Friday, October 16, 2009

Health Care Reform Lite: The Sky is NOT Falling, People!

By J.D. Kleinke

Also available on The Health Care Blog at

“The only constant in health care is change.” It’s one of those shop-worn things you hear too often on health care’s rubber-chicken circuit; and not only is it not true, but it is exactly untrue.

The only constant in health care that I’ve actually witnessed, since I was first sentenced to the industry in 1989, is well - every fundamental thing about health care. Oh, and constant anxiety about change that never actually happens.

If you think I am overstating the case, let’s nostalgia-trip back to 1989 for a moment. We had a dysfunctional, third-party-payer, fee-for-service system that everyone hated, and everyone figured out how to navigate to their own enrichment. Hospitals merged, marketed themselves, made money, claimed not to be making money (except to Wall Street), added wings, and flew to the skies. Doctors worked mostly in small practices, embraced technologies they could bill for, resisted those they couldn’t, and found ways to game the system. Health insurers made lots of happytalk, generally walked in the opposite direction, raged against the inefficiency and disingenuousness of providers, and printed money, while Kaiser and a few other mutant plans did their own thing. Drug companies discovered miracle drugs, me-too drugs, and junk drugs, marketed all of them with equal fervor, and also printed money. Employers made speeches, shook their fists, and set up several dozens coalitions to fix "the problem." The Medicare Trust Fund was a decade away from insolvency; the Boomers were coming; Medicaid programs were grossly underfunded; medical malpractice was bankrupting the system; costs were “skyrocketing” along with the ranks of the uninsured; and life went on.

Of course, there is one thing different in 2009: everybody gets to carp about it on Facebook.

So too health care reform. When the “journalists” at Fox News, the red-faced demagogues in Congress, and the alarmists in your organization are done ranting about “ObamaCare” and the sky falling, understand that the essence of the health care bill(s) moving forward today is one very simple thing: a violent endorsement of the status quo, paid for with an artfully diffused redistribution costing on annualized basis less than 4 percent of the system’s annual $2.2 trillion haul.

Under the plan that looks most likely to pass after some classic Capitol Hill 3 a.m. horse-trading - this time between the grumpy far left and poll-sitting centrists on both sides of the aisle - health care “reform” will involve little of substance beyond the (1) a long overdue jamming of 46 million people currently outside the system into that system, and (2) an equally long overdue prohibition against health insurers kicking them back out. For the typical middle class taxpayer in denial of what could happen in 90 horrifically unlucky days at their job and within their bone marrow, i.e., the typical swing voter with coverage they might not be able to afford after simultaneously being fired and getting leukemia, #2 is worth the entire effort, and the reason any politician of calculation if not conscience should vote for the current plan.

But at the end of the legislative process, and as with the bitterly debated Medicare Drug Benefit in 2004, all we’re doing is expanding exactly what we have today for most Americans - to include (almost) all Americans. We’ll spread the economic pain around the system fairly evenly, via mandates, taxes and fees that will show up in new equilibrium prices for insurance, drugs, and devices. And the economics of finally putting everyone into the system – instead of waiting until they are on death’s door, a.k.a., the door to the emergency room - will more than offset the upfront costs of getting them there.

Best of all, that last bit of accounting - which lifts what everyone knows to be the worst economic and emotional drag on the entire system - has not been accounted for in the current plan’s financial scoring. Such accounting involves too multivariate a set of equations, too many interdependent factors, too many unknowables in the cost and epidemiology of unmanaged disease – and so the CBO had no way to consider the most profound part of the entire initiative. Meaning: the systemic economic effects of including everyone in the system are gravy. Billions of dollars worth of gravy, if you believe any of the estimates of what the “safety net” costs all of us every year via the madness of hospital-to-insurer-to-employer-to-us cross-subsidy.

My point about how the Medicare Drug Benefit has played out in the past five years bears repeating. When the “Part D” benefit was debated in Congress, the hysterics on the right screamed on cue about “government bureaucrats” in our medicine cabinets, an entitlement that will bankrupt the country, etc.; while the hysterics on the left carped about the evils of capitalism, the program’s outrageous use of money-making corporations to deliver products to people, etc. Out of that political sausage-grinder came a classically American public health care program of government funding and corporate delivery. The health plans, specialty drug plans, and PBMs that administer the program - and the drug companies that supply it - did not get everything they wanted, but they got enough to stay in business, make some money, and deliver long needed care to millions of people who previously couldn’t afford it. Yes, many of the plans did especially well thanks to Federal subsidies, included in the “Medicare Advantage” program to prove the efficiency of the private sector; but that was a bone to the right, not the left, to support the program, so we’ll ignore that pesky irony.

The Medicare Drug Benefit may be working no more perfectly than anything else in health care, but it is working just fine for millions of Americans who had too often been forced to choose between medicine and food, between certain death and slow starvation. Maybe that’s why so few on the right or the left have brought it up in the debate: its embodiment of political compromise and its programmatic success constitute enough actual empirical evidence to sully anyone’s ideological polemics.

Consider the Medicare Drug Benefit a perfect trial run for what we all should hope will pass into law in the next few months: health insurance market reform. It’s not true health care reform – this would apparently require an Act of God rather than an Act of Congress. But the bill(s) before Congress today will finally let the health care system function like something closer to an actual system, because the worst external perturbations to that system – the chronically uninsured, chronically sick, and chronically most expensive to care for – are finally included.

And if you are running a health care organization and worrying about the effects of “health care reform lite,” take note of what happened to those involved in the Medicare Drug Benefit: a few organizations failed miserably, some have profited mightily, and most have muddled through, figured out the rules of the new game, and are doing just fine. Just like most everyone in 1989.


J.D. Kleinke is a medical economist, author, and health information industry pioneer. He has been instrumental in the creation of four health care information organizations; served on several public and privately-held health care information company boards; and written about health care business policy for The Wall Street Journal. His work has also appeared in JAMA, Barron's, the British Medical Journal, Modern Healthcare, and numerous other publications. His books include Bleeding Edge: The Business of Health Care in the New Century (1998), Oxymorons: The Myth of a U.S. Health Care System (2001), and Catching Babies, a novel about the training of OB/GYNs, which will be published next year.


  1. My younger brother Jeff is the shame of the Degan family. He not only lives in France, he actually likes it there. He has a French wife and two gorgeous little French daughters. Honestly I think the guy is a closet commie. Back in August, in a letter to his fellow countrymen and women regarding health care, he ended it by saying:

    "In short, in the US, you pay more, get less, and die younger than we do in Europe. What part of that don't you understand?"

    Well, hey there! That's a danged good question! What part of that don't we understand? Why is it that so many of us have to be dragged, kicking and screaming like half-witted little preschoolers, into the brave new world of change? What the hell is the matter with us anyway? How can it be that such a huge number of Americans cheerfully join movements of mass stupidity and salivate on cue to the sound of Dr. Glenn "Pavlov" Beck's bell? It kind of makes you wonder, huh?

    Tom Degan
    Goshen, NY

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