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Paul Hsieh

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Friday, August 29, 2008

Remember Maine? 

By Paul Hsieh

Before Massachusetts implemented their "universal" health care plan, the state of Maine had attempted a plan to guarantee coverage for all the uninsured, called Dirigo.

Now, unhappy Maine residents are protesting yet another tax hike to fund their system, especially after the program was sold to Maine residents as not requiring any new taxes. Nor did the program do much to reduce the problem of the uninsured, as the article notes:

Dirigo Care has cost the state's taxpayers nearly $164 million in the four years since its inception. Although its intended purpose was to insure 128,000 people who had no health coverage, only 4 percent of that total, or just over 5,000 individuals, have been successfully removed from the rolls of the uninsured and into the state program, according to figures from the Maine Heritage Policy Center.

In 2007, the New York Times described Dirigo as "faltering."

In June 2008, others are using the words "boondoggle" and "failure":

DirigoChoice costs taxpayers $2,977 per enrollee per year just for the premium subsidy, excluding Dirigo Health Agency administrative costs.

As of April 2008, there were 12,637 individuals covered by DirigoChoice, less than 1 percent of the state's population.

Only 31 percent of DirigoChoice enrollees -- 3,917 -- were previously uninsured for at least 12 months prior to enrollment. That is only 3.2 percent of the state's uninsured population.

The marginal cost to state taxpayers is $9,603 to subsidize the coverage for one previously uninsured person through DirigoChoice.

Maine's uninsured rate from 2003 to 2006, the latest year available, is virtually unchanged - 128,000 uninsured in 2003, 115,000 in 2004, 132,000 in 2005, 122,000 in 2006.

The Dirigo Health Agency's administrative costs were $3.7 million in calendar year 2007.

Because of financial difficulties, DirigoChoice was closed to new enrollees on Sept. 1, 2007.

The 1.8 percent health care claims tax, which was included in the tax increase package approved by the Legislature, will cost individuals about $78 and families about $210 a year in higher health care premiums.

Without the $57 to $72 million tax increase, DirigoChoice enrollment is projected to drop by 4,000 individuals. Even with the tax increase, DirigoChoice enrollment still is projected to drop by 1,000 people.

The Dirigo Health experience has cost Maine taxpayers more than $100 million since 2005.

Dirigo Health was supposed to make health insurance more affordable and provide coverage for most of Maine's uninsured. In fact, it has done neither.

This is the predictable result of government-guaranteed health care.

Thursday, August 28, 2008

When 'Free' Health Care Isn't 

By Paul Hsieh

Categories:  Single-Payer Follies

Here's the ninth myth listed at BigGovHealth.org, which provides a lot of useful facts in the discussion of health care:

Fact: People in other health care systems often pay more than Americans do, sometimes in the form of taxes. And they may also incur high costs if they need a drug that is not covered by their health system or want to see a specialist.

In the US, a family of four with an employer-based PPO will have around $15,609 total this year in health care costs. Of this amount, $9442 will be paid by the employer and the employee will contribute $3,492 in premiums and $2,675 on copays, etc. [1] That's about 6 percent of average family income. [2]

In Canada, while the percentage of taxes used to provide health care varies, it is estimated that 22% of taxes collected went to the health system in 2004.[3] Several provinces, including Quebec, Ontario, Alberta, and British Columbia, also charge additional premiums.[4] Canadians also may spend money to receive private treatment for procedures or drugs that are not covered by the government system.

Citizens of the UK pay 11 percent of each pound they make in weekly income between £100 - £670 for the NHS, plus an addition 1 percent of income over £670 a week.[5] Though the copay for drugs is low, many drugs are not covered, often because they not considered cost efficient. And anyone who uses their own money to buy powerful but expensive drugs not paid for by the NHS finds him or herself shut out of the NHS for having gone outside the system.

