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A FEDERAL RESERVE SYSTEM FOR HEALTH CARE — IT’S ABOUT TIME

It’s encouraging to see that one of the proposals being advanced by the Obama Administration to deal with health care is an idea we proposed four years ago – an independent agency modeled on the Federal Reserve System to oversee health policy and expenditures.

We suggested this solution in our 2004 book, CRITICAL CONDITION: How Health Care in America Became Big Business — and Bad Medicine, which also described why our present fundamentally flawed system is in such desperate need of reform.

In researching the current system and the havoc it is wreaking on millions of American families, we concluded that the only way the nation can break the political gridlock over health care is to create a quasi-independent agency modeled along the lines of the Fed.

Our book sketches out the broad concept of such an agency and explains why it is so desperately needed. The response to our proposal from citizens groups, health professionals and average Americans across the country with whom we have talked has been strikingly positive.

Here is the excerpt from Critical Condition  calling for creation of a Federal Reserve like board to set overall policy on health care and control expenditures:

Americans are the most over-treated, under-treated, and mistreated health care patients on earth.

It need not be this way.

The simplest and most cost-effective remedy would be to provide universal coverage and to create one agency to collect medical fees and pay claims. This would eliminate the staggering overlap, duplication, bureaucracy, and waste created by thousands of individual plans, the hidden costs that continue to drive health care out of reach for a steadily growing number of Americans.

Under single-payer, all health care providers –- doctors, hospitals, clinics — would bill one agency for their services and would be reimbursed by the same agency. Every American would receive basic comprehensive health care, including essential prescription drugs and rehabilitative care. Anyone who needed to be treated or hospitalized could receive medical care without having to wrestle with referrals and without fear of financial ruin. Complex billing procedures and ambiguities over what is covered by insurance would be eliminated.

Radical? We already have a universal health care and single-payer system for everybody aged sixty-five and over: It’s called Medicare. For years, researchers, think tanks, citizens’ groups, and health care professionals have advocated a similar plan for the rest of the population. Study after study has concluded the most practical and cost-effective way to provide quality health care and to restrain costs is a single-payer system, but no plan ever has come close to adoption because of fierce opposition by the powerful health care lobby.

To discredit the single-payer idea, insurers, HMOs, for-profit hospitals, and other private interests play on Americans’ long-standing fears of big government. This view was summed up by Susan Pisano, a vice-president of the American Association of Health Plans, who contended in 2002 that a single-payer “would lead to the creation of a large federal bureaucracy that would be less responsive and actually raise issues of cost, access and quality more than it would solve them.”

In truth, it is the private market that has created the largest army of clerks in health care, a free-market bureaucracy that dwarfs the size and costs of Medicare. Because there are so many different plans and payers, each with its own requirements, computer systems, call centers, reimbursement formulas, and red tape, health care is strangling in paperwork and duplicative processes that have pushed the cost of administering the profit-driven system to stratospheric heights.

By contrast, notwithstanding worries over government waste, the federal Medicare program is the most efficiently run health insurance program in America. Medicare’s administrative costs average about 2 percent a year. In a 2002 study for Maine, a Princeton-based firm, Mathematica Inc., concluded that administrative costs of private insurers in the state ranged from 12 percent to more than 30 percent. Studies of private carriers in other areas have reached similar conclusions. This isn’t surprising, because Medicare relies on economies of scale and standardized universal coverage. Private insurance is built on bewilderingly complex layers of plans and providers that require a costly bureaucracy to administer, much of which is geared toward denying claims.

Some studies have put the price tag for administering the current system at one out of every three health care dollars, much higher than any nation with single-payer health care. There is no way of knowing how much the United States could save by adopting such a system, but even with one that covered 100 percent of the population, the savings would still be substantial.

What kind of an agency would administer it?

The idea of a single payer plan run by the U.S. government carries with it far too much political baggage to ever get off the ground. Hence the need for a totally fresh approach, establishment of an organization that is independent and free from politics, one that can focus with laser-like precision on what needs to be done to further the health interests of everyone in a fair and evenhanded manner. For in addition to covering the basic costs of all Americans, a new system needs to institute the programs that will improve American health generally, that will be as concerned with preventing illness and disease as with treatment, and do so without breaking the bank.

How does the United States come up with such a mechanism?

One possible answer: Loosely copy and then amend and expand on what already exists in another setting: The Federal Reserve System, a quasi-governmental organization that oversees the nation’s money and banking policies. The Fed is one of the nation’s most ingenious creations, a public agency that is largely independent of politics. The Fed’s Board members are appointed to staggered, fourteen-year terms by the President with the consent of the Senate, meaning that no one in the White House or Congress can substantively influence the Fed’s policies while they are in office.

Call this independent agency the U.S. Council on Health Care (USCHC). Like the Federal Reserve, the USCHC would set an overall policy for health care and influence its direction by controlling federal spending –- from managing research grants to providing basic and catastrophic medical coverage for all citizens. Unlike the Federal Reserve, it would be entirely taxpayer funded. The money could come from just two taxes, a gross receipts levy on businesses and a flat tax, similar to the current Medicare tax, on all individual income, not just wages. This would not represent an additional cost to society, but rather replace existing taxes. It would cut costs for corporations and raise taxes slightly on individuals at the top of the income ladder. Members of the USCHC board would include both professionals, drawn from the health care field, and ordinary citizens from all walks of life. Its mission: Implement policies that improve health care for everyone, not just those suffering from a particular disease. In short, make the unpopular decisions that the market cannot make.

