Volume 67, no. 2 February 2011
The proverbial example of an animal too big to succeed is Tyrannosaurus rex. The mightiest of the dinosaurs were 10 times more massive than any animal that has since walked the earth. They did dominate the world for quite a long time. But when hard times came, as when the earth was struck by a giant meteor, they perished. It was a disadvantage to need a huge quantity of food, even if the beast was able to digest items of low nutritive value.
There may be entities that are “too big to fail”—though not without catastrophic system-wide consequences. But as Greg Scandlen writes, “ObamaCare showed us what ‘too big to succeed’ looks like.” There were so many versions and iterations that it became nearly impossible to discuss. Literally no one in Washington knew what they were voting on, so they all voted for political reasons with no real understanding of the consequences. Mike Manes compared it to doing surgery in the dark.
The reformers’ idea is to get rid of “fragmentation.” Yet we know that concentration is not necessarily good. In the 1990s, hospital consolidation raised inpatient prices by at least 5%, and by 40% or more when merging hospitals were located close to each other (Thomas Greaney, NEJM 1/6/11).
Regarding another critical area of the economy, Richard Epstein notes that banks are “insanely large.” Twin City Federal, for example, with $18 billion in assets, is a real company. But with Chase, which is 100 times that large, “the left hand does not know what the right is doing,” Epstein writes. “You cannot run from the center an organization that large.” The market depends on having a large number of intermediate-size organizations. They can do virtually any transaction, but do not create systemic risk (Reason, February 2011).
Advocates argue that insurance premiums will come down if we can just get a big enough risk pool. Scandlen writes that most of the beneficial effects of pooling can be achieved with as few as 25,000 covered lives. An enormous risk pool, with emphasis on the “pool” of funds rather than on the “risk,” creates a “tragedy of the commons”: all try to get theirs before the pool runs dry.
We have already tried a mammoth single risk pool: with Medicare. There is clear recognition, on both sides of the aisle, that Medicare is the problem, writes James C. Capretta of Galen Institute. Medicare is, at a minimum, the single most important engine pulling the system down the tracks at an accelerated rate.
The Real Y2K Problem
The acknowledged debt of the U.S. government, for which “the American people and their property are the sole collateral,” has reached $14 trillion, writes Arthur Robinson (Access to Energy, December 2010). With at least an additional $50 trillion more in nonfunded liabilities including Social Security, Medicare, and public employee pensions, the debt is $640,000 per American family. “Even if the U.S. economy revived spectacularly—unlikely in this political climate—it would take two generations of saving and self denial by American families to pay this debt.”
Robinson shows graphically how the U.S. economy fell off a cliff starting from a peak in Y2K, the year 2000, when the effects of progressive socialism and the “post-industrial” society took hold in earnest. From 2000 on, the U.S. lost about 12 factories and 2,400 manufacturing jobs per day. Between 2000 and 2010, the percentage of U.S. industrial workers fell from 19% to 9%. Concomitantly, the U.S. stock market fell from a value of 40 oz of gold/Dow to 9 oz/Dow, an 80% drop—and has not recovered.
Leviathan cannot be fed adequately by confiscating the assets of wealthy Americans. “The result of such an exercise would be the destruction of the remaining capital that is keeping our crippled nation alive,” Robinson warns.
The Entitlement Meteor
Between 2010 and 2030, the population aged 65 and older is expected to increase from 41 million to 71 million. Although Peter Orszag, Obama’s first budget director, said, “Health care reform is entitlement reform,” ObamaCare simply piles on new entitlements and expands Medicaid.
The Medicare payment structure drives the whole system. With Medicare’s fee for service, there is virtually no cost sharing at the time of service; 90% of beneficiaries have Medigap or other coverage for nearly all costs. Medicare price controls preclude any extra billing. For all the talk about payment for value, physicians can earn more only by providing more services, not by adding value. Not surprisingly, the average beneficiary used 40% more services in 2005 than only 8 years earlier, writes Capretta.