In Germany, coverage from a public sickness fund currently can range significantly in cost, from around 12.2 to 16.7 percent of income, with the employee paying a bit under half. As of fall 2008, premiums are to be standardized from the federal level and health care experts anticipate that they will be set around 15.5 percent.[6] Private patients can generally expect to pay more than they would in the public system.

In France, employees contribute only to 0.75% of their salaries towards medical care, but also pay a 7.5 percent General Social Contribution, the majority of which is earmarked for the health system. This base coverage reimburses people for the majority of costs for doctors visits and for a portion of the costs of medications.[7] On top of the government coverage, almost all French residents have supplementary coverage from a mutuelle, costing approximately 2.5 percent of salary.[8]

(See original article for references)

As always, these sorts of economic facts are tremendously helpful in reinforcing the underlying moral point that health care is not a right. Health care is a commodity that must be created by the thought and work of a rational mind. There is no such thing as a "right" to something that must be produced by another.

When a government attempts to guarantee health care as a "right", it can only do so by violating the actual rights of doctors and other health care providers, who are forced to provide that service on the government's terms and for the government's prices, rather than on their own terms in a free market.

The results we see in Europe and Canada are the result of this idea put into practice.

Wednesday, August 27, 2008

Malpractice Premiums Chopped for Concierge Docs 

By Paul Hsieh

Dr. Steve Knope explains that switching to a concierge medicine practice cut his malpractice rates by a whopping 55 percent. His insurance company gave him the following reasons that they were willing to offer him such a low rate:

  1. The fact that patients are willing to pay you directly for your services means that you have a good reputation in the community. We know that lousy doctors cannot sustain a concierge practice.
  2. Concierge practices are smaller than traditional practices. By sheer number, the risk of lawsuits is smaller. You have several hundred patients as opposed to several thousand.
  3. You have more time to spend with each patient. You are less hurried. You are able to be more meticulous and pay greater attention to detail. This lowers your risk of human error.
  4. Though you are capable of making a mistake, you actually have a relationship with your patients. You know them personally. You spend a great deal of time trying to do the right thing for them. Even if you make a mistake, your patients will be more likely to forgive you for human error.
  5. Finally, we have looked at over 200 practice years of concierge physicians. To date, we have been unable to identify a single judgment against a concierge physician.

This is yet another example where a free market approach benefits both doctors and patients. I recommend reading his entire blog post.

Tuesday, August 19, 2008

Guaranteed Rationing 

By Paul Hsieh

Categories:  Single-Payer Follies

Supporters of "universal health care" like to argue that under a government-run system, health care will be "guaranteed."

Unfortunately, the facts of reality show the exact opposite. Recently, the British government has ruled that its National Health Service should deny medical care if the cost is too high:

Patients 'should not expect NHS to save their life if it costs too much'

The NHS should not always attempt to save someone's life if the cost is too much, the medical regulator has ruled...

[T]he regulator says: "There is a powerful human impulse, known as the 'rule of rescue', to attempt to help an identifiable person whose life is in danger, no matter how much it costs. When there are limited resources for healthcare, applying the 'rule of rescue' may mean that other people will not be able to have the care or treatment they need...

This is of course, classic rationing.

In reality, government "guaranteed" health care means that health care is dispensed at the government's discretion, rather than on the basis of what a patient and his physician decide is best.

Do we really want that kind of system for America?

Friday, August 15, 2008

Myths, Ethics and Concierge Medicine 

By Paul Hsieh

Dr. Steven Knope addresses a few of the common untruths written and said about concierge medicine. In particular, he tackles the following four misconceptions:

  • Myth # 1: The only ethical way to save our medical system is to create a universal health care system managed by the government and abandon private medicine.
  • Myth #2: Concierge Medicine doctors only see wealthy patients, abandoning the poor and middle class.
  • Myth #3: Health care is a right! People should not have to pay for their healthcare.
  • Myth #4: Concierge doctors are only concerned with money. There is no reason that they cannot care for complex patients with multiple medical problems in an eight-minute office visit.

