Observations on the AHCP Republican healthcare plan

Here are some initial observations about the American Health Care Plan.

Obamacare diagnosed the problem of our health care system as an underinsurance problem and focused on getting everyone insured. Although it's true that something like 15% of our citizens were locked out of the system, Obamacare addressed only one of the symptoms of our sick system rather than the disease. Furthermore its treatment was faulty and was falling apart.

The Obamacare plan for the uninsured was to have the younger healthy people fund the care for the older sicker people but they weren't buying into the deal. There were certainly winners but a lot of losers too as many were forced off insurance they liked and had to pay much higher premiums. Many of the winners, actually most, were simply being pushed into the Medicaid program. Medicaid is not the subject of this post except to say that it is a truly terrible program. It is flawed from many aspects but from the economic standpoint it is at the same time grossly wasteful and grossly underfunded and pushing more people into it is definitely not a rational solution for what ails our system.

Most reasonable Democrats agree that Obamacare as it stands is flawed but wish simply to fix it. However not only is the basic concept wrong but it does nothing to correct or even aggravates the more fundamental problems of our health care system such as severely excessive medical prices, stifling of innovation in medical services and grossly excessive outside interference in medical practice. The plan that the President and Congressional leaders have now proposed will attempt to address all these problems.

The Repubs have some major problems that the Dems didn't have in 2009. The Dems had a filibuster-proof 60 member majority. Also, despite its problems, 8 years have now allowed a bunch of Obamacare beneficiaries to settle in. The Repubs must honor Trump's pledge that the new plan would take care of these people. Parading them around would be red meat for the Dems attacks. More than that it's the right thing to do.

What the Repubs must absolutely clarify is that the AHCP is only the first installment of a comprehensive three part plan to rationalize American health care economics and it is the least important part to boot. It's the Obamacare replacement to help the uninsured. It gives them money through the tax system to use to buy their own insurance. No more mandates. It keeps in force the Obamacare insurance regulations on pre-existing illness and children up to age 26.

The next 2 parts to follow are more critically important. Part 2 is Tom Price, the HHS director, eliminating many of the Obama era regulations on health care. Part 3 is the good part intended to lower health care costs, encourage service innovation and give health care back to patients and doctors. This includes things like buying insurance across state lines, malpractice reforms, broadening the use of health savings accounts, and allowing various organizations other than employers and unions to develop specific insurance products. For example ARC, an organization advocating for the disabled, could develop an insurance plan tailored for its members like my disabled grandson.

The reason for splitting things up like this have to do with Senate rules which will allow Part 1 to be passed by a simple majority, but Part 3 will need to get some Democrat buy-in to overcome a filibuster. However the whole thing ties together. Giving the uninsured money to buy their own insurance is important, but bringing the cost down and allowing for service innovation is critical, not just for the uninsured, but for everybody.

The Dems are shooting at the plan, which is to be expected. The Repubs did it with Obamacare. However the Dems have allies of convenience in Rand Paul and his conservative friends who look at the refundable tax credits as another government entitlement. There's a problem with their argument. Tax subsidies, mostly from the federal government, amounting to more than $300 billion, go to people who get insurance through their employer. No matter how you slice it that ain't fair to those who don't. Dr. Senator Paul can't have things both ways. Either you give the subsidies to everybody or not to anyone, but taking them away from those who get employer based insurance at this point would be political suicide.

Part 1 might have some alterations before coming to a vote. But the most important point is that passing Part 1 is necessary both to replace the Obamacare arrangement to help the uninsured, but also to get to the good stuff in Parts 2 and 3.

One last point. Almost immediately the AMA leadership came out against the new plan. That alone would make me support it. The AMA presumes to speak for all physicians, but have less than 20% membership, and that counts student and resident members. Practicing doctors didn't drop their memberships because they just forgot to send in their dues. The AMA doesn't speak for them so don't be fooled by that one.

