The Regulation Firestorm and Medicare

I did my initial medical training in pre-Medicare days. In those days there was the private service and the ward service where patients who could not afford to pay were treated free of charge in open wards by physicians in training under supervision. Medicare started between my internship and my residency. We liked the wards but the fickle patients abandoned us in droves for the private hospitals and experienced doctors. So it was pretty obvious that Medicare filled a need. But Lyndon Johnson and the Democrats had their sights set on a larger target than just helping the needy and so we had a government takeover of medical care for everyone over age 65. Doctors were skeptical but were in the end bought off, and probably did not have the political power to resist in any case.

The Medicare law provides specifically that: "Nothing in this title shall be construed to authorize any federal officer or employee to exercise any supervision or control over the practice of medicine "

What a blatant falsehood this has become! We are hearing a lot these days about the negative effects on the private sector of excessive government regulation and in this regard the healthcare industry tops the list. For medical practice, Medicare has become a regulation nightmare, producing such high cost and complexity as to be rapidly driving doctors from independent practice to salaried jobs with hospitals and large medical conglomerates.

Since seniors use a disproportionately high amount of medical services, and since all their services are governed by Medicare regulations, Medicare is a dominant force in most medical practices. Payment by Medicare for doctor services is through a byzantine system, with multiple different payment levels each requiring detailed documentation of voluminous extraneous material mostly having nothing to do with the problem at hand. And for the past few years all this documentation must be done by complicated highly regulated computer programs costing an average of $30-35 thousand per doctor requiring thousands more each year for maintenance. Moreover compliance requires medical practices to hire added personnel such as billing and coding specialists.

It would be one thing if such regulations produced improvement in patient care, but instead they are making things far worse. In addition to increased cost they are diverting doctor's time to administrative busywork instead of patient care. Medical records have become a mass of bureaucratic jargon, filled with sometimes erroneous material of no importance. Major new regulations are scheduled to start on January 1st supposedly to improve the quality of medical practice. Quality is to be judged by even more documenting and reporting. But this is nonsense. The quality that patients value more than anything else is the time and attention of the doctor.

This regulation firestorm is becoming bizarre, the stuff of Alice in Wonderland and Franz Kafka. Sadly there is no way to characterize it other than government oppression. And it is becoming intolerable to the point that a small but increasing number of doctors are taking the risk to opt out to DPC, direct patient care, which will be a matter for another time.

Trump's plans to change healthcare

Trump plans to repeal and replace Obamacare. We're going to be hearing about a lot of proposed changes in how government interfaces with our medical care so it's good to know the issues.

Since the 1940's medical benefits from employers have been tax exempt. This amounts to a government subsidy of about $295 billion. Although well intentioned there are several problems with this arrangement. Only those who work for a company which provides insurance get the benefit. Also the subsidy is greater if you have a higher income and therefore pay more taxes.

Although we've all come to think of taking part of our employee compensation as medical insurance rather than wages as a good thing, it's really not that great. As previously discussed paying for things by insurance wastes money and restricts choice. We do want insurance for the big, high risk things but why let your employer pick out what you get? And moving from one job to another is always a medical insurance hassle.

The biggest benefit of getting medical insurance through your job instead of as an individual is that you're part of a pool so that the administrative costs for the insurance company are much less and it's a better arrangement for the occasional employee who comes down with a medical problem.

So we're going to hear about changes to address some of these problems. If the government is going to subsidize medical insurance we should all benefit and the subsidy should be distributed more fairly. You should be able to choose from a wide array of insurance types that fit your individual needs and that belongs to you regardless of your employment status.

But buying medical insurance as an individual in the present system is way too expensive, so other changes will be proposed. Permitting insurance pools other than with employers will be one, including any of the whole host of professional, charitable and small business organizations. And if ever the interstate commerce law should apply to anything it should be to medical insurance so as to bypass all the state insurance coverage mandates.  

Besides all that, cheaper high deductible medical insurance looks a lot better when you're buying your own than when it's part of your benefits. But realistically you're paying the bill both ways, so high deductible insurance linked with a health savings account is the way to go. HSA's are a game changing idea, but the above changes in the insurance market are needed for them to work well. More about that another time.

The last problem is the "pre-existing condition" issue. No one wants to sell insurance to someone whose expenses are going to be more than the premiums. In that case it's not insurance it's charity. Obamacare tried to handle this by transferring the costs to the young healthy people. It didn't work. It's a sticky issue. There are several ideas out there about how to handle it. We'll see what the Trump team comes up with.

