Tuesday, June 20, 2017

Calhoun County

Tonight there is a United States Senate Republican Candidate Debate sponsored by The Calhoun County Republican Party.

Presumably health care will be in the debate.

Starting with a blog entry Health care posted in March, I have been endeavoring to get honest and intelligent discussion of health care by Alabama's representatives in Congress.  I have tried to keep up with positions and discussion of health care by the candidates on their websites and in news media reporting. This entry is to build on the blog entries I have written thus far.

New reporting on the views of candidates can be found in the article Alabama's Senate candidates on Obamacare: Repeal, replace or build on (which currently has 38 comments on it), posted by Al.com Mobile posted this past Sunday:

The blog entry Health care has links to my other blog entries about health care. This blog entry will be a restatement and expansion of the "My statement" section set forth in Alabama expertise re health care.

The goal of  my discussion here is indicate where I think candidate discussion has been reasonable and where I think the candidate discussion is wanting. 

A. Medicaid
On Medicaid, it appears from The Montgomery Advertiser June 14th article Alabama Senate race: GOP candidates differ on proposed Medicaid changes that the candidates reasonably acknowledge that there is a significant correlation between the amount of funding for Medicaid and the quantum of health care services that are received by persons served by Medicaid. There can be  room for making Medicaid a more efficient program so that the same quantum of benefits of health care services may be delivered for a lesser amount. It  is very problematic, however, to quantify in advance how much can be saved by greater efficiency, and, even after changes are put into effect, there can be great difficulty in measuring cost savings that have been achieved. 

This reasonableness of the Senate candidates is to be compared to the dishonesty about Medicaid that has been manifested by Tom Price and Donald Trump regarding $850 billion of cuts in Medicaid not reducing services.

The Senate candidates can advocate for differing levels of Medicaid and can advocate for increasing State control or not.

It goes without saying that the country as a whole has huge requirements for health care services, the costs of providing the services are correspondingly huge, and that is applicable to the health care needs of those who are served by Medicaid.

This is captured where the Montgomery Advertiser article says:
Medicaid provides health insurance to 1 million Alabamians, almost all of whom are children, the elderly or the disabled. More than half the children in the state qualified for Medicaid in 2015, according to the Alabama Medicaid Agency. The state’s hospitals also count on Medicaid to ensure a flow of patients to keep their doors open, and primary care providers – particularly pediatricians – see many patients through the program.
Politicians don't want to dwell on costs, which voters ultimately have to pay for, but they are central in the health care debate.

B. U.S. health care spending
One lack in the health care discussion thus far is that the candidates have not brought up how health care spending is more than twice the health care spending in other developed countries and have not offered explanations about why this is so and what should be done in the United States about the situation.  The below table is from Wikipedia.
Total health expenditure per capita in US dollars (PPP).[2]

Czech Republic2028233023862464
New Zealand3199348635373590
Slovak Republic2000207319712064
United Kingdom3192388139714003
United States8423861790249451
Possibly some of the candidates believe the United States gets more and better health care services for its much greater spending, it is right for it to be that way in United States, and Congress and the country need not be greatly bothered with seeking to reduce the higher spending in the United States.

The mantra of the Republicans is that freeing up the market for health insurance and having more competition and choice in insurance plans is the elixir for what ails the country's health care  and particularly for reducing insurance premiums and deductibles.. This elixir will be discussed at length below, but first some things that most will agree can reduce costs and spending will be discussed .

C. Things that can reduce cost and spending
Although the below items have not figured prominently in candidate discussion thus far,, there is probably agreement among the candidates that the following are ways that can reduce health care costs and health care spending.

1. If medical malpractice and other medical liability is reformed, and defensive medicine is reduced, that will help reduce the country's health care costs. If the candidates decide to talk more about this, for now I will leave it to them  to provide estimates of how much health care cost can be reduced by reforming medical malpractice and other medical liability is reduced.