Obamacare - How to Replace It

Obamacare repeal has become the subject of the day, and it should be repealed. But we should not lose sight of the fact that Obamacare is a small part of the problem and much more needs to be done. This misguided idea was actually an attempt to fix problems in the economics of our medical care that have been developing gradually because of government policies over the past 50 years. It was a government solution to a government caused problem.
The government in its tax policies since the end of WW2 encouraged full medical insurance paid by employers. That was well-intentioned and might have been OK in the 1950's with an entirely different kind of work force. Today expecting that everyone will get all their medical care through their employer doesn't work. Nowadays our economy is far more diverse. People change jobs frequently, or work for small employers or are self employed. Medical care is far more complex and variable and so requires the efficiency and adaptability of a true market.
And then since 1965 there's the big elephant in the room, Medicare (and it's little sister Medicaid) which has become the dominant force in shaping medical care. This program as I've been complaining incessantly has been a major factor in preventing price competition, in stifling of innovation, and in causing misalignment in services. In addition it is killing us financially. And its determined efforts to correct its problems by ever more bureaucratic regulation is becoming nightmarish and absurd.
President Obama and his supporters saw one small aspect of our problem, namely that those who are not covered by employer insurance, such as it is these days, or by one government program or another, are left out of the game. Their solution was to force everyone to play, and to make things even worse by mandating that insurances cover things that people don't need. Evidently, as smart as they are, they have their noses right up against one of the trees and don't see the forest.
The Republicans are touting repeal and replace. There is nervous tittering among the Democrats who think their opponents have a tiger by the tail and won't be able to come up with anything better. Their problem of course has been that they've always been unable to think out of the box of government control. There are some good plans out there, such as one recently proposed by Dr Rand Paul. Also Trump's new HHS Director Dr Tom Price and CMS Director Seema Verma understand the problems well and I think the Repubs will coalesce around a comprehensive plan.
So what do we really need? Here are the components:
First and foremost we need prices to come down. Across the board they're many times higher than they would be if they were based on market forces. Providers of medical goods and services base their prices on insurance reimbursements rather than on their costs and return on investment. Competition to lower prices is absent since everyone gets the same reimbursement from the payers and are paid only for things that are covered. Overhead costs to comply with regulation are going through the roof. Lower prices will be a boon for all medical consumers but especially for those with lower incomes.
A big way to accomplish lower prices is to reduce our dependence on insurance and third party payment. Insurance should be for big, unexpected items, not for everyday expenses. Everybody knows this. No one would buy homeowners insurance that covered blocked sink drains. Paying for ordinary items by insurance causes price inflation and decreases choice. But our problem is that we've got a system where someone else buys the insurance for us even though we're still paying the price through decreased wages. So then we have a high priced system which leads to demands for more insurance. And those who don't have insurance are really stuck paying ridiculously high prices that no one else has to pay. It's a vicious cycle.
So as far as insurance is concerned preferably we should buy our own and own it ourselves so it's ours no matter what job we have. But before that happens the insurance market has to have major revisions to bring the cost down such as Drs. Paul and Price are proposing. When we buy our own we'll want cheaper high deductible insurance and we'll demand that all the regulations on where we buy it and what needs to be covered be eliminated.
We need to get government out of the way except for people that need help. That's a problem for now because we're all adjusted to the present system. But if the government is going to divvy up tax money for medical care it ought to at least be distributed fairly and at present it isn't. This is a big part of the maldistribution in medical care in our country that Obamacare was supposed to address. And whatever subsidies are given should allow for the broadest possible choice of their use. These are all features of the present Repub plans so hopefully we will see some good changes. Personally I think start up government funding of Health Savings Accounts would be an interesting idea.

letter to annals - constitutionality of ACA

Annals of Internal Medicine published an article by 2 Harvard economists claiming that the ACA is constitutional. The following was my response.

Drs Gruber and Cutler contend that the ACA individual mandate is essential for the integrity of the medical payment system which they favor but this is hardly the constitutional point. These Harvard economists should instead attend to whether the ACA comports with basic economic principles (as outlined in the textbook of economics written by their own Harvard colleague (1)) and leave the legal reasoning to others.

 Medical insurance is not insurance at all, but is a high priced pre- payment system. It is by far the worst way to pay for anything. It relieves the patient and physician from the trouble of making appropriate price motivated trade-offs and substitutions. The system requires large administrative cost for coding, billing and documentation, none of this with medical value. Inherent in all this is a large amount of wasted resources which could be directed toward useful alternatives. Price fixing produces waste, decrease in quality and loss of competitive forces that improve services and bring prices down.

