Rorschach Test

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President Obama and the Democrats were never going to compromise and were going to jam health reform down the throats of the Republicans

OR

The Republicans were going to oppose anything and everything in the way of health reform and wouldn't compromise or negotiate, because they couldn't afford to allow President Obama to have a victory.
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Most people will believe one of these two versions is true, almost immediately; if you believe one, there is almost no way you will believe someone could believe the other. Welcome to our divided country.

There are a variety of folks writing stories this week along the lines of 'would the Democrats political standing (and therefore their presumed election results) be better' if health reform had been handled differently, or not addressed at all. Here is wonkroom nicely pulling together multiple progressive writers considering these questions. One of the main arguments seems to be that the President made an error by not being more centrally involved in driving the health reform train from the start of his administration and deferring too much to the Democrats in Congress. A few thoughts on all this:

• one of the truisms coming out of the Clinton reform effort was that it was an error to have such an executive-branch driven process since it is the Congress that ultimately must pass legislation. Now, some say it was a big mistake to let the Congress have such a predominant role because the legislation got too watered down.
• If you ascribe to the too watered down version (what passed wasn't progressive enough), think back to the snowy night in December, 2009. Which Republican was going to vote yea on the motion to proceed in the Senate of a more progressive bill? What more would Ben Nelson have required to stay a yea vote on a more progressive bill? Make Nebraska its own country and him the King....?
  
• The health care system is unsustainable, and PPACA is a first step that gives us a chance to move towards a sustainable system. Doing nothing was and is a route to health care cost inflation bankrupting our nation as our perpetual cost inflation problem is joined with the retirement of the baby boomers in the next few years. In policy terms, health care is the biggest long term policy problem facing the nation. It was correct to address it because it is the biggest problem. If the Democratic party suffers large losses partly for addressing the biggest problem, then you just have to be ok with that.
• Lets say the Republicans win massive victories next Tuesday, and actually move beyond hyperventilating about repealing this law and actually propose some coherent health care policies. If this happens, the passage of PPACA will be responsible for their engagement in health reform. Think back to the last time the Republicans were in power and they tried to drive a comprehensive health reform attempt....you are correct, there is no such example. The Republicans have no offense on health reform. This is not the same as having no ideas. They have many ideas, and are expert at employing strident ideological rhetoric in opposing any plan. Example A is that they used an individual mandate as the basis for their argument against the Clinton plan. 15 years later, an individual mandate is central to PPACA, and according to the Republicans, this now foretells the end of the republic. Such rhetoric is of limited use in trying to develop practical solutions in the messy arena of health care policy, but is great in being against something.
• I believe that the passage of PPACA will viewed as a historic achievement, because it helped to break a log jam in the health care system and started in motion a process that can lead to a sustainable health care system. It has put the health system in play. Each Congress for the next 5 (maybe 10) will return to health care. It is the first step. The next steps are yet to be determined....but they would never have come about without the first one.

Answering Austin's Questions on SS

Austin Frakt asking me some good questions about my prior post that is here.

Question 1: Is public policy like homework, meaning if you expend all your energy on the easy fix (Social Security), then you might not have anything left for the harder part (Medicare)?

• Maybe. If we could only do one thing, we would be better off addressing Medicare. In the end, if we do NOTHING on Social Security, what we are saying is that in 2039 (or so) when the reserve funds collected the past quarter Century and redeemed by the government over the next 30 years are exhausted, that the outlays of Social Security must equal the payroll taxes in a given year (that is current law). The worst year is probably around 2045 or so, when this would mean that around 80% of the promised benefits would be paid out in that year, when I will be 77 if still alive, so this is not theoretical for me! So, the default is a large benefit cut (but anyone saying there will be nothing when you retire etc. either doesn't know what they are talking about or is being purposefully misleading).
  
• If we have a Social Security fix, I am imagining it to be more of a 'lets hold hands and jump together' type of fix coming out of the Deficit Commission, and not a long protracted 'war'. This would seem to come relatively quickly or not at all. This is what I mean by we need momentum around the Deficit Commission....make some compromises and find some solutions, holds hands and jump and then fight it out over health care (implement v. repeal, how to amend and improve, etc).
• The next step in addressing Medicare cost inflation is to implement PPACA, and especially the IPAB. Culturally, we need to begin asking the following questions in Medicare (and the rest of the system). Does it improve quality of life? Does it extend life? If no to both questions, we need to ask, why again are we doing it? And regardless of the answer to these questions, how much does it cost? There is obviously uncertainty in answering these questions, and mistakes will be made, but we must start asking them, and move to use the answers to make policy. The IPAB is a first step to all of this. I am not sure of the calculus of how we eventually use the answers to these questions to make policy both in Medicare and private insurance; we will have to work that out and it will take time. This is a cultural issue as much as a health policy one: will we grow up and learn to talk thoughtfully about limits and then make some practical decisions? I am rambling....my point is that we won't crack these profound health policy questions this year (or even this decade), but we could shore up Social Security this year.
  
