Beyond the Deficit Commission’s non-report total cop-out on health care, what disturbs me is what changes they do recommend: embracing the economagic myth that the way to control health care costs is just to make regular people pay even higher co-pays, deductibles, and out of pocket costs. This idea that we can reduce overall health care spending by making people pay even more is pure economic theology. It is support by free-marketeers like a religious doctrine despite the fact that all evidence shows it is not successful.
Making regular people pay more for health care does not control cost
Looking back at America’s health care over the past few decades, or at a comparison of health care costs among industrialized nations, the foolishness of this thinking becomes clear. Over the past two decades, most Americans have seen their co-pays, deductibles, and premiums grow sharply, yet we still have the most expensive health care with costs growing far beyond the rate of inflation.
Internationally, there is no real positive correlation between out-of-pocket costs and lower health care spending per capita. The United States has the highest personal out-of-pocket cost and the most expensive health care. Switzerland has expensive health care and also high private and personal cost sharing. Meanwhile, the UK and Norway have low out-of-pocket costs and much cheaper per capita health care than both the US and Switzerland.
This economagic is based on a belief in savvy consumer economics, which just doesn’t apply to health care. Consumers need to have a deep knowledge, the ability to bargain, and the ability to turn down an offer for a market to bring down the price. This inherently does work with health care. Patients don’t have the vast medical knowledge the hospitals do to know what treatments they need and how marginally less effective a cheaper methodology often is. Many health services are monopolies, like patent-protected drugs. Critically, much of the expensive care is emergency based. When you are being rushed to a hospital with a heart attack, you don’t have time to shop around or decide to come back in two months during the hospital’s special President’s day sale. People aren’t going to refuse emergency life-saving surgery because they think the doctor is going to overcharge.
Though the theory is unsound, it is useful to those looking to justify making the middle class shoulder all of the “shared sacrifice.”
Not surprisingly, many of the Catfood Commission’s recommendations to reduce health care costs are wholly based on this economic theology. This includes proposals to increase cost-sharing in Medicare, end “first dollar” Medigap coverage, and change the way federal employee health care works. For example, from the draft:
Reform Medicare cost-sharing rules.
(Saves $10 billion in 2015, $110 billion through 2020)Currently, Medicare beneficiaries must navigate a hodge-podge of premiums, deductibles, and copays that offer neither spending predictability nor protection from catastrophic financial risk. Because cost-sharing for most medical services is low, the benefit structure encourages over-utilization of health care.
The logic is effectively that senior citizens on fixed incomes so love colonoscopies and hernia surgeries that they are getting unnecessary ones just for fun but would stop if they had a higher co-pay. Of course, the reality is that most people don’t like going to the doctor, and, due to their lack of medical knowledge, undergo whatever medical treatment the doctor orders.
While the national and international health care data fails to support this line of thinking, it is useful as a justification for the commission’s desire to force regular Americans to pay more for health care while keeping taxes for the wealthy very low. Just a reminder that “deficit reduction” is mostly just a disguise for class warfare against the working class.





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People’s reluctance to get care can in some cases actually increase healthcare costs, by allowing conditions that are preventable, or easily treatable in the early stages, progress to the point where they are incurable and very expensive. The overall effect of this is complex and debatable, but there’s a distinct possibility that the Catfood Commission’s approach to healthcare will actually increase its total cost over time, by increasing the disincentives to get care early.
Absolutely, and the point I just made reinforces this one. They don’t care how much healthcare costs; they only care how much they have to pay. They would still support their proposals even if they knew that it would mean massive increases in the overall cost of healthcare. It would just mean that much more profit for Big Pharma and the insurance industry. Then they would use the increased cost to justify another Catfood Commission report, and on and on the vicious cycle goes.
I agree entirely with your emphasis on healthcare as the central issue. I’ve argued elsewhere that the Catfood Commission and its miserable “report” do not even deserve a reasoned response, only ridicule and blanket condemnation, and that the details of the “report” do not even matter: the whole thing was designed from the start as a rationalization for dismantling of the social safety net, and it cannot have any other significance. This graphic is the best answer to Simpson and his accomplices. But if you do insist on responding to it in a rational manner, the best tack is the one you’re taking: to use it as a point of departure for a more general discussion of the real causes and significance of the nation’s high healthcare costs. Unlike this “report”, that topic does merit some serious thought.
