How To Fix Medicare And Beyond

I have written quite a bit about health care reform over the past few years, including my last post of 2011, which received this comment from the always thoughtful and thought-provoking Jim Wheeler:

My conclusion: the present system, including the ACA, is unaffordable and the Paul Ryan plan is even worse. Extending Medicare to all ages, sorry Duane, would have the same problem, unless that is, if the government were given pricing power in the medical market, but it seems to me that such would be equivalent to the Public Option, the only solution that makes sense to me. The bottom line is a tough one in that any viable solution will have to slash industry profits by half, which is why industry lobbyists sank the Public Option in the first place.

My response is necessarily lengthy because the issues are obviously difficult.  But let the following stand as my current, if somewhat tentative, endorsement of what to do to fix what is wrong with our health care system, despite the passage of the Affordable Care Act:

Jim,

As you know, I was a proponent of the public option. But the kind of public option I would favor was found in H.R. 4789, which had 82 co-sponsors. It amended the Social Security Act “to authorize an option for any citizen or permanent resident of the United States to buy into Medicare.”

I choose Medicare-for-all not because it would be the best possible system, but because it seems to me to be the only politically possible system that would also be a considerable improvement over what we have now. I say that because most people already have a high opinion of Medicare and would, with gentle persuasion over time, be open to applying it to all people.

My own personal choice—I want to make clear—would be a complete government health care system, similar to the VA system, or even expanding the current VA system to include all people.  It turns out that since the late 1990s—contrary to what most people believe—the VA system—socialized medicine—is the model of efficiency and effectiveness. (And, of course, the “moderate” Mitt Romney wants to privatize it.) It also has the power to negotiate discounts for prescription drugs, which is essential to control costs.  This kind of truly socialized medicine would be my “public option.”

But I recognize the near-impossibility of such a move, given our politics and our historical national aversion to such things, even though it appears to me that conservatives would have a hard time labeling the VA system as dangerous European socialism and the military veterans who use it as scary socialists. But I digress.

Let’s talk first about the possibility of fixing or improving the current Medicare system, before extending it to all people. Without the fix, I agree that it would be a problematic option for all people.

To begin, let me get this out of the way: As a rule, I believe choice and competition are good things and serve us well as Americans. But let us keep in mind that they ought to be our servants and not our masters.

I also believe the profit-motive is indispensable for a society that seeks a general prosperity that benefits everyone, even if there are some inequities necessarily arising out of a system that values the concept of making gobs of money. (Severe inequities, though, should be addressed via a progressive tax system, but that’s for another day.)

But those who believe that increased choice and competition and profit-opportunities in the health care system overall will lead to greater efficiency and reduced costs don’t understand how the American health care system works or how it has worked in the past. (Phillip Longman does; read here and here for the details.) What this choice and competition leads to most often is inefficiency and wasted resources, often at the insistence of the health care consumer, who doesn’t mind all that much in times of dire need if, for instance, the specialist orders extra—and profitable—but unnecessary treatment.

Look at this graph, which I know you are familiar with:

The idea here, of course, is that as Americans (the top blue line) we are spending a lot of money on our private, profit-based health care system, compared with most of the rest of the industrialized world, and we are not necessarily getting our money’s worth. Many unnecessary expenses are built into the kind of system we have, including unnecessary treatment in the form of operations and other costly procedures.  

And, look, I don’t necessarily chalk up everything wrong with this picture to “greedy bastards” in the health care and health insurance business. There are plenty of entrepreneurial reasons why over-treating patients makes $en$e (see, for instance, this New York Times article by Dr. Peter Bach, who criticizes fee-for-service plans because they encourage doctors to quickly move patients through their practices and to order expensive and profitable testing).

And there are plenty of profit-minded reasons, given our capitalist system and what some call “actuarial logic,” why it is that insurance companies charge older folks more for insurance or discriminate against the sick, even though such behavior causes gratuitous harm to society.  They are in business to make money, not to promote the general welfare.

So, it only makes another kind of sense—common sense—to take, or begin to take, the profit-motive out of our health care system. As I said, I would be in favor of a complete government-run, VA-like system, but the second-best in my opinion would be to improve the Medicare system and extend it to all folks who want it.

