Recently a friend of mine, Miles Dean, got into an email discussion around healthcare with John Laxmi. I found it so interesting and understandable, that I thought you might as well. Here goes.
Miles: The Supreme Court is considering the Affordable Health Care Act, and much discussion is on the question of individual mandates and how these requirements infringe on our rights. Why is it OK to mandate auto insurance, but not health insurance? What’s the difference between cost shifting on cars and accidents, and cost shifting on health care?
To get license plates for our cars each year, we show up at the DMV with a copy of our title, proof of insurance and a paid tax bill. The reason for showing up with a proof of insurance is so that we, or another driver who can’t, or chooses not to obtain some insurance, can’t foist the cost of repairs on other drivers. This is a mandate.
If I don’t have insurance, they won’t let me license my car, and if I get stopped without tags and insurance, it is likely that authorities will take my Drivers License and possibly take my car to some impoundment. This is a mandate with penalties.
I’m sure that Tea Party and Libertarians feel that these requirements are intrusions. OK, what is their solution when some uninsured motorist runs into the side of their car?
With all this “stuff” taking time, the US continues to compare with third world countries when it come to the quality of health care provided.
JL: Automobile insurance is often suggested as an analogy to health insurance to argue that the mandate for the former justifies a mandate for the latter.
The analogy is not apt on several counts, the most important being that health “insurance” is not really insurance at all. The term “health insurance” is an oxymoron.
Insurance is the business which seeks to make profit by setting premiums at a level above actuarially estimated claim payments. Premiums are paid by policyholders who want compensation for things that they themselves seek to avoid by their own actions. The presumption is that a policyholder with a fire insurance policy will do everything to prevent a fire leading to claims. A policyholder with an accident insurance policy is presumed to do everything to prevent an accident because the accident will be injurious to the policyholder even if the insurance policy pays the claim. Even life insurance (which should be called death insurance) is based on the presumption that most people will try to live as long as possible, in their own interest, even though that will postpone the timing of payment of the claim.
The so-called “health insurance” is different from the above types of insurance. People with health “insurance” do not – on their own – minimize or prevent claims. Far from it. We go to healthcare providers as often as we want and the government wants claims paid regardless of our behavior. The insurers resist and try to limit claims, but ultimately, the insurance companies are regulated and dictated to keep premiums low while paying claims with minimal restrictions. While auto insurance is also regulated, auto insurers can depend on the self-interested behavior of the insured. Health-insurers cannot.
This is not how “insurance” is supposed to work, by the original inventors of the concept of insurance or by present-day corporations engaged in the business. In most other forms of insurance, the insurer can make a profit by the presumed behavior of the insured to minimize claims. In health insurance, the opposite is the case. The health insurer cannot make a profit, except to the extent dictated / allowed by regulators.
Otherwise: Great distinction, Lax. Health care is a good that people use/overuse. If you lower the price, they will use more of it. If I get a great deal on auto insurance, I don’t decide to go out and get in a wreck, but if I have good health insurance, I am more likely to go to the doctor for a trivial complaint.
But as you say, it’s taken us decades to get into this mess. Our current system is very inefficient. The convoluted system whereby users don’t pay has created entire industries devoted to negotiating the regulatory morass, e.g., coding (helping doctors get the maximum amount from every visit.)
We need to cut this Gordian knot. What’s wrong with the federal government stepping in to take a role?
JL: We are a nation of laws, and the federal government does not have the legal right to step into this problem.
Automobile insurance is mandated by state laws. While states and local governments may impose such mandates, the national government may not, according to most constitutional scholars.
Also, there’s the broccoli argument. We pass laws to protect others from the actions of a few. Automobile liability insurance is designed to pay for “third party” injuries, not to pay for injury to oneself. State automobile insurance mandates do not require a driver to insure herself, the mandate is only to insure third parties. Health insurance mandate, on the other hand, is being imposed on a person even when and if a person is healthy. The argument is that the person may become acutely sick some day and go to an emergency room and claim benefits. But, the mandate compels a person to buy insurance even if that person remains healthy enough and accident-free never to have to go to an emergency room.
Automobile insurance is designed to protect damage from those driving on public roads. If one does not choose to drive at all or choose not to own a car at all or drives only within one’s own property, the state does not force that person to buy auto insurance.
Otherwise: Do you buy that Miles?
Miles: Not really. I think that the “State Only” argument falls down because the federal government has control over those issues involving Interstate Commerce. Health care is largely provided by hospital chains that are located in multiple states. Insurance, the same. If these providers make available “free care” in one state, or more free care in one state, they try to make it up with better margins in another state. To the extent they are successful, their CEOs and stockholders are rewarded. The federal government has the responsibility to regulate Interstate Commerce. The requirement that all participate is a method for doing that.
JL: Miles, yes, you bring up a good issue, i.e., the national dimensions of healthcare and healthcare insurance.
The interstate commerce aspects of healthcare and healthcare insurance could provide justification for the federal government to play a role. However, that reasoning cannot justify the individual mandate.
While healthcare is a national industry, healthcare INSURANCE is not. Health insurance policies are not portable from state to state. They are not uniform either. They differ from state to state.
As you well know, historically, the insurance industry (all types of insurance, not just health insurance) has not been regulated by the feds; it has been regulated by states through state insurance commissions. Insurance companies spend enormous amounts of money, time and effort to get their policy terms approved by the insurance commission in each of the states in which they sell insurance policies.
