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Health Insurance
Clinton Health Plan and its replacements.
Obamacare: Examination and Response
An appraisal of the Affordable Care Act and-- with some guesswork-- its tricky politics. Then, a way to capture major new revenue, even paying down existing Medicare debt, without raising premiums or harming quality care. Then, an offering of reforms even more basic, but more incremental. Finally, the briefest of statements about the basic premise.
It has to be noticed that developing lifetime health insurance is hampered by the considerable pregnancy and newborn costs which intrude at the beginning of the earning period from ages eighteen to forty-five. Otherwise, there is a reasonably manageable medical cost at the end of life, potentially preceded by a long period of negligible medical costs where compounded interest could be at work. So the thought naturally arises we might somehow pay for pregnancies in some novel way, essentially borrowing those costs against the future. What's involved here?
Instead of taxing each affected individual working person to subsidize his newborns and terminal care, the necessary subsidy could take place between three insurance plans, assuming the three costs to fall in separate insurances. Everyone owes a debt for being born, and everyone needs to save enough for getting old and dying. Society's benefits and costs of having children are not confined to those who have children. An unhealthy incentive to delay the first child has been created by paying for pregnancies this way, spreading the consequences to higher education and disrupted careers. Instead of regarding neonatal care as an expense of pregnancy (which we currently regard as part of the mother's health cost), just reverse matters, and include pregnancy costs as part of the baby's own debt for being born. Any move assigning pregnancy costs must somewhat fudge the transition cost of getting born without paying for it or even asking for it. Attitudes depend to some degree on whether people generally want children to help on the farm, to help care for their own old age, as entertainment or plaything, or accidentally. The theoretical fact is that pregnancy costs might be judged fairly split between the child and his parents if it were only practical to do it. Once those practicalities are addressed by covering the first and last years of life with entitlement, transfers become relatively easy. If we must have entitlements, birth and death are certainly inescapable ones.
Unfortunately, once the finance is made practical, other issues assume greater importance. Science is beginning to make single parenthood more feasible, while easy divorce makes multiple parenthood possible. Easy sharing of the costs could reasonably be resisted as a moral issue we never had, and now don't need. The longer you live, the more interest you earn on those first 26 years. But the longer you live, the more medically expensive you become, toward the other end of life. There is still a great deal of argument about what is a fair division, and much time will elapse before final resolution can be considered a settled matter. But ultimately, serious savings could occur from keeping the first and last years of life in mind as the only universal medical costs, extracting maximum savings as one argument for choosing accounting tricks to settle the pregnancy part of it. What would be left would be accidents and occasional health calamities, which paradoxically are the only parts of current health insurance which truly fit the current insurance model.
Let's give an example. Lifetime health expenses are said to be somewhere around $300,000. If you have $40,000 in a Health Savings Account on attaining the age of 65, you can passively achieve $300,000 by age 86 (which we hope is at least average life expectancy) by letting the HSA grow untouched. In this example, all other sources of health insurance revenue are available for other purposes -- they are the "profit" from using compound interest, but it is unnecessary for that to be exclusively the case. Now, the problem transforms into achieving $40,000 by age 65. That could be reached by investing $150 at birth, or $2400 at age 26. Both are achievable, neither is easy.
But it's nice to have some choice, which including the first 26 years will give you. You can even do it twice, once in the child's account, and secondly in your own. My guess is that about a third of people could spare $40,000 at age 65 right now, trading a single payment for Medicare for its present wobbly finances. With overlapping populations, 2/3 of people could afford to spare $75 from each parent of a newborn, or $150 for a single parent, in return for eliminating the obstetrical premium within their health insurance. Considering the problems of young parents, some might prefer to combine $150 with $4800 for both parents at age 26 into a financing package of $4950 spread over ten years, from 26 to 36. But notice it gets harder, the longer you wait. Finding $80,000 for both parents now aged 65 gets really hard to do, but at least the child is all paid up. If you wait, it gets pretty hard to do this without extending the retirement age to 70, sacrificing five of your thirty years of retirement, but reducing the amount you need to save by about a sixth. Nothing like these choices would be readily accepted. But the policy axiom remains: the younger you start, the easier it is to stretch the distance. And the more attractive it becomes to treat some or all obstetrical costs as the responsibility of the person getting born.
Before concluding this approach is impossible, try to remember it is quite unnecessary to make lifelong healthcare free to the last penny, although some will demand it. In fact, first-dollar coverage (i.e. making all healthcare seem free) is a big part of what got us into this mess. If we only achieve a quarter or a third of this promise, the national aggregate would amount to a stupendous amount of money. A more realistic goal might be to reduce projected medical costs by a third, offset another third with investment income, and pay a third in cash. All three of those approaches seem comfortably achievable.
As this chapter is being written, Obamacare has been struggling for three years to achieve its twin goals of reducing the cost of medical care, while improving its quality and scope. The public has long been skeptical that the two goals are incompatible. During those three years, we have achieved a cure for Hepatitis C. That cure will save millions of lives and eventually the costs will decline. In time, the public will be able to see the difference between the results of the two approaches. During that time, biological science has discovered the relationship between sleep and the circulation of spinal fluid through the brain, probably the greatest advance in physiology since Harvey discovered the circulation of blood in 1628. In another field, Joachim Frank has identified the function of the Ribosome, making strips of protein the way a zipper works, and very likely the step at the beginning of cellular life, operating at room temperature and without caustic chemicals. These three discoveries are surely less than 1% of the scientific advances of the last three years, giving promise of vast advances in the cheap production of protein drug therapies, saving of lives, and ultimately the extension of life expectancy at a lessened cost. During these past three years, what has Obamacare accomplished, at enormous cost, and widespread turmoil in the medical system?
