Obama asks the question.............

[Munger]

Re: Obama asks the question.............

[Ghent12]

Re: Obama asks the question.............

I'm willing to cede the points brought up by the actors in your movies, Munger, but the whole focus, as clearly demonstrated by Starving Steve's rants, is on the symptoms of the problem and not the root causes of the problem. I didn't live through the 1950's, but apparently in the time before HMO's, health insurance was only for catastrophic health events because insurance was never necessary for lesser issues. Now health insurance is ubiquitous with health care. Why?

Proponents of universal health care argue that the marriage between employment and health insurance has created an unsustainable system, yet they don't address why that has occurred.

Proponents always complain of the enormous cost of health care and health insurance, but they never address why it is so expensive. (Sorry SS, but evil profit-gorging corporations do not operate in a vacuum.)

We are in the "health care crisis" now because of regulations and practices implemented in the past. Now, instead of addressing those root causes, we apparently choose to look solely at the symptoms of the situation we are in and pick a course of action that will inevitably lead to ruinous consequences.

This is exactly the same as arguing that the Federal Reserve should have more regulatory oversight. It's giving the keys to solve the problem to the same entity that caused the problem. The government is not the way out of this mess. Universal health care will work just fine... for a short period of time. Perhaps even a few decades. But then what? What happens when care gets rationed? Give us your tired, your sick, your huddled masses yearning to breath free.

[rjwjr]

Re: Obama asks the question.............

An America without a right to healthcare is simply not a free country and not an America that I would ever want to live in again.

The free market for healthcare has been a complete failure; even the doctors and the nurses in America are now in revolt against for-profit medicine run by private health insurance companies.

Profit and medicine do NOT mix. And you might give that message to your FOX News channel and to the Republicans in Congress.

Health care is not a right provided by our constitution so your argument is void of merit. Plus, you have it backwards...a FREE America is one WITHOUT government mandated health care.

For what it's worth, starting a post with "Let the Americans go to hell..." is not wise. It detracts from your point as it places (most) Americans immediately on the defensive. Also, many of us are "cowboys" with guns and egos and great pride in our Country and we don't take kindly to your type of argument. Most of us are open to constructive, intelligent criticism and welcome your future ideas. Few of us are open to America bashing or American bashing.

[Munger]

Re: Obama asks the question.............

We are in the "health care crisis" now because of regulations and practices implemented in the past.

Contrary to libertarian wishful-thinking, the problem is not government "regulations" but perverse market incentives within private sector insurance and health care.

When Market Incentives Lead to Bad Outcomes

One of our readers recommended a fascinating and important article on health care economics, “The Cost Conundrum,” in The New Yorker. It’s by Atul Gawande, a surgeon and a professor of public health and surgery at Harvard.

Gawande contrasts McAllen, Texas, which has some of the highest health care costs in the country, with El Paso, Texas, a demographically similar city with moderate health care costs, and with low-cost communities such as Rochester, Minnesota (home of the Mayo Clinic) and Grand Junction, Colorado. To simplify greatly, his conclusion is that the medical community in McAllen practices medicine as a business, while the community in Rochester or Grand Junction practices it as a way of improving health. But the aberration isn’t the profit-loving doctors of McAllen; it’s all the doctors who are not out there maximizing profits.

The real puzzle of American health care, I realized on the airplane home, is not why McAllen is different from El Paso. It’s why El Paso isn’t like McAllen. Every incentive in the system is an invitation to go the way McAllen has gone.

And the prognosis is not good:

In the war over the culture of medicine—the war over whether our country’s anchor model will be Mayo or McAllen—the Mayo model is losing. In the sharpest economic downturn that our health system has faced in half a century, many people in medicine don’t see why they should do the hard work of organizing themselves in ways that reduce waste and improve quality if it means sacrificing revenue.

In short, we have a health care system that motivates doctors to behave like businessmen and maximize their revenues from patients. In the long run, those incentives are wearing down whatever ethic of professionalism or feelings of altruism lead doctors to behave differently. But while the pursuit of profit in the free market is supposed to benefit the public – and probably does in most areas – here it has led to an explosion of costs with no measurable improvement in health care outcomes.

