Access to Health Care

In the United States, the stated goal of health care reform debate has been to provide universal access to high quality health care at a reasonable cost. However, most of the rhetoric has focused myopically of universal access. Unfortunately, in the real world proponents of universal access must also take into account the quality and cost of that health care. After all, no one aspires to provide universal access to low quality health care or universal access to high quality health care that no one can afford. Unfortunately, any reasonable account of access, quality, and cost of health care generates mind-boggling complexity. Let’s start with access.

Today, about 55% of all Americans gain access to health care via private health insurance purchased through their employers, while 45% gain access to public insurance via Medicaid, Medicare, Veterans Medicine, and SCHIP. (poor, elderly, veterans, and children). In 2005, the Census Bureau reported that at least 44.8 million Americans were without either private or public health insurance coverage. By 2006, that number rose to 47 million: a 15% increase. Since, 2000 the number of uninsured Americans has grown by 8.6 million: an increase of about 22 percent. The largest segments of uninsured are employed young adults 19-29 and older adults 45-64. The uninsured rate among young adults, signals a corresponding rise in the number of uninsured young children; which has led to the recent reauthorization of SCHIP. Due to the ongoing economic recession the number of privately-insured Americans has decreased and the number of publically insured has increased. Although the public policy goal has been to increase the ranks of the insured, what is the precise relationship between “access to health insurance” and “access to health care? That answer is hardly straightforward.

When reformers call for universal access to health insurance, presumably they mean “good health insurance.” In an ideal world, “good insurance” is “comprehensive insurance” that covers every possible health care need (or want). Conversely, “bad insurance” covers nothing. So in the real world, the mere fact that you have health insurance does not necessarily guarantee that you have access to the health care products and services that you may need or want. Therefore, what most of us really want is universal access to comprehensive health insurance. But in the context of health care what does “comprehensive” mean? Does it include “all health care” or just “basic health care?”

Well, what precisely is this alleged distinction between “comprehensive” and “basic” health care and who decides? Does “basic” include access to all known preventive care, including: annual physicals, vitamins, and all known tests, imaging technologies (eye exams, hearing exams, MRIs, mammograms etc.), and vaccines? Does it include access to all known treatments, including: laser surgery, stem cell therapy, and genetic therapy? How about doctor’s office visits for minor illnesses such as colds and flu? Should everyone have equal access to: state-of-the-art trauma centers, organ transplants, hip replacement surgery, physical therapy, fertility treatment, psychiatric treatment, eye glasses, vision correction surgery and cosmetic surgery? Should all Americans have access to both new and old drugs, including: AIDS drugs, and diabetic drugs? How about access to weight loss therapy (including surgery), smoking cessation programs, and mental health treatment? Does basic insurance cover Tommy John’s surgery for 53 year old beer-league baseball pitchers, motorized scooters for the morbidly obese, or psychiatric drugs for children diagnosed with Attention Deficit Disorder or depression, erectile dysfunction drugs for old men, or chemo and radiation therapy for all cancer patients (including for ninety year-olds)? In Vitro Fertilization, abortions, or birth control pills for the poor? Does basic health insurance include unimpeded access to experimental, futile, and/or low-quality treatments (that are less-than safe, or less-than effective)?

Therefore, it seems obvious that the distinction between “basic” and “comprehensive” insurance is far from clear. Even if you are a member of congress that has the most comprehensive health insurance coverage in the world, there is still wide variability in access to specialists and state-of-the-art technology. That’s because access to health care products and services depends largely upon where you live. Our current health care system has evolved to serve major urban populations. Therefore, even insured congressmen from rural districts may not have access to the health care they need or want. Other rural patients have “access” to specialists and state-of-the-art technology, but only to the extent that they are willing (and/or able) to wait for an appointment and/or travel to a distant urban area. And, of course, rural patients that are uninsured (or under-insured) have access to health care to the extent that they are willing or able to pay for both the trip and the treatment. So one might argue that rural patients in the United States have “access” to a vast market of health care products and services, but only to the extent that they are willing (and/or able) to overcome geographical and financial barriers. Now is that really “universal access to health care?” If not, how would congress go about addressing this alleged injustice?

