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April 22, 2012

Are Death Panels Making A Comeback?

Walter Russell Mead

What passes for good news about healthcare costs came in recently: they grew by “only” 4 percent between February 2011 and February 2012, significantly faster than the overall rate of inflation, but less quickly than they’ve grown in the past. Health care now accounts for 18 percent of total US GDP and costs are rising at almost double the rate of GDP growth.

The reduction in the rate of increase is not an Obamacare effect: to tweak the budget math in order to disguise its true costs and otherwise groom that sketchy law in hopes the public would hate it less, Dems made sure most Obamacare provisions wouldn’t kick in until after the 2012 election.

However, debates over the future of health care in the US are opening up some interesting ideas about how to cut costs. Early this month the New York Times picked up on an intriguing development. A group of nine medical specialty boards has recommended doctors perform 45 common tests and procedures less often:

The specialty groups are announcing the educational initiative called Choosing Wisely, directed at both patients and physicians, under the auspices of the American Board of Internal Medicine Foundation and in partnership with Consumer Reports.

The list of tests and procedures they advise against includes EKGs done routinely during a physical, even when there is no sign of heart trouble, M.R.I.’s ordered whenever a patient complains of back pain, and antibiotics prescribed for mild sinusitis—all quite common.

According to the Times, many of these additional routine procedures are ordered by doctors because they fear malpractice lawsuits. The more tests they run, the better protected they are. They are also ordered because, well, they pay, and doctors and hospitals are, on the whole, fond of money.

Some estimates cited in the Times piece suggest that unnecessary treatment accounts for one third of total medical spending in the country. Obamacare advocates sometimes played that down in the debate over the law before it was passed. Any talk about cutting back on “unnecessary” procedures was sure to spook the voters; as fast as you can say “death panel” voters worry when health care reformers talk about those horrible bitter clingers out there in the boonies using “too much” health care to prolong their worthless Snuggie wrapped, polyester-clad existences for a few more miserable months of watching Fox News and American Idol.

Physician greed and patient insensitivity to cost (if insurance is paying, why not have just one more little test to make sure?) are definitely part of the mess. But every doctor I’ve ever talked to — and the Mead family has been producing physicians in every generation back to great-grandfather Mead who graduated from medical school in the late 1800s — says that malpractice fears play a huge role in driving doctors and hospitals to play defensive medicine.

Malpractice reform, an issue the pusillanimous authors of Obamacare shrank from addressing (obeisance to tort lawyers being an important community value in the political party that selected John Edwards as its vice presidential nominee), might well accomplish more than any other single step to bring health care costs down to earth in the short term. To this end, reports by well respected physicians could be useful — if, for example, no doctor who followed certain approved guidelines by reputable physician associations could be sued for malpractice.

No system will ever work perfectly in the gritty, murky world of illness and treatment. People confronting their own mortality and that of their loved ones, people suffering from disabling and debilitating diseases, harried professionals trying to get the job done, government and insurance company green eye shade types trying to audit the whole mess, uninsured drug addicts popping into emergency rooms hoping for an Oxycontin scrip or a hot meal, hotshot CEOs looking to ramp up their bonuses by gaming the system, unions grimly fighting to hold onto their turf, the very young and the very old: to expect this complicated mix of people and priorities to be simply and efficiently organized is simply not in the cards.  And no top down administration will ever bring order to this chaos.

America is a much more diverse and complicated country than any of the member states of the European Union or, for that matter, Canada, and national systems that work acceptably well there would fail pretty spectacularly over here.

One perverse result of centralizing the health care system and regulating it more through top down rules rather than price signals and incentives: Obamacare may actually make it harder to cut back unnecessary treatments and slow the rise of health costs. Patients and patient advocates all over the country are going to fight mandated cutbacks in medical services and allowable treatments, especially if these are perceived as being required by some Orwellian Ministry of Life. Pictures of grannies and toddlers denied lifesaving treatment by heartless bureaucrats will fill the media. (The Times piece features a breast cancer survivor who might not have survived under the new and ‘improved’ guidelines being proposed.)