Let’s go out on a long excerpt designed to motivate you to read the whole article:

We are witnessing a battle for the soul of American medicine. Somewhere in the United States at this moment, a patient with chest pain, or a tumor, or a cough is seeing a doctor. And the damning question we have to ask is whether the doctor is set up to meet the needs of the patient, first and foremost, or to maximize revenue.

There is no insurance system that will make the two aims match perfectly. But having a system that does so much to misalign them has proved disastrous. As economists have often pointed out, we pay doctors for quantity, not quality. As they point out less often, we also pay them as individuals, rather than as members of a team working together for their patients. Both practices have made for serious problems.

Providing health care is like building a house. The task requires experts, expensive equipment and materials, and a huge amount of coördination. Imagine that, instead of paying a contractor to pull a team together and keep them on track, you paid an electrician for every outlet he recommends, a plumber for every faucet, and a carpenter for every cabinet. Would you be surprised if you got a house with a thousand outlets, faucets, and cabinets, at three times the cost you expected, and the whole thing fell apart a couple of years later? Getting the country’s best electrician on the job (he trained at Harvard, somebody tells you) isn’t going to solve this problem. Nor will changing the person who writes him the check.

http://baselinescenario.com/2009/05/...ost-conundrum/

When Market Incentives Lead to Bad Outcomes, Continued

A couple of weeks ago, I wrote a post about Atul Gawande’s New Yorker article about health care spending and outcomes. I didn’t claim to have any particular insight about health care economics; I just thought that people should read his article – which, to summarize greatly, argues that there is no correlation between high spending and good outcomes, because the current system does not motivate doctors to seek good outcomes. (Apparently Barack Obama agreed, since the Times reported that “the article became required reading in the White House.”)

That post got a lot of interest, so here is a follow-up.

A lot of the data on regional variations in spending and outcomes come from the Dartmouth Atlas of Health Care, whose findings are summarized in the first paragraph of Jonathan Skinner’s Economix post:

“For the last three decades, John Wennberg and his Dartmouth colleagues have documented regional variation in Medicare spending and a puzzling lack of association between spending and better health outcomes. Regions that spend more on medical care don’t necessarily have sicker people, and they don’t get better results. It isn’t clear what benefit they are receiving for all the money they’re spending.”

Skinner’s post cites and then responds to criticisms mentioned in the aforementioned Times article and in a Wall Street Journal editorial. The most direct criticism, it seems to me, is that the Dartmouth study does not control for the sickness of populations; however, as Skinner says, studies that do control for population differences still find major spending gaps. In Economix yesterday, David Leonhardt provides an overview of this debate.


Finally, Leonhardt’s column yesterday addresses the political flavor of the same issue: rationing. His position is summed up here:

“Milton Friedman’s beloved line is a good way to frame the issue: There is no such thing as a free lunch. The choice isn’t between rationing and not rationing. It’s between rationing well and rationing badly. Given that the United States devotes far more of its economy to health care than other rich countries, and gets worse results by many measures, it’s hard to argue that we are now rationing very rationally.”

Leonhardt argues that the current health care “system” implements three kinds of rationing. First, businesses faced with higher health care costs compensate by reducing wage growth (to zero, in some cases) – so expensive health care comes at the cost of everything else. Second, higher health costs mean that many businesses do not provide health insurance; the rationing here is that some people get semi-comprehensive health care, and some don’t. Third, the current economic incentives lead doctors to provide some types of care (expensive procedures) at the expense of other types of care (spending time with patients, preventive medicine), even though the latter may be more important than the former; here, rationing is preventing access to some forms of care.

With financial reform watered down to “minor technocratic tweaks” (although I hold out some hope for the Financial Product Safety Commission, or whatever it will be called), the established health care interests must be encouraged.

http://baselinescenario.com/2009/06/...mes-continued/

[Ghent12]

Re: Obama asks the question.............

Munger, again, the author fails to address why we are in the situation we are in now.

