Could There Be a Long-Term Benefit From the Health Care Debate?

January 22, 2010

Could There Be a Long-Term Benefit From the Health Care Debate?

The recent Massachusetts election confirmed the fact that the health care debate is far from over. The people in the one state where every citizen nominally has health care insurance have extended their influence to the health care of the nation. Those voters may not have been addressing that issue alone, but their actions will have some effect on us all. Interestingly, depending on one’s political perspective, anxiety had been expressed about every plan being brought forward, not the least of which was the concern about the potential effect of these proposals on constitutional liberties. That may no longer be a problem. Nevertheless, even if another alternative is developed, the evolution of the discussion has helped us all.

In our open free society, there is a benefit associated with the debate itself. Some see an increased awareness of these health concerns as a potential stimulus for continued economic growth. As we know, the United States is in the midst of a profound demographic change. There has been an aging of the population characterized by an increased proportion of persons aged 65 and older. The Congressional Research Service’s demographic charts reveal a great upsurge in the number of older people in this country. By keeping that population healthy, we should all benefit from this preserved human capital. By improving the health and well-being of the generations to follow, additional benefits accrue. As others have indicated, “the accumulation of human capital—in the form of increased knowledge and skills and improved health and longevity” will continue to play an essential role in the economic growth of this country. My contention is that making people aware of these issues has offered some benefit to our society, regardless of the outcome of the debate.

If the investments in American health care that already exist work as expected, there should be a measurable improvement in the long-term functional status of many citizens, both young and old. Not only will the Medicare generation continue to receive benefits, but people that are newly aware of these issues will have a better chance of a healthy life extending into their old age. With many people continuing to be healthy, a small part of the future demand for health care may become reduced over time.

But there is another activity occurring, one discussed less often. In many cases, as people grow older, they continue to work and contribute to the GDP. This had been noted in the past, but few paid attention to it. However, even before people were aware of the developing “sea change” in American health care demographics, there was an increase in the proportion of the workforce older than age 65. Most of those workers are people who are not obligated to work because of reduced economic circumstances. Instead, these individuals have chosen to continue on their jobs, and contribute to society in other ways, because it gives more meaning to their lives.

Going forward, one expects still another “sea change” to develop as a result of the health care debate, but this would be in the doctor-patient relationship arena. What had been a paternalistic situation, with the physician in the role of an all-knowing father, is in the process of shifting. When most patients are older (and more experienced) than their primary care providers, physicians will need to explain their activities in greater detail. The Internet has created a standard of health care knowledge that is free and open to the public. As a result, at every patient interaction, physicians will have to show that their expertise is greater than what one can look up online. Otherwise, why would a patient want to participate? That is, the doctor encounter has to continue to be a “value added” experience that the patient can measure.

At present, from an economic perspective, the prices of health care are not informative, and consumers cannot use dollar-related data to compare physicians and/or hospitals. The existing problem of health care information asymmetry has kept patients at a disadvantage. Reforming that situation may be an added benefit developing from within the current discussions. This seems to be included, to some degree, in every version of the health care bills. No matter on which side of the aisle one sits, everyone appears in favor of improving knowledge.

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4 Comments »

Very interesting commentary. Perhaps we can extend the debate on some of the issues you have raised.

The problem of health care information asymmetry was NOT addressed in either the House or Senate bills which passed. One issue which was addressed was the use of electronic medical records. An EMR makes information more easily accessible to more health care providers, or at least that is what it is supposed to do, but that does not provide the patient with more information. It seems to me that you are confusing the asymmetry of medical knowledge with the problems of health care pricing. Let me address each of those separately.

There is no doubt that the information accessible to patients makes them much more informed than they were 20 years ago. As anyone who has used Wikipedia as a source knows, the open nature of the information on the internet has problems as well. There is a significant amount of useful information, but there is also a large amount of propaganda or inaccurate information. I frequently have patients bring reams of print-outs from the internet to their initial consultations. My role is to help them decipher what is pertinent and true from what is irrelevant or even incorrect, and then make recommendations based on my knowledge and training. The paternalistic physician-patient relationship which you describe was changing at least a generation ago (and for the most part no longer describes most physician-patient interactions).