“Reform” relies on still another effort to force providers into managed-care-like entities. It is exclusively a top-down program, and rules out, for most insurance plans, the only effective cost-reduction mechanism: more cost sharing by beneficiaries.
The confluence of the demographic meteor and a devastated economy has been noticed by many Americans. Only 20% think that their Medicare is secure (USA Today 12/30/10). ObamaCare advocates, however, describe its impact as “creative destruction.” Our “fragmented” system will be “transformed.” Information technology and skilled managers will hold clinicians accountable, as for preventing illness (NEJM 12/30/10).
No amount of media, market, or political hype can change the desperate situation, Robinson writes—only productive work, and the freedom we need to do it. Otherwise, “we die.”
It’s Been Tried Before
Dr. Berwick’s beloved National Health Service promised to reduce the burden of illness with free preventive services. The result: “either the passage of the NHS worsened the state of health in England or it has severely multiplied malingering…. British businessmen found that absenteeism in plants and companies nearly doubled the first year the health service was in effect” (Gary Allen, American Opinion, February 1971).
Will American physicians really quit in the numbers that surveys suggest in the wake of ObamaCare? England had 44,000 physicians before instituting socialized medicine, but by 1971 it had only 23,000 doctors (ibid.).
Where’s the Money?
Over the next 6 months, the U.S. will buy $900 billion of its own debt with money printed by the Federal Reserve. This “quantitative easing number 2” (QE2) is an effort to keep down interest rates on the government debt, Robinson writes (op. cit.).
“Simultaneously, the U.S. government is issuing more bogus ‘price index’ numbers intended to mislead holders of the vast sea of dollars that is now outside the U.S. into believing that there is no loss associated with this dilution of their asset.”
If QEn causes the return of the sea of dollars to the U.S., with the inflation we previously were able to export, we may all need new software to update the value of our bank accounts daily, or perhaps hourly, Robinson suggests.
Four days after QE2 was announced, World Bank president Robert Zoellick suggested that the dollar and other fiat currencies be re-tied to gold (Early Warning Report, January 2011).
In December, the U.S. Government Accountability Office (GAO) stated that the U.S. government’s 2010 consolidated financial statement “shows significant financial management and fiscal challenges.” Significant uncertainties, material internal control weaknesses, and other problems made the statements of many agencies unauditable http://www.gao.gov/financial.html .
End-of-Life Planning Benefit Is In
The controversial provision on “end-of-life” counseling that was deleted from the Affordable Care Act, owing to concern over “death panels,” is back by regulation. Its original author, Rep. Earl Blumenauer (D-OR), urged people “not to broadcast this accomplishment” because “the longer this goes unnoticed, the better our chances of keeping it” (Robert Pear, NYT 12/31/10).
The entire evidence base cited for its value was one study in Australia involving 309 patients aged 80 or older. In the 56 patients who died within 6 months, known wishes were more likely to be followed in the intervention group, and family satisfaction was higher. None in the intervention group, and 4 in the control group, died in an ICU (BMJ 2010;340:c1345 doi:10.1136/bmj.c1345). Planners did not cover legal, estate, or religious issues.
“In the Carboniferous Epoch we were promised abundance for all,
“By robbing selected Peter to pay for collective Paul;
“But, though we had plenty of money, there was nothing our money could buy.
“And the Gods of the Copybook Headings said: ‘If you don’t work you die.’”
Rudyard Kipling, 1919
The Half-Life of Best Practices
According to a study by the Ottawa Health Research Institute, half of the conclusions derived from clinical studies about drugs, devices, and procedures were contradicted within 5 years. Within only 1 year, 15 of 100 recommendations based on the “best evidence” were reversed, and within 2 years, 23 were reversed (Jerome Groopman & Pamela Hartzband, WSJ 8/30/09).