In general, local / state regulation is better than federal legislation. State and local regulators are in better touch with local problems and are better suited to regulate activities within their local jurisdictions. However, local and state regulators do no always learn from one anothers’ experiences (in spite of national associations). For example, the National Association of Insurance Commissioners (NAIC) has been around for a long time. The NAIC could help coordinate the way state commissions approach insurance-related issues. But, the NAIC does not have legal standing and has not been able to streamline the regulatory methodologies of state insurance commissions. This is an issue not only for health insurance but also for other forms of insurance. This is one of the reasons insurance policies run to tens of pages of fine print with disclaimers about which provisions apply in which states. This (absence of federal regulation) is also cited as one of the reasons for the financial crisis, namely the role of financial derivatives. Many credit derivatives were structured as insurance products instead of being treated as investment products. These derivatives were then bought and sold as bilateral insurance contracts instead of being traded on the securities exchanges which have elaborate rules and collateral requirements. This is now being remedied by new regulations governing derivatives. Similarly, if the federal government had created an insurance regulator to replace (not duplicate) the state insurance commissions, health insurance would become far more streamlined nationally.
A parallel can be found in the energy industry. The Federal Energy Regulatory Commission (FERC) regulates interstate energy utilities like pipelines leaving state utility commissions to regulate intrastate utilities. This has been working generally satisfactorily.
Regardless of which level of government regulates an industry, regulators must understand the economics of that industry. As I mentioned earlier, “health insurance” is a misnomer. The firms in the business should be called “healthcare mutual associations.” Essentially, they pool large numbers of participants, use the collective bargaining power to lower the cost of medicines and service and use their collective clout to expand the number of providers (i.e., doctors, nurses, attendants).
Otherwise: By the way, the CEO of one of the auto insurers wrote an op-ed in the New York Times last year called “Regulate Me, Please,” asking the federal government to step in to replace state by state regulation and NAIC.
Miles: If there was a willingness to deny health care to those who don’t have insurance, then one could make the case that insurance or no insurance should be left as a voluntary decision, but in the absence of such, I don’t want to always be paying the cost shifting burden for those who choose not to have health insurance.
JL: Fair point. None of the above arguments is to deny health care for all citizens.
We could, as a society, decide that in order to provide health insurance to everyone, we can live with a highly regulated health-insurance industry. But, universal healthcare could be achieved more easily by the government using our tax dollars to buy insurance for those who cannot afford it, instead of mandating every citizen to buy insurance. In the end, the social objectives would still be met but the constitutionally guaranteed freedoms would be preserved.
If the federal government had chosen to impose a “tax,” citizens could not refuse. But, the U.S. Congress did not have the gumption to impose a tax for health care. Instead, it chose to dictate that citizens purchase an insurance policy.
Otherwise: Not only do we not have the gumption to tax, but we don’t have the gumption to take away tax loopholes, which would change the way people view health insurance. I think the problem is there should be no such thing as untaxed employer-provided healthcare, period. Employers began providing health care to circumvent wage controls. Now people have come to expect it. But there is absolutely no way that employer-provided healthcare should be an untaxed benefit. That is hugely discriminatory against people on the lower-middle rungs of the healthcare ladder, who must pay with after tax dollars and who must pay rack rate.
JL: With all the faults of our system, our healthcare system is a lot better than most third-world countries and is also better than many first world countries.
Otherwise: Not sure about that one. I have lived all over the world, and everywhere I have lived the local healthcare system promoted the idea that it was best. That is bloviating by pompous medical people. In my experience, excellent health care is available everywhere. When I retire, I will not hesitate to go to Mexico or India for an expensive procedure.
Our healthcare is ruinously expensive. On a value basis, our healthcare is far from the best in the world. In Ecuador last week, a member of our party got four hours of medical care and two CAT scans at a private hospital for $200. Our costs are ridiculous because of the monopoly system imposed by the AMA, in part because hospitals have engaged in an arms race and have huge overcapacity in the system, and in part because doctors overprescribe because of big pharma marketing and sales. Doctors from all over the world flock to the U.S. because this is where you can make the most money. I am sure there are other reasons as well. That excessive cost is why the number of people covered by health insurance has dropped from 75% in the late seventies to 50% today (stats from memory, may be a little off.) It would be even worse if large employers did not use intermediaries who squeeze providers for discounts.
Miles: Part of the high cost is also the cost of profit-making intermediaries, i.e., the insurance companies. According to Fortune 500′s 2010 list, the top seven health insurance companies in terms of overall revenues include: UnitedHealth Group – $87 billion, WellPoint – $65 billion, Aetna – $34.7 billion, Humana – $30.9 billion, Cigna – $18.4 billion, Health Net – $15.7 billion, and Coventry Health Care – $13.9 billion. The average comp of the CEOs of those organizations was $10.5 million last year.
JL: We have a lot of potential ways to improve and reform the system. The sky will not fall if the Supreme Court declares the individual mandate unconstitutional. There are many other reforms in this sector that we have barely scratched the surface of. The healthcare sector is one-sixth of our economy. How we regulate this sector deserves very careful deliberation.
Otherwise: One-sixth of the economy. I think that says it all. Thanks guys.
So, Otherwise, I’m going to write something snarky here because I don’t want to be accused by you, again, of being a “prissy snob.” I’d hate to be a nice guy and put forth something reasoned and calm. I know you wouldn’t respect that.
First off, none of you know very much about this issue on the only level it matters: The ongoing fight to control costs while maintaining quality. In the private sector, that fight is almost entirely contained within a set of very large employers who can have an impact on their own or as a group, though one could also make a case that capitated, staff-model HMOs are also engaged in this effort. Over the years, I worked with over 100 of these companies in one capacity or another, including more than 80 of the Fortune 500, working shoulder-to-shoulder, in many of those cases, with the best health care management consultants in the world. Those companies provided thousands of their own experts, and it wasn’t uncommon for the CFO and his/her staff to be involved and even, on occasion, the CEO. So, when JL tells us he has all the answers that all these tens of thousands of smart, hard-working, experienced super experts couldn’t come up with, I know you’ll pardon my skepticism.