Once the “Let my Mommy live!” campaigns start, and they surely will, laws and regulations will be changed, insurance and pharmaceutical lobbyists inserting phrases here and exceptions there, to mitigate whatever horror has the press and the blogosphere up in arms — this week. The inevitable result will be a ferocious cost bloat and an ever more complex, ever less workable and less affordable health care system.

A decentralized system with built in incentives (patients wanting to save money, for example) and malpractice protection that ends physicians’ need to practice defensive medicine will have the same or greater effect on costs as National Death Panel rulings, but will not elicit the same kind of focused outrage.

I don’t think we can build a great or even a sustainably mediocre health care system on a national basis, but we can start to get rid of bad things — like the plague of ambulance chasing, second-guessing tort lawyers, the distorted incentives that ensure that patients don’t ask how much some marginal procedure will cost, and the crazy financial incentives that force both doctors and hospitals to over-use expensive technology to recoup their costs.

Ultimately the fixes will have to be more aggressive and more out of the box, but there are some things we can short term to ensure that we get more of the care that we do need, and less of the care that we don’t.  I’d suggest we start with the tort reform before moving on to the death panels, but maybe that is just four generations of medical Mead-talk.

If something like a third of our health costs are unnecessary, we are squandering the equivalent of six percent of GDP. Tort reform is the easiest way to gather some low hanging fruit: defensive medicine generally involves tests that patients don’t ask for and that doctors think aren’t needed. Surely health care expenditures that are both unneeded and unwanted are the ones we ought to cut first.

Image courtesy of Shutterstock.

Posted in Essays, Healthcare, Obama, Politics
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  • vanderleun

    “I’d suggest we start with the tort reform before moving on to the death panels, but maybe that is just four generations of medical Mead-talk.”

    Alas, it is just that: Mead-talk.

    File “Get Rid of Tort Reform” in the drawer labeled “Fat Chance.”

  • http://thepencilofnature.net Lorenz Gude

    Australia runs both a private and a public health system for 8.5% of GDP with better outcomes than the US. in 2010 I heard over a hospital wall a Virginian man dying of cancer who had no insurance say that his values required that he couldn’t accept treatment he couldn’t pay for knowing he would die as a result. He would be taken care of in Australia. A lot of our efficiency arises from very stringent central supervision of both doctors and testing facilities.

  • Andrew Allison

    Another brilliant essay; your students are very fortunate.
    I’m inclined to think that CYA represents a high percentage of the unnecessary procedures. Might a possible solution be single-payer malpractice insurance in conjunction with a code of recommended procedures which, if followed by the practitioner, would hold him/her harmless from claims. This could be accompanied by measures such as requiring a second opinion for procedures outside the code and insurance companies not covering the cost of unnecessary procedures. It’s a somewhat round-about way of addressing the problem, but if the patient were advised by the practitioner that that an unnecessary antibiotic or procedure would be paid for out of the patient’s pocket, the patient could make the decision, thereby protecting the practitioner from a charge of malpractice.

  • Paul Z

    Lorenz, I think you missed the following from the post:

    “America is a much more diverse and complicated country than any of the member states of the European Union or, for that matter, Canada, and national systems that work acceptably well there would fail pretty spectacularly over here.”

    You need to explain how America could model their system based on Australia’s when taking into account America’s size and diversity. For example, the one quality of the Australian system you provided, “very stringent central supervision,” is anathema to most here.

  • Kala

    Lorenz misses the point. The care was available it was the mans’ choice not to take it. What kind of waiting list wiould he be on under your system.

  • Jacksonian Libertarian

    “Physician greed and patient insensitivity to cost (if insurance is paying, why not have just one more little test to make sure?) are definitely part of the mess.”

    “A decentralized system with built in incentives (patients wanting to save money, for example) and malpractice protection that ends physicians’ need to practice defensive medicine will have the same or greater effect on costs as National Death Panel rulings, but will not elicit the same kind of focused outrage.”

