Wednesday, August 12, 2009

The Party of Fear – Healthcare Edition

If you watched CNN this morning you saw, presumably, what I saw. You saw videotape of town halls devolving into shouting matches between people on both sides of the healthcare debate. You probably also saw the signs of protestors. For those in support of healthcare reform you saw signs saying “Obamacare saves $$$” or “Everyone deserves insurance.” I’m paraphrasing slightly, but you saw signs meant to positively advocate for healthcare reform. If you looked at the protestors against healthcare reform you saw signs with a picture of Hitler and the words “Yes we can” underneath it, invoking the catchphrase of Obama’s presidential campaign. You saw signs with the words “Death Panel” partially covered by the ubiquitous and universal sign for no. You saw signs designed to frighten, or assuming a greater nobility, signs expressing the fears of those that wielded them. The debate on healthcare has devolved to a state so devoid of intelligence it is comparable only to the period right after 9/11.

What’s everyone so angry about? Call me too Midwestern, but I was watching people shout at each other in town halls and carrying signs so acidic in their opposition that I couldn’t help but wonder why people are so angry. Rumors have been started by that every elusive “them” that a government-run healthcare option will lead to “death panels” where grandma or grandpa will be denied care because the cost of treating them is greater then their societal worth as determined by a panel-to-be-named-later, though clearly for many “death panel” is the leading contender for the name. It sounds so ridiculous to me that at first I dismissed it, but when it didn’t go away I tried to think backwards. How do we get from a government-run healthcare option to death panels?

When I thought it through, here is the domino effect I presume is the “logic” that led us to death panels: Basically, if a government-run healthcare option is passed, then employers will stop providing a private health insurance option to employees. Why should they if the government going to act as the safety net? And how can they compete against the competitiveness and efficiency of a government-run system? The employer abandonment of private health insurance will drive the health insurance into the ground so that eventually even the companies that didn’t drop their private option will have to because there will be no private option. Presto, change-o we have only a government option for health care. So why does grandma have to die? Well with the exploding cost burden on the system tough choices will have to be made. We’ll need a panel full of mustache twisting, number crunching bureaucrats that will size up grandma and decide if she’s fit to contribute to society or she should be allowed to die.

Now let’s set aside some of the problems of logic here and focus on a few key assumptions on the surface. First, there has been no healthcare reform. There is no government-run option available to people to buy into. Second, the Democratic leadership and President Obama have repeatedly said that the public option is not a sole-provider, Canadian-esque system. Third, no one has talked about a panel that would deny care to the infirmed because they were infirmed. Turning to the logic, we are making some mighty leaps here and presuming an extreme level of nefariousness from our government officials. I mean that members of Congress and the President would push for a system that they fully know and anticipate will require the government to make life and death decisions requires a level of government distrust that is beyond anything I felt during the darkest periods of the Bush administration. If the path I presented above is not within reason, what is?

Okay, so here comes the econ lesson. There are two main drivers to have a government-run healthcare option as part of healthcare reform. First, to serve as a safety net, expanding Medicaid so that people who are currently uninsured can receive preventative healthcare. The thought being if a cough can be suppressed with an antibiotic prescribed from a clinic it will be less expensive then letting that cough worsen, requiring a trip (either planned or unplanned) to the emergency room for more dramatic, invasive, and expensive care. Second, it is to make private insurers compete. I have written on this topic in the past and Paul Krugman of the New York Times writes on this all the time, but basically currently private health insurance providers operate without competition. They only compete to be the health insurance vendor for large organizations. As far as the consumer is concerned, especially if you have employer-based health insurance, you might get a lot of options in the amount of coverage you receive, but it’s all coming from the same company. It’s like going to Baskin Robbins. There are 50 flavors, but it’s all Baskin Robbin’s ice cream.

