 |
On one of those "quiet" days, while working from home but still answering a few die-hard colleagues via my Blackberry, I listened to talk radio. In my company office, the radio typically is just background noise, but on this day, choosing to listen in, I had the privilege to hear economist Walter E. Williams.
If you aren't familiar with Dr. Williams, find a day when you owe yourself a "treat" and check out his writings online. He is a fascinating and thought-provoking talent. His Ph.D. in economics (University of California 1972) is impressive, yet it is only the topsoil in a very rich garden. Since 1980, he has taught economics at George Mason University. He has written several books, as well as many commentaries in scholarly journals and more popular publications. Somehow he's also found time to appear on numerous television and radio programs and produce a regular newspaper column, "A Minority View," which has been in syndication since 1981.
Yet for all of his academic credentials and scholarly work, he is one of those rare subject matter experts who relates well to "real people." That may be why he has found testifying before Congress so frustrating that he rarely does so these days. We've all had teachers or listened to so-called experts who delight in creating confusion while showing you just how "smart" they are. Yet legitimate experts like Dr. Williams routinely boil down complex issues and ideas into succinct concepts or analogies that regular folks can easily understand.
During the radio program I heard, Dr. Williams bantered with callers about his views on the economy, the never-ending bailout bonanza in Washington, D.C., and such. One of his remarks instantly resonated with me, not on the financial mess but on the related topic of national health care reform.
"How many of you," he asked, "if you saw a fire, would call the arsonist who set the fire to come help you put it out?" If health care in the U.S. is a five-alarm inferno as some would have you believe, then who is the arsonist? Lately it seems a whole lot of people have run circles around health care with a lit match and a crazed look. But to set a fire of this magnitude, you'd need a very large match indeed -- or at least a lot of accelerant. Enter our friends in the federal government.
Yes, the same folks who are directly responsible for nearly half of our nation's annual spending on health care, and who indirectly influence a great deal more than that, are the same arsonists who now want to run the fire department. OK, let's review their resum?.
The largest government-controlled health care conflagration is Medicare. Most fires start small and grow larger over time. This one started large and has gone colossal. When Medicare became law in 1965, Congress projected that the program's hospital costs (Part A) would reach $9 billion in 1990. The actual amount that year was $66 billion. (It has since mushroomed to $203 billion in 2007.) Missing a projection by 733% is a bit more than a rounding error, but it has not inhibited these would-be guardians of our health care from seeking more authority and control, and enlisting a vocal cadre of supporters, mostly from consumer groups and labor unions.
So how did Congress manage this whopping "oops moment"? They increased taxes, of course. Medicare's Hospital Insurance (HI) Trust Fund, funded by a combination of payroll taxes, beneficiary premiums, and state payments, is nearly double what the plan's sponsors originally told us would be necessary. Worse, according to the report issued by the Medicare trustees in 2007, the HI trust fund is projected to be completely exhausted by 2019.
Sadly, that isn't the worst of it. The trustees also reported that Medicare poses the single greatest long-term challenge to taxpayers of all government programs. In 2007, total Medicare expenditures were $432 billion, representing 3.2% of gross domestic product (GDP), and that is expected to double to 7.0% by 2035 and grow to 10.8% by 2082. According to the trustees, Medicare's total unfunded obligations amount to $36.3 trillion over the next 75 years.
What if Medicare didn't have quite that hot a burn rate? Trustee Thomas R. Saving noted that in the totally unlikely event that the program's percentage of GDP would not increase at all, Medicare would still rack up $25 trillion in unfunded obligations over the next 75 years.
Medicare's plan design pieces together various "parts" rather than an integrated benefit delivery system. It's a defined benefit arrangement without yearly actuarial certification and funding -- just a promised benefit somewhere out in space. There are no incentives for any kind of market-based competition (except, perhaps, poor embattled Part D) and there is no consumer incentive. Could any of us stay in business with such a business model?