• Any changes/alterations to PPACA that address cost inflation should be seriously considered and supported. The big enchilada is changing the tax treatment of employer paid insurance. Interestingly, I believe every single Republican member of the Deficit Commission has at one point or another favored eliminating the tax exclusion of employer paid insurance. This is what made their (Republicans, generally) opposition to the tax on high cost health insurance so preposterous, which of course in a roundabout way accomplishes the same thing. And of course the President pushed for this, obviously over the wishes of organized labor a key Democratic Party constituency. The tax was delayed until 2018 and the trigger level made to apply only to policies over $27,000 in value I believe (for families). The fact that this tax on high cost insurance remained in the final legislation is in my opinion, the least reported 'big deal' of PPACA. The delay and increase in trigger point was in the reconciliation bill, which of course expires in 10 years. Inside the Senate bill is a tax with a lower threshold level that is being updated at 1 point above CPI that will come into force in a decade, and will apply to a good number of policies since health care cost inflation is going up lots faster than 1 point above CPI. The pay-for to get rid of it (repeal it in 10 years) will be very large. So, the tax treatment of employer paid insurance is likely going to change in a decade or so one way or another. That is one of the best aspects of long range PPACA in terms of cost control. I would rather cap the tax exclusion in a straightforward manner and at a lower level, much sooner.
  
• Austin's comment about lack of momentum after PPACA casting doubt about my notion that a Social Security fix could add momentum for general policy movement is a fair point....I am an optimistic person. And I keep thinking that at some point the seriousness of the issue facing our nation will mean that the grown ups will rise up and work things out.....
  

Question 2: Why not apply the payroll tax to the 90th percentile (~$156,000 in 2012) and use the extra revenueX (X = OASDI rate applied to first $156,000 - OASDI rate applied to first #113,660) to exempt the first dollars of wages from the OASDI tax? Note, I don't know how high up the wage level that the revenue X above would allow. Lets say for argument sake, it would exempt the first $7,500 of wages from Social Security; your rate on the first $7,500 of wages would be 0 if you did this (I will try and back of the envelope it later).

• I think this is a bad idea, because it undermines Social Security as a Social Insurance program. A payroll tax is regressive, which means that for 83% of the US population, 100% of their wages are subject to the OASDI tax; for someone with $1 Million in wages, only 11% of their wages are subjected to the tax. It is the opposite of our income tax structure that is progressive. However, having a payroll tax be a first-dollar tax also means that each person with wages chips in something to Social Security (and also Medicare). And while it is true that Social Security has a redistributionist aspect (floor below which no one can fall; non retirement protection such as survivor benefits); it is also true that your wage history (what you paid in) is important in setting your retirement benefit level. I don't think that it is romantic to be poor, but it is the case that even someone with very low wages today has contributed something to Social Security, and I think that provides them with a measure of dignity, and helps explain the high level of support for the program: everyone contributes, everyone benefits.

Social Security First or Second?

Noam Scheiber guesting in J. Chaits blog giving kudos to a Social Security fix proposed by Jed Graham of Investor's Business Daily. Scheiber says that he would prefer to deal with Social Security after Medicare and Medicaid have been addressed....because they are a far, far greater problem for the long term budget deficit. He is correct that the third rail has become the easy fix, because of how hard the Medicare fix will be.

From a strategy standpoint, my gut is the opposite of Scheiber's. We should go ahead and focus on Social Security using momentum (assuming there is some,or if not we need to create some) coming out of the President's Deficit Commission that will report on Dec. 1. I was helping one of my kids with homework planning the other day and told them to complete the easiest assignment first, then move to the next, and so on. Waiting to address Social Security until after Medicare and Medicaid are fully addressed doesn't seem wise, and it would be good for us (the 310 Million version of us) to actually address a big problem and come up with a solution and prove the concept still exists. Maybe doing this will provide some momentum for Medicare and Medicaid fixes.

The problem with Social Security is that the Baby Boomers had fewer children than did their parents. It is one purely of demographics. The reason Medicare is more complicated is that it shares the demographic problems of Social Security, but it covers health care as opposed to simply mailing checks. The benefits paid out by Social Security are indexed to inflation in one way or another, while health care costs in both Medicare and private insurance have risen two or three times faster than inflation. Medicare is a promise to pay for health care, some of which has yet to be invented. This isn't proof of a sinister plot, just a practical reality of a program who was created because society thought it was unacceptable for half of the Seniors in this country to be uninsured. So, thank you Medicare....the third rail is now the easy fix!

The essence of Graham's plan, endorsed by Scheiber is that benefit cuts to young, affluent retirees should be used to shore up the program while maintaining the retirement age and the benefit levels of lower income workers. In this way, you maintain the safety net, while incentivizing more affluent persons to work longer.

One benefit of this option is that it does not increase the retirement age beyond the 67 to which this age is going by 2025. I have written and supported increasing the eligibility age of Medicare to unify it with Social Security, but do not think the Social Security age should be raised further than planned. I think this is important because while a professor like me might easily expect and be able to work to a much older age than 67, for persons with manual labor jobs it is not so simple.

The CBO has a list of 30 policy options to address Social Security, and I have generally been saying that while I have preferences we just need to pick one/some and shore up Social Security and move on to the next steps after PPACA needed to make Medicare and the entire health care system sustainable. I think I favor extending the essence of the compromise that was the Greenspan Commission fix of Social Security in the early 1980s that extended the life of the trust fund until 2039.....which is now in the future but not that far away. Greenspan et al. set the wage level to which the OASDI payroll tax was applied to the 90th percentile of wages (wage point at which 90% of the population has a lower wage). This level has been indexed by average inflation ever since. The problem is that high end wages have risen much faster in the past 25 years than have average wages, so the OASDI payroll tax now is set to the 83rd percentile of wages. In 2012, the OASDI tax is set to be applied to the first $113,700 dollars of wages. If increased that to the 90th percentile (around $156,000) then the benefit structure and retirement age wouldn't have to be changed (the rate would remain the same, just be applied to more wages). You would also update the wage level to which OASDI was applied to be the 90th percentile going forward.