It seems incongruous to contend that a citizenry who already pay for this system indirectly cannot pay for it more directly. Small items like lab tests and doctor visits and even small procedures are affordable out of pocket for the average individual and there would be less waste and lower cost if paid this way. Bona fide lower cost insurance that belongs to the individual could pay for high priced unexpected medical events.

Granted that persons with low income or serious chronic illness need society's help but total government command and control is surely not the best solution.

The ACA mandates an expansion of our present wasteful pre-payment price-fixed system to every individual. It forces free citizens to waste the fruits of their labor for the sake of a collectivist experiment. It will almost certainly raise the cost and reduce the availability of medical services for everyone.

1. Principles of Economics 2011 Edition. Chapter 1. N. Gregory Mankiw.

The real meaning of Obamacare

Here is the reaction of one liberal Democrat with whom I debate, a physician unbelievably. It provides some insight into the mindset of these people. First of all how sick is the paternalistic view of the government and its relationship to the individual citizens, as if the government ever produced or provided anything that it doesn't take from us. The italicized part (my italics) tells you all you need to know about the intentions of this group to take over and control medical care. Watch out everyone else, you're next.

"We will no longer be the only nation in the first world that does not provide health coverage to its population. Now we can begin to weed out the practitioners who dupe their patients into demanding unnecessary and/or ineffective treatments at great expense to all of us. It will take time, but it will be worth it."

60 leaders stood up to insurance companies and stood up for working families all across America.

Isn't it strange that the 60 leaders were all from one party. Anyway they sure socked it to those horrible greedy insurance companies who now are going to have to sell their product to everyone in the whole country even if they're sick as hell. And if they charge somebody more than they can pay well then the government will just take care of everything. And those bad young healthy people are not going to get away with not buying their product anymore no matter what it costs. Can you imagine the stupid people on wall street were idiotic enough to pay higher prices for the insurance company stocks when they knew that President Obama was very mad at them and told everybody they were very greedy and were causing all our problems. Well when everybody sees what happens to those bad insurance companies they're going to know just which one of those parties did it and they will get everything that they deserve. You wait and see.

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From: Terrence Carden <tscii@comcast.net>
Sent: Thu, December 24, 2009 7:41:14 AM
Subject: 60 leaders stood up to insurance companies and stood up for working families all across America.

T

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December 24, 2009

News Analysis

In Senate Health Care Vote, New Partisan Vitriol

By DAVID M. HERSZENHORN

WASHINGTON — The vote on Monday, in the dead of night, was 60 to 40. The vote on Tuesday, just after daybreak, was 60 to 39. And the vote on Wednesday afternoon, at a civil hour but after less-than-civil debate, was 60 to 39 again — an immutable tally that showed Democrats unwavering in the march to adopt a far-reaching overhaul of the health care system over united Republican opposition.

The votes also marked something else: the culmination of more than a generation of partisan polarization of the American political system, and a precipitous decline in collegiality and collaboration in governing that seemed to move in inverse proportion to a rising influence of lobbying, money, the 24-hour news cycle and hostilities on talk shows and in the blogosphere.

The health care legislation is likely to be approved Thursday morning, with the Senate divided on party lines — something that has not happened in modern times on so important a shift in domestic policy, or on major legislation of any kind, lawmakers and Congressional historians said.

The Democrats flaunted their unity on Wednesday at a news conference with nearly their entire caucus in attendance.

Many senators said the current vitriol, which continued on the floor on Wednesday with a fight over when to cast the final health care vote, was unlike anything they had seen. "It has gotten so much more partisan," said Senator John D. Rockefeller IV, Democrat of West Virginia. "This was so wicked. This was so venal."

Even in a bitter fight over President Bill Clinton's budget in 1993, decided 51 to 50 with a rare tie-breaker vote by Vice President Al Gore, the partisanship was not as stark as it is today. Although no Republicans voted for Mr. Clinton's budget, six Democrats joined them in what amounted to bipartisan opposition.

