expanding coverage with actuarial vouchers

I was going to write a post on the current health care reform debate, but at this point the proposals are too amorphous and the debate too inane. That said, there are numerous problems with the American health care system, and today I’ll share an idea I have for tackling the problem of non-existent or inadequate health care coverage. Perhaps in another post I’ll tackle cost control, but now I just want to drill down on this actuarial auction idea.

Filed under: Health

three millenia of waste management

For the past few months I have searched high and low for a book that would provide me with a comprehensive understanding of the history of waste management in relationship to the rise and decline (or perhaps more appropriately, growth and diseased death) of human societies. This book would cover the history of sanitation, from aqueducts to soap to sewers, and explain how proper waste management acted as an upper bound on city growth, with failure resulting in biblical plagues that would wipe out entire towns and set back development hundreds of years.

I came across The Big Necessity and Flushed, among others -reading the latter and adding the former to an increasingly formidable “to-read” pile- but neither had the historical context I was looking for.

Filed under: General Welfare, Health

overview of health care

It’s been awhile, but I’ve been trying to figure out how to leverage the delicious tagged articles and reduce redundant writing (and reading). So below is a summary I’ve written up on the health care perspective I’ve amassed, along with supporting articles and their summaries below.

US health care is bad, but less so in providing access to expensive treatments (we do have the best cancer survival rates) than in paying for everything under the sun. Universal health care is not the primary health care issue facing the US; the primary problem is cost containment. If you want universal health care, you better first deal with that – Medicare spending is projected to some insane percentage of GDP (like 30-40%) of GDP, yes GDP, in not too long – as neither Medicare (nor private payers) have figured out how to deny coverage or payment to over-priced products or services. The reason Western Europe is more cost-effective than the US is that they DON’T COVER a lot of expensive drugs and therapies (explaining why our cancer survival rates are better). They let the government apply a cost-benefit analysis to every product/service — if a private payer or Medicare does that, they end up in SiCKO.

We shouldn’t try to emulate Western Europe, but take lessons from less-visible systems like Singapore. We need to separate redistribution for care for the sick from actual health insurance. We also need to change the way we think about care and coordination, which means changing Medicare’s payment systems for physician services and health care products. The emphasis should not be on reducing profits, but ensuring payment is linked to value-added, not service provided.

Below the fold is more information.

Scroll over the link titles to read the summary.

Filed under: Health

idea for better health care

The strongest criticism of consumer-driven healthcare is that consumers lack the knowledge necessary to make informed decisions, especially given the complexity of the choices presented before them. There is something to this. Then again, people know relatively little about how the thousands of available computers or restaurants, but they are able to make relatively sound choices. Why?

We have Consumer Reports. We have expert advice. We have friends. We have the internet, with thousands of customer ratings and reviews.

With health care? Not so much.

Outcomes reporting is getting better, but still isn’t particularly actionable for your average patient.

And while I’m not of the camp that believes it’s impossible to assess the quality of physician care, hospital management, or health care plan, I will agree that adequate information is not currently available (thanks in large part to those vested in protecting their care monopolies). So while I’ll continue to push for more information and health care results sharing at every level of the health care system, I am also interested in providing patients with more leverage in the mean time.

Arnold Kling has written about the need for a “single case manager” for “when a complex patient enters the healthcare delivery system.”

I’d go a step further.

Currently, insured patients choose a general practitioner (also known as, primary care physician, etc.), who, in theory, manages their care; the doc will give you a physical, make sure you’re blood pressure’s at a decent level, etc.

Of course, most of these tasks are actually done by a nurse, with the GP popping in for a quick hello, write a prescription, or hand out a referral.

This dynamic is not only grossly inefficient, but it fails to deliver the expertise that would most improve a patient’s health. I would like to see the GP hand over a lot of his/her clinical duties to the nurses (which means buy-in from the American Medical Assocation…), and take on managerial duties.

I envision patients choosing between different GP corporations who would advise patients on which insurance plan makes the most sense for them, which specialists delivers the best value, how to choose between a generic drug and a more expensive brand drug, and sets up appointments at local clinics (e.g., Wal-mart one-stop shops or more expensive, more typical practices).

It would be relatively inexpensive, as one GP could oversee the health management of hundreds of patients a year, with the assistance of health care professionals (you don’t need to be a GP to gather information, or setup appointments, or chart blood pressure; just like you don’t need a construction team of architects to build a house).

The GP would be a health advisor, similar to a financial advisor (tangentially, I think if you want to help poorer people, subsidizing financial management could improve outcomes substantially).

What do we lose in this system? Well, for those that can afford going to see a quality GP regularly, you might not get a physician with as much experience as your current GP giving you a checkup next time around. Not because you wouldn’t be able to find an experienced GP to do so, but because you would also have the option to have a nurse provide the same service at a fraction of the cost, and you’d probably go with the cheaper option.

Why? Well, because your GP advisor would break down the costs and benefits associated with each of your health care decisions, and provide you with simple, straightforward choices. Have I completely worked out this system yet? No. But I think its the right direction.