My phrase for the market imperfections you describe is “mafia of the intelligentsia.” It also applies to legal services & higher ed tuitions, all of which are rising much faster than the rate of inflation. The first I wrote about this was nearly 2 decades ago, and the intervening time has been like watching a slomo train wreck, which will end in a big crash.
Tell me again why we could not have the Public Option or Single Payer?
Because …
Fuckit.
You are right. I don’t think anything will change until TBTF is forced to break up and go back to regular banks and investment branches separated from each other.
LOL! Because, they don’t want the citizenry to have anything. We are just supposed to pay taxes to the sovreign.
I’ve got my fingers crossed, hoping for a giant crash soon. I think the best chance we have of that is centered around fraudclosure. Undermine the legitimacy of the largest single group of assets in the world, shit hits the fan.
I think a complete economic collapse is the only thing that will kickstart serious changes in our society.
It doesn’t control cost. It does ration care.
We don’t have single payer because it would force private insurers to be cost-competitive, therefore decreasing their profit margins. What turns my stomache here is it wouldn’t make private insurers unprofitable, just make them less profitable. They would still run the largest racket in the country. It just wouldn’t be as grossly bloated as it is now.
Tell me, what the fuck do you spend a billion dollars on, anyway? Who needs a billion dollars?
I can’t buy anything so I am contributing. I hope it does crash. I hope the banksters get themselves unemployed and uninsured for a while.
The miracle is that with all the wrongheaded econ policies, the U.S. economy still functions at all.
Which raises a meta point: economic policy does not matter much over wide variations. It can certainly make things better or worse, and at extemes, can matter a lot. Examples of such extremes were the Soviets’ central planning, and today’s religiousity toward neolibrul policies. Even so, it took the former 70 years to destroy the Soviet economy. Meaning perhaps the U.S. has another 40 years to get worser & worser & worser.
See my 12.
Airplanes, Helicopters, Yachts, 10 houses all over the world, maids, gardners, nanny’s, jewels, cars, art, and all kinds of other really good stuff that is useless in a world gone awry.
True. I like your meta facts. Ruth and I have been discussing this for years now. We saw the logs on the shitpile when they started stacking them.
I’ve seen some evidence that HDHP’s lower health costs. Obviously the Catfood Commission got their numbers from somewhere.
But, as these charts illustrate beautifully, it completely ignores the fact that prices for health services in the U.S. are too damn high:
http://voices.washingtonpost.com/ezra-klein/IFHP%20Comparative%20Price%20Report%20with%20AHA%20data%20addition.pdf
And HDHP’s are a pain to administer because patients don’t have the money when providers come to collect it, and providers have to go hunting for ways to shift those costs to someone else.
I’ve heard that people with HDHP’s often stitch their kid’s cuts themselves, and engage in other forms of self-treatment. I have no opinion on that but the people who advocate HDHP’s should be aware that that’s what’s going to result from high cost sharing.
Okay. So what do you buy with the leftover 700 million?
ummm…. shoes! Ask Condi.
Roger. I see your point, and appreciate the example of Soviet Russia.
However, it would seem that, in the 1-in-a-billion, near impossible even that banksters were held accountable for their wrongdoing (scoff! I know!), simply by courts upholding the rule of law, they would ALL be forced into insolvency in one fell swoop. This would devalue the dollar to the point of pesos, or beyond, and we would need to reboot.
I can dream, right?
I just threw up in my mouth a little bit. If I ever have to speak to that toad, I’ll pray there’s a curtain between us. And a nice potpurri in the room to mask the scent of criminal complicity that oozes out of her every pore.
I have no idea how much a peso is worth, but the buck is only worth 60 cents next to the Euro and the Pound wipes it out.
LOL! I have several cast iron skillets.
It was my understanding that the Soviet Union wasn’t destroyed by central planning per se. Instead, the Reaganite neoconservatives (in accordance with the principle “It takes one to know one”) correctly predicted that the Soviets would be paranoid enough to spend themselves into bankruptcy rather than allow the USA to win the arms race. (Almost all liberals in this country guessed wrong on this one.) The decline of the Soviet Union was not a gradual, 70-year process, but a sharp precipice in the decade of the 1980s. And the Russian economy initially contracted by 50% after the downfall of the Soviet Union in 1989. Hardly a shining example of the superior merits of the free market over a command economy.
