nos-trum. pronunciation: \nos'-trum\. noun. Etymology: Latin, neuter of noster our, ours.
1. a medicine of secret composition recommended by its preparer but usually without scientific proof of its effectiveness.
2. a usually questionable remedy or scheme.
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Friday, August 28, 2009


I don’t know if you all want to see this, but I spent a lot of time doing the research and analysis. So, rather than have it go to waste, I’ll just throw it out here and you can read it or not.  IT’S WAY TOO LONG, BUT…

It only scratches the surface.  Every day I see claims from proponents and critics that don’t make sense, along with a few things that do.  I just can’t cover it all.

The overall situation on healthcare reform is as follows.  (1) What little discussion there was in the beginning over the cost and benefits of proposed plans has been drowned out by hyperbole and misrepresentation, from both sides.  More on this below.  (2)  The tactic used so successfully with cap-and-trade, to rush quickly (and poorly) written draft legislation through a one-party Congress without at least some internal reflection on its contents by supporters, much less by the critics, has created a morass of factions and split opinions.  Some of the public is losing faith.  (3) What could have been done very simply with existing resources was foregone in favor of a massive undertaking.

If you want to see more reasoned discussion, I recommend the Senate Doctors Show at  Both Senators are Republicans, but unlike the President, the President’s Health Policy Advisor, and the Secretary of Health and Human Services, they have actual experience of how patients get taken care of.  They conduct a session twice a week.

I.                    WHAT’S NEEDED

The problems to be addressed were these:  Access and cost. 

(1)     ACCESS

(a). There are millions of Americans who are chronically uninsured or under-insured.  Estimates of the number vary, but most are in the range of 8-15 million (roughly under 5%).  I’ve talked about the “47 million uninsured” figure in the past:  it includes the wealthy, those who do not desire insurance, illegal immigrants, and those who are between jobs and without insurance for (on avg) 4 months.  (RULE OF THUMB #1:  Statements by anybody who still uses the 47M figures should be discounted.  They know it’s not a valid figure, but are willing to use false data to make their advocacy stronger.)

(b). Of the remaining insured population, 80% consider their coverage and quality to be “good or excellent.”  This is ~120 million people (obviously kids don’t have insurance).

(c).  One of the lessons from the Massachusetts experience is, if you add a bunch of demand (new patients) to the system when the supply (doctors and hospitals) is unchanged, then price (healthcare costs) will go up.  Anybody who graduated from high school knows about supply and demand, and can do the arithmetic.  This is why MA is broke, many patients are experiencing delays, the state is exluding ~109,000 beneficiaries (kicking them out, “temporarily” they say), and Commonweatlh Care is raising limits on who gets financial support for their healthcare (a higher income threshold for when and how much you’re expecting to pay).  

(d) None of the Congressional bills currently under consideration deal with the supply side (doctors) realistically.  The President has said they will make more Primary Care doctors and pay them more.  Great idea, but we will see the first doctor in eight years, depending on how quickly medical schools can expand (not easy).  By that time the “doctor-deficit” will have continued to grow, and input to the provider population will need to accelerate.  Further, none of the estimates by the Administration include data from recent studies that a greater percentage of doctors are planning to leave clinical practice earlier than past generations did (the worst-case projection is 40% by the age of 55…I expect it be considerably less than that, though:  doctors are whiners).

(e)  The Massachusetts experience is also instructive in another respect, and corroborates what’s been found in other countries with single-payer systems:  when people don’t have to consider expense in order to seek medical care, they access the system (approx) twice as often.  This is human nature.  As one of the commanders in the military’s healthcare system, we were always getting beat up by the green eyeshade bureaucrats about why our population sought care 1.8 times more than the civilian population, even though a substantial part of the population was arguably more healthy than the civilians—that is, the active duty population.  My population would always say, “well, we weren’t sure we needed to see the doctor, but even if we didn’t, why not?” (RULE OF THUMB #2:  When people have no motivation to decide whether to seek medical care or not (no “skin in the game” as the media says), the decision will be to seek more.)  When the number of medical appointments available in the community is constant, then access goes down, and waiting times go up.

