Althouse: Bending the long-term cost curve.

July 17, 2009

Bending the long-term cost curve.

Not.

48 comments:

Big Mike said...: Color me shocked, shocked!

Democrats cannot sell their plan if it includes even the faintest hint of rationing, but cannot control costs unless it plans on curtailing people's access to healthcare. This is news?

Or they could limit malpractice exposure for doctors, but then trial lawyers would suffer. Can't let that happen.; 7/17/09, 9:21 AM
Hoosier Daddy said...: The CBO is full of shit. Joe Biden said that we need more government spending or we'll go bankrupt.; 7/17/09, 9:26 AM
Original Mike said...: If I was Elmendorf, I'd start having a staffer start my car for me (while I linger a safe distance away).

Seriously, this man deserves a medal.; 7/17/09, 9:27 AM
Anonymous said...: CBO makes an acute observation of the obvious.

The emperor-has-no-clothes comment by
Elmendorf merits early retirement or separation so he 'can spend more time with his family'.; 7/17/09, 9:31 AM
Original Mike said...: Per Hoosier: Isn't it incredible? The way to reign in the amount of money the government spends on healthcare is to take on more health care obligations. I know they think this is a sophisticated, clever plan. But in reality, it's just brain-dead-stupid.; 7/17/09, 9:35 AM
Scott M said...: I don't have time to troll the left-leaning blogs this morning, but who wants to bet that instead of debating his report, the commentators are attacking Elmendorf personally.

Accusations of who's pocket he's really in, who he voted for, etc, etc.; 7/17/09, 9:37 AM
Kev said...: (the other kev)

Don't worry, Scott, I'm sure AL or HD will drop by with the latest talking points. It's what passes for debate these days.; 7/17/09, 9:40 AM
Rialby said...: I hope for the sake of America that Elmendorf has never strayed from his wife. Because they will find out and they will use it to destroy him and quash his message.; 7/17/09, 9:43 AM
Balfegor said...: Per Hoosier: Isn't it incredible? The way to reign in the amount of money the government spends on healthcare is to take on more health care obligations. I know they think this is a sophisticated, clever plan. But in reality, it's just brain-dead-stupid.

The thing is, if they were serious about introducing national health care and engaging in cost cutting, they could already do it with the amount that's going into Medicare and Medicaid. Among the industrialised nations, Japan has the best health outcomes overall, and they spend about as much on health care per capita (on a purchasing power basis) as we do on Medicare and Medicaid.

For a recent year (I did not write down which), we spent $431.2M on Medicare and $329.4M on Medicaid, for a total outlay of $760.6M. With a population of 304M, that comes to about $2,500 per capita. Meanwhile, I was too lazy to find total health spending figures for all Japan (mostly, they seem to be reported on a provincial or municipal basis, probably because the taxes that pay it vary from province to province and municipality to municipality), but evened out, they spend about 8% of GDP on health care. With GDP per capita of about $30K (on a PPP basis), that comes out to $2,400 per capita. And this is with a markedly older population than we have, mind, so they're paying for a lot of expensive elderly care out of that budget too.

The administration is not serious.; 7/17/09, 9:45 AM
Anonymous said...: Time for another teleprompted speach by Obama telling us to remain calm, all is well.; 7/17/09, 9:47 AM
MadisonMan said...: If you're going to tax health insurance benefits, why not just pay your employees extra and forego covering them with insurance at all. Then the employee can decide: Do I want to spend this taxed income on health insurance, or on something else?

As a State Employee, I don't think I can opt out of insurance unless I'm covered elsewhere, in which case I don't get any of the money the state saves by not covering me. If I'm going to be taxed on this benefit, I'd rather it was an optional, not required, benefit.; 7/17/09, 9:55 AM
Original Mike said...: I think that's billion with a B, Balfegor, but you're right ("The administration is not serious"). The claims of doing this to save costs is a thin venier. It's about working their way to single payer.