The private sector has tried everything imaginable to hold costs down since the 80s, often with initial success, only to have that initial success destroyed by market adjustments. I’ve seen the progression: SSOs, pre-certs, PPOs, HMOs (staff and distributed models), EMOs, point-of-service, code audits, consumer-driven health care, and the list goes on and on and on. None of them worked very well for very long, because the marketplace works perversely in the health care arena. And it has nothing in the @#$%$ world to do with whether “health care insurance” is an oxymoron (it isn’t), or regulation (which increases some costs, such as maternity costs, but is hardly the main driver, or even a significant driver, of our ridiculously out of control health care costs), or, in most cases, insurance company profits, which have been running around 3% to 4% of all health care costs. (Note: To the degree that regulations require that health care be delivered to those who do not have insurance and cannot afford to pay, regulation DOES have a substantial impact, but this is a humanitarian matter, and is not likely to be on the table unless those at the table are sociopaths.)
In fact, the really big-ticket employers aren’t insured by insurance companies at all. They self-insure, paying as they go, and use the administrative services only (an ASO contract) of the large insurance companies to pay claims, do pre-certs, and the like. Those contracts generally pay around 3% or so of total claims, and the admin would have to be done, anyway, so there is always going to be an administrative cost involved in health care. The insurance companies are hardly the villains, there. They simply provide a service at a cost a company could not generally match by itself.
Not all health insurance is ‘insurance,” certainly, but a great deal of it is. For instance, employers stopped offering vision “insurance” when it became clear that those who bought it used it, so it was a sort of prepaid and tax-free way to pay for vision services and glasses. When FSAs came in, there was no longer a need for the tax-free aspect. The fact is, all mass health care costs are predicted by actuaries and prices for real “insurance” are set at some percentage above that predicted cost. Money is pooled among participants, with some making no claims and others claiming millions of dollars. That’s pooled risk. That’s insurance. In addition, some large employers will ensure part of their risk with stop-loss arrangements at some predetermined cost level. The insurance company charges for the risk they assume. That’s insurance.
Are there differences in the way this insurance works in the marketplace than with other kinds of insurance? Absolutely. But it’s still insurance. If you’re in an auto accident and need $500,000 worth of care, you’re insured against penury by your health care insurance. If you have a premie and it costs $1.5 million, you’re insured to the limits of whatever coverage you have. If you have a stroke and owe $80,000 for a four-day stay in ICU, you’re insured against those costs.
What’s different about health care insurance is that the providers call the shots. THEY get to determine how much you use and, thus, how much they get paid. It’s also different in that health care insurance typically covers any technology that has proven “medically effective” for your condition. That means that, unlike other industries, there’s no cost/benefit analysis done when developing those technologies. If you develop a drug for a condition that affects only 1,000 Americans, you develop that drug, anyway, and charge $10,000 a pop. Insurance has to pay for it unless it was specifically excluded in the policy/plan document, and almost nothing of that sort is ever excluded. Of course, the pharma company has a patent that allows it to charge this much until the patent runs out.
It’s the same for equipment. No matter how obscure the disease or condition, you can get whatever you want to charge for whatever piece of equipment as long as you have the patent, and the market won’t say “no,” because the market is insured. And, of course, if a person is dying, health care insurance will pay for any number of extraordinary measures to keep that person alive, often when unconscious, for a few extra days. Once again, there is no cost/benefit trade off in the private system.
There are other contributors, as well. For instance, MRI machines are of great benefit to humanity, but the number of people who actually need an MRI tends to be quite small as a percentage of the population. However, when hospitals began to see their physicians move patients to hospitals that had MRI machines, they got their own MRI machines. Then, they had to pay for them by filling them. So, they did. Overuse of procedures/technology is absolutely rampant in private-sector health care.
And then we have the docs, themselves, some of whom are wonderful humanitarians, and too many of whom are money-grubbing businesspeople looking for ways to squeeze another dime from the public. If you’re an orthopedic surgeon, is it surprising that you’ll recommend expensive, dangerous surgery that’s effective only 50% of the time, while having considerable, life-altering complications the other 50%, even though more effective therapies are available that have few or no side effects? I don’t find it all that surprising, personally.
And then there’s the research, most of which is done by companies with a profit-motive. I’ve talked to American docs who extensively use European research these days, since it’s motivated only by getting it right.
I’ve only scratched the surface, here. There’s much, much more. Like the near monopolies health care conglomerates have in a large number of markets that make meaningful price negotiation an exercise in silliness. As I said, every time large employers thought they might have a handle on this, the health care industry adjusted to milk even more money out of the economy.
As for effectiveness? In outcomes, the US leads in a couple of medical disciplines. Other countries have the lead in other areas. Overall, the US gets far worse health care outcomes for far more money than all other industrialized countries on the planet. At least, that’s where it stood the last time I checked about three years ago. I suspect it hasn’t changed.
The insurance industry isn’t the villain, here: 3% to 4% profits on total sales is not an unreasonable amount, and SOMEONE has to administer these plans. And whoever that someone is will cost money. There’s no free risk-assumption/administrative services lunch, here.
The only way to reduce costs while increasing quality is to go with single payer health care. A single payer can say “no” to technologies that benefit the very few at a price that slams the very many. A single payer can refuse to pay for three or four extra days of life, at exorbitant cost, for an unconscious patient for whom those days mean nothing, anyway. A single payer can say no to orthopedic surgery when there are better alternatives. A single payer can pay for research that reveals reality instead of whatever a profit-motive company wants to find out about its technology/drugs. A single payer can insist on tests and preventive care that reduce future health care costs.
The best way to do this is taxation, so that everyone is in the risk pool, and no one is freeloading on a system that refuses to deny care (or at least emergency care) to those who don’t pay. In other words, Medicare.
Great comment. Thanks
JSO, good comments. Thanks. I do not have all the answers. You and I seem to agree that taxation would have been a better way to go. You and I agree that the providers exercise so much power in the market because the demand side (a single patient or even a large employer) has no leverage in negotiations with the suppliers, as you rightly point out. The AMA controls the supply of medical professionals and the hospitals and doctors charge with no restraint or cost-benefit analysis.