Why do the economics of health care provide incentives for doctors to provide expensive procedures instead of other less expensive ones?

Why are health care costs vastly outpacing inflation?

These issues remain unaddressed.

[jhurt]

Re: Obama asks the question.............

A SURGEON'S VIEWPOINT:

Government-run healthcare...that's what you want?

Be careful what you ask for.

It's strange to me that no one ever really considers the fact that the US does have a completely run government healthcare system already in existance. It's call the VA (Veteran's Affairs) health care system.

If people really knew what they were asking for then I'm sure they'd think twice. The care at the VA is marginal at best. I'm an orthopedic surgeon and spent considerable time at the Dallas VA. I remember having a list of over 200 vets waiting for total knee or hip replacements. We would see them in clinic, exhaust conservative options, and then scribble their names and phone numbers down in a tablet book we kept there.

As a residents there my colleagues and I could never make a dent in that list because the OR ran so inefficiently. In general, max per day (ie 7am-5pm) we could do two joint replacements (and no we were not reimbursed per joint...straight salary that didn't touch the mounting med school debt we had accumulated). When we tried to book more the staff would intentionally sabotage us. There were constant issues with sterile processing or staff taking 2-3 hours between cases. It was impossible to affect change because no one could be fired...such is the case with government employees. In addition, the administration didn't want us to do more cases because every joint performed meant more funds expended. So slow was actually good. For reference an efficient surgeon in private practice with 2 OR's can do 5 joints between 7 and 12.

My father is a retired pathologist. He remembers the VA system exactly the same...things haven't really changed with time.

You think the UK/Europe has a good system? I spent 3 months of my residency practicing in Norwich, England. They have a two tiered system-private and public. Many doctors participate in both. I remember running the joint clinics there (often without the attending because again, no incentive to provide excellent care...they have no where else to go) and seeing patients who had been waiting for months if not a year to get to clinic. Once there an AMERICAN REGISTRAR (their equivalent of a surgeon in training) would then make the decision of whether or not they recieved a joint...sometime 6-9 months in the future. Yes, free is nice but free doesn't equate with quality or efficiency. Michael Moore left that part out of his movie. And I suppose "free" is a bit of an overstatement since they all pay for it via taxes.

What about Medicare and Medicaid? If you're not over 65 you might not realize that many practicing GP's are no longer accepting Medicare. It pays so poorly you can't make a living on it. And Medicaid...because my group alots overhead according to headcount I actually LOSE money for every Medicaid patient I see. And typically, these are much more difficult patients to care for (yes, it's true but no one will actually say it). CHIPS...don't make me laugh. It is sad that Obama actually tries to pass off Medicaid and CHIPS recipients as "insured"...try finding doctors who accept those...good luck. We see some but limit the number because the GP'd will inundate any clinic who actually says yes to these patients.

What about all those rich doctors? They make so much money...they should just do their part, right Mr. Obama? First of all, things have changed a lot in the last 20 years regarding physician compensation. In the 80's an orthopod would make around $5000 for a total knee replacement (I've only been practicing 4 years). Keep in mind this not a car...something that you use for 5 or 6 years and then trade in...something that can be broken or wrecked and yet easily replaced...something that really many consider a luxury. No this is a PART OF YOUR BODY meant to last 10-20 years...you walk on it every single step. If this goes wrong (infection, loosening, etc...) you are in a bad way. So again, is this worth a $5000 fee to be implanted correctly?...only the buyer can say. Point is, in the last 20 years those fees to doctors have been reduced to $1250 per joint. If you adjust for inflation then it looks even uglier. Every year our cost to operate our clinics goes up and Medicare/Private payer fees go down. No wonder patients feel like doctors are rushing them through clinic...they are...it's the only way to stay afloat.

So what will happen if they socialize medicine? Well it won't matter anymore if a doctor is good or not (barely does today)...people won't have anywhere else to go. Doctors will likely become salaried. Instead of being incentivized to give excellent/efficient care most will do the minimum necessary (like they do in England or the VA).

I could go on all day...people are so blind. Everyone wants a hamburger that is excellent, quick, and cheap. I've got news for you...in no aspect of life is that possible including medicine.