The thing is, even a venier has to at least be credible on its face. The CBO is calling them out on it.; 7/17/09, 9:57 AM
Original Mike said...: "As a State Employee, I don't think I can opt out of insurance unless I'm covered elsewhere"

I didn't know that.; 7/17/09, 9:59 AM
David said...: You have to remember that Obama, most of his senior staff and most members of Congress have never run anything. This means that they have almost never been accountable for results. Indeed, a primary skill of national politicians these days is to deflect accountability. No wonder they are designing a cumbersome, expensive, dishonest and ultimately ungovernable system.; 7/17/09, 10:04 AM
Anonymous said...: "If you're going to tax health insurance benefits, why not just pay your employees extra and forego covering them with insurance at all."

Because under Obamacare the business gets taxed an extra 8% because it doesn't offer coverage.; 7/17/09, 10:06 AM
MadisonMan said...: By the way, I was happy to read about the Coburn Amendment that requires Congresscritters to participate in this plan.

I think that in any debate between incumbents and challengers, the first question should be to the incumbent: What health plan are you using? How are you enjoying it?

Tammy Baldwin, Madison's Representative, has made Health Care For Everyone her raison d'etre. I wonder how she'll enjoy this plan they are passing. If she's not up to using it, she should be dumped.

Original Mike: I could be wrong about the Health Insurance -- haven't had to deal with it for 15 years or so since I started here.; 7/17/09, 10:15 AM
Scott M said...: So Pelosi and her ilk are suddenly lambasted by reality and sudden they're talking cheerfully about how this is the process and how it's supposed to work? That the next step was bipartisan work on the bill to make it affordable?

Memory must be failing me. These were the same goons that were ramming this thing through as quickly as possible while at the same time locking the Republicans out of much of the language.

Maybe we need a forth branch of government with lifetime appointees who's job it is to report the actual cost of legislation.; 7/17/09, 10:58 AM
The Drill SGT said...: Original Mike said...
Per Hoosier: Isn't it incredible? The way to reign in the amount of money the government spends on healthcare is to take on more health care obligations. I know they think this is a sophisticated, clever plan. But in reality, it's just brain-dead-stupid.

The short one liner versions:

1. If it's going to save money why do we need to raise taxes?

2. If you have all these great cost savings solutions, why not implement them in Medicare, Medicaid and the VA first?

3. If Fee for service (FfS) is evil, and outcomes based care will save gazillions, let's convert Medicare and Medicaid from FfS to outcomes based payments now.

As I said before, the irony that the Coburn amendment highlights is that Congress is in the FEHBP, like all Feds, and that is just a red/white/blue wrapper around that evil Blue Cross Plan.; 7/17/09, 11:06 AM
Dust Bunny Queen said...: Expect Elmendorf to "voluntarily" (ha ha) resign shortly. Soon to be replaced with a more compliant liar/mouthpiece.

I wonder if the Obama administration uses the Soprano method of gaining cooperation? Kneecap 'em!! Threaten their families?; 7/17/09, 11:12 AM
Anonymous said...: Balfegor:

Where did you get those numbers and do you know if they include employer and employee contributions? Although I don't remember some of the details, a Japanese friend and I talked about this a few months ago. His monthly contribution for health insurance for his family is about $700. IIRC, it has a 30% co-pay. The plan is an association group plan - all employers in his industry (healthcare, as it happens ;-) participate in the group plan.; 7/17/09, 11:13 AM
Dust Bunny Queen said...: Isn't it incredible? The way to reign in the amount of money the government spends on healthcare is to take on more health care obligations. I know they think this is a sophisticated, clever plan. But in reality, it's just brain-dead-stupid.

Told you....it is the Underpant Gnomes all over again.

Phase 1: Collect Underpants
Phase 2: ?
Phase 3: Profit!; 7/17/09, 11:14 AM
Jeremy said...: Drill Sgt, re: your #2 point. This is not unlike immigration reform, wherein the "reformers" claim to want to implement comprehensive reform that both legalizes persons here and also tightens enforcement/security. But there's no reason to not increase enforcement/security now if it's really possible. Instead, it's used as a lure to draw broader support. The upshot is that they can't implement cost-cutting changes now because A)they don't exist and B) even if they did, there'd be no motivation for moving on the rest of the reform package. It's galling really.

