Monday, November 30, 2009

Health Care Reform Summarized. . .

With the health care debate beginning in the Senate today, Washington is going to smell distinctly like a cattle yard. Let’s summarize everything you need to know about health care (in one simple to swallow article) so that you can confidently call ”El Toro Kaka!” whenever you hear your Senator drop some.

Q. Why does our health care system need reform?

Seven out of ten Americans say our health care system needs “fundamental change” or must be “completely rebuilt.” The problems with the American system fall into three broad categories: (1) out-of-control costs, (2) access to health care, and (3) quality control:

• Americans spend $2.1 trillion each year on health care, 16% of our GNP, about half of which is wasted spending.

Forty-six million Americans have no health insurance coverage, though only 7.3 million Americans lack insurance because they cannot afford it. Another 9.7 illegal aliens lack coverage, and another 5 million people are considered uninsurable because of pre-existing medical conditions.

• The American system suffers from massive over-treatment, exposes patients to an amazingly high risk of under-treatment, and results in an incredible number of preventable medical injuries and deaths.
Q. What causes our system to be so expensive?

There are many reasons our system is so expensive. First, we have an innovative system, and half of the growth in health care spending over the past decade has been the result of medical advances. Secondly, we are compassionate. A 1996 study found that 1% of health care users accounted for 27% of the total spending on health care. These services are related mainly to prolonging life for the elderly (Europe lets them die . .. euthanasia should be renamed eldereuropeanize).

Aside from this, our system experiences the following unnecessary costs:
• Medically Unnecessary Procedures: Americans spend $500-$700 billion on treatments, tests, or hospitalizations that do nothing to improve health. This is directly related to the payment methods established by the government and by poor quality control.

• Overhead Costs: Because of conflicting and overlapping government regulations, 31% of health care spending goes to pay administrative/overhead costs (this is nearly double the 16% percent spent in Canada). A reduction to even Canadian levels would save Americans $339 billion annually.

• Hospitals provided $35 billion worth of uncompensated care (for the uninsured) in 2008. This is largely the result of the government’s failure to control the illegal alien problem.

• Lawyers/Malpractice: According to CBO estimates, tort reform could reduce the cost of medical malpractice insurance by $11.3 billion. Another $66 billion could be saved in “defensive medicine.”
Each of these costs is directly or indirectly the result of government interference. (See our solution.)

Q. Will PelosiCare or Baucus reduce these costs?

No. These bills seek to reduce costs by cutting $500 billion from Medicare and by reducing reimbursements to hospitals for covering the uninsured (they are reimbursed because federal law requires them to cover anyone who arrives at the hospital). They do not address the fundamental problems driving costs.

Q. Won’t that hurt Medicare?

Yes. Medicare already needs a $250 billion cash infusion just to maintain the current system, which is falling apart as more and more doctors refuse to take Medicare patients. The Democrats are proposing to take another $250 billion away from that system. They will also eliminate Medicare Advantage, a program used by nine million seniors.

Q. But it will decrease the cost of my insurance, right?

No. The portion of the public that has private insurance, 60%, will find their insurance costs going up almost immediately. Insurers have estimated that the new requirements will increase the cost of a typical policy by $3,000 to $4,000 per year. Moreover, many members of the public will suddenly find their benefits being taxed at a 40% rate. This is the excise tax on so-called “Cadillac benefits” plans. This will apply to approximately 14% of families and 19% of singles in 2013 (despite indexing, this will increase to 31% and 34% by 2019).

Moreover, these bills include tax increases on drug makers and medical equipment providers, and cuts in Medicare payments to hospitals and doctors, each of which will be passed on to you.

Q. But at least everyone will have coverage, right?

Not even close. While recent polls show that 60% of ObamaCare supporters expect to get free health care from this bill, these bills will extend coverage only to persons who make less than $14,403. Everyone else will simply be fined if they don’t get coverage. Even the Obamacrats themselves admit that the bill will only reduce the number of people without insurance from 46 million to 25 million. . . and it takes until 2019 to do this!