Health Savings Accounts

We shouldn't be paying for ordinary expected medical items by insurance. It costs more and restricts our choice. We should prefer compensation for our work to be in higher wages rather than in medical insurance and we should ideally have our own insurance that fits our needs and that we don't lose if we change jobs.Trump's administration plans to lower insurance costs by increasing competition across state lines and allowing insurance pools outside of employers. And high deductible insurance that kicks in only when we run into serious problems is much cheaper. But medical prices are high and what do we do when we need that MRI or colonoscopy.

Enter Health Savings Accounts. Basically it's a bank account that you fund periodically and then draw on for medical expenses. One place you get the money is from what is saved from the lower high deductible insurance premiums. What's the point of that, you say. Aren't I coming out the same in the end? Not at all. Because what's in the HSA is your money, that stays in your account if you don't spend it and that builds up over time. So if you decide on getting only what you really think is necessary and shop around for the things you do want and follow good health practices, then the money you save goes to you and not the insurance company.

In addition it's not just a savings account, but it's more like an IRA since the money in the account is tax exempt. And as you accumulate more than you need to pay your medical expenses you can put the rest into something interest bearing like a mutual fund which is also tax exempt. So it's really a better way to save for the future than an IRA because you can take the money out for medical expenses without penalty. And when you do retire you can actually use the money for any purpose without penalty.

The other good thing is that you don't need to worry about restrictions from the insurance company as to how you use the money other than that it has to be used for health related items. There are some government restrictions like you can't use it to pay for the gym or buy toothpaste but generally they're pretty liberal so that for example dental and vision and taxi rides to the doctor visits are fine.

So the smart thing to do is to get your company to set up an HSA, give you a really high deductible medical policy and put the money saved from the lower premiums into the HSA. When you change jobs the HSA, and the money in it, goes with you because it's yours. And if you have to buy your own medical insurance, do the same thing. The banks that offer them usually don't charge you, they keep track of the fund and you get a debit card and a checkbook to make payments from the account. Generally even if you pay a bill with the HSA it's best to pass it through the insurance since you get the discounted price.

Generally the Democrats have been against HSA's and have tried to slow them down because they tend to move us away from a government controlled medical care system. However even though most people are not familiar with HSA's the numbers of people who have them are rapidly growing because it's such a good idea. You'll be hearing much more about them when Trump and his health care team take over.

Is Medical Care a Right. The Negative Side of the Debate

Let me make the crucial point to begin with which is that I believe that we have the moral obligation to provide basic medical care to everybody who needs it and who cannot or will not provide it for himself.

Beyond the moral obligation I believe there is also a practical basis for this from the social standpoint as well. As Mr. Trump says -- we can't have people dying in the street.

Furthermore I believe that the overwhelming majority or our citizens, including the overwhelming majority of my conservative fellow citizens would agree with this statement especially in the practical setting of someone who required help.

I would hope that this would help at least to some extent to dispel the argument that conservatives,  many of whom are highly intelligent and steeped in Judeo-Christian traditions, do not consider medical care a right because of ignorance, greed or lack of compassion.

I will skip over the philosophical argument  that human rights such as those traditionally envisioned by our founders and the philosophers of the Enlightenment were simply freedoms from oppression by the majority and in particular the force of government. These rights are essentially unrestricted except where they impose on similar rights of others. I also understand the argument raised by the socialists of the 30's as encapsulated by FDR's discussion of the four freedoms that an individual cannot be truly free without being free from basic human needs.

The real arguments against calling medical care a basic human right are practical ones, to wit:

The concept has the inherent contradiction that fulfillment of such a right would oblige someone else to provide it, thus imposing on that person's freedom. In addition this right must be fulfilled by material goods and services which are in limited supply and therefore the question arises as to the whether and in what manner this right is to be restricted. But by far the most important practical consideration is how exactly we are to arrange for the enjoyment of this right.

The usual solution for the method of providing this right is for a collective arrangement supervised and regulated by the government. I would say that the main reason that we have not adopted this approach in the U.S. is our deep-rooted skepticism of government activity, not by all, but by a very substantial portion of our citizenry. Time and time again the government in its activities has proved itself to be venal, wasteful and hypocritical. Politicians claiming to be interested in public service are often more interested in self-service. Many government bureaucrats are sincere and hard-working but at the same time inefficient government bureaucracies are notoriously the subject of common humor.

However I think the more important criticism of collective action supervised and regulated by the government is that in society there is no such thing as common purpose and the common good but only individual desires and needs frequently in conflict with each other. Without going into detailed examples or appealing to the great number of authorities who have discussed this subject, the salient point is that it is simply not possible for government to arrange to provide suitably for the individual needs and desires of the individual citizens in the same manner that they would provide for themselves.

