Wednesday, July 22, 2009

Why is health care so expensive?

Health care is currently taking up $2.8 TRILLION dollars of our economy, or roughly 16% of GDP. In 1960, fifty years ago, health care was taking up 5.2% of national GDP. So health care has gotten way expensive over the past fifty years. Is that good, or bad? Let's take a look...

Disease Outcome 1960 Outcome 2009 Cost of treatment
Leukemia Go home to die 33% survival rate after 5 years $1,000,000
Liver failure Go home to die Transplant, almost 100% success rate $400,000
Heart failure Go home to die Heart transplant $300,000
Heart valve failure Go home to die New heart valve $130,000
Kidney failure Go home to die(*) Dialysis or transplant $130,000
And it goes on and on. Pages and pages of diseases where my mom's 1960 edition of the Merck Manual says "send patient home to die with palliative care" now have actual treatments. Most of these treatments were very expensive to develop, and many address rare but deadly diseases like leukemia where amortizing the costs over large numbers cannot be done, unlike, say, myopia, which afflicts 30% of Americans and thus allows the costs of developing LASIK to be amortized over millions of people so people can pay for it out-of-pocket.

So to a certain extent, it's good that health care spending has increased since 1960. We now have treatments for far more diseases than if we'd stayed at a 1960 level of health care spending. People blast the health insurance industry and Medicare for causing health care spending to skyrocket, and to a certain extent that's true -- without the pooling effect and resulting distortion of the free market created by health insurance and Medicare, we could never have increased health care spending to this extent, because sick people are consuming 16% of national GDP, yet produce nowhere near 16% of national GDP -- they simply could not afford this level of healthcare if forced to pay entirely out-of-pocket. But: The only reason we have these treatments in the first place is because of the pooling effect created by having health insurance and Medicare -- otherwise nobody could afford to buy them, and they would never have been developed because the few millionaires able to pay for these procedures out-of-pocket would be too few to justify developing them.

Okay, so now we have the #1 cause of the increase in health care spending: new and expensive medical procedures and drugs. The problem is that there is no inherent upper bounds here, and we're already creaking under the burden of 16% health care spending. Still, we do not want to cut off innovation by eliminating the ability of drug companies and researchers to create new medical procedures to cure as-yet-uncured diseases, so we don't want to just blindly say "No more spending, we cap health care spending at its current rate forever." We have to do that -- we go bankrupt as a nation otherwise -- but we have to be smart about it. We can cap spending at the current rate, but if we make the system more efficient we can get more medical innovation without compromising care.

The problem is, how do we do that? Well, here's how NOT to do it:

