WE HAVE TO FAIL TO SUCCEED

We are a reactive nation. To say we’re not proactive is an understatement. It goes well beyond apathy. If there were a psychological term for psychotic aversion to proactiveness, we’d be its poster child. Denial is the mechanism but doesn’t do justice to the heights we’ve achieved in the pursuit of avoidance and inaction.

Although this less-than-endearing trait permeates all facets of our social fabric, I’m ranting on our perennial economic/financial malfeasance. In 1973, so-called “discretionary” spending was 9.6 percent of GDP, with about 60 percent of that for defense. Today, discretionary spending is 6.6 percent of GDP—and included in these figures are defense spending (which, with the state of the world, I would hardly categorize as “discretionary”). The CBO says that discretionary spending is 35 percent of federal outlays (a pie chart from the CBO pegs it at 26 percent with 8 percent interest). The defense portion is 3-4 percent. The lion’s share, or two-thirds, of our non-discretionary spending is Medicare and Social Security. The Democrats don’t worry about spending, don’t worry about debt, and their entire political strategy revolves around steadily increasing spending and government welfare via dollar redistribution through taxation, borrowing, and printing (otherwise known as inflation). In service of recruiting to their party an ever-larger segment of an electorate nurtured on the government teat and no longer wedded to the concept of individual responsibility, this tactic handily buys votes for power. Now a majority of the electorate not only no longer looks upon government largess as demeaning, which was the norm just a few generations ago, but demands these handouts which inevitably morph into entitlements. Having been indoctrinated to believe that it comes from “rich” people who don’t “pay their fair share,” they are happy with the status quo. But it’s not really a status quo as the spending and size and intrusiveness of government are a moving target in one direction—up—and nary a voice calls for tit-for-tat reductions in spending in other areas; the idea of a balanced budget has long been abandoned. And Congress routinely abdicates its responsibility of even generating one by its mandated deadline; hence, the yearly threat of “government shutdown.” The Republicans as well are not blameless. While they at least play lip service to fiscal and budgetary responsibility, they’re junior varsity progressives, and also regularly overspend and grow government, albeit with less alacrity. There’s no shortage of economists that the Left can lean on to support “government assisted” economic policy. That history has time and again shown the disastrous consequences of this approach is no deterrent; musical chairs on a national level is only an unpalatable game to the one whose chair disappears, until all the chairs are gone. And people have an uncanny ability to ignore the missing chairs until it’s theirs.

Unfortunately, given the above circumstances, any talk of solutions by cutting discretionary spending are nothing more than a political smokescreen, You see, the American people have no appetite for cutting either Medicare or Social Security. In fact, any allusion to this is regarded as political suicide; hence the term, the “third rail” of politics. To her credit, Nikki Haley did discuss this issue early in her campaign; it seems to have taken a back seat, likely on the counsel of her political advisors. But who can blame her?

Medicare has been very good to me, covering the vast majority of my expenses for several chronic medical conditions. Personally, I’d hate to see it go, and I’ll likely pass on before it does. But it will; at least in its current form. Even now, physician have seen substantial cuts in reimbursement for decades, eaten away more aggressively lately by inflation, and something will have to give. In the short-term, I anticipate more monetary legerdemain to engineer some temporizing but inadequate reimbursement increases. But the end of the road exists for government-funded Medicine, Social Security, and our national debt in general. The unstated truth is that we’ve lived “higher on the hog” than the standard of living to which we’ve become accustomed, borrowing from generations to come, and the bill will come due. Those who think that “right wingers” have been singing this tune for years and no economic Armageddon has emerged are wise to remember the analogy of an earthquake fault: You can live near one for hundreds, or thousands of years while it builds tension, until it blows. And I see signs it will happen in my lifetime or shortly thereafter. But the reality is simply that it has to happen, whenever. And my heart goes out to those who will unwillingly bear the burden of our fiscal irresponsibility. Not that they are entirely blameless, for many have chosen to go along for the ride, but they were conditioned to accept this abnormal “norm” that benefited those that will soon be gone.