I could live with either of these, or a blending of the two. One is a cut in benefits, the other an increase in taxes. Those are the two choices.

Update, 10am: Austin Frakt, asking me two very good questions. I will restate and then try and give an answer.

Question 1: Is public policy like homework, meaning if you expend all your energy on the easy fix (Social Security), then you might not have anything left for the harder part (Medicare)?

• Maybe. If we could only do one thing, we would be better off addressing Medicare. In the end, if we do NOTHING on Social Security, what we are saying is that in 2039 (or so) when the reserve funds collected the past quarter Century and redeemed by the government over the next 30 years are exhausted, that the outlays of Social Security must equal the payroll taxes in a given year (that is current law). The worst year is probably around 2045 or so, when this would mean that around 80% of the promised benefits would be paid out in that year, when I will be 72 if still alive, so this is not theoretical for me! So, the default is a large benefit cut (but anyone saying there will be nothing when you retire etc. either doesn't know what they are talking about or is being purposefully misleading).
  
• If we have a Social Security fix, I am imagining it to be more of a 'lets hold hands and jump together' type of fix coming out of the Deficit Commission, and not a long protracted 'war'. This would seem to come relatively quickly or not at all. This is what I mean by we need momentum around the Deficit Commission....make some compromises and find some solutions, holds hands and jump and then fight it out over health care (implement v. repeal, how to amend and improve, etc).
• The next step in addressing Medicare cost inflation is to implement PPACA, and especially the IPAB. Culturally, we need to begin asking the following questions in Medicare (and the rest of the system). Does it improve quality of life? Does it extend life? If no to both questions, we need to ask, why again are we doing it? And regardless of the answer to these questions, how much does it cost? There is obviously uncertainty in answering these questions, and mistakes will be made, but we must start asking them, and move to use the answers to make policy. The IPAB is a first step to all of this. I am not sure of the calculus of how we eventually use the answers to these questions to make policy both in Medicare and private insurance; we will have to work that out and it will take time. This is a cultural issue as much as a health policy one: will we grow up and learn to talking thoughtfully about limits? I am rambling....my point is that ee won't crack these profound health policy questions this year (or even this decade), but we could shore up Social Security this year.
  
• Any changes/alterations to PPACA that address cost inflation should be seriously considered and supported. The big enchilada is changing the tax treatment of employer paid insurance. Interestingly, I believe every single Republican member of the Deficit Commission has at one point or another favored eliminating the tax exclusion of employer paid insurance. This is what made their (Republicans, generally) opposition to the tax on high cost health insurance so preposterous, which of course in a roundabout way accomplishes the same thing. And of course the President pushed for this, obviously over the wishes of organized labor a key Democratic Party constituency. The tax was delayed until 2018 and the trigger level made to apply only to policies over $27,000 in value I believe (for families). The fact that this tax on high cost insurance remained in the final legislation is in my opinion, the least reported 'big deal' of PPACA. The delay and increase in trigger point was in the reconciliation bill, which of course expires in 10 years. Inside the Senate bill is a tax with a lower threshold level that is being updated at 1 point above CPI that will come into force in a decade, and will apply to a good number of policies since health care cost inflation is going up lots faster than 1 point above CPI. The pay-for to get rid of it (repeal it in 10 years) will be very large. So, the tax treatment of employer paid insurance is likely going to change in a decade or so one way or another. That is one of the best aspects of long range PPACA in terms of cost control. I would rather cap the tax exclusion in a straightforward manner and at a lower level, much sooner.
  
• Austin's comment about lack of momentum after PPACA casting doubt about my notion that a Social Security fix could add momentum for general policy movement is a fair point....I am an optimistic person. And I keep thinking that at some point the seriousness of the issue facing our nation will mean that the grown ups will rise up and work things out.....
  

Question 2: Why not apply the payroll tax to the 90th percentile (~$156,000 in 2012) and use the extra revenueX (X = OASDI rate applied to first $156,000 - OASDI rate applied to first #113,660) to exempt the first dollars of wages from the OASDI tax? Note, I don't know how high up the wage level that the revenue X above would allow. Lets say for argument sake, it would exempt the first $7,500 of wages from Social Security; your rate on the first $7,500 of wages would be 0 if you did this (I will try and back of the envelope it later).

• I think this is a bad idea, because it undermines Social Security as a Social Insurance program. A payroll tax is regressive, which means that for 83% of the US population, 100% of their wages are subject to the OASDI tax; for someone with $1 Million in wages, only 11% of their wages are subjected to the tax. It is the opposite of our income tax structure that is progressive. However, having a payroll tax be a first-dollar tax also means that each person with wages chips in something to Social Security (and also Medicare). And while it is true that Social Security has a redistributionist aspect (floor below which no one can fall; non retirement protection such as survivor benefits); it is also true that your wage history (what you paid in) is important in setting your retirement benefit level. I don't think that it is romantic to be poor, but it is the case that even someone with very low wages today has contributed something to Social Security, and I think that provides them with a measure of dignity, and helps explain the high level of support for the program: everyone contributes, everyone benefits.