    I think you’re beginning to get it, as this is the first time I’ve seen you mention how insulated from Healthcare costs the patient is in the present insurance system. We can’t get the market effects of continuous improvements in Quality, Service, and Price, if the patient doesn’t have any buying decisions to make, in other words if there isn’t any market. It’s the feedback of competition, which is missing from our present system. Health Insurance isn’t a product you buy in case of a Health catastrophe, but rather an employer or government pre-paid service with tiny co-payments that don’t change no matter what service the Doctor performs.

    We will know we have a True Market when medical service providers are forced to advertize their prices to compete for patients. A perfect example of this is Lasik eye surgery, which isn’t covered by most Health insurance, and which improves every year in Quality, Service, and Price. Prices have now dropped so far that a consumer can get Lasik eye surgery for a few hundred dollars or about the same price as a pair of designer prescription eye glasses.

    My prescription for Healthcare:
    1. Only High Deductable ($2,000+) Catastrophic Health Insurance should be legal (HMO’s and Cadillac Healthcare plans must be outlawed)
    2. Health Savings Accounts should be fully tax deductible, and any unused money should become the consumers on reaching 65 years of age, tax free.
    3. Only Consumer paid for Health Insurance should be tax deductible, company’s could still pay but could no longer deduct it as a cost of doing business, company’s could still require that an employee carry Health Insurance as a condition of employment.
    4. Tort reform
    5. Seniors as the largest Healthcare consumers, and with the most time and incentive to shop, must be brought into the system with a medicare paid for High Deductable Health Insurance plan, and a Health Savings Account filled each year by medicare, where any unused money in the Health Savings Account becomes the senior’s every year tax free.
    6. All Healthcare providers would be required to publish their prices, for all products and services

    Quality, Service, and Price would all improve drastically in a very short period of time if the above plan were implemented. Similarly to the breakup of AT&T, or the deregulation of the Airline Industry.

  • http://therandomtexan.wordpress.com Mike Anderson
  • Mrs. Davis

    Where to start?

    I don’t get my car, home or life insurance from my employer, why should I get my health insurance there? Just because of unions trying to find a way to skirt wage and price controls in WWII? Just another part of the Blue Model that needs to fall.

    Get users of the system back in control. Then they will make the judgment that is in their best interest. Just like that Virginian who accepts his responsibility for providing for himself. If he died, at least it was with his self respect in tact, unlike those tortured till death by the medical establishment.

    Like him, I’ll pay my own way and suffer the consequences. In three years, I won’t sign up for Medicare. I’ll not be a burden on my children or grandchildren let alone those not even related to me. If I only live to 72 instead of 74, I’ll still have had a good life and can go to the next place free of financial debt. Lord knows I have enough other debts to be forgiven without adding those.

  • Mark Michael

    Re: Tort reform

    Here in Ohio we adopted very modest tort reform starting in 2003 with a few changes made in succeeding years. The Columbus Dispatch reported that medical malpractice claims have dropped 41% and doctor’s malpractice insurance premiums have fallen 26% since then. See:

    http://www.dispatch.com/content/stories/local/2012/04/16/lawsuits-against-doctors-have-declined.html

    They limited non-economic “pain and suffering” awards to no more than $500,000. Legitimate economic damages are not affected. See story for more details.

    Re: HSAs – a statewide experiment for state government workers in Indiana

    Gov. Mitch Daniels made HSAs coupled with high-deductible (catastrophic) health insurance policies very attractive to Indiana state workers when he first became governor. (Did it by executive order.) Something like 70% of state workers now have HSAs. See:

    http://online.wsj.com/article/SB10001424052748704231304575091600470293066.html

    This article is 2 years old; it was published March 1, 2010. I’ve not looked into how well this HSA – catastrophic policy option is doing now. A quote from it:

    The HSA option has proven highly popular. This year, over 70% of our 30,000 Indiana state workers chose it, by far the highest in public-sector America. Due to the rejection of these plans by government unions, the average use of HSAs in the public sector across the country is just 2%.

