A college classmate asked me for ideas about reducing the cost of health care. Here's my response:
Thank you for asking me to suggest ways to reduce the cost of health care. I certainly do NOT pretend to be an expert in this complicated topic. Although I’m an actuary, I didn’t work on acute health care. I studied the issue significantly in 2009 to help our country decide how to proceed. Unfortunately, I learned that my politicians were not interested in my expertise.
To answer, I
reviewed numerous sources, including an article of mine published in 2009. I apologize that this is so lengthy, but
there is no “magic bullet”. Many changes
could collectively have a significant impact.
I invite readers to add ideas and to promote some of these ideas if you like
them.
In 2009, I
described the advantages and disadvantages of three alternative philosophies. The “Equality Philosophy” espouses the same
health care for everybody. The “Rising
Tide Philosophy” espouses a safety net, allowing people to purchase more health
care. The “Libertarian Philosophy”
espouses no threshold. My article
included 26 principles that should guide any of those philosophies.
Since 2009,
our health care system has had many modifications. I’ve given them little thought because I had
no influence and felt I could have more impact by investing my time otherwise. Nonetheless, I suspect you’ll conclude that
at least some of my points are relevant.
I number
paragraphs to help people focus a comment or question. Several topics could appear in various
sections below and the sections are not necessarily in priority order. The sections are:
1.
Goals
2.
Pharmaceutical
costs
3.
Tort
Reform
4.
Price
transparency and “skin in the game”
5.
Healthier
food
6.
Regulatory
Issues
7.
Environment
8.
End-of-life
care
9.
Long-Term
Care
10.
Other
Medicaid issues
11.
Health
Care fraud
12.
Mental
health
13.
Overreliance
on pharmaceuticals, psychologists and technology
14.
Drug
policy
15.
Mental
health
16.
Integrated
health insurance
17.
Veterans’
care
18.
Education
19.
Foreign
aid
20.
Gun
control
1. Our goals are unrealistic to some degree.
c. We seem unable to quantify the value
of increased productivity as an economic offset. Increased quality of life is a return on the
investment, albeit not necessarily an economic return.
2. Pharmaceutical costs. It is important not to kill “the Golden Goose”. If we stymie research, we won’t even know
what we’re missing.
a.
I
believe pharmaceutical manufacturers priced drugs so USA sales would cover
R&D costs. When other countries put
arbitrary limits on price, manufacturers could accommodate those governments if
the price was more than their marginal cost of production.
President Trump issued an executive order to establish a “most favored nation”
pricing policy. That is, the USA would
pay the lowest price at which that drug is offered to a group of developed
countries. By limiting the comparison to
a group of developed countries, the executive order avoided the pitfall of
stymieing donations of drugs to needy countries. The MFN approach may help manufacturers
negotiate more strongly with European countries, resulting in a price increase
there and decrease in the USA.
(CNN asked a Democrat about this. The lady said she was glad to see President
Trump adopting one of President Biden’s programs. The CNN host failed to comment. President Biden claimed he was allowing the
government to “negotiate” with pharmaceutical companies, but his program
involved the government setting a price.
The manufacturer could contest the price, but the government had total
control on the final price, and if the manufacturer was not willing to sell at
that price, it would be fined!)
b.
Prescription
Benefit Managers are middlemen in filling prescriptions. The theory is that, as large buyers, they can
negotiate discounts from manufacturers and pass those discounts on to
clients. However, some of their
practices may need to be outlawed. For
example, I understand that they created intermediaries (under common ownership)
which retain some of the discounts, leaving the PBM with less “discount” to
pass on to the client.
c.
Private
industry can help: Mark Cuban’s CostPlus Drugs and other disrupters (GoodRx)
help drive down the cost of pharmaceuticals.
CostCo is driving down the cost of hearing aids.
d.
The Rx Advocates educates people about available
manufacturer drug discount programs.
e. GLPs are an interesting case. They are causing health costs to soar but may
eventually reduce health costs significantly. In 2009, I commented “obesity costs us $117
billion/year in health care costs, not counting the additional costs of
workplace absenteeism, etc.”