CutGo?

I am not sure that future speaker Boehner could be serious about this and say he was interested in deficit reduction. Jon Chait (h/t @CitizenCohn) reporting that John Boehner, who is looking like the next speaker of the House wants to move away from PayGo, whereby any new spending or tax increases must be offset by other taxes or spending cuts. CutGo says that any new spending program has to be offset by a cut in other spending. Fair enough. Go for it. But, it explicitly says that tax cuts do not have to be offset.

A balanced budget means the ins match the outs. The ins are taxes and the outs are (explicit spending + tax expenditures). Simple idea, hard to achieve.

Quality of Care

Aaron Carroll has been doing a series comparing quality of care/outcomes for the US and several nations to which we are often compared at Incidental Economist. The most recent post is here and the link to the overall series is here. He did a similar series of where health care spending in the US goes as compared to other nations, that is here that clearly identified the degree to which we spend more than other nations for specific types of care.

The quality series is not completed yet, but the basic message is that we spend around $2 dollars per capita for each $1 that nations that other high income nations spend, and our quality and outcomes are in the middle (really bad on some things, really good on others, but usually in the middle). Seems clear to me that we do not get our monies worth for what we spend.

So many things to do in the health care system.

Medicare Claims Records

WSJ with an interesting story about their use of Medicare claims data to identify unusual or odd patterns of payment by Medicare for physician services. In this case, they are saying that a particular physician billed Medicare for around $2 Million in one year. The file they analyzed, known as the Carrier Analytic File, records payment from Part B (physician services) of Medicare to physicians. Such files contain a 5% random sample of all such files, and allow one to get a sense of the trends in Medicare's payment for such care across the nation.

Probably 30 of the papers I have published are based on Medicare claims data such as what WSJ describes. If you want to describe the experience of the full Medicare program you would not only need to use the file noted in this story (Carrier Analytic File, Part B) but also inpatient hospital files, outpatient, skilled nursing facility (SNF), durable medical equipment (DME), home health and hospice files. Each file is in a separate database (though there are summary files) and it takes quite a lot of technical expertise to analyze such data. An ongoing project of mine currently has a data request under review at Center for Medicare and Medicaid Services to get the series of files I note above so that we can describe the full Medicare-financed health profile of a group of patients. The paper notes the cost of the files they wanted to be expensive ($100,000).....the cost of the data I am currently seeking is roughly $45,000.

The upshot of the WSJ article is that you can use such files to find odd patterns of care that may constitute fraud. Perhaps that is true. However, there are many other uses for such data, and it certainly would be a step in the right direction to expand the access (by reducing the cost) to Medicare claims records to researchers/analysts so long as safeguards are in place to protect the identity of patients. Identity of providers is also masked, at least in all the Medicare claims files I have worked with.

As a researcher and policy analyst, count me as a yes vote for easier access to Medicare data.

NY Times on Deficit Commission

Story in today's NY Times on the effect the election will have on the movement to adopt, or even consider difficult proposals made by the Deficit Reduction Commission that could put us on a path to a long term sustainable budget. The politician's unwillingness to talk seriously and reasonably about what type of long term changes are needed in the benefit structure of programs like Medicare and Social Security, the appropriate level of Military spending, and the structure of the tax code that could pay for the spending we decide we want reflects the delusion of the public.

Over the past year or so, I have given many talks around North Carolina talking about the need for health reform, my view that PPACA is a good start but that many harder steps will follow if we are to truly deal with costs, and the need to develop a plan for a long term sustainable budget. When talking in generalities, the vast majority of people nod and agree. Lo and behold, they hate all this spending! However, when you begin to talk about any policy that would have a chance to slow the rate of health care inflation, for example, people change their tune.

• Don't cap the tax exclusion of employer paid health insurance, I work hard for my benefits.
  
• Don't [pick one of many policies that could make Social Security solvent beyond 2039], that would mean a cutting of benefits/raising of taxes [hint: those are the two choices for Social Security reform]
• Don't begin systematically asking questions like 'does this improve quality of life?' 'does this extend life?' 'and how much does it cost per benefit?' in a program like Medicare, why that is rationing.
  

And so on. Our country desperately needs to grow up and learn how to talk about hard things, make some practical decisions, and move on. Before you blame the politicians, realize that their ambivalence to do the hard thing simply reflects us as a people. That has got to change.

Update: Ezra Klein saying if you think PPACA slows costs too slowly, be for things that can change that.

More update: if you need a giggle break, here is Pat Toomey, being pushed to identify one thing he would cut (after waxing on and on about fiscal repsonsibility during campaign, etc.) identifying one thing federal study abroad funding.....total is $635 Million.....So, if we abolished that then the projected deficit next year would be about $1 Trillion, 199 Billion and 365 Million instead of $1 Trillion, 200 Billion. Maybe he is just pacing himself.....

Deficit Commission

Report from the WSJ on the deficit commission working toward negotiating what items they can agree on before their report is to be released Dec. 1, 2010. This report notes that they are focused in on so-called tax expenditures--aspects of the tax code that benefit some persons and not others. The two largest are the home mortgage deduction and the tax exclusion of employer paid insurance. These two alone reduced tax receipts, and therefore increased the deficit, by around $450 Billion this year.