I will gloss over the comparative virtues of the market economy vis a vis the centrally planned economy in providing efficiently and appropriately goods and services at the lowest cost except to say that if there ever was a settled argument this is it. One might argue that it is reasonable to accept the waste, inefficiency and progressive regulation of government central control for the sake of equality of outcome. In response to this I will not bother you with the many examples that government control simply shifts the spectrum of those who receive favored treatment. Instead I would argue that the correct approach for the U.S. (which is a substantially different culture from Europe or Australia or Japan, etc) would be to not interfere with the majority who can provide for themselves and limit government involvement to those who cannot or will not make those provisions. In addition government should continue to act as a facilitator of the market to be sure there is no fraudulent activity or inappropriate hindrance of competition.

I understand the argument that some make about the fairness and the undesirability of a two tiered medical system. It is my personal opinion and those of many others that the major adverse tradeoffs inherent in a full centrally controlled system are simply too severe to warrant this purported benefit. I will leave aside any discussion of the fact that no system, especially a government controlled one, exists which does not favor the wealthy and politically connected. More importantly many argue that the efficiencies and substantially lower cost inherent in a market based system would significantly reduce the number of those who would require assistance. Nevertheless I strongly believe that government care limited to those who cannot or will not provide for themselves could easily match the care presently being provided by the advanced countries with centrally controlled systems, especially absent the government's involvement with other segments of our population.

Much of what is wrong in our present  system is due to undue government intervention. Time would be needed to reverse the effects of the unfair government subsidies dispensed to those working for large employers or who have high cost cadillac medical insurance. Other problems to address over time would be the large government benefits to the non-needy elderly, costly restrictions on the availability and type of coverage of medical insurance, restrictions on type of practitioners, extensive price controls, hyperregulation and many other similar problems which add high cost or inefficiency.

In this regard if one wishes to propose medical care as a right, we should address those economic rights which government is presently restricting. Should we not have to right to decide in what manner to purchase medical goods and services, what price to pay, what records are to be kept of interactions, what type of practitioner I can contract with, whether or not to purchase medical insurance and what type it should be. All of these regulations and restrictions have been judged to be legal but many citizens consider them to be abhorrent and oppressive.

I lay all this out not to convince you to my opinion but simply to convince you that there are reasoned alternative arguments. You speak of the right to medical care as if it were a geometric axiom, not to be denied by any rational being, so obviously true as to incite frustration at the obtuseness of your adversary.

The Economic Problems of Medical Care in the U.S.

What should be done to resolve the economic woes of medical care in our country. Unfortunately just repealing Obamacare will not do it. This misguided experiment added insult to injury but the problem is far more fundamental.

Obamacare sought to provide universal medical insurance coverage which completely misses the point of our problem. The development of the concept of insurance as a way of controlling potential risk of economic catastrophe was a great invention (of Genoese merchants in the 14th century) but it is a terrible way of paying for everyday expenses or even untoward events of manageable cost. What sense does it possibly make to purchase an item or service by giving your money to an intermediary who then deducts an administrative cost and profit and then pays your bill at the same time restricting your choice. 

But that's not the worst of it. When you're looking to purchase something you look at the price and if it's more than you can afford you let it go or look for some cheaper acceptable substitute. If you think it's something you need or really want you at least shop around. Sellers on the other hand want the best price they can get, but so do their competitors. So the best way for them to prosper is to figure out a way to offer you what you want at a price you want to pay at least as well as does their competition. . 

Paying by insurance messes that whole system up. Since the insurance company is paying the bill the sky is the limit. Maybe you're not trying to game the system but if something is sitting there on the shelf and you think you might be able to use it, what the heck, it's not costing you anything. If you think about it that deal also works pretty well for the sellers. So in that arrangement the insurance company has to be the bad guy and do the restricting. Of course the company can always raise its premiums but that can get ridiculous and of course they have competitors too. 

But, you tell me, you're not seeing the full picture. You point out that what I haven't considered is that it's your boss's problem since he's paying for the insurance. No,no,no. When you climb the ladder and look at things from his point of view you'll see that you're slaving away every day just as much for your benefits as for your salary. You're the one who's really paying for your medical insurance!

There's way more to this story but let's stop here for now. The bottom line is that we've developed a system of third party payment for medical goods and services that's tremendously inefficient and producing prices that are way too high. It's my educated guess that, depending on the item or service, medical prices are probably anywhere from 50% to 10 times what they would be in a market system in which people pay for things directly. And the high prices make things very difficult for anyone who really does have to pay out of pocket. Our problem is not too little insurance but too much. 