3. Tort reform would save money by reducing the
number of lawsuits, reducing aggregate settlements, lowering medical liability insurance
premiums, and especially by reducing defensive medicine.
a. One study indicates 2.6% potential reduction in
costs, but it might be higher.
b. An example of fraudulent tort suits: “He
Fought the Tort Bar -- and Won”, published in the WSJ, May 4, 2009.
c. Punitive damages assessed against
health providers should be used to offset the cost of health care rather than
to enrich plaintiffs.
d. Plaintiffs should be responsible for
the cost of a lawsuit they lose, if the judge or jury determines that the
lawsuit was frivolous.
e. My example of defensive medicine: Having
demonstrated a minor heart arrhythmia, I wore an external heart monitor for a
while. The results were favorable, but
my doctors ordered a 45-minute exercise EKG stress test, which I passed with
flying colors. My cardiac
electrophysiologist educated me about my very infrequent arrhythmias, assuring
me repeatedly that I was fine and needed no more attention. When I asked a couple of simple questions as
to which chambers had misfired, he excused himself to talk with a senior
doctor. When he returned, I suddenly
needed surgery to try induce arrhythmia.
If they were successful, they would implant a pacemaker. If not, they would implant a heart
monitor. I demurred, saying it didn’t
seem necessary based on what he had told me, but he stuck to his new
story. I then consulted my other cardiologist;
she suggested it was a good idea. I’ve
had the heart monitor nearly 3 years; it has never gone off.
4. Price transparency and “skin in the
game”:
b. I’m a fan of Health Savings Accounts
with high deductibles for people who can afford them.
c. Skin in the game/incentives would make
people more likely to adopt lifestyle changes such as exercise, reduced
substance abuse, and better diet and to preventive health options.
d. Originally, the Affordable Care Act
had an artificially low ratio of insurance premium cost for smokers vs.
non-smokers. That ratio was subsequently
raised so may be high enough now, but it is worth reviewing that ratio and other
potential factors to reflect in pricing.
e. Transparency includes admitting the
huge size of our “off-ledger” liabilities.
Only some of those liabilities are related to health care, but our
health care is likely to suffer greatly when our economy collapses due to its
debt burden. If we believe in “preventive
care”, we should address our huge on-ledger and off-ledger debt now.
5. Healthier food: We should encourage
consumption of healthier food. Here
are some ways to do so:
a. SNAP cannot be used to purchase
alcohol, tobacco, or foods that are hot at the time of sale. During his last term as Mayor of New York
City, Michael Bloomberg sought permission to exclude sugary drinks from food
stamp purchases, but the USDA denied his request. Recently, the Trump administration approved
such limits in AR, ID and UT. This could
be helpful. Bloomberg also tried to
outlaw 32-oz servings of such drinks, arguing that people could get two 16-oz
servings and/or refills. Such ideas would
probably improve health.
b. I recently hosted an event for The
Land Institute and American
Farmland Trust. Several other food-related non-profits
attended, some of which are noted below.
i. The Land Institute creates
deeply-rooted perennial grain crops to replace our current annual
crops, with tremendous potential to sequester carbon, retain topsoil, decrease
fossil fuel usage, and reduce or eliminate chemical inputs and toxic run-offs,
thereby helping to stabilize climate, stop aquifer depletion, and regenerate
diverse ecosystems, including pollinator populations. See the root
comparison below and learn more about their work in this 3-minute video or from KCUR. This can also
make food healthier and eventually less expensive.
ii. I started supporting American Farmland
Trust 40 years ago when they started helping farmers put easements on their
property forbidding development for 99 years.
As a result, their property taxes were based on farm value rather than
the development value of encroaching suburbs.
AFT works on an array of issues that improve the quality, and reduce the
cost, of food while protecting the environment.
c. The Giving
Grove sponsors local fruit/nut
orchards/bushes in areas of food insecurity.
