A Fresh Look at Healthcare Reform; Part II of II

In HealthCare, Guaranteed, Dr. Ezekiel Emanuel proposes a bold plan for health care reform that offers free, high quality health care to all Americans. No premiums. No deductibles. Low-co-pays. Under this plan, the government insists that all insurers offer the same comprehensive benefits to everyone, including: office and home visits, hospitalization, preventive screening tests, prescription drugs, some dental care, inpatient and outpatient mental health care and physical and occupational therapy. These benefits are more generous than Medicare’s and more comprehensive than what 85 percent of all employers offer their employees. 

How do we fund it? Emanuel, who is the Director of the Clinical Bioethics Department at the U.S. National Institutes of Health, proposes a 10 percent Value-Added Tax (VAT) on consumption. For a median-income family earning $50,000 a year and spending virtually every penny, this means that they would pay $5,000 a year (10 percent of $50,000) in taxes on their purchases. But in return, they would receive health care benefits worth more than $12,500 (the current average price for comprehensive insurance that covers a family.)  In addition, because The Guaranteed HealthCare Access Plan would replace employer-based coverage, many workers could expect a raise roughly equivalent to what their employer now pays toward their premiums.

Here is how the plan works: Every American would receive a voucher for individual or family coverage. The vouchers would be of equal value and all insurers would be required to offer the same comprehensive benefits package to anyone who applied—young or old, sick or healthy.

Insures would report to 12 Regional Health Boards.  Each Board would have a Center for Patient Safety and Dispute Resolution staffed by patients, physicians and lawyers that would receive and adjudicate patient complaints, compensate patients, discipline and disqualify physicians responsible for repeatedly injuring patients, and fund and develop patient safety programs.  (Patients not satisfied with the Board’s resolution of their complaint still could sue for malpractice).

The Guaranteed HealthCare Access Plan pledges to cover the 257 million Americans who are not now on Medicare at a cost of nearly $1 trillion. This number includes what we now spend on employer-based insurance, Medicaid and SCHIP –plus what it would cost if the uninsured had employer-based coverage.

People who are now enrolled in Medicaid, SCHIP or Medicare would not be forced to switch to the new Guaranteed HealthCare Access Plan, but if they chose to, they could. For the time being, probably most seniors on Medicare would stay put.  But over 15 years, these three plans would be phased out.

For more details on the plan—and how it would affect families at different income levels, see part 1 of this post.

Why Not Just Raise Income Taxes?

It may seem strange—not to mention politically dangerous—to introduce
the possibility of a whole new tax, especially one with European
pedigree, into the health care debate. In a telephone interview last
week Emanuel agrees that this could be the biggest obstacle his plan
faces. On the other hand, when the majority of developed countries do
something and we don’t—whether it is providing healthcare for all of
their citizens, or taxing consumption—you have to wonder: how likely is
it that all of them are wrong, and we alone are right?

Moreover, at this point all options are on the table, and no less than
Bruce Bartlett—a consummate supply-sider who served as domestic policy
adviser to Reagan and a treasury official under Bush—has gone on the record
as supporting a VAT to fund healthcare. Healthcare reformers need some
Conservative support—particularly on the question of the cost of
universal coverage.  As I have argued in the past,
if reformers don’t have  sharp answers  as to how they will fund
universal coverage, there is a real danger that conservatives could
torpedo health care reform on the cost issue alone.

More importantly, the VAT doesn’t just introduce a new tax, it also
lets us cut other taxes. Today, the average state spends over 30
percent of its budget on a combination of health care benefits for
state employees plus Medicaid and SCHIP. Under this proposal, VAT would
take over funding health care benefits for government employees, and
with time, both Medicaid and SCHIP would be subsumed within the new,
centralized framework.  State taxes would be bound to drop: “What state
governor wouldn’t like to be able to cut taxes by, say 25 percent, and
still have change left over to improve education?”  Emanuel asks.

Higher income taxes would mean more of the same. With the VAT, we won’t
just be piling tax upon tax. Here there is a compelling political
narrative at work: the system is becoming more efficient and health
care reform is not just targeting the rich, but imposing a universal
tax for the good of all.

