticipate) the tactics of Aetna. I wonder if Mankiw disapproves of Aetna’s approach here–or if he’d like to see Gotcha Capitalism further extended into the health industry.

Before ditching the public plan option, politicians should think hard about what the world of health care will look like without it. Jon Cohn provides a projection:

Fast forward a few years to the first day that [a weak] reform bill–signed with much fanfare in the Rose Garden, with a beaming bipartisan coterie–takes effect. The bill’s crown jewel is not the public option, but a “national insurance exchange,” a benefit clearinghouse that is supposed to sign up private insurers to provide choices to people without workplace insurance. These choices vary based on the region you live in, to reflect the plans in the local market.

In many markets, however, the choices turn out to be roughly as limited as they are today, when the dominant insurer enrolls at least half of privately insured people in 16 states and at least a third in 38 states. The national insurance exchange is meant to create greater competition, but for most of the country, the choice is basically between WellPoint and UnitedHealth–gargantuan for-profit insurers each about the size of Medicare. Yes, there is more than one choice in most areas, but not choices that meaningfully differ from each other, or from what is on offer today. . . .

Not surprisingly, the premiums that most plans offer within the exchange are just as high as they are today. Without a public plan offering coverage that, estimates project, would be around 25 percent cheaper, the private plans in many markets are free to gouge consumers without much concern about losing business. And without pressure on these plans to control costs, they aren’t about to cut back their administrative waste or high profits or excessive executive salaries, much less bargain aggressively with drug companies and hospitals demanding ever higher prices.

Not a pretty picture.

Tim Greaney on competition in the insurance market.

Tim Jost on the prerequisites for a successful co-op compromise.

John Jacobi on public plans and chronic care.

Nathan Cortez on comparative health reform.

Tamara Coley on quality of care differences by insurance status at community health centers.

Michael Ricciardelli on the Medicare Part D Doughnut Hole and private insurer CEO compensation.

Jacob Hudnut on failed state health reforms.

Justin Goldstein on insurance exchanges.

We’re trying to develop a new resource collecting news and commentary on health reform. The eventual vision is to have [...]]]> Now that we’ve got a critical mass of posts, I just wanted to announce Health Reform Watch, a project of the Seton Hall’s Center for Health & Pharmaceutical Law & Policy. We’ve been honored with some great contributions, including:

Tim Greaney on competition in the insurance market.

Tim Jost on the prerequisites for a successful co-op compromise.

John Jacobi on public plans and chronic care.

Nathan Cortez on comparative health reform.

Tamara Coley on quality of care differences by insurance status at community health centers.

Michael Ricciardelli on the Medicare Part D Doughnut Hole and private insurer CEO compensation.

Jacob Hudnut on failed state health reforms.

Justin Goldstein on insurance exchanges.

We’re trying to develop a new resource collecting news and commentary on health reform. The eventual vision is to have bloggers covering certain “beats” (including Medicare, Medicaid, state reforms, licensure rules, etc.). I think Managing Editor Michael Ricciardelli has done a great job getting a wide variety of relevant content online. Please let him or me know if you have any suggestions for improving it.

There are good reasons for all the attention in health reform circles. But there’s a paradox here, too, because Gawande doesn’t believe that changes to health care finance and regulation can deter the wasteful and uncoordinated provider behavior which he sees at the root of the present crisis. I respectfully disagree. Law may not be doing a good job at this now—largely because health care regulators over the past 20 years vastly overestimated the degree to which the market [...]]]> Atul Gawande’s article “The Cost Conundrum” has become a cause celebre in policy circles. The Obama White House is reading it, leading journal Health Affairs has sponsored a roundtable on it, and pundits across the political spectrum are invoking it.

There are good reasons for all the attention in health reform circles. But there’s a paradox here, too, because Gawande doesn’t believe that changes to health care finance and regulation can deter the wasteful and uncoordinated provider behavior which he sees at the root of the present crisis. I respectfully disagree. Law may not be doing a good job at this now—largely because health care regulators over the past 20 years vastly overestimated the degree to which the market would improve quality and access. But we have a rare window of opportunity to correct for those assumptions. Moreover, without real reform, the profit-obsessed providers who are the villains of Gawande’s piece will systematically outcompete the integrated delivery systems he champions. Gresham’s Law applies in health care, too.