Mr. Rockefeller said the health bill had created an almost perfect storm of political and policy disagreements, so that some of the bitterness reflected basic philosophical disputes crystallized by President Obama's agenda. "If there was ever a time for that kind of partisanship to come out, this was the bill to do it," he said.

Ross K. Baker, a political scientist at Rutgers University and an expert on the history of the Senate, said that in earlier eras, senators would routinely cross party lines to vote in favor of major legislation on issues like civil rights and social welfare policy.

In 1965, the Senate created the Medicare program by a vote of 68 to 21, with 13 Republicans joining 55 Democrats in favor, and 7 Democrats joining 14 Republicans in opposition. In 2003, some Democrats in both the House and the Senate voted with most Republicans to add a prescription drug benefit to Medicare.

"It certainly is a culmination of a long period of intensifying political polarization," Mr. Baker said of this year's showdown over health care. "It has gotten so bad now that Republicans don't want to be seen publicly in the presence of Democrats or have a Democrat profess friendship for them or vice versa."

With Democrats nominally controlling 60 seats, the precise number needed to overcome Republican filibusters, there is no room for wavering Democrats to break ranks. If they held one less seat, there would be no choice but to win over a Republican; one or two more, and one or two senators with apprehensions could be released to vote no.

Some lawmakers predicted that the Senate would eventually rediscover its genteel equilibrium.

"There's a tolerance level here for what we have just been through, and I think we have hit the tipping point," said Senator Christopher J. Dodd, Democrat of Connecticut. "It got rougher than it should. We are getting precariously close to fracturing an institution where no one wins, so I think we are going to be back on track."

But some experts said that the divide in the Senate reflected a broader political shift that lawmakers cannot easily reverse. "In the 1970s, for instance, there was a much wider political spectrum in both parties," said Donald A. Ritchie, the Senate historian. "You had conservative and liberal wings in both parties."

Mr. Ritchie and many senators said they had witnessed the change in the last 30 years.

"You have got this divide, this polarization in America," said Senator Olympia J. Snowe of Maine, the only Republican in recent weeks to seriously consider supporting the health bill. "People become risk-averse, politically risk-averse. There is no incentive to reach across the divide and appeal to a broader inclination. It looks like pragmatism is a political cop-out; compromise is certainly viewed that way."

But even as senators complained about the rancor and expressed nostalgia for a kinder era, they conceded that the hyper-partisanship was likely to continue, potentially coloring coming debates on other major issues including financial regulation, climate change and, perhaps, immigration.

Senator Max Baucus, Democrat of Montana, and chairman of the Finance Committee, said the political — and often personal — divisions that now characterize the Senate were epitomized by the empty tables in the senators' private dining room, a place where members of both parties used to break bread.

"Nobody goes there anymore," Mr. Baucus said. "When I was here 10, 15, 30 years ago, that was the place you would go to talk to senators, let your hair down, just kind of compare notes, no spouses allowed, no staff, nobody. It is now empty."

For more than 30 years, the major parties — Democrats and Republicans — worked every angle to transform politics into a zero-sum numbers game. State legislatures redrew Congressional districts to take advantage of party affiliation in the local population. The two-year campaign cycle became a never-ending one.

Senator Orrin G. Hatch, Republican of Utah, who worked on many bipartisan health care bills over the years, often with a close friend, the late Senator Edward M. Kennedy, Democrat of Massachusetts, said that the both parties were to blame but that external factors including ethics rules also discouraged senators from fraternizing.

"Both parties have become very polarized," Mr. Hatch said. "A lot of that is because of the stupid ethics rules. We can't get together at various events. A lot of people complain about taking foreign trips, which are really critical for us to understand foreign policy. The Internet is constantly badgering everybody. In the process, it's gotten pretty doggone partisan, both ways. It's bad."

Mr. Hatch and Republican leaders said the lack of any support on their side showed that the health bill was mortally flawed.

The majority leader, Harry Reid of Nevada, at a news conference on Wednesday with most of his caucus standing behind him, offered a different take.

"I don't see this as 60 Democrats versus 40 Republicans," he said. "I see it as 60 leaders who stood up to insurance companies and stood up for working families all across America."

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