Correcting Mis- and Disinformation in the Health Care Debate

Drs. Groopman and Hartzband (both Harvard Medical School) correct some myths and factual misrepresentations in today's Wall Street Journal:

• The World Health Organization ranks the U.S. 37th In the world in quality. This is another frightening statistic. It is also not accurate. Yet the head of the National Committee for Quality Assurance, a powerful organization influencing both the government and private insurers in defining quality of care, has stated this as fact.
The World Health Organization ranks the U.S. No. 1 among all countries in "responsiveness." Responsiveness has two components: respect for persons (including dignity, confidentiality and autonomy of individuals and families to make decisions about their own care), and client orientation (including prompt attention, access to social support networks during care, quality of basic amenities and choice of provider). This is what Americans rightly understand as quality care and worry will be lost in the upheaval of reform. Our country's composite score fell to 37 primarily because we lack universal coverage and care is a financial burden for many citizens.

[Sorting Fact From Fiction on Health Care, WSJ, 8/31/09]

Profits, competition, and the public option

On Aug. 20, President Obama was interviewed by Michael Smerconish on his radio show. Responding to a question about choice and the public option, he stated the following:

But the important thing that I think I have to make absolutely clear: Nobody would be obligated to choose the public option. If you went on that Web site and you said, you know what, Aetna or Blue Cross Blue Shield are offering a good deal and I would rather choose that plan than the public plan, you'd be perfectly free to do so. Nobody would be saying you are obligated to go into a public plan.

Unfortunately, President Obama seems to be confused by basic economics and ignorant of key facts. Under the proposed insurance exchange incorporating a public option, government would be able to 1.) set the terms for all other participating insurers, and 2.) undercut them, driving them out of the competitive space.

Eventually, there would be no Aetna, BCBS, UnitedHealth , or other providers for this type of insurance.

Politicians eager to pass the current proposed legislation are promising to increase competition by providing a "public option". Even if government were to miraculously level the playing field between itself and private insurers by compensating doctors at the same level as private insurance companies (which would increase, not reduce health care spending), one more participant in a health insurance market thick with 1,300 participants wouldn't make any impact at all on competition. It certainly wouldn't come close to the competitive effect of all 1,300 companies competing in a national market for health insurance - without a "public option".

Worse, it seems the politicians want to not only control the "public option", but all insurance companies as well using strong-arm tactics. In an effort to demonize the health insurance industry, the largest insurance companies were recently targeted by various pro-reform politicians for “immoral profits.” This is nonsense - health insurance companies aren’t that profitable. As Brett Arends observed in the Wall Street Journal,

Returns on assets, a key measure of profitability, are typically pretty modest too. According to analysis by FactSet, WellPoint's ROA has averaged 5.8% over the past five years, Aetna's, 4.2%. Those were, remember, supposedly boom years. UnitedHealth was higher, at 9.6%, but fell to 6.4% in 2008. These are reasonable, but hardly spectacular, results. By comparison, Wal-Mart averaged a 9.2% return on its assets and Dell, Inc. 12.4%.

[Will a Public Option Hurt Insurance Company Profits? WSJ, 8/5/09, more profit margin analysis here: What Does Pelosi Define as “Immoral” Profits? Greater than Zero?]

Perhaps before promising maximum choice and large cost savings from eliminating “immoral” 4% profit margins, President Obama and his supporters should do better research on the actual operating environment of health insurance providers, as well as take a few economics courses.

Here’s John Stossel’s take on health care competition: The Case for Real Health Care Competition
[h/t Coyote, Reason]

Not my brother

Ezekiel Emanuel (brother of Chief of Staff Rahm Emanuel) is gaining prominence as chief medical advisor to President Obama in the healthcare debates.

Dr. Emanuel adds a scary dimension to the discussion.
He has written extensively about bioethics, and believes that it is the job of the state to decide who gets treatment and who should be left to die, given the right set of circumstances, and in spite of his oath to do no harm.
In a 2008 Washington Post Op-Ed, he wrote:

The United States is No. 1 in only one sense: the amount we shell out for health care. We have the most expensive system in the world per capita, but we lag behind many developed nations on virtually every health statistic you can name.

This statement reveals a dangerous ignorance of morbidity and mortality statistics, and is factually wrong.
When adjusted for premature death, US life expectancy ranks first. The same is true of cancer survival rates.

Dr. Emanuel also bickers,

Society ended up paying the whole bill for dialysis instead of having people make those decisions.

Since Dr Emanuel caused the dialysis machine shortage via government restrictions, Dr. Emanuel probably should rethink his conclusion.

Medical (and most other) insurance pools attempt to anticipate costs among voluntary group participants, i.e. insurance company, co-op, underwriter syndicate, or other pool. Participants and investors in those pools are direct stakeholders.

Under state-run health care, everyone is an involuntary participant, and no one is accountable.

