The Alan Katz Health Care Reform Blog

Health Care Reform From One Person's Perspective

Health Care Reform’s Likely Outcome: Worse Than Promised; Not as Bad as Feared

Posted by Alan on November 20, 2009

As the Senate begins their effort to pass health care reform anxiety levels are, quite naturally and rightly rising. Health care is highly personal. For those of us working within the current framework, having politicians mess with our livelihood is a stressful to say the least. That these politicians (both Democrats and Republicans) seem to care less about the substance of the reform and more about how they appeal to their electoral base does nothing to reduce that stress.

Of course, what we’re reacting to at this stage is not the final reform legislation. The House and Senate proposals foreshadow what Congress will eventually pass (if it passes anything). The actual legislation is still to come. Put another way, we know the basic outline, but the devil resides in a suburb of the details. As I pointed out in my previous post, however, the real drafting of health care reform legislation hasn’t started yet. With the Senate taking up the issue we’re seeing the end of the legislative phase in which the parameters are defined. It’s in the upcoming conference committee that will define health care reform 2009-style (or, more likely, early 2010).

Concerning that prior post, Ron Masters, a friend and frequent reader/commenter of this blog, took me to task for writing too kindly about the current House and Senate versions of health care reform. “I’m surprised that you seem to feel that either of these bills are any good,” he write. This after a litany of shortcomings concerning the current administration, the ability of government to deliver much of anything, and the foolishness of imposing taxes and creating new entitlements in the midst of the current economic mess. And he makes some fair points.

He’s not alone. I’ve heard from a lot of brokers, readers and others who are convinced the coming health care reform will be a disaster leading to ruin and damnation for the country. I disagree. Here’s why.

As any reader of this blog knows, I don’t buy into the premises of those at the extreme. Not all government programs are good, but some are. Not all taxes are bad, but some are. Change is important, but getting change right is more important. Defending the status quo just because it is the status quo is indefensible. In other words, I’m comfortable with the gray shades of reality and uncomfortable with the black-and-whites of true believers.

I’m also comfortable with the government doing stupid things now and then. No party and no administration has a monopoly on such foolishness. (Nor has any party or administration failed to achieve some truly noble accomplishments). What’s more, no administration lasts forever. Whatever health care reform passes in the next few months will be administered by a parade of future administrations and modified by Congresses yet to-be-elected. Many people have a tendency to believe whatever Congress passes and how the current administration implements it will remain unchanged forever. It won’t. Medicare was vilified as socialistic and a fast slide toward America’s ruin when it was being created. Things didn’t work out that way. The program has survived for nearly 45 years under the administrations of Presidents Johnson, Nixon, Ford, Carter, Reagan, Bush-the-first, Clinton and Bush-the-second. Yes, it is a far from perfect program and faces significant challenges. Still, it works, it’s evolved and it will continue to do so. And the country has survived.

Another reason I’m not outright opposed to health care reform is because I believe expanding access to health insurance is critically important. It is well understood that everyone in America has access to health care. But it is also well documented that people with health insurance live healthier, longer lives. A recent study by researchers at Harvard Medical School confirmed an earlier study from the 1980’s that “uninsurance is associated with mortality.” That’s an awkward way of stating a well-accepted truism: being uninsured can be hazardous to your health.

Expanding coverage, however, is expensive. The more people who have coverage the more people who will incur medical expenses. That is after all, the whole idea and a desirable outcome. It’s also an expensive outcome. In my mind, it’s a price worth paying. Especially considering the potential return on this investment.

Those with insurance are already making heavy payments to pay for care received by the uninsured according to a study by Families USA. In 2008, the study reports, nearly $43 billion of health care the uninsured received from hospitals, doctors and other providers went unpaid. This uncompensated care results in higher premiums for those with coverage. In 2008 this hidden tax increased premiums $368 for single coverage and $1,017 for family coverage. Given the recession, this amount has no doubt gone up. Increasing the number of Americans with insurance should reduce this burden.

Early identification of potential health conditions before they blossom into serious diseases can generate tremendous economic benefits, although these savings are rarely considered in a cost-benefit analysis. Every dollar invested in preventing and treating heart attacks generates $7 in increased productivity, according to a study by United BioSource Corporation.

In other words, it’s not just the reform bills being considered in Washington that are expensive. So is the status quo. Health care costs are crippling businesses, bankrupting families and state governments, enabling fraud and abuse, increasing taxes, and failing to deliver on many of its promises. Change is inevitable – and it’s coming.

Too many in Washington believe (or at least claim to believe) that reforming the health insurance industry will reduce the cost of coverage. Far from it. The bills being considered in Congress will cause premiums to increase. Until Congress tackles the underlying causes of skyrocketing medical costs, health insurance coverage will become increasingly unaffordable. The House and Senate health care reform bills do have more cost containment provisions than is generally acknowledged. Could they be stronger and more ambitious? Yes. Are obvious cost containment opportunities missing (e.g., malpractice reform?) Yes. But they’re there. And future efforts to restrain medical costs will benefit from the seeds planted in the current reform debate.

Which brings us, I suppose, to the key question: are the House and Senate health care reform bills good? No, not really. They’re too heavy handed, using an axe when a scalpel is required. As noted, their cost containment provisions are weaker than the American people deserve. The bills reflect a misunderstanding of how health insurance works and about what drives premiums. The costs for the program are no doubt understated (few initiatives of this magnitude, whether attempted by government or business, come in under budget).