You want cheap medicine?...sacrifice quality, efficiency, or both
You want it excellent?...it's going to cost you and frankly not everyone will get exactly the same quality.

I'm sink of the entitlement mentality in America. You don't like the price I'm charging...then you sacrifice 4 years of undergrad, 4 years of medschool, 5 years of residency, and 1 year of fellowship of the most productive youthful years of your life and do it yourself. Just because you can't hold it in your hand, turn it on with a remote, drive it down the street, or whatever doesn't mean it isn't worth something. Don't forget...you always get what you pay for.

If this country is so crappy why do we have to build fences to keep people out? Wake up America before it's too late.

[Serge_Tomiko]

Re: Obama asks the question.............

Let the Americans go to hell with their private (for-profit) insurance industry, their $600+ monthly private health insurance premiums, their co-payments for healthcare, their healthcare just for the very rich, their non-covered or non-insured health services, their short life-span compared to nations with socialized medicine, plus their gun violence, their failing industries due to healthcare costs for employees, and their corrupt Congress run by money from lobbyists.

Socialized medicine with a health tax paid by everyone would be far superior to the system the U.S. now has where 50 million people now do without healthcare and the rest have to pay their outrageous private health insurance premiums, plus co-payments and deductibles.

I really wish the iTulip staff would ban you from this site. I find your posts at best banal and at worst offensive. This post above is no exception.

[Jim]

Re: Obama asks the question.............

I will second that.

[Munger]

Re: Obama asks the question.............

Sigh. You didn't watch the videos or read my post. The insurance industry knows that govt. competition will erode their profits. They know Michael Moore's Sicko was accurate. The insurance exec interviewed in the video said so explicitly. So they wage a propaganda war against it. The insurance exec in the video waged it.

Doctors are not incentivised to provide efficient care. They are incentivised to provide volume of treatment/procedures. And the costs are breaking the system. Meanwhile the U.S. on average gets shitty care compared to countries with "socialized" medicine at twice the cost.

[Starving Steve]

Re: Obama asks the question.............

I think it is time for America to change and to re-invent itself, and even to re-write that relic from the 18th C. that you call a constitution. The country is anything but free now, and a tiny clique of insiders on Wall Street and in the nation's big banks and in the U.S. government run the country, regardless of what the Constitution says and regardless of what the people really want.

If this Bernanke at the Federal Reserve Bank handing a $50 million dollar cheque over to the top executives of AIG, the ones who ran AIG into the ground, didn't tell you what is going on in America, you are lost.

Have you noticed all of the bonuses the big banks are paying to their top executives, and on TARP money no less? Or have you missed that too?

And the lobbyists who own the Congress and set its agenda, or have you missed that too? How about the lobbying by the private health insurance companies in Washington, especially in the Congress: how much money have the private health insurance companies spent to keep Congress from passing Obama's healthcare initiative? Who got that money?

Do the names Paulson, Geithner, and Summers mean anything to you---- the hold-overs from the Bush Administration that are still in Washington and running the show even now?

When you keep a constitution for more than 200 years, little changed since the day it was written, this is what happens; the country becomes stale and corrupt.

[Munger]

Re: Obama asks the question.............

Munger, again, the author fails to address why we are in the situation we are in now.

Why do the economics of health care provide incentives for doctors to provide expensive procedures instead of other less expensive ones?

Why are health care costs vastly outpacing inflation?

These issues remain unaddressed.

The underlying "why" is information asymmetry - a very common cause of market failures. In fact, the first paper to discuss information asymmetry in economic systems was directed toward health care.

In short, the patient must trust the doctor to tell them what tests they need. Doctors get paid according to the number of tests they perform. There are also market inefficiencies because of the reluctance to switch doctors. It is also difficult for people to evaluate the quality of treatment they are getting or to compare the treatment they are getting with the treatment they might be provided by a different care provider.

More info than you want here and here.

This is the market failure – the US system is structured in a cost-inflating manner. Cost containment is just not adequately instituted.