I have written alot about the tax exclusion of employer paid insurance, and it is certainly the next step I would take in 'implementing and improving' PPACA. For all the brave cost cutting members of Congress and those running for election who say they would be for health reform, "if it did more to deal with costs" well capping the tax exclusion and moving toward ending it is by far the simplest, most effective means of applying downward pressure to health care costs. Lets see if there is a rush to co-sponsor the bill.....I have my doubts. Capping or ending the tax exclusion would be a very flexible policy, meaning it would work as intended under almost any imaginable direction in overall health policy. This of course will be reducing a benefit that people like me (those with good jobs) now get, so don't be surprised to learn that many of the angry voters 'who hate government spending' actually like quite alot of it.

The article linked also points out an argument that will be made against capping or ending tax expenditures, that they are pushed under the guise of tax reform but are actually ways to increase revenue. This is nonsense. If you claim to want a balanced budget, that simply means the ins (taxes) must match the outs (explicit spending plus tax expenditures). All the tax expenditures combined increased the deficit by around $1 Trillion this year. If you claim you want a balanced budget, then a dollar of tax expenditure is no different from a dollar spent by a program. The ins must match the outs....

Finally, the article discusses Social Security reform. The inexorable rise of health care costs, when coupled with the impending retirement of the baby boomers makes fixing Medicare much more difficult than Social Security. The 'third rail of American politics' is now the easy fix.....here are 30 policy options for Social Security reform that the CBO put out in July, 2010. That is because Social Security only has a demographic problem since benefits and indexed to inflation. Medicare, because it pays for health care, has the same demographic problem, but it has another problem because it purchases medical care that has been rising around 3 times faster than inflation for the past 30 years.

What we should do: (1) pick a social security option or options; (2) cap the tax exclusion of employer paid insurance and move toward ending it; (3) implement PPACA and beef up the ability of Medicare to be a more active purchaser of health care via the Independent Payment Advisory Board.

These policy options will be very good for addressing health care cost inflation, which means they will be good for improving the long range budget issues of the U.S. The deficit problem we have is not due to the TARP or the stimulus--in fact, it seems obvious we needed more stimulus. The real issue is the long term deficit that is primarily a health care cost problem that is exacerbated and made acute by the retirement of the baby boomers. It is using deficits to finance normal and predictable expenditures (notably health care) over the next 30-40 years that is the essence of the unsustainability of the federal budget.

It will be interesting to see what happens after the election and the expected large gains of the Republican party....there has been lots of talk of fiscal responsibility from them during the campaign, but history suggests that at least in the recent past they only talk but don't act in a fiscally responsible manner. Maybe it will be different this time. We will see.

Update: Austin Frakt correctly noting that these 3 are fairly general. A bit more detail.

• #1 Social Security reform needs to be done. I have some general preferences, but really mean it when I say we just need to pick one or a mix of fixes outlined by CBO.
  
• #2, tax exclusion of employer paid insurance, I would want to move much earlier than 2018 to cap the tax exclusion and would want to let it apply to more policies, quicker. I agree with Austin that a tax on high cost insurance can have mostly the same economic effect. However, this was and is sold as a tax on insurance companies, when they will pass on the costs to employers and therefore to employees. In fact, if they don't it won't work. Capping the tax exclusion would give more focus on the end user of health care--you and me--and this would help us to be clear that it is the employee that is getting the benefit of the tax exclusion. I would suggest a schedule along these lines: cap the tax exclusion at 75%ile of the national average in 2012; median in 2014; 25%ile in 2016; and then end it by 2018. In its December 2008 policy options for health care, CBO noted that capping it at the mean would reduce the deficit by around $500 Billion over 10 years....what I wrote above would probably be of similar and likely a bit more in terms of cost savings.
• #3, IPAB, Austin is probably correct that at this point we should simply hope what is now written into law regarding IPAB remains and I also agree that Leonhardt and Orszag notions of what it would look like make sense.
  

If You Knew Suzy

If You Knew Suzy: A Mother, A Daughter, A Reporter's Notebook, by Katherine Rosman, Harper, 2010. ISBN#978-0-06-173523-3. Amazon link. Less of a book review and really more of an encouragement to read this book....

If You Knew Suzy is a beautiful book, that is also important. These two attributes don't often describe the same book for me. By beautiful, I mean that it is well written and tells a story that drew me in, and touched me deeply. If you can read this one and not cry, there is something wrong with you. It is important, because it provides an honest glimpse into the health care system of the United States, or more accurately, into the system of how care is provided to persons who are said to be 'dying.' Expectations, hopes, fears and realities are all described as they occur, often in disturbing detail, and with an honesty that I can only describe as ruthless, and appreciated. The book is at the same time funny and irreverent.

This book is worth reading for its beauty alone, but you would then be avoiding the many profound questions raised in this book about the how, where and why of our health care system; especially care provided to persons with advanced life limiting illness. If you bring to the book pre-conceived notions of how people should react when facing their own mortality, or a situation that seems 'hopeless' the book provides an important reminder that people are distinct, and don't fit into neat boxes or roles. At the same time, the individual decisions each of us make affects all of us when it comes to health care decisions, both on the macro level as well as what our choices imply for our family and friends.

I met Katie Rosman in May, 2010, when she came to Duke University's Institute on Care at the End of Life to give a presentation about her book to a group of providers and advocates for end of life care. This is a round table, blue ribbon type of group that is seeking to advance the research basis of end of life care and to promote better policy. From different perspectives, the participants are mostly interested in improving the quality of life of persons who are suffering.