So yes Obamacare has made things worse by insurance coverage mandates but it's not the fundamental problem. Future installments will cover how we got into this insurance mess and the sad ongoing destruction of our country's medical care by the biggest and baddest insurance company of all, Medicare. Here's what I think is the fundamental problem. Progressive efforts to correct the bad results have made it worse.

Trump's Speech in Cincinnati

Trump's speech the other night in Cincinnati was remarkable. Anyone who didn't see it should bring it up on YouTube and give it a look.

He was preceded by Mike Pence who is an appealing guy with normal political oratorical ability and who gave Trump a rousing introduction to a packed very enthusiastic crowd. The contrast when Trump appeared was immediate. His relaxed style of direct communication with his audience is remarkable to watch.  Instead of the expected ceremonial pomp he started right off with joking comments about the problems the attendees had to go through with the security and he maintained that personal tone throughout.

The speech was about 70% teleprompted and the rest extemporaneous and he has an amazing ability to move seamlessly between the two modes. One can really only tell the difference from the content. This is a communicator to the ordinary man and woman who we haven't seen since Reagan. Obama is admittedly a master of prompted delivery but he's not nearly this good all around.

Alec Baldwin had great fun with his Trump imitation on SNL but Trump outdid him by a mile in his long takeoff of the news media predicting his loss and their pained astonishment when he pulled off the win. The speech is worth watching for that part alone. But the real treat was his message of unity and optimism about overcoming the decline which our country has been experiencing for the past few decades in almost any area you can name. It was a spirit that people felt somewhat with Obama's initial oratory, based on which he was given a Nobel prize, but which he totally failed to deliver.

Diehard liberals will of course be repulsed by Trump's display. But those of us, even those on the political fence, who are disappointed by the steadily ongoing American deterioration toward a dim future take some hope from this remarkable guy. He didn't have to take on this task. In fact it's hard to imagine a motivation for a 70 year old, who I can assure you is starting to see his life as a very finite quantity, other than a sincere vision that this country needs to be turned around and the self confidence that he can do it.

Strict conservatives have opposed the Trump phenomenon as well. They want a minimalist constitutional government with a President who understands his limited role and not a larger than life personality. We will have our checks and balances but especially in bad times our country has always prospered best when great leaders have emerged, starting right from George Washington. Trump may prove to be such a person. He's been a big winner so far.

Things May Be Looking Up for Healthcare

I like to distinguish between "health care" and "medical care". Health care is often a personal behavior matter and from that standpoint much of it is free. Following a sensible diet, staying physically active, getting adequate rest, good hygiene, avoiding tobacco, excessive alcohol and other intoxicants cost nothing and these practices go a long way toward maintaining health and extending life. Medical care, on the other hand, is not free. Doctors, nurses, hospitals, drugs and medical tests and devices must be paid for. How is it that we've been led to buy into the concept that when it comes to getting medical care we needn't bother our heads about the cost. Someone else will pay the bill.

It isn't true! It's us who pay the bill. Who else is there really? And the system we use for payment makes the costs go way up so we pay way more than we should and besides that it restricts our choices, reduces the quality of services and stifles innovation.

Here are some interesting facts. A study done in 2013 revealed that in that year government (that is, U.S. taxpayers) funded 64.3% of medical care expenses and rising. In Canada by comparison the figure was 71%. In 2015 medical expenses took up 17.5% of GDP and this is forecasted to rise to 20% by 2025. That's a fifth of what we earn going just to medical payments. Medical costs continue to rise faster than the GDP. Medicare is 20% of the overall costs and is rising the fastest, even though Medicare controls the prices of every medical service and product that it funds.

Obamacare tried to address the disparities in our system by mandating that everyone have medical insurance and mandating what it must cover. This approach did not lower prices, it increased them. Prices for medical goods and services in our third party payment system are way higher than they would be in a market based system. Moreover usually neither patients nor providers know the prices. This situation is threatening to everybody's financial welfare but is especially problematical for those who are out of the system and must pay the grossly inflated prices out of pocket.

All of these data and economic concepts are well known to medical economic experts but have been discounted by healthcare planners in the Obama administration who have favored increasing government control for solutions.

In my 50 years in medicine I had never seen the morale among my colleagues lower nor the future for medical care looking bleaker. The changes since the recent election have brought me a sense of cautious optimism. Trump has appointed Dr. Tom Price, physician and U.S. Representative from Georgia, as head of HHS (Department of Health and Human Services) and Seema Verma, a medical economic expert formerly serving under Indiana Governor Pence, who will run CMS (Center for Medicare and Medicaid Services). Both of these individuals fully understand the principles described above and are determined to carry out changes accordingly. This will be no easy task and must be done carefully so as not to cause disruption to those who have been accommodated to our present system despite its serious flaws.