  1. Tort reform: According to the CBO, tort insurance premiums for the last year they had full data for (2004) was $6.7 billion dollars. This is less than 0.3% of healthcare spending. And the CBO also casts a skeptical look on the claim that "defensive medicine" causes extra health care spending, noting that all such claims are based on one medical procedure in a hospital setting and there's no evidence that this happens in other settings, and noting that strict tort limits have had minimal effect upon healthcare spending between states with them and states that don't have them, finding for example that a tort limit makes only 1.4% difference at most in total health care spending costs. Indeed, California has had strict tort limits on malpractice claims since 1975, yet is still one of the most expensive states to receive medical treatment in. Frankly, you'd get as much savings by regulating doctors' purchases of stethoscopes and tongue depressors as you'd get with tort reform -- it's that trivial an expense for the healthcare system as a whole.
  2. Make all healthcare out-of-pocket free market: Problem is, 16% of the nation's GDP is tied up in healthcare, but sick people don't make 16% of the nation's GDP. This would cause a significant decrease in health care spending by making any treatment more advanced than those available in 1960 too expensive for individuals other than millionaires to purchase, and would kill all medical advancement since there'd be no way to amortize the costs of development of new expensive medical treatments.
  3. Prevention. We have ample evidence that prevention makes no real difference in overall healthcare spending -- fat people for example die earlier (at average of age 70), meaning they never get the expensive diseases that health people get in their 80's. We have studies on this -- see this one on obesity, and this one on smoking, for example, which prove that fatties and smokers actually save us money by croaking sooner. That said, we should decidedly fund prevention, but because it makes us healthier -- not because it saves any money.
  4. Eliminate all private health insurance. Private health insurance accounts for only 35% of all healthcare spending in the USA. Of that, only 20% is overhead and waste (private insurers are currently running an 80% payout rate, i.e. 80c of every premium dollar goes towards healthcare). So we could save a maximum of 5% of total US healthcare costs by eliminating private health insurance, or reduce total spending from 17% of GDP to 16.15% of GDP. Which is useful, but this isn't going to solve the problem altogether, continuing inflation of provider costs will wipe out that savings almost immediately. Note that eliminating private health insurance isn't absolutely necessary to reduce provider administrative costs -- see below.
  5. Create a Medical Costs Board to set reimbursement rates for providers and premium rates for health insurers, without a must-issue/cannot-cancel mandate on insurers: Providers and insurers would simply game the system. Insurers would kick sick people out of their insurance pools and insure only healthy people, and providers would simply shift costs and game the system by prescribing more treatments to get more money. The net result of this is 40% uninsured like in Taiwan in 1994 -- the least-healthy 40% would simply get gamed right out of the system.
  6. Create a must-issue/cannot cancel mandate on insurers to avoid the above problem, without a must-buy mandate on individuals: Individuals simply wouldn't purchase insurance until they got sick, resulting in an insurance company death spiral as only sick people bought insurance -- and remember, sick people don't make 16% of national GDP.
So how do we control costs? Looking at what other countries have done, here's the deal:
  1. All people must be in the system, via mandates on both individuals and on insurance pools (whether public or private is irrelevant for this item). Otherwise insurers or providers will respond to cost controls by kicking people out of the system, much as, e.g., state Medicaid boards are responding to cost problems by reducing Medicaid eligibility. Universal coverage is a prerequisite to *any* effective control of costs, otherwise the system responds by kicking people out.
  2. Reduce administrative overhead. It is estimated that as much as 20% of the cost of the current system is administrative overhead caused by our multi-payer system. We could eliminate 97% of these costs by going to single-payer Medicare For All, but even if we retain the multi-payer system administrative overhead for providers can be reduced significantly. Doctors and hospitals should have *one* set of forms and procedures to follow for all claims, perhaps by the Federal Government setting up central claims-handling dispatch centers similar to the way they set up central check processing centers to dispatch checks quickly to their issuing banks. This center should also handle pre-approvals in a consistent manner via maintaining a map of diseases to benefits to approved treatments and providing ombudsmen to handle appeals in a consistent and timely manner. This would let doctors go back to being doctors, instead of insurance company lawyers.
  3. Reduce incentives for over-treatment. Doctors should not be allowed to send patients to hospitals and diagnostic testing centers that they are part-owners of, doctors and hospitals should not be allowed to make a profit on medications and diagnostic testing that they prescribe (which gives incentive to over-medicate and over-test), and doctors' fees for procedures should be capped at a maximum per-patient level so that anything above that level, he gets only his expenses for the procedure -- no additional profit.
  4. A ban on consumer-oriented drug advertising. We have plentiful evidence now that drug advertising leads to overtreatment. We should go back to the way it was when I was a child, when drug advertising was aimed at doctors and consisted of a brochure and a box with samples of the new drug.
  5. A Medical Payments Board negotiates pricing and maximum reimbursement rates with all hospitals, drug makers, and providers (or their industry groups thereof) in order to allow for some margin but nobody gets rich off the illnesses of others. Medicine should be a calling, not a way to become a millionaire. Go into banking if you want to be a millionaire.
  6. Increased incentives for people to go into primary medicine so that we have more primary care providers, without the crippling debt that is currently keeping people from going into primary care or causing them to overprescribe and game the system for the money to pay their outrageous medical school debt.
The experience of Taiwan, which covered 40% of their population with $0 increase in medical costs when they went single-payer, shows that we can squeeze at least 40% increased efficiency out of the current U.S. system without affecting the quality of care. That will take us at least until the end of the next decade before healthcare treatment innovation costs eat up that savings and we have to start imposing hard caps and start making hard decisions that will affect the pace of medical innovation or even cause that dreaded R-word (rationing) to rear its head. Most of these changes would be much much easier with a single-payer system -- otherwise we end up adding another layer between providers and insurers to bring providers' administrative costs down to a reasonable level -- but as a minimal first step, we need to bring everybody into the system. HR3200, the current AMA-endorsed proposal in the House of Representatives, is not going to solve this costs problem, but it does take a significant first step -- it brings everybody into the system and gives everybody, not just sick people, a reason to care about the next step of bringing costs under control by increasing the efficiency of the system.