The VAT also is fairer than many taxes because it has a high compliance
rate. It’s hard to cheat. This is in large part because the tax is
applied throughout the chain of production, making it easy for auditors
to cross-check invoices and tax returns at various points in that
chain.  (When a manufacturer purchases raw materials from a supplier,
it pays a tax to the government; when the manufacturer turns around and
sells the good to the retailer, the retailer again pays a tax with its
purchase; and the consumer pays the VAT when he or she buys the final
product from the retailer.) By contrast, it’s quite easy for a cash
business like a restaurant to lie about how much it’s taking in, and
keep a portion of the sales taxes it collects. And of course,
individuals who are paid in cash often do not report their full income.

The VAT is as reliable a cash-cow as you’re going to find: it can
generate an enormous amount of money at a relatively low tax rate.

It also automatically keeps up with inflation. If the cost of goods
rises, so will the amount that the VAT collects. In that way, funding
for healthcare will keep up with overall price increases. 

The VAT Provides an Incentive to Reduce Waste

At the same time—and this is key—VAT funding will rein in runaway
health care inflation.  In recent years, health care spending has been
rising faster than both inflation and GDP growth. This is what we
cannot afford. 

As Emanuel points out, the VAT gives us a national health care budget
that reflects what is happening in the rest of the economy:

“We cannot spend more than the VAT brings in. If Americans want more
healthcare services, they will have to lobby and convince Congress to
increase the VAT.”  And it is not likely that Congress would be willing
to hike a new tax anytime in the new future.  By putting a cap on
health care spending, the VAT creates a much-needed incentive to make
sure that we are getting value for our health care dollars by weeding
out waste and inefficiencies.

Insurers won’t be able to raise premiums—they will have to live on the
funding that the VAT provides. This means that they will be motivated
to find more creative ways to manage chronic diseases –so that they
don’t have to pay for costly hospital care down the road.  Insurance
companies also will need to experiment with how to reimburse
physicians, hospitals and other providers in a way that rewards them
for coordinating care and delivering it in the most efficient setting.
This is what I mean when I say that the plan forces insurers to
complete on quality, not price.

To make certain that insurers are not trying to save money by
withholding needed care, each quarter insurance companies will be
required to provide data to 12 Regional health Boards on their
performance, reporting on  patient satisfaction,  dis-enrollment rates,
use of preventive services, and patient outcomes. Regional health
boards will make this information public, to help families choose their

At this point, “outcomes research” is still an infant science, so at
the beginning the information that the Regional Boards collects may be
sketchy. But because the Regional Boards will be demanding
accountability, this will give insurers a strong motivation to create
an efficient infrastructure…and establish electronic medical records
systems. As Emanuel observes: “Health insurance companies and plans
will be hard-pressed to deliver the required data without electronic
medical records that reach across physicians, hospitals and other

Those records, in turn, could create the database needed to advance outcomes research.

How The Guaranteed Health Access Plan Slashes Administrative Costs

Our health care system is so expensive in part because it is so
fragmented, leading to exorbitant administrative costs. By replacing
employer-based insurance, and including everyone under one umbrella,
the Guaranteed HealthCare Access plan saves billions.

On this point, Emanuel quotes healthcare economists Alain Enthoven and
Victor Fuchs : “The need for more than 850 insurance companies to see
and contract with million of employers, underwriting each one [deciding
how much to charge based on the age and health of their employees] adds
greatly to overhead. Typically administrative costs are on the order of
11 percent of premiums, and this does not include the costs to
employers to purchase and manage healthcare spending, including armies
of consultants, benefits managers and brokers.

“To understand how this could be different,” Enthoven and Fuchs write,
“consider that Kaiser Permanente signs one annual contract for the
coverage of more than 400,000 employees and dependents with the
California Public Employees Retirement System (CalPERS) and CalPER’s
administrative costs are on the order of 0.5 percent of premiums.”

By removing the employer as middle man, Emanuel’s plan could save that 10.5 percent—or roughly $120 billion a year.

