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RATIONING OR REFORM? Rep. Jim Cooper speaks at David Lipscomb University on the topic “The Perils of Health Care Today & Tomorrow” June 22, 2009

David Lipscomb 6.23.09

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Page 1: David Lipscomb 6.23.09

RATIONING OR REFORM?

Rep. Jim Cooper speaks at David Lipscomb University on the topic“The Perils of Health Care Today & Tomorrow”June 22, 2009

Page 2: David Lipscomb 6.23.09

I CHOOSE REFORM!

Surprise, surprise

I support the HealthyAmericans Act

Page 3: David Lipscomb 6.23.09

Rationing is a dirty word

• Street definition– Some jerk saying “no” to my sick wife

• Standard definition– Withholding needed medical care– Doesn’t matter who the bad guy is: insurance

company or government• U.S. definition?

– No other nation spends so much, gets so little– Slowing growth of health sector to 17+% GDP

Page 4: David Lipscomb 6.23.09

Possible to reconcile these views?

1. Only if people understand that 2/3 of America’s financial problems are due to overspending on medical care

2. Only if government understands that people have a right to all the medical care they can afford, and enough care so that everyone can live up to their potential

What we have is a failure to communicate

Page 5: David Lipscomb 6.23.09

How can we spend so much, and people still feel short-changed?

Demand for medical care is unlimited, whether is helps us or not“More is better”

Page 6: David Lipscomb 6.23.09
Page 7: David Lipscomb 6.23.09

“…unalienable Rights… Life, Liberty and the pursuit of Happiness”

Declaration of Independence, 1776

Page 8: David Lipscomb 6.23.09

We don’t need to ration health care!

• We are wasting $700 billion annually– We can slow spending without denying needed care

• Proof– McKinsey Global Institute – top private consultants– Dartmouth Atlas of Health Care– Peter Orszag at OMB and CBO– Shannon Brownlee’s book “Overtreated”– Even industry admits to $200 billion waste a year

• June 2009 White House Summit of industry leaders promises $2 trillion savings over ten years

Page 9: David Lipscomb 6.23.09

Private Health Spending

http://www.worldmapper.org/images/largepng/214.png

Page 10: David Lipscomb 6.23.09

Remember: Don’t use static analysis

• No one is thinking of reducing current $2.4 trillion to $1.7 trillion in annual spending

• We are talking of slowing the rate of growth of medical spending to the rate of inflation– No more “inflation plus 2.5%”

• Slowing growth by even 1% avoids 2/3 of our entitlement solvency problems– While allowing growth that other industries envy

• Every basis point (1/100th of 1%) matters

Page 11: David Lipscomb 6.23.09

2.32

2.46

2.64

2.8

2.97

3.15

3.35

3.55

3.76

3.98

2.33

2.5

2.7

2.89

3.09

3.3

3.54

3.79

4.04

4.32

$2.0

$2.5

$3.0

$3.5

$4.0

$4.5

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Year

Tri

llio

n o

f D

olla

rs

Does this look like rationing to you?

Lewin Group, Cost and Coverage Estimates for the “Healthy Americans Act,” Dec. 12, 2006

Wyden-BennettHealthy

Americans Act

CurrentTrends

HAA Ten-Year Savings = $1.48 Trillion (4.5%)

Page 12: David Lipscomb 6.23.09

“What is federal government?A giant insurance company that is $56 trillion in

the hole, with a side business in defense.”

“And we are an insurance company that uses cash accounting. What is an insurance company that

does that? It’s not an insurance company. It’s an accident waiting to happen.”

- Peter Fisher, former Asst. Sec. of Treasury, now at Blackrock

Page 13: David Lipscomb 6.23.09

Regular government issacrificed to entitlements

Your choice: double taxesor cut benefits by 1/2

Page 14: David Lipscomb 6.23.09

The first Baby Boom retiree

Page 15: David Lipscomb 6.23.09

?

?

?Out-of-controlmedical costsof little value

The Baby Boom problem

Page 16: David Lipscomb 6.23.09

$56T Real National Debt

And this does not count Medicaid!

Page 17: David Lipscomb 6.23.09

Wrap your mind around it:

• One million seconds = 12 days• One billion seconds = 32 years• One trillion seconds = 32,000 years

• We almost need new words to describe these completely different quantities

Page 18: David Lipscomb 6.23.09

Are we fiddling while Rome burns?

Page 19: David Lipscomb 6.23.09

BACK TOMEDICALCARE

Page 20: David Lipscomb 6.23.09

How to get healthy?