So Social Security, Medicare, and ultimately The System, will have to fail utterly before it’s fixed, like the junkie that must reach bottom. Keep an eye on states like mine, California, that are the most progressive, as they are the canaries in the coalmine. Will we, as a country, survive in recognizable form? Who knows, particularly in light of the deterioration of our social fabric on multiple fronts. But there is little doubt that the ogre, the second Great Depression, is peaking out from behind the money tree. Happy Halloween.

BIG GOVERNMENT HEALTHCARE

When I started this blog back in 2009 as a practicing clinician, it was with the intent to dissect the healthcare industry, of which I was a part, riddled with flaws as well as fraud and waste, to determine where the problems lied. As was evident to me, and confirmed by my research, no facet of the system, from doctors, patients, government, insurers, medico-legal system, or the interface with Big Pharma, were untouched by issues. But what I came to understand a bit late was how the the lack of transparency in the system and its shielding of itself from market forces contributed in a major and arguably predominant way.

What always made Medicine less straightforward than say, business and commerce, is the fact that access to good medical care is essential to health and even life itself. To leave patient care to the harsh ministrations of the marketplace seems, on its surface, to be at best callous, and at worst, naive. But I’ve begun to rethink this. First of all, despite the flaws and waste in the private sector of the capitalist system, when left to its own devices it is self-correcting. True, a lot of damage can occur in the short run, but in the end the marketplace chooses winners and losers who rise and fall based on their abilities to provide goods and services effectively and affordably. Most of the problems (frequently attributed by the uninitiated to “capitalism” itself) relate to often well-intentioned or power-driven government policies that attempt to reward or punish certain players due to a political agenda, foisted by people who think they are smarter and more noble than the rest of us and the marketplace, and distort it to the point that it ultimately fails and/or corrects with more disastrous consequences than if it had been left alone. That’s not to say that injustices and fraud should not be regulated; that is precisely the government’s role. It’s simply that it has grown enormously beyond this with resultant microregulation and injection of the welfare state from the top down into every level of endeavor.

So we’re left with with an over-regulated mess of a chimeric healthcare Gordian knot. Even within the professional component, we have too few doctors, misaligned numbers of specialists based on financial incentives that are distorted and shielded from variables of need, expertise, and risk, and costs so variable from hospital to hospital as to seem arbitrary. Within this morass are buried true inputs reflective of the economic marketplace. For instance, some of the higher costs of academic and tertiary medical centers reflect research, clinical studies and relative costs of caring for the indigent and uninsured. But it now seems clear to me we won’t even begin to deal with the problem until we expose the healthcare system more openly to the sunlight of the marketplace. Before we even go down that rabbit hole, however, we need to lay to rest the counterargument of government healthcare, often referred to as “single payer.”

I’ve already addressed the dangers of placing bureaucrats, elected or otherwise, in the position of distorting the marketplace based on personal agendas, well-intentioned or not. Some use Medicare as an example of good government stewardship. However, this is actually a partnership between government and the private sector, and while it has had successes, frankly it is going broke. In this country, the VA system is a purer example of government-run healthcare and is fraught with problems. And now we have a concrete example of the failure of a decades old purely government-administered system: the NHS, or National Health Service in Great Britain. A report from the Daily Signal outlines some of the the issues:

• Only 63 percent of British patients are being treated within 18 weeks; the British government’s target was 92 percent.
• Accident and Emergency Care: Only 72 percent of British patients seeking emergency care are seen within four hours.
• Primary Care Appointments: Only 55 percent of British patients are getting “face to face” appointments; pre-pandemic, it was 80 percent.

England’s branch of the NHS has an estimated shortage of 12,000 hospital doctors and 50,000 nurses and midwives and a third of British General Practitioners are considering leaving medical practice within the next five years. And low pay plagues the nursing profession. 543,000 British patients have had to wait more than four hours to receive accident and emergency care; 2,300 British patients have had to wait more than amonth to start cancer treatment; and 407,00 British patients have failed to get MRI examinations or colonoscopies within six weeks.

This is not unexpected. Government-run entities are inherently inefficient because they are not motivated by profit and are not self-correcting. And if a program is cost-effective and performs below budget, the incentive is to spend more the next go-around so as to not have budget cuts. Studies of effectiveness/cost-effectiveness, if done, can take years, and once a program is established is often continued ad infinitum. Abolishing programs and agencies, even for incompetence or fraud, is even more difficult in the government than the private sector (although microregulaton through HR law in the private center is closing the gap).