2. The government can play a role in reducing health care costs by exerting control over prices. The biggest impact could be regarding drug prices, which might start with Medicare negotiating drug prices with the pharmaceutical companies. This is a controversial step, which may be part of the plan of Trump and the Republicans. It needs to be kept in mind that any such control have ramifications, including reducing availability of some drugs and lessening the development of new drugs.

3. If there is a reduction in total demand for health care, prices should fall and premiums and deductibles should fall. The American Health Care Act passed by the House of Representative will reduce government funds for health care by means Medicaid cutbacks and by replacing higher subsidies with lower tax credits, and this will translate to a reduction of demand. Under principles of supply and demand, the reduced demand should result in a reduction of prices but the amount of such reduction is very problematic and may be negligible. It needs to be stated that the reduction in prices, premiums and deductible here is not due to increased plan choice, but is due to a forced reduction in spending and reduced health services, drugs and medical equipment being obtained.

D. Free markets and competition
The Republican mantra is that free markets and competition in insurance plan choices will reduce insurance premiums and deductibles. This needs dissecting.

1. Increased plan choice as shifting who pays

One consequence of increased plan choice is merely a shifting around of who has to pay what.

Greater plan choice allows for people to plan that they won't need or want certain services, drugs and equipment, for those not to be covered under their plan. and that can allow the insurance company to charge them less in premiums and deductibles.

It is getting generally recognized, if some people are allowed to do that, the people who need the services, drugs and equipment that the first set of people forego will have to pay higher premiums and deductibles to have the services, drugs and equipment covered by their plan. In other words, plan choice can reduce premiums and deductibles for some people but increase them for other people.

Similar analysis applies to the Obamacare mandate and what happens if it is eliminated.The elimination of the mandate will reduce premiums for those who choose not to have insurance coverage. If healthier people do not buy insurance, that will result in higher premiums and deductibles for the unhealthier people who buy insurance.

In other words, increasing plan choice does not reduce provider prices and does not reduce health care spending

2. Further discussion of free markets and competition in health care

Free markets and competition for determining prices of goods and services in the economy are generally viewed favorably, including how competition on the supply side results in a lowering of prices (compared to there not being competition on the supply side).

Two important elements for free markets and competition to work are that prices on the supply side be visible to consumers in making their choices, and that consumers are "spending their own money" in choosing to make a purchase.

If consumers directly purchased their health care services, and if the prices charged by providers were publicly posted, that could result in significant "comparison shopping" by health care consumers, and the result of such competition could result in a significant reduction of provider prices and reduced health care spending.

It should also be pointed out, if the health care system entailed all consumers paying directly from their own resources for health care services, some consumers would not be able to afford the prices, they would not obtain the services, and there would be an overall reduction of demand for health care services, and this would also contribute to a reduction of prices.

That, however, is not the way the United States health care system is currently. Perhaps some Republicans would like the health care system to be that way. There is probably zero chance of that happening. In the debate, attention should be paid whether any of the candidates are arguing for.

In the real world of health care insurance, the above two elements are not adequately present.

With health insurance, both consumers and insurers need to be looked at to show this.

Consumers may make choices about insurance policies and corresponding premiums, but, once they have selected their policy, in choosing to obtain particular services, consumers can't "comparison shop" among different providers and different prices.. The insurer has already selected who the providers will be and the prices to be paid for the services.

Also, in health insurance, consumers making choices to obtain services are not then confronted with having to pay the full price, but, having paid their insurance premiums, consumers may obtain the services for no or little additional payment. At the juncture of choosing to obtain health care services, the phenomenon of "spending someone else's money" kicks in, and there is no weighing the value of the service against the full price of the service.

Regarding the insurance policies themselves, purchasers of the policies have no meaningful way of comparing the value of the policy against the amount of the premiums . They know the premiums they have to pay and what deductibles they may have to pay, but they otherwise cannot make a comparison of policies, including not being able to take into account the respective networks under the policies, not knowing in advance what services will in fact be needed and obtained, and many other things having bearing on the value of the policy and making a decision about which policy is a better deal for them.