I recommend reading the whole thing, because Dr. Knope provides a positive moral defense of his profession.

Concierge medicine is a natural consequence of the free market, where physicians and patients can voluntarily negotiate using their rational judgment according to their mutual interest. Patients receive quality care for a fair price, and physicians are able to practice good medicine according to their professional conscience, and both sides win as a result.

Thursday, August 14, 2008

Schmooze or Loose 

By Paul Hsieh

Categories:  Single-Payer Follies

One Canadian resident pointed out to me that socialist policies may seem successful in the short term due to the initial looting of taxpayers, but they're not sustainable in the long run. Economic reality always sets in, with the inevitable shortages and rationing.

Here's a slightly edited version of his e-mail, quoted with his permission:

...When Canada's Health Care System was nationalized, I predicted, to any who would listen, that in 15 years its initial flush of great service would decline from "lack of funds" (1985). That is exactly what happened, but health care professionals took dozens of steps to mask or hide that effect. E.g., for the last decade, in the hospital where [a family member] works, an entire ward of ~25 beds has been used for storage, while patients lie on gurneys in the hallways. It is closed because the government will not provide enough funds for nurses to staff it. Many employees in the hospital are unaware of this closed ward, even as they walk past it every day. Patients on those gurneys who die of heart failure or stroke, while awaiting for surgery, are not listed as having died from "waiting".

Similarly, emergency-ward wait times have been increasing. I used to hear of people waiting as much as twelve hours, but recently spoke to a man in who had to wait 36 hours while in considerable pain (a new record for my mental tracking of wait times). Meanwhile, an architecturally stunning new cancer wing has been built with private funds provided by local construction magnate... Outside there are gardens and statues of ordinary looking people "leaving the building." A sign tells us they are "Survivors." The wing has received a great deal of positive media attention and garners lots of oohs and aahs, but elsewhere there are still ~25 beds unavailable for other patients.

The hospital president is good friends with [a local politician]. When that friend became the province's Minister of Health the president was very excited that, with a little "schmoozing" (his word), he'd now be able to get money for the hospital. Yes, that's how it's done!

More American politicians should learn what medical care is really like in Canada, before advocating a similar system for the US.

Wednesday, August 13, 2008

KO'ing Krugman 

The difference between "rights" and "needs"

By Paul Hsieh

Categories:  Colorado, Single-Payer Follies

Independence Institute health care blogger Brian Schwartz takes on the latest New York Times opinion piece by Paul Krugman singing the praises of government-run "single-payer" health care. Here are a few excerpts from Dr. Schwartz's piece:

If citizens of these other wealthy countries have guaranteed care, can Dr. Krugman explain to me to following instances of people in these countries not getting needed medical care:

  • The British National Post reports on "How the NHS is letting my father die - by a top hospital consultant."
  • The Globe and Mail reports that "More than 100 Canadian women with high-risk pregnancies have been sent to United States hospitals over the past year - in what a doctors' group attributes to the lack of a national birthing plan."
  • The Canadian Medical Association Journal reports that in one year, 71 Ontario patients died while waiting for coronary bypass surgery and over one hundred more became "medically unfit for surgery."
  • The Canadian Broadcasting Corporation reports that "109 people had a heart attack or suffered heart failure while on the waiting list. Fifty of those patients died."
  • The Globe and Mail also reported that "More than 400 Canadians in the full throes of a heart attack or other cardiac emergency have been sent to the United States because no hospital can provide the lifesaving care they require here."
  • A Daily Telegraph headline reads: "Sufferers pull out teeth due to lack of dentists." "Doctors are calling for NHS treatment to be withheld from patients who are too old or who lead unhealthy lives," reports another article.

(Read the whole piece here.)

My own thoughts: This is the consequence of "universal health care."