My conclusion is that the most efficient use of top-down government within the healthcare industry would be a partnership with the private sector through subsidies or tax incentives for both R&D and medical necessity/homeland security (i.e., repatriating essential medical manufacturing), and for orphan drugs and rare illnesses that have little assistance from the marketplace. On the other hand, returning funds to more state and local governments and communities to care for the indigent would lead to more targeted and efficient disbursement of care to need and make it easier to monitor for waste and fraud. In addition, the opaque remuneration system for hospitals and healthcare providers must be overtly addressed.

Is it safe to entrust healthcare to the harsh mistress of the marketplace? While emergency care is just that, and there is no time to go “shopping,” this is not true of elective healthcare. In 2020 $4.12 trillion ($3.7 in 2018) was spent on healthcare. In 2017, the cost of all Emergency Department visits was $33.7 billion. While the average cost of treating common primary care treatable conditions at a hospital ED is 12 times higher than visiting a physician office ($167) and 10 times higher than traveling to an urgent care center ($193) to treat those same conditions a significant amount of non-emergent care filters through the ED. Surprisingly, I was unable to find the percentage of total healthcare expenditures in the US for all emergency versus elective care and don’t know if this has been reliably studied. It appears obvious that if we placed the patient back in the loop instead of relying almost exclusively on third party payers, the collective wisdom of the masses would have a significantly positive effect on both affordability, cost-effectiveness, and quality of care, simply by allowing the patient to choose where and to whom to go for treatment and services. In other words, injecting a larger dose of the marketplace into the elective side of the healthcare equation and sidelining the government bureaucrat seems to me to be a no-brainer. And the validity of such an approach is testable on a smaller scale (i.e., the state level) before widespread adoption. With an anticipated reduction in revenue for hospitals and healthcare providers, one might reasonably argue that institutions burdened with a higher number of indigent and uninsured as wells as those with additional research and educational obligations would be most negatively impacted by such a change. To that I’d answer that without the costs buried within in our current complex and relatively opaque billing paradigm we would know with greater certainty where to apply government subsidies.

As in all areas of human endeavor, especially those dominated by government intervention, many of the ills of the healthcare system can be cured with a dose of marketplace sunlight.

THE OTHER SIDE OF THE STORY

As per my last rant, Forbes magazine’s critique by Chris Conover of Steve Brill’s investigative report on health care pricing appeared early this month in parts one and two. It centers on the premise that Brill obfuscates issues enough that his piece might be interpreted as making a case for a single-payer health system. Salient points of Conover’s “counter-attack” follow:

• The claim that U.S. outcomes are no better and often worse than in other countries is exaggerated. When adjusted for violent deaths that have nothing to do with health care, the U.S. ranks #1 in life expectancy at birth, and the figures for infant mortality distort the issue as well. Adjusted for length of gestation, the U.S. ranks second, third or fourth against European nations. Cancer patients live longer in this country than any other, we screen more people, have lower smoking rates and, despite our smaller size, produce more top medical and pharmaceutical innovations.
• The claim that the U.S. spends 27% more than other countries is refuted with the assessment that, when broken down into regions such as states more comparable to the size of European nations, “U.S. health spending is almost exactly where it is expected to be, given U.S. GDP per capita.” Conover does add that he is not implying that there is no waste in our system.
• The assertion that drug prices here are 50% higher on average than other developed nations is true for those still on patent, but we pay less for generics and over-the-counter products. These account for 70% of the volume but only 20% by sales. The argument that government monopoly or removal of patent protection should be used to lower prices will destroy the incentive for research and innovation; the return on investment for drug research is 18%. The CBO concluded that negotiating drug prices for Medicare would result in negligible savings over what is obtained under current law for covered Part D drugs.
• Excess prices don’t equate to excess profits. Inpatient hospital care generates an average operating profit margin of 2%; the 11.7% Mr. Brill cites is too high. The profits in the health services sector are in the middle of the pack (or lower) compared to other industries.
• Medicare administration is not more efficient than private health insurers. Private insurers spend 9.2% rather than 22.5% of each health care dollar on claims processing. Medicare also doesn’t have to pay for as many functions, such as marketing and provider rate negotiations, inflating the private insurers’ costs by one-half. Also, the patient population using Medicare uses costly services more so its administrative expenditures will necessarily be a smaller percentage of the total. Conover maintains that the “handcuffs” Congress has itself placed on Medicare points to the fallacy of a public health care system being inherently better, and he reminds us that every dollar Uncle Sam gets carries the burden of shrinking the economy by 44 cents (he doesn’t mention that we borrow 40% of this).
• Less consequential issues are Brill’s exaggeration of the personal bankruptcy figure related to medical bills (Conover says it is less than half the figure claimed), that the charity care Brill claims is based on chargemaster prices is not accurate, and that the argument that there is less fraud in the Medicare that the private sector is false.

