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Health Care and the Law of Unintended Consequences

Editor’s note: An excellent article by John Goodman. It is the issue of unintended consequences. Of interpretations by administrators and regulators — the same sort of people that Americans claim work for insurance companies and deny them care.

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Sep 9, 2009
by John Goodman

“Lies and distortions,” says David Axelrod. “The 26 lies about H.R. 3200,” headlines an Annenberg report. “The Five Biggest Lies About Health Reform,” is the lead in a Newsweek article.

You would think we were living in some foreign country.

There are many contentious issues, of course. But towering above all others, THE ISSUE is denying people care. Or, if you like, health care rationing.

At the National Center for Policy Analysis we have brought this issue up frequently — but, I believe, in a responsible way. For that matter, Barack Obama has brought the issue up frequently — also in a responsible way.

Yet what is driving the defenders of Obama Care crazy is that this issue is being discussed at all. For one thing, the President is saying things most Democrats never say when they talk about health care. For another, the opponents have passed up not a single opportunity to distort and exaggerate to the hilt. To get one absurd statement out of the way, let’s admit that none of the bills before Congress contain the words “death panel.”

Still, is there something here we should be worried about? Answer: Yes. You should be very worried.

President Obama’s view of how to control health care costs. His own grandmother probably didn’t need the hip replacement she received, the President opined on one occasion. “Maybe you’re better off not having the surgery, but taking the painkiller,” he told another audience. We’re only talking about eliminating care that is unnecessary, he told a national television audience at the ABC infomercial in June.

President Obama was more explicit in his speech to the American Medical Association. Patients are getting too many tests, too many exams and too many services of all types, he said. Office of Management and Budget Director Peter Orszag says we could lower health care spending by one-third nationwide if doctors everywhere practiced medicine as efficiently as the lowest spending regions.

Here’s the bottom line. Barack Obama really does want to come between you and your doctor. More precisely, he wants to change the way your doctor practices medicine. In the Administration’s ideal world, you would get all the health care you need. Only unnecessary or futile care would be eliminated. But that’s what the Canadian government, the British government and just about every other government in the world says. To state the obvious, the public clearly does not trust the Administration to get it right.

How rationing will be done under Obama Care. As I explained in a recent National Review editorial, rationing Obama-style will be done indirectly. It will be the result of administrative decisions — all ostensibly made for the best of reasons: to eliminate futile and unnecessary care. Here’s how it will work:

Under Medicare, the Administration is seeking the authority to make decisions on reimbursing providers through an independent commission. The federal government will use the power of the purse to force doctors to change the way they practice medicine. There will be fewer CAT scans, fewer MRI scans, fewer blood tests and fewer operations for the simple reason that Medicare will quit paying for procedures it considers questionable.

But how do we know that the scan or the test not ordered isn’t in reality life-saving? We don’t. In the very act of trying to change how doctors practice medicine from the payer side of the market, we run the real risk that quality of care will be sacrificed. And remember: the rule makers in Washington — far away from practicing doctors and real patients — will be under constant pressure to keep spending down.

Medicaid (for the poor) could be pressured in the same way as Medicare (for the elderly and disabled). But what about private health plans?

Under Obama Care, everyone who does not get health care from an employer will be required to obtain it in a health insurance exchange. The plans will be free to set their own premiums, but they will have to charge all enrollees the same price — regardless of health status. Because some plans will attract a greater percentage of sick enrollees than others, a government administrator will have the power to “tax” plans with healthier enrollees in order to subsidize plans with sicker enrollees in a process called “risk adjustment.” And it is precisely through such adjustments that the government will have enormous power to influence what is done for the sick.

For example, suppose a plan attracts an above-average number of people whose doctors say they need hip replacements and ask the government risk adjustor for an extra payment to cover the cost. The risk adjustor may decide these hip replacements constitute “unnecessary care” or “futile care” and deny the request. In this way, the risk adjustor will have the power to indirectly force health plans to deny people care.

The government risk adjustor will be aided in this effort by a national health board which will be doing “comparative effectiveness” analyses. If the health board decides that a certain type of hip replacement in certain circumstances is “unnecessary” or “futile,” this will be prima facie cover for the risk adjustor to deny payments and for the health plan to deny care.

What is the difference between rationing and eliminating unnecessary care? As a practical matter, there isn’t much. Rarely does a doctor intentionally give a patient unnecessary care. That’s malpractice. But there is a lot of care that is of marginal value. A great many MRI scans, blood tests, other diagnostic procedures and even a lot of surgeries cost a lot more than any value they create for patients. However, getting rid of them through rules established by payers would almost certainly constitute a form of rationing.

For example, “comparative effectiveness” in Britain means comparing the number of extra years of life that are produced by a procedure/test/drug/etc. to the cost. The rule of thumb currently used is: approve the procedure so long as it costs less than about $45,000 per (quality-adjusted) year of life saved.

Is it fair to bring up the writings of Zeke Emanuel and Tom Daschle? I think it is. As noted at this blog, Daschle’s book makes comparative effectiveness, as practiced by the National Institute for Health and Clinical Excellence (NICE) in Britain, the model for controlling health care costs. Obama initially chose Daschle to be his health care czar and Daschle’s co-author is the Director of the Health and Human Services Office of Health Reform. Also as noted here, Emanuel’s writings on the need to ration and how to do it reflect a state of mind. None of this is Administration policy, of course. But an enormous amount of health reform policy will be enacted administratively. So the attitudes of people in the Administration who design and carry out the reform are important and fair game.

Is there a better way? As I have argued in Congressional testimony, in an NCPA study and at this blog, waste cannot be effectively eliminated by demand-side measures. Efficiencies have to come from the supply side of the market. If providers are freed to repackage and reprice their services, they will produce higher-quality, lower-cost care without any direction from on high. Of all the examples we can point to of excellence in medical care, not a one was created by Medicare, Blue Cross, an employer, or any other third-party payer.

Burden of proof. No one knows exactly how Obama-type health reform will work. But there is one point on which everyone should agree. The burden of proof is on the Obama Administration to demonstrate how they plan to reduce health care spending without denying people high quality health care.

http://www.john-goodman-blog.com/the-r-word/comment-page-1/#comment-45897

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September 9, 2009 - Posted by | Federal Government, healthcare | , ,

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