Into this group, with much experience in the reality of dying and how care is provided just before death, Katie managed to bring a fresh voice, the story of her mother's death from lung cancer. While her story and this book provides glimpses into the medicalized world of an ICU and interactions with physicians and nurses--some good and some bad--the story of Suzy's death (Katie's mother) is told as a part of her life.

The occasion of her mother's illness and death motivated Katie Rosman to investigate chapters of her mother's life about which she had not know a great deal. And it seems that in her mother's death she seems to come to know her mother much better. Intertwined into the story of the decline of her mother's health and and the families attempts at navigating the health care system are glimpses of Katie's childhood, her relationship with her sister, father, stepfather, and mother all told to honor the memory of her mother and to preserve it for grand children that will never meet Suzy.

As a person who spends quite a lot of time thinking about policy related to the provision of hospice and palliative care, and who believes that our culture is profoundly bad at having honest and thoughtful discussions about the limits of what medicine can do, there are all sorts of lessons that could be drawn from this book. Bashing off a list of policy changes that I was for before I read the book and claiming the book proves I am right seems inappropriate. I will just leave it where I started: If You Knew Suzy is a beautiful, and important book.

Facing Death

PBS Frontline will have an episode entitled, "Facing Death" that runs the week of Nov. 23. I haven't seen a preview copy of the whole thing, but have watched this trailer, which focuses on the ICU. Our culture and society is not good at talking about limits. We need to learn how to have thoughtful conversations about the tradeoffs between what can be done, how much what can be done will benefit the patient, and at what cost, both financial and emotional. Currently, even asking these questions--much less answering them--is demonized politically.

We will all die. It is only a question of when, and from what.

Leaving aside the macro-policy decisions these sorts of questions bring about, Thanksgiving week many families will be together. This Frontline special could be useful in helping families and individuals think through their preferences, and to make those known before the onset of a serious, life-limiting illness. My mom will long for the days when I only brought up politics at Thanksgiving dinner....

PPACA and existing employer coverage

Wall Street Journal has an op-ed by Gov. Bredesen of Tennessee (D-TN) saying PPACA (who knew the WSJ could actually allow the name of the law to be written on its editorial page!) will incentivize businesses to drop insurance coverage. There of course will be some of this effect, which is essentially crowd out of now provided employer based insurance to exchange based insurance, but CBO has said it will be small. More importantly, it hasn't happened in Massachusetts, which has of course implemented a plan on which PPACA is largely based.

As I glanced at the Governor's piece this morning I was thinking that the he didn't have his math/magnitude of effect straight, and that he was wildly over-stating his case. So, I was going to try and do a 'back of the envelope calculation' to convince myself that the Governor was wrong and write a blog post about it.....but I cannot do better than this from Jon Gruber.

In many ways the largest fallacy of the Governor's argument, and most of those against PPACA is that it doesn't mention/remember that the baseline status quo of the health system is a train wreck. The employer-based private insurance system is unwinding; in 2009 the absolute number of persons with employer based cover dropped. Finally, PPACA is based on the Massachusetts plan that has been implemented. It hasn't been perfect, and shows that more needs to be done to address costs, but it hasn't lead to a meltdown of employer based insurance due to employers dropping coverage there. Massachusetts is an even higher cost state than Tennessee, so the incentive should have been even stronger there for employers to drop coverage.....but it didn't happen.

The Governor has a new book on health reform that I haven't read, but I will take a look....

update: Austin Frakt's take.

Another update 10/22: RAND corporation micro-simulation of PPACA actuallys shows a large increase in uptake of employer-based coverage. They note the effect of individual mandate penalties as increasing propensity of some who now decline offers of employer-based insurance to take them up in the future. The RAND corporation's analysis is rosier than is CBOs....and both of them and actual experience in Massachusetts are roughly the opposite of the effect the Governor says he expects.

To me it seems the opposite

David Leonhardt (h/t @IncidentalEcon) has a nice article up in Economix blog about the degree to which comparative effectiveness research (CER) can be used to control Medicare coverage decisions and payment rates. CER cannot be the sole reason that a treatment is covered or not, but this article talks of using such research primarily to set the fee. For example, if a more expensive treatment has not been proven to be better in terms of outcome, Medicare might still cover it, but pay the same rate as the least expensive treatment.

Discussions of this sort will have to become open, honest and common if we will ever get a handle on health care cost inflation. We are not so good at talking about this as a country.

As an aside, Leonhardt quotes Mark McClellan as saying that perhaps private insurers should lead the way in the use of CER to make coverage and payment determinations because seeking to cut costs in Medicare is so politically difficult. Obviously Mark McClellan (former head of CMS under the second President Bush) is an expert, but it seems to me to be exactly the opposite. Medicare is the only payer that can lead the way in implementing the use of CER. While it seems a paradox to most, Medicare has lead the way in most insurance innovations the past 30 years or so--Prospective Payment, DRGs, RBRVS, the creation of the Medicare hospice benefit. Private insurance has almost always followed Medicare.

Taking the Medicare hospice benefit as an example, if private insurance would have tried to lead the way in beginning such a benefit I don't think people would have bought it; they would have assumed the insurance companies were just trying to increase their profits. Medicare beginning to fund hospice mainstreamed this care and today over 4 in 10 Medicare decedents use hospice before they die. It wouldn't have happened if Medicare had not lead the way.