I believe it’s time to take another look at the command economy. Yes, it does have problems, but at this point, are they any worse, or less fixable, than the alternative? All economic systems have some unsolved problems, but in the USA, there’s a bias toward seeing problems with the command economy as fatal flaws, while equally serious problems with the free market are assumed (on blind faith) to be solvable.
Well, thinking about it a little more, the kind of econ policy the neolibruls are following is inherently less stable than the wrong-headed central planning. Think bubbles & crashes. So U.S. economy prolly won’t last as long as 70 years before the big crash. (I’m roughly dating from Reagan, when the dismantling of the ‘mixed’ economy began.)
You are not impressed that she has an oil tanker named after her?
Standards of living in Soviet Union were declining long before the final militarization, aided by Reagan. Respectable economists debate whether that had much influence at all; the rot was already so deep, chances are the economy would have failed soon enough without it. I don’t know enough about it to weigh in on one side of that evaluation or the other.
An economy that has gone the wrong way for so long usually ends with a big crash, because the whole structure becomes worthless all at once in the moment of reckoning.
We don’t need more cost-sharing, we need less cost to share.
According to the US-based Medical Tourism Association, these are some representative overseas costs.
*Heart bypass: $8,500 in India; in the U.S., $144,000
*Liver transplant: $75,000 in Latin America; in the U.S., up to $315,000
*Dental implant: $1,000 in Costa Rica; in the U.S., $2,000-$10,000
*Knee replacement: $10,650 in Mexico; in the U.S., $50,000
We already have several underground economies. If more and more are unemployed, people will do whatever it takes to survive. New and even broader underground economies will emerge. I remember reading about some of the insurance companies that started after the great depression. They were co-ops, lots of them started by farmers and shop owners.
I’m quite sure that the Soviets’ application of central planning was suboptimal, to put it mildly. Still, I don’t see any reason other than ideology why “respectable economists” (even Heilbroner, from whose book The Worldly Philosophers I first learned some of broad outlines of Marxist theory) are convinced that 1989 was the final verdict on the socialist command economy.
Oh, and no reason to go to extremes anyhow. The U.S. had quite nice ‘mixed’ economy from New Deal until roughly Reagan. Europe, with higher real standards of living than the U.S., is in the process of dismantling their mixed economy.
Were I economic craz (only word I ever had dyslexia about as a kid was czar but I like craz better), I’d look at each ‘market,’ like medical services, figure out what its particular ‘imperfection’ was, and try to devise a better way. That’s what developed European countries did after WWII for such critical services as medical.
BTW, the phrase market imperfection is econ jargon but I think it is close enough to real English to be understandable without further explanation.
I keep being reminded that the elites and politicians are actually Marxists.
wonder why?
The point is not to optimize an economic extreme, but to pick & choose.
It makes better sense to compartmentalize the industry sectors, rather than developing an economic plan that is supposed to govern all. But then again, the banks would not have a bubble to bet on.
Yes. Nice examples of mixing. See Steve Hill’s book, Europe’s Promise. He was here for a book salon earlier this year. Coops, like Europe’s stakeholder teams, involving management & worker reps, are a little like that.
And it’s a one-sided bet, since when banksters fail, USG bails them out.
AND, the logic is also that, if say 10% fewer of them did elect to have the procedure, doctors and hospitals wouldn’t raise the price to make up the difference.
I’ve seen this fucking bullshit out of so-called economists for decades. Using the model of perfect competition to make predictions when none of the assumptions underlying the model hold. NO theory in economics states that lowering the subsidy of a service will lower the price (or cost) of a service when both the quantity and price of the service are controlled by monopolistic enterprises. NONE.
Economists have done far more harm to society than astrologists.
I’ve often thought about this, Ecahn. Especially for those of us unemployed. We are a very talented group of people here and we could create our own economy. Obama has yet to determine a new economic policy. Heck, we are still running on Bush’s service economy mess where burger joints are now manufacturers!
Put another way: We can reduce spending by making people spend more.
In other news: war is peace, ignorance is strength, etc.