The problem with health care pricing is not because of asymmetry of information, it is because those who pay for the care are not the consumers. The government is the payor for nearly half of all health care encounters (through Medicare, Medicaid, the VA, the Indian Health Services, etc). Those prices are (for the most part) set by the federal government, with bureaucrats in the executive branch (for example, Centers for Medicaid and Medicaid Services – CMS) making the rules to determine which services are reimbursed, and for what amounts. There is a single source of money, for which all health care providers (e.g., hospitals and physicians) have to fight for their share. This, in effect, pits hospitals vs physicians, and different specialists vs each other or vs primary care physicians. Many of the reimbursement rules punish efficiency. Although this makes a little difference to the consumers of health care, the only cost difference to them is in the initial component of care each year – once you reach your deductible and co-pay limits, additional care really doesn’t cost much.

For most of those with private insurance, the payor is the employer through the insurance company. Practically the only interaction the consumer has with pricing is trying to determine whether to consume services in network (which will be less expensive) or out of network. Typically, for out-of-network charges, the patient WILL be told how much the health care services will cost. There may be some negotiating at directly between the health care provider and the consumer (patient) at that point. The House and Senate bills really did not address this cost/price information asymmetry at all. There are provisions which for a government-run insurance exchange. Don’t get too excited, it is just a database. And, as you previously noted, the internet makes that kind of information readily accessible.

I share your enthusiasm for a debate on health care, but I am concerned that we are debtaing the wrong issues. The question being debated in Washington, D.C., is: “Shouldn’t we have health care insurance coverage for everyone?” but that makes too many assumptions in the initial premise. I agree with the first two sentences of your last paragraph:

“At present, from an economic perspective, the prices of health care are not informative, and consumers cannot use dollar-related data to compare physicians and/or hospitals. The existing problem of health care information asymmetry has kept patients at a disadvantage.”

However, the next three sentences are the ones with which I take issue:
“Reforming that situation may be an added benefit developing from within the current discussions. This seems to be included, to some degree, in every version of the health care bills. No matter on which side of the aisle one sits, everyone appears in favor of improving knowledge.”

The current debates are not focused on the issues which you identified in the first two sentences of the paragraph. We need to start the conversation again, but completely throw out the proposals which made it through the House and Senate. If everyone on both sides of the aisle appear to be “in favor of improving knowledge,” why then were most of the discussions on these bills in formerly-smoke-filled back rooms? Why were the Senate and House bills rushed through to votes with little or no floor debate? This process has been purely political. We need to start anew, and throw out any assumptions made during the past year’s political debates.

Comment by Bill H — January 23, 2010 @ 10:03 a.m.
I would say the greatest benefit from the healthcare debate is the exposure of the lie that more money equals better care. The mammogram dust up over ‘every woman should have a mammogram every year from age forty regardless of ability to pay’. That’s only a little hyperbolic.

Additional benefits include looking at other countries’ attempts to rein in costs (none that successful) as their populations are aging faster than ours.

Bringing to light that we even though we live in the information age, data can be scarce as to what is the best course of treatment for ‘common’ maladies such as prostate cancer.

How intense the lobbies for insurance and pharmaceuticals can be.

More than the above, but I think those issues made it into the public consciousness and that is a good thing.