Our main point of disagreement appears to be over how to balance the suppliers’ clout. You advocate a single payer to get more power for the buy side. My view is that the federal government is not the best entity to be that single payer. Our system provides better alternatives for these functions. The federal government already has too much on its plate. (Canada and European countries have simpler political systems. The national governments of those countries are not burdened with the international roles that America has played historically and is likely to play for the foreseeable future. Their constitutions do not confer on their local governments the powers (particularly power to tax) that our constitution has provided to our states and local governments.
In my opinion, multiple payers regionally / locally would work better than a single payer. The state governments and/or local governments could band together and form regional compacts and get more clout while still providing choices and competitive models. That would then free up the federal government to do the many other things it is struggling to do well.
[By the way, for your information, I worked for several years in a state government; I am not against government, per se.]
John
John,
I assume you’re “JL”? You don’t say so, but you seem to have a dog in this fight, so I’ll assume that’s you.
Can you explain to me EXACTLY how the price negotiations would go with, say, a health care company that commands 90% of the beds in a given market, that would make a bunch of local alternatives work? I’ve been in some of those sessions, and I have no idea how it would go in the local/regional authority’s favor. Nor do any of the people who do this for a living, as far as I can tell. The way I’ve seen it work between monopoly suppliers and monopoly administrators (say, CIGNA in some markets) is something like this (abridged):
CIGNA: We control 80% of the covered employees in this market.
Health Care Monopoly (HCM): And we have 90% of the beds.
CIGNA: You’ll have no way to fill those beds if you don’t cooperate with us.
HCM: And you’ll be unable to offer your clients’ employees adequate health care if we refuse to accept your prices.
CIGNA: So, we’re at a stalemate.
HCM: We don’t think so. We’re going to prepare a press release explaining to the press why 80% of the covered employees here will no longer have access to adequate health care. There’s no way the remaining 10% of providers can serve 80% of covered employees. And we can’t cover them if we can’t make enough money to survive. We’ll have to close our provider locations in this community, and devote our resources elsewhere in areas where rates are enough for us to survive.
CIGNA: You’d close up your infrastructure here? I don’t believe it.
HCM: Well (smiling). Only for a while. Just until the rates from your employers come up. And they will.
The only way to prevent this is to make rates uniform, or at least uniform with some sort of adjustment for, say, COL. We can’t have a situation where health care conglomerates pull out of markets for greener pastures when they don’t get the rates they want. This has happened quite a bit in the insurance industry when laws restricting insurance rates made the market unprofitable.
JSO, yes, I am the John Laxmi mentioned in the blog. I don’t have a dog in this and I don’t think this needs to become a “dog fight.”
I do not represent any health-care provider. I am a consumer, subject to the market forces of the health-care providers and insurance companies. I am not in the health care field at all and therefore cannot tell you exactly how the negotiations you illustrate would go. I am a lay citizen interested in public policy matters.
What are the impediments to local laws banning market concentration of the type you describe (where a single provider controls 90% of the market?) Have local laws been enacted and tried and failed? Local regulations are working in many other sectors. Why are they not working in this sector? Are there any constitutional or other restrictions on state regulations barring a single provider from becoming so dominant as to control 90% of the beds? I am generally aware of the so-called “Parker Immunity” which shields providers from federal anti-trust laws if they are acting under state legislative mandates, but which states are so permissive as to allow 90% concentration and why?
This is not to plunge into a technical debate at this blogsite which may not be a suitable forum. All I am pointing out is that the president took a long leap and signed a far-reaching law without explaining why his approach is a carefully considered, constitutional alternative. Not to change the topic, but GW Bush did the same mistake with the bailout of financial firms. The bailout may have been critical to save the system but the government did not explain to the public why the banks are so critical to the economy. Public officials are accountable and must explain and get their actions validated by a clear consensus. If the public is deeply divided over an issue as it is with healthcare, the solution is not to hurry up and pass a controversial mandate. We must be patient and work through the issues until we have a consensus. Right now, we don’t have a consensus on many issues. It is the job of the president to formulate policies and get the people behind such policies, by force of discussions and arguments. Bill Clinton did that well. Obama has the intellect and eloquence to do it well too. Instead, the health-care law was rushed without adequate consensus building. Now, we must fix it.
John
The observations made in this discussion range from data driven, to experience based, to political. All seem to agree that the current system produces poor results at a high cost, that various attempts to control health care service quality and cost have not worked, and that “let the market work it out” has not and will not work
Market roll ups have created massive providers and insurers whose interstate operations are in some instances are “to big to fail”, and too large for the capabilities of most state insurance commissions, and local political pressures have created individual hospitals whose existence in political more than economic or health care related.
Implicit in the comments are the realization that “someone” needs to regulate and control the system. A single payer might work, effective regulation might work (FCC, FERC), but making the system voluntary only will work if the non participants can be turned away at the door.
“We” have decided that this is not an acceptable approach, so it seems to me that the Individual mandate becomes the only way to reduce the cost transfer of the current system.
John: The reason I asked you for specifics about *exactly* how you would go about dealing with a specific, negotiation issue is because I believe that this entire blog post is a symptom of the essential American failing: Everyone believes they’re experts at everything, and puts forth simple solutions that are alike in only one way: They won’t work. Hey, I’m not an expert in the American health care system, but I worked alongside super-experts, and I picked up a LOT from them. But I know what I don’t know.
Are there laws against local monopolies? *laughing* Sure, very weak ones. Look around you at the gas stations available in your community. If you’re like most communities, there are probably no more than two dominant brands — and sometimes only one. That didn’t happen by accident. I was working as a consultant to Exxon when this strategy of selling holdings to other oil and gas companies to gain dominance and pricing premiums in regional markets. Do you see the gummint steppin’ in on this stuff?
But even if laws were stronger, there are many, many markets where 100% of the beds are controlled by a single entity, and that’s all there’s ever, ever going to be. This is the way things are in the vast majority of rural America, where a single hospital, and the medical community that grows up around it, might serve everyone within a 50-mile radius, or 100 miles or more in the more sparsely populated states. There’s no negotiating possible in this situation. There are physicians and other providers who actually move to these rural communities so that they can make as much money as possible, free of price negotiations with providers.