This a pretty good book, I have the first two of the three vols. It’s clear, relevant and helpful.
http://www.amazon.com/Power-Struggle-Politics-Nonviolent-Action/dp/087558070X
“Politics of Nonviolent Action”
Here’s and interview with the guy.
http://www.utne.com/Politics/Gene-Sharp-Interview-Power-of-Nonviolence.aspx
Only 3% of U.S. economists self-identify as neoliberals. Unfortunately, they’re the ones who are in charge of U.S. econ policy, & have tried to capture world econ policy thru IMF & WB.
The point that should be made from that quote is that if doctors, etc. did not suggest the patient need so many of those procedures, costs would then be lowered. However, it is a racket where they all grease the wheel to get more and the patient or medicare pays the most.
Although I’m an across-the-board socialist, there are definitely some industries whose market imperfections (and other problems) provide additional compelling arguments for nationalization, above and beyond the generic arguments for across-the-board socialism. In particular, private insurance is inherently a complete racket; the government is inevitably the insurer of last resort (no one else has deep enough pockets), so insurance companies are making private profit from risks underwritten by the government and its capacity for bailouts. (And, as we are now seeing, the same really applies to the entire financial-services sector.) Likewise, the arguments given in the main post here about the market imperfections in healthcare are compelling: ideal market competition cannot exist in healthcare. Notice that these are the very two industries that the vultures are currently trying hardest to keep fully private. By contrast, if there were only two industries I could nationalize, these (financial services, including insurance, and healthcare, at least large-scale healthcare such as hospitals and drug companies) are the two I would pick.
I’ve been thinking about that as I spend more time in mid-Hudson, where the source of economic activity after IBM pulled out, is more than a bit of mystery. Lots of little stuff, likely a lot of underground stuff, going on that is not immediately visible to the naked eye.
Don’t forget the downside of nationalization. Would you want your medical services to be determined by Stalin or W?
I have to agree on the finacial services for sure. Hospitals should not be for profit IMO, and drug companies should not hold monopolies.
That is a false dichotomy. I’d be fine if some swedes figured it out, they seem to be doing pretty well, yes?
http://en.wikipedia.org/wiki/False_dilemma
Same here in the south. I’m not speaking of drugs, but regular everyday type things. People are stepping out and away from everything expensive and corporate.
Yep, sounds similar. Back in the days when Ds were still Ds, one town govt switched from R to D over keeping Wal-Mart out; another switched over a big housing development planned right on a view of the cliffs from much of the valley below. Both were prevented. Now, however, the local grass root Ds haven’t figured out that their reps have been coopted by neoliberals. Not sure exactly how that works. In one case, U.S. Rep. Hinchey, who used to be a reliable good guy, got put in the veal pen once O was elected. Don’t know enough about how the more local ones work to have that figured out yet.
Power corrupts & ultimate power corrupts completely. Once you centralize power, there is no guaranty that corruption won’t be complete. Don’t know enough about Sweden to know why that hasn’t happened there. Suspect it might have to do with greater homogeneity of population. It might not be an accident that other developed European countries are trying to dismantle their social welfare systems when immigrants become a larger part of the population. Just speculating, as those issues are well beyond my pay grade.
If they are not for profit then how to you expect them to stay open in business? No profit, no mission.
And don’t confuse for-profit with not-for-profit, both have to earn and do earn a profit.
Be careful what ye wisheth for. The shock doctrine usually works one way: to give the plutocrats more of what they want and the poor less of what they need.
Because Obama is a Reagan Republican conservative.
Realizing he’s a conservative makes so many things much clearer.
If the government approached this as an public purpose engineering problem instead of a rent-seeking political problem, they’d simply fly the foreign surgical teams here.
Wow go on vacation and have your heart replaced @ the same time and save everybody money. I won’t be not surprised when the so called Health Ins. companies make it mandatory that we have to leave the country to have these surgeries soon. Rates still wouldn’t go down though just company profits.
Kleptocrats and our financial sector combined in the form of Private Equity are partially to blame for the healthcare fiasco.
From a Fresh Air interview with Josh Kosman:
http://www.npr.org/templates/transcript/transcript.php?storyId=120391729
Gross: “You say that the hospital industry has been especially hard hit by private equity takeovers. Why the hospital industry?”
Kosman: “…they are looking for companies that are healthy, usually that are not fast growers and that they think will have dependable cash flow no matter what happens.”