-- Badtux the Healthcare Penguin

* The first kidney dialysis happened in March 1960, but it was an experimental treatment available in only a few locations.
** My thanks to those I've had Twiscussions with on Twitter for helping me dig up a lot of the data and formulate a lot of the conclusions mentioned above


  1. Please to excuse my simplistic views and probable missunderstandings of the system , But ; Medicare , as I understand , we all (who still hold jobs) pay for it it taxes . The users pay for it as a yearly charge in addition to a deductable set by their income . Medicare in return sets prices that it will pay for services , and should have set prices for pharmacuticals as well .
    It seems so much like we have a working solution to health care now . Add a bit more in employer contribution and a slightly higher tax rate to pay for it . Perhaps a specific tax on unhealthy living : smokes , drugs , booze ,etc. Enroll everyone , and then charge people of wealth a higher percentage than a SSI victim , with a much higher percentage out of pocket for "non essential" services .
    Yea I know , I used that phrase "tax increase" , but it seems like a small increase with a lot of new users might work ?
    Am I (more than) "one toke over the line" ? Or might this work ?
    a curious w3ski

  2. What I see you proposing is a funding mechanism for Medicare For All. Here are the numbers for that:

    Public healthcare spending currently accounts for 46% of all healthcare spending in America, and insurance companies account for 35%. The remaining 19% are either out-of-pocket copays or charitable donations. Of the 35% done by insurance, 5% is profit or overhead that we can chop off. So: If we raise taxes by 30% of healthcare spending, or 5.1%, we fund *all* spending currently funded by private health insurance.

    The effective tax rate, looking at the French experience, would actually have to be about 6%, split equally between employer and individual at 3/3, because of tax evasion and so forth. But yes, we could fund all health care in America by increasing the payroll tax by that relatively small amount, as vs. the current system where people on average spend 8% of their income on health insurance (if you count the portion being thrown into the pot by employers).

    So yes, Medicare For All can be made to work quite trivially, from a financial point of view, and solves the medical claims complexity problem *without* creating a central claims processing board to dispatch claims from doctors to insurers for payment. Unfortunately, nobody is proposing Medicare For All except Dennis Kucinich, and he's just one Congressman...

    - Badtux the Healthcare Penguin

  3. Dear Brainy Bird -

    Nice post. I know a lot of work goes into a post as factual as that. Thanks.


  4. It tends to make a lot of good people despondent and at the least susceptible, when they read, watch and listen to the maverick storm of media ads, thumping down President Obama's health care initiative? Much of the rambling artifacts are the Simon and Lois ads of the Clinton administration, heavily armed against any revisions in this issue that wealthy insurance companies and subsidiaries won’t tolerate.

    They insulted the senior citizens with their propaganda and bald faced lies about the European government run health care system. Being originally an Englishman myself, I guarantee in the 1960's, we had a unique form of medical services, inclusive of eye and teeth. Even government run medical care in Australia was exceptional. It did plummet down somewhat, when business starting recruiting foreign labor from the commonwealth and Northern Europe. Many were out for a free financial ride and got it, along with their large families that British citizens have to support with their limited pounds sterling.

    Just as the anti-governmental health care extremists have been pounding the airwaves, the open border, globalist is now subjecting the American people to a torrent of inflaming immigration polls. But like all polls they can be intentional manipulated, in exactly how the questions are worded? Sure they can keep their co-pays, deductibles and pre-existing small-print clauses, squeezing every penny from a hurting economy, but tell the--BLOODY TRUTH!

    It's a sad fact that you cannot trust the Liberal slant regarding this searing problem, although not all Liberals are favorable to another AMNESTY? The Democratic leadership, hiding liberal views behind closed drapes tried to annihilate any good, workable illegal immigration enforcement laws. In an earlier session of the Senate an error was made with E-Verify, so it's was fortunate to survive Sen. Reid and Pelosi’s notion? Anything that has an impact on removing illegal immigrants is intercepted by business oriented free traders.

    GOOGLE---illegal immigration--to find out their sinister intention, to just throw open the gates, ports and airline entrances to cheap labor, that also become the downfall of the European Union. the polling I have seen has been calculatedly --ENGINEERED--to get results, that they can brandish around, declaring the majority of Americans believe in a path to citizenship and open borders? Already the Democrats are ready to flag the Save Act, 287(g) local police enforcement to weaken these laws.