First, some background. Gawande compares a high-cost Texas town (McAllen) with a nearby, low-cost one (El Paso). He finds very little in the McAllen extravagance that is actually improving the longevity or quality of life of its residents. The piece describes in some detail how commercial imperatives affected medical practice in McAllen:

[M]any physicians are remarkably oblivious to the financial implications of their decisions. They see their patients. They make their recommendations. They send out the bills. And, as long as the numbers come out all right at the end of each month, they put the money out of their minds.

Others think of the money as a means of improving what they do. They think about how to use the insurance money to maybe install electronic health records with colleagues, or provide easier phone and e-mail access, or offer expanded hours. They hire an extra nurse to monitor diabetic patients more closely, and to make sure that patients don’t miss their mammograms and pap smears and colonoscopies.

Then there are the physicians who see their practice primarily as a revenue stream. They instruct their secretary to have patients who call with follow-up questions schedule an appointment, because insurers don’t pay for phone calls, only office visits. They consider providing Botox injections for cash. They take a Doppler ultrasound course, buy a machine, and start doing their patients’ scans themselves, so that the insurance payments go to them rather than to the hospital. They figure out ways to increase their high-margin work and decrease their low-margin work. . . .

In every community, you’ll find a mixture of these views among physicians, but one or another tends to predominate. McAllen seems simply to be the community at [the high-cost] extreme.

Gawande describes a market gone wild in McAllen, where doctors would demand “four or five thousand [dollars] a month” or even sex in exchange for routing their patients to certain home health agencies.

How does such a culture of commercialization develop? Gawande is not a social scientist, but he can extrapolate from his own experience. He knows how physicians mentor one another and provide models of care. He also mentions the work of Woody Powell, who examines how certain leading institutions can set the tone for much of an economic community. These “anchor tenants” led McAllen’s “medical community . . . to treat patients the way subprime-mortgage lenders treated home buyers: as profit centers.”

Gawande contrasts McAllen with several centers of excellence in health care, including the Mayo Clinic and a Grand Junction, Colorado network of physicians. Mayo doctors are salaried, and in Grand Junction “the doctors agreed among themselves to a system that paid them a similar fee whether they saw Medicare, Medicaid, or private-insurance patients, so that there would be little incentive to cherry-pick [and lemon-drop] patients.” A local HMO encouraged the Grand Junction doctors to meet and “focus[] on rooting out problems like poor prevention practices, unnecessary back operations, and unusual hospital-complication rates.” As a result, quality improved, cost declined, and Grand Junction Medicaid patients enjoyed higher rates of effective access than average.

It would seem that a health reform ought to focus on encouraging these types of interventions. But in an interview with Ezra Klein, Gawande is strangely agnostic on whether law can change much:

My vantage point on the world is the operating room where I see my patients. And trying to think about whether a public option would change anything didn’t connect. I order something like $20,000 or $30,000 of health care in a day. Would a public or private option change that?

People say that the most expensive piece of medical equipment is the doctor’s pen. It’s not that we make all the money. It’s that we order all the money. We’re hoping that Medicare versus Aetna will be more effective at making me do my operations differently? I don’t get that. Neither one has been very effective thus far.

I think there are several misconceptions in that quote. First, the public option is not designed to displace private insurance. It’s supposed to be a benchmark for private plans, to incentivize them to act more constructively. Second, Gawande is here invoking his own perspective, that of “good” physicians, those who push “the money out of their minds” as they decide courses of treatment. Law, as Justice Holmes reminds us, should be written and interpreted with the proverbial “bad man” in mind, who “cares only for the material consequences which [knowledge of law] enables him to predict.”

Many of the rules of health care finance and regulation address exactly the types of problematic behavior discussed in the article. Niche facilities and imaging centers are at the cutting edge of the commercialization Gawande worries about. Lawyers have debated them for years, and the policymaking is still ongoing. HHS set a moratorium on the development of specialty hospitals in 2003, but it expired. This led to a flurry of interest in administrative action designed to address specialty hospitals’ “cherry-picking” of lucrative patients and “lemon dropping” of costly cases onto other hospitals. Something as obscure as “certificate of need” rules (operating at a state level) have proven critical in determining the spread of specialty hospitals. Reports from the GAO and the Medicare Payment Advisory Commission have investigated their impact, while CMS rulemakings have focused on re-assessing payment levels for procedures at ambulatory surgical centers. Antitrust litigation could also play a pivotal role in the struggles between general and specialty hospitals for what Gawande calls the “soul of medicine.”

In the article, Gawande repeatedly talks about “blunting financial incentives” for bad medicine or patient cherrypicking. But that’s exactly the charge of the Medicare Payment Advisory Commission (MedPAC) in its examinations of developments like niche providers. State policymakers can also reflect these concerns in various ways–adjusting nonprofit status, facilities licensure rules, taxation, and many other legal variables.