Whenever the government attempts to guarantee a good or service such as health care, it must also control it. The inevitable end result of attempting to make health care a "right" is this sort of rationing and waiting lists. Far from being a "right", government health care then becomes a privilege dispensed at the discretion of bureaucrats who control those lists. Ask any Canadian who has waited 8 months for his knee MRI scan, while the son of a well-connected politician jumps to the front of the line.

The flawed premise behind "universal health care" is regarding health care as a "right." Health care is a need, but not a "right," and that's a critical difference. A right is a freedom of action, such as the right to free speech or right to contract. It is not an unearned automatic claim on the goods or services produced by another person -- that's just state-sanctioned theft or slavery. Just because my neighbor is hungry, it doesn't give him the right to take a can of soup from my pantry.

Rights only impose negative obligations on others -- for instance, my right to free speech only means that someone else (my neighbor or the government) can't stop me. If someone chooses to leave me alone, then he hasn't violated my rights.

In contrast, the various entitlements (such as an alleged "right" to health care) imposes a positive obligation to provide something to someone (e.g., an appendectomy). One of the biggest problems with modern-day America is the proliferation of positive "entitlements" which are mistakenly called "rights."

Any alleged "right" to health care can only be implemented by violating the actual rights of doctors and other health care providers. This is why "universal health care" is such a grossly immoral policy, and should be opposed as such.

Tuesday, August 12, 2008

Massachusetts Dental Pain 

By Paul Hsieh

Categories:  Insurance Regulation

Massachusetts blogger Paula Hall dissects the latest problem with Massachusetts' universal health care -- lack of dental care -- in her latest blog post, "A Pocket Full of Insurance and no Dental Care to Buy."

Here are some excerpts she's highlighted from the following article in the August 7, 2008 Boston Globe. Again, it highlights the fact that "coverage" is not the same as actual care:

Dental benefits widen, waiting lines grow

Two years into the state's bold healthcare experiment, its early success in expanding dental coverage may be threatened by a shortage of dentists willing to treat newly insured patients.

...Dentists say the state's reimbursement rate for adults covers only about half their costs, and they also cite payment delays and burdensome paperwork.

...The Massachusetts Dental Society has been urging members to join, saying it is the responsible thing to do. But it's been slow going.

...Michael Wasserman, a Pittsfield dentist who treats some subsidized patients [stated,] "I think if a dentist is going to treat these patients he or she should not be forced to lose money."

Dr. Wasserman is exactly right and the Massachusetts Dental Society is exactly wrong here. It is wrong for the state dental society to claim that their member dentists have a moral responsibility to work at a loss. No has the right to demand that one person commit professional or economic suicide for the sake of another.

Currently dentists can still remain financially viable because they are not forced to accept everyone covered by the state plan, but can voluntarily choose how many of the government-covered patients they will accept. In essence, the private sector patients are continuing to subsidize the government patients.

But if the socialists have their way, private insurance is outlawed, and the government pays all dental bills (i.e., "single payer"), what will happen? How many dentists will continue to practice if they have to work at a loss?

At the economic level, the big mistake is conflating "coverage" with actual health care. David Hogberg explains the danger of this fallacy at, "'Health care,' more or less."

At the philosophical level, the underlying problem is the premise that dental care is a "right." Fully and consistently implemented, this idea essentially turns dentists into slaves of the state. Massachusetts hasn't gotten there yet, but it is moving in the wrong direction. We shall see how far Massachusetts dentists are willing to go along with this idea before they rebel.

Wednesday, August 6, 2008

Putting Doctors on the Medicare RAC 

By Paul Hsieh

Categories:  Arizona, California, Florida, Massachusetts, New York, South Carolina

Dr. Evan Madianos has alerted me to the next possible Medicare cost-containing measure -- the Recovery Audit Contractor, or RAC.

Basically, these are people who are given the task of finding overpayments from Medicare to doctors, and was initially implemented in 2005 as a pilot program in three states (California, Florida, and New York), then later expanded in 2007 to include three more states (Massachusetts, South Carolina, and Arizona).