The Council could establish regions similar to the Federal Reserve System, which is divided into twelve areas. Whatever their number, the geographic subdivisions could take into account cultural and regional differences among Americans. They would allow for health care delivery to be fine tuned at the local level, and to assure that rules and regulations could take into account the differences between metropolitan and small town community hospitals. Although the USCHC could be set up to keep partisan politics out of hospitals and doctors’ office, health care politics, which can be every bit as divisive as the mainstream variety, would still present a challenge. If you have any doubt, just assemble surgeons, radiologists, and internists in a room to discuss the merits of their particular approaches to treatment of a specific disease. But those members of a USCHC board drawn from outside the health care community would at least introduce a moderating influence.

By Don and Jim on 1.8.09 | Comments [10]

A Question of Fairness

Welcome to the new Barlett and Steele Web site. In addition to a greatly expanded archive of our work, including video and audio material, it will also be the home of our Blog. From time to time, we will offer our observations on a range of subjects, especially those we have written about over the years: Health care; local, state and federal taxes; globalization; corporate welfare; illegal immigration; Social Security; government policies that serve moneyed interests rather than working people; the inequities growing out of those policies; government contractors, and, of course, the world of Washington politics. We also hope to explore new topics with the hope that you will help educate us. We look forward to your ideas.

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Some years ago, the historian, David McCullough, delivered a commencement address at the University of Connecticut whose message was the importance of reading books throughout life. In an aside tailored for his young audience, he offered a critical observation on the Internet age and the speed with which information is transmitted today:

“Everything moves faster and our notions of time and space adjust of necessity, whether we realize it or not. Information is available as never before and at the touch of a finger. Information has become an industry, a commodity to be packaged, promoted, and marketed incessantly. The tools for ‘accessing’ data grow ever more wondrous and ubiquitous and essential if we’re to keep in step, we’ve come to believe. All hail the Web, the Internet, the Information Highway.

“We’re being sold the idea that information is learning and we’re being sold a bill of goods. Information isn’t learning. Information isn’t wisdom. It isn’t common sense necessarily. It isn’t kindness. Or trustworthiness. Or good judgment. Or imagination. Or a sense of humor. Or courage. It doesn’t tell us right from wrong.”

Indeed not. Today, more than ever, we need to learn to think critically. With so much information flying by, we all must stop and ask questions, probe slick phrases, study analogies closely, weigh alternative explanations for often bad ideas packaged in rhetoric that seems quite logical at first. This will be one of the missions on this Blog: To encourage critical thinking. This is especially important in a presidential election year marked by endless campaign speeches devoid of specific solutions, passionate one-liners, attack ads, spin sessions, glib comments by television news personalities — all at a time when, depending upon your economist of choice, the nation is moving toward, or already mired in, a recession.

In recent months, for example, special interests and their spokespersons have criticized the idea that the federal government should retrain workers who have lost their jobs as a result of unfettered trade policies. Such was the tack taken by a University of Rochester economics professor, Steven E. Landsburg, in an opinion page article in The New York Times. The potential readership of Landsburg’s column grew exponentially as it passed from blog to blog on the Internet.

Landsburg posed the question of whether there is “a moral mandate for the taxpayer-subsidized retraining programs” proposed by Republican presidential candidates John McCain and Mitt Romney?” He offered this unequivocal answer:

“Um, no. Even if you’ve just lost your job, there’s something fundamentally churlish about blaming the very phenomenon that’s elevated you above the subsistence level since the day you were born. If the world owes you compensation for enduring the downside of trade, what do you owe the world for enjoying the upside?”

“. . .One way to think about that is to ask what your moral instincts tell you in analogous situations. Suppose, after years of buying shampoo at your local pharmacy, you discover you can order the same shampoo for less money on the Web. Do you have an obligation to compensate your pharmacist? If you move to a cheaper apartment, should you compensate your landlord? When you eat at McDonald’s, should you compensate the owners of the diner next door?”

The analogy is seriously flawed. The loss of a single shampoo order is hardly equal to the loss of a job. But there’s something else to think about. Anyone who has entered the workforce in the last decade knows, or certainly should know, that his or her employment is transient. Those who went to work two decades or more ago did so with the expectation that loyalty to a single company would be repaid with a lifetime job.

Then Congress changed the rules of the game. As a result, corporations were encouraged to move their plants to other countries where workers could be paid far less. American workers, in turn, were dumped on the street.

The real question becomes: Is it right, or fair, to change the rules of the game in the middle? Think about that when you watch the next Super Bowl. As one team holds an eight point lead and the opposing team scores a touchdown with seconds to play, even with the extra point that team will come up short. But what if the referees decided to make the extra point worth three points? Not fair, you say? Couldn’t happen? Certainly not in sports. But it happens every day in the work world when Congress changes the rules to benefit powerful special interests. Lest you think Washington doesn’t really work that way, then ask why Congress has imposed a stiff tax on much cheaper imported ethanol from Brazil so that it cannot compete with higher-priced U.S. ethanol?

Lastly, think about this: While Landsburg, the economics professor, feels it’s unfair to ask society to pay the retraining costs for displaced workers, a few years back he was arguing that university professors should have tenure to improve the quality of education. In other words, college professors should be guaranteed employment for life, but other workers are disposable.

He put it this way in an Internet article talking about the need for colleges to combat grade inflation, a truly serious problem:

“. . .Easy graders are more popular on campus. The costs of leniency — measured in lost reputation — are spread over the entire school, while the benefits are concentrated in the professor’s own classroom. Therefore the professor is biased toward leniency. The problem, then, is in the gap between the professor’s interests and the college’s. Any solution must involve narrowing that gap. That’s where tenure comes in. An untenured professor is like a corporate bondholder — as long as the institution stays above water in the short run he’s happy. A tenured professor is like a corporate stockholder — he has a permanent stake in the fortunes of the institution. Professors should have job security for the same reason Alan Greenspan should have job security: It instills a healthy respect for the long run.”

By Don and Jim on 2.5.08 | Comments [9]