It is for these two reasons that a government-run option is essential. We need to expand the safety net and introduce competition into the marketplace. Expanding the safety net would seem a moral imperative, but the thought of competition in the marketplace is a major reason for many people government-run becomes death panel. Will some business, especially small businesses, drop private insurance for their employees? Absolutely. Is there a possibility that this government-run system will drive all the private insurers out of business? Yes, but it’s not a probability. And part of the reason it’s not a probability is because the government-run system, presumably, will not run as efficiently as a private insurance option. Opponents of healthcare reform can’t have it both ways. They can’t decry a bureaucrat will sit between you and healthcare (even though one already does) and that this government system will run so well it will destroy the private health insurance industry.

I titled this post The Party of Fear, because as the healthcare debate devolves, the Republican, conservative strategy for defeat reform has become clear. See, first they tried to remind you how bad government is, but that didn’t really take hold. So the tactic has changed. Now they want you to be scared to death of government. They put their arm around grandma and ask if you want her to be put in front of a death panel. Reform and change are things to be feared. The government is rife with evil, dark figures (allusion intended) set on running your life, removing your God-given free will, and, for kicks, killing your grandma. Once again the choice has been made to abandon intellectualism and instead embrace fear.

You know what I haven’t heard from the Republican party? A solution. So much energy has been used. So much money has been spent to tell you all the reasons the reform is bad and when mild, classic reasons didn’t work they turned up the volume. It is far easier to sit in a room and breakdown an idea. It’s far harder come up with an idea, incorporating all the different interests involved. Healthcare reform is THE domestic issue for this generation and most certainly the next.

And so I’ll make a final appeal to those Republicans willing to listen. Stop spreading fear. Come to the table with ideas and an open mind. There will be disagreements, but let them be intelligent disagreements. Something needs done and you can either be a part of the solution, or remain the party of fear. The American people are united in their desire for change, but remain unwedded to a mode. There is an opportunity.


Colin said...

A few points:

* I think that Micky Kaus has the most accurate take on where talk of death panels originates:

* Unless someone is calling for the extinction of Jews, allusions to Hitler or Nazis have no place in American political discourse. But where was the outrage when Bush was regularly compared to Hitler? This wasn't limited to a wacko fringe either, with Richard Perle compared to Goebbels by Vanity Fair.

* It is not at all apparent that a government option is needed, with something like 1,300 companies currently selling health insurance policies. Indeed, profit margins in the health insurance industry are around 3.3%. This is not indicative of an uncompetitive market.

That said, if you really want to expand competition we should simply allow consumers to purchase insurance across state lines. Best of all it would cost the government nothing. Strangely this is not on the table.

Further, what reason is there to think that government has any expertise in selling insurance? I mean, they can't even make Amtrak or USPS break even. And if the public option doesn't break even, then it isn't competing on an even playing field. Would be nice if they could make Medicare break even first.

Lastly, I'm all for a calm, rational debate. Nancy Pelosi's reference to insurance providers as "villains" certainly is not a step in this direction.

Colin said...

One additional point: while you say that the Republican party has not offered up a solution of their own -- and indeed, I don't think the RNC has put anything out -- Republicans in Congress have in fact submitted legislation. Rep. Tom Price, a physician by trade, has introduced HR 3400 the Empowering Patients First Act.

Sen. Tom Coburn -- another medical practitioner -- and Rep. Paul Ryan meanwhile have the The Patients' Choice Act of 2009.

Colin said...

Oh, and regarding this point:

"First, to serve as a safety net, expanding Medicaid so that people who are currently uninsured can receive preventative healthcare. The thought being if a cough can be suppressed with an antibiotic prescribed from a clinic it will be less expensive then letting that cough worsen, requiring a trip (either planned or unplanned) to the emergency room for more dramatic, invasive, and expensive care."

The head of the Congressional Budget Office says that there are no apparent savings from preventative care:

"The evidence suggests that, for most preventive services, expanded utilization leads to higher, not lower, medical spending overall."

Ben said...

Colin, I think Kennedy's broader point is that instead of allowing a calm, rational debate on the merits of health reform and its various incarnations, the Republican Party has once again relied on reflexive appeals to emotion (Red Baiting, of all things), made out of whole cloth (death panels).

I, too, am for a rational debate but it is difficult to have such a debate when the person across the aisle from you is inventing a frightening notion and the projecting his invention into the future. Certainly, you cannot be defending that as honest debate.