Comment by Papillon — January 25, 2010 @ 2:21 p.m.
Hello Bill H.,
Thank you for your commentary. Sorry to be so late getting back to you, but my day job doesn’t let me get on-line as often as I would like. You raised some interesting points, so let’s talk about them.
1) Neither the House nor the Senate bill addressed information asymmetry (IA). However, my contention is that the ongoing discussion made people more aware of that problem.
2) The Electronic Medical Record (EMR) is something that is going develop no matter what other changes occur in the near future. Every physician wants to practice medicine more efficiently, and this is just one tool that is moving in that direction.
3) IA and the EMR are not the same. Your patient that had reams of print-outs was helping you, even though some of his understanding may have been wrong. Your work to decipher and correct the information is the “value added” benefit being sought by the patient. The print-out serves as a very brief preliminary problem-directed medical education for the patient. As a result, the two of you can speak a common language and work together more easily.
4) The paternalistic physician patient relationship still exists. Maybe not in your practice, but elsewhere in America. My day job is teaching surgery at a medical school that has its clinics located in the inner city. It is a constant and continuous battle for me to bring the surgical residents out of that mind-set.
5) You have some very good thoughts about the health care pricing problem. I don’t know if you saw the article on the Show Me Institute web-site last August about that subject. See: http://showmeinstitute.org/publication/id.205/pub_detail.asp for more details.
6) The reality is that the government has been paying for almost all health care for over 50 years. It is just that most people were not aware of it. Some believe this is the result of the US tax system. The tax treatment of health insurance developed from the wage and price controls imposed during World War II. In 1942, because of the war, US employers were limited in their ability to raise wages. For that reason most employers offered other incentives to recruit workers, such as health care. That evolved since that time so that now the federal tax code excludes the cash value of any employer-sponsored health insurance. This tax exclusion for employer-sponsored insurance is a huge, but hidden, federal subsidy. To the best of my understanding, the first time the tax code excluded employer-sponsored health insurance was in 1954, when Eisenhower was President. (If you want to read the original documents that relate to this, please see P.L. 83-591, August 16, 1954; Internal Revenue Code of 1954, Section 106 accessible at http://www.socialsecurity.gov/OP_Home/comp2/F083-591.html) The economic value of this arrangement has grown since then. Congress’s Joint Committee on Taxation estimated that the cash value of this tax exclusion alone, in the year 2007, was $246.1 billion. That value is not the price of the purchased insurance. The $246.1 billion is the foregone income the government would have received if the money spent to purchase employer-sponsored health care insurance was treated as regular income (See US Congress, Joint Committee on Taxation, “Tax Expenditures for Health Care,” July 31, 2008 at http://www.jct.gov/x-66-08.pdf ). Currently this is the third largest federal health care expenditure following Medicare and Medicaid.
7) With that as back-ground, it appears that almost everyone in this country has had some form of government sponsored health care insurance since 1954. Those that are indigent have Medicaid, those that are elderly get Medicare, and those with jobs get this hidden form of government assistance through the tax laws. It is just that most people are not aware that this is going on.
8) The only people in this country that don’t have some form of government underwritten health care are those that work, earn an income, and are uninsured. Most of them are self-employed and/or those who purchase insurance independently for other reasons. Interestingly, in Missouri, most of these people are the ones who run the independent family farms. That is one of the reasons why there are so few physicians in our rural counties; most of the people there don’t have any form of health insurance.
9) Your last paragraph is great. As you indicated, now is the time to start the discussion about these issues. However, with our current political system, that is not likely to occur.

Once again, thank you for your thoughts.
Stephen

Comment by Feman — January 26, 2010 @ 7:35 a.m.
[...] Feman writes a few paragraphs on the potential long-term benefits of the health care debate. But the most interesting comments he makes come in the comments, in which he responds to a reader. [...]

Pingback by Medicare, Medicaid,Tax Exclusion | www.statehousecall.org — January 27, 2010 @ 5:15 a.m.

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Very interesting commentary. Perhaps we can extend the debate on some of the issues you have raised.

The problem of health care information asymmetry was NOT addressed in either the House or Senate bills which passed. One issue which was addressed was the use of electronic medical records. An EMR makes information more easily accessible to more health care providers, or at least that is what it is supposed to do, but that does not provide the patient with more information. It seems to me that you are confusing the asymmetry of medical knowledge with the problems of health care pricing. Let me address each of those separately.

