The Sovereign Mind

Free thought on politics and real life

Archive for March 2010

How to Fix the Health Care Fix

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Now that health care reform is passed and signed into law, Republicans say they will try to repeal the law when they are back in power. Repealing isn’t going to happen, since it would take a super-majority that the Republicans won’t have for a long time. By that time the law will have become settled along side Medicare and Social Security. But, it might be feasible to adjust the reform, since even some moderate Democrats might come on board for that.

So, how would I fix the health care fix?

The way I see it, the main problem with the reform is its cost. If we could provide good insurance to all Americans without breaking the bank, I’d be all for it. The CBO scored the bill as a deficit reducer, but it also raised a number of questions about how the funds are raised, and whether the proposed savings could be realized. I won’t go into the details of that discussion since the argument has been laid out elsewhere.

We should keep the measures that seek to eliminate waste in Medicare. However, considering that Medicare is underfunded, the money saved from those measures should be used to extend Medicare’s solvency, not fund a new entitlement program. That blows a huge hole in the funding mechanism used to pay for this reform, so we’d have to scale back the bill’s spending. The bulk of the spending in the bill is for subsidies for people to buy insurance. Instead of subsidizing comprehensive health care insurance, we could pay only for catastrophic plans. For the poor who don’t qualify for Medicaid, the government would pay 100% of a catastrophic plan, which would include coverage for people with chronic illnesses. The subsidy would be on a sliding scale, with those making 400% of the poverty line not getting any subsidy. Of course, if we are only subsidizing catastrophic plans, we cannot mandate that everyone buy a comprehensive plan, so the mandate to buy insurance would have to be scaled back as well. Individuals would only be required to purchase a catastrophic plan.

Of course there are some objections that can be raised to my plan, but before I get to those, let’s look at some of the supporting points:

First, this plan maintains several of the positive aspects of the current reform, but with a lower price tag. Having everyone covered with a catastrophic plan would ensure that those who get diagnosed with serious illnesses do not get forced into bankruptcy due to their health status. We would not be paying for people to show up in the emergency room to get uncompensated care. People with chronic illnesses would not be denied supplemental insurance since care related to their condition would already be covered by their catastrophic plan.

Second, giving people the choice to buy supplemental insurance, or pay for preventive care themselves, will make them more cost conscious, thus reducing the cost of health care and reducing the demand for unproven treatment and technology, which the CBO says is a major driver of health care costs. To enhance this effect, I’d also support ending the tax exempt status of employer-based health benefits, but that can be a separate discussion.

Lastly, some people choose not to go to doctors except for in emergencies. Your or I might not agree with that lifestyle, but why should those people be forced to buy something that they will choose never to use?

Now, on to the obvious objection: subsidizing and mandating only catastrophic plans will leave some people without coverage for routine, preventive care. However, more prevention (at least the kind that you pay for) doesn’t actually lead to lower health care costs. Sure, treating someone with a serious illness is expensive, but so is testing millions of people who won’t ever get the illness. Of course, cost aside, most of us want to do what we can to avoid serious illness, but shouldn’t we be free to make that cost-benefit analysis for ourselves? However, it is true that there will be some lower-income Americans who want supplemental insurance to cover routine care, but can’t afford it. I’d love to be able to give them that coverage, but we simply can’t afford it. We support the poor in many ways through many welfare programs. In fact, we help the poor so much that the effective marginal tax rate can actually exceed 100%. We can’t afford yet another welfare program.

I doubt I’ve convinced everyone, but I hope I’ve at least helped the discussion get started. Many on the left will object to stripping out the generous subsidies, and many on the right will object to any proposition that doesn’t have the word “repeal” in it. So, it would be a tough sell, but hopefully most of us can agree that any “fix” to this health care fix has to be focussed on making it more fiscally sustainable.

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Written by Mike

March 28, 2010 at 9:56 pm

How to Mislead with Graphs: Health Care Edition

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People don’t like looking at big tables of numbers, which is why people invented graphs. Looking at a graph can often make the meaning behind a large set of numbers become much clearer. However, we mustn’t confuse clarity with accuracy. A graph can make a set of numbers much more easily understood, but if those numbers don’t tell us the whole story, then the graph doesn’t either.