Mr. Conover states, “What makes good for politics far too often is not good policy,” and concludes, “Mr. Brill has nicely codified much of what is wrong with American health care. He arguably has shown just how inadequately Obamacare addresses the myriad of problems he identified.  But unfortunately, he also has contributed to some of the very same misconceptions that resulted in Obamacare, a very misguided prescription for what really ails the American health care system.”

I leave it to the reader to decide who is right. There are many known problems with a single-payer system, and we ignore them at our peril. The truth is that our current, unsustainable system through indirect subsidies has helped many of the single-payer systems overseas to function at diminished cost. Like our economy, the medical marketplace is, to an extent, a global one. However, the uniqueness of medical care is that much of it is essential rather than discretionary, and creating the ideal, a marketplace with free competiton, is not always feasible from the standpoints of logistics and optimal health care delivery. We need a hybrid approach. I’ve given my opinion of the needed fixes in past rants.

Mr. Conover feels that Obamacare is a “misguided prescription for what really ails the American helath care system,” and that “[u]ntil we get the diagnosis right, we have no reasonable prospect of getting off the wrong track we’re now on thanks to the Affordable Care Act.” I agree. And I’d like to add that until the American public becomes more informed and begins making the right demands of its ruling class, the patient we call our health care system will remain as what we physicians term a “failure to thrive.”

SPECIAL INTERESTS

I began this rant a few years ago by lambasting corruption and waste in all segments of the health care system, from government to lawyers to doctors to insurers, even the patients themselves. I proposed 15 changes that would need to be implemented if we were serious about fixing what ailed it which I subsequently distilled down to the most critical five. So when an associate sent me a link to Steven Brill’s Time Magazine exposé, “Bitter Pill: Why Medical Bills Are Killing Us,” I couldn’t help but disagree with my colleague’s observation that it should be required reading for anyone in medicine. It should be required reading for anyone not suffering from rigor mortis. I was chagrined to have given such little attention to this superbly researched elephant in the room. This investigative report will take a bit of time to get through, but it’s time well spent.

For years I’ve known about the outrageous charges on hospital bills, the so-called “retail” charges that hardly anyone paid, or so I thought, because the insurance companies knocked them down, and the indigent “self pay” patients were served by programs with deep pockets or walked away from the bills without consequence. I ignored the high percentage of bankruptcies related to health care costs. As Brills points out, “Unlike those of almost any other area we can think of, the dynamics of the medical marketplace seem to be such that the advance of technology has made medical care more expensive, not less.” He dispels the arguments made that the exorbitant rates help pay for the poor. “A closer look at hospital finance suggests two holes in that argument. … [A]t most hospitals it’s not a Saudi sheik but the almost poor — those who don’t qualify for Medicaid and don’t have insurance — who are most often asked to pay those exorbitant chargemaster prices. Second, there is the jaw-dropping difference between those list prices and the hospitals’ costs, which enables these ostensibly nonprofit institutions to produce high profits even after all the discounts.” He goes on to elaborate, “So, what do these wealthy nonprofits do with all the profit? In a trend similar to what we’ve seen in nonprofit colleges and universities … the hospitals improve and expand facilities (despite the fact that the U.S. has more hospital beds than it can fill), buy more equipment, hire more people, offer more services, buy rival hospitals and then raise executive salaries because their operations have gotten so much larger. They keep the upward spiral going by marketing for more patients, raising prices and pushing harder to collect bill payments. Only with health care, the upward spiral is easier to sustain. Health care is seen as even more of a necessity than higher education. And unlike in higher education, in health care there is little price transparency — and far less competition in any given locale even if there were transparency. Besides, a hospital is typically one of the community’s larger employers if not the largest, so there is unlikely to be much local complaining about its burgeoning economic fortunes.”