-The Other Jeremy; 7/17/09, 11:42 AM
KCFleming said...: The numbers will be as horrible as Medicare's have looked for decades, but multiplied by a factor of 5 to 10.

But that misses the point of nationalizing health care. It has never been about savings or a moral imperative for coverage, but about expanding government power.

All else is smokescreen covering that subterfuge, that tyranny.

The little people are meant to wonder what plan covers the most people. The true players are designing how best to take control over as much of your wealth and liberty as possible.

The costs are immaterial. Totalitarianism is always expensive, depending on how much one values freedom.; 7/17/09, 12:10 PM
Original Mike said...: MadisonMan: I was shocked a couple of nights ago to hear a radio ad urging people to call Tammy Baldwin's office and thank her for her efforts on health care. What was shocking was that the ad was paid for by a group which, from their name, sounded to be a drug company trade group. Didn't catch who, exactly (I'll try and catch it next time). My first thought was, Baldwin's extracting protection money from the health care industry. Or maybe the group's name is just a cover for a single payer lobbying group.; 7/17/09, 12:14 PM
Hoosier Daddy said...: I wonder if the Obama administration uses the Soprano method of gaining cooperation? Kneecap 'em!! Threaten their families?

Heh. I’m reminded of that scene in the Untouchables when DiNiro playing Capone is giving is ‘baseball’ speech at the dinner party.

Obama is from Chicago....conincidence....; 7/17/09, 12:28 PM
Balfegor said...: Where did you get those numbers and do you know if they include employer and employee contributions? Although I don't remember some of the details, a Japanese friend and I talked about this a few months ago. His monthly contribution for health insurance for his family is about $700.

The 8% figure is quoted widely. See here, for example. I don't know whether it is comprehensive, but given that it is comparing against total health care spending in the US, not just government spending, it may well be a significant overcount of Japanese government healthcare spending. For the US spending, I cannot remember the source. But here's something from the CBO that suggests that Medicare + Medicaid + additional government healthcare spending is even higher than the 760M I indicated.

Percent of GDP figures, which are often used for these cross-country comparisons, are a little misleading, because PPP GDP per capita is significantly higher in the US than in most of the other big industrialised countries. So 8% (or 10% or whatever) of GDP in those countries would equate to something more like 6-8% over here.

Re: health care taxation in Japan, I'm not sure how funds are treated once they're taken in as taxes, but there seem to be some pretty massive disparities in the health tax burden, based on where you live. If you scroll down to the table towards the bottom of this wikipedia article, it looks like some municipalities have people paying more than twice as much as others.; 7/17/09, 1:22 PM
Original Mike said...: Ted Van Dyk makes this claim today (http://online.wsj.com/article/SB124779697143755743.html): "Could your health plan be scaled back to catastrophic coverage for all -- badly needed by most families, but quite affordable if deductibles are set at the right levels?"

I wonder if his numbers are right (i.e. could we afford to provide catastrophic coverage for all)? If so, it raises my level of pissed-offed-nness to a whole new level. This would provide real economic security for people, rather than just indulge in some liberal wet dream of prevention (what's the HTML code for disdain?).; 7/17/09, 1:23 PM
The Drill SGT said...: I wonder if his numbers are right (i.e. could we afford to provide catastrophic coverage for all)?

likely depends on what you include.

heart attacks? effectively we have catastrophic coverage now. all heart attacks get treated. The insurance/Feds pay, or the hospital duns a person who pays or ignores it, upon which the cost ultimately is spread across all insured.

heart transplants? no. the uninsured dont get what are called elective surgery

so some high deductible, rationed catastrophic care should be cheap and doable. will it satisfy all, absolutely not, but it will cover traffic acidents, heart attacks, and babies

what it would do is shift costs around and not create a huge new entitlement; 7/17/09, 2:10 PM
MJ said...: In other news, the oceans are unlikely to evaporate overnight.; 7/17/09, 2:21 PM
Jeremy said...: One interesting effect of a catastrophic-coverage-only plan would be on infant delivery. It's not clear how it would be dealt with. It's elective and (often) planned - it's certainly not a catastrophy. I think you'd see a big return to midwifery and home births (or birth clinic births) as scheduled c-section/epidurals just become too expensive. That would be interesting.