    Currently both issues have heavy fallout, and you the voter should let your Senator or Representative know your opinion on either matter at 202-224-3121---BEFORE IT'S TOO LATE. Both have massive consequences in costs and quality of life in your future and generations to come.WE MUST SAY NO AMNESTY! SEAL OUR BORDERS AND NO MORE FREEBIES TO ILLEGAL ALIENS. THEY ARE THE CRIMINALS, NOT AMERICANS WHO SACRIFICE TAXES? GOOGLE--NUMBERSUSA for details our government and the media have a nefarious talent, for keeping facts under wraps?

  5. WTF? Dude, you need to lay off the Glenn Beck and Lou Dobbs, the nuttiness is wearin' off on you. WTF does immigration have to do with health care? Nothing.

    I'm leaving your post here just to point and laugh at it -- "hey look, a paranoid bigot posted on my blog!" -- but any further off-topic posting of immigration garbage on a health care topic *WILL* be deleted. Not that I expect you to be back, since you're a single-issue troll who has dumped his load (PLOP!) and gone.

    - Badtux the Pointing-and-laughing Penguin

  6. Whew! Thought I got the wrong page by accident .
    Thanks ,

  7. Wingnuts are all in arms about illegal aliens getting health care. There are 46 million Americans w/out health care, and an estimated 3 million illegal aliens. But they are determined to deny care to the 47 million on account of the 3 million. Math impaired?

  8. I thought your post was well informed as to the state of the situation. I'm glad to see you acknowledge the bright side of our 16% GDP spending. And I totally agree that the employer-insurer grip on healthcare is a distortion of the free market which has helped cause an artificially higher spend on health care.

    But then you proceed to argue that we need to *maintain* this artificially higher spend rate. So you are admitting that you don't care that we spend 16%, and you expect cost pressure to continue to rise, but to buy us time, you want to squeeze out some more efficiency by centrally planning our health care economy.

    So, in otherwords, you you want to trade the current distortion with your own more efficient one.

    How about we don't try to centrally plan the system? Why not get back to Constitution 101. There is no power to regulate health care in the Constitution, and amendment 10 of the Bill of Rights is supposed to guarantee that the Federal government does not micromanage our lives as you are so intent on doing. So first you need an amendment to the Constitution for you can mandate all citizens into your plan.

    Why do liberal schemes always have to be Federal? Why not use your own state as a laboratory of democracy for your ideas? Add California to Texas, and you have about the same number of people as France. If France can do it, why can't California?

    And yes, the Federal government *has* already interfered by creating the current employer-insurer distortion you mentioned. So let's just get rid of that distortion and see what the States can do. Massachussets is covering everyone. If you don't like their method, do it better in your state.

    I know that Federal solutions are appealing because interstate commerce introduces complexity. But that is the cost of freedom as it was designed for America. We are a United States, plural!

    Look, Utopia can never be achieved, even if you and Krugman and every other genius controlled all the levers. Bad stuff happens. Good stuff happens too. More good stuff happens to more people when bureaucrats who live hundreds of miles away aren't pulling their puppet strings.

    I know you mean well, and I think your plan would result in many good outcomes. But pretty soon the bureaucrats will ration, subsidize, pick, and choose your life away.

    Please consider freedom, localism, and State sovereignty in your plans.

  9. Nathan, I already explained why *any* health insurance -- employer-based or not -- inherently is a distortion of the free market by having the pool pay rather than the individual. That disintermediation removes the mechanism of the free market. Switzerland has no employer-provided health insurance and has had some of the same problems with escalating costs, so it is not a problem with health insurance being employer-provided, it's a problem with pooling as a whole (whether government or private is irrelevant).

    And as I explained above, a perfect "free market" health care system would never develop advanced treatments, because without pooling, the cost of developing advanced treatments would never get amortized -- sick people use 16% of GDP but do not make 16% of GDP, so health care spending would plummet drastically, to a point where it makes no sense to try to develop advanced treatments because there's no money in the healthcare marketplace to buy them.

    There is nothing inherent in HR3200 that prohibits states from setting up their own systems. MassCare is 100% compatible with HR3200, except that the federal government takes over the cost of subsidies for people who can't afford their own insurance and the cost of enforcing the mandates. MassCare's in-state free market health insurance exchange is 100% authorized by HR3200. California has passed single-payer twice (and had it vetoed twice by the Governator), and the Kucinich amendment lets California implement their own system too if the next governor signs it. Law is fungible, not fixed in stone. If a state wants to experiment, it's fairly easy to get an amendment to the law that will allow them to experiment. But so far few have done so, because most states other than the very biggest simply lack the scale to do single-payer or etc. right.