Related posts: value-based health care, real chance for health care reform

Filed under: Health

ammo for liberals

No, I don’t mean some juicy rumor about a McCain/Bush romantic romp through Saudi Arabia paid for by stolen welfare funds. This post aims at providing the left with some rational material to work off for criticizing the right and their insistence on market-driven everything. I’ve come across a blog post that provides some (surprising) insights into health care, which I don’t think the people to the right of me would necessarily accept, but I find very interesting and worthy of discussion.

I stumbled across the treatise on health care, via Bryan Caplan over at EconLog, who offered his comments on this supremely interesting recent article on health care in Singapore. Caplan characterizes the Singaporean system as “not laissez-faire, but it is state intervention with the hands of a surgeon.”

Caplan then quotes from the piece:

“What’s the reason for Singapore’s success? It’s not government spending. The state, using taxes, funds only about one-fourth of Singapore’s total health costs. Individuals and their employers pay for the rest. In fact, the latest figures show that Singapore’s government spends only $381 (all dollars in this article are U.S.) per capita on health—or one-seventh what the U.S. government spends.

Singapore’s system requires individuals to take responsibility for their own health, and for much of their own spending on medical care. As the Health Ministry puts it, “Patients are expected to co-pay part of their medical expenses and to pay more when they demand a higher level of service. At the same time, government subsidies help to keep basic healthcare affordable.”

The reason the system works so well is that it puts decisions in the hands of patients and doctors rather than of government bureaucrats and insurers. The state’s role is to provide a safety net for the few people unable to save enough to pay their way, to subsidize public hospitals, and to fund preventative health campaigns.

In Singapore’s system, the primary role of government is to require people to save in order to meet medical expenses they don’t expect. While the Singaporean government does regulate prices and services, its hand is nowhere near as heavy as that of governments with extensive nationalized healthcare, such as the United Kingdom or Germany.”

Unlike the United States, Singapore features four related, but distinct entities to provide health care. By dividing the health care responsibilities to distinct bodies, Singapore avoids the problem that plagues the American health care market — trying to accomplish fundamentally different tasks within the same entities: (a) provide everyday care, b) provide insurance for catastrophic unplanned care, c) subsidize care of those who can’t afford it, d) subsidized the disabled elderly.

In the US, we try to do it all within the same program, and we do it poorly. Singapore specializes, and is unsurprisingly much better at each task.

1) Medisave: “covers about 85 percent of all Singaporeans, is a component of a mandatory pension program… accounts can be used to pay directly for hospital expenses incurred by an individual or his immediate family.”

2) Medishield: “a national insurance plan that covers the higher cost of especially serious illness or accident, which in Singapore’s system is described as “catastrophic.” Singaporeans can choose Medishield or several private alternatives, some offered by firms listed on the Singaporean stock exchange. Premiums for the insurance plans, including Medishield, can be paid using Medisave accounts. “

3) Medifund: “for the roughly 10 percent of Singaporeans who don’t have the means to pay for their medical needs, despite the government’s subsidy of hospital and outpatient costs. The fund was set up in 1993 with $150 million, with the budget surplus providing additional contributions since then. Only interest income, not capital, may be disbursed.” (A self-perpetuating financial assistance program, WHAAAAAAAA?!?!?!?)

4) Eldershield: “private insurance for disability as a result of old age. It pays a monthly cash allowance to those unable to perform three or more basic activities of daily living.”

It’s important to note that patients aren’t isolated from price in this system, unlike in the US and Europe:

“Nearly all Singaporeans contribute directly toward each treatment, including prescription drugs, through patient co-payments of 20 percent for amounts above deductible levels. The money to meet deductibles and co-payments can come out of a person’s Medisave account.”

A Singaporean health policy professor cites these principles as the source of Singaporean success:

“The creation of incentives for responsible behavior and the efficient delivery of services; the discouragement of overconsumption through cost-sharing; the regulation of hospital beds, doctors, and the use of high-cost medical technology; the promotion of personal responsibility; targeted government subsidies; and the injection of competition through a mix of public- and private-sector providers.”

Does Singapore have all the answers? Definitely not. Check out the article yourself to see Singapore deal with the same issues we are struggling with in the US.

I certainly would prefer a more market-based approach, but if you are more market-averse, Singapore is a much stronger example than France, Cuba, or anything else you’ll find in SiCKO. Advocates of the single-payer system should be a bit more discerning in the examples they seek to emulate. I think even most single-payer advocates would admit that the single-payer strategy depends absolutely on intelligent design to work (at all), and simply pointing to the most politically-convenient or recognizable is not a recipe for reform, but simply more of the same.

Filed under: Health

real chance for health care reform

Everyone wants to fix healthcare. McCain likes the market, but his plan for insuring those with pre-existing conditions is somewhat shoddy, and certainly doesn’t put your mind at ease if you have a loved one with any sort of debilitating disease. The Dems offer two different flavors of the same lollipop, but won’t offer a realistic plan for financing their operations (expiration of Bush tax cuts won’t cut it). But did you know there was a reform proposal being debated in Congress that actually passed mustard as budget neutral by Congressional Budget Office? A bipartisan bill that seeks to finally move American health care beyond the employer-based model of the 20th century while upgrading the regulatory infrastructure and providing universal health care?