I thought it was a great idea, but not sustainable. However, I supported the Giving Grove, and
they proved me wrong, now having expanded to 20 cities across the country!
d. Tiered aquaponics allows high levels
of production of healthy food with minimal inputs on vacant inner-city
plots. I supported Nile Valley Aquaponics in KC but I think it is out of
business. This idea is a HOME RUN, in my
opinion! Do any of you know someone who would run with this idea?
e. We have lots of ponds in housing
developments. I’ve tried to find a non-profit
which would seed ponds with fish, then harvest them. One non-profit was interested but wanted me
to do all the work creating the project. I have too many things on my plate. Do any of you know a non-profit interested in
this idea?
f. We also have a lot of Canada geese
that get thinned. I’d like to support a
non-profit which would thin the flocks and provide the geese to the
nutritionally-challenged. Some people
criticize this idea because they say goose is not a healthy meal. WebMD disagrees.
Furthermore, I think it is a moot point if people are going hungry.
g. We should use “ugly” harvested fruit
and also food wastes. Urban Produce Push rescues fresh, nutrient-dense produce
and delivers it directly to food pantries and people in food-insecure
communities. Panera’s Day-End Dough-Nation program is another great model. Find and support such programs in your
neighborhood.
h. Food deserts are a huge problem. Stores can’ t afford to stay open, partly
because of theft and destruction. We
should be able to address those problems.
i. RFK, Jr. banned the use of red dye
#3. I’m not knowledgeable about this
issue. I believe environmental issues
(including diet) contribute to some health issues such as ADHD, autism,
cancers, and dementia. On the other
hand, I’m skeptical of studies criticizing various compounds because enormous
consumption would cause a problem.
6. Regulatory issues may be sprinkled throughout this
paper. Some that don’t fit elsewhere:
a. RFK, Jr.’s attacks on vaccines and
fluoridation seem ill-advised.
b. “Any willing provider” laws undermine
plan administrators’ ability to negotiate lower costs. While plans must have an adequate footprint
of services, AWP is going too far.
c. The FDA safety process has a fine line
to toe, between safety and obstruction.
People with incurable diseases should be allowed to test new, unproven
techniques.
d. Immigration policy is important
because immigrants provide supply that lowers the cost of health care.
e. Many people are unaware that
Independent Review panels can resolve some disputes between insurers and
claimants for acute health claims and long-term care health claims. I’m not sure this point belongs in this
paper, but readers might be interested.
f. It is my impression that nurses go
into nursing to help patients but end up being unable to spend much time with
patients. We need to enable health care
professionals to do their job without undue stress.
g. I don’t know how much progress we’ve
made toward compensating for quality of care vs. quantity of care.
7. Environment: Improving the environment will also
improve health. Some of the
above-mentioned food projects address this issue, but obviously there are a lot
more environmental issues that can impact health. I don’t think we fully understand the
environmental impacts on health. Climate
is relevant to health, so climate change is clearly relevant.
8. End-of-Life care: There is disagreement as to how
extreme USA costs are for end-of-life care, but it is expensive. Here are some sources: Patterns of Healthcare Spending in the
Last Year of Life - PMC; End-Of-Life Medical Spending In Last
Twelve Months Of Life Is Lower Than Previously Reported | Health Affairs; End of Life Care Cost: The Financial
Side of End of Life Care. The second source says “End-of-life care
accounts for approximately 30 percent of national Medicare spending and, as
such, continues to have the attention of healthcare policymakers, payers, and
providers.1,2 While decedents represent only a
small fraction of all Medicare beneficiaries, Medicare spends on average $40 to
$50 thousand per decedent in the last year of life compared to only $7 thousand
per year for survivors.1,3,4“
Risking being very politically incorrect and perhaps
strategically unwise to mention this in the context of reduced health care
costs, I am a strong supporter of Compassion
& Choices, the
main advocate of Medical Aid in Dying, which I consider to be a civil rights
issue. An unintended consequence is
health care savings.
9. Long-Term Care (LTC) costs:
a. Medicaid is intended to pay medical
costs for those who can’t afford to pay for their care. If you receive Medicaid LTC in a facility, we
protect your house, so you can return home if you recover. When you die, we recover what we paid for
your care from your assets so we can afford to provide services to others. However, we do not collect against your house
if your spouse, minor child or blind or disabled child still lives in it, nor if
a child who was your caregiver for two years lives in the house or a sibling
who was your caregiver for a year lives in the house. That’s all fine, but beyond that, we ignore
$730,000 of home value (2025 value; it is indexed. In some states $1,097,000). For two decades, I’ve written papers
explaining why the $730,000 protection should be removed. Democrats should love this reform because it
protects Medicaid for the needy.