If either the House or Senate bills were the final legislation I’d be more concerned than I am now (and, for the record, I am concerned). But neither HR 3962 nor Senate Majority Leader Harry Reid’s proposal are going to be enacted, not as currently written. I believe the conference committee will need to make significant changes in order to get the votes needed for passage – if that’s even possible.

There are plenty of substantive problems with these health care reform proposals. To make matters worse, their backers and opponents are knowingly overpromising or attempting to frighten the public. Democrats claim their reforms will reduce overall health care costs, lower premiums and reduce the deficit. Wrong on all counts. Republicans claim it will destroy American businesses, annihilate Medicare, create death panels and bankrupt the country. Just as wrong.

We’ve seen this script before concerning Medicare, Iraq, and a host of other issues. Partisans on one side over promise, their opponents dredge up scenarios of doom. That both sides are equally guilty makes it no more acceptable or welcome. But it is what it is.

The main point of my previous post, and of this one, is that if reform passes, it will not be as bad as feared nor as good as promised. It will be refined sooner (by regulation) and later (by future legislation). The fight for a better health care system will continue. Only the status quo will have changed. The need to improve on it will remain.


6 Responses to “Health Care Reform’s Likely Outcome: Worse Than Promised; Not as Bad as Feared”

  1. Mike said

    Expanding access to more Americans is critical. Many Americans who have health care insurance find themselves with minimal coverage and are not receiving the quality care they require and deserve. The major defects in America’s current health care insurance include the increasing costs, restricted access to care, and continuous holes in quality. These defects prove that the current system has been unsuccessful and we must reform healthcare.

  2. John Eley said

    You wrote
    “Expanding coverage, however, is expensive. The more people who have coverage the more people who will incur medical expenses. That is after all, the whole idea and a desirable outcome. It’s also an expensive outcome. In my mind, it’s a price worth paying. Especially considering the potential return on this investment.”

    I would like to state as clearly as I can that no return on this investment that can be secured only with coercion of currently free Americans is justifiable. You are far too willing to impose costs on some and to thereby limit their freedom in order to benefit others regardless of need and desert. One of the major costs is loss of freedom by those who do not choose to purchase insurance so that they can pursue their own life plans, which at the moment do not not include paying for health care. The other is a serious loss of the possibility of innovation in the economy. One wonders how many major productive projects, think Microsoft, Google, etc. will have to be postponed because young innovators have to spend money on health insurance that they would not otherwise have to spend. This diversion of resources could have serious negative consequences and at the same time reduce the scope of freedom which in and of itself is a serious loss to society. We need to find non-coercive ways of accomplishing the same goal, if indeed we should be pursuing the goals of universal coverage which will almost certainly make health care more expense for everyone with too much money seeking scarce goods.

  3. James S. Thornton said

    Alan, you are the best blogger I have read. This column was yet another testimony to your pragmatism, even-handedness, and wisdom. That you make your living from this industry, and can still write about proposed changes in such a fair way–even if the ultimate changes could impact your livelihood negatively–is, to my way of thinking, proof that rationality still does live on in an increasingly irrational political environment.

    If only the nation as one could simply make you Healthcare King for a day, I have no doubt you would set us on a course that would do the country proud.


  4. A.B. said

    How can you say this:

    “I believe expanding access to health insurance is critically important.”

    and this:

    “Health care costs are crippling businesses, bankrupting families and state governments, enabling fraud and abuse, increasing taxes, and failing to deliver on many of its promises.”

    when the costs of health care are directly related to what we refer to as “Health Insurance.” Traditionally and by definition, insurance is a risk-management tool. What we refer to as “Health insurance” is not insurance at all. It is a health-care payment plan.

    Should the Federal government require Auto-insurance to cover oil changes?

    The costs of health CARE need to reflect the prices at which a willing buyer and willing seller decide to transact business (free-markets) before any meaningful reform can be effected.

  5. JimK said

    One other item, you mention that the proposed healthcare reform does not include malpractice reform and until recently, I would have just ignored that comment and just assumed that you were part of the grand scheme to deprive Americans of one more of their basic civil liberties. I have since reconsidered this subject based in part because the current system includes only about 3% of the individuals who actually suffer harm due to medical malpractice. On another blog, I engaged in written conversation with one of the administrators of the blog on this very subject and posted a comment with my recommendations. Since the post was somewhat lengthy, I did not repost it here but if you are interested in reading the proposal, I have included a link to that particular blog. I have several comments on this blog but my proposal is one of the last comments.
    The reason I am including this here is because the recent Republican proposal did have a proposal on malpractice reform and interestingly enough it was somewhat similar to my proposal. The Republican proposal endorsed the use of Alternative Dispute Resolution as a means of solving malpractice cases. While the Republican proposal has some serious shortcomings such as the inclusion of the term malicious intent when deciding financial settlements or raising the standard of proof from the civil litigation norm of preponderance of the evidence to the higher standard of clear and convincing evidence it can still be used as a starting point.

  6. JimK said

    One of the criticisms of the current healthcare reform proposals is that they do not provide enough incentive to “bend the cost curve.” David Leonhardt, an economics writer for the NY Times has written an article that disputes this assertion, at least in regards to the original Senate proposal. Mr. Leonhardt provides a link to a study conducted by McKinsey and Company in which McKinsey concludes that the original Senate proposal would actually achieve the desired results of bending the cost curve. According to the report the shift would not be immediate but would phase in over time. Whether the report is accurate is not for me to determine but the reality is that bending the cost curve will most certainly be an incremental procedure.

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