The problem is that it’s being taken seriously . It has been obvious from the beginning this is nothing but a thinly veiled attack on the New Deal starting with Social Security . Since this thing started lots of right wing hacks have been putting out ” me too “plans , all just as insidious . What they’re going for is the bandwagon effect and a lot of people are being sucked in .When only one sides ideas are floated or considered the debate is quite limited .This is especially true when the media is controlled by that sides ideological brethren . The real question is why Obama put together such a biased commission in the first place . Why Simpson wasn’t shown the door after the disgusting comments he made and why they were allowed to put Social Security in the mix when it has nothing to do with the deficit ? I believe pretty much everyone on this site has already figured this out , Obama is a fraud , a corporate tool and a Trojan horse . We can only hope that liberals , including a lot of so called liberal talk show hosts , hear me Stephanie , Obama butt boy Hal Sparks , Ed Schlutz and some others . Unless the liberal community can figure out a way to wake up it’s troops , start really challenging this phony every time he does something like appointing this awful right wing commission or appoints another corporate toady to his administration , we’re finished . Did anyone else notice that Andy Stearns seems to be going along with this too , WTF’s with that ?
Actually the only evidence that deductibles and co-pays lower “health costs” (defined as health insurance claims) comes from one study (RAND) that ran 5 years ending in the very early 80′s – and that study was on low dollar amount cost versus no charge. It proved the obvious – if things are free some folks will treat a visit to the doctor as a social occasion and go just to talk to someone – but the savings were minimal, albeit real.
But the key is the design of that experiment – it was low deductibles – not the 500 per person that is proposed followed by co-pays that will average about 2000 per year.
As an actuary I had to follow this research – everything other than the 5 year study (less than 6000 persons in less than 3000 families) that is available has so few folks over so little time that they are laughed at and ignored by actuaries because the studies are scientifically not credible. Indeed they just repeat the free causes extra visits result but with no credible detail that can be used to project savings.
Finally, the purpose of the study was to decrease health insurance claims – not to decrease health claims/cost or to improve population health. What is good for insurance companies is not in this case good for America.
Steffie Woolhandler, M.D., M.P.H. and David U. Himmelstein, M.D in the Journal of General Internal Medicine replied to an health insurance push for higher deductibles (Knight) with the following comment:
According to the Kaiser/Health Research & Educational Trust (HRET) Survey of Employer-Sponsored Health Benefits, the average family premium for CDH is 14.6% lower than that for a Point of Service plan.1 Even this figure probably exaggerates the true cost savings because CDHs attract disproportionately healthy enrollees.2 CDHs can save little because most costs are incurred by a few very sick patients who quickly exceed the deductible and are then impervious to CDH incentives.
In the Rand Health Insurance Experiment, expenditures in the 95% cost-sharing plan (similar to a CDH) were 75% of those in the free care plan—not half as Knight claims3—and cost savings at a population level are probably smaller. Many of the sickest families refused enrollment in Rand’s high deductible health plan (HDHP), skewing the subsample toward low-cost individuals. Moreover, each physician cared for only a few Rand patients. Data from Canada indicate that physicians control visit rates to maintain flat overall utilization in the face of changes in cost sharing. In Saskatchewan, imposing co-payments did not cut overall utilization, although it shifted it from the poor to the wealthy.4 Conversely, Quebec’s elimination of cost sharing caused no change in the total number of outpatient visits or in physicians’ patient care hours, although it shifted care from the wealthy to sicker and poorer patients.5
Overall cost trends contravene the notion that high out-of-pocket costs constrain spending. The USA has the world’s highest out-of-pocket costs and the costliest health system. Moreover, sharp increases in cost sharing during the 1980s had no discernible impact on skyrocketing health costs.