Q. I can get fined?

Yes. If you don’t obtain appropriate health care, you will be fined each year. If you fail to pay that fine, you can be fined $25,000 and sent to jail for up to five years (the Senate version does not include jail time).

Q. But I’ll get a subsidy. right?

Sure will, most Americans will. Indeed, 67% of Americans will qualify for some subsidy, but the amounts will be insignificant. Using Democratic estimates, the typical subsidies will be less than $200 a year, and even the maximum subsidies cannot exceed 10% of the cost of the policy.

Q. Do I get to keep my current insurance?

Sure, if they keep providing it. Since insurers will not be able to enroll new members, the pools upon which those plans are based will become smaller and smaller as people change jobs. Eventually, insurers will need to shut these plans down. Not to mention that most insurers will go bankrupt.

Q. But the public option will protect me, right?

Nope. You will only be eligible to go into a public plan if your employer doesn’t offer a plan. Moreover, the CBO has already determined that the public plans will cost more than private plans. And you may have a very hard time finding doctors who are willing to take such coverage if, as expected, it is priced like Medicare.

Q. Do these bills do anything to improve quality of care or safety?


Q. Does it really only cost $829 billion like the media keeps saying?

Not even close. The CBO scored the Baucus bill at $829 billion, as reported. But to reach that number, the CBO relied on the assumptions given to it by the Democrats. Obvious problems with this estimate is the assumption that $250 billion in savings can be found in Medicare, that health care costs will magically fall below the current levels paid by the private sector, and that people will not adjust their behavior in response to the tax increases.

Moreover, the bill was scored in such a way to hide the true long-term cost. Rather than looking at the expected yearly cost of the bill, the CBO looked at the first ten year period to arrive at this $829 billion estimate. Importantly, the benefits don’t roll out right away during that period. Indeed, it takes nine years for each of the benefits to kick in. Thus, a comparison of the first ten years with the second ten years would show a massive increase in expense during the second ten year period.

And this doesn’t even address the fact that the House version is estimated to cost $1.65 trillion.

Just looking at the numbers logically, applying the current Medicare rates to only the new 12 million people who will be covered (forget the other 34 million), will cost the taxpayer $173.2 billion per year -- or $1.7 trillion over ten years. You can image what the whole package will cost.

Q. At least the bill is deficit neutral, right?

Not on your life. To be deficit neutral, the Democrats have taken 23% of the cost “off the budget.” What they did was to attach a provision adding $210 billion in payments to doctors to a “pay-go” bill requiring that all amounts spent be accounted for rather than adding them to the deficit. Only, the Democrats specifically exempted the $210 billion from that requirement. It goes straight to the deficit.

Moreover, the House does not even bother accounting for $340 billion of the cost of its version. And the Senate pulls a trick that could be even worse. As we just noted, the CBO scoring understated the cost of the Senate bill because it looked only at the first ten years, during which time many of the benefits don’t yet exist. To declare the bill deficit neutral, it compared those costs against the tax increases which run throughout the entire ten year period. When all of the benefits kick in after ten years, those tax increased will likely cover less than half the cost. This is why many Democrats are talking about eventually needing a value added tax.

Q. Isn’t the European system better? Maybe we should just copy them?

Heck no. The figures most commonly used to claim that the United States lags Europe in health care are our infant mortality rate and our life expectancy. But, the Europeans exclude certain types of deaths from their figures, e.g. babies who are less than 30 centimeters long when they die are not counted in Europe, but are in the United States. That artificially improves their numbers. If we did the same, our numbers would be slightly better than Europe’s. Not to mention that the United States is in the middle of a full blow diabetes epidemic (which Europe is only now beginning), which dramatically skews our health care numbers.

Moreover, when you look at survival rates for the top killer diseases, availability of treatment, and cost of things like generic drugs, the United States exceeds or far exceeds the Europeans in each of those categories. Click here for a full breakdown.