    What we, and independent health-care experts at Mercer Consulting, have found is that individually owned and directed health-care coverage has a startlingly positive effect on costs for both employees and the state. What follows is a summary of our experience:

    State employees enrolled in the consumer-driven plan will save more than $8 million in 2010 compared to their coworkers in the old-fashioned preferred provider organization (PPO) alternative. In the second straight year in which we’ve been forced to skip salary increases, workers switching to the HSA are adding thousands of dollars to their take-home pay. (Even if an employee had health issues and incurred the maximum out-of-pocket expenses, he would still be hundreds of dollars ahead.) HSA customers seem highly satisfied; only 3% have opted to switch back to the PPO.

    The state is saving, too. In a time of severe budgetary stress, Indiana will save at least $20 million in 2010 because of our high HSA enrollment. Mercer calculates the state’s total costs are being reduced by 11% solely due to the HSA option.

    Most important, we are seeing significant changes in behavior, and consequently lower total costs. In 2009, for example, state workers with the HSA visited emergency rooms and physicians 67% less frequently than co-workers with traditional health care. They were much more likely to use generic drugs than those enrolled in the conventional plan, resulting in an average lower cost per prescription of $18. They were admitted to hospitals less than half as frequently as their colleagues. Differences in health status between the groups account for part of this disparity, but consumer decision-making is, we’ve found, also a major factor.

    Overall, participants in our new plan ran up only $65 in cost for every $100 incurred by their associates under the old coverage. Are HSA participants denying themselves needed care in order to save money? The answer, as far as the state of Indiana and Mercer Consulting can find, is no. There is no evidence HSA members are more likely to defer needed care or common-sense preventive measures such as routine physicals or mammograms.

    It turns out that, when someone is spending his own money alone for routine expenses, he is far more likely to ask the questions he would ask if purchasing any other good or service: “Is there a generic version of that drug?” “Didn’t I take that same test just recently?” “Where can I get the colonoscopy at the best price?”

  • Mark Michael

    My quickie policy thought: About 65% of Americans are non-poor and not retired and on Medicare (there are 48 million on Medicare; 40 million retired and 8 million younger people with disabilities; about 20% are poor & use Medicaid or other welfare benefits). That 65% should be strongly encouraged via public law changes to adopt Indiana’s idea of using HSAs coupled with catastrophic health insurance policies noted in my previous comment. (Comment #6 has some details on how to implement it.)

    Add it tort reform a la Ohio, Texas, or other states that have adopted reasonable restrictions on the tort bar.

    THEN WENT 10 YEARS! If the health care “cost curve” has not bent down close to the inflation rate, then all of those proclaiming that “health care is different” from all other industries known to mankind have been proven correct. Go ahead and adopt the Australian system maybe.

    (Okay, I’m ignoring Medicaid – that’s for the poor, of course. It should be turned over to the states to manage with few or no strings attached over a period of time. Paul Ryan in his budget proposal I believe proposes this. Don’t allow taking care of the poor to dictate how the other 80% of the population buys its health care!)

    ANECDOTE: Paul Krugman was at some conference giving a talk. He asked the audience how many Canadians were in the audience. Maybe 7 or 8 raised their hands. He asked them a question biased towards the answer he wanted. It went something like this, “Is the Canadian single payer system really such a terrible system that some make it out to be? If you agree, raise your hand!”

    The moderator counted hands: The same number as had raised their hands as being Canadian!

    It did not stop him from continuing with his talk how great it would be for the US to adopt a single payer system, of course.

  • MarkE

    All of the weaknesses of the healthcare system you describe seem valid, but they are linked by the financial underpinning of the system. Since taxes and fees paid to the government are regarded as a sunk cost, consumers and producers of healthcare regard the 45% of total healthcare that government pays as a subsidy. This extravagant “subsidy” has created a healthcare “bubble”.
    The current 18% of GDP spent on healthcare may not be sustainable. Certainly the projected expenditures are not. Bubbles always collapse. When this bubble collapses, medicine will change a lot. The good news is that it will cost less. The bad news is you will probably paying for more of it yourself.
    I have tried to imagine planning scenarios, but it is a little link planning for the sinking of the Titanic.