Insurers also would save because they wouldn’t have to market their
plans to millions of employers. Instead they would deal with just the
12 Regional Boards that would certify that each insurer had a
sufficient network of physicians and hospitals, adequate financial
reserves—and that insurers were indeed providing the full menu of

The Institute for Technology and Outcomes Assessment

We know that health care inflation has been racing
ahead of inflation in the rest of the economy largely due to the rising
cost of new medical technologies. But if we cap total health care
spending so that it doesn’t grow any faster than the VAT  how will we
pay for exciting new medical breakthroughs?

The truth is that, today, for ever truly effective breakthrough,
countless over-priced, ineffective and sometimes dangerous drugs and
medical devices are flooding the marektplace. In recent years,
newspapers have been filled with stories about the recalls—and the
patients who have died or suffered injury because new products were not
fully tested.

The problem is that, under the current system, manufacturers control
the research and what we are allowed to know about their products. As I
have discussed,
too often that research is biased. Meanwhile, drug-makers and
device-makers have resisted calls for “head-to-head” trials that would
compare a new product to an older, less expensive device, drug or test
already on the market.

The Guaranteed Health Care Access plan would change all of that by
creating an independent Institute for Technology and Outcomes
Assessment that will evaluate the effectiveness of new drugs and
devices as well as new procedures. Its goal would be to identify and
promote technologies that save money without reducing the quality of
care by. To that end, the Institute would review existing research;
sponsor studies to compare products and services where comparative
research is lacking, and analyze the data from health plans and
insurance companies on patient outcomes and on the drugs, medical
technologies and interventions used to achieve those outcomes.

Emanuel argues that the Institute’s assessments also will “change the
dynamics of long-term medical research and development. In particular,
its decisions will encourage drug and medical-device companies to focus
their research on high-value interventions. Today, these companies
develop new interventions with little regard for price or the degree of
improvement over existing interventions.”

By creating a more rational framework for coverage decisions, the
Institute will provide industry with “more reliable information [about]
future coverage decisions.” Thus “the independent Institute will help
shift research priorities toward technologies that provide real
improvements in survival and health. In this new scenario no amount of
advertising razzle-dazzle could create broad profitable markets for
other products.”

Protecting Our Health Care System From the Lobbyists

Best of all, Emanuel’s plan shields the new health care system from the
hordes of lobbyists who use campaign contributions to distort our
healthcare system to meet their special interests.

Emanuel argues that the problem with Medicare-for-all (or any single
payer plan) is that it would depend on annual appropriations from
Congress. And experience tells us that if lobbyists representing
private insurers, drug-makers, equipment-makers, a particular guild of
specialists or group of hospitals howl loudly enough, legislators will
withhold funds until their demands are met.

“The history of Medicare offers a sobering lesson on how events would
be likely to play out,” Emanuel observes. “As we have seen when
Medicare tries to…equalize payments in different parts of the country,
hospitals put pressure on their representatives and senators to
increase payments.” Drug-makers also use patient advocacy groups to
lean on Congressmen who, in turn, put pressure on Medicare to cover
unproven products Too often, political manipulation, rather than
medical evidence, drives decisions. 

The Guaranteed Healthcare Access Plan is insulated from both
politicians and lobbyists because it has its own separate dedicated
stream of funding– the VAT. It does not need to go to Congress to beg
for money

Most importantly, the Institute for Technology and Outcomes Assessment
is not subject to interference by Congress. It, too, is funded by the
VAT and needs no annual appropriations from Congress.  This gives our
health care system the protection from political interference that it
so desperately needs.

The Guaranteed Healthcare Access Plan is not perfect.  Emanuel does not
try to flesh out all of the details that would make it work. But I
think he is wise when he says:  “At this stage of the healthcare
debate, it is more effective to realize that God is in the Essentials.”