-The Other Jeremy; 7/17/09, 3:19 PM
BJM said...: This comment has been removed by the author.; 7/17/09, 3:28 PM
BJM said...: Did Obama just pull a "Gavin Newsom" on national TV?

How'd that work out for him?; 7/17/09, 3:35 PM
avwh said...: I live in the Bay Area, and I have no idea what "pulling a Gavin Newsom" means in the context of bending the long-term health care cost curve - can someone enlighten me?; 7/17/09, 4:03 PM
BJM said...: avwh,

Riddle me this, how exactly is it possible to bend the long-term health-care costs without rationing and/or restricting access? Obama's "savings" realized by his proposed 30% cut in Medicare Part A only addresses the current numbers, it doesn't include the approx. 70 million Boomers that are about to hit the system.

However, I think this sort of thing and the CBO report was the reason Obama was forced to speak this afternoon. Dems are feeling pressure in their districts.

In spite of the AARP selling seniors out for slice of Obama's insurance pie, word is spreading quickly. My mailbox is running hot with forwards, links, petitions, notices of gatherings and such.; 7/17/09, 4:32 PM
janemariemd said...: I saw an article somewhere that basically said "it's not the costs it's the demographics", which seemed pretty sensible to me. We know how the Medicare-eligible population will grow in future years, leading to the projections of bankruptcy. Why not increase the minimum age of enrollment (for healthy people)? Why not start with current 62-year olds who expect to enroll at 65--postpone their enrollment a year, and the 61 year olds 2 years, etc, until 70 is the minimum age for enrollment? Delaying entry into Medicare will force many if not most to work longer--if they are able to, wouldn't that be a good thing? I guess this would be called "restricting access", but it would surely decrease the estimated costs in the future. There would still need to be work on utilization of tests and things that could help save money, but this change would perhaps get us a few more years to work on Medicare reforms.; 7/17/09, 8:00 PM
Ralph L said...: Other Jeremy, I recall hearing some years ago that about 2/3rds of births were paid by Medicaid, even when the parents weren't enrolled.; 7/17/09, 9:27 PM
former law student said...: Now that a plan is on the table, we can all study it and make suggestions. I have to think that anyone who claims to understand the financial impact at this point is talking out his sphincter.; 7/17/09, 9:45 PM
former law student said...: Why not increase the minimum age of enrollment (for healthy people)? Why not start with current 62-year olds who expect to enroll at 65--postpone their enrollment a year, and the 61 year olds 2 years, etc, until 70 is the minimum age for enrollment? Delaying entry into Medicare will force many if not most to work longer

At jobs that don't pay health benefits. Have you priced private insurance for 64 year olds lately?; 7/17/09, 9:46 PM
Scott M said...: @FLS

I notice you didn't answer a good deal of response to your questions listed below;

Why do you think this?

Has public transportation wiped out private transportation?

Has city-provided tap water eliminated bottled water?

Have libraries obliterated Amazon? Public schools eliminated private schools? Police eliminated private security?

Why would the existence of a public option in this one endeavor above all others destroy private options?

chickenlittle is of course expected to shout "The sky is falling; the sky is falling!" What excuse do the rest of the alarmists have?