The private insurance system’s main techniques for holding down costs are practicing risk selection, limiting the services covered, constraining payments to providers, and shifting costs to patients. But given the system’s fragmentation and perverse incentives, much cost-effective care is squeezed out, resources are increasingly allocated in response to profit opportunities rather than medical need, many attainable efficiencies are not achieved, unnecessary medical care is provided for profit, administrative expenses are high, and enormous sums are squandered in efforts to game the system.

The result is a blend of overtreatment and undertreatment — and escalating costs. Researchers calculate that between one fifth and one third of medical outlays do nothing to improve health.
…
Many U.S. insurers do reward physicians for following standard clinical practices, but these incentives do not aggregate to an efficient national system of care. After more than three decades of managed care — and the same three decades of studies by Wennberg and colleagues identifying wide variations in practice patterns — consistent practices are still far from the norm. Commercial incentives are not fixing what’s broken.

Instead, cost-containment efforts have fallen heavily on primary care physicians, who have seen caseloads increase and net earnings stagnate or decline. A popular strategy among cost-containment consultants relies on the psychology of income targeting. The idea is that physicians have a mental picture of expected earnings — an income target. If the insurance plan squeezes their income by reducing payments per visit, doctors compensate by increasing their caseload and spending less time with each patient.

This is among the reasons why nationalised/socialised/universal (call it what you will) Health Care/Insurance makes so much sense: only a government is big enough to achieve national agency on behalf of consumers of health care. The problem, then, isn’t market failure per se – it’s that we have a tonne of markets, haphazardly stitched together nation-wide, when what is required is a national market. Whether a national market with monopsony purchasing power or not is another issue.

[Munger]

Re: Obama asks the question.............

But then what? What happens when care gets rationed? Give us your tired, your sick, your huddled masses yearning to breath free.

Health care, along with every other scarce resource, is already rationed. The U.S., many argue, is the most rationed system on earth. "Price" is simply one way of rationing.

‘Rationing’ Health Care: What Does It Mean?

By Uwe E. Reinhardt

Uwe E. Reinhardt is an economics professor at Princeton.

As the dreaded R-word — rationing — once again worms its way into our debate on health care reform, it may be helpful to relearn what is taught about rationing in freshman economics.

In their well-known textbook Microeconomics, the Harvard professor Michael L. Katz and the Princeton professor Harvey S. Rosen, for example, put it thusly:

Prices ration scarce resources. If bread were free, a huge quantity of it would be demanded. Because the resources used to produce bread are scarce, the actual amount of bread has to be rationed among its potential users. Not everyone can have all the bread that they could possibly want. The bread must be rationed somehow; the price system accomplishes this in the following way: Everyone who is willing to pay the equilibrium price gets the good, and everyone who does not, does not. [Italics added.]

In short, free markets are not an alternative to rationing. They are just one particular form of rationing. Ever since the Fall from Grace, human beings have had to ration everything not available in unlimited quantities, and market forces do most of the rationing.

Many critics of the current health reform efforts would have us believe that only governments ration things.
When a government insurance program refuses to pay for procedures that the managers of those insurance pools do not consider worth the taxpayer’s money, these critics immediately trot out the R-word. It is the core of their argument against cost-effectiveness analysis and a public health plan for the nonelderly.

On the other hand, these same people believe that when, for similar reasons, a private health insurer refuses to pay for a particular procedure or has a price-tiered formulary for drugs – e.g., asking the insured to pay a 35 percent coinsurance rate on highly expensive biologic specialty drugs that effectively put that drug out of the patient’s reach — the insurer is not rationing health care. Instead, the insurer is merely allowing “consumers” (formerly “patients”) to use their discretion on how to use their own money. The insurers are said to be managing prudently and efficiently, forcing patients to trade off the benefits of health care against their other budget priorities.

These thoughts popped into my head as I sat as a guest in the White House East Room during last week’s ABC News town hall meeting. There a neurologist suggested in his question that the president and his policy-making team seek to impose rationing of health care so that more lower-income Americans can receive it, all the while refusing to countenance that rationing for their own families.