As my friend Art Jetter likes to say, "Bad ideas in the private sector go out of business. Bad ideas in the public sector get more funding." There is no finer example of Jetter's dictum than the Medicare system, which offers a 43-year window into how government might run the entire health care universe if we afford them that opportunity. How's that working out for us?
If an enterprise in the private sector had such a track record, you'd think it would welcome critical thinking and innovation. In the New York Times (June 25, 2008), reporter David Leonhardt identified the challenge. "On Wal-Mart's web site, you can buy a walker for $59.92. It is called the Carex Explorer, and it's a typical walker: a few feet high, with four metal poles extending to the ground. The Explorer is one of the walkers covered by Medicare. But Medicare and its beneficiaries aren't paying $59.92 for the Explorer or any similar walker. In fact, they're not paying anything close to it. They are paying about $110."
Medicare's legacy of mind-numbing deficits finally led to the requirement that companies competitively bid to offer these and other durable medical equipment products for sale to the government. Well ... almost. Last July 15, Congress overrode the president's veto of the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA). If you heard about this at all, it was in the context of delaying planned cuts in physician reimbursements.
Yet MIPPA also delayed the competitive billing initiative as well. The first round of the program had gone into effect in 10 geographic areas on July 1, 2008, but under MIPPA, contracts awarded in round one will have to be rebid in 2009, and bidding for round two is delayed until 2011. With heavy industry lobbying from the American Association of Healthcare as a catalyst, Sen. Max Baucus (D-MT), chairman of the Senate Finance Committee, added language to the bill to delay implementation of competitive bidding. To quote John McEnroe, "You cannot be serious!"
Sen. Baucus said, "I am most concerned about the impact that a poorly designed program will have on Medicare beneficiaries, many of whom are confused about what this new program means for them and are concerned that they won't be able to get care from someone in their own community." The Congressional Budget Office estimates that the delay will cost $19.8 billion over five years. For most businesses, even on a proportional basis, delaying the realization of that kind of savings would be unthinkable. For the folks who want to run our entire health care universe, I guess that's just chump change.
By the way, this is the same Sen. Baucus whose white paper on health care reform, "Call to Action," was released a week after the presidential election. Really? Are we ready to accept recommendations from someone who won't implement such fundamental business concepts as competitive bidding? Without questioning the senator's sincerity on health care reform, it does make you wonder about asking the arsonist(s) to help extinguish the flames.
All of this begs another, perhaps more basic question. For years, this 800-pound health care gorilla has set prices for physicians and hospitals based on the sound economic principle known as "BISS" (Because I Said So). According to the actuarial consultants at Milliman, Inc., inadequate reimbursements by programs such as Medicare and Medicaid increase the annual cost of covering a family in the private sector by nearly $1,800. So the public ends up paying for these programs in two ways -- through payroll taxes and through higher insurance costs to cover federal cost shifting.
In an upcoming column, we'll examine the longstanding problem of federal cost shifting more closely. Meanwhile, the arsonists keep pouring gasoline on the fire while decrying the high cost of coverage in the private market. But if there is no longer a real private sector to which these costs may be shifted, where will those costs go in the system? You can smooth the bumps in the toothpaste tube, but the toothpaste is still in there. Former Senator Tom Daschle, secretary-designate of Health and Human Services, thinks we should appoint a special commission to tell us that the problem is merely that we have the wrong size tube. The one we have isn't "cost effective," so Uncle Sam will give us smaller tubes. In my old neighborhood, we call that "rationing."
That's another topic for a future column. Today's exercise was to look at the history of the folks who have run nearly half of the health care universe and apparently believe they know best how to run all of it. The question is whether or not, based on the long record of these Congressional and bureaucratic custodians of our health care, "We the People" are going to sit back and allow them to do so, or wake up and finally ask ourselves if it makes any sense at all to ask the arsonists to run the fire department.
Readers may write to David Saltzman at Carolina Care Plan, Inc., 201 Executive Center Drive, Columbia, SC 29210. David is a past president of NAHU and has been a health, disability, life, and employee benefits broker for more than 25 years. He is the director of the large group segment for Carolina Care Plan.