Although most patients with health insurance believe that they have access to health care, most policies cover much less than they think. That’s because, “good insurance,” which is comprehensive is very expensive and difficult to sell employers, especially to small businesses. Therefore insurance companies adapted by devising innovative marketing strategies that help them sell that “bad health insurance.” Their solution: disguise the quality of their insurance policies behind a veil of complex, obscure jargon that only insurance adjusters can decipher. Systemic obscurantism has no doubt contributed to the growing number of uninsured and under-insured patients. Why buy expensive health insurance, if you don’t know what it will cover? Therefore, one area more than ripe for reform is the restoration of transparency in health insurance.

In conclusion the single-minded pursuit of universal access to health insurance is really an overly-simplistic basis for health care reform. We must also take into account quality and cost of that insurance and the actual health care covered by those policies.

HEALTH CARE REFORM: IDEALISM V. REALISM

In light of President Obama’s efforts to reform health care in the United States, and given the fact that I’m teaching a graduate course on Health Care Policy this summer, I decided to dedicate the next four blogs to health care reform.

This initial installment will suggest that the conceptual framework underlying much of the health care reform debate is based on discourse that is overly-idealistic and incompatible with health care as it currently exists in the United States. I shall, therefore, propose an alternative model of discourse: Health Care Realism, or the Real Model. Although the Real Model has already begun to take root (whether we like it or not) the lingering remnants of the Ideal Model continue to cloud our thinking.

The long-prevailing Ideal Model is rooted in the ethereal belief that health care is a moral system rooted in the Judeo-Christian and Hippocratic virtue of “care.” Historically, this model implied on systemic paternalism, which has been long embedded in doctor-patient discourse. Paternalism generally posits a rights-based moral relationship between “fatherly” physicians and “childlike” patients. Within this ideology, physicians are represented as self-sacrificing, duty-bound moral agents dedicated to healing their patients. In other words, patients have an inviolable, “right” to health care and physicians have a corresponding “duty” to provide it.

One of the corollaries of many duty-based (or rights-based) moral arguments is the underlying assumption that moral imperatives always trump economic imperatives. In other words, if it’s the right thing to do, then we are morally required to do it, regardless of how much it costs. This web of discourse is usually anchored by the Judeo-Christian and Kantian belief human life is of infinite value and that the cost of preserving it is morally irrelevant. Once it is established that a patient “needs” medical treatment moral discourse ends and the cost of filling that need becomes morally irrelevant. Throughout most of the twentieth century, this complex equation based on interlocking rights and duties contributed to spiraling health care costs, as physicians liberally prescribed non-competitively priced products and services (owned by other providers) to their needy, price-insensitive patients. This meant more tests, more drugs, and more hospitalization and a feeding frenzy for providers.

As long as health care providers were able to earn a comfortable living by charging non-competitive prices to price-insensitive payers, and as long as patients were insulated from those prices, the Ideal Model appeared to be a “win-win” arrangement. The Ideal Model began to erode in the 1990s when government programs (Medicare and Medicaid) and quasi-private insurance companies (Blue Cross and Blue Shield) became increasingly price-sensitive. That’s when physicians were first saddled with the added responsibility of serving as duty-bound “gatekeepers.” So while patients expected paternalistic physicians to selflessly, provide health care; public and private payers expected them to reel in costs. This steadily eroded public trust in physicians and the gradual collapse of the Ideal Model.

Although many physicians and other health care professionals and institutions still attempt to live up to the Ideal Model, the real world always has a way of undermining all otherworldly ideologies. After all, in the real world, health care providers are just as “worldly” as the rest of us. They must earn a living to support themselves and their families. Most must pay back enormous college loans, malpractice insurance and other business expenses (not to mention local, state, and federal taxes!) They also have personal mortgages, car payments, and also hope to save a few bucks for their children’s college education. Health care institutions are equally worldly. Hospitals, research laboratories, and colleges and universities still have to pay their employees, stockholders, suppliers, insurance companies, and lawyers.

As health care reform unfolds over the next year, lingering remnants of the Ideal Model will continue to obfuscate health care discourse as Idealists focus debate on providing “universal access to high quality health care at a reasonable cost.” My next three blog entries will discuss access, quality, and cost from the standpoint of idealism and realism.