    Finally: The only freedom the new scheme will take away is the "freedom" to die from lack of healthcare because you can't afford health insurance. Some "freedom". The only "choice" the new scheme takes away is the "choice" to be killed by health insurers who refuse to pay for the healthcare you need because it would hurt their profits. If those are your definitions of "freedom" and "choice", I would assert that you have far more difficult problems than healthcare in your life...

    - Badtux the Healthcare Penguin

  10. Most of these treatments were very expensive to develop

    Yup.. tho most of the monies came from we, the taxpayers.. Universities are very much publicly funded.. The 'beauty' (to the reapers of wealth) of the U.S. system is a company _must_ profit for a thing to be legal.. said only partially tongue-in-cheek.. Hence, private 'ownership' (remember the 'ownership society'?) of publicly funded knowledge/systems. Hell, NASA is/was trying to auction off patents held in trust by we, the people.. Their discovery was funded by our taxes. We shouldn't have to pay for the fruits of their genius.. twice.

    BTW, the reason for the need for a nation wide system is business will flock from states which try to help people over business.. This is the strength of the EU. We truly are all in this together..

    Also, instead of taxes on 'unhealthy' eating/living, why not a tax on business that produce unhealthy things. We already (supposedly) prevent gross killing of people.. Let's make it real & recognize that certain respect for nature is required to maintain, hell, get back to, a safe, clean healthy world. Allowing a business while taxing people shows the true contempt our gov. has for we, the people. Guinea pigs, all.. Strangely enough, mostly willing.. Hmm..

  11. Durnik, yes, a lot of the initial theory to create new treatments comes out of universities. Even some entire new drugs have been created there. But drugs do not manufacture themselves. Once a university has created a drug in their lab, it has to be manufactured in bulk somehow. It has to be warehoused, marketed, shipped, and otherwise brought to customers. You can't handwave any of this away. I've set up supply chains and manufacturing processes before, and it is *hard*, and, alas, unrewarding work here in the USA which is why I don't do it anymore, but most new technology companies that fail do so because they can't manufacture and market the gee-whiz stuff their engineers and scientists come up with, not because they have bad product.

  12. But drugs do not manufacture themselves.

    Let's do a little elemental math here.. Profit = Net - Cost.. So.. if there are high Profits (see pharmaceutical company statements), there are either _not_ high Costs or there is a too high a Net. One incompletely stated point is we, the people, already own the drug patents.. They (the meds) should be free (no patent restrictions) for any company to manufacture. We already know that 'generic' drugs cost less.. So, where's the 'Cost'? Ah, yes.. Capitalism.. The Rich MUST get richer.. & the poor, poorer.. You know, the 'good old boy' system is most alive & well among the educated wealthy.. It's simply called the 'rich white man' system there..

    And yes, I used to be head engineer (electrical) in a small company as well as self employed (going on 30 years now) I know of costs..

  13. BadTux, you evaded my concern of constitutionality. I also reject the idea that all pooling of resources is a "distortion" of the free market. Home and auto insurance. Life insurance. The are all effective free market (with some regulation of course) measures that work pretty well. In fact any company that sells stock is pooling resources to have enough capital to do something that individuals can't do.

    Badtux, it *is* constitutional in the U.S. to subsidize medical research. So it is possible to continue the innovation with government help and by pooling resources. The distortion is not the pooling of resources. It is the fact that our tax code forces employers to fund and pick insurance instead of individuals. It ties us to our employer and interferes with the price signals as individuals don't question the cost of care that they aren't paying for. If all individuals bought their own insurance, they would probably all go back to buying just catastrophic insurance. This would cause a great downward pressure on the cost of everyday procedures. It would also cause hospitals to be more modest (smaller no-frills rooms such as in France). But the pool of resources for catastrophic care would continue to fund major illnesses. There are ways to ensure that the poor are given tax credits so they can be in on this system.

    It just isn't constitutional to mandate individual behavior. Badtux, you tread on very thin ice when you start making good health a right. There is no end to the government intrusion if the government has to ensure your good health. It would have to make sky diving illegal, it would have to make eating at McDonalds illegal. It would have to make it illegal to have children if the woman has risk factors. See? And as I have tried to explain before, a health right becomes a major infringement on the pursuit of happiness for a great number of people. People in their last few years of life can cost millions to keep alive. This right to good health that you speak of would require that most of us give up our pursuit of happiness to divert our energies to ensuring health parity. It could consume well over 50% of GDP to keep old folks alive for as long as possible. So eventually, yes, you have to have the right to die. And who will decide when the right to die exceeds the right to good health? Are you going to pick the magic age? You see, the government shouldn't be in this business, it is a private matter.