If we ever get serious about applying CER in making coverage and payment decisions, it will likely be Medicare that leads the way.

On the dog catching the car

I have an op-ed in Sunday's Raleigh, (N.C.) News and Observer on why repeal of the Patient Protection and Affordable Care Act (PPACA aka Obamacare) is about as bad an idea as a dog chasing a car actually catching the car. Then what?

We still need to do much more to address cost inflation, and here are a few ideas. Republicans especially have long discussed the need to reform the tax treatment of employer paid health insurance. They happen to be correct there. However, they have historically shown no offense when it comes to reform, only a strong expertise in ideological based defense. It is much easier to argue against something than it is to practically address the series of inter-connected problems of lack of coverage and cost inflation in the U.S. health care system. Many Republican ideas could improve the PPACA, especially in the area of cost inflation. Given that what has actually passed was essentially the Republican alternative to the Clinton plan plus a large Medicaid expansion, Republicans and Democrats have always been closer in policy reality than the strident anti-PPACA rhetoric suggested.

I am hoping Republicans are just saying whatever it takes to get elected, and will then seek to practically improve the bill. Again, if not, what happens if the dog actually catches the car....

Also, some of their rhetoric about rationing, especially as it relates to the Independent Medicare Advisory Commission seems to conveniently forget that the most comprehensive Republican Reform alternative, the Patients Choice Act, co-Sponsored by Richard Burr (R-N.C.), was the first to propose the idea. Adopting verbatim the Patients Choice Act language for such a commission is better than getting rid of it totally. Better yet would be for Republicans and Democrats to admit that there are limits to what can be done and to try and thoughtfully work through this fact.

I wonder if Senator Burr still likes his own bill? Haven't heard him mention it lately?

Draft W-2 to show cost of health benefits

Sarah Kliff at politico and @sarahkliff on twitter pointing out that a newly released draft W-2 form with a space (box 12) to report the cost of employer paid insurance premiums on behalf of the employer, per PPACA. These benefits are not taxable as income, but this is a great step in at least helping people understand how much their health insurance actually costs.

During the health reform discussion, I became obsessed with the fact that people working in my building (a school of public policy!) had no idea that Duke was paying more than twice as much per month for health insurance premiums than we were paying individually. Some said, 'Don, you are nuts, they don't do that,' I pay my own premiums. Others said, 'that must be a special benefit for professors only.'

Since World War II, when employers pay health insurance premiums on behalf of their employees (aka a 'benefit'), then the employer does not pay taxes on the value of the premiums paid. This is an example of a tax expenditure in the federal tax code, which simply means the tax code provides a benefit to one group of tax payers (those who get insurance partly paid for by employers) and not others.

The tax on high cost health insurance which was delayed until 2018 by the reconciliation bill will eventually make use of this information to apply this tax.

I would prefer going ahead and capping the amount that is tax free (capping the tax exclusion) much sooner than that because it is probably the one policy option that will most surely apply downward pressure on the rate of health care cost inflation, and it is a flexible policy, meaning it will work as intended (slow the rate of cost inflation) under any conceivable health insurance policy option that our nation might take.

Here is a column I wrote about this last year, and again earlier this year when talking about the Deficit Commission on the tax exclusion.

Negotiated Rulemaking Committlee, Day 2

of meeting 2 is well underway. We have had some productive conservations this morning reacting to the presentation of a preliminary analysis on use/need/demand that conceived of underservice as the difference between primary care use for folks without known barriers to care as compared to those with them. The main outcome being considered here is use of care. Several lines of discussion:

• needing to look at health outcome and not just use.
  
• some concerns that this part of the analysis was too similar to parts of what was proposed the last time there was consideration of changing HPSA and MUA.
• specific suggestions about variables that need to be considered
• worries about certain aspects of the data, notably coming up with the actual supply of primary care providers on the ground (are non-physician providers counted, who is a specialist v. who is a primary care provider, etc.).

This morning it seems as though we have shifted into the meat of the discussion.

Update: 11:45am: discussion of whether there needs to be two designation processes/approaches in the future like we currently have (Health Professional Shortage Area and Medically Underserved Area) or whether there might be one unifying method. I was agnostic coming in. Most members seem to favor keeping two distinct processes, though some folks are unsure. We will probably need to move ahead with this question (one designation process v. two) still uncertain.

Update: 3pm: We are moving ahead assuming that we will have two designation approaches, but have not finalized this. We have appointed a data subcommittee to do a bit of data testing for different approaches to designation-subcommittee will report back @ November meeting. The subcommittee will be trying to give the committee a sense of the different possibilities before we lock in on one approach. In particular, we will think through and begin considering health outcome as a measure of underservice and/or a way to triangulate on measures that foucs on need/demand.

We will discuss different approaches to assessing need/demand/use at the next meeting and also take up special populations, including giving special attention to data limits/difficulties of special populations.

No new innovation or power shift away from insurers

Austin Frakt over at incidental economist has a nice graph showing the shift from 1990 to 2000 of the proportion of surgeries that were performed in inpatient v. outpatient surgery centers. In 1990, nearly 6 in 10 surgeries were inpatient; a decade later, it was the opposite. Now in 2010, the proportion has been the same since 2000. Why the change from 1990 to 2000? And why no more change in the past 10 years?

My thoughts on the most likely reasons why these trends are observed.

