Sunday, October 28, 2012

3 different views about Healthcare Reform

1. Interviewing the doctor

Teen Deficit Hawk: Do you support Obama's healthcare law.

Doctor: No.

T.D.H. : Why not?

Doctor: President Obama's health are law is well intended. It tries to extend healthcare to many people who currently have no coverage. However, it does nothing to control cost. Therefore, the government will  incur large increases in healthcare cost. The increase in cost will be due to both extension of benefits to currently uninsured people and the increase in the premiums of privately insured patients. President Obama believes that he can pay for these costs by mandating that each citizen purchase health insurance. Revenue from this mandate will fall far short of paying for the increase in healthcare cost.

T.D.H. : What would you do instead?

Doctor: The answer depends on what type of healthcare system that Americans want. Currently Americans appear to want universal coverage delivered in the convienence of a private sector system. In addition, they do not want to pay any extra taxes to support this system. That is an unrealistic expectation. My solution would be to provide all Americans with a level of healthcare that satisfies their basic needs. This healthcare system would not be as convienient as our current privately funded system. It would cover primary care, prenatal care, and illness. However patients would be forced to wait for appointments, and visits to specialists would be decreased. In addition, patients would have to wait much longer times before having elective surgery. Healthcare costs such as expensive medications, diagnostic imaging, and expensive surguries would be greatly curtailed. Extending this level of healthcare would require an increase in taxes. I would propose a national sales tax to cover these expenses. Many Americans would want a more convienent and extensive system. These Americans would have the option of buying private healthcare insurance. At first, this idea of a two tiered system appears unfair to less wealthy Americans. However, this plan would provide basic healthcare to millions of Americans who currently have no coverage.

T.D.H. What do you think about negotiating drug prices:

Doctor: Absolutely, our government should be able to aggressively negotiate the best prices for Americans. I understand that drug companies have huge expenses in research and development, marketing, and legal defense. They have every right to price their products to cover these costs. However, their is no reason that countries such as Canada, who negotiate lower prices, should pay much less than America for the same medicines. Drug companies may need to increase prices for other countries, but America would pay much less than it currently does for medications. The savings would be huge to any publicly funded healthcare system.

2. Interviewing the conservative:

TDH: Do You support Obama's healthcare bill. 

Conservative: No 

TDH: Explain why you don't support the law and what you would do instead.

     I do not support the President's healthcare law for a number of reasons.  Aside from the fact that I believe that it is unconstitutional in its present form (which will be decided shortly by the Supreme Court), I do not believe that it will work.  It is based on flawed assumptions about cost and human behavior, things that are consistent with socialist type policies that we have seen throughout history.  Already updated cost data has shown that the program will cost more than 1 trillion dollars above initial estimates and this is probably low.

     Without getting into extraordinary details, you have two competing idealogies at work in terms of solving what most everyone agrees is a serious problem.  We have to address the problem based on the current realities that we face as a country in regard to available resources.  The overall picture is getting bleaker by the day as it relates to Medicaire, Medicaid, Social Security and overall spending in general.
    What Would you do instead Regarding Healthcare specifically, total structural reform has to happen over some reasonable period of time.  I would point you to the Ryan (R)/ Wyden (D) plan to address Medicare as a reasonable way forward.  Almost all incentives over the past 50 years have put in the wrong places leading to exploding costs and horrendous inefficiencies.  Examples include. the fact that people working for a company get their insurance pre-tax vs. people who are self employed who must pay after tax, or the unbelievable growth in regulations that have burdened providers, or the onerous litigation climate.  These things, ostensibly with the goal of bettering the system, have done almost nothing but raise costs and mis allocate resources.  The Ryan/Wyden plan begins to both place more responsibility on the individual, while also giving them more choice, allowing the private sector to compete for business.  This philosophical view, very different from the President's, begins to stream line the system and would eventually allocate resources far more efficiently.  It also does not touch benefits for those 55 and above.  This has some conservative opposition as many do not think it aggressive enough.  It is hard to understate the drag that the proposed regulation and our current situation has on the overall economy.  By changing the system over time, we can remove this drag and increase revenue to the government.