Sigh, if only we weren’t in an election year (or had a ceaseless election cycle), the Wyden-Bennett plan would be getting more attention. Sens. Ron Wyden (D) and Bob Bennett (R) hail from Oregon and Utah, respectively, and yet found enough common ground to rehaul the American health care system:

“Under the Wyden-Bennett system, health dollars would be controlled by the individual (a long-time conservative goal) and used within a restructured, heavily regulated, totally universal, insurance marketplace.“

The proposal has six Republicans and six Democrats on board, already making it “the largest bipartisan coalition ever assembled around a concrete piece of universal health-care legislation.
…
The Lewin Group, a highly respected health-care consulting firm, estimates that the plan would save $1.4 trillion over 10 years.

Unlike the proposals being bandied about now, this proposal will actually control cost to some degree — which is *THE* problem of American health care, while still providing a “minimum standard for comprehensiveness (equivalent to the standard Blue Cross/Blue Shield plan currently offered to members of Congress), and they could not discriminate based on pre-existing conditions, occupation, genetic information, gender or age.”

As you might imagine, a legitimate health care reform package is far too massive to relate in its entirety via blog post, so I will once again point you to this article on Health Care’s Odd Couple. I have a few questions, but I would support its adoption tomorrow, especially if meant that none of the Presidential candidates’ plans were implemented. One Health Affairs article I read directed readers to keep an eye on this proposal, as it has a better chance of being the grand plan for reform than the Presidential plans. I hope so.

Filed under: Health

US health care’s chronic condition

Health care in the US is a mess – everyone agrees about that. The question is how best to clean up this mess. Should we copy the Canadian model? German? French? British? As George Halvorson and George Isham argue in “Epidemic of Care,” what many don’t seem to realize about these health systems it that the majority entail central government ownership of hospitals, turning physicians into government employees, etc. – basically, what would be the greatest nationalization in the history of the United States.

Some are more possible than others, like the German model, which allows for citizens to choose a health fund, which then receives a premium from the government to provide all health care. This is similar to what gun-toting, church-going, American-pie eating Hillary Clinton fought for in the 90s.

But do we want a single-payer system? I won’t say empirically yes or no, but I will say that I think it distracts from the real issues that cause the American government to spend more tax money per person on health care than the British government (and the British provide universal coverage).

The problem with US health care is not who is paying the bills.

One of the most basic problems with American health care is that it is trying to do two things at once.

1) Provide health insurance by pooling risk to pay for care in case of any accidents or unforeseen developments.
2) Provide chronic care and high-cost procedures for patients with known health problems.

79-percent of health care expenditures was directed towards patients with at least one chronic condition in 1998; more than half of spending went to individuals with multiple chronic conditions.

With this population, “insurer” is a misnomer. They are payers, be they public (Medicare, Medicaid) or private.

The market can do a good job providing health insurance because risk is actually pooled.

The introduction of the chronically-sick changes the game from pooling risk to simply pooling money. And as we’ve learned from the Social Security, there is nothing magical about pooling money – you get what you put in. The introduction of the “sick” population to the “healthy, but might get sick in the future” only drives up premiums in what amounts to a redistribution of income from the healthy to the sick.

I don’t think there is anything implicitly wrong with that (though I don’t want to pay for millionaire medication…), but clearly the government is better suited for economic redistribution than the private sector.

To further illustrate the health care split, only one-percent of patients encompass 30% of health care spending; 70% of the people encompass only 10% of total spending.

Heart transplants, dialysis, kidney transplants, etc. are the big cost drivers, and their relation to common health and lifestyle issues underscore the fact that the American health care crisis is profoundly behavioral.

Single payer systems accomplish both aims by making all citizens pay a higher premium by way of taxes to subsidize the chronic care while providing benefits not really in tune with the needs of the healthy 70%. It’s a compromise they are willing to make, and their large and active governments are well-suited to own and manage hospitals, employee physicians, etc.

The American model has clearly been a disaster, as it attempts to accomplish (1) and (2) partly with government programs and partly with private payers, with no delineation of responsibility or authority. The end result is a big game of cost-shifting, which runs both ways.

What’s the solution?

I’m not quite sure. The major problem is that chronic conditions are unbelievably expensive to treat, and while we know how individuals can minimize their risk for most conditions, we don’t know how to MAKE them do so. (Should Medicaid be handing out Whole Foods vouchers? Gym memberships)

I think the most important takeaway though is that there are two different problems. The more glaring is the healthcare system itself, which is overregulated, underregulated, and provided with a series of perverse incentives – yet, for most people, it really does an adequate, if not better job, and the changes being made are certainly going in the right direction. We’ve come a long way from the 80s.

The bigger problem is the population who live unhealthily. Rather than Universal Coverage or Single Payer, I think the more sensible rallying call would be for funding the heck out of Medicaid and instituting creative plans to minimize the unhealthy behaviors.

Again, I’m open to a single payer system (I’d take it over what we have now), but I think we’d be better off with a state “care” plan for the sick and those prone to sickness, and a separate insurance industry for healthy individuals for protection in case of emergency.

Filed under: Health