One must wonder where people worried about “rationing” health care have been in the last 20 years. Could they possibly be unaware that the United States health system has rationed health care in spades for many years, on the economist’s definition of rationing, and that President Obama and Congress are now desperately seeking to reduce or eliminate that form of rationing?

Let me remind rationing-phobes what they would find in the huge body of research literature and media reports on our health system, should they ever trouble themselves to read it:

• Many Americans without health insurance or very high deductibles routinely forgo prescribed medicine or follow-up visits with a doctor because they cannot afford it, risking more serious illness later on.
• A 2008 peer-reviewed study by researchers at the Urban Institute found that health spending for uninsured nonelderly Americans is only about 43 percent of health spending for similar, privately insured Americans. Unless one argues that the extra 57 percent received by insured Americans is all waste, these data imply rationing by price and ability to pay.
• A few years ago, The Wall Street Journal featured a series of articles reporting how often uninsured middle-class Americans are charged the highest prices at pharmacies and in hospitals, and how sometimes they are hounded over medical bills to the point of being jailed for failed court appearances.
• Studies have shown that solid middle-class American families — even ostensibly insured families — can lose all of their savings and sometimes their homes over mounting medical bills in the case of severe illness.
• In its report Hidden Cost, Value Lost: The Uninsured in America, the prestigious Institute of Medicine a few years ago estimated that some 18,000 Americans yearly die prematurely for want of the timely health care that health insurance makes possible and that can prevent catastrophic illness.
• A recent study by an M.I.T. professor found that uninsured victims of severe traffic accidents receive 20 percent less health care than equivalent, insured victims and are 37 percent more likely to die from their injuries.

Need I go on?

As I read it, the main thrust of the health care reforms espoused by President Obama and his allies in Congress is first of all to reduce rationing on the basis of price and ability to pay in our health system.

An important allied goal is to seek greater value for the dollar in health care, through comparative effectiveness analysis and payment reform. As I reported in an earlier post on this blog, even the Business Roundtable, once a staunch defender of the American health system, now laments that relative to citizens in other developed countries, Americans receive an estimated 23 percent less value than they should, given our high health care spending.

To suggest that the main goal of the health reform efforts is to cram rationing down the throat of hapless, nonelite Americans reflects either woeful ignorance or of utter cynicism. Take your pick.

http://economix.blogs.nytimes.com/20...-does-it-mean/

The question is, how do we ration efficiently? Currently, the U.S. spends twice as mucc per person as any other country and gets worse results.

See also, this.

[sunskyfan]

Re: Obama asks the question.............

Free markets and capitalism are not one in the same. Wall Street and others may have failed capitalism but there is little doubt that capitalism is at least in crisis. Even Alan Greenspan acknowledged there is a critical flaw. Free markets work when they are well informed and don't when they are not. Some how the demand signal is not reaching the supply creation in the health care situation and it is not because government has meddled.

There are tough questions to be addressed here and Obama is ultimately right in that if we can address the health care CRISIS then nothing else will matter.

[Mashuri]

Re: Obama asks the question.............

The underlying "why" is information asymmetry - a very common cause of market failures. In fact, the first paper to discuss information asymmetry in economic systems was directed toward health care.

In short, the patient must trust the doctor to tell them what tests they need. Doctors get paid according to the number of tests they perform. There are also market inefficiencies because of the reluctance to switch doctors. It is also difficult for people to evaluate the quality of treatment they are getting or to compare the treatment they are getting with the treatment they might be provided by a different care provider.

More info than you want here and here.

This making the assumption that a government bureaucrat will know what's best better than a direct relationship between doctor and patient. I'm not buying it.

[Mashuri]

Re: Obama asks the question.............

The underlying "why" is information asymmetry - a very common cause of market failures. In fact, the first paper to discuss information asymmetry in economic systems was directed toward health care.

As for information. There is no possible way a group of government workers will ever have enough information to "tame" any market. Since a relatively tiny group of people would now have to make decisions for an exponentially higher amount of people in the general population, there will be far more "asymmetry" than between your average individual doctor and patient.