Knight also understates the harms of CDHs. The Rand study is hardly reassuring. It predated the introduction of statins, angiotensin-converting enzyme inhibitors, metformin, tamoxifen, etc. And the Rand researchers cushioned out-of-pocket costs by giving participants advance cash payments to offset any deductibles. Nonetheless, high deductibles raised the risk of dying by 10% among the sickest and poorest quarter of the study population and cut appropriate and inappropriate care by roughly the same proportions.
eCAHN-I am interested in your comments and from others. I am a 62 year eye surgeon. Not well versed in econ. Some facts. In 1966 a cataract surg was $600 and a chevelle was 2000. When I started surgery in 1983 cat surg. was 1800. The next year my prices were frozen by Big Brother-then reduced. Cat surg. now is $570. and a chevelle is ?. Most of my practice is “single payer” ie medicare. Any further reduction in re-imbursement might close my doors. eCAHN who can you advocate “single payer” while still realizing that either “Stalin or W” determines how your health care is delivered. Obamacare does have significant rationing as an intergral part of the deal.
I am 62 so a short timer in terms of actually practice time left. Lots of good thinkers on this site. I hope to be able to offer some of my views. Been to Russia- seen their health care. Know a fair amount about England- really don’t want to see either system here. Doctor John
Thanks for your great reporting.
Seriously, what is wrong with these people? Of course folks, especially older folks who may have a difficult time even getting to the doctor, do not just go through procedures for the heck of it. How can people be so clueless?
And all that talk about those “Cadillac” plans– what was that about? Begrudging people good health care?
Maybe I’m wrong on this, but I remember Obama, during the HCR discussions, talking about how we would save money on Medicare “waste” by eliminating duplication– that is, doctors repeating the same test. Assuming the patient doesn’t have dementia, won’t he/she say– I already had an x-ray?
Here’s some proof for those who don’t realize President Obama is conservative:
“Privately, Mr. Obama has described himself, at times, as essentially a Blue Dog Democrat, referring to the shrinking caucus of fiscally conservative members of the party.”
http://www.nytimes.com/2010/12/01/us/politics/01bai.html
The article says that he’s pragmatic and not part of ’60s liberalism or ’80s conservatism. But who is?? I think we’re arguing for good health care for all and taking care of the poor, the elderly, and those who need help out of a moral sense. Furthermore, the Republican gang and especially the tea party are not motivated by fiscal conservatism, but a desire to win elections by appealing to their nationalist extremist base. The article calls Obama part of an “emerging generation”. He’s nearly 50– how is that emerging? I don’t want to make everyone feel old by saying that. In fact, I am not young (I prefer not to give my age). But I am tired of reading about how Obama represents something new and we who fight for SS and Medicare live in the past. It is simply not true.
Stalin and W are both examples of failure of representative democracy. A command economy does not (or should not!) imply a single “czar” with autocratic powers, any more than a single Chief Executive necessarily implies dictatorship. We need to extend democratic controls, such as we already have for our political system, into the realm of economic production. That includes checks and balances, and separation of powers. Such checks and balances need not include anything resembling a market economy.
I find Marx useful mainly as a guide to the real workings of capitalism, not to the best form of socialism for us to adopt: he’s better at diagnosis than cure. I have no sympathy at all for “dictatorship of the proletariat”, and I wouldn’t want to resurrect the Soviet Union even if I could. It can be easy to write off “bourgeois democracy” when (as at present) we see it bought and paid for by the grifters, and under those circumstances it may indeed to be necessary to carry out political direct action “outside the system of formal political democracy” (Chomsky and Herman). But the formalities of a democratic republic remain essential to restoring a healthy society after the grifters are brought down.
Average woman’s Social Security benefit: $972/month
Average woman’s dialysis treatment: $240/treatment, or $2880/month for the bare minimum of 3 treatments/week (any more frequent dialysis costs more but is much better for health)
She affords this exactly how if stuck with higher costs?
On March 9 or 11 of 2009 Obama met with the “New Democrat Coalition” and they announced that he called himself a “New Democrat”. Look it up on c-span and/or the New Dems websites.
Knowing this makes his moves to the Right after election all the more congruent and a betrayal.
The reason cuts in reimbursements would put you out of business is because of the credit binge Greenspan, Bernanke and the rest of the financial parasites put the country on. One of the effects of the bubble was to raise the cost of education so that doctors need to charge more to pay their massive education loans, as well as for the lifestyle to which they have become accustomed. Then there are the parasitic insurance companies that take a cut of the transaction to give their CEO’s 73 million dollar golden parachutes.
http://blog.aflcio.org/2010/01/05/health-insurance-ceos-73-million-bonus-covers-a-lot-of-co-paysand-other-health-care-news/
Frankly, your complaints don’t interest me. Close your business if you like.