• There was a 'play out' in innovation related to either anesthesia care or post-op care that meant that the trend toward outpatient surgeries 'stalled out.'
• There was a shift in the relative power in the health care marketplace. In 1990, the health insurers held relatively more power, whereas by 2000 the power had shifted to providers (defined as hospital and most notably health systems.). This is similar to Austin's 'demise of managed care' explanation.
  

One thing I would be interested in seeing/knowing: are there differences in the inpatient v. outpatient surgery proportions by the type/size of hospital? Put another way, if you remove large health systems, would the proportion of surgeries inpatient v. outpatient look the same? I honestly have no idea.

Second HRSA Negotiated Rulemaking Committee

Meeting to consider redefining the manner in which the federal government identifies medically underserved areas (MUA) and health professional shortage areas (HPSA) is kicking off today in Rockville, MD. We are going to begin getting into the nitty gritty of considering new designation approaches.

Some key issues/questions we will begin considering over the next two days:

• Discussion of the distinction/overlap between the current HPSA and MUA designation methods, including looking at the various programs that use these designation approaches to allocate resources;
• Begin discussion designed to lead to a consensus (eventually) of what the committee means by 'underservice.'
• Discuss the difference between need and demand for health care services
• Develop a list of the variables/measures of underservice and the databases containing same that would be a part of any future designation measure(s).

Past stuff on the negotiated rulemaking committee here, here, and here.

Update: 2:45pm. We have heard presentations about data sources and about the use of the current designations by existing programs. After lunch we have been working on an exhaustive list of "Barriers to Primary Care that lead to underservice" has roughly identified just about all the problems with access to the health care system. There is also some discussion that we move to pivot from very expansive and exhaustive list of all the problems with access/underservice and begin to focus our efforts in line with the more narrow charge to the group of PPACA as laid out in the Federal Register.

Do We Spend Too Much (Ctd.)

Aaron Carroll and Austin Frakt @IncidentalEcon and Incidental Economist blog have more on how much more we spend per capita on health care as compared to other nations. In the post link above, Aaron updates his estimates and adds in other countries....demonstrating it is not the mixture of control group countries picked; low and behold, we spend a lot on health care! Austin with a great post addressing the issue that just spending more doesn't mean it is necessarily too much, and some of the different ways to think about the 'how much should we spend?' question.

In short, you would expect the US to spend the most on health care per capita because we are roughly the richest nation in the world in per capita GDP terms (leaving out places like Monaco, etc.). No shock we spend the most.

The real question is what do we get for it? Over the next 30 years or so, we will have to learn to ruthlessly and methodically ask this question. Stop demonizing the simple asking of this question. Provide some answers to this question. And then decide what to do about it.

Some insurance policies need to go away

Last week came news that McDonalds was considering dropping health insurance coverage for 30,000 of its lowest income employees due to new regulations that would come about from PPACA. This was heralded by some as an example of health reform destroying the current system. In one sense, it is destroying part of it, but that is good, not bad.

The coverage is not so good, and if employees assume it is a standard policy, they would be in for a rude awakening if they actually got sick.

David Leonhardt has a nice piece discussing this issue. It turns out that McDonalds had a variety of workers covered by $2,000 limit insurance policies. This was not $2,000 deductible insurance policies, which would give protection against catastrophic coverage. But, instead first dollar coverage policies who maximum payouts were $2,000. Basically, this was health insurance for people that didn't get sick. Anyone who actually got (very) sick or injured in an accident would rocket through $2,000 quickly. Insurance is first and foremost supposed to protect one against a catastrophic loss. Would you buy a homeowners insurance policy that paid $2,000 toward rebuilding your house if it burned?

Is a policy that covers the first $2,000 of care and no more on top of that better than nothing? I guess it is. But, it is really the opposite of insurance, where you know gain protection against a catastrophic expenditure. McDonalds understood it to be in their self interest to criticize PPACA and to say they would drop this policy. Fine. Now they seem to be backing off, in part because it is clear how poor the coverage actually is that has been provided. In the end, when one looks closely at this episode, I think you find that there are not so many people who would want their children covered by such a policy. Some insurance policies going away are a sign of progress.

update: more from aaron carroll @ incidental economist.

Mammography Screening Controversy

This is the most succinct, clear discussion of the studies released last week about teh benefits of mammography for women in their 40s that I have read.

There is some benefit to screening all women in their 40s....pretty much all studies show this. This question is how much benefit is there and how much does it cost. There is also harm in screening everyone (radiation, false positives). From a broad health policy perspective, the biggest issue is that our nation needs to learn how to talk about issues such as this in a reasonable, non-hysterical way.

National Health Workforce Commission

The National Health Workforce Commission was announced today....15 members appointed to rolling terms, appointed by the GAO. Tom Ricketts, Professor of Health Policy and Management at the UNC School of Public Health was one of the members appointed to this commission. Tom is a rural health and health policy expert with much experience in workforce projections.

Tom was my dissertation chair at the UNC school of Public Health, but we go back much further than that. When I was a sophomore at UNC I stumbled into a class on the US Health Care System. Not really sure why I went....but was intrigued by Tom, the material he taught and the course generally. He later hired me to photocopy stuff....and I started reading some of it and got even more interested in health policy. Then he hired me as a summer intern, etc etc.....in short, I certainly wouldn't be doing what I do today if it weren't for Tom Ricketts. He is a great guy and a great person to serve on this important commission, that is another part of seeking to develop the health system that our nation needs.