Based on all that, I suggest considering the recommendations of the above-mentioned Phillip Longman, who says that to improve and make Medicare financially sustainable, we ought to set a date certain for the conversion of that system from an inefficient fee-for-service plan to one that utilizes Medicare-certified nonprofit HMOs.  He addresses the historical problems with Health Maintenance Organizations (there are many) and offers valuable examples of ones that have worked well, including, but not limited to, the VA system. (Among other non-government players, he mentions the Cleveland Clinic and the Mayo Clinic.)  

Longman says:

Approximately a third of all Medicare spending goes for unnecessary surgeries, redundant testing, and other forms of overtreatment, according to well-accepted estimates. The largest single reason for this extraordinary volume of wasteful and often dangerous overtreatment is Medicare’s use of the “fee-for-service” method of compensating health care providers that dominates U.S. medicine, under which doctors and hospitals are rewarded according to how many procedures and tests they perform. To fix this, the federal government should do the following: announce a day certain and near when Medicare will be out of the business of subsidizing profit-driven, fee-for-service medicine.

Republicans, famously, have voted en masse to voucherize Medicare, which would, as Longman says, “lead to seniors paying for nearly 70 percent of the cost of their health care, which is hardly insurance at all.” And certainly not “Medicare” at all.

Democratic fixes, says Longman, are less onerous for seniors, but “don’t necessarily save money” because “profit-maximizing providers remain free to game the system.” And some of the fixes built into the Affordable Care Act, like the Independent Payment Advisory Board, are subject to political demagoguery (“death panels”) and thus reversal, and at best, even if they survive, their ability to do good is “gradual.”

Longman again:

Unless a more immediate and certain reform is applied, most of the Medicare population will continued to be treated—for years if not decades to come—by the status quo of a pattern of deeply fragmented, wasteful, and dangerous fee-for-service care, the cost of which everyone now agrees is unsustainable. If we’re going to avoid financial Armageddon, we have to do better than that.

Phillip Longman’s idea of setting a date “when the Medicare system will stop covering fee-for-service medicine” and instead give seniors a choice “among competing managed care organizations” that do not operate under the profit motive sounds like a good place to start to me, in terms of fixing the Medicare system we have today.

After that, or as part of that fix, we could, if we generated the political will, extend the program as an option to all—even though Longman does not go that far in his proposal.

And speaking of political will, over all this talk of reform hangs the politics. By adopting his proposal, Longman argues, both Democrats and Republicans can declare some kind of victory:

It allows Democrats to say that they will not cut benefits to Medicare recipients. And Democrats should also like that these nongovernmental organizations serving the Medicare population will have the freedom to do things liberals have long wanted Medicare itself to do, like bargain with drug companies for lower prices. Meanwhile, Republicans who support this proposal will be able to boast that it takes vast decision- making power out of the hands of “unelected bureaucrats in the federal government” and puts that power in the hands of private organizations that compete with each other for customers.

Longman closes with this, which will serve as my close:

America is still a rich and productive country. Compared to Europe or Japan, it has a youthful population and no real long-term debt crisis except that caused by huge volumes of wasteful and dangerous fee-for-service medicine. So once again in our long history, Americans can have their cake and eat it too. We can improve our health care while lowering its cost, and in the process eliminate our long-term deficits and resume building for future.

So why don’t we feel more optimistic? Because there is this feeling of despair, especially among policy makers and the chattering classes, that we don’t know how, politically, to bring health care costs in line. We know that all other developed countries get better health care for less money, and that it is no real mystery how they do it. But all their approaches seem—or can be spun as— socialistic, paternalistic, and fundamentally un-American, and therefore impossible to consider.

Yet we have within our reach a solution that is not imported from abroad, and that has been proved on our own shores by all-American institutions, from our best nonprofit HMOs to the VA health system. We may not currently have the political will to use these institutions as the model and means to fix the health care crisis, and hence eliminate our long-term fiscal problems. But we shouldn’t fool ourselves into thinking it can’t be done.

If you want to hear Phillip Longman discuss at length his findings about the VA health system—he started out as a skeptic—here is a video of the talk. His interest in the health care delivery system was related to the unfortunate experience of his late wife, who died of breast cancer:

 

Posted by R. Duane Graham on January 2, 2012

https://duanegraham.wordpress.com/2012/01/02/how-to-fix-medicare-and-beyond/