In other words, law matters. Sure, all these laws can be bent in ways that favor the further commercialization of medicine. Much of any book on health care finance regulation is a tale of frustrated hopes and dashed ambitions. But this body of law at least provides some tangible guide to past and potential realignments of incentives–something that can’t be said for the appeals to cultural change at the core of Gawandean quietism.

Gawande concedes that “In the war over the culture of medicine—the war over whether our country’s anchor model will be Mayo or McAllen—the Mayo model is losing.” Calls for cultural change just aren’t being heeded—and why should they be? If an insurer develops an extremely effective protocol for dealing with the chronically ill, it will be rewarded by the market with. . . . more expensive, chronically ill patients wanting to sign up for it. As things stand now, providing high-quality care for the chronically ill is a great way to go out of business in virtually any market where your competitors can “skim the cream” of the healthiest half of the population, who only demand about 3% of health care spending. Health reform (including real risk adjustment to properly compensate such plans) can help change that.

Gawande’s “Cost Conundrum” could be to health reform what Sinclair’s “The Jungle” was to food safety. It explains current trends in the commercialization of medicine better than virtually any journalistic work out there. Sadly, it appears that its author is now more inclined to “stay above the fray” than to try to articulate and lobby for the regulatory infrastructure necessary for the cultural change he so eloquently advocates.

Debates about reform have scrutinized the health-insurance market, but they have neglected a crucially defective feature of the medical marketplace — the way doctors and hospitals charge patients when prices are not set by regulation or by negotiation with insurers. . . .

A comprehensive analysis of data hospitals report to Medicare shows that, on average, hospitals charge uninsured patients two-and-a-half times more than they charge insured patients and three [...]]]> Health policy experts Mark A. Hall and Carl Schneider have recently published a policy brief on “provider price gouging.” I’m familiar with Hall’s extraordinarily wide-ranging and insightful work on health care law, and this research shows once again why he is at the cutting edge of the field. It offers the following findings:

Debates about reform have scrutinized the health-insurance market, but they have neglected a crucially defective feature of the medical marketplace — the way doctors and hospitals charge patients when prices are not set by regulation or by negotiation with insurers. . . .

A comprehensive analysis of data hospitals report to Medicare shows that, on average, hospitals charge uninsured patients two-and-a-half times more than they charge insured patients and three times more than their actual costs. In some states mark-ups average four-fold.

This empirical research confirms what antitrust scholars long suspected: merged hospitals and increasingly powerful single-specialty groups would have a great deal of power to set prices. That’s one reason the “cost shift hydraulic” leaves private insurance payments around 122% of hospital costs, while Medicare pays about 100%.

What’s the end game for ultraprofitable specialties and dominant hospitals?

Perhaps treating Medicare patients with the same aloofness many now display toward Medicaid enrollees. As Joseph White reminds us, “Power in a market is basically the ability to walk away from a contract if one does not get a price one likes—or to force others to agree to a contract on terms that one does like.” The more specialists and dominant hospitals can squeeze from private insurers, the better financially positioned they are to simply refuse to take Medicaid and Medicare patients.

Provider price-gouging suggests a simple truth of zero-sum dynamics in health care financing. To the extent one group overpays for medical services, they start empowering their providers to turn their backs on the rest of the market. For that reason alone, a public plan should pay somewhere between the 100% Medicare baseline and the 120% private insurance payment rates. Without that intervention, we can expect dominant hospitals and powerful specialists to develop even more market power than they currently enjoy. As Abraham Verghese argues,

We may not like it, but the only way a government can control costs is by wielding great purchasing power to get concessions on the price of drugs, physician fees, and hospital services; the only way they can control administrative costs is by providing a simplified service, yes, the Medicare model (with a 3% overhead), and not allowing private insurance to cherry-pick patients (some of them operating with 30% overheads, the cost passed on to you).

Contrary to what we might think, comparative studies show us that the US, when compared to other advanced countries, does not have a sicker population: we actually use fewer prescription drugs and we have shorter hospital stays (though we manage to do a lot more imaging in those short stays—got to feed the MRI machines). The bottom line is that our health care is costly because it is costly, not because we deliver more care, better care or special care. Alas, a solution that does not address the cost of care, and negotiate new prices for the services offered will not work; a solution that does not put caps on spending and that instead projects cost-savings here and there also won’t cut it. Leaders have to make tough and unpopular decisions, and if he is to be the first President to successfully accomplish reform there does not seem to be much choice: cut costs.