Pre-payment versus Post-payment
Prepaid health care is not insurance, explains Greg Scandlen, because there is no risk. Knowing that we are likely to use $6,000 worth of medical care in 5 years, we may pay 60 monthly premiums of $100 because it is more convenient to spread the cost out in equal increments. There is an element of cost sharing because some may use $4,000 worth of care and others $8,000, but its core principle is financing known consumption. Though providers may prefer pre-payment to avoid having to collect a debt, there is no fundamental economic difference with post-payment. If one has a baby, for example, one could incur the expense, and pay it back with 60 payments of $100. Yet in counting the uninsured, someone with a pre-payment program is considered insured, while someone with a post-payment program is not.
Unequal under the Law
HHS waivers from minimum loss requirements have been granted to mini-med insurance plans that cover about 1.5 million workers. Of these, a third are union members, although only 7% of the private-sector work force is unionized.
The AARP, which provided a big chunk of the $121 million in advertising in support of ObamaCare, also gets a waiver. It can require a waiting period before covering seniors with pre-existing conditions; those who insure persons under age 65 cannot. AARP is also exempt from the $500,000 cap on executive pay, and from the $14 billion in new taxes on insurance companies. While Medicare Advantage companies must spend 85% of Medigap premium dollars on claims, AARP only needs to spend 65%.
As a result of HHS favoritism, writes Karl Rove, “business executives will be discouraged from contributing to the president’s opponents or from taking any other steps that might upset the White House or its political appointees at HHS” (WSJ 1/6/11).
Secretary Sebelius has also decreed that HHS will determine whether any insurance premium increase exceeding 10% is “unreasonable,” pre-empting regulators in 43 states who already must approve premium increases based on actuarial and solvency data. She also threatens to exclude insurers who have a “pattern” of “unjustified” increases from exchanges (WSJ 12/22/10).
AAPS Calendar
Sep 28-Oct 1, 2011. 68th annual meeting, Atlanta, GA.
Price-Fixing [by ACOs] OK
Although self-referral and price-fixing are illegal for physicians in most circumstances, Robert Leibenluft, J.D., writes that “the DHHS should reverse its presumptions about the effects of financial relationships among providers, at least for DHHS-approved [accountable care organizations]” (NEJM 1/13/11).
“Joint negotiations by completely independent practices are condemned summarily as ‘naked’ price fixing, because they cannot result in any efficiencies that could benefit consumers,” he writes. But if the physicians are economically integrated—for example, sharing financial risks for improving quality or reducing costs—their conduct cannot be dismissed as price fixing lacking any redeeming value” [emphasis added].
Covered (v. naked) price fixing should apparently be allowed, despite the acknowledged “theoretical” incentive for withholding services, because ACOs offer the “best hope” for needed reform in ObamaCare, in Leibenluft’s opinion.
Fee Splitting [by Managed Care] OK
In 1913, the American College of Surgeons was faced with a dilemma similar to that which faces the entire profession of medicine today, notes Robert Sewell, M.D., as it attempted to legitimize the new field known as surgery. One issue that generated considerable controversy was called “fee-splitting”: In many instances a surgeon was required to “give” a portion of his fee to the referring physician. The original ACS fellowship pledge states: “Upon my honor, I hereby declare, I will not practice fee splitting.” Interestingly, the language has been changed.
We now have a system that amounts to fee splitting between specialists and insurers/government payers, in which specialists receive referrals in return for accepting partial payment.
Acceptance of incentives, whether split fees for referrals or HMO bonuses for reduced utilization, can be defined as profiteering, writes Robert Geist, M.D. Such incentives are akin to bribes.
We now have a legal and ethical double standard, Geist suggests, for venal behavior, rationalized under HMO law in the name of loyalty to society’s agenda—for cost control, equity, quality care, scientific progress, or whatever. He observes that incentive bonuses are never paid for the benefit of patients but rather use the patient’s money to enrich the corporation and its “buyer” customers (employers and government agencies).