    The notion of the right to life in the U.S. law is that the government should take no measures to distinguish life. But by the same token, it should not take extraordinary measure to extend life, or you interfere with other primary rights such as the right to pursue your life as you see fit and the right to property. Basically, it's a non-interference of government that is paramount. BadTux, I place a high value on having children. For me, it is like denying the right to live to somebody if you don't honor the God-given responsibility to reproduce. But should I then advocate a federal law that mandates that everyone have kids? No! Alternatively, what if we make it a right to live in a pristine world. Then we have to go the other way and make it illegal to have kids, because the more people there are, the harder it is to protect the environment. You see, the questions of life and death are very personal, and you should not be dictating what others should decide. You're only job is to ensure that people are free and that the government doesn't go out of its way to extinguish life. So your lowest hanging fruit should be to prevent abortions.

  14. Nathan, I didn't evade your question about Constitutionality, I utterly ignored it because it was nonsense based on a restrictive reading of the Constitution that no Supreme Court all the way back to the 1790's has ever held.

    There is no Constitutional prohibition on taxes to provide services to Americans. None. There is no Constitutional prohibition on mandating that Americans purchase auto insurance or health insurance in order to protect the general welfare by providing proper risk pools to handle accidents or illnesses. None. The U.S. Supreme Court has already ruled on this multiple times and you might stamp your widdle feetsies and claim "But it's not so!" but that's not how it works in the system set up by the Constitution, the USSC, not you, decide which interpretation of the Constitution applies (yours or mine), and they ruled that mine applies.

    I already addressed most of the rest of your comment in previous posts (click on 'healthcare' at the bottom of this post), but regarding your notion that it is employer-provided insurance that is the problem: in Switzerland, individuals, not employers, purchase insurance. It didn't work. Swiss healthcare costs kept spiraling up just as fast as here in the US, though since they started at a lower base, their absolute costs were not as high. Insurers reacted by canceling the insurance of sick people to reduce the cost of insurance. Government reacted by making insurance must-issue cannot-cancel. Well individuals reacted to the escalating insurance costs by canceling their insurance, leaving only sick people in the insurance pool, which doesn't work because sick people spend 10% of the Swiss GDP but don't earn 10% of the Swiss GDP and insurers could not charge them enough premiums to stay in business. Finally Switzerland had to go to must-issue must-have -- just like HR3200, except without the "public option" -- and now have universal coverage, but it's still very expensive for the other reasons I've alluded to.

    Durnick: The cost of R&D is actually *not* the major costs of most drugs. It's been a while since I looked it up, but marketing is the biggest cost, followed by manufacturing, and R&D is down there at under 20%. And while your proposal to multi-license patents for drugs developed at public institutions is interesting, the majority of drugs are *not* developed at public institutions and thus it will not significantly drive down the cost of drugs. We have to address the other costs -- the outrageous marketing costs especially -- to get any real cost savings. I believe we can squeeze 20 to 30% out of drug prices via measures to increase efficiency, which will be decidedly helpful, but modern medicine is going to remain expensive no matter what we do.

    - Badtux the Healthcare Penguin

  15. Basically, what you're saying is that because men and women on the supreme court have chosen to reinterpret the Constitution, that it changes it? Yes, it does for the purposes of what people can get away with here and now. But it doesn't change the spirit of the Constitution. It takes a liberal reading, and frankly, a dishonest reading to throw everything into the purview of the Federal Government.

    The issues I'm talking about were recently brought up in the Sotomayor hearings. They aren't nonsense.

    What do think about the Madison quote warning about the misinterpretation of the general welfare clause. Jefferson totally agreed with Madison.

    Since 1790? Are you talking about the First Bank of the United States? Yes, Hamilton stretched the constitution in terms of means, but his ends (paying of war debt) was totally constitutional and is an enumerated power. Several of FDR's schemes *were* declared unconstitutional (and more of there weren't because the judges were packed) Yet today's health care take over is tamer then many of those schemes that were unconstitutional.