Over at the other thread here;
http://althouse.blogspot.com/2009/07/why-arent-democrats-giving-us-chance-to.html

...on basically this same topic.; 7/17/09, 10:08 PM
janemariemd said...: Many if not most 62 year-olds who work have some health insurance through their employer; the point would be to not support retirement at age 65, which then leads to Medicare enrollment at that age. Many prudent people would consider working longer if pressed to think about it (as perhaps some are doing now in our terrible economy). Remember, if 45 million people are uninsured, in a country of 300 million (15%), then 85% have some health insurance. It is simply a fact that the government would spend less on Medicare in the future if the age of eligibility were increased. That's not to say that the problems of healthcare delivery in this country would then be solved; far from it. Costs will still rise, but at a slightly lower rate.

Encouraging people to work longer would have other benefits--more income tax to be paid, more savings for retirement. Personally, I think about this alot because there is tremendous longevity in my family, so I expect to work to at least age 70 or 75 if possible, so I can (hopefully) have a big enough nest egg to pay for the nursing/long-term care I woulf prefer late in life.; 7/17/09, 10:19 PM
Jim said...: Neither Social Security nor Medicare were ever designed to care for people for 15-20 years. They were designed to ease end-of-life for 5 years at most.

The problem with these systems (beyond the fact that they exist at all and are government-run, but that's another ideological battle for another day) is that life expectancy has far outstripped the capacity of the system to deal with it.

The real answer to "saving" them is that the "retirement age" needs to be increased to 75 (or so) to bring them back from being essentially government-run pension plans to being the end-of-life palliative measures that they were originally intended to be.

The problem is that any time rationalizing retirement ages arises, the Leftists start screaming about how conservatives hate old people and there goes any possibility whatsoever to actually deal with the issue. They know it's not true, but why should that stop them from using taxpayer dollars from buying more votes for themselves?

Maybe if the Left can be convinced to stop demagoging the issue, then we can "save" Medicare and Social Security. But I'm not holding my breath.; 7/18/09, 1:11 AM
former law student said...: I notice you didn't answer a good deal of response to your questions listed below

You mean, "Health care is different," and "Amazon (a corporation that provides reading material you can keep for a small payment) does not perform the same function as a public library (a governmental agency that provides reading material free of charge, but you must return it within a reasonable time)?

Consider me floored by such comebacks, I guess.; 7/18/09, 1:51 AM
former law student said...: Many if not most 62 year-olds who work have some health insurance through their employer; the point would be to not support retirement at age 65

Health insurance costs money, and health insurance for old people costs the most. Requiring employers to provide health insurance to all workers thus creates a disincentive to hire old people.

But most old farts do get health insurance through their employers. In 2007, 2/3 of 55-64 year olds got health care through their employers, 1/5 got it from government, 1/10 bought their own, and 1/8 did without.

http://www.census.gov/prod/2008pubs/p60-235.pdf

Retirement at 65 is already a thing of the past; the war babies retiring now have already had to wait to turn 66 to receive a full SS payout, implemented as part of SS reform during the Reagan administration.

Personally, I think about this alot because there is tremendous longevity in my family, so I expect to work to at least age 70 or 75 if possible,

There used to be tremendous longevity in my family, but the more recent generations are in trouble. Neither of my parents came even close to collecting Social Security, and my sister died in her mid-forties. I would like to live long enough to collect a few payments, but I'm not going to count on it.; 7/18/09, 2:17 AM
Bruce Hayden said...: The problem with the idea of bending the long term cost curves is that this really doesn't do it. It was designed by a bunch of liberals with no real understanding of markets. And, so, I would suggest that the Democrats are making all the wrong moves as far as addressing the long term problems.

First keep in mind that the 47 million uninsured figure is pretty bogus. A lot of different groups are being combined here, with varying degrees of legitimacy. Let me suggest that few tears are shed from those who spend their health insurance money on beer and those who are here illegally. Adding in the frictional uninsured (those only uninsured for part of the year) and those who are eligible for some government insurance, and you end up with 10-15 or so million hard core uninsured who need to be worried about. And that number could easily be handled by slightly expanding current programs.

So, the "crisis" is really pretty bogus, and I think a lot of us know that. It is cover for something else, and a lot of us think that something else is socialized medicine (which those at the top proposing this are going to exempt themselves from). It is the paternalistic power grab thing that we have seen throughout the Obama Administration.; 7/18/09, 8:40 AM
Bruce Hayden said...: Yes, health care costs are rising quickly, and will be rising even more quickly if nothing is done. But the question is why?