(f)  On the other hand , proponents of universal coverage say that all the people who are now uncovered and seeking emergency room care will, when covered, go through the primary care system and relieve demand on emergency services.  This would free up emergency resources for primary care.  While this works in principle, it didn’t in Massachusetts:  the ER’s are overflowing even more, because now it costs less, more people seek care, and they can’t get an appointment.  So, back we go to the ER…

So how do we ensure access to 5% of the population?  (1)  Add people to the system incrementally.  Current resources could absorb a percentage of the uninsured each year, spread out over several years.  Use the time to crank up more providers.  Cover the most needy first.  (2) Use triage systems and telephone consults:  the patient calls a specially trained nurse, who deals with minor issues over the phone, and arranges for a visit when the nature of the problem requires it.  This keeps things like refills and infant diet questions from taking up valuable clinical time.  I’ve done this before, successfully…there just need to be very strict safeguards in place:  if the triage nurse has ANY doubt, refer to an appt.  (3)  Make sure everybody contributes (except the disabled) to their care, even if it’s a token amount, and it doesn’t have to be money.  (RULE OF THUMB #3:  people value those things they invest in; free things are taken for granted.  If this is not intuitive for you, see the history of public housing)

None of these things are a part of the any draft legislation under consideration.

(2)     COST

(a).  It’s mind-boggling that somewhere between 70  and 100 billion dollars a year are wasted due to Medicare and Medicaid Fraud, Waste and Abuse (FWA).  I’ve written before on this, but here’s why this huge amount goes down the drain.  The Fraud division of the Centers for Medicare and Medicaid Services (CMS), has the resources to investigate less than one percent of all potential fraud and waste.  Increased funding has been denied for at least the last five years.  Bad on Congress for this…

(b)  Tort reform has been a great success in Texas.  It brought down malpractice insurance premiums between 20-50% depending on the specialty since its enactment in 2003.  Also, since 2003 Texas has the fastest growing population of physicians and scarce subspecialists in the country (before 2003, about 1000 new doctors a year…now about 3000 in 2008).  About 30 Texas counties now have obstetricians that did not before.  Malpractice suits have fallen by a third (are you surprised, based on who makes the money out of malpractice suits?).  Institutions who have recouped insurance premiums from falling liability, like Kelsey Seybold in Houston, have poured the money into new equipment, new clinics, and rural healthcare projects.

LEST YOU MISUNDERSTAND TORT REFORM:  (1) Note that patients only receive, on average, 15 cents out of every dollar of their malpractice award; the rest goes mostly to the trial lawyers.  And (2) note that the reform does not limit “economic” damages (the harm done to the patient).  It only limits “punitive” damages (that is, the money that could be awarded to punish the transgressor) to $250,000.  In the past you would see an economic award for $3M and a punitive award for $10M.  Juries did this knowing that 85% would go to the lawyer, and they wanted a way to give a substantial amount to the patient (in this example, only 2M of the 13M).  The Trial Lawyers Association has been attacking Texas tort reform unrelentingly since 2003, arguing that it cheats the patient who was harmed.   Do you buy that?   Anyway, so far, the legislature has seen the benefit of reform and has stayed the course, despite the lawyers spending millions lobbying them.  The courts have also repeatedly upheld the legislation against challenge…including the US Supreme Court.

If expanded to the entire US, it’s estimated that between $10-20B will be saved per year.  In a revealing statement this week, Howard Dean (Dem ex-Gov, and physician) said that “the enemies it would make to do tort reform would be worse than the money gained.  He’s talking about rich trial lawyers here:  the Administration (a lot of whom are lawyers) don’t want to piss them off.  That’s pretty sad:  political allies benefit over the health of Americans.

(c). Cost containment in other countries with single-payer systems is breaking down.  A few weeks ago it was reported in the London Times that Britain is facing an empty treasury for healthcare.  The National Health Service has, in response, found that there were 60,000 steroid injections given last year in GB, and decided that they will authorize payment in the coming year for only 3,000 of them.  I’ll admit that in past decades we shot people with steroids too much, but that era is over.  The patients who would have received the remaining 57,000 will suffer inappropriately, or take narcotics, or do other sub-optimal things to relieve the misery of degenerative disease.  When you look at the current draft US legislation, boards created to decide on standards for coverage and panels of experts who decide on standards for medical care, should give you pause:  not that they couldn’t be used to great benefit in a perfect, non-political world, but are they structure and staffed in such a way that they could be used perversely.  However, if Britain’s actions don’t meet your concept of “rationing,” then I give up.