Look, the list of market-based distortions goes on and on and on. For instance, there was a movement to allow health insurance companies, like BC/BS, to begin operating across state lines. That would do no good, whatsoever. Very, very few insurance companies have the financial wherewithal to move into a market where they have no presence. They can’t compete on price, because they have no customer base with which to negotiate. in order to get those customers, they’d have to buy market share, heavily discounting rates to attract customers until their actual customer base gave them some bargaining power. But it would be no better bargaining power than any of their competitors. So where’s the profit motive in a business yielding only 3% to 4% return on sales? That’s an anemic return. The average return on sales in the US, across all industries, is probably around 10% or so. Only the sheer size of the health care market makes it feasible to operate in that insurance sector, much the same way food companies make pennies on the dollar, but make it up in volume.
i
Miles:
As I’ve pointed out, above, the insurance companies really aren’t the villains here. No company making three to four cents on the dollar can be much of a villain. Even if someone waved a magic wand so that no administration of health care claims was ever necessary, the complete elimination of insurance companies could not drop health care rates more that 3% to 4%. Given the rate of growth of the health care industry, this savings would disappear in a heartbeat.
Are there any health care insurance companies that are too big to fail? Good question, but probably not, except in those cases where they also have a number of annuities or other financial instruments that could affect the US economy. As I’ve said, the really big companies tend to self insure so that the big insurance companies are providing only administrative services. They have no risk in those situations, and risk is so spread out among other, smaller companies and individuals that the inherent risks in the business are much lower than for companies offering property and casualty insurance.
JSO, thanks.
You claim that the health-insurance business is not very profitable; you say insurance companies do not have enough clout to negotiate with monopolistic health-care providers. Miles and others claim that health-insurance firms are exploiting the public and earning super profits.
It seems to me that the primary issue is that health-care costs are rising faster than inflation and we are all groping for a system that would pass on the rising costs to someone else, either to tax-payers or to insurance companies. You point out that doctors and hospitals in rural America charge a lot because they don’t have a lot of competition. But, that’s the way most sectors of the economy work. Can we force doctors to work in the places we want them to go to and to work for wages prescribed by the government or insurance companie? We could, I suppose, but I am not sure that there is a consensus in the country as yet to dictate wages for any specific sector that way or to prescribe the cost of drugs by government fiat. Single-payer systems, in essence, would do just that.
It looks like we somehow want to achieve a miracle that delivers the same super-high levels of health-care to all the people living in every part of the country at costs that remain flat even if usage keeps going up partly due to the aging population and partly due to our desire to get all the cutting-edge technology without cost-benefit analysis. That is unachievable and, if achieved temporarily by force of government, unsustainable in the long run.
John
Interesting discussion Miles, J.L and Otherwise. A brief look at a principle of Federal Jurisprudence may illuminate this discussion. Stare Decisis is a legal principle that requires the observance of precedent. The reason for this is the need to avoid upheavals and uncertainty, to establish confidence in the Supreme Court ‘s decisions and promote reliance on settled law. An orderly and civil society cannot function in a state of unpredictable changes. This is particularly true in a federal system, such as ours. For this reason, Stare Decisis operates to caution against sudden and radical changes to the law. In the last several decades, nominees to the Court have solemnly repeated their adherence to this doctrine and promised to be modest, follow established precedent and not be “activist judges”. For some reason, between their Confirmation and the first year on the court, the power grab begins and the current conservative majority seems to be following a pattern of overturning established law in favor of what can only be described as an ideological agenda.
Miles, you are right to maintain that the Commerce Clause grants the power to the Federal Government to regulate all matters coming within the scope of the law. For a fuller discussion of this principle, please see seventy years of case law following the courts decision in Wickard v. Filburn (1942) upholding the power of Congress over Interstate Commerce. At the beginning of our nation, the “United States” was anything but. Each state had it’s own set of laws and regulations respecting customs and duties ( oh, yes, and money) creating havoc for a purveyor of any type of goods to send them into the stream of commerce. For example, a maker of blankets in Massachusetts sending them into South Carolina would have to deal with a mixture of burdensome and contradictory laws as it passed through the various states.
To relieve this problem and to encourage commerce, Congress enacted the Commerce clause of the Constitution to regulate “Interstate Commerce” and insured that all Congressional regulations “necessary and proper” to carry out this mandate would be constitutional. The question then becomes is Health Care “Interstate Commerce.”?
The error in the previous writers essay is to confuse health care with the health care insurance industry. Health care could easily exist without the private health care insurance industry, which is a cost on top of a cost. See Medicare which has far lower administrative costs than private insurance which has to secure a profit for the shareholders. This would eliminate waste and skyrocketing expenses of the insurance industry whose CEOs pocket millions each year, duplicate services and drive up the cost of care to enormous levels, far higher than that of comparable industrialized nations whose health care outcomes are better than ours.
Then it is necessary to decide if health care is, itself, Interstate Commerce?. Consider the transportation of pharmaceuticals, organ transplants or vacationing residents of another state and it is clear that health care is interstate commerce. Or else the man on vacation from North Dakota finds himself with a heart attack in the middle of Disneyland and has to go back to North Dakota for care.
To maintain that anyone may choose not to participate in the health care market is plausible only if one can imagine an individual, born in the wilderness, who lives his whole life in a cave and dies unattended by any care provider. This is possible in Afghanistan, but highly unlikely in America. So we are all part of the health care system,
I take exception to JL’s opinion that “most experts” feel that the individual mandate is unconstitutional. To the contrary, many legal experts,, Constitutional Law professors, and federal judges believe that the Affordable Health Care Act is constitutional and the individual mandate a “necessary and proper” provision of the law. Numerous lower courts have upheld the law. There are many distinguished conservative legal experts who have written and spoken in support of the law. To cite just a few, the following three conservative legal thinkers are worth noting.