As we approach the elections which will serve as a national judgment on Obamacare, it still remains difficult to say what it is. It clearly will raise costs, not lower them. It will extend a few subsidies to people who were uninsured, but the subsidies could have been extended without so much uproar. In any event, a number of people will have worse insurance after the dust settles. A regulation factory has been established, pumping out confusion, but changing comparatively little after three years of trying. It begins to seem incredible that there is so little to show for so much uproar, and there is room to doubt anything dramatic will emerge so late in the process. If the goal is to establish a regulation factory to shift control to the regulators, the public is quite right to ask what good will come of that; at the present rate of revelation, the eventual product will just be an expensive nuisance. So it seems fair to compare the final product with the Veterans Administration health system, which has been operating on a large scale for more than fifty years.
The Veteran's Administration health system is in the news, finally. Perhaps we should examine what is the matter with the VA, as at least a source of ideas about the forces which hem in any government health system. For example, whether it is a municipal, state or federal hospital system, it seems to be much better at constructing new buildings than maintaining them. Perhaps it is time to convene a study or a series of studies to address this discrete issue. Why is the system of control by budget relatively successful in an environment of designing and building a project, and so unsuccessful in running it?
Second, is there an inherent problem in setting the rules by the Congress or Legislature, instead of an appointed board of overseers? No doubt, there is an occasional abuse of power by a trustee of any organization, but lower-level administrators do not act as though this a big problem for them in private institutions. So what is it about governance by politicians which encourages the endless intrusion of politicians into the admissions, purchasing methods, hiring and disciplining processes of public hospitals? Does it make a problem to have control at the highest level be unified in a Congress or City Council, or is it the other way around, with too little authority vested in the operating divisions? Every administrator complains about staff physicians intruding into daily operations, but is it possible that the public institutions have gone too far in hierarchy, or else possibly not far enough? Most physicians hate administrative work, allowing a few tyrants to emerge, who do like it. When these would-be dictators are in administration because they are poor physicians, trouble is almost inevitable, and it cannot be improved by giving the power to nurses, pharmacists or other professionals who are normally lower in the pecking order than the professionals who now report to them. There is no good substitute for physician control, but what if all the physicians in a health system would rather quit than do administrative work? Maybe, just maybe, the private sector has something to teach us in this delicate issue.
To go on, politics may play the same disruptive role as professionals harnessed as administrators. Administrators detect and quickly resent a Union or American Legion official placed in a role which can disrupt the official power structure, just as if a pharmacist were appointed, or a nurse practitioner, or even an eminent neurosurgeon.
Finally, some new title should be applied to the type of corruption which is seen when union officials get their way in disrupting the day to day business of a health system. Quite recently, I was forced to hear the Director of local city Veterans Affairs say to an open meeting of strangers that he was totally and permanently disabled with a service-connected disability, and also working full time for $50,000 a year. Furthermore, he had recently declined an offer to work at a higher government level, at $200,000 a year -- plus, of course, his 100% permanent disability payments. There is more than a small chance he was making some exaggerated boasts, but even so, it is appalling to hear such indiscrete remarks being offered, without the slightest sign that he recognized the revulsion such remarks made on his audience. It seemed obvious to all of us that he heard such remarks so constantly, that he regarded such politics (new word needed) as reflecting a normal, legal and desirable state of affairs. If Obamacare contemplates anything approaching what seems to be the normal attitudes prevailing in the VA, it really will not matter much what is written in its regulations. In defense of the VA, a more compassionate history may reveal a plausible explanation.
It is my view that Congress is more responsible than they themselves realize, and the problem is worse than we think. Things have been trending in the present direction for fifty years, but the adoption of the DRG system of hospital payments came along in the 1980s. It was a brilliant rationing system, but it did not work well in Psychiatry, where the diagnosis has little correspondence to the cost. After a few convulsive experiments, Psychiatric hospitals were offered a payment system so unsuitable they could not exist with it. One by one, inpatient psychiatry disappeared no matter what the patient's finances were, and there is really only the Veterans System left. The situation was so egregious that admission officers simply ignored any rules which prevented admission of a case which clearly needed it. The distinction between service-connected and non-service-connected was most readily shoved aside, since humanitarian and medical urgency so clearly over-rode the rules. After twenty years, the disregard for administrative admission rules spread out to almost every condition, and it is going to be very hard to put the genie back in the bottle, when so many involved participants never wanted such non-medical constraints, from the very beginning.
Building a network of modern buildings in every section of the country, running an organization dominated by unions and their counterpart the American Legion, within a system which most doctors in the country avoid if they can, the VA is a quiet disgrace, slouching along for half a century. The underfunding, the political favoritism, the squelching of pride and achievement and the waste, are all about what you would expect from a union-dominated or politically dominated system. But most disheartening is to watch reform efforts squelched. Under the leadership of Dr. Dan Blain, a system of Dean's Hospitals had been created to infuse the high standards of neighboring teaching hospitals into what seemed like systems similar toward medicine, reformed by the Flexner Report in 1914. For a few years, it seemed to be working, but in time the financial ethics of teaching hospitals seemed, not to raise the standards of the VA, but to be dragged toward imitating their behavior. The medical school doctors assigned to VA hospitals served out their time, then agitated to be transferred back to the teaching hospitals, with difficulties in replacing them with the same quality, slowing winning. When you begin to see elevator operators running the self-service elevators, you can be pretty sure the administrators have lost the battle. There are thank goodness, plenty of exceptions. But nobody seriously expects them to change things very much. If you like what you see at the VA, you are going to love Obamacare.
Originally published: Wednesday, April 24, 2013; most-recently modified: Friday, June 07, 2019