The “behavioral and systems view of professionalism” (Lesser et al., JAMA 12/22-29/10), is compatible with these incentives. The 2002 Physician Charter on Medical Professionalism assumes a “core commitment” to society: e.g. physician responsibility to minimize health care disparities due to patient race or sex, and to participate in quality improvement.
Harmonizing a Right to Health
Obligations of its UN membership arguably make the right to health legally as well as morally binding on the U.S., argue Eric Friedman and Eli Adashi (JAMA 12/15/10). This means the right to enjoy the highest attainable standard of physical and mental health, and hence to underlying determinants of health such as sound housing and clean water. The U.S. must build on ObamaCare to meet these international requirements, they state.
Can Congress Make You Buy Broccoli?
It’s a hard question, write Mariner et al. (NEJM 12/11/10). After all, if Congress can make you buy health insurance in order to keep premiums affordable, why can’t it also enact other “necessary and proper” laws to execute its powers? Why can’t it make you buy baby aspirin, gym memberships, or broccoli, also to keep premiums affordable?
These authors blame the constitutional controversy on conservative legislators who insisted on a role for the private sector. If Congress had just made everyone eligible for Medicare, there would have been no problem, as Congress may tax and spend as much as it wants for the general welfare—or so they say.
Is Withholding Documents OK [for HHS]?
In October, Judicial Watch filed a Freedom of Information Act (FOIA) request, seeking documentation regarding HHS decisions to grant waivers from ObamaCare requirements. HHS has yet to respond, and Judicial Watch filed suit on Jan 12.
“The Obamacare waiver fiasco is exactly the type of chaos that ensues when the federal government attempts to seize control of a large sector of the private economy,” stated Judicial Watch president Tom Fitton. “Secretary Sebelius might want to begin her implementation of Obamacare by obeying federal law regarding public records.” Waiver requests have “created an enormous potential for political favoritism and influence peddling.”
Is Overcharging Medicaid OK [for the State]?
According to a legislative probe of Medicaid waste, fraud, and abuse in Utah, the worst offender seems to be the Utah Dept of Health, the same agency that oversees Medicaid. Among those who overcharged is the health department’s executive director David Sundwall. He apologized, stressing that the errors were not intentional, and that the state-run clinic has no motive for overbilling because any surplus goes back to the state.’
Previously, the Bureau of Program Integrity had been discouraged from scrutinizing the claims of state-run clinics because they “weren’t a priority” (Salt Lake Tribune 12/15/10).
Sundwall is not being indicted or subjected to demands for $100,000 penalties, as private neurologist Taj Becker was a decade ago, although she had not been overcharging (J Am Phys Surg, winter 2010, see http://www.jpands.org/vol15no4/becker.pdf ).
See http://le.utah.gov/audit/newaudit.htm for the audit.
Feds Sue NYC for Medicaid Fraud
In a lawsuit in federal court in Manhattan, the U.S. seeks damages and civil penalties against New York City, saying that administrators routinely reauthorized 24-hour personal services for applicants without medical evaluations. Over 10 years, this cost the program tens of millions of dollars. Sometimes the administrator even overruled the local medical director.
The allegations “unfortunately reflect a systemic failure to responsibly administer the Medicaid program,” said U.S. Attorney Preet Bharara. “It goes without saying that ultimate medical decisions about patient care should be made by doctors and nurses, not government bureaucrats” (AP 1/12/11).
Correspondence
Penalty Points. It looks as though the Medicare Peer Review Organizations (PROs), which first raised their ugly heads in the mid 1980s, are gathering the troops for another assault on the medical profession. The original modus operandi—reviewing charts and assigning deficiency points, which could be used to impose penalties such as extra educational requirements on physicians—seemed to fade away, likely because of physician complaints. But the organizations did not die; they branched out into organizations that allegedly provided quality improvement activities to entities other than the government. Now the New York PRO is actively recruiting physician members. Presumably, the members of an organization actively support its goals. Based on the motto that appears with their logo, IPRO’s goal is to promote collectivist medicine: “Improving Healthcare for the Common Good.” We may see a return of the deficiency point system, based on failure to achieve “quality indicators” that can only be demonstrated with an electronic medical record. IPRO assaults may be another incentive for physicians to join “accountable care organizations” to help them cope with the demands.