The Swine Flu Epidemic and Personal Liberty

As the Swine Flu Epidemic threatens to upend civilization as we know it, I thought it would be worthwhile to squeeze in one last blog before we all revert back to hunter-gatherer lifestyles. Although this specific strain of influenza originated in non-human species (swine and birds) we’re not supposed to call it “swine flu,” for fear of adversely affecting the pork industry. Fact: You cannot catch swine flu from bacon, sausage, or pork chops! Thank God! So let’s call it by its less-threatening name: “Type A H1N1 Influenza.” So what should we make of this impending epidemic and the various governmental responses? First of all, let’s face the unpleasant reality that human beings have been dying from “seasonal flu” since the Pleistocene era. According to the Centers for Disease Control about 36, 000 Americans die every year from seasonal influenza: mostly the very young, very old, and very unhealthy. If you trust the Food and Drug Administration’s oversight of clinical trials, there are anti-viral drugs currently on the market that moderate symptoms, and perhaps shorten its duration. There are also flu vaccines available. Unfortunately, it takes 6 months to manufacture these vaccines and therefore, every year the World Health Organization guesses which three strains might be presnt in any upcoming flu season in various regions. Last year, I had the flu shot, but caught a strain that was not covered by the immunization. So although modern science has developed vaccines and drugs may help you avoid getting the flu and perhaps lessen its symptoms, there is no cure for it. Viruses evolve much faster than clinical research. They also have an uncanny ability to survive on hard surfaces for over 24 hours. Despite these daunting limitations, governments, have the power to drastically reduce infection rates, and limit the number deaths. Of course worldwide, governments have already been actively working to limit the spread of the new strain of influenza. Egypt has ordered the extermination of its entire pig population (although there is no evidence of pig to human transmission). Many governments have banned public gatherings: closing down border-crossings, restaurants, mass transit, schools, sporting events, and air travel. Even Joe Biden’s family is avoiding all air travel. Indeed, modern governments are deeply committed to the reduction of all public health risks. And there are a lot of other risks out there as evidenced by the recent spike in apocalyptic warnings. Over the past few years, governments, scientists, and the mass media have issued a steady stream of urgent warnings predicting: terrorist attacks (especially on airlines), global warming, bird flu, SARS, global recession, and an endless series of food, drug, and toy recalls. So far, the human species has survived the onslaught! My question is this: “Is there a point where the social and economic costs wrought by public health initiatives outweigh benefits?” Governments certainly have the power to eliminate not only the impending flu epidemic, but all future “flu seasons.” Simply shut down schools, public transit, sporting events, shopping centers, restaurants etc. In short: let’s just stay home 4-5 months a year. Maybe that’s a bit extreme. When we leave the house let’s just wear rubber suits, gloves, and gas masks. Once we eliminate the threat of infectious diseases and save those 35,000 lives, then let’s address those other threats to human life. What about those notoriously dangerous automobiles? Solution: 25 MPH speed limits, body armor and helmets. Or, better yet, walk! Breast cancer: no smoking and mandatory mastectomies for all females at puberty. Heart disease: veggies, no meat, compulsory exercise. Libertarians do not doubt the fragility of human life and do not deny that many risks can be easily avoided. However, one of the most serious risks we humans face is the unbridled expansion of the powers of government in pursuit of an idealized vision of public health. If there is no objective threshold for public health initiative, and if we accept the moral principle that human life is of infinite value and that government has a moral obligation to protect human life at all costs, what would our risk-free lives be like? A long, risk-free life at home playing video games and watching old videos may not necessarily be a life that’s worth living.