And the Essentials—those points that must not be compromised—are in his plan:

  • High quality, affordable health care for everyone, regardless of  health status or income
  • Effective Cost Controls that make the program affordable and
    sustainable by relying on unbiased comparative effectiveness research
    to spotlight over-priced products and services that are not adding to
    the quality of care
  • Coordinated care with government oversight that fosters the
    infrastructure, information systems and financial incentives for
    high-quality health outcomes, and that holds providers accountable to
    achieve them
  • Choice of health insurance plans, doctors and hospitals as well as the option to purchase additional benefits
  • Funding which requires all Americans to contribute their fair share to funding the healthcare system
  • Reasonable dispute resolution to replace the current malpractice system

44 thoughts on “A Fresh Look at Healthcare Reform; Part II of II

  1. Raise taxes. Excellent idea. Why not name it “Mondale,” and really insure its passage?
    As if enough money isn’t already pumping in the system to Lexus dealers.

  2. Maggie,
    I want to highlight two problems that I think Mr. Emanuel and Congress will need to deal with in considering a proposal like this. First, the concept of a voucher of equal value won’t work in a country as big and diverse as the U.S. There are very significant regional differences in wage rates, real estate costs, state and local taxes and malpractice insurance costs. Even Medicare attempts to take this into account with regional adjustment factors in calculating its provider payment rates. Second, without a robust risk adjustment mechanism, insurers will still have an incentive to find ways to minimize the number of sicker members they take on. The Netherlands has a Risk Equalization Fund to address this issue. It provides extra payments to insurers that wind up with a sicker than average population and it assesses insurers whose members are healthier than average. We will need something similar.
    I still don’t think a 10% VAT plus eliminating the tax preference for employer provided health insurance will raise enough money to provide universal coverage and comprehensive benefits as Emanuel proposes. On the other hand, I like his proposal to deal with medical dispute resolution. I think electronic records have enormous long term potential to advance outcomes research and analysis, and I’ve always been in favor of independent comparative effectiveness research. I also think we are much more likely to get continued innovations in benefit design with multiple insurers competing for business vs. a single payer system.
    Finally, as an aside, approximately 55% of people (including family members) who get their health insurance through an employer are in self funded plans. In these cases, the employer determines the benefit design such as deductibles, co-pays, out of pocket maximums and scope of coverage that it is willing to pay for. Those employers pay insurers a fee of about $15-$20 per member per month (PMPM) for claims processing, network access and, if they want to buy it, disease management. Administrative costs are much lower because the self funded plans don’t have to pay for medical underwriting or broker commissions. It is also far cheaper and more cost-effective to sell health insurance policies thousands at a time to a large group than one at a time to each individual.

  3. I have serious doubts about this proposal. While I agree with the concept of universal coverage and a single payor, this plan seems impractical to me.
    First, the idea that a median family would receive $12,500 of benefits for $5,000 of VAT doesn’t compute to me.
    Second, the idea that Congress would enact a whole new tax mechanism on top of our existing tax structure seems unlikely as well as unduly complex.
    The Patent Office won’t patent anything that is a perpetual motion machine. This seems like the medical/financial version of perpetual motion machine – you get more out of it than you put in.

  4. I like the idea of regional boards and everything they encompass, but I’m confused by this 10% tax proposal. Federal government or State?
    “When a manufacturer purchases raw materials from a supplier, it pays a tax to the government;” What tax and what government? I’ve never heard of any such tax on raw goods a manufacturer uses.
    “when the manufacturer turns around and sells the good to the retailer, the retailer again pays a tax with its purchase;” No, this is not a taxable transaction, guess it depends on the state, but there’s only one taxable event per transaction and that occurs when the end-user makes a purchase.
    ” and the consumer pays the VAT when he or she buys the final product from the retailer.)” Much like sales tax, so, is this state run healthcare or a “sales” tax to the federal government? These examples of tax to a manufacturer and tax to a retailer, is this a proposed idea with these additional newly taxable events also funding healthcare?
    I dunno if this will be very popular. A family of 4 earning $50k a year, likely is paying next to nothing in income tax as it is. In Texas we have no state income tax, our sales tax rate is 8.25%, this VAT proposal would boost it up to 18.25%, holy **** are you kidding? And we all know it’s only a matter of time before VAT starts increasing and expanding to pay for this that and the other. Is 10% really what healthcare is going to cost? Other than that steep bill, sounds like a pretty good idea.

