The Piercing Problem Of Funding Health Care

The Administration has largely stayed out of the details of the health care debate, preferring to forward a list of "priorities" and let Congress sort out the details. Max Baucus has set to work at the Senate Finance Committee, trying to build his legacy by creating a fundamental change in policy, building a system that "doesn't exist, really" to bend the cost curve, increase access and improve quality. And Ted Kennedy's Health, Education, Labor and Pensions (HELP) Committee will release a bipartisan bill on Friday. While the fate of the public option is unclear, advocacy groups have attached themselves to that element of the policy like Rottweilers and have actually made some progress. So things are moving along.

Except that nobody really has a clear picture of how to pay for this reform, the single biggest issue lawmakers face. People can announce support for reform, but without the dollars, it will wither on the vine. Cost projections of up to $150 billion per year need to be met with revenue, and the troubles with maintaining costs in Massachusetts' universal health care reform, which is an analogue to the national program, show how hard it is to even get the numbers down to that level. The supposed vows of the health care industry to do away with $2 trillion in costs is hopeful, but may run into legal antitrust issues involving collusion to hold down those costs, and anyway the industry has softened their tone in recent weeks, claiming that they were just "suggesting" the cost comedown.

Why does health care cost so much in America? Atul Gawande has an amazing piece in the New Yorker looking at this very problem. Often similar cities in the same state have wild variances in costs. Gawande looks at McAllen, Texas, with some of the highest costs for health care in the country, despite similar cities like El Paso having the same vital statistics and much less of a cost burden. Why? Here's a great excerpt:

One night, I went to dinner with six McAllen doctors. All were what you would call bread-and-butter physicians: busy, full-time, private-practice doctors who work from seven in the morning to seven at night and sometimes later, their waiting rooms teeming and their desks stacked with medical charts to review.

Some were dubious when I told them that McAllen was the country’s most expensive place for health care. I gave them the spending data from Medicare. In 1992, in the McAllen market, the average cost per Medicare enrollee was $4,891, almost exactly the national average. But since then, year after year, McAllen’s health costs have grown faster than any other market in the country, ultimately soaring by more than ten thousand dollars per person.

“Maybe the service is better here,” the cardiologist suggested. People can be seen faster and get their tests more readily, he said.

Others were skeptical. “I don’t think that explains the costs he’s talking about,” the general surgeon said.

“It’s malpractice,” a family physician who had practiced here for thirty-three years said.

“McAllen is legal hell,” the cardiologist agreed. Doctors order unnecessary tests just to protect themselves, he said. Everyone thought the lawyers here were worse than elsewhere.

That explanation puzzled me. Several years ago, Texas passed a tough malpractice law that capped pain-and-suffering awards at two hundred and fifty thousand dollars. Didn’t lawsuits go down?

“Practically to zero,” the cardiologist admitted.

“Come on,” the general surgeon finally said. “We all know these arguments are bullshit. There is overutilization here, pure and simple.” Doctors, he said, were racking up charges with extra tests, services, and procedures.

The surgeon came to McAllen in the mid-nineties, and since then, he said, “the way to practice medicine has changed completely. Before, it was about how to do a good job. Now it is about ‘How much will you benefit?’"

Essentially, doctors can cut corners by offering up batches of tests and spending way over what they need to provide care. Of course, many patients would decry having a test being held from them. It's a real conundrum, and having some comparative effectiveness research, so we know which treatments work better and why, would help, but still you would see a lot of these outcries. And doctors have a financial interest in more care. We have an overtreated society, but in many ways we want it that way. And more does not equal better.

Americans like to believe that, with most things, more is better. But research suggests that where medicine is concerned it may actually be worse. For example, Rochester, Minnesota, where the Mayo Clinic dominates the scene, has fantastically high levels of technological capability and quality, but its Medicare spending is in the lowest fifteen per cent of the country—$6,688 per enrollee in 2006, which is eight thousand dollars less than the figure for McAllen. Two economists working at Dartmouth, Katherine Baicker and Amitabh Chandra, found that the more money Medicare spent per person in a given state the lower that state’s quality ranking tended to be. In fact, the four states with the highest levels of spending—Louisiana, Texas, California, and Florida—were near the bottom of the national rankings on the quality of patient care.

In a 2003 study, another Dartmouth team, led by the internist Elliott Fisher, examined the treatment received by a million elderly Americans diagnosed with colon or rectal cancer, a hip fracture, or a heart attack. They found that patients in higher-spending regions received sixty per cent more care than elsewhere. They got more frequent tests and procedures, more visits with specialists, and more frequent admission to hospitals. Yet they did no better than other patients, whether this was measured in terms of survival, their ability to function, or satisfaction with the care they received. If anything, they seemed to do worse.

That’s because nothing in medicine is without risks. Complications can arise from hospital stays, medications, procedures, and tests, and when these things are of marginal value the harm can be greater than the benefits. In recent years, we doctors have markedly increased the number of operations we do, for instance. In 2006, doctors performed at least sixty million surgical procedures, one for every five Americans. No other country does anything like as many operations on its citizens. Are we better off for it? No one knows for sure, but it seems highly unlikely. After all, some hundred thousand people die each year from complications of surgery—far more than die in car crashes.

You can find a similar conundrum in how to actually pay for care. Employer-based insurance is an historical accident from the 1940s aimed at avoiding wage controls. And the deduction to employers for health care costs a tremendous amount of money for the government. Yet try to touch it, and public employee unions and I assume workers with health care from their employers will attack. Ezra makes an important point:

Wyden, after all, is a liberal Democrat. AFSCME is a left-leaning union. Both are desperate for health reform. But AFSCME is spending its time attacking Wyden. Why? Because Wyden wants to replace the employer tax exclusion (I told you that thing was important!) with a progressive tax deduction that all Americans, not just those with good employer benefits, would get. That means the poorest among us would get slightly more and AFSCME's members might get slightly less.

But AFSCME isn't really attacking Wyden. The bill Wyden co-sponsored -- the Wyden-Bennett Healthy Americans Act -- has fallen out of the conversation. The energy right now is in Sen. Max Baucus's (D-Mont.) process, and maybe Sen. Ted Kennedy's (D-Mass.) coming proposal. Everyone expects the final legislation out of the Senate to include a cap of some kind on the employer tax exclusion. And that's really what AFSCME is going after here. They're hitting Wyden to demonstrate their willingness to attack anyone who touches their tax benefit. This is less an assault on Wyden than a warning to Wyden's colleagues.

Reasonable people can disagree on whether capping or eliminating the employer tax deduction is a good idea. I tend to go for capping. But reasonable people can disagree on ALL funding streams for health care. And at the end of the day, when everyone disagrees, nothing happens and health care reform dies.

Hopefully, this is just the normal course of sausage-making. But I'm concerned that meaningful reform and the protective interests of advocacy groups - or the protective interests of people who want to keep what they have - work at cross purposes.