WARNING: OUR HEALTH CARE SYSTEM CAN BE HAZARDOUS TO YOUR HEALTH

Last January I finally got around to getting my annual physical. Same story…in terms of overall health, I’m among the top 5% of all men my age. Other than an occasional bout of labile, stress-related blood pressure, I am in great shape. That was good news, until I checked the mail in February and found a bill for $500 from the lab that processed the blood test that confirmed my excellent health. I immediately called Employee Benefits at my college to make sure that our new health insurance covers “blood tests.” She confirmed that lab tests are covered, and explained that there is often lag time in communication between the insurance companies and providers. In short: "not to worry!"So I ignored the bill. But I kept getting more of them. So I called our family doctor’s office and asked the receptionist what she thought had happened. She had no idea. But she was sure that she had forwarded my insurance information to the laboratory. Then a few days later, I received an automated phone message from a collection agency in regard to an overdue account that belonged to “Ronald Wade.” Of course, I am “Ronald White,” so I hung up. Then it called again, and, again, etc. So I called my insurance company to check up on the status of that mysterious bill. After waiting on hold for 10 minutes, I spoke to an agent that determined that the laboratory never submitted a $500 claim, but that my physician’s bill had already been paid-in-full. Then, I decided that I’d better contact the laboratory. The bill stated that I should use the company website. I quickly confirmed that I owed $500, and I was urged to pay off the account by credit card. After about 30 minutes of searching the website, I found a phone number. I called it and I was immediately captured by one of those endless option loops. Finally, after optioning for 20 minutes, I stumbled upon the option that I wanted: “speak to a customer service representative.” Elated, I pressed option #4 and hit the “pound key.” “We’re sorry, but all of our representatives are busy assisting other customers. Please wait for the next available representative.” Then I was treated to 30 minutes of soft rock, interrupted every 2 minutes by an automated female voice urging me to remain on the line. Finally, a company representative with an Indian accent asked me how he could assist me. I read off my 14 digit patient code and he pulled up my file. Sure enough, I owed $500 to the laboratory. I explained that I had health insurance and that the insurance company had no record of the lab submitting a claim and that my physician had forwarded the insurance information to the lab. Perplexed, he read off a 17 digit insurance number and asked me if it corresponded to the one on my insurance card. It didn’t match! It had two wrong digits. He immediately corrected the typos and told me that he would resubmit the claim with the correct number. Then I politely asked him why the laboratory didn’t contact the insurance company, or the doctor's office; and how the lab could reasonably expect me to figure out that someone at the lab miscopied a 17 digit insurance number? He couldn’t answer! Then, I respectfully complained to him about the endless loops on the website and phone system. He responded: “We’ve had many complaints about our website and phone systems.” So what’s wrong with our health care system? Well, we have a four-party system: first party patients, second party providers (physicians, labs, drug companies etc.), third party payers (private insurance companies, Medicare, Medicaid etc), and fourth party insurance payers (employers that purchase health insurance for their employees.) Can you imagine a more convoluted way to provide an annual physical? Wait a minute, I have to answer the phone…I’m back! That was that pesky collection agency again. Let’s make that a five-party system. Whew! I’m sure glad I’m healthy: even if my blood pressure is now 150/90. Check out my forthcoming essay (co-authored by Charles Kroncke) on our four-party health care system system. It will appear in the summer issue of the Independent Review.

