Why Reduce Health Care Costs?

drugcostsOne rare point of elite consensus is that the US needs to reduce health care costs. Frightening graphs expose America as a spendthrift outlier. Before he decamped to Citigroup, the President’s OMB director warned about how important it was to “bend the cost curve.” The President’s opponents are even more passionate about austerity.

Journalists and academics support that political consensus. Andrew Sullivan calls health spending a “giant suck from the rest of the working economy.” Gregg Bloche estimates that “the 30% of health care spending that’s wasted on worthless care” is “about the price of the $700 billion mortgage bailout, squandered every year.” He calls rising health spending an “existential challenge,” menacing other “national priorities.” Perhaps inspired by Children of the Corn, George Mason economist Robin Hanson compares modern medicine to a voracious brat:

King Solomon famously threatened to cut a disputed baby in half, to expose the fake mother who would permit such a thing. The debate over medicine today is like that baby, but with disputants who won’t fall for Solomon’s trick. The left says markets won’t ensure everyone gets enough of the precious medical baby. The right says governments produce a much inferior baby. I say: cut the baby in half, dollar-wise, and throw half away! Our “precious” medical baby is in fact a vast monster filling our great temple, whose feeding starves our people and future. Half a monster is plenty.

But when you scratch the surface of these sentiments, you have to wonder: is the overall level of health care spending really the most important threat facing the country? Is it one of the most important threats? There are many ways to raise revenue to pay for rising health costs. Aspects of the Affordable Care Act, like ACOs and pilot projects, are designed to help root out unnecessary care.

I am happy to join the crusade against waste. But why focus on total health spending as particularly egregious or worrisome? Let’s explore some of the usual rationales.

Terrible Tax Expenditures and Suspect Subsidies?

Employment-based insurance gets favorable tax treatment, and much Medicare and Medicaid spending is drawn from general revenues. So, the story goes, medicine’s big spenders don’t have enough “skin in the game.” Once health and wealth are traded off at the personal level (as the Harvard Business School’s Clayton Christensen advocates), people will be much less likely to demand so much care. Government can attend to other national priorities, or individuals will enjoy higher incomes and will be free to spend more.

I respect these arguments to a point, but I worry they partake of the “nirvana fallacy.” If I could be certain that leviathan would repurpose all those wasted health care dollars on infrastructure, or green energy, or smart defense, or healthier agriculture, I’d be ready to end tax-advantaged health insurance in an instant. But I find it hard to imagine Washington going in any of these directions presently.

Giving tax dollars back to taxpayers also sounds great, until one processes exactly how unequal our income distribution is. In 2004, “the top 0.1% — that’s one-tenth of one percent — had more combined pre-tax income than the poorest 120 million people.” To the extent health-related taxes are cut, very wealthy households may see millions per year in income gains; the median household might enjoy thousands of dollars per year. Sure, middle income families will find important uses for those funds (other than bidding up the price of housing and education). But at what price? What if the insurance systems start collapsing without subsidies, and more physicians (who are already expressing a desire to work less) start seeking out pure cash practices? A few interactions with the the very wealthy may be far more lucrative than dozens of ordinary appointments.

Consider the math: billing a $20,000 retainer from each of 50 millionaires annually may be a lot more attractive to physicians than trying to wrangle up 500 patients paying $2000 each—or, worse, getting the money from their insurers. There are about 10 million millionaires in the US; that’s a lot of buying power. One $10,000 score by a cosmetic dentist from such a client could be worth 400 visits from Medicaid patients seeking diagnostic procedures. Providers are voting with their feet, and a Medicaid card is already on its way to becoming a “useless piece of plastic” for many patients. Given those trends, simply reducing health care “purchasing power” generally risks some very troubling outcomes for the very people the health care cost cutters claim to protect. No one should welcome a health care plutonomy, where the richest 5% consume 35% of services, regardless of how sick they are.

Is Anyone Underpaid in Health Care?