As far as cost savings related to preventive care go, I'm afraid I must echo the White House's response. The CBO director discussed the cost of screening one person versus the cost of treating him or her for the disease screened and aggragated that over the population. Though a reasonable methodology, it does not account for such things as the cost to the economy, in terms of lost productivity, when an individual dies or is hospitalized for a long period in the middle of his or her life and it certainly does not account for the costs to the economy resulting from that person's disease and inhering to his or her family members. Further, I think the preventive care debate gets mixed up with the notion of primary care versus catastrophic care - I'm inclined to believe that access to primary care may greatly decrease costs associated with individuals who allow a condition to fester until they are in need of catastrophic care.

Ben said...

Also, I would encourage you to read the NEJM study that the CBO cited - it does not quite reach the same conclusions that the CBO has. Read it here - it has a great chart, FYI.

Colin said...

An honest debate goes both ways. I do not defend those who label Obama a communist, Nazi or invoke death panels in the discussion. But this fearmongering is hardly a one way street. We have Obama pronouncing that health care costs cause a bankruptcy every 30 seconds, a statistic more grounded in myth than reality:

And, as stated previously, we have the Speaker of the House calling health insurance companies "villians" and "immoral" who have been operating at the "expense of the American people". The hallmarks of someone looking for a rational debate?

I also don't know how much of the death panel discussion originates with the Republican party as a whole. The only two Republicans I have heard use the term are Sarah Palin -- who does not currently serve in elected office -- and Sen. Chuck Grassley. In fact, I think that the idea for end of life counseling originates with Rep. Johnny Isakson, a GA Republican.

Regarding prevention and its costs/benefits, I will note that at two least prominent academics also take a skeptical view of its benefits:

Maybe prevention really is cost-effective, but it's not at all clear.

Colin said...

Ben, thanks for the link. This part stood out for me:

Our findings suggest that the
broad generalizations made by many presidential candidates can be misleading. These statements convey the message that substantial resources can be saved through
prevention. Although some preventive measures do save money, the vast majority reviewed in the health economics literature do not.

I think that, at best, the case for substantial cost savings to be realized is rather ambiguous.

Ben said...

Colin, that comment stood out for me as well. I also noted the comment tht in some cases preventive care can lead to cost savings - maybe rather than overbroad statements by either side, we should focus on the preventive care that can lead to cost savings (because that's postiive for the economy) and those that are of ambiguous savings but lead to better/longer quality of life (because that's human).

You may disagree, but I think that "villain" is qualitatively different than "Socialist," "Nazi," or "Hitler." I'd like to see neither side use such emotional and ridiculous appeals, but I think the Right is more culpable in its use than the left.

Ben said...

NYTimes tracks the Death Panel nonsense here.

Jason said...

I'll come back to some of the more technical aspects of your rebuttal Colin, but I have to agree with Ben.

Using the words "villain" when describing insurance companies might not be the most productive choice of words, but it is far milder then the frequent invocation of "death panels" by Sarah Palin and indeed Chuck Grassley, one of the "moderate" Republican voices in the Senate.

I was reading the transcript from Ezra Klein's chat yesterday and he made a great point. The whole idea right now is to create a floor, not a ceiling. Every US citizen deserves to know the can go to a doctor regardless of their means.

Colin, would you suggest it is not a moral imperative that every US citizen should have access to some basic level of healthcare and that said basic level should be available somewhere other then the emergency room?

Colin said...

Should every American have access to at least a basic level of health care? Absolutely, just like they should have access to a basic level of food or housing.

With food this is accomplished by providing the poor with food stamps, which are in effect vouchers. We haven't set up government grocery stores or farms to compete with the private sector. (Although the government does play a sizable role through the use of subsidies and price supports, defenders of which are few and far between among economists)

Rather, the marketplace is relied upon to provide a wide selection of goods at a low price with the poor given vouchers to then purchase the goods.

Housing operates on a similar principle, with section 8 vouchers given to those who struggle to afford housing. Indeed, where the government has directly provided the good through public housing it almost invariably met with disaster.