There is no doubt that the information accessible to patients makes them much more informed than they were 20 years ago. As anyone who has used Wikipedia as a source knows, the open nature of the information on the internet has problems as well. There is a significant amount of useful information, but there is also a large amount of propaganda or inaccurate information. I frequently have patients bring reams of print-outs from the internet to their initial consultations. My role is to help them decipher what is pertinent and true from what is irrelevant or even incorrect, and then make recommendations based on my knowledge and training. The paternalistic physician-patient relationship which you describe was changing at least a generation ago (and for the most part no longer describes most physician-patient interactions).

The problem with health care pricing is not because of asymmetry of information, it is because those who pay for the care are not the consumers. The government is the payor for nearly half of all health care encounters (through Medicare, Medicaid, the VA, the Indian Health Services, etc). Those prices are (for the most part) set by the federal government, with bureaucrats in the executive branch (for example, Centers for Medicaid and Medicaid Services – CMS) making the rules to determine which services are reimbursed, and for what amounts. There is a single source of money, for which all health care providers (e.g., hospitals and physicians) have to fight for their share. This, in effect, pits hospitals vs physicians, and different specialists vs each other or vs primary care physicians. Many of the reimbursement rules punish efficiency. Although this makes a little difference to the consumers of health care, the only cost difference to them is in the initial component of care each year – once you reach your deductible and co-pay limits, additional care really doesn’t cost much.

For most of those with private insurance, the payor is the employer through the insurance company. Practically the only interaction the consumer has with pricing is trying to determine whether to consume services in network (which will be less expensive) or out of network. Typically, for out-of-network charges, the patient WILL be told how much the health care services will cost. There may be some negotiating at directly between the health care provider and the consumer (patient) at that point. The House and Senate bills really did not address this cost/price information asymmetry at all. There are provisions which for a government-run insurance exchange. Don’t get too excited, it is just a database. And, as you previously noted, the internet makes that kind of information readily accessible.

I share your enthusiasm for a debate on health care, but I am concerned that we are debtaing the wrong issues. The question being debated in Washington, D.C., is: “Shouldn’t we have health care insurance coverage for everyone?” but that makes too many assumptions in the initial premise. I agree with the first two sentences of your last paragraph:

“At present, from an economic perspective, the prices of health care are not informative, and consumers cannot use dollar-related data to compare physicians and/or hospitals. The existing problem of health care information asymmetry has kept patients at a disadvantage.”

However, the next three sentences are the ones with which I take issue:
“Reforming that situation may be an added benefit developing from within the current discussions. This seems to be included, to some degree, in every version of the health care bills. No matter on which side of the aisle one sits, everyone appears in favor of improving knowledge.”

The current debates are not focused on the issues which you identified in the first two sentences of the paragraph. We need to start the conversation again, but completely throw out the proposals which made it through the House and Senate. If everyone on both sides of the aisle appear to be “in favor of improving knowledge,” why then were most of the discussions on these bills in formerly-smoke-filled back rooms? Why were the Senate and House bills rushed through to votes with little or no floor debate? This process has been purely political. We need to start anew, and throw out any assumptions made during the past year’s political debates.

Comment by Bill H — January 23, 2010 @ 10:03 a.m.

I would say the greatest benefit from the healthcare debate is the exposure of the lie that more money equals better care. The mammogram dust up over ‘every woman should have a mammogram every year from age forty regardless of ability to pay’. That’s only a little hyperbolic.

Additional benefits include looking at other countries’ attempts to rein in costs (none that successful) as their populations are aging faster than ours.

Bringing to light that we even though we live in the information age, data can be scarce as to what is the best course of treatment for ‘common’ maladies such as prostate cancer.

How intense the lobbies for insurance and pharmaceuticals can be.

More than the above, but I think those issues made it into the public consciousness and that is a good thing.

Comment by Papillon — January 25, 2010 @ 2:21 p.m.