(d)  Proponents of the current legislation argue that we ration care in the US already.  That’s true, we do it by price.  That needs to be addressed.  However, the government’s pockets are not deep enough to sustain future cost increases…as these other countries have found.  They can reduce reimbursement to doctors and hospitals, making them less likely to accept government patients, or reduce what things they will authorize for reimbursement.  But none of those things get at the root cause of cost increases.

(e)  While all the components of the healthcare system contribute to the rise in cost, no one part is more responsible, in my opinion.  Doctors’ incomes have been flat for 10 years.  Healthcare insurers rank 86th among all other sectors of the economy in profit.  US drug companies are almost the only ones investing in research and development of new drugs, with a fixed cost of $1-2B per medicine they develop.   For my money, the analysis done by the economist Arthur Laffer is the most fundamental about cost.  You may remember Laffer from ECON 101.  He proposed that tax rates and tax revenues form a bell curve:  increase taxes and up to a point, the government gets more money; increase further and revenue to the government starts to fall.  Almost all economists agree…they just argue over where the top of the bell curve is.  Laffer’s report is here:  The short summary is that we have

a large and growing government healthcare wedge—an economic separation of effort from reward, of consumers (patients) from producers (health care providers), caused by government policies. Rising government expenditures on health care are the main factor driving the growth in the wedge. The wedge is a primary driver in rising health care costs, i.e., inflation in medical costs.

Recall that almost 50 cents of every dollar that’s spent on healthcare already comes from the government (Medicare, Medicaid, SCHIP, WAC, military, etc).  And this is exactly the situation of those other countries who are have problems with their government-run healthcare systems.  I recommend Laffer’s report.

SO, WHAT’S THE ANSWER TO ALL THIS?  We’ve got millions who need coverage, and we need to pay for it.   Let’s do a calculation.  Assume 12 million people are the target population.  Assume that if we could only recoup about 80% of the total that’s out there in fraud and waste, and tort reform.  Use a median figure for both of those, and you get (15B + 80B)X (.80) = 76 billion dollars.

Now, divide by the number of people we need to provide for and you get :   $80B / 12M  = $6,700.00 in cash to pay for each and every person OR $26,800.00 for every four persons (a “family” of four)  The current cost of healthcare in 2009 for a family of four is ~$13,000.00.

Note that this was done without taxes, without regulations, and without panels, boards, task forces, agencies, and committees.  Nor does the government need to get engaged, except to establish portability (between jobs) and administer the new coverage.  If you don’t like these two sources of revenue, there are a number of others that could pay for what we want to do.  Admittedly, my example is simplistic and maybe not practical, but the bottom line is that there’s plenty of money in the system right now without creating new government or spending a lot more.

But none of this is under discussion by the Administration or Congress.  Instead we get a massive overhaul of the entire system, with huge costs in the out-years, and if not control, at least oversight, by an institution that has failed to show that it knows how to manage anything effectively.

Oh, and one last thing.  For those who say that “opponents have not offered any alternatives, they just want to kill reform,” there are alternatives that have been offered by both Democrats and Republicans that include these elements and others.  It’s disingenuous to control what legislation can be considered and then accuse people of not offering any proposals.  (RULE OF THUMB #4:  Anyone who makes the “no other alternatives offered” argument, can’t be trusted.  They are more interested in what they’re pushing than in what’s best.)


The following is a collection of statements people have made about healthcare reform legislation.  The President is right that there’s misinformation, but he doesn’t get off scott-free in the process.

(1)     The America I know and love is not one in which my parents or my baby with Down Syndrome will have to stand in front of Obama’s “death panel” so his bureaucrats can decide, based on a subjective judgment of their “level of productivity in society,” whether they are worthy of health care.” (Sarah Palin, Facebook, 7 Aug).