       One point I would make on "universal healthcare" is that it has not been a complete failure every place it has been tried.  While the situation in England is a disaster, in Canada it is somewhat successful.  Couple of points here. Canada is a nation that is small population wise (some of our biggest Insurance companies have more members).  That certainly makes it more manageable.  But what really has made it possible for the system to survive at reasonable productivity is that Canada has taken huge steps over the past ten years (started by Liberals I might add) to truly cut the size of government in total.  I am not talking about cutting the growth of spending, rather actually cutting real dollars from the baseline.  They have also cut taxes and made other structural reforms that have made them one of the best performing economies in the world during an extremely difficult time over the past 4 years.  In other words by using conservative principles as a whole, they have been able to generate the resources to pay for the program.  If it had any chance to work in the US, these types of steps would have to be taken in a large way.  Otherwise pursuing this type of system would be financial suicide.

 TDH: What is your opinion on negotiating drug prices

Conservative:      Negotiating drug prices is a very thorny issue, primarily because of the way the system is currently set up.  This also applies to negotiating any medical service.  What is happening now due to the dire financial situation that Medicare and Medicaid are in, is massive cost shifting.  So the government, which is the countries largest insurer, sets pricing that leads to losses for medical providers.  This means those with private insurance pick up that tab in higher prices.  Because the government is not only the largest buyer, but also the regulator and law maker this is not a tenable situation.  Competition is stifled and prices generally rise.  On drugs in particular, there is a trade off that has to be addressed, we must ask ourselves whether we are willing to accept a lower amount of new potentially life saving drugs and drug shortages should the government set prices.  Drugs do not just materialize out of the goodness of scientists hearts.  The immense amount of capital to get a new drug to market (often time 1 billion dollars or more) comes primarily from the private sector and investments from stockholders in drug companies.  That capital requires a rate of return or it will not be available.  If prices are artificially lowered (price controls) there will be less of any given product, including drugs. This is not an arguable fact, it is an immutable law of economics.  Personally that is not a sacrifice I think would be a net positive for society as a whole.  Price negotiation if the playing field were level, would be fine.  Many lawmakers have pointed to Canada and that we should get drugs for the same price as them.  This essentially has been a larger exercise in cost shifting where Canada benefits from our higher prices.  Unfortunately, if we were to do that, the result would be the same as price controls, less production of drugs.  This speaks to the larger and more complex point of having a free market based system vs. a government controlled one.  Medicare itself is not going away any time soon, but putting it on a path to work inside of  a free market model over time is in my view the only way to satisfactorily save it and the entire system.  

     Last point on drug prices, in the short term the best way to generate lower prices, is to lower the cost of getting drugs to market.  Again there are regulatory and safety trade offs that would have to be addressed, but that framework has gotten significantly out of hand over the last decade or two and could likely be rationalized considerably


     The President's vision, which runs through most of his policies regarding the economy (healthcare is a huge part of the overall economy) is one in which the government takes an ever increasing role.  This vision, what I would call the "blue state model" is one that has failed every place that it has been tried and is facing total implosion today in places like Spain, Greece, California and Illinois.  Why trying this on a grander scale makes any sense, is beyond logical reason.  With population trends the way they are, government growth crowding out private sector growth (and tax revenue) and the enormous size of our unpaid liabilities for the above mentioned programs, something has to give.

3. Interviewing the Liberal

Teen Deficit Hawk: Do you support Obama's healthcare law?

Liberal: Yes

TDH: Why?

Liberal:    For too many reasons to list here.  Among others, it assures that citizens may obtain healthcare despite preexisting conditions; that healthcare may be purchased across state lines (which will drive down insurance costs and provide greater choice for coverage options); that children may stay on their parents’ healthcare until they are 26; and that tens of millions of persons who would otherwise spend years suffering from lack of medical treatment will have longer, more healthy, and more productive lives.

TDH: Are there any things you would add to the law or change about it?:   

Liberal: In order to avoid monopolization, no insurer should have the right to administer healthcare for more than 25% of the population in any state or interstate metropolitan area (e.g., New York-Newark-Philadelphia; Cincinnati-Lexington; Kansas City).  Otherwise, test the fully-implemented law for at least five years before attempting to tweak it.

TDH: What do you think about negotiating drug prices?

Liberal:  Medicare and health insurers should have the right to negotiate drug prices; however, there should be a pre-established floor below which the pharmaceutical manufacturers would not be required (or allowed) to bargain.  

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