Hello Bill H.,
Thank you for your commentary. Sorry to be so late getting back to you, but my day job doesn’t let me get on-line as often as I would like. You raised some interesting points, so let’s talk about them.
1) Neither the House nor the Senate bill addressed information asymmetry (IA). However, my contention is that the ongoing discussion made people more aware of that problem.
2) The Electronic Medical Record (EMR) is something that is going develop no matter what other changes occur in the near future. Every physician wants to practice medicine more efficiently, and this is just one tool that is moving in that direction.
3) IA and the EMR are not the same. Your patient that had reams of print-outs was helping you, even though some of his understanding may have been wrong. Your work to decipher and correct the information is the “value added” benefit being sought by the patient. The print-out serves as a very brief preliminary problem-directed medical education for the patient. As a result, the two of you can speak a common language and work together more easily.
4) The paternalistic physician patient relationship still exists. Maybe not in your practice, but elsewhere in America. My day job is teaching surgery at a medical school that has its clinics located in the inner city. It is a constant and continuous battle for me to bring the surgical residents out of that mind-set.
5) You have some very good thoughts about the health care pricing problem. I don’t know if you saw the article on the Show Me Institute web-site last August about that subject. See: http://showmeinstitute.org/publication/id.205/pub_detail.asp for more details.
6) The reality is that the government has been paying for almost all health care for over 50 years. It is just that most people were not aware of it. Some believe this is the result of the US tax system. The tax treatment of health insurance developed from the wage and price controls imposed during World War II. In 1942, because of the war, US employers were limited in their ability to raise wages. For that reason most employers offered other incentives to recruit workers, such as health care. That evolved since that time so that now the federal tax code excludes the cash value of any employer-sponsored health insurance. This tax exclusion for employer-sponsored insurance is a huge, but hidden, federal subsidy. To the best of my understanding, the first time the tax code excluded employer-sponsored health insurance was in 1954, when Eisenhower was President. (If you want to read the original documents that relate to this, please see P.L. 83-591, August 16, 1954; Internal Revenue Code of 1954, Section 106 accessible at http://www.socialsecurity.gov/OP_Home/comp2/F083-591.html) The economic value of this arrangement has grown since then. Congress’s Joint Committee on Taxation estimated that the cash value of this tax exclusion alone, in the year 2007, was $246.1 billion. That value is not the price of the purchased insurance. The $246.1 billion is the foregone income the government would have received if the money spent to purchase employer-sponsored health care insurance was treated as regular income (See US Congress, Joint Committee on Taxation, “Tax Expenditures for Health Care,” July 31, 2008 at http://www.jct.gov/x-66-08.pdf ). Currently this is the third largest federal health care expenditure following Medicare and Medicaid.
7) With that as back-ground, it appears that almost everyone in this country has had some form of government sponsored health care insurance since 1954. Those that are indigent have Medicaid, those that are elderly get Medicare, and those with jobs get this hidden form of government assistance through the tax laws. It is just that most people are not aware that this is going on.
8) The only people in this country that don’t have some form of government underwritten health care are those that work, earn an income, and are uninsured. Most of them are self-employed and/or those who purchase insurance independently for other reasons. Interestingly, in Missouri, most of these people are the ones who run the independent family farms. That is one of the reasons why there are so few physicians in our rural counties; most of the people there don’t have any form of health insurance.
9) Your last paragraph is great. As you indicated, now is the time to start the discussion about these issues. However, with our current political system, that is not likely to occur.

Once again, thank you for your thoughts.
Stephen

Comment by Feman — January 26, 2010 @ 7:35 a.m.

[...] Feman writes a few paragraphs on the potential long-term benefits of the health care debate. But the most interesting comments he makes come in the comments, in which he responds to a reader. [...]

Pingback by Medicare, Medicaid,Tax Exclusion | www.statehousecall.org — January 27, 2010 @ 5:15 a.m.

January 22, 2010