This is pretty laughable, but unfortunately, rhetoric like this results in people showing up at meetings with Obama/Hitler posters.  In retrospect, I think she did it on purpose:  throw out an inflammatory statement to get visibility,  Because her follow-up Facebook note contains a more thorough and grounded criticism of end-of-life counseling.  My objection to the draft legislation is two-fold:  first, this counseling is already being done, so why ensconce it in the legislation and provide deadlines and content for what it entails.  The legislation has several pages of what must be included in the counseling.  The government doesn’t need to get into this business.  Second, it flies in the face of attempts to reassure people that no bureaucrat will come between you and your doctor:  in fact, it tells the doctor exactly what he has to counsel the patient in great detail.

The part of Palin’s statement that is quoted at the end, “level of productivity in society,” is a periphrasis of work by Dr. Zeke Emanuel, a physician who is a healthcare advisor to the President.  He was talking about how to allocate scarce resources, and made the argument that infants and the elderly should be lower in priority for those resources.  He was writing about things like organ transplantation, which have always been scarce.  But I think it’s right to suggest that he would feel no different if the “scarcity” was money for healthcare, leading to lowered priority and funding for expensive care later in life.  Scarcity won’t necessarily be confined to just organ transplants:  you’ve seen the plans for novel H1N1 vaccine, which will be “scarce” initially, and the priorities set for that situation.

(2)     Under the reform we’re proposing, if you like your doctor, you can keep your doctor.  If you like your health care plan, you can keep your health care plan.”  (President Obama, NH Town Hall, 11 Aug, and on occasions)

It’s hard for me to understand why he keeps making this statement.  For the people who have employer-based insurance (the largest segment of the industry), it may come as a surprise that they don’t control their plan:  the employer does.  And if the employer decides not to buy a plan, the employees don’t keep their plan…or their doctor.  Any new plan they enroll in may not have that doctor in its network.  The proposed legislation levies an 8% fee on employers that don’t offer insurance to their employees.  I’m being told of employers (businesses and institutions) who have already made the decision that the trade-off is in their favor to cancel their plans.  If you ran a business and 8% of an employee’s compensation is less than what you are paying in premiums and administrative costs, wouldn’t you unload that burden?  And in fact, most employers DO pay more than 8%.

I can’t give you a figure for how many people this will dump onto the market, but estimates have run from 10-100 million.  We’ll see. 

I suspect the President knows this.  He will just claim that it wasn’t him that did it…it was those evil ________ (add your favorite culprit:  insurers, employers, etc).  But, Americans aren’t stupid.  They will know that it was set up this way.  And, ask yourself why Congress chose 8%, instead of a higher figure.  I hate to say it, but these are the shenanigans we have to live with.

(3)     In answer to a question from someone who couldn’t get the medicine he needed without going trying the ones that the government would pay for, but that didn’t work, first, the President said, “It may be that it wasn’t as efficient – it wasn’t as smooth as it should have been, but the result is a good one.”

This was someone who was prescribed an expensive cholesterol-lowering drug that Medicaid had decided was unnecessary, since there were others that were less expensive.   He went through separate trials with each of the two medicines that are authorized.  My guess is that each trial was about 3 months, since it takes that long to know the full effect of the medicine.  Both didn’t work.  So, he had to go through a waiver process to obtain the original drug prescribed…which worked.  Not only had the President assured people earlier in his talk that patients “won’t have to wait in line,” he also thought that this man’s experience was a “good result.”  The example is instructive because it’s exactly how one goes about discouraging cost, and clearly puts a central decision in between this patient and his doctor.

(4)     “Prevention saves money in the long run.”  (many sources:  the President, politicians, media, even some doctors)

Prevention is good because it makes people healthier.  It usually doesn’t save money in the short run or the long run.  I’ve talked about this before:  just because you exercise and eat right, which delays the onset of arthritis or heart disease, doesn’t mean that it eliminates it forever.  You may live longer and it catches up with you later…increasing costs.

But there’s another issue:  in the short run it may not save money.  Imagine we have a test that costs X dollars, but we have to test 10,000 people before we prevent one person from getting the disease.  We did the right thing, but do you think we saved money?

There are dozens of prevention programs in the proposed legislation, with no validation of what we expect to accomplish with the investment in any of them.