According to this article:

Because the contractors were paid in part based on how many overpayments they found, they were soon referred to as "bounty hunters," a moniker that still persists.

Physicians in California and Florida complained that the contractors used questionable tactics. They say the RACs made medical necessity determinations based on written Medicare coverage guidelines without the input of a single physician. Contractors reviewed claims that Medicare carriers already had adjudicated, misinterpreted coding statutes and went on fishing expeditions by demanding scores of records at a time. For the most part, CMS [Centers for Medicare & Medicaid Services] officials were powerless to review the RACs' work unless a doctor lodged an official appeal.

The article also describes in detail the "Kafka-esque" nightmare of Dr. Jeffrey E. Kaufman, a urologist accused of overbilling for drugs. Only after he spent "countless hours of unpaid work" submitting numerous records and appeals, did he finally clear his good name of the accusations of financial impropriety.

Many physicians don't even bother to dispute the charges but instead just pay the penalty, because "the cost to the practice of retrieving the corresponding record and forwarding the information could be 10 times that amount" of the requested fine.

If this program is implemented nationwide, I expect we'll see large numbers of RAC "bounty hunters" making money by alleging real or imagined billing errors by physicians who are caught in a maze of increasingly-complex Medicare regulations that no one can be reasonably expected to follow.

This will then spawn a new set of RAC consultants who will (for a price of course) tell physicians how to keep clear of the RAC "bounty hunters." As one such consultant promises:

What you'll learn:

  • What RAC-stricken physicians and clinics are dealing with now.
  • 3 Must-do steps to prepare for RAC audits -- as well as OIG and Medicare contractor visits.
  • Can I -- and should I -- appeal RAC decisions? Here's what the experts say.
  • Future concerns: projecting problem area identification and the expansion of external audits.
  • What types of facilities and specialties RACs are targeting next.

In turn, this will spawn new laws to close the "loopholes" allegedly being "exploited" by "greedy" physicians trying to cheat the government, etc., etc.

The end result will be that the bureaucrats and parasites who create no actual value will make out like bandits, while the producers (i.e., the physicians) get sucked dry.

When doctors are obliged to pay the salaries of their own destroyers, this takes us dangerously close to the nightmare scenario depicted in the classic novel, Atlas Shrugged.

(Of course some doctors have decided to opt of the Medicare altogether and adopt alternative practice models, such as concierge medicine. If Medicare continues to create disincentives for physicians, I expect this trend will accelerate, just as the large numbers of Baby Boomers hit retirement -- in which case things are going to get very interesting very quickly...)

Tuesday, August 5, 2008

Right Diagnosis, Governor, Wrong Antidote 

By Paul Hsieh

Categories:  Tennessee

Tennessee Gov. Phil Bredesen made an interesting analogy in his July 31 USAToday op-ed, "Think gas prices are high? Watch out for health care":

...Imagine a trip to a grocery store. You walk up the aisles as usual, while attractive displays compete for your attention. You fill your basket, take it to the checkout, and the clerk rings it up. But you never see any price or total, and the bill is just sent to some anonymous party for payment. A box of oatmeal would cost $20 at that grocery, and that is exactly the way our health-care economy works today.

    That grocery store is not going to be straightened out by tax credits for the purchase of oatmeal or by a better grocery information system. America has a wonderful and efficient economic system where competition drives innovation and value; we can and should put it to work in health care.

Bredesen is exactly right on this point. The perverse economic incentives of our employer-based health insurance system lead to rampant overutilization of services, because individuals don't directly experience the financial consequences of their choices as they would if they purchased a new washing machine or stereo. Then when costs run wild, the government offers various forms of rationing as a "solution" to the problem.

However, I strongly disagree with Gov. Bredesen's proposed solution, which entails more government interference in the free market, along the lines of "Social Security or Medicare" -- hardly models of solvency.

Overall, my reaction to his guest column is mixed: He recognizes market forces are good, but he isn't willing to take the next logical step and advocate for a free market as the proper solution.

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