    Let me provide an example. If I had to guess I would bet that you were against Bush's warrantless wiretapping. And I bet the 4th amendment figures into your thinking, at least it does for most people who detested wiretapping. But by reading Article II liberally, you can TOTALLY make the case the wiretapping such as was done is constitutional. In fact, I at first thought it is constitutional from a liberal reading and I applauded Bush at the time for doing it. But it does violate the spirit of the Constitution doesn't it? So if we can dump the 10th amendment for you pet projects, how can you expect us to honor any other amendment?

    It has been proven that judges often just write opinions based on the outcomes they want. Imprecise human language is easy to circumvent. But sit down and read the Constitution and at least some of the more prominent Federalist Papers (For you I'd recommend first the ones authored by Madison) and tell me that the USSC hasn't departed from the Constitution?

    I don't much care for legal precedent when it it clear that it goes against the spirit of law. Do you think that the Dred Scott case was the be-all and end-all of law regarding slavery?

    So back to the power of spending federal taxes on general welfare. I agree that there is some latitude there as along as you can prove that the money benefits all Americans equally. But as soon as you can tell that is it benefiting just a special interest group it is unconstitutional. But you are going farther than the power of taxation and spending, you are *forcing* people to participate. You are controlling companies and people right and left. That is clearly not an enumerated power.

  16. the read and comments were fascinating. and bravo to all you work

    how about we just ban warfare like japan and use all that money to make the country and infrastructure healthy instead of destroying nations, killing people and increasing the mental disease in this country (like glenn beck)

    i dont know what the solution is - i know some of your points are excellent. but i do know what we have doesnt work, and what the rich folks in congress with great insurance will do - will make it worse.

  17. Nathan, the point is that under our Constitution you don't get to interpret it. The courts do. Occasionally they have interpretations of it that I don't agree with -- Dred Scott, for example. Occasionally they have interpretations of it that you don't agree with -- Roe v. Wade, for example. Sometimes they have interpretations of it that *neither* of us agree with, for that matter. But this is the mechanism set up by our Constitution, imperfect as it may sometimes be.

    Please note that HR3200 does *not* force you to purchase insurance. It gives you the option to instead pay a healthcare tax that goes into the uncompensated care fund so that when you *DO* go to the ER with a broken arm, your tax money that you paid, not my insurance premium money, goes to fix your arm. There is nothing unconstitutional about a tax, period.

    Personally I think we should just go single-payer with Medicare For All, but that's because it's provably the most efficient way to manage things -- every country that has tried it (e.g., Taiwan and France) has had excellent results in improving healthcare efficiencies without harming quality of care. But HR3200 does solve *one* of the perverse incentives of the current system. Currently, insurers have an incentive to kick sick people out of the system rather than become more efficient, and providers have an incentive to over-treat rather than provide medically necessary treatment. HR3200 doesn't fix the second problem, but it certainly fixes the first, and thus at least solves half the equation -- the half where the current system responds to any attempt to force efficiencies upon it by kicking people out of the system (i.e., RATIONING, which is bad, right?).

    - Badtux the Healthcare Penguin

  18. Just because the courts get to interpret the Constitution doesn't mean that I can't as citizen decry laws that are unconstitutional in spirit. Thus, it is NOT nonsense for me to cite the Constitution as a concern. It SHOULD be pertinent in all discussions such as this.

    When I was talking about controlling people, I was talking about your proposal, not HR3200, which I have yet to study in depth.

    France and Taiwan are not the US nor do they have the same value on individual freedom. I'm sure they are nice places. But both of those countries owe their current existence to the U.S. and the strength that came from the U.S. Constitution.

  19. Nathan: The French don't value personal freedoms? Excuse me? The French are the most arrogant, opinionated, and ornery people I've ever encountered. You violate what a Frenchman views as his personal freedoms, and he doesn't just complain to a Congressman -- he and a hundred thousand of his compatriots go out and blockade government buildings and otherwise make a nuisance of themselves until it's fixed. It's one of the reasons behind France's poor war record -- they just aren't good at that whole being regimented and following orders deal.

    In short, nobody tells a Frenchman what health care he can have or not have. Nobody. Anybody who tried would get re-educated immediately. Frenchmen pay high taxes, but they pay them voluntarily in order to provide services to themselves, not because they hate freedom or some bullshit like that. Have you even BEEN to France? Or even known actual, real Frenchmen? I mean, these are the motherfuckers who CUT THE HEADS OFF of their royalty! They be some ornery bastards, yessiree!