(5)     “First of all, I said I won’t sign a bill that adds to the deficit or the national debt.  Okay?” (President Obama, NH Town Hall)

Once again, I’m not sure why he says this.  Everything that’s on the table is a deficit back-breaker.  You all know the Congressional Budget Office estimates; I won’t repeat them.  And this doesn’t pass the sniff test with most Americans.  There’s a healthcare pie, and people get a slice.  Now we’re going to add a bunch more people, and while we can’t make more pie, everybody is going to get the same size slice as before.  Say that again…?

(6)     “…we will do this without adding to our deficit over the next decade, largely by cutting out the waste and insurance company giveaways in Medicare that aren’t making any of our seniors healthier.”

The president has insisted that the cuts to pay for reform won’t affect Medicare “benefits,” only “insurance company giveaways in Medicare.”   In another Town Hall he referred to these as “Medicare subsidies.”  This is the biggest chunk of what he expects to gain in order to make the claim that reform won’t add to the deficit:  $238 billion.  The problem is that few realize that he is talking about the Medicare subsidy involved in the Medicare Advantage programs which provide the elderly with low cost medications.  It’s wildly popular, and 22 million have enrolled.  Further, over 40% of African-Americans over 65, and almost 30% of Hispanics over 65 are in the program:  these tend to be the lower income groups.  He believes he can cancel that program and force the drug companies to sell for much less.

Good luck with that, Buddy.  As soon as seniors figure this out….look out. 

The President has argued that the subsidy is not competitive and thus is a “giveaway”.  Unfortunately, it’s the only federal healthcare program to have come in under its projected cost. 

But, guess what happens to his no “adding to the deficit” promise if he doesn’t get the moola from canceling this program?

Here’s what I think will happen.  He will keep his promise, but when the bill lands on his desk he’ll turn to his staff and say “tell me this doesn’t add to the deficit or debt” and they will say “Yes, sir, Mr President, it doesn’t” and he will sign it.  If tasked with contrary evidence, he will just say that he doesn’t believe it.  There will be a little damage control, but the Administration will decide he can weather it.  In my military service in DC I saw this kind of thing happen over and over again.

(7)     “Private insurance companies can’t compete with the government.”  (many sources in the media, Congress, and the Administration)

Here’s a list of activities where private companies have been, or are in the processing of being, pushed out by the federal government:  Flood insurance, FHA, Fannie Mae and Freddie Mac, terrorist insurance, guaranteed college loans, the Tennessee Valley Authority.  Each area has its unique elements and pressures, but in all cases the government intervened with an “option” because it felt that private sources were not giving enough of a break, or a low enough rate to the population the government was interested in.   The federal government used its appropriation authority to fund their option at non-competitive rates, and the inevitable occurred.  The process with FHA and college loans is not yet complete; private lenders are leaving the field as we speak.  (RULE OF THUMB #5:  Where the government can exercise its authority to obtain an outcome it wants politically, it will do so.)

III References

A number of studies have been published in the last few months.   Laffer’s, above is one.  Here are a few more:

The Congressional Budget Office’s analysis of the current bill (HR 3200):

From the medical community:

The studies are mostly critical.  Most of what I saw on the positive side is not analytical.  But you can go to here to see the President’s political organization’s view:   or here for Democratic Party’s platform:  

All of this stuff can get very confusing.   The legislation doesn’t cover illegals, although we’ll pay for them anyway when they go to the ER, since federal law prohibits turning anyone away.  There is no public funding of abortion but the courts have said that where this is not specifically excluded then it’s covered.  The numbers people toss around can always be criticized by someone else.  Legislation is drafted by Congressional staffers who are people who have a BA in political science or some related field, and know someone, so they get hired.  Many of them consider themselves experts, but aren’t.  What they are experts at, is the politics and the ideologies and leanings of their member or committee.  They are sometimes lawyers.   This is why we have such an incomprehensible mess to decipher what they’ve drafted.

I don’t know what the final result from all this will be.  Given the political pressures, the President’s need to pass “something,” the lawmakers lack of knowledge, and the Law of Unintended Consequences, I’m not optimistic that our original impulse will be realized:  cover the uninsured and reduce the cost.  It’s a simple task, really, made complex by political parties and vested interests…who want their own vision to prevail, instead of what benefits us the most.

Doc D


What I'm Reading - Updated 3 May