• 40% behavior• 30% genetics• 15% social conditions• 10% remedial health care• 5% environment

Steven A. Schroeder, M.D., We Can Do Better – Improving the Health of the American People, New England Journal of Medicine, 357:12, p. 1221, Sept. 20, 2007.

Page 21: David Lipscomb 6.23.09

We don’t need to ration health care!

• May need to ration health hazards• Reducing smoking, alcohol, sloth, and

gluttony could save 900,000 deaths annually, or 40% of annual U.S. mortality• Jeffrey Liebman and Richard Zechhauser, “Simple Humans, Complex Insurance, and Subtle Subsidies,”

NBER Working Paper 14330, Sept. 2008, p. 15.

• Health insurance for all could save 20,000 lives a year

Page 22: David Lipscomb 6.23.09
Page 23: David Lipscomb 6.23.09

Still, many will oppose reform

by claiming it is rationing.They will say anything to keep

the profitable status quo,even if it sinks America

Page 24: David Lipscomb 6.23.09

Some patients will oppose reform;Blame Game v. Responsibility

Easier to blame someone else than to lose weight, exercise, make more money, and get a positive attitude

Page 25: David Lipscomb 6.23.09

Medical industry will oppose reform$2.4 Trillion = $2.4 Trillion

Health spending = Vested interestsNo one will admit they are wasting a single

penny

Page 26: David Lipscomb 6.23.09

What Is the Right Amount?

EconomistScarce resources

PhysicianPatient comes first

PatientRight to health care

Optimum: Marginal Cost = Marginal Benefit

Hippocratic Oath:Do No Harm

Survival Instinct:Get Well Soon

$1 care = $1 benefit $1 care = $0 benefit

Joseph P. Newhouse, Pricing the Priceless, MIT Press 2002, p. 79..

$1 care = $0.10, or out-of-pocket expense

$0.99 of benefit not worth it

-$0.01 of harm not worth it

$0.09 of benefit not worth it

Don’t waste money Don’t waste patient Don’t charge full price

What is the right amount of care?

Don’t waste money

Don’t pay full priceDon’t lose patientGreatest fear:

$0.99 of care is

not worth it

$0.09 of care is

not worth it

-$0.01 of harm is not worth it

Ideal stated

negatively:

$1 of care =

$1 of benefit

$1 of care =

$0.10 of benefit

(patient’s co-pay)

$1 of care =

$0 benefit

Ideal in

economic

terms:

Optimal: Marginal

cost = benefit;

Scarce resources

Survival Instinct:

Get well soon;

Right to health care

Hippocratic Oath:

Do no harm;

Patient comes first

Professional

Ideals:

Everyday goal:

BusinessPatientPhysician

This is why we disagree:

Page 27: David Lipscomb 6.23.09

TAKE ACLOSER

LOOK

Page 28: David Lipscomb 6.23.09

We don’t have a health care system. We have a sickness care non-system.

Dr. Jonathan Perlin, Chief Medical Officer, HCA

We do need medical reform:

Page 29: David Lipscomb 6.23.09

But status quo is still popular

96% of voters have health insuranceDon’t want to give up anything

Afraid of changeNot aware of own responsibility for health,

or nation’s fiscal nightmare

Page 30: David Lipscomb 6.23.09

Existing rationing we don’t notice

1. Rationing by income level by insurance companies– Rich can get experimental procedures, assisted living– Bigger tax breaks to buy health insurance

2. Rationing by poverty status by doctors– 2/3 physicians refuse to see most Medicaid patients

3. Rationing of prevention/wellness care by insurance4. Rationing of U.S.-born physicians by medical schools5. Rationing of primary care physicians by med schools6. Rationing by racial and ethnic group by doctors7. Rationing by region by Medicare

– Miami = 3x Minneapolis; McAllen = 2x El Paso

Page 31: David Lipscomb 6.23.09

We supported rationing in WWII,but not formedical caretoday

Page 32: David Lipscomb 6.23.09

Don’t ignore price of care

• Has grown much faster than wages or inflation– But our out-of-pocket spending is lower % of total

• Growing feeling that no family should have to spend more than 5% of income for care– Equivalent housing number is 30%– Is health so much less important than housing?

• How can U.S. spend 16+% of GDP on health while families will only spend 5%?

Page 33: David Lipscomb 6.23.09

Paying full price for care is unfair?