If Dr. Emanuel's suggestions are implemented, physicians will be required to judge what is best for an amorphous society rather than what is best for the patient he is treating. In a 2008 article in JAMA, Dr. Emanuel expressed a belief that the Hippocratic oath is taken too seriously by physicians:

"This culture is further reinforced by a unique understanding of professional obligations, specifically the Hippocratic Oath's admonition to 'use my power to help the sick to the best of my ability and judgment' as an imperative to do everything for the patient regardless of cost or effect on others"

Instead, Dr. Emanuel prefers "to provide socially sustainable, cost-effective care."

Physicians are neither equipped to nor wish to treat the pecuniary problems of society. Treating individual patients is an arduous enough task without becoming keepers of a false aggregate labeled "society" as well.

The argument that the US spends more on health care than other countries is irrelevant. Dr. Emanuel is economically ignorant and ethically suspect. Do doctors and patients really want a committee of Dr. Emanuels making decisions about something as personal and individual as our medical care?

Health Care Bill Forces the IRS to Reveal Your Personal Tax Information

Declan McCullagh at Taking Liberties shines a light on a portion of the bill that forces the IRS to reveal filers' tax return details to both the Social Security Administration and the and Health Choices Commissioner.

Section 431(a) of the bill says that the IRS must divulge taxpayer identity information, including the filing status, the modified adjusted gross income, the number of dependents, and "other information as is prescribed by" regulation. That information will be provided to the new Health Choices Commissioner and state health programs and used to determine who qualifies for "affordability credits."

and

Section 1801(a) says that the Social Security Administration can obtain tax return data on anyone who may be eligible for a "low-income prescription drug subsidy" but has not applied for it.

What the bill doesn't contain is any limits on what is to be provided and penalties if your information is made public by government officials. This has obvious implications for both privacy and ease of identity theft.

Lessons from the Soviet Union

Yuri Malstev reminds us that the Soviet Union's universal health care was also justified with the same arguments as those put forth by President Obama in favour of a larger role for Government and universal rights.

We may not end up like the Soviet Union, but it's important to consider what others before us have found at the end of the same path we are considering embarking upon.

(hat tip to brotio)

Private Health Insurance discussed on Cafe Hayek Blog

An interesting discussion of private insurance was sparked by a Cafe Hayek reader, Tom. Professor Russ Roberts, Co-owner of the Cafe Hayek blog asked readers of his blog to answer Tom's concerns:

Tom Writes:

Imagine we had entirely private health insurance market – no Medicare or Medicaid. If I live to be sixty-five, I will probably have a personal and/or family history that indicates a strong probability of developing an expensive chronic condition. I would wager that is true of almost all sixty-five year olds.

So here is my question: which insurer in their right mind would take on my risk?

I suspect none. Once philanthropy and savings were exhausted, I would surely risk a painful life and preventable death.

Do I want this? Does anyone? Isn’t “socialized” medicine for older people an unpleasant moral necessity for our wealthy society? Please note I am deeply suspicious of most arguments cast in moral terms in discussions of politics and economics. I ask these questions guardedly.

The comment section for this post is long and well worth reading.

The Insurance Problem - Part III

Most people would agree that we should have the same tax treatment for those who buy their insurance as individuals as those who receive their insurance through employer contributions. This means that either you pay normal income taxes on any premiums paid on your behalf by your employer or that the folks in the individual market get to deduct their insurance costs.

Keeping employer contributions untaxed and expanding the deductibility of premiums to individuals is certainly the politically expedient thing to do since polls have shown that most people don’t want their benefits taxed. But adding a new deduction cuts tax revenue, and cutting tax revenue without cutting a like amount of spending only adds to the deficit, shifting the a larger tax burden onto our children and grandchildren. And we will still have the problem of the paying for the 45 million uninsured. If we, as a people, want insurance for all, we are going to have to increase taxes. The logical way to do this is to treat employer paid health insurance premiums as any other compensation. Everyone would buy insurance with after tax dollars.

So what “insurance reform” turns out to be necessary?

1.)Remove the regulatory burden on individual insurance market to allow market innovation as proposed by John Cochrane. (Solves preexisting conditions and medical underwriting issues plus encourages cost effective plan designs and competition)

2.)Allow sales of individual health insurance across state lines. (At least partially resolves state mandate burden)

3.)Delink health insurance from employment and tax group and individual policy premiums the same at the individual level. (Assists portability and funds insurance for all Americans)

The only issue not dealt with is that of “free riders.” These are the individuals, not eligible for Medicaid or Medicare, whose annual income is $50,000 or more and who choose not to purchase insurance. What happens when the need to medical attention and can’t or won’t pay? Their unreimbursed costs get built into health care providers charges just like the under reimbursements from Medicaid and Medicare. They become a hidden tax on all of the insured. Some form of individual mandate is one solution to this problem, but mandates are politically difficult to implement.

There are probably many other improvements in the way we could insure ourselves against unforeseen medical expenses. The free market would undoubtedly discover them if the heavy hand of regulation were lifted.