  • Adam Maas

    It’s a myth that Canada has a National Healthcare system, it does not and never has. The Federal Government requires that each Province provide such a system to its residents. This myth arises because Canada does Federally mandate a single-payer system, although that interpretation is weakening as the actual legislation is ambiguous and there’s been at least one major court case successfully challenging the single-payer issue in Quebec.

    Canada is very nearly as diverse as the US, with 4 major regional divides, vs 5 for the US. Much like in Canada, a single national health-care system will not function well (likely worse than the UK’s already awful NHS). State-level systems with a certain minimum mandated federally might work much like in Canada where it’s functional but not particularly good. But nobody is proposing such a system (although Romney’s hinted at it in his hedges about RomneyCare).

    Canada’s system has its advantages, it tends to handle long-term chronic care better than most other systems. It’s significantly inferior to the US for diagnostic access and emergency care though, and moderately inferior for critical short-term care.

  • JeremyR

    What’s the difference though, if you can’t get medical treatment because you can’t afford it, and you can’t get medical treatment because of a triage system says the costs aren’t worth the benefit?

    I mean, the fact remains that we pay more for health care than any other country in the world, despite a good chunk of the population simply not getting health care. So of course the price goes up when they start to. But is that really worse than them not getting health care in the first place?

  • DaveJ

    Another, unremarked cost floor exists. I am accustomed to paying cash for care and receiving a significant discount. No forms, no claims, no 4 month waits, no 30 cents-on-the-dollar nonsense. Cash on the barrel-head is worth between 25% to 50% of the sticker price to some practices.

    Then I moved to a new state. State law prohibits charging any customer a lower price than is charged to the state for a Medicare patient. See above list of forms, waits, and cents-on-the-dollar built into that. My cash discount goes out the window so I can subsidize the state yet again. When I asked for the same payment terms that the state got, guess what the answer was…

    Tort reform, end the hidden subsidies, and ideas 3 & 5 from Jacksonian above would help.

  • Anthony

    “Health care now accounts for 18 percent of total GDP and costs are rising at almost double the rate of GDP growth…No system will ever work perfectly in the gritty, murky world of illness and treatment….”

    Taking for granted that health care will not reform itself (the vested interests are too entangled/intertwined), then for me the question becomes: how does average American through our federal system work to moderate health costs via a “systems approach” (a public/private buy in)? Recognizing the low hanging fruit towards costs moderation (tort reform, direct pay, etc.), the current infrastructure, employer provided/government provided health coverage, creates incentives to maximize costs and it would be foolish to expect system to reduce costs and prices without organized effort…

  • brad

    Once you understand that suffocating regulation in the medical or any industry is a make work program for the legal cartels as lawyers are hired either as a prosecutors or a defense attorneys, irrational costs won’t surprise you. Cost is no longer related to traditional constraints and rationality but the incestuous relationship between legislators as lawyers. Why do you think trial lawyers “donate” as much money as the do to the political class

  • teapartydoc

    How about a decentralized system that is truly decentralized? The only way to have that is to remove the one factor that has caused all of the problems the last hundred years: medical licensing.

  • Rich R

    In addition to lasik as an example of competition lowering prices, I have seen a number of MRI operations doing the same. I’m guessing it’s the catastrophic insurance customers driving that development.

    But Mr. Mead, how do your Dr. relatives feel about reimbursement rates and coverage expanded to a large degree at the medicaid reimbursement level.

    I’m 45 and have had ill parents. Most of my peers favor a sort of Medicare for all based on the little they know. They haven’t seen a CMS receipt demonstrating reimbursement often 1/3 of what the provider asks for.
    They don’t understand that our system, warts and all, survives in large part due to a mix of reimbursements that cost shift to private plans. They have never called a clinic and been put on hold while waiting for scheduler to check the current medicare to private plan patient ratio before allowing an appointment. They don’t understand that coverage is no comfort if the doc you want to see won’t see you. They don’t understand docs are fleeing primary care just as primary care is being put forth as a cost saver.