• 80% of people turn down traditional COBRA coverage – the only time you see full price

• Half of personal bankruptcies are due to health costs?– Yes, but discharged medical expense was $3,600– Yes, but entire episode of illness was only $11,500– So people declare bankruptcy for less than the

cost of a used car

Page 34: David Lipscomb 6.23.09

Existing “reverse rationing”

• “Reverse rationing” ignores income levels– Mayo Clinic, VA have best quality, lowest prices

• More people would go there if they could see quality and price more clearly – “Less is More”

– Middle-class has less risk of adverse drug event• Less likely to be over-medicated

– Some Medicaid patients get better benefits• Higher actuarial value than Blue Cross

– Meth burn patients get millions at Vanderbilt

Page 35: David Lipscomb 6.23.09

What new rationing do you fear?

• Limits on doctor or hospital services?– Doctors and hospitals slow work without more $$$?– Hospitals eliminate more emergency rooms?– “Comparative effectiveness” testing will reduce choice of

meds or technology? But FDA doesn’t do this work– New insurance networks may not want your doctor or

hospital if they don’t measure up? Do you want a bad doctor?

• Limits on insurance options?– Choices should increase if you can shop like a federal

employee does

Page 36: David Lipscomb 6.23.09

What ethical guidelines do you use?

• Your family’s needs?• Your faith’s doctrines?

– Christianity opposes artificially-prolonged life?• Devil says “How much better for us if all humans died in

costly nursing homes amid doctors who lie and nurses who lie, promising life to the dying.” C.S. Lewis, The Screwtape Letters

– Catholic Church dislikes for-profit care?– Jehovah’s Witnesses oppose many forms of care?

• Your country’s needs?

Page 37: David Lipscomb 6.23.09

Right to health care v. Rationing

• “If criminals have the right to a lawyer, I think working Americans should have the right to a doctor… I am Harris Wofford and I believe there is nothing more fundamental than the right to see a doctor when you are sick.” 1990 Senate campaign ad

• Talk like this stops rationing• But could obscure U.S. solvency problems until

they are too big to fix?

Page 38: David Lipscomb 6.23.09

Short history of U.S. medical care1912 – safe to go to doctor

1932 - invention of health insurance

1942 – employer-based insurance

1953 - no more “natural” deaths

1965 - Medicare and Medicaid

1983 - DRGs

1996 – SCHIP

2009 – reformed American health care?

Page 39: David Lipscomb 6.23.09

Conclusion:

• Rationing is unnecessary– $700 billion in annual waste; often hurts health

• Reform is necessary– Must reduce this annual waste; won’t hurt anyone

• Reform will still be attacked as rationing– Disagreement over which spending is wasteful

• Can’t duck need to solve fiscal problems– U.S. health spending is unsustainable

Page 40: David Lipscomb 6.23.09

Guide to Health Care Reform

Insurance ReformPublicOption

Page 41: David Lipscomb 6.23.09

The Kennedy Bill

- $1+ trillion price tag- Subsidizes up to

500% of poverty- Income of $110,000

for family of four- New disability

entitlement program

Page 42: David Lipscomb 6.23.09

The Senate Finance Bill: $1.6 Trillion

Page 43: David Lipscomb 6.23.09

Senate omits Medicaid reform?

• 2nd Class medical care?– Low reimbursement– 2/3 doctors shun patients– States vary widely– Dominates most state budgets

• Long-term care, end-of life issues ignored

Page 44: David Lipscomb 6.23.09

Healthy Americans Act

• Covers everyone• Bipartisan• No new taxes• Scored by CBO• Fits Obama’s 8

principlesThe perfect breed?

Page 45: David Lipscomb 6.23.09

Other bills to come…?

Page 46: David Lipscomb 6.23.09

Obama’s choice will matter most

Page 47: David Lipscomb 6.23.09

Big issue is the tail: public option

• Tail must fit dog• Must not wag dog

Page 48: David Lipscomb 6.23.09

Some tails look ridiculous

Page 49: David Lipscomb 6.23.09

Public option: no bullies allowed

Need a level playing field

Page 50: David Lipscomb 6.23.09

Schumer Option

Fair competition between dogs

Page 51: David Lipscomb 6.23.09

Conrad’s Co-op Option

Page 52: David Lipscomb 6.23.09
Page 53: David Lipscomb 6.23.09

.

Isn’t this radical?

Page 54: David Lipscomb 6.23.09
Page 55: David Lipscomb 6.23.09

Key relationships in health care

Patient

Doctor

Insurance

Government

TriageConvenience Reimbursement

Self-referral

Managed care Utilization review Capitation paymentsHMOs

Rationing?

Medicare Medicaid Tax subsidies Tax exemption

Anti-trust exemption