Distinguished conservative scholar, Charles Fried, Harvard Law Professor and former solicitor General under Reagan, called the lawsuits attacking the Law as “grandstanding in a preposterous way”. Pepperdine Law Professor, Douglas W. Kmiec former top Justice Department lawyer under Reagan said he hoped the Justices ” would come to their senses. and uphold the law as a reasonable regulation of Interstate Commerce.” Judge Laurence H. Silberman, Reagan appointee to the Court of Appeals in Washington, long a leader of the conservative legal movement, wrote that Congress has “the power to forge national solutions to national problems.”
Just because members of the public do not like a law does not make it unconstitutional. Recall the furious reaction to the Civil Rights Laws. The carnival of Tea Party activists marching around the supreme Court in a loud and ignorant display of bumper stickers may exercise their first Amendment rights, but surely Justice Scalia does the Court no credit by repeating their arguments. The Broccoli argument is simplistic and inapt. One could live an entire lifetime and die without ever having purchased or eaten broccoli. The same is not true of health care. It is hardly reasonable that broccoli would be eaten in an “emergency” and the cost foisted on the rest of us. Nor does refusing to buy broccoli, affect anyone else’s decision to buy broccoli. The health care market is a different type of industry from groceries.
Otherwise, I agree that excellent health care is available in other parts of the world. In the last fifteen years my husband and I and our family have made many trips to various parts of Europe, both urban and rural, and received outstanding health care. Fifteen years ago, my husband suddenly developed a torn retina in his “good” eye and need emergency surgery to repair it two days before we were to fly to Paris. Having no sight in his bad eye and limited sight in the other we were apprehensive about the trip. The surgeon permitted him to go providing he sought follow up care from an Ophthalmologist in Paris. On arrival, my husband saw the specialist he was referred to and received world class care. The French have, in addition to marvelous baguettes , a superior health care system.
This system of universal health care includes excellent maternal and infant care. Our daughter and her husband were stationed in Paris when she gave birth to their first child. Six days later we found her in the hospital where she was happily eating lobster bisque and cuddling her son. By law, mothers in France must stay in the hospital at least five days to insure their more complete recovery and the cuisine doesn’t hurt , either. The French believe that if you eat well, you’ll get well. What a concept.
Well, of course you may be thinking, Paris is a world capital so good health care would be the norm. But what about the more isolated reaches of Europe?. In 2005 we went with a large family group to visit Sardinia, my husbands’ ancestral homeland. The village we visited was a tiny mountainside enclave of 5000 people in a rural area where only one person spoke English. In the middle of the week, a cousin from our group fell and shattered her ankle. The doctor came to the house immediately, called an ambulance and had her transported to the hospital in the next town. There, she had emergency surgery resulting in several pins and rods being put into her ankle and remained in the hospital for a week where she was tended by competent and kindly doctors and nurses . Who spoke no English. One of her nurses, noticing the authentic spelling of her last name looked up long lost relatives who came to the hospital to pay their respects and offer comfort to their “cousin from America “. They also spoke no English, so her anxiety about whether the medical care was adequate was understandable. On discharge, she discovered that her entire care had been free and the only charge was thirty five dollars for the English translation of her medical records.
On return to the US, this cousin anxiously went to the local specialists and was informed after x-rays were taken that her care had been “outstanding” The charge for this one hour consultation? $800. At the risk of too much focus on food, this cousin also noted that the hospital meals were “delicious”. Just a cultural thing, I suppose, as one rarely hears this in America.
Otherwise , you suggest moral hazard in providing universal healthcare because then people would overuse it for “trivial”complaints. One man’s mole is another man’s melanoma. I have rarely encountered anyone who actually liked to go to the doctor. Hours of waiting, trips to labs and unpleasant medical tests are few peoples’ idea of fun. Of course, there are no doubt masochists around who enjoy this, but I suspect that the wasted funds spent on these cases would be far less than the ER visits and catastrophic illnesses that result from denying health care to all.
The problem is how to set up an effective healthcare system that provides good care to all. Congress and the Obama administration have addressed this problem with the Affordable Health care Act. J. L., I agree with you that “there are many ways to achieve” universal health care, but the right wing in Congress blocked the use of these methods and the individual mandate became the compromise. We must not let the perfect become the enemy become the enemy of the good. We have such a system . Let it play out and fix any problems that may arise as is often the case with laws. I see no problem with calling this law Obamacare. He does care. and so do we all.
John,
You said: “It looks like we somehow want to achieve a miracle that delivers the same super-high levels of health-care to all the people living in every part of the country at costs that remain flat even if usage keeps going up partly due to the aging population and partly due to our desire to get all the cutting-edge technology without cost-benefit analysis. That is unachievable and, if achieved temporarily by force of government, unsustainable in the long run.”
Really? It’s sustainable in every other (EVERY other) industrialized nation in the world. They’ve been doing it for years with better results than we’ve gotten here. Can the government dictate rates of pay? It already does. See “Medicare.” See “VA payment rates.”
One of our basic problems communicating here is that you don’t have even a basic understanding of how all this works. Not even close, and when I explain it to you, you still fail to grasp it. For instance, there’s little disagreement between Miles and me, really. I’ve been using return on sales as a measurement. He/she has been using gross profit numbers. My argument has been, all along, that the ROS number is the important one, because it defines how much GROSS savings there could possibly be if we eliminated health care claim administration altogether, and it’s mostly health care claims administration that the insurance companies do when you’re looking at total people covered (most covered employees work for large companies/organizations that are not insured; they self insure. I’ve said this over and over and over again, to absolutely no avail. WHEN will it sink in for you, John? The key number for public companies, and some of the insurance companies are not public, is earnings per share. That makes the overall market worthwhile, depending on the net income and numbers of shares outstanding. But the NATIONAL issue still comes down to ROS, doesn’t it? That’s the place to look for savings, and those savings just aren’t there in insurance company profits.)