Lawrence R. Huntoon, M.D., Ph.D., Lake View, NY
Patient Choice Saves Money. Colorado Medicaid saved more than 15% on attendant support costs when it put people receiving the care in charge of the funds, overseen by a third-party bookkeeper. They hired and fired their own attendants, rather than having to take whomever the Medicaid-qualified agency sent. They kept half of any money left over and could use it for things that Medicaid didn’t cover, such as lifts to make the attendant’s job easier, or voice-activated telephones for quadriplegics. Results were stunning. Health improved. Costs decreased. The federal government nixed the funds sharing when the pilot was over.
Linda Gorman, Ph.D., Independence Institute, Golden, CO
ObamaCare Must Be Repealed. The “reform” separates patients from their personal physicians by creating a centrally planned system made up of new governmental entities and their for-profit partners. Physician functionaries will work as a team to ration care for the financial benefit of the collective good.
As Solzhenitsyn explained in Cancer Ward, universal “free” care is funded by the same patients who would pay for private care. “Treatment isn’t free; it’s just depersonalized.”
Millions of Americans believe it is unethical for politicians to mortgage our future to promote utopia. We must de-fund and repeal this expensive takeover of much more than medicine.
Dan Giurgiu, M.D., San Diego, CA
Incentives. Penalties and subsidies are tools of elitist control freaks who want to be able to dole out goodies. Their formulation is costly administratively, and takes away the feedback that true cost provides. The natural incentive to buy real insurance without waiting is the prospect of being rated (charged more) or declined.
Janice Michaud, Manhattan Beach, CA
Covert Rationing. The Independent Payment Advisory Board (IPAB), §10320, is a sneaky attempt to restore rationing by enabling denials of care in advance. It is as harmful to the CEO as to the lowliest worker. Its repeal should be a priority of hospital associations, medical associations, and unions.
Robert L. Weinmann, M.D., San Jose, CA
Pre-existings. Rep. Eric Cantor (R-VA), after meeting with the socialist-in-chief, stated that he was going to work for a modification of ObamaCare that left 26-year-olds on Mommy’s health insurance and maintained the provision for no underwriting adjustments on pre-existing conditions. Cantor doesn’t seem to understand that actions have consequences; to ignore pre-existings is like offering fire insurance when the house is on fire. I suggest that Republicans are not really serious, and that is ominous.
John Dale Dunn, M.D., J.D., Brownwood, TX
Havoc. Though required by law to have rules on the medical loss ration (MLR) requirements by June 23, HHS didn’t release them until November. They take effect Jan 1, 2011. Everyone whose career hangs in the balance by this new rule has a couple of weeks to figure out what to do. Everyone except the government faces a hard deadline. As of Jan 1, professional insurance agents will have their commissions cut by 50%. We have not yet begun to understand how disruptive ObamaCare will be to the economy, needed services or commodities, our jobs, and our personal lives.
Dave Racer, M. Litt., St. Paul, MN
Truths on Self Interest: “Self-interest cannot be expunged. Where there is private property and its possession and acquisition are protected and treated with respect, self-interest and jealousy can be deployed against laziness and the desire for that which is not one’s own, and there tends to be plenty as a consequence.
“But where one takes from those who join talent with industry to provide for those lacking either or both, where the fruits of one man’s labor are appropriated to benefit another who is less productive, self-interest reinforces laziness, jealousy engenders covetousness, and these combine in a bitter stew to produce both conflict and dearth,” writes Paul Rahe of Hillsdale College.
Arthur Fougner, M.D., Flushing, NY