Health commentators rightly draw attention to big insurer CEO paydays. Top layers of management at hospitals and pharma firms are also getting scrutiny. Wonks are up in arms about specialist pay. Read more

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Heckuva Job, OIRA

December 12, 2010 by · Leave a Comment
Filed under: Social Justice 

sickeggRemember the massive 500 million egg recall back in August? At least 2,000 people reported illness from the eggs; countless others may have mistakenly blamed their misery on some other source of food poisoning. We are now beginning to understand how regulatory pathologies beyond the usual capture story allowed this entirely preventable outbreak of salmonella.

Lyndsey Layton’s article on salmonella-tainted eggs offers an excellent case study of the toxic consequences of deregulatory ideology and a broken “cost-benefit analysis” apparatus. Layton describes years of controversy over bad eggs, which appeared to finally resolve in the late 1990s as the most responsible egg producers realized the terrible reputational consequences they were suffering because of their wild west competitors:

In the spring of 2000, a deal was struck. The egg industry agreed that the federal government would for the first time set rules for egg farms. At a private meeting on the eighth floor of a sleek office building overlooking Washington’s Union Station, Klippen, representing the egg farmers, shook hands with Richard Wood of Farm Animals Care Trust, who was negotiating on behalf of consumer groups. The regulators looked on, approvingly.

“This is how government and industry are supposed to work together,” Judy Riggins, a policymaker at the USDA, whispered to Klippen. And then, nothing. For the next nine years, the government failed to deliver the rules.

Old battles between the USDA and FDA explain some of the lethargy. But I found most remarkable this intervention from the OMB, whose Office of Information and Regulatory Affairs performs cost-benefit analysis on proposed regulations:
Read more

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Global Inequality & Access to Health Care

La Danse macabre. Paris, Guy Marchant, 1486 : Un moine, un usurier et un pauvre (monk, usurer and poor man)

La Danse macabre. Paris, Guy Marchant, 1486 : Un moine, un usurier et un pauvre (monk, usurer and poor man)

According to a recent study in The Lancet, “The world’s wealthiest two billion people get 75 percent of all the surgery done each year, while the poorest two billion get only 4 percent and often die or live in misery as a result.” It’s a striking fact; how are we to interpret it?

There are two metanarrative accounts of the relationship between inequality and health care. On a Whiggish, optimistic view, vast inequality can generate the capital necessary to fund investment in innovative health care technologies. Scholars like Richard Epstein have celebrated both general economic inequality and unequal access to health care particularly because, they claim, buying power at the top promotes investment in medical advances. On this view, innovations in the wealthy world can diffuse throughout lesser developed regions. Moreover, the rich can also subsidize the poor locally, paying for infrastructure that serves a broader community.

Interpreted less charitably, inequality enables the well-off to bid away resources and opportunities from the poor. Richer nations and persons may snap up limited resources; for instance, in 2009, Jeanne Whalen at the Wall Street Journal wrote an article entitled “Rich Nations Lock In Flu Vaccine as Poor Ones Fret:”

A scramble among wealthy nations to guard against a swine-flu pandemic is raising concerns that billions of people in poorer countries could be left without adequate supplies of vaccine. . . . The emerging battle between the haves and have-nots underscores a major weakness in the global health system: Pharmaceutical companies have severely limited capacity to produce flu vaccines in emergencies.

Inequalities can be even more stark at the R&D phase. If an anti-baldness cure can generate billions of dollars in revenue while a new therapy for tuberculosis only generates hundreds of millions, for-profit pharmaceutical companies may well have a fiduciary duty to invest scarce research dollars in the unhirsute rather than the truly unhealthy.

Lawrence Gostin’s recent article “Redressing the Unconscionable Global Health Gap” offers some practical ways of addressing these disparities:

The international community is deeply resistant to taking bold remedial action — more concerned with their geostrategic interests than the health of the poor. The scale of foreign aid is both insufficient and unsustainable and fails to address the key determinants of health. As a result, the world’s distribution of the “good” of human health remains fundamentally unfair, causing enormous physical and mental suffering by those who experience the compounding disadvantages of poverty and ill health.