The Somali Piracy Industy

Has anyone noticed the recent surge in piracy activity off the coast of Africa? What does this phenomenon suggest about human nature and how might it impact your 401k? As usual, let’s start with some basic assumptions. First, let’s acknowledge that piracy on the high seas is a perfectly natural human activity as old as the shipping industry. Like any other industry, it is an enterprise that thrives under certain environmental, economic, and cultural conditions. Piracy is most profitable under favorable climatic conditions. I can’t recall an episode of “Deadliest Catch” where the captains had to negotiate with pirates. The International Pirates Union now refuses to work in that part of the world. The weather on the North Sea is too cold and the seas are dauntingly dangerous. Moreover, fans of the T.V. show know that these burley and (obviously fearless) crab fishermen only get paid if they bring home a catch, and therefore are not likely to be easily intimidated into giving up their valued cargo. Even if pirates managed to successfully commandeer a vessel, the cargo is vulnerable to spoilage. It is notoriously difficult to sell pirated crabs, even on the black market. In 2007, the two competing franchises that operated in the North Sea filed for bankruptcy protection under Chapter 11, and are now receiving federal bailout assistance. President Obama fired both CEOs (Blackbeard and Captain Hook) shortly after their profanity laced tirade before the U.S. Senate. Although North Sea operations are now defunct, the pirate industry is now thriving off the coast of Somalia. The weather is predictably pleasant and the calm waters of the Indian Ocean make it relatively easy for pirates to identify ships from a distance. Somali pirates know that their most valued cargo ships (food and oil) are unarmed and that the unionized crew members would much sooner give up their cargo than resist. Crews also know that their cargo is insured by AIG, and that they will get a paycheck, even if their shiment is hijacked. Well-trained pirates also know that maritime merchants would rather pay a ransom, than deal with high-priced lawyers and tight-fisted insurance underwriters. Somali pirates have little fear of having operations interrupted by the recent arrival of naval patrols. It is impossible to protect a million square miles of ocean and the “rules of engagement” tend to favor the pirating industry. The Somali government is heavily invested in piracy and subsidizes the industry by providing not only a safe haven for swashbucklers, but also access to well-maintained smuggling routes and money-laundering services. Advanced technology is also fueling the bull market in piracy. Cell phones and Global Positioning Systems now make it much easier for pirates to coordinate their attacks, and inexpensive, high-speed boats shorten the commute to and from work. Low gas prices also pad the bottom line. A healthy black market in state-of-the-art weaponry provides pirates with an endless supply of AK47s, surface to air missiles, torpedoes, plastic explosives, and helicopters. Indeed, the piracy industry has been so successful that it has been entering other lucrative markets such as hostage-taking, illegal weapon sales, money-laundering, and extortion. What can the maritime industry do to protect itself from pirates? Experts agree that it must somehow raise the costs of piracy. They could alter their shipping routes, which would require a longer commute for would-be pirates. Shippers could also increase costs by installing radar technologies that could warn the merchant crews up approaching vessels; equip ships with torpedoes, and arm crew members with AK 47s. Unfortunately, this strategy would only precipitate an expensive arms race with the pirates, which would increase the value of their investments in illegal weapons. Pundits of the piracy industry argue that the recent death of three Somali pirates in an ill-advised confrontation with a freighter protected by a brave captain, a crew armed with ice picks, and a U.S. Navy warship portends a dark future for the industry. However, in light of AIGs recent decision to underwrite the pirate industry, most financial advisors now agree that piracy stocks offer a recession-proof, tax-free, addition to your 401k.

A Libertarian Perspective on "Too Big to Fail"

As the government continues to “bailout” failing corporations such as General Motors, Chrysler, American Investment Group (AIG), and a host of other financial institutions, the “too big to fail principle” has been cited as the primary justification for these rescue packages. This is a utilitarian principle that implies that the costs of “allowing” these corporations to fail outweigh the benefits; that is, if they fail others will fail and unemployment will rise. Although most economists seem to accept this utilitarian justification, no one has offered any explanation of how these corporations got “too big to fail.” Let’s explore two alternative explanations. The free market explanation is that corporations get “big” because they offer higher quality products and/or services at a lower cost than their rivals. These natural monopolies get “big” because they defeat their competition. In the absence of competition these monopolies raise prices and earn windfall profits. But natural monopolies are usually short-lived because other corporations can see their success, copy their strategies and/or improve upon those strategies. This process of weeding out the “unfit” (inefficient) competitors and inspiring competitors that are more “fit” (efficient) is called “creative destruction.” Unfortunately, there are other ways for corporations to “destroy” their competition. The second way to “get big” is to raise the cost of competing in a market by artificially raising the cost of others entering the competition. The easiest way for “big” corporations to stifle competition from smaller, more innovative companies is by lobbying government officials to raise the cost of competing by imposing costly regulations. These artificial monopolies can maintain their stature, regardless of their actual “fitness.” In fact, most artificial monopolies are downright inept: U.S. Postal Service, Public Schools, Public Utilities, etc. Now, how did AIG (American International Group) get “too big to fail?” Did it “take-over” its competitors because it was more “fit” or because it was more adept at lobbying government? The basic problem with the “too big to fail principle," is that if a corporation is “too big to fail” in the eyes of the government, it can take risks that other smaller, risk-sensitive corporations cannot. This leads to the proliferation of large, inefficient corporations that are protected from failure. Then, these maladapted corporations proceed to takeover over smaller, more efficient corporations. In short, the “too big to fail principle” tends to undermine “creative destruction.” Libertarians argue that when governments artificially prop up obviously inefficient corporations that take irrational risks, and reward incompetent executives with bonus pay, they also drive good corporations out of business. Would you rather invest in, work for, or buy from an inefficient corporation that is “too big to fail;” or invest in, work for, or buy from an efficient corporation that will probably be driven out of business by an inefficient corporation that is “too big to fail?” If you owned a smaller, more innovative, and more efficient competitor would you rather continue to compete with a corporation that is “too big to fail,” or agree to a lucrative takeover offer? The libertarian view on the “too big to fail principle” is that it undermines “creative destruction,” and leads to endless cycles of future government bailouts. But more than that it gives rise to an enormously destructive corollary the “too small to succeed principle.”