Health insurers are in business to make profits, and components of doing that include offering policies that consumers are willing to purchase, setting up provider networks to provide serves under the insurance contract, and setting premiums at sufficient levels that will pay the agreed charges with the provider network, taking into account projections of how much consumers will obtain the benefits under the policy, plus earning a profit for the insurance company. While consumers are largely ignorant in the market place, the insurance companies are very informed about the health care market place,differing provider charges being available, the breadth or narrowness of the provider network, all of which the insurance companies negotiate out. Insurance companies are practiced in navigating the provider marketplace, out of sight of consumers, with a view to higher insurer profitability, and with probably little concern about consumer plan choice translating into reduced charges.

Maybe the best way to see this is to think about insurance companies and providers negotiating prices with one another, with insurers seeking lower prices and suppliers seeking higher prices. The same would go on under both Obamacare under whatever new regime is put in place that allows the insurance companies to offer a greater choice of plans. Unless there is a reduction of total health care services provided to all insureds, there is not a basis for thinking insurance companies could negotiate their supplier prices to be less than under Obamacare.

That analysis then forces focus on the quantum of health services under Obamacare and the quantum of health services afforded under the new regime. This in turn turn means the discussion needs to grapple with the total quantum of health care services that are sought to be provided. The experience of Obamacare may demonstrate only that the total quantum of health services that Obamacare has sought to provide is more services than society is willing to pay for. The discussion then needs to to turn to deciding a reduced quantum of health services to be provided.

E. Summary
The country has spent six wrenching and expensive years endeavoring to implement Obamacare, and the result has been very inadequate in addressing the country's immense difficulties in providing health care to its citizens.

It is submitted that, unless there is delving into why the United States has much greater health care spending than other developed countries, whatever plan the Republicans propose will be wanting for the country in the long run.

The American Health Care Act passed by the House of Representatives will make a great reduction of health care spending by cutting Medicaid and reducing subsidies for health insurance (meaning some people will become uninsured). This is largely at the expense of those least able to afford health care, and it is submitted that this will not be a viable long term solution for tackling the reasons for the high health care spending in the United States.

The history of "managed care" is instructive, and it is worth your time to read in the Wikipedia article about Managed care to get some understanding. What I think should be taken away from that discussion is that for 30 years, enormous efforts have been made to figure out ways to get control over health care costs and spending. Notwithstanding those efforts, the United States is still confronted with having much higher health care spending (as shown in the table reproduced above).

Why, why, why, should be on the minds of Republican Senators as they work on turning out their new bill. Health care is incredibly hard, Obamacare has not worked, and new thinking is needed. It is predicted that the Senate bill will not embody new thinking.

For the Senate candidates in Alabama, it is recommended that they read and determine whether any helpful insights are provided by the 2009 book The Healing of America: A Global Quest for Better, Cheaper, and Fairer Health Care. The linked review says:

Whether journalist T.R. Reid's new book, "The Healing of America," will influence the high-stakes health care debate this fall [over Obamacare] remains to be seen, but he makes a compelling case that an efficient, effective universal health care system is not pie in the sky.
He reports that every industrialized democracy, except the United States, has figured out how to provide insurance and basic health care to virtually all of its citizens, and argues that the United States should borrow and adapt successful ideas from other countries. In practice, none of these health care systems is problem-free, Reid makes clear, and nearly everywhere escalating costs are a major challenge. But every industrialized democracy spends a far smaller percentage of its wealth on health care than does the United States and gets better results according to standard measures such as life expectancy after birth (the United States ranks 47th) and infant mortality (22nd).
I think the book will help answer the why question of why the United States spends so much more on health care than other developed countries, including after decades of trying get control of such spending. Whether the book will peruade that the United States can and will ultimately take steps not to be the exception to what other industrialized democracies have done regarding health care.

If the Republicans continue on their track, and are successful in enacting a new law, my prediction is that the Republican law will fail as much as Obamacare, and the country will go through a repeat of more years of wrenching, unsuccessful change (from the wrenching, unsuccessful change of the past seven years).

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