Obama’s health care blind spot

We took a look at Sen McCain’s health reform plan last week, aided by an analysis published on the web by the journal ‘Health Affairs. Today it’s Obama’s turn.
Unlike Sen McCain’s plan, Sen Obama’s plan maintains employer-based coverage (something most Americans want), prohibits medical underwriting and cancellation of policies and establishes a minimum set of benefits to prevent ‘back-door’ medical underwriting, and requires employers to contribute to employee coverage or pay a tax.
Estimates indicate Obama’s plan will add eighteen million Americans to the rolls of the insured over the near term, with some likelihood that there would be increasing incentives put in place to encourage more and more folks to buy health insurance coverage. Obama has resisted (although not too strenuously) calls from many to establish a universal mandate, thereby requiring all to have health insurace, noting that it is more important to first control costs and only then expand coverage.
He’s right. Unfortunately Obama’s plan doesn’t do enough to control costs.
Perhaps the most significant cost-oriented part of Obama’s plan is the ‘stop loss’ coverage whereby the government will agree to “reimburse employer health plans for a portion of the catastrophic costs they incur above a threshold if they guarantee such savings are used to reduce the cost of workers’ premiums.” For truly catastrophic claims there’s certainly lots of precedents for this type of coverage – for years self-insured smaller employers have purchased stop loss coverage for high-cost individual claims for years. The question is how much of the claim cost will the Feds assume, and how much it will cost to do so (someone’s got to come up with the dollars, and if the Feds do that ‘someone’ is the taxpayer; it looks like the Chinese are done funding our deficits for a while). But while this will reduce the cost of insurance, this does nothing to address health care costs per se.
The only other solid part of the plan that addresses cost is the call to negotiate drug prices. That may well lower trend rates somewhat, but drug pricing seems to be rather flat these days, so the change may not be all that beneficial over the near term.
Neither of these policy ideas will do much to address costs. That’s because US health care costs are not high (relative to other countries) because care is better, or we live longer, healthier lives, or Americans have more access to expensive medical technology or drugs, or there are proportionally fewer folks dieing of cancer or heart disease or AIDS. US health care costs are higher because for two mostly unrelated reasons – higher unit prices and wildly varying, and inconsistent, medical treatment.
Unit prices for medical services are higher in the US than in other industrialized countries. Office visits, diagnostic imaging, lab tests, hospital stays, surgery, brand (but not generic) drugs – almost are are more expensive – on a per-service basis – in the US than elsewhere. Those higher unit prices mean more profits for manufacturers, higher wages for clinicians and support staff (and consultants) and more cash to use to build even more medical facilities and buy medical machines.
Sounds simple, because it is.
The not-really related issue of practice pattern variation (a technician’s term for different physicians in different geographic areas using different medical care to treat the same condition), and the increasing evidence that this variation results in far too much useless or potentially harmful care may be even more of a problem. Practice pattern variation has been shown to result in far too many hospital admissions in Boston, prostatectomies in Alaska, hysterectomies in parts of Maine, and back surgeries in southwestern Florida,. There is absolutely no evidence that these additional medical procedures deliver longer/better life, or even that they represent appropriate care. On the contrary, these additional procedures add cost and complicate treatment with no apparent benefit.
These two issues are not addressed adequately by Obama (or McCain either, for that matter). However, as Obama has correctly stated that expansion of coverage must be preceded by cost control, this oversight is more obvious in his plan.
Obama has called for the establishment of a Federal Agency to oversee effectiveness assessment – to help determine what medical care works best for what patients. Yet the proposed funding for this agency appears grossly inadequate. It is also instructive to remember what happened to the ‘old’ Agency for Health Care Policy and Research, a body that was emasculated after angering physicians and other stakeholders by pointing out the inconsistencies in treatment for back pain across the country.
As I noted last week, taking on the medical establishment, which is what the next President and Congress must do if they are to rein in health care costs and expand coverage, is going to be a brutal and bloody war. Big pharma, medical device manufacturers, physicians, hospitals, ancillary providers, health plans, nursing homes, medical gas suppliers, distributors, states, attorneys, and consultants will all be vociferous in their defense of their critically important, and therefore financially-deserving role. Health care accounts for a sixth of the US economy, which means that very few would be untouched by a major restructuring of the health care system. While it is understandable that Obama would not tip his hand, thereby opening himself up to the inevitable assault from those whose oxen slated to be gored, it is also unfortunate that the ‘change’ candidate won’t reveal more of his plan than the usual ‘reduce cost through elimination of waste fraud and abuse’.
Solving the health care crisis will absolutely require attacking price and practice pattern variation. This should be the core of any health reform program, for without cost control universal coverage will rapidly drive up costs, crowding out investment in plant, labor, technology and education. We should know where the candidates stand, what they are prepared to do, what groups they will take on and how they will do it. Yet neither candidate has the political courage to take a stand.
Obama’s platform falls well short on the most important issue.