  5. I just read part one, not sure how I missed it. Anyway, I liked the idea of the payroll tax proposed in HR 676. 4% payroll tax vs 10% VAT. I did some quick calculations based on our own lifestyle, and the 10% VAT is substantially more (out of pocket to the consumer) than 4% payroll (676 proposes 4% from the employer, 4% from the worker). I think the 4% payroll is much more politically digestable and acceptable to voters.
    Can we take the best of 676 and the best of Dr. Emmanual’s VAT proposal and have our solution?

  6. Thank you all for your comments.
    A VAT is a federal, not a state tax. As I mention in the post, virtually every other developed country has a VAT–except us. This could mean that we alone have figured out the best way to collect taxes. Or it could mean that it’s worth looking at what other countries do. . .
    The 10% is paid at each point in the transaction, which raises the final price to the consumer by 10%. The advantage of having it paid, and passed along at each point in the chain is that it makes it very hard for anyone to cheat. It’s easy for the IRS to cross-check.
    The median income family earning $50,000 –and spending the whole $50,000–pays $5,000 in
    VAT taxes.
    Meanwhile that family receives a comphrensive family insurance plan that is richer than Medicare and better than what 80 percent of employers offer their employees. The market value of this plan (what an employer and employee would pay for it today) is $12,500. So by paying $5,000 the median income family gets a plan worth $12,500.
    If you look at the math for the family earning $200,000 it works out well for them too because they are likely to benefit even more from raise it wages they will get (because their employer is no longer paying a hefty share of their premium) and from the cut in state taxes (becuase states no longer have to pay for their employees or Medicaid or SCHIP).
    Today a median-income family with two or three children in public schools may well be receiving educational benefits that are worth three times what that family pays in property taxes. Next door, an elderly couple pays the same property taxes and receives no educational benefit.
    Our tax system is all about collecting money from everyone on a sliding scale (more if your property is more valuable, more if your wages are higher), than redistributing that money based on need: educational benefits for famlies that
    have kids, public health services for peopole who need public health services, subsidized nursing homes for those who need nursing homes, highway repair for those who drive,tax breaks for those who own homes to help them carry their mortgages, etc.
    So the VAT isn’t a perpetual motion machine—it’s just another example of how all countries use taxes to redistribute money.
    The VAT is popular among many economists and politicians. We’ve never enacted a VAT but Fortune Magazine has called it “the tax that won’t go away.” It’s likely that, at some point, we will begin to tax consumption instead of just taxing income. (
    Conservatives point out that by taxing spending we could encourage people to save more. Their are various ways in which the VAT helps the economy, and would help our trade balance that I won’t try to go into here.)
    Finally while the VAT raises taxes on consumption, because it is used soley for health care it will lead to lower state taxes. And because it relieves employers of the responsibily of providing health benefits (which makes it hard for some of them to compete abroad) it will lead to higher wages and more hiring, revitalizing the economy.
    Barry– Read the posts and you will see that there is a risk-adjustment mechanism (I think it’s in the first post.)
    And one reason that the program is administered through 12 regional boards who oversee insurers is because of regional differences in wages etc.
    At the same time, the Plan aims to smooth out regional differences that have nothing to do with differences in overall health of the population or local cost-of-living (cost of real estate etc.)
    Here, I’m thinking of the regional variations that the Dartmouth reserach reveals –which are directly linked to too many specailists and too many beds leading to overtreatment.
    Insurers would have to find ways to avoid over-treatment by refusing to pay for unncessary hospitalizations, etc. (Congressoinal Budget Office Director Peter Orzag, who knows the Dartmouth resarch cold, is particularly insistent on this–and he’ll have to sign off on any plan.)
    Very likely, smart insurers would begin paying for shared decision-making –which reduces the number of unwanted elective surgeries–and palliative care, which reduced unwanted end-of-life care.
    The Technology Assessment Institute also will be setting up guidelines for best practice (not rules, guideline) that define what is best for most patients. Doctors and hospitals won’t have to follow these guidelines in every individual case but doctors and hopsitals that are consistently outliers (over a period of time) will find that they will no longer be paid.
    Medical centers with excellent outcomes that are able to deliver better care for less (by making fewer erros, having fewer readmisions and not over-treating) will serve as benchmarks.
    People in Iowa would no longer be paying taxes so that people in N.Y. can be over-treated.
    As for whether the 10% VAT tax would do it– it does.
    Remember it’s not trying to cover people on Medicare, though it does assume that everyone on Medicaid and SCHIP switches into the new plan. It’s also not trying to cover the public programs that the federal govt now covers– the VA, public hospitals etc–which accounts for 12% of our national health care bill.
    I’ve gone through the numbers–at today’s rates (roughly 12,500 per family) we’d need $990 billion–or nearly one trillion to cover everyone not on Medicare.
    The administrative savings from this plan add up to about $120,000–as explained in the post.
    Because we get rid of the regressive tax break for people who receive employer-based insurance and don’t pay any tax on that extra income, we’ll save another $200 billion.
    TAs a result, VAT easily covers everyone outside of Medicare. Meanwhile, Medicare will continue with its own separate funding, though over time the two programs will be joined.
    No one likes the idea of raising taxes, but here is the unpleasant truth: Given the cost of the war in Iraq, given the fact that we need to address the problem of glboal warming, given the fact that rising food prices and oil prices will mean that more people will need help in the form of food stamps help paying their heating bills, etc.,given the fact that returning Vets from Iraq are going to need a huge amount of medical care . . .we are going to have to raise taxes.
    Simply letting Bush’s tax cuts for affluent families expire won’t do the trick. That money has already been spent.
    Iraq, in particular has become a financial black hole and will continue to cost us tens of millions of dollars.
    You’ll notice that none of the presidential candidates are pledging “no tax increases.” They all know they’ll have to raise taxes,McCain included because he believes that we should keep fighting in Iraq, no matter how long it takes, until we win it.