Not to mention that the world is piggybacking on American innovation. The top five US hospitals conduct more clinical trials than all the hospitals in every other developed country combined. Since the 1970s, the Nobel Prize in medicine or physiology has gone to US residents more than the residents of all other countries combined. And the United States spends three times as much as the rest of the world on R&D in biotechnology, which also explains why our costs are higher. That would all end if we changed our system.

Interestingly, the Europeans are no more happy with their systems (less so in fact) than Americans.

Q. Then why do the Europeans believe our system is so much worse?

The European media is no more honest with their people than our media is with ours. Indeed, check out our discussion of this article to see the kinds of propaganda they get about America. If you believed this reporter, vast numbers of Americans are roaming the streets looking for medical care. Nothing this guy says is accurate or makes sense, but it’s typical of what the Europeans get in the way of American news.

Q. Finally, what other effects could these bills have?

Here are some of the unintended consequences that are fairly obvious from these bills:
• Doctor shortages: First, there are not enough doctors to treat the sudden influx of people. Secondly, doctors will stop taking Medicare and will not participate with the public options as they cannot afford it. Third, the number of people going to medical school will fall.

• Failing Insurers: Most of the nation’s 1300 insurers will go out of business, ending most people’s currently existing plans.

• Hospital Bankruptcies: Hospitals, which are already in financial trouble, are slated to have their reimbursements cut by another $155 billion. This will cause many to fail.

• Job Market Changes: As the employer mandates kick in, employers will switch to more temporary workers (in place of permanent workers) and will reduce part time workers’ hours to below 30 hours per week to avoid fines and the need to provide insurance.


JG said...

Thank you for this. This is the most comprehensive, concise discussion on healthcare reform I have read. Well done, and I am certainly passing this along.

AndrewPrice said...

Thanks JG, I hope it helps. I figured it was a good idea to create a summary of all the posts we had because they were just too much to understand being spread over so many posts.

LawHawkSF said...

Andrew: Again, a great summary and refutation of the garbage being put out by the Obamists and their fellow-travelers in the mainstream media. And at the risk of being called a racist, I should also point out that if you compare the European insurance and death rates demographically (which is to say basically caucasian natives), the American health care system, even in its current messy state, makes the European and Canadian systems look like third-world witch doctors. In America, non-natives, non-legal immigrants and blacks, who are already covered by Medicaid and other government programs, skew the statistics completely out of proportion.

AndrewPrice said...

Lawhawk, I don't think it's a race thing per se, so much as the fact that our poor communities (black, white or brown) are beset by very destructive behaviors, i.e. drugs, violence, bad dietary habits, which bring about a lot of ill health.

The Europeans really don't deal with that.

We also do our best to keep people alive no matter what their condition, whereas the Europeans really don't. That skews our numbers even more.

patti said...

dude, i told my readers that our america-saving capes were to be put back on tomorrow, and you beat us all to the punch. well done and nary a snark. will link, my linky friend...

AndrewPrice said...

Thanks Patti! Glad you liked it. welcome back from the undisclosed location! LOL1

Tennessee Jed said...

While the post may, on the surface, appear long for a summary, considering the lengths of the two contending bills in Congress, it is a bargain at twice it's length (ha!). As has been previously pointed out by Andrew Price and others, fix the unnecessary procedures and regulations and you have cut costs in half! The idiots who are trying to force this on the American people never have understood the difference between price and cost.

People at this site have pointed out reasons why it will be tough to pass this legislation. Others have indicated they will not hold their breath because socialists will never ever give up. I respect both thoughts, but consider staving off this so called "reform" as possibly the biggest legislative issue of my adult life.

StanH said...

Hey! What’s not to love…what a deal! Andrew you’ve done the best synopsis of the healthcare monstrosity. Not only have you criticized, but have given common sense Commentarama solutions, but alas we have witless Barry, and his band of Marxist myrmidons. Great article!

