Fwd: qotd: Uwe Reindardt on the U.S. path to three-tiered health care

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Subject: qotd: Uwe Reindardt on the U.S. path to three-tiered health care
Date: Mon, 23 Dec 2013 10:09:37 -0800
From: Don McCanne <don@mccanne.org>
To: Quote-of-the-Day <quote-of-the-day@mccanne.org>



The New York Times
December 20, 2013
The Economics of Being Kinder and Gentler in Health Care
By Uwe E. Reinhardt

In the late 1980s, about 35 million respondents to large nationwide
surveys declared that they lacked health insurance of any kind. The
comparable number now is close to 50 million.

Then, as now, the endless "national conversation" went on and on,
pondering ways to achieve truly universal health insurance coverage, a
feat most other developed nations accomplished long ago.

Then, as now, news organizations and the health services research
community reported on the financial and physical hardship that many
low-income, uninsured Americans face when they fall ill.

And then, as now, the prices for identical health care goods and
services were more than twice as high in the United States as they were
– and still are – in the member nations of the Organization for Economic
Cooperation and Development.

For all the wonderful things the United States health system has done
for the American people, then, as now, it has also helped price some
degree of kindness out of our souls, a side effect of their treatments
that the leaders of American health care at some point must begin to
contemplate.

My interpretation is that opposition to the Affordable Care Act largely
reflects the age-old reluctance among many of the nation's haves and the
healthy to help purchase for America's lower-income families and the
chronically ill the super-expensive health care that the haves enjoy
themselves. That attitude is all the more striking because of the
generous federal indirect subsidies enjoyed by many of the haves,
especially high-income Americans. (I am thinking specifically of the
generous tax preference accorded employment-based health insurance, the
largest tax expenditure in the federal budget.)

Some people on both the extreme left and right seem to believe that the
current travails of implementing the Affordable Care Act and the
possibility of a so-called "death spiral" in the market for individual
health insurance may usher in single-payer health insurance in the
United States – say, Medicare for all.

I do not find that a likely prospect. Rather than embracing a
single-payer system, the United States is more likely to stumble, in
fits and starts, toward something resembling officially sanctioned
tiering of the American health care experience by income class, as follows:

FOR MEDICAID BENEFICIARIES AND THE UNINSURED, a budget-constrained
system of public hospitals and public clinics. It would allow
politicians to ration health care (through tight budgets) without ever
having to acknowledge that they were doing so. In other words, it would
reduce the price of being kind.

FOR THE EMPLOYED MIDDLE CLASS, a mixed system with defined contributions
by employers, private health insurance exchanges and reference pricing
by insurers. Under a restructured Medicare program also based on a
defined contribution model, reference pricing would be likely to apply
to Medicare beneficiaries as well. Depending on how it is operated –
e.g., if it were solely based on cost, in abstraction of quality –
reference pricing also permits tiering of the health care experience by
income class, without anyone having to say so openly.

FOR THE UPPER-INCOME GROUPS, boutique medicine, which is already growing
in the United States. Here the sky will be the limit.

And what do readers think?

http://economix.blogs.nytimes.com/2013/12/20/the-economics-of-being-kinder-and-gentler-in-health-care/


Comment: Uwe Reinhardt, an astute observer of the U.S. health care
system, does not see single payer in our future, but rather sees an
"officially sanctioned tiering of the American health care experience by
income class." We already have the three tiers that he describes, but
the middle tier is rapidly evolving in a way that may provoke a renewed
and more intense interest in single payer.

The lowest tier - Medicaid beneficiaries and the uninsured - have never
had much of a political voice. Nevertheless, even the most heartless of
politicians recognize that we must provide care for indigent pregnant
women and children. Thus we have the chronically underfunded Medicaid
program plus safety net hospitals and community health centers. Some
states also have included other low-income adults, though they still
make up the largest percentage of the uninsured. Except for the most
basic of primary care services and care for events that threaten life or
limb, access to health care for this sector is limited, especially for
specialized services. As Professor Reinhardt indicates, politicians are
able to ration health care for Medicaid beneficiaries and the uninsured
without admitting that they are doing it, merely by placing restraints
on the budget. Since it is unAmerican to ration health care, they would
never do that, but rather they merely refuse to budget spending that we
can't afford. (Of course, inadequate funding of health care is
rationing, and we actually can afford to pay for health care for all,
though we do need more efficiency in our financing system.)

The highest tier - the upper-income groups - have never had problems
with gaining access to the best care available. That is true now, and
will be true no matter what health care financing system we will have.
Some have expressed concerns that in a truly egalitarian system, such as
a single payer system, the wealthy would have to give up some of the
finer amenities of health care and stand in line with the rest of us,
but that will never happen. The wealthy are not hampered by noblesse
oblige when it comes to moving to the front of the line for health care.
Besides, a well designed system should not have an excessive queue anyway.

The middle tier - the employed middle class - will see greater changes
in health care access and affordability, changes that have already
begun. Although the plans to be offered in the state exchanges will
include many of these changes, employers are already following by
modifying their plans to reduce their own exposure to costs. Higher
deductibles and other forms of cost sharing are shifting more costs to
the pockets of those who need health care. Although ten categories of
benefits will be required under the plans, the insurers have
considerable flexibility in the composition of benefits within each
category and will leave out selected benefits that some individuals will
need, especially some of the more expensive benefits. Insurers are
reducing their networks of physicians and hospitals, further limiting
patient choice of their health care providers, unlike the traditional
Medicare program, which allows free choice. Patents may still face
catastrophic losses since the maximum out-of-pocket expenditures apply
only to covered benefits provided within the networks. Care unavoidably
obtained out of network and health care services not included as a plan
benefit can result in costs that threaten personal bankruptcy. Even the
allowed maximums would create a hardship for many. Employers are
beginning to switch to defined benefit contributions to health plans
that would be selected from private (not state) health exchanges. This
voucher approach allows employers to shift the future increases in
health care costs disproportionately to the employees. Reference pricing
is the process of setting a low price for given health care services and
requiring the patient to pay the full difference in prices if the
patient selects a more expensive provider. This is another method of
shifting more costs to the patient, not to mention that it further
limits choice of providers since these extra costs may be truly
unaffordable. A shift in control of Congress and the White House to
conservatives may well result in premium support of Medicare (vouchers -
a defined contribution), thereby allowing Medicare to adopt some of
these same policies that shift more costs to patients in need.

The obvious point is that the exchange plans and now even
employer-sponsored plans will cause the employed middle class to become
quite dissatisfied with our health care financing system. Once they or
their families and friends have enough negative experiences with our
health care financing, and once they understand single payer - an
improved Medicare for all - it will be the middle class workers that
will be the loudest in demanding change.

In the meantime, under our present three-tiered system, we will be able
to obtain a basic level of care for Tiny Tim, just not the specialized
services that he really needs. And Ebenezer Scrooge will be able to
access his boutique providers, with the sky as the limit. But what about
the people of the village? Once Scrooge gains control of the insurance
industry, will he further advance the current agenda of making health
care more expensive to increase profits, and less accessible to reduce
costs? Will another visit from the Ghost Of Christmas Yet To Come be
adequate? Or will he be hardened enough to carry on, as Reinhardt
writes, "the age-old reluctance among many of the nation's haves and the
healthy to help purchase for America's lower-income families and the
chronically ill the super-expensive health care that the haves enjoy
themselves."

Though should we really expect a different outcome? We now have a
society that when Bob Cratchit pulls himself up by his bootstraps and
runs for mayor, we elect Ebenezer Scrooge instead.