The “chargemaster” referred to above is a list of charges often ten times the actual cost or Medicare reimbursement for a medication, device, or service. Ironically, while Medicare is able to more effectively limit chargemaster overpayments than many private insurers, special interests have lobbied to limit its ability to limit the excessive profiteering in areas of medications and devices. We, a debtor nation, continue to subsidize the world, which has no qualms limiting the pharmaceutical and device manufacturers’ charges.

To many this will sound like I’m backtracking on my free market ideology. Nothing could be further from the truth. Only in a free, competitive marketplace can the true value of goods and services be found. The government’s meddling, even when the intentions are good, tends to distort the marketplace and create unintended consequences down the line that create larger problems. Where the market is large enough, such as the competition between insurers (when allowing for commerce across state lines) it should be permitted to do its job. When there is a relative monopoly in terms of services, as is often the case when it comes to medical care, especially when it’s emergent, then regulation along the lines of fraud an abuse is necessary and appropriate. The behavior of many of these health care industry CEOs is tantamount to charging a dying man in the desert $500 for a cup of water. It perpetuates an economic milieu where they can “justify” seven-figure salaries by dint of irresponsibly inflated profit margins. The arguments for chargemaster prices and the dubious estimates of the magnitude of charitable services provided alluded  to in the Brill piece should be a wake-up call to us all.

Instead of reaching out to the government for handouts to help perpetuate a corrupt system, the American people must demand change in the system itself. I’ve often stated that the liberal view of government charity for those in need is misdirected. The old saws, “Give a man a fish and you feed him for a day; teach him to fish and you feed him for a lifetime,” and “A rising tide lifts all boats,” has never been truer than today.

It’s time that the American public viewed itself as a special interest.

Next: Some concrete suggestions for change.

I HATE TO SAY I TOLD YOU SO …

Well, maybe not. There is a perverse pleasure in seeing one’s assessment, even when it comes to bad news, validated. It’s human nature. To that end I present a recent excerpt from the ACC News Digest that references several sources analyzing our health care spending:

IOM Says US Health System Wastes $750 Billion Annually.

The AP (9/7, Alonso-Zaldivar) reports that yesterday the Institute of Medicine issued a report finding that “the U.S. health care system squanders $750 billion a year – roughly 30 cents of every medical dollar – through unneeded care, Byzantine paperwork, fraud and other waste.” The conclusion drawn is that while both “President Obama and Republican Mitt Romney are accusing each other of trying to slash Medicare and put seniors at risk … deep cuts are possible without rationing, and a leaner system may even produce better quality.” That’s because the IOM’s “one-year estimate of health care waste is equal to more than 10 years of Medicare cuts” under the ACA and “more than enough to care for the uninsured.” The report also “identifies six major areas of waste: unnecessary services ($210 billion annually), inefficient delivery of care ($130 billion), excess administrative costs ($190 billion), inflated prices ($105 billion), prevention failures ($55 billion) and fraud ($75 billion).”

The Washington Times (9/7, Cunningham) reports in its “Inside Politics” blog, “The report highlighted flaws that have long plagued the U.S. health care system, which is relatively slow to adopt new technologies, lacks incentives for doctors and hospitals to keep costs down and doesn’t encourage all of a patient’s providers to coordinate care.”

ABC (9/7, Wong) in its “Medical Unit” blog says that “the money squandered on services that failed to improve Americans’ health could have provided health insurance for more than 150 million workers or covered the salaries of all of the nation’s first responders for more than 12 years.” Author Dr. Mark Smith, president of the California HealthCare Foundation, said, “We’re spending money in ways that don’t seem to improve people’s health.”

I began this blog a few years ago with the health care system as its initial focus. My estimates were based on my personal experiences but I suspected, correctly it seems, that my observations were generalizable. There is a silver lining to this bad news: With this much waste, theoretically we can dramatically improve our health care delivery and its cost by waste cutting alone. The devil’s in the details of ferreting out the problems and realigning the incentives.