  7. Lisa writes:
    >> “Anyway, I liked the idea of the payroll tax proposed in HR 676. 4% payroll tax vs 10% VAT. I did some quick calculations based on our own lifestyle, and the 10% VAT is substantially more (out of pocket to the consumer) than 4% payroll (676 proposes 4% from the employer, 4% from the worker). I think the 4% payroll is much more politically digestable and acceptable to voters. ” << One question here -- how would HR 676 handle affluent retirees and people who live off of capital gains, interest and dividends? A payroll tax seems awfully regressive, and would certainly be an incentive to retire early if continued health insurance wasn't a concern -- and paid for by others.

  8. Tim–
    You are right–affluent retirees don’t pay any tax on money that they withdraw from a Roth IRA (which includes compounded capital gains and dividends) and pay at the lower capital gains tax rate on money that is not in a retirement fund.
    The nice thing about adding a VAT rather than expanding payroll taxes is that you reach a group of people who are now avoiding income and sales taxes–either by cheating or by exploiting the holes that makes income taxs not as progressive as one would wish.
    It’s very hard to cheat on a VAT.
    If we tax people in several different ways, we do a better job of spreading the burden.
    And Lisa– If employers pay 4% of payroll, then you don’t get the wage increases that you get under this VAT plan.
    If your employer gives you health benefits, he pays you that much less in wages. That has been well-documented.
    And most employers just haven’t done a very good job of demanding that insurers provide better quality care. By and large, employers are more intersted in the price of the insurance than the quality of the coverage.
    That’s why I’d rather see an independent regional board overseeing quality of insurance . ..

  9. “If we tax people in several different ways, we do a better job of spreading the burden. ”
    That’s my thinking, too. Maybe a payroll tax could be a piece of the funding mechanism, but it is too regressive and unfair to the working class to be the primary piece of it.
    I suppose you could probably tweak it so that there’s an entry for “health care tax” on the income tax form where you’d pay a percentage of your income on the form — minus a credit for all the payroll taxes you put in during the year. That way the people living on investment income wouldn’t get a free or nearly free ride. Or perhaps there could be a national sales tax for part of the funding, but that might require a Constitutional amendment.
    In general, I don’t think creating disincentives for earning income through working for it is good public policy.