Hall & Schneider also offer several compelling policy ideas for checking provider price gouging, including a cap on “what doctors, hospitals, and other providers may charge patients who are not protected by regulated or negotiated discounts.” Such caps are good first steps toward reform.

It appears designed to achieve two contradictory goals: to lower the bill’s cost and to reassure the insurance lobby. These are achieved at the expense of extending and improving Americans’ access to health care, which some might say is the whole point of passing a reform bill. . . .

As Paul Krugman observes today, “relatively conservative [Senate] Democrats still cling to the old dream of becoming kingmakers, of recreating the bipartisan center that used to run America.” They may be at the center of the political spectrum in their states, but they’re ignoring the views of the “eighty-three percent of Americans [who favor] ‘creating a new public health insurance plan [...]]]> Slate’s Timothy Noah boils down the latest Senate Finance Committee Bill as follows:

It appears designed to achieve two contradictory goals: to lower the bill’s cost and to reassure the insurance lobby. These are achieved at the expense of extending and improving Americans’ access to health care, which some might say is the whole point of passing a reform bill. . . .

As Paul Krugman observes today, “relatively conservative [Senate] Democrats still cling to the old dream of becoming kingmakers, of recreating the bipartisan center that used to run America.” They may be at the center of the political spectrum in their states, but they’re ignoring the views of the “eighty-three percent of Americans [who favor] ‘creating a new public health insurance plan that anyone can purchase.’”

If there was only popular support behind the public option, perhaps the Senate would be properly serving some function of “political conservation.” However, a growing consensus of health law and policy experts sees the need for a public option as well. Tim Greaney has been making the case compellingly; here’s his latest installment:

In America, health care “delivery” (we should abandon the misnomer ‘system’) is a fragmented hodgepodge of autonomous doctors, hospitals, facility owners, and vendors of technology, pharmaceuticals and equipment. Their lack of interconnectedness and coordination is at the core of most of the quality and cost problems Congress is now confronting. Add to that the fact that “consumer” decisions are filtered through a triple layer of agency (i.e. their employers, doctors, health plans). Moreover, as a result of lax antitrust enforcement and providers’ relentless efforts to gain “leverage”, many hospital and physician markets are now tight oligopolies or de facto monopolies. And one more: information on quality, outcomes and cost is scarce, and in some cases, unobtainable. . . .

Which brings us to the public plan option. Does it correct the myriad market failures and assure an efficient health delivery system emerges? Not by itself. However, if we are going to rely on the market interplay between insurers and providers in many hundreds of markets around the country (like politics, most health services and health insurance are local), then we need some assurance that each market will have vigorous intermediaries negotiating for consumers. . . .

There is no quick and easy way to change health care delivery arrangements that are deeply embedded in institutions and habits. The radical course, I would think, would be to subsidize a vast expansion of health insurance without putting in place institutions capable of improving a badly broken system.

The leading “expert” argument against the public option now is money–or, to be more precise, the arcane scoring system employed by CBO to weigh every conceivable cost of most publicly oriented health reform against a selective account of its benefits to the federal bottom line. Let’s leave aside for the moment the general political bias of cost-benefit analysis, the specifically dubious calculation of “survivors’ costs,” and other contestable accounting methods. The bottom line here from a budget perspective is, as Nathan Cortez puts it, “The Less You Change, The More It Costs.” If you really want to see health care costs balloon out of control, follow the Baucus path toward subsidizing private insurers (along with a a fig-leaf “co-op”) to continue their present practices.

To understand those practices, I highly recommend Joseph White’s article Markets and Medical Care: The United States, 1993-2005. (This article should be to public intellectuals what Atul Gawande’s The Cost Conundrum has been for the informed public generally.) White exhaustively describes the role of the market in organizing health delivery over the time period, and concludes that one of its most important effects was to speed the consolidation of insurers and provider groups. Rather than leading to a clash of these titans, market forces led them to join forces against employers and consumers generally:

One might wonder why consolidation among insurers did not allow them to resist the providers’ demand for increased payments. The simple answer is that there were two concentrated parts of the market and one fragmented part. The insurers had to choose between fighting a full-pitched battle with the providers or exploiting their own market power vis-a-vis employers. Raising premiums to employers was a lot easier.

BaucusCare and ConradCare as they stand now are a recipe for advancing that dynamic well into the future.

PS: Timothy Noah has been doing some great articles on health reform, and here is his selection of “must-read” sources.