Lest we dismiss such inequalities as “not our problem,” Thomas Pogge’s sobering new book elaborates on his earlier argument that wealthier nations are responsible for the plight of the poorest:

[P]olitical and economic inequalities are rising dramatically both intra-nationally and globally. The affluent states and the international organizations they control knowingly contribute greatly to these evils — selfishly promoting rules and policies harmful to the poor while hypocritically pretending to set and promote ambitious development goals.

Both Pogge and Gostin’s work should guide policy responses to the extraordinary disparities exemplified in the Lancet story. As I continue to study fractal inequality in access to medicine, I will be sure to consult their proposals for a more just world. I also hope to see proposals for taxation of “medical tourism” that would redirect at least some of the funds from overseas patients to infrastructure that would support underserved patients in the regions they visit.

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“You see then that a man is justified by works, and not by faith alone.” James 2:24

October 4, 2009 by · 2 Comments
Filed under: Health Reform, Social Justice 

kathleen m. boozangWhen I heard these words at mass a few weeks ago, my heart soared, because it was the perfect lead-in for a sermon about the urgency of health care reform, based upon Christian notions of distributive justice and social solidarity seeking our collective good.  The punch line won’t surprise you — Not a mention of health care.   Why aren’t  progressives of faith, whether in the pulpit or in the well of Congress, not employing every persuasive tool to advance healthcare reform as an imperative not only for the least among us but for us all?

Evoking religious values has long been effective in achieving social transformation.  This tradition of social reformers, clergy and politicians joining together, and invoking faith to obtain fundamental change experienced its apex during the abolition, anti-Vietnam, and civil rights movements.  Progressives abandoned the device of transcendent vision almost simultaneous with Conservatives adopting this successful script of shared values and worldview based upon God’s will.  The religious right employs Christianity to resist protections against anti-discrimination laws — the Christian Coalition is currently mobilizing on a bill that would give gays and transsexuals federal protection in the workplace — and to support war — President George Bush famously explained to foreign leaders that God told him to invade Iraq and Afghanistan.

Televangelists employ prophetic language to preach against social evils, which are, in their view, largely perpetrated by, well, Democrats.  But the prophetic vision also embraces “a vision of a more equitable society characterized by the virtues of solidarity and compassion and of justice inspired by the love of God and neighbor.” (Lisa Sowle Cahill)  Why don’t we hear our elected representatives cry that “respect for life” and “human dignity” compel universal access to healthcare?

The left has ceded public policy grounded in faith to the right.  It can’t be because nobody on the left prays.  A Pew Survey reports that 84% of respondents self-identify affiliation with a specific religious denomination. I interpret that as meaning that progressives go to church and temple too. A Census Bureau 2001 American Religious Identification Study concluded that 76.7% of the U.S. adult population of 208 million is Christian.  Democratic presidential candidates emphasize their faith (Obama, Hillary Clinton, Bill Clinton, Jimmy Carter)  when they run, but as soon as they take office they revert to dry policy arguments for social goals that meet with passionately poetical threats of sin and damnation from the right.  Are Democrats unable to invoke a competing interpretation of faith to inspire outrage that 50 million people living in the United States are uninsured?  Such a position could find more persuasive biblical support than the position that “government takeover” of healthcare is unchristian.  Progressives were likewise paralyzed in the “death panel” debate, with no politician effectively arguing that the over-medicalization of death seemed an ironic position for people of faith who aspire to an after-life with God.

Many Progressives of faith are organizing to support health care, but Democratic politicians have left behind the rich tradition of invoking faith to achieve social reform.   Nobody even has to use the word God — like Susan Dentzer of Health Affairs, we can simply demand a debate about whether our system is ethical and just.

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