In early 2010 I whittled down my 15 recommendations for a healthier health care industry to what I felt were the most crucial 5:

1. Tort reform. Without it we’re banging out heads against an endless testing and retesting wall.
2. Increase competition by allowing patients to obtain coverage from out-of-state insurers, possibly in conjunction with nonprofit health cooperatives owned by the patients. Mandatory minimum coverage for those that can afford it has to be part of this.
3. Establish a centralized medical records database.
4. Immediately halt the arbitrary reimbursement cuts (actually, they seem to be based solely on volume and cost, rather than utility and appropriateness).
5. Notify physicians and providers that are utilization outliers (and by that I mean beyond two standard deviations from the mean) of their status, without penalties.

Since then I’ve become less sanguine about the value of tort reform as a means of reducing cost, considering its impact (or lack thereof) in California, where we’ve had it for decades. Its benefit lies in its ability to bolster physician access by limiting the bloated malpractice insurance premiums that drive doctors away from essential specialties. In any case, little has progressed in this arena. Likewise, numbers 2 and 3 have seen little change, although isolated EMRs are springing up like poorly programmed weeds due to government incentives, which is a first step toward more universal connectivity. Reimbursement cuts are proceeding, although haltingly, so as to keep physicians from bolting from Medicare. I haven’t seen even a mention of number 5.

Will Obamacare be the answer? I know people who think so. I’m skeptical that a complex law no one fully understands, and which the legislators haven’t even read, can increase the extent and scope of medical coverage by increasing taxes without further driving us to the brink of bankruptcy, but we’ll see. Unless it’s repealed.

The only thing for certain is that the only road to “something for nothing” is waste management.

THE FOUR RULES

There have been recent reassessments of the insolvency date for Medicare. Yes, it’s even sooner than the experts thought. I can’t believe it [yawn]. Last year the predicted date moved five years forward to 2024. This year it’s 2022. So I’ve decided to present Heartheaded’s Four Inviolable Rules:

1. Don’t believe the experts. They either don’t know or have an agenda. This should have been apparent to us in 2008 when all we heard from them was a collective gasp when the bottom fell out of the economy.
2. There must and will be rationing of health care. Period. Except for prisoners and the ruling class.
3. The “right” amount of health care is an ideal and a moving target, sort of like a galloping unicorn. In camouflage.
4. In the aggregate, physician practice patterns, even among the stout of character, inevitably drift to follow the incentives, with a capital $. The moth-and-flame analogy is apropos here.

Managed care got its start in the 1980s because of concerns of out-of-control health care spending and, despite the many criticisms, did contribute to an awareness of the need for cost-conscious and cost-effective medicine, something almost totally lacking at the time. Why then do I resist its siren call and the single payer drumbeat?

Managed care is like socialism. It inevitably rewards for doing less, and encourages stagnation. It is contrary to human nature, which thrives on innovation and reward. Traditional fee-for-service is in line with these natural inclinations, and might have succeeded if allowed to function within the marketplace, but interposing third-party payers (read: insurance companies and the government) isolated the customer (i.e., patient) from costs and contributed to the mayhem. Health care, being a unique and often critical need, has been deemed too fragile to expose to the short- and intermediate-term vagaries of the marketplace, and this is not an unreasonable premise. Still, in my lifetime, insurance has morphed from a backstop to provide in times of medical catastrophe to a pay-for-all for stubbed toes and runny noses. It’s hard to say at this point to what extent the evolution of the third party payer system is responsible for encouraging the spiraling costs or exists because of them.

This brings me to the nagging question of what we can do about it. The current exploration of ACOs or accountable care organizations is an experiment in progress that is attempting to meld the current system with a managed care shell. My initial exposure to it tells me that it will be a long, tortuous process with a very uncertain outcome. So, if we must control costs but can’t do it through managed care, what are our options?

When I started this blog over two years ago I laid out the many problems in all areas of the system and suggested changes that would need to be made concurrently for any hope of success. One of those was a program to be administered by the professional societies that would provide the physician and other health care providers with personal statistics of their ordering and prescribing patterns, and their place relative to their peers. The idea behind this is that we’re the engine pulling the train—ultimately our management decisions drive the costs. Granted, there are many factors influencing these decisions, but there is still 20-30 percent waste in the system that must be excised. When presented with personal statistics, I believe well-meaning doctors (and that is the vast majority) will voluntarily change their practice patterns more in the direction of best-practice guidelines, without costly and inefficient government meddling. Physicians that aren’t “up to snuff” will also get a wake up call. Those few that are malevolent will likely change behaviors as well, fearing that the statistics will be used in a way that will ultimately have professional or criminal consequences. This approach is a way of using the medical marketplace constructively without the downside of exposing patients to potential short term financial ruin.