The answer is not that too many tests are being ordered or that doctors, hospitals, and drug companies are too greedy. Few, if any, health care providers make anything akin to the types of incomes made by many in the securities industries, and yet, the incomes of the later are being protected by this Administration, while those in the former are being vilified and run out of business. The difference, of course, is that a lot of Wall Street, etc. money goes to the Democrats, and a lot of doctors' money has traditionally gone to the Republicans. (And then there are the contingency fee lawyers and malpractice).

Right now, the current system is unsustainable. Medicare, etc. recipients pay for almost none of their care. It is rather paid for by the rest of society, through the taxes we pay on our incomes, and through massive cross-subsidizations by almost everyone else who uses medical care through the setting of reimbursement rates (now) far below actual costs. And both of these trends are running in the wrong direction, with the percentage of those eligible for Medicare scheduled to skyrocket in the next decade, and reimbursement rates being crammed down ever harder.

If we were to truly sever the Medicare and other government insurance problem from the rest of health care, by, for example, eliminating cross-subsidization, and these programs started to pay their own way (however that were accomplished), then I think that we might be able to find a solution.

For one thing, it would hopefully become evident that a lot of our current problems are a direct result of malpractice excesses. Too many tests being ordered? A lot fewer would be ordered if the doctors involved knew that they wouldn't be liable if that 1 in a thousand test hadn't been ordered. And insurance companies might be less willing to pay for the latest technology, if they weren't facing bad faith litigation claims for denying payment.

The problem is that the true costs of Medicare, etc. are hidden from all of us, especially those using the programs. And, as a result, they have no incentive to economize. Rather, you see things like that hip replacement on my 90 year old uncle, who probably didn't last a year after that.

There is going to have to be some sort of limitations placed on government funded health care. But rationing is really the wrong way to go about that, since it still fails to address the differences between supply and demand, and the reasons for it. It is a band aid approach that doesn't really address the problem.

But if we were to truly separate out government funded health care from all other health care, and impose meaningful tort reform, then the cost curves for everyone else would not look all that bad.

Remember though, the Obama Administration's motto, that it is a shame to waste a good crisis.; 7/18/09, 9:07 AM
Bruce Hayden said...: Now that a plan is on the table, we can all study it and make suggestions. I have to think that anyone who claims to understand the financial impact at this point is talking out his sphincter.

I would second that, in particular, for those supporting the program, and, in particular, those in Congress and the Administration pushing it.

But, I would take probably the opposite lessen from that that FLS probably does. I would suggest that we not spend trillions of dollars on this program until the economic effects of the proposed legislation are much better understood. I suspect that his position would be that we shouldn't criticize it until we do - but (and yes, this is a straw man) if we wait for that, then the program will be implemented WITHOUT that knowledge.

Let me suggest that when it comes to spending, or more likely grossly misspending, trillions of dollars, while possibly seriously impacting the level of health care available to most Americans, then the burden should be on the proponents to fully address all the economic issues up front to most everyone' satisfaction.

And, yet, somehow, the burden seems to be reversed - we just trust these lawyers because, after all, they are lawyers, and are so much smarter than everyone else, and these are especially smart lawyers, since they are Ivy League Lawyers.

My problem here though is that I don't have any reason to believe that these lawyers trying to ram this through so fast have any real idea of the unintended consequences of what they are trying to do.; 7/18/09, 9:24 AM
Dust Bunny Queen said...: Many if not most 62 year-olds who work have some health insurance through their employer

Bullshit.

I love the 'let them eat cake' attitude.; 7/18/09, 10:05 AM
former law student said...: I agree with Bruce H. in that I don't want to see health care reform enacted until every aspect of the bill has been thoroughly analyzed and the consequences understood. Not everyone will like everything, but people with concerns should get answers.; 7/18/09, 10:17 AM