    And is the “penalty” enough to make sure folks won’t abuse pre-existing coverage mandate as a way to use insurance the way some use the ER? Obama lectured Ms. Clinton on that but I don’t hear much about it any more.

  • Tonestaple

    It seems only logical that doctors would put malpractice fears at the top of their list of causes of rising costs, but I would suspect that first-dollar insurance coverage actually drives costs more than malpractice fears. Insurance that pays first dollar for anything is always going to be very, very expensive and, if it covers everything, it’s not insurance; it’s just a transfer payment. The system we have now is deeply, deeply stupid but tort reform is definitely not at the top of the list of things to fix.

    I find Jacksonian Libertarian’s proposals very reasonable although I think a $2,000 deductible is too low. Otherwise, good ideas.

  • Rich R

    “first-dollar insurance coverage”

    Define what you are referring to.

  • lhf

    Rationing will be necessary to control costs – the only question is if it will be by the market or by government fiat. I prefer the former.

  • Aloysiusmiller

    Abortion, euthanasia, death panels etc. are all necessary tools of socialism. It’s reasonable cost control for the state that pays for everything. Unless we dismantle state welfare altogether they will all continue to be issues.

  • http://knownofold.blogspot.com J R Yankovic

    A misleadingly (sensationally?) titled essay that on the whole, I think, does a very fine job of presenting the most fundamental issues and options – and priorities. Not having a lot of decided views on the subject – other than the need more strongly to emphasize prevention (but how? – prevention presupposes a relative abundance of TIME, which flies directly in the face of the single greatest poverty threat of the COMING era), and also to balance commercial and professional incentives among caregivers (I get the feeling the former won’t work NEARLY as well for vital as opposed to elective kinds of treatment and care) – for once I think I’ll keep my yapping trap shut.

  • Rumpole

    Any savings from tort reform is illusory. Compare the cost of medical care in Texas and Indiana which have very restrictive laws with other states that don’t and you will find that the cost of care is the same. Tort reform will reduce malpractice insurance premiums at the expense of injured patients but the money saved goes someplace other than the cost of care.

  • Lark

    A government that runs on graft won’t vote for less graft – or at least not unless some local temporary well-publicized graft-reduction is compensated for by large permanent unreported increases elsewhere.
    So good luck fixing torts, insurance, et c.

  • jaed

    Rich R., “first-dollar insurance coverage” refers to an insurance plan that’s really prepaid medical care, where you go through the insurance provider for all medical care including predictable and ordinary expenses (annual checkup, visit for a strep throat, and similar). You usually will have to pay a copay and/or coinsurance percentage, and there may be a deductible amount, so this doesn’t mean the insurance covers it all, but you must go through the insurance company for all care – even the “first dollar” of medical expenses.

    This is as opposed to major-medical or contingency insurance plans, where the insurance company is involved only when you have major expenses. (Think about how car insurance works, as opposed to a hypothetical car policy that covers oil changes and flat tires.)

  • Beasly

    You’ve touched a nerve.

    Tort reform does nothing to decrease the costs of healthcre. As a Texas lawyer who makes her living representing doctors and hospitals, I have not seen any reductions in prices on Chargemasters and RVUs have increased. This study confirmed what we all knew: http://www.ama-assn.org/amednews/2011/10/31/prsc1031.htm

    Negligence is a basic legal concept that many physicians do not believe should apply to them. This doctor, for instance: http://query.nytimes.com/gst/fullpage.html?res=9402E4D7113BF933A15751C1A9679D8B63&ref=malpractice

    I don’t even try to connect the dots for them anymore. I may, however, do a Grand Rounds on the topic.

  • Ken Lathrop

    It’s hard to compare socialized healthcare systems to ours. I lived in New Zealand for 2 years and experienced it for myself. My final analysis is that it works better than our system. Before we can even think about it we’d have to address an unpopular question. Are we willing to put patients before the system or not. If we say yes then a huge burden gets shifted to the system away from the patients. Doctors and nurses would take a cut in pay as well as all other institutions and providers of services.