    - Badtux the Quarter-French Penguin
    (My Daddy's momma was from France).

  20. The chart on healthcare in 1960 vs the present is very informative, thanks. It should also be pointed out that America spends more on healthcare because we can afford it.

    I guess I should read more. This is first time I have seen the following point you made: "Problem is, 16% of the nation's GDP is tied up in healthcare, but sick people don't make 16% of the nation's GDP."

    I do believe you underestimate the potential savings from tort reform. Without reform every doctor is forced to practice defensive medicine. In most cases this means a series of mostly unnecessary tests based on statistics. Juries don't understand statistical probabilities very well. Remember the O.J. trial?

  21. EGD, I am not the person understating the savings from tort reform. That is the CBO which found that the costs difference between states with strict tort limits and those without strict tort limits was 1.4%. So it does appear that defensive medicine happens, but it is a very small part of healthcare spending (especially since three of the four biggest states -- California, Texas, and Florida -- have strict tort limits, only New York does not), and frankly we have bigger fish to fry.

    Regarding "America spends more because we can afford it", that is why I use the percentage of GDP as my comparison point. France puts about 12% of their GDP into healthcare as vs. 17% for the US, i.e., they spend about 70% as much as the US as a proportion of their national income, but if you looked at their absolute spending in PPP-adjusted dollars their health care is 60% of the price of US health care because France's economy is comparatively smaller on a per-capita basis compared to the US economy. But I use the GDP figures to explicitly point out that US higher spending is not *solely* because the US is wealthier on a per capita basis -- rather, the percentage of that wealth used for health care is higher too.

    In short, my point -- that the US system is spending far more for the same outcomes as the French or Swiss system and thus has significant inefficiencies that can be wrung out of it -- remains valid. I explicitly chose the French and Swiss systems as my basis for comparison because neither has rationing nor waiting lists for service, and both have more physicians per capita than the United States as well as significant healthcare innovation and a worldwide reputation for high quality healthcare. If looking for ways to reduce U.S. healthcare spending without harming quality, comparative research of this type -- seeing what works in other nations that is not working in the United States -- is valuable and, alas, mostly not done other than spurious comparisons to Canadian and British systems which are completely unlike any proposal to reform the US healthcare system (apparently in the right wing universe the only nations outside the US are Canada and Britain, go figure!).

    - Badtux the Healthcare Economist Penguin

  22. [nice rant -- that's a lovely description of the french, be they from montreal or breaux bridge or the heart of paris.]

    i take issue with a couple of your non-french points though.

    hard to tell just looking at the big picture, exactly how much the insurance companies distort the pricing of medical care. i'm convinced we could reduce our 'health care' spending by 20% or more if we dump them.

    i use those nhe tables a lot, but something i've never found out [and tell me the answer if you know it] is whether the privatized portions of medicare and medicaid get counted as phi or govt spending in those tables. it looks like, just from comparing the nhe tables to the medicare trustees reports that the privatized portions of medicare [~20%] and medicaid [~60%] and schip [?%] are NOT counted in the phi column. if so, then there's another 3% or so wasted that we could get back.

    then there's the less tangible stuff. one of the big issues is just how much readmissions cost [people getting sent home from the hospital and going right back in a few days]. if insurers are the drivers behind people getting sent home too early [and it does happen], then they're costing us a boodle in excess medical spending as well as in unneeded overhead. even harder to track down would be how much they're indirectly driving other medical [not just administrative] spending with all their other delays and denials.

    Reduce incentives for over-treatment. Doctors should not be allowed to send patients to hospitals and diagnostic testing centers that they are part-owners of,

    it's my understanding that japan allows doctors to own hospitals and send their patients to their own hospitals, but yes, i think that along with the astonishingly low prices the govt allows them to charge, it's possible that they're non-profits also, but i don't know that for sure.

    same for 'over-use' of imaging, japan has scads of mri machines and ct scanners, they just charge way less per scan than we do. korea too.

    ama-endorsed, eh? those same people who want to keep the dr supply low so as to [theoretically, at least] keep doctors' incomes high? color me skeptical.

  23. Very thoughtful and informative. You've really done some homework on this which, sadly, too many others have not. No doubt even the system you describe will be gamed (this is a human-based activity, after all), but the biggest and most dangerous game--kicking people out--will no longer be an option.

    You can further mitigate the costs of a universal system by reducing the costs of the National Security State.


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