Nadya Suleman's Octuplets: An Exercise in Moral Hazard

We libertarians rely heavily on the linkage between the concepts of “liberty” and “personal responsibility.” The underlying assumption is that our lives are the product of risk-management. Sometimes our lives are shaped by our own decisions and sometimes by others. Libertarians argue that within the bounds of legality, individuals must be allowed to reap the benefits of “good risk-taking decisions” and/or pay the costs for “bad risk-taking decisions.” But in the real world, we often rescue one another from the painful consequences of our bad decisions under the guidance of morality. Unfortunately, when we exercise beneficence under these circumstances, we encourage future risk-taking on the part of the beneficiary and other aspiring future risk-takers. Economists call this predictable incentive pattern “moral hazard.” Nadya Suleman’s Octuplets provide a valuable case study on how government programs, charitable organizations, and a doting mother can lead to an unfathonable degree of morally hazardous behavior. Because of confidentiality laws, we don’t know all of the details, but here’s what I’ve been able to gather. Nadya is a 33 year-old, unemployed single mother. Before the octuplets were born she already had six children via two separate vitro fertilization procedures. On average IVF yields live births about 30% of the time and costs about $15,000 per cycle. Most “live births” require more than one cycle. In order to increase the odds of having a “live birth,” clinics often insert multiple embryos into the uterus, which can lead to multiple pre-mature births. Premature births require the services of neonatal intensive care units (NICUs), which cost on average about $475,000 per child. Although clinics do not pay NICU costs, the American Fertility Society recommends the insertion of no more than 2-3 embryos at a time. However, desperate mothers with limited financial resources often request more than two embryos to avoid multiple IVF cycles. Inefficient clinics often insert multiple embryos to cover up their inefficiency and/or increase their published “live birth rate” Nadya’s doctor apparently inserted 6 embryos for those two initial multiple birth pregnancies, and for the cycle that yielded the octuplets (which allegedly included 2 sets of twins). So who paid for the IVF and NICU costs of the first two pregnancies, and who will pay for the octuplets? Private insurance companies rarely cover IVF treatments but are required by law to cover NICU costs. They usually limit that exposure to $1 million. Nadya is unemployed so forget about that! If uninsured, Medicaid (and a raft of other state assistance programs) usually covers most of these costs. Again, we don’t know who paid the medical costs for those first two IVF and NICU services, but we do know that she now receives Social Security Disability Payments for three of those children (one is autistic) and that she collects $480 in food stamps. We also know that Nadya also owes $50,000 in student loans. Her mother Angela has been trying to financially support Nadya and her six children. But Nadya’s home, which is owned by Angela, is currently $23,000 behind in mortgage payments and under foreclosure by the bank. The family has filed for bankruptcy. Given the uncertainties surrounding the Nadya’s ability to care for these 14 children, it is not clear if or when Child Protective Services will allow the octuplets to leave the NICU, or where they will live. “Angels in Waiting” a charitable group of nurses offered free 24 hour-a-day assistance (worth $130,000. a month) for all 14 kids, which would have avoided action by Child Protective Services. But self-reliant Nadya refused that offer. So how will she pay for all of this? Back in 1999, Nadya apparently suffered a back injury at work and has filed for permanent disability. She is also planning to take out more student loans so she can return to graduate school at Cal State Fullerton to finish her degree in counseling, while her mother continues to provide free care for her 14 children under six years old. Nadya also hopes land a lucrative T.V. offer and/or book deal. So what can a lifelong libertarian say about all of this? Absolutely nothing!