We can’t escape the Four Rules. But we can do a lot better job of living under them.

SOME ROADS LEAD TO ROME

A recent post in the ACC News Digest recently proclaimed:

Berwick Says As Much As 30% Of Health Spending Is “Waste.”

The New York Times (12/4, Pear, Subscription Publication) reports that Donald Berwick, in an interview on his last day as head of the Centers for Medicare and Medicaid Services, said “20 percent to 30 percent of health spending is ‘waste’ that yields no benefit to patients, and that some of the needless spending is a result of onerous, archaic regulations enforced by his agency.” Berwick “listed five reasons for what he described as the ‘extremely high level of waste.’ They are overtreatment of patients, the failure to coordinate care, the administrative complexity of the healthcare system, burdensome rules and fraud.”

The Hill (12/5, Baker) reports in its “Healthwatch” blog, “Berwick came to the job with a passion for delivery-system reform, and in roughly 18 months as CMS administrator he oversaw an aggressive push to implement pieces of healthcare reform that matched his vision.” Sen. Tom Harkin (D-IA) remarked, “This is a missed opportunity to have someone who really understands the healthcare system, who understands quality of care rather than volume of care, which has been his hallmark. I’m just so sorry to see this end like this.”

The actual articles are brief and worth reading. Dr. Berwick, a pediatrician, and I have reached strikingly similar conclusions about the state of health care. The 20-30% number for waste  and the remark, “The decision is not whether or not we will ration care — the decision is whether we will ration with our eyes open,” will sound familiar to those who have read my past rants on he health care crisis. Despite our areas of agreement, I find it harder to swallow the premise that the massive, complex law we’ve dubbed “Obamacare” is the road to our salvation. Forgive me if I also gag on his view that “[t]he government, unlike many private health insurance plans, is working in the daylight. That’s a strength.” The same article quotes him as stating, “Government is more complex than I had realized. Government decisions result from the interactions of many internal stakeholders — different agencies and parts of government that, in many cases, have their own world views.”

We’re dealing with a complex, multifaceted issue involving many people and institutions with their own agendas and are trying to regulate it with a complex, multifaceted institution with many people and institutions with their own agendas. Toss in a large dollop of corruption in both pots, and we have a recipe for disaster. Unfortunately, as with the overarching economy, we need real change, fast, because we’ve kicked the can down the road for too long. But change of this magnitude, implemented incorrectly, may sink us faster. Are we doomed? Maybe. But a good start would be to examine all the pieces, as I’ve done when I began this journey over two years ago, and set realistic goals.

Yes, Dr. Berwick, we will be rationing care. We always have, poorly. Now we have to do it rationally.

THE WHOLE ENCHILADA

As I did for the health care crisis, I’d like to take this opportunity to summarize all the elements presented in prior rants that I’ve laid out as necessary for a full and enduring economic recovery:

1. Close the tax loopholes with a flat tax; consider a consumption component to derail tax-avoidance though the underground economy.

2.  Limit CEO salaries to reflect performance and prevent abuse equivalent to racketeering.

3.  Strictly regulate credit default swaps.

4.  Ban high-risk no-money-down mortgages.

5.  Close the loopholes in our anti-monopoly laws to prevent the “too big to fail” conundrum.

6.  Ease the capital gain tax to fuel the economy’s engine.

7.  Cut spending to at lease 2008 levels, preferably 2005. A balanced budget amendment would be nice; in the long term, essential.

8.   Start whittling down the size of the federal government; start with the Departments of Energy and Education.

9.  Rethink the role and function of the Federal Reserve.

10.  End defined benefits. We need to all share in our own risk.

11.  Reform Social Security and make is self-sustaining.

12.  Reform Medicare and make it self-sustaining; physicians need to look to cleaning our own house, as well.

13.  Find ways to limit outsourcing of jobs—a difficult task in a global economy with widely disparate standards of living.