So should it be with health care. The private sector should be unleashed to provide health care at a low cost with government providing funds to the poor to purchase either health insurance or, more preferably, funding medical savings accounts.

If we want to achieve real cost savings and expand health care affordability the only proven way of doing this is through private-sector competition. Deregulation and the expansion of competition works virtually every time it is tried, such as the airline and trucking industries.

We even see this to a limited extent in health care with the rise of retail health clinics:,28804,1903873_1903925_1903791-1,00.html

And Lasik, which is not covered by insurance, has seen an improvement in quality and drop in cost over time, a huge contrast with the rest of the health care sector.

Just imagine how much more efficient and competitive the health care market could be if we did away with the employer insurance subsidy (which expands the use of health insurance, with is nonsensical for non-emergency/catastrophic care and is a huge cost driver), let people purchase insurance across state lines and eased licensing requirements to expand the supply of medical professionals.

Ben said...

Colin, I wouldn't hold out airlines as a model of success. They have a tendancy to go bankrupt and, while ticket prices continue to increase, services are continually cut back. I'm not blaming deregulation necessarily, it just strikes me as poor example for your argument.

As far as the substance, do you favor mandates and vouchers, then? I can get behind that for primary care, and even specialists, but what about emergency care? The competition argument falls flat there, I think - not much choice when you're bleeding profusely.

Colin said...

Ben, if we want to achieve real cost savings we should let consumers decide which preventative treatments are worthwhile and which aren't. Currently there is no incentive for them to make such decisions because they are shielded from costs and thus can't make a good cost-benefit analysis. The private sector does an excellent job, for example, in determining which automotive maintenance procedures make sense and at what intervals. We could do the same for health care.

The other path to cost savings, in which the government decides which procedures are cost-effective and which aren't, and applies that template to the entire population, doesn't strike me as likely to achieve its stated goals.

Colin said...

Actually I think that airlines are a fantastic example. The fact that they go out of business on a regular basis is of no concern to me as a consumer. My only concern is with getting the best deal. We should be promoting the interests of consumers, not business. It would be great if we could also get health care providers down to razor thin margins and have competition as fierce as that in the airlines.

The solution to people in need of emergency care -- say, someone involved in a terrible accident or heart attack victim -- is low-cost catastrophic insurance. Looking on I was able to find a plan with a $5000 deductible for a 40 year old male in Washington DC for $77/month -- less than the cost for an iphone service plan.

Whether that should be mandated or not I am not sure. But ultimately we need to get to a system where people pay most costs out of pocket -- to drive competition and make consumers cost-sensitive -- while using insurance for catastrophic/emergency events, which is what insurance was originally designed for.

Jason said...

Colin, is medicine and deciding a course of treatment truly an area that should be left to individual consumers?

There's obviously a reason there are so many jokes out there about how someone gets taken to the cleaners at an auto repair shop. Is it a good idea to have similar jokes about healthcare?

Someone making $25k a year working two service jobs who is given a voucher by the government to "shop around" will probably go to the same doctor a trusted friend goes to. Not because that doctor is better or cheaper, but because someone that person trusts trusts the doctor.

This is just the beginning of where economics breaks down in healthcare when you get down to a consumer level. The level of information required to make an informed decision, weighing qualifications, against care, against cost, against geography is far too scarce.

Colin said...

Jason, do you think that the auto repair sector would be improved or degraded through increased government intervention in that sector?

Information asymmetries exist all over the place. Rarely do consumers have all information before making decisions, yet that doesn't stop us from having mostly positive interactions.

In the free market for Lasik services, for example, I can do a quick websearch and find companies that try to prove their credentials to me as a consumer and even offer bios and qualifications for some of their doctors:

Now, under a free market system will some people patronize bad doctors and receive poor treatment? Undoubtedly. But that would occur in any health care system. There isn't one that provides perfect care.

The question isn't whether the free market model would be perfect, it's whether it would be the best out there. As a consumer-oriented system it holds the best promise for providing high quality care at a minimal cost and drive bad quality service providers out of business.