Recently, I came across this stunning graph. Take a few moments to absorb its beauty:

According to this graph, the measure of the goodness of the health care system correlates with the slope of the line. If the line goes up, that’s good, and the more it goes up, the better it is. If the line goes down, then… you get the picture.

Before I get to the criticism, let me say that I agree with the general point: health care costs too much in the US, and I believe we do need to do something about it. But scale matters. It matters whether we think the current system is so bad that we need to completely gut it and start over, or whether we think it just needs a few tweaks (for the record, I think it’s somewhere in between). Looking at this graph might lead you to believe that our system is entirely without merit and should be discarded immediately, so it’s worth considering whether that graph really does represent an accurate picture of the situation.

First, since we are to measure a health care system based on the slope of the line, that implies that there is some way to balance the value of lifespan against the value of dollars. The graph implies that every year of lifespan is worth about $200 a year for that person in health care spending. Is that about right? Is the relationship even linear? That’s a tough thing to measure, but that’s the implication of the graph. As a thought experiment, imagine that the average lifespan in the US was 85, putting us higher than any other nation. What would the slope look like? It would still be the most negative slope on the graph. But would our extra spending on health care be worth it then? Maybe. What if our average lifespan were 90? Would it be worth it? According to the graph, we would still be the most inefficient system, since our slope would be the most negative. To further illustrate the point, look at Mexico’s line. Their efficiency is pretty impressive. Should we be switching to their model? Thus we see the difficulty in trying to equate dollars with life-years, and we see that we can’t really judge the scale of our problem based on the slope of these lines, because the authors of the graph have arbitrarily decided how much a life-year is worth.

Second, looking only at the left side of the graph, we have to ask: why does health care cost so much in the US? Is it all just waste and inefficiency? Should we really be shooting to spend the average amount of $3,000 per person? It turns out that it may not be fair to compare countries in this way, because richer nations tend to spend more on health care. Of course that makes sense: if you have more money, you’ll spend more on everything. But the effect is even greater than that because if you have more money, you are likely to increase your health care spending by an even greater degree than other spending. The additional spending is less likely to have a major impact on life expectancy because of the principle of diminishing returns, but that doesn’t mean it isn’t worth it to the person doing the spending. In the US, we like our technology and advanced tests, even if that technology and those advanced tests only buy us a marginal gain over less expensive alternatives. Whether that is good or bad is a debate we ought to have (or better yet, let’s just let people decide for themselves), but the graph above ignores the question entirely. In addition, wealthier countries have to pay their medical professionals more, because there is more competition for high-skill labor. And the same principles applies to prices of medical supplies and pharmaceuticals, as I’ve described before. The bottom line is that you can’t just take the total spending per capita as a comparison between nations without considering all of these complicated and inconvenient factors that don’t fit so nicely into a pretty graph.

According to the report from OECD linked above, the US is overspending by $2,500 per person, when adjusting for our wealth. So, we’re still overspending, but by much less than the $4,000 depicted in the graph. To be a fairer comparison, you’d have to adjust the left-hand side of the US line down a good bit, thus decreasing the slope of the line quite a bit. Remember, scale matters.

Lastly, let’s look at the right half of the graph. I think it’s pretty obvious that health care spending is not the major factor in average lifespan. Sure, it is *a* factor, but not a major one. This graph itself is evidence of that. With lines crossing every-which-way, there appears to be almost no correlation (although of course there is some). It’s not a stretch to argue that a good portion of our lower lifespans is due to our unhealthy lifestyles and risky behavior. How much would our lifespans go up if Americans made the same lifestyle choices as Europeans or (better yet) Asians? Who knows, but it would certainly go up, thus decreasing the downward slope of the line.

So, am I arguing that we have nothing to worry about? Of course not. We need to reform our system to be more efficient and less expensive so that more Americans can afford it. But understanding the scale of the problem matters. It matters when figuring out how to fix it and what we are willing to sacrifice to do it.

Written by Mike

March 12, 2010 at 11:57 pm

Posted in politics, Uncategorized

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