14.  Encourage a resurgence of the values that made this country great. Values instilled by family, community, and religion such as self-sufficiency, work ethic, and charity.

15.  Encourage a resurgence of the values that made this country great. It’s worth mentioning this twice since corruption of values is at the core of every other problem, and no sustained relief will ever be attained without attention to this.

And that’s my 2 (15 in this inflated economy) cent’s worth.

MEDICARELESS

With health care expenditures being more than one-sixth of the GDP and Medicare being 20%  of this (and Medicaid another 15%), it’s clear that we ignore the precarious state of our government’s foray into the arena of health insurance at our own peril. It’s no wonder that Medicare and Social Security, the two largest entitlement programs, have been described as the “third rail” of American politics. When people get more than they’ve paid in, they’re understandably reluctant to have it reformed. One of my associates, unfortunately faced with an illness requiring expensive medical treatments, gushes about the munificence of the system, and in the next breath laments its unsustainability. For, as with Social Security, the numbers paying in are dwindling compared to the aging recipients. It’s not that this wasn’t predictable, it’s just that “fixing” it was unpalatable. Since I’ve discussed this at length in previous rants on the health care debacle, I don’t want to belabor the point. I’ll direct the reader to past rants describing the specific steps required to turn things around.

What I did want to address is something to which I gave short shrift—the disparity in compensation throughout the medical profession. When pushed against the financial wall, the government tends to use a club rather than a scalpel, and the private insurers will likely follow Medicare’s lead. The analysts look to see where the most volume is in terms of procedures and lop off a healthy percentage. Now, medical fees, in my opinion, are a hodge-podge of historically-driven numbers influenced heavily by non-market forces, that have become progressively distorted. Minor office procedures that can be done quickly are reimbursed more heavily than long, complex medical visits. Open heart surgery, when adjusted for time and skill, is treated more casually than fixing a hang-nail. Physicians, myself included, are reluctant to spotlight this disparity because of the tendency of the government, and insurers in general, to simply cut everything more.

What needs to happen is reasonable reimbursement for skill, stress, and time at risk. I wonder if most people realize that the physician who rousts himself to deliver care at 3 a.m. gets the same reimbursement as 3 p.m. Many patients are unaware that the doctor they see in the middle of the night isn’t a shift-worker. While the emergency room is staffed this way, most physicians have to present for work the next day after a nocturnal emergency. We need to stop cutting compensation for acute care, augment services provided after-hours, and reexamine reimbursement for less urgent, less skilled interventions, or we’ll find fewer and fewer takers for the high-stress, “inconvenient” jobs in medicine.

PUNTING THE TOUGH STUFF

Cynics say the government doesn’t do anything well, but they fail to give credit where credit is due: No one kicks the can down the road better than our ruling class. If we weren’t running out of road, they’d still be doing it. Lord knows,  at least half of them are still trying.

When it comes to cutting spending they’ve squirmed, squealed and squabbled. When they realized it was only a matter of time before the printing presses would run out of green ink, Congress abdicated its responsibility to a small committee of people that can fight in closer quarters. In fairness, we’ve enabled them; doing what they should do mandates major give-backs by us, things we’ve been granted in return for our sweet votes. Freebies our elected benefactors didn’t have the assets to offer in the first place. But the shiny printing presses were just too inviting. As I’ve said in prior rants, the government is addicted to spending.

The answer is simple, the consequences hard. Instead of endless, fruitless negotiations, we need to cut spending to 2008 levels. 2005 might even be better. There is a glimmer of hope that something dramatic may occur—people in  the electorate and in government are actually talking about the sacred cows, Social Security and Medicare, something that has been termed for decades the “third rail” of politics. Although they still gasp in horror when a presidential candidate refers to Social Security, a program that uses the money of relatively small numbers of players to pay for the burgeoning numbers of older participants, without putting aside a dime, as a “Ponzi scheme.” Oh, well, change comes slowly.

Cutting spending across the board doesn’t mean every governmental institution needs to remain sacrosanct. As crucial to our well-being as each and every agency may seem to the bureaucrats that nurture them, perhaps we can find a few modifications we can live with.

Next: Cutting the fat