As an aside. Did anyone see how many people in Barry’s cabinet came from the private sector, “7%!!!!” …WOW! His closest competitors were JFK and Carter at around 30%. Folks we are in big trouble with these eggheads in charge of the most vibrant free market system, the USA. They know nothing about business whatsoever, except what they’ve read in books. Oh yeah…and businesses are like magical money trees, that they can extort taxes. I wonder is the estimable Paul Krugman and Robert Reich (the midget Marxist) will be at the big jobs summit, what a waste of time. This is the perfect group to take over a fifth of the American economy healthcare, again we’re screwed!

AndrewPrice said...

Jed, I think you're right. This is probably the most important/dangerous bill in our lifetimes. If this thing passes, it will be a disaster for this country, not only in how it tries to hook people on government, but also in terms of the damage it does to our health care system, our economy, our budget, and our way of life.

Let's hope this thing never gets through. The math says it won't, but I've seen too much to say that anything is certain.

AndrewPrice said...

Thanks Stan. We've tried hard to give you all the facts and some options.

It is amazing that the Democrats are so dead set on doing the wrong thing.

I hadn't heard about his cabinet, but it doesn't surprise me. I can't think of any business people -- lots of academics. That certainly explains his utter lack of understanding of market economics.

Individualist said...


First off let me state that your article was well thought out and informative.

That being said it made me sad.

I cannot believe we are considering this nightmare. I have two observations.

One) I think part of the rising costs can be related to the price control schedules of medicare. Rent control tripled the cost of renting in New York so it seems the same ecomic principles apply.

Two) I think part of the reason for having to completely overhaul health insurance has to do with the fact that SSN is no longer paying a surplus (I read in Forbes this is the first year it went into the read). They have been telling us it would go into the red for two decades and have not fixed it (Fix means quit spending money you don't have). So rather than be embarrased and tell seniors hey we can't afford the benefits we will just take over the health care system in total and control costs in reduced medical care and just lie about it and hope people don't notice.

Just my thoughts, cynical I know but hey it is Washington after all.

LawHawkSF said...

Andrew: Precisely my point. Not only are those bad behaviors endemic among the groups mentioned, but the government encourages it by ignoring it, thus continuing the unconscionable pattern of "benign neglect" and the "bigotry of low expectations." Left to their own devices, the racial and economic groups we touched on would work hard to change those bad behaviors. Instead, the leadership shrugs it's shoulders, and mouths the loathsome words "it's a cultural thing."

Writer X said...

Andrew, thank your for your post. I've send this link to everyone I know.

What are they considering a "Cadillac" plan? Anyone who has private insurance?

So it sounds like my premiums and my health care costs will both increase if this piece of crap legislation is passed. Perfect!

AndrewPrice said...

Writer X, Right now, "Cadillac" plans are anything over about $20,000 a year (unless you're union, then it's higher). But, as you very perceptively note, that's going to fall very quickly as they need more money and soon any old Yugo plan is going to count.

Thanks for spreading the word! :-)

AndrewPrice said...

Individualist, Thanks.

I absolutely agree that Medicare is the cost driver here. The entire health care system is set up to work with Medicare, which is highly bureaucratic and rule-bound.

I'm not sure this is an attempt to cover up Social Security so much as it is simply the next "big thing" on the liberal agenda. Since they firmly have both Houses of Congress and the Presidency, they were going to do a bunch of liberal stuff, and this was just the biggest one on the list.

I think they're still ignoring SS.

AndrewPrice said...

Lawhawk, As I said, I don't see this as a race issue, just as a poverty issue. Some of the unhealthiest parts of the country are in places like West Virginia which is made up basically of poor, rural whites.

CrispyRice said...

Thanks for the summary, Andrew.

I'm sick to my stomach just reading it. :(

AndrewPrice said...

You're welcome CrispyRice. It is depressing isn't it?

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