You also failed to understand my argument about rural areas, though it’s quite apparent. You cannot negotiate lower prices with a monopoly, so those in the monopoly make more money than those outside the monopoly. BUT, if you added another hospital in those areas, TOTAL cost would go up while health care workers’ income would decrease, because competition between the hospitals would drive a technology arms race leading to increasing utilization, which would more than offset the lower rates for specific diagnostic codes/procedures. The technology companies/pharmaceutical companies would win, but WE can’t freakin’ WIN that battle, as all of the other industrialized nations discovered many years ago when they gave up trying to win it.
The current federal plan on the table does shift costs by requiring all those who might ever have need of health care to pay for it, or avail themselves of some sort of subsidized or free care offered through the federal government. It spreads the burden more evenly, but does too little, in my opinion, to rein in total costs. Given the political environment, though, it’s an important first step … a camel’s nose in the tent, if you will. Nationalized health care has failed to pass twice in the past two decades. It will pass, eventually, because health care insurance will become so unaffordable that the economic burden on the US will become unbearable. The only question, really, is whether the US passes a law before or after the cost burden makes our businesses even more uncompetitive than they are now. I suspect we’ll wait too late. We’ll see.
But there will be Medicare for everyone. This issues are when, and in what form.
Miles, JL, JS–now you’ve done it. You’ve got Judge Marrosso in the argument. She’s really, really, really smart and actually knows what she’s talking about. Darn.
More seriously–Joan, delightful to have you weigh in. Superb thinking and articulation as always.
Now having said that, I do think people overuse healthcare. The pharma industry revs dropped last year for the first year in many because people stopped filling prescriptions. I happen to believe that people drastically over-medicate, so I assume some of that is reduction of overuse. I know that is conjecture on my part. When I started working out a few years ago, every day something hurt–badly. Finally, my coach said, “Unless it hurts really bad for two days, ignore it.” I can’t tell you how many agonizing injuries I’ve had that stopped hurting after 47.5 hrs.
O
Ms. Marroso, thanks. Using the argument of Stare Decisis is clever but, in this context, not applicable, I’m afraid. Stare Decisis is the principle of respecting precedents and established matters resulting from decisions of superior courts and courts standing by their own prior decisions. Stare Decisis does not rule out judicial review of new legislation passed barely a year ago. Each side uses Stare Decisis conveniently when it wants courts not to disturb issues settled in its own favor. Matters are far from established in healthcare.
It is true that there are respected scholars on both sides, on the question of whether federal individual mandate is constitutional. We have the matter before nine specific judges who will adjudicate this issue. Many believe that federal mandate is an ineffective way to approach the issue. However, if the Supreme Court declares the mandate to be constitutional, those who oppose the mandate must respect and live with the court’s decision. Likewise, I hope those who think the federal mandate is essential will equally respect the court if it rules against the mandate. The courts are the arbitrators on what is constitutional, not the legislature. Once the courts establish precedents, Stare Decisis becomes applicable.
In comparing the quality and affordability of healthcare in America with those in other countries, personal anecdotes can go both ways, depending on each individual’s coincidental experiences. Much was made of the Newfoundland’s Premier Williams coming to the U.S. for heart surgery two years ago by those arguing that the U.S. health care system is superior. Anecdotes like these are interesting but not sufficient in developing national policies.
JSO argues that all other industrialized countries are already running successful and sustainable universal health care systems. Many of these industrialized nations are also struggling with ballooning budget deficits and debt. And those nations don’t step up the way we do on international matters, whether it be in wars or humanitarian aid. Even if we want to emulate Europe and Japan, the process by which we get there is not to hurry up, enact a mandate and then use Stare Decisis to ban any debate.
And, most of those industrialized nations use taxation to provide national health care. As I said at the very beginning of this discussion, if our congress had imposed a tax to pay for those who cannot afford healthcare or insurance, that would have met most of our objectives and shown courage and gumption.
JSO says that I “don’t have even a basic understanding of how all this works” and that even when it is explained to me, I “still fail to grasp it.” That brings up an important point. A large part of the population is like me in this respect. Like me, a large part of the population does not have expertise in health care or health insurance. Like me, a large part of the population is of average IQ and yet has the right to vote and would like to discuss and understand the issues. A large part of the population, like me, is open-minded on this topic because everyone could face the prospect of being left without insurance just when she/he needs it. Educating and persuading the public on a far-reaching legislation like this is primarily the job of the president. He doesn’t have to persuade every voter. He must develop a consensus, before pushing the mandate. On a matter of such importance (one-sixth of the economy dealing with life and death), large numbers of lay people like me must be educated and persuaded to see the light, not mandated and then silenced by Stare Decisis.
John
John makes some interesting points, but most notably reminds us that this issue does not exist in a vacuum. For starters, every reliable stack of data I have ever seen demonstrates that the rest of the developed world outperforms the US on every meaningful measure of health. And they do it for a half to a third of what we spend. Granted, many of these nations have advantages – smaller, more homogenous populations, stronger histories of collective action to leverage, etc. But still, they get more and spend less.
Now, let’s imagine a scenario in which we DON’T spend nearly as much as the rest of the world combined on military adventures.
I bet we could afford the best healthcare in the history of the galaxy, couldn’t we?
Mr. Laxmi, thank you for your interest, but I’m afraid you’re mistaken.Stare Decisis Does not preclude judicial review, nor did I say it did. Judicial Review is what the Court DOES. This principle of the law not only commands the lower federal courts to follow precedent but cautions the Supreme Court to exercise ” caution ” and “restraint” when deciding to overturn established precedent. Exactly what all the nominees promised in their confirmation hearings to do.
In numerous cases, the Court has broadly interpreted the Commerce Clause to allow the Congress to regulate Interstate Commerce. In such cases, the only two questions before the court are ;
1. Does this case fall within the scope of the Interstate Commerce Clause?
2. Has congress used all “necessary and proper means” to regulate this commerce?
If the answers are “yes” , then Congress has exercised it’s power properly and the law stands.This has been so for 70 years and without embarking upon a long and tedious analysis of this body of the law, I suggest that you read the cases following Wickard v Filburn. ( 1942). I believe you’d find the Court’s history in this area enlightening. Congressional power in the use of the Commerce Clause is both broad and deep and hence, insusceptible to one-sentence restatements of complex legal principles.