Republicans should love it because it upholds personal
responsibility. We’d save the government
a lot of money and processing costs; quality of care would improve because
providers would be paid private-pay rates rather than the discounted fees paid
by Medicaid; state and Federal governments would earn more tax revenue from the
increased income of care providers and from insurers and insurance brokers
selling LTC insurance; and the types of care provided under Medicaid could be
expanded.
b. See Posit Science under mental health.
10. Other Medicaid costs
a. President Obama expanded Medicare
promising that the federal government would pay 90% of the cost, clearly a
problematic design. I live in a state
that hasn’t expanded Medicaid. The #1
argument we hear for expanding Medicaid is that it is “free money”. Obviously, it is not free as it should be
funded by taxes we pay to the federal government. Worse, the federal government doesn’t have
the money. Regardless of a person’s position
on expansion, we should admit that it increases our destructive debt burden. (Productivity offsets should be considered.)
b. States assess “provider taxes”.
Providers (hospitals) profit from being taxed! The state spends that tax on health care,
triggering a federal match of 100% to 900% depending on the state and whether
the money is spent on normal Medicaid or Medicaid expansion. That money funnels back to the
providers. In 1991, when George
H.W. Bush signed bipartisan legislation to limit this scheme,
even Nancy Pelosi and Chuck Schumer voted for it. Currently, a 6% or lower provider tax is
automatically presumed to be fine; above that is subject to review. The “Big, Beautiful Bill” reduces the 6% “safe
harbor” to 5.5% and down to 3.5% in 2032.
11. There is a lot of health care
fraud by providers, patients and insurers.
a. For example, in my LTC insurance work,
I run into people who have a long history of disability but want insurers to
accept them as healthy risks for LTC insurance.
They explain that they really weren’t disabled all that time; their
doctors were cooperating to help them maintain undeserved benefits.
b. Of course, there are disagreements as
to how much fraud there is and, in some cases, it may cost more to catch the
fraud than to ignore it. However, that
is a slippery slope, because ignoring fraud encourages fraud.
c. Insurers get criticized a lot, but, in
my experience as an insurance executive, I was pressured by the insurer’s
attorneys to pay inappropriate claims because payment was less expensive than
the cost of litigation. This is a ”tragedy of the commons”.
If each case is settled to avoid litigation, we encourage fraud.
d. Minor, but personal example: I locked
my keys in my company car and did not want to bother my wife to bring my spare
key. An attendant at our parking garage
offered to jimmy the passenger door to unlock the car. I accepted, but the passenger car door could
no longer be unlocked from the inside. I
asked the entity managing our company cars whether I had to go to a dealer or
might find another mechanic who could fix the door less expensively. The repeated response was that I should
simply file a claim! Despite my strong
pushback, they continued to insist that I file a claim. I reported them to our management. They denied their behavior, so I hope I
altered their behavior prospectively.
e. Another example: I never got a bill
from a dentist to cover my co-pay. After
repeated efforts, I learned that he was overbilling so that I wouldn’t have to
pay my co-pay. I never saw that dentist
again.
f. In general, I think we have slipped in
raising our children to be virtuous. For
example, announcers compliment “cheating” in sports as being a “smart” play. We need an inspirational leader to encourage
us all to make sacrifices for the common good.
12. Mental Health
a. I’ve maintained for many decades that
the pace of change in our society is so fast that even bright people have
trouble keeping up with it. Thus, there
are increasing mental health problems. I
think most people suffer mental health illness during their lives.
b.
A
friend of mine suggests the following direct-to-consumer behavioral health
offerings
ii. Helping
Humans - YourCoach Health
c. I’ve been following Posit
Science for over 20
years. Their amazing brain fitness
programs delay dementia, improve balance and hearing, widen useful field of
vision (peripheral vision), improve mood, etc.