If this has no appeal for you, then may I caution you that Wickipedia can offer only limited light on the issue. Again, thank you for your comment, I have enjoyed this discussion.
J.D. Marroso
Ms. Marroso, thanks. There is no reason to presume that this court will not generally respect the traditions followed for nearly a century. The preemptive attack on the court sounds like bullying to some. The members of this court deserve the same respect and courtesy accorded to members of the other two branches. The Congress acted in good faith. The margin was very narrow in passing this law. But, that doesn’t mean it is not the law. Similarly, if the court rules 5-4 in favor of or against the mandate, it stands, regardless of the narrow margin.
Sam, thanks. Yes, we could all imagine a scenario in which we DON’T spend so much on what you call “military adventures” and ask if we could then afford the best healthcare in history. The answer is, of course, “yes,” in that imaginary world. Our history makes us what we are and, try hard as we might, we remain what we are.
IF only we had not sent naval forces to fend off the Barbary pirates in the 18th and 19th centuries and IF only the XYZ Affair had never occurred … who knows? We may have never acquired the naval expertise to become a force in WW I & II. After all, pirates had been attacking British and European ships all along. Why did the British not wage war against Tripoli? Was it because America was willing to, allowing the British to reap the rewards later?
IF only America had not waged war against Mexico in the 1840s? Was that war really necessary? The Whigs were against it, weren’t they? But, we believed in Manifest Destiny and the belief persists still.
IF only we had not annexed Hawaii in the 1890s, would we have cared about Pearl Harbor half a century later?
IF only we had ignored the Cubans’ plight? IF Democrats had not pushed McKinley into the Spanish American War, would we have gone on to Philippines? What strategic interests did America have then in Cuban independence? Or in Central America? IF we had not controlled the Panama Canal, would we be any less prosperous?
For more than a century, we’ve been interventionist, adventurous. It has become part of our nature, our history.
IF Wilson had remained an isolationist? Indeed, he tried but eventually declared that the “World must be safe for democracy!” Was America really threatened in 1917?
IF we had stayed away from the Holocaust, from Korea, from Vietnam, from Bosnia, from Iraq, from Afghanistan … IF, IF, IF.
Over two centuries of successful and idealistic American activism, combined with a steady stream of oppressive dictators, genocidal megalomaniacs, communist thugs, Khmer Rouges, Milosevics, Chemical Alis and bin Ladens have made us who we are. Is Europe ready to deal with Iran? We did not become a military-industrial complex by chance or by design. History has given us this mantle because there is no other nation ready to bear these burdens.
Does it sound like we have strayed far away from health-care insurance? We have not. We started with the question of why we cannot have health insurance like the Europeans have. We cannot be like Europe because we are not Europe. We were founded by those who fled Europe. We became the savior of Europe. Most of us have origins in Europe. And yet, we are not Europe. Not in international affairs, not in military commitments, not in our customs and manners , not in our cuisine, not in our Constitution and, no, not in health insurance.
Nor can Europe become America. They try, but it is not easy. Their history sets their course. That is why the Euro is not the Dollar. When there is a panic, the world does not run to the Euro or to the Yen.
We cannot solve our problems by trying to emulate Europe. We must find our own way to solve our problems. Because, we are unique. That’s not a pompous declaration. That is the reality.
John
Thanks, John, but:
Estimates of the total direct and indirect costs of the Iraq adventure range as high as $2.7 trillion by 2017. Even if I grant you that all our past wars were somehow good and/or necessary (I don’t, but if I did) let’s focus on what’s before us right now. (Although I DO agree with you that “warlike” has become a part of our nature.) It’s a little odd that, in a discussion entertaining all kinds of hypothetical speculations on what could be done, what should be done, what ifs and so on, you feel comfortable dismissing the biggest and most on-point what if.
About all those wars. You’re seem comfortable assuming that, in the long run, they were for the best. Some no doubt were. Some were necessary wars. But others were imperial adventures and frankly, some of what perhaps look “necessary” at a glance traces directly to our own bad foreign policy decisions. We did a lot of things in the aftermath of WW2, for instance, that we’re paying for today.
Finally, there’s a thing called the Principle of Sensitivity to Initial Conditions – aka the Butterfly Effect – and as a result I’m not even comfortable assuming that actions that looked necessary and apparently worked out well in the past were optimal.
All of which adds up to the idea that we need to do the right thing right now and from here on out, and from my perspective that means dismantling a good bit of our war machine and reallocating those resources into healthcare and education.
Sam, you are right.
If America could turn its focus inward for a decade or two, we could repair a lot of damage in our midst. In hindsight, many of our historical actions may be interpreted as sub-optimal. However, the same Butterfly Effect that you cite makes it impossible for us to figure out what might have happened in the long run if America had not taken those actions. If we had not repealed the 18th amendment, would we all be a lot more sober or wiser?
It has been twenty years since Francis Fukayama wrote of the “Last Man,” of History’s end and the universalization of liberal democracy as the final form of human government. Within those twenty years, we have had one humanitarian crisis after another, ranging from Bosnia to Sudan to Rwanda to Myanmar, not to speak of Sept 11 and Iraq and Afghanistan.
Which country in history has been able to make the kind of radical change you dream of? Japan and Germany after WW2 did, but only after being completely devastated. The sun set on the British Empire long ago but Britain is still not able to stay away from distant conflicts. China is the only country that I know of which has transformed itself radically, from a communist backward-looking nation on to an unmatched forward march, but their history and leaders have nothing in common with ours.
A radical change, leading to an inward-focused America, is not impossible. But, each time we think we are about to enter a period of peace, another distant butterfly flutters its wings.
I apologize for having strayed too far from this blog’s central topic. Hoping to meet again in another blog ….
John Laxmi