We should promote usage. It is
available as an extremely inexpensive employee benefit which I’m trying to
promote (so far unsuccessfully).
d. Digital health: Screen
Sanity, an
organization founded and run by my daughter, is a leader in addressing the
mental health problems related to use of electronics. Their services are also available as a very
inexpensive employee benefit.
e. Post-partum blues can be reduced
significantly by educating prospective parents about the “fourth
trimester”. If first-time parents
understood that their new-born would not be able to reward their attention for
three months, those parents would be healthier after delivery. Happiest Baby, which developed that concept, also
has other ideas, including a medically-certified bassinet that keeps babies
asleep through swaddling, playing music, and rocking, so parents enjoy better
sleep and health. I also promote
Happiest Baby as an inexpensive employee benefit.
f. A great way to improve mood and health
is to help others. We could try to
inspire couch potatoes by scrolling messages under TV screens leading them to
find ways they can help.
g. When I was younger, I didn’t respect
psychologists and psychiatrists, thinking people should simply apply
self-discipline. I have learned to have
much more respect for such professionals, and I also think mental health care
has improved a lot.
My son did a lot better on a particular medication for
his ADHD. My daughter went through a
mental health problem in high school when, in short order, my mother died, and
a fellow student died in a car crash. I
was oblivious to the problem, but her friends and Young
Life helped her pull
out of it.
I think we have to be more attentive to others’ needs.
h. At risk of inflaming some readers, I
think we contribute to mental health issues and other health costs by grooming
children to become transgender. Puberty
is a difficult stage in life in which most of us question our ability to be
successful. Persuading children that
their uncertainty is because they aren’t really their gender seems unwise. We twist language in many ways, in this case
by saying gender is “assigned” at birth and treatment to change gender is
“gender-affirming” care. It seems
obvious that it is “gender-disaffirming” care.
13. Overreliance on pharmaceuticals,
psychologists and technology.
a. Despite my above comments about mental
health, I still think we have a cultural attitude that
we want doctors, psychologists and medications to fix things for us.
b. We also want convenience. If we were willing to travel farther or to
wait longer to access technology, we would not have so much technology and
frequent upgrades every hospital. Does
the value of convenience offset the cost?
(My wife and I benefit greatly in this regard. The health care we have within 5 minutes is
incredible, but I could sacrifice that for the common good.)
c. However, I believe electronic medical
records will save cost (and improve health) in the long run and help analyze
optimal treatment.
14. Drug Policy: I don’t know the answer, but George Shultz and Paul
Volcker wrote an article (WSJ, June 11, 2011) in which they suggested: “One
possibility is to decriminalize the individual use of drugs while maintaining
laws against supplying them, thus allowing law-enforcement efforts to focus on
the drug peddlers. Some of the money that is saved can be spent on treatment
centers, which drug users are more likely to seek out if doing so does not
expose them to the risk of arrest.”
15. Telehealth is a very promising way to reduce the
cost of healthcare. Telehealth
regulation is a challenging area. Some
suggestions are listed in the Mental Health section.
16. Integrated health insurance.
Acute health insurers would have more incentive to reduce long-term
health risks if their policies covered long-term care.
17. We under-spend on Veterans’ Care. We should take better care of our soldiers,
including cosmetic surgery.
18. Education:
a. I’m not familiar with the health
teaching in our schools. It is my
impression that we are doing a lot better than in the past, but maybe we can do
better.
b. Our public education system is failing
us, relegating too many citizens to lives of poverty which include greater
health challenges. I’ve written about a
lot of things we can do to improve education, among them public school choice
and public charter schools. (I don’t
support total school choice, but the entrenched public school monopoly risks
pushing a lot of people to favor school choice.
One way or another, we can’t continue locking people into
under-performing inner-city schools!)
You can read about my ideas on education here: A Thausand Ideas: My Beliefs about Education.
19. Foreign Aid: Some foreign aid contributes
to our health by reducing the risk of pandemics and imported infections and by
keeping peace. (I consider micro-loans
to be our best foreign policy.)
20. Gun Control: I would be remiss not to mention this
topic. I support some types of gun
control but am haunted by the experience of the Dutch. In the 1930s, Queen Wilhelmina convinced them
that gun registry would make them safer.
When the Nazis rolled in, they found the list and went door-to-door
demanding that specific weapons be surrendered.
As a result, the Dutch resistance had no guns. (Source: “Was God on Vacation?”, an amazing
autobiography by Jack van der Geest).
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