  10. Tim-Maggie, good points about the payroll taxes, although I don’t think a VAT is any guarantee of a wage increase.
    Is 10% of everything we purchase really what this is going to cost? And are you saying 10% at each point in the chain? (Mfr to retailer to consumer?) Egads that’s a lot of money.
    Here at work it’s renewal time and we switched to another health insurance provider. I’m now paying 22% of my income for catastrophic-only coverage for my family (4). Traditional co-pays and covered office visits would be 38% of my income, can’t afford it, no-how no-way. You know what else is backwards about this? If any of us need to make an office visit or get diagnostic tests, we’ll have to pay more than the insurance company would be charged if we had traditional coverage. We have to do something soon.

  11. Lisa & Tim–
    Lisa, workers who employers value would get a pay raise roughly equivalent to the benefit they are getting now. Because if their employers didn’t give them the raise, some other employer (who would also now have more money to spend on wages and benefits) would hire him away.
    So employers would have to give the raise to employees that they don’t want to lose.
    They would be less likely to give the raise to lower-income workers that they view as “replaceable.” But today, those workers are less likely to have health insurance.
    So even if they don’t get the raise, suddenly getting very good health insurance for you & family at no cost, would be a very good deal in return for paying, say $3,000 a year (if you earn $30,000 and spend every penny)
    I agree. We’re already taxing income, and for the middle-class the tax is pretty steep.
    Taxing consumption would tax another group– affluent retirees who aren’t earning but are spending a lot.

  12. Lisa, I was wondering the same thing about levying 10% at every stage in the movement of goods from manufacturer to consumer. Maybe the VAT would be set up such that the typical tax totals 10% through the supply chain; I don’t know.
    In any event, if this were levied at every stage, it wouldn’t seem a good idea to be in the middleman business, as that every additional middleman makes your goods 10% more expensive in a competitive market. It would seem to provide incentives for manufacturers to deal directly with merchants and even individuals.
    If this is indeed a 10% levy as the goods pass from one entity to another in the supply chain, it would seem that if a business has a $100 item, it could sell directly to the consumer for $110…but if the manufacturer first sent it to a distributor/wholesaler who sent it to a retail store who sold it to an individual, you’d have three 10% taxes levied for a cost of $133.10.
    I’d think this would put a lot of middleman operations out of business in a competitive marketplace, but I could be wrong.

  13. How A Value-Added Tax Works–
    Lisa, Tim, and Everyone,
    Because we’re not used to VATs in the U.S., it can seem more complicated than it is. Let me try explaining how it works:
    First, you need to understand that the VAT is a tax on consumers. In this case, it taxes them 10 percent of what they spend. It is not a tax on businesses.
    The businesses are simply the Channel through which the tax is collected by the government.
    It is called a Value-Added Tax because the tax becomes payable at each successive stage where value is added to the product or service.
    For example, if someone sells $100 worth of sheep’s wool to a manufactuer who will spin the woll into cloth, he might charge $100 plus the VAT. IF the VAT is 10 percent, he charges the manufacturer $110.
    The person who sold the sheep’s wool will then pay the extra $10 that he received to the government.
    Once the manufacturer has spun the wool into cloth, he has added value to it, he may sell it to it a dress-maker for $200 plus a 10% VAT –or $220. (The $10 tax that the manufacturer paid is embedded in the $200 he now charges. If he lived in a country with no VAT, he would charge $190 for the cloth.
    The manufacturer then pays the extra $20 that he received to the govt.
    The dress-maker makes a dress from the cloth and, having added value, sells it to a retailer for $300–plus the 10 percent VAT or $330.
    The dress-maker then sends the extra $30 to the government.
    Finally a retailer sells the dress to a customer for $400– plus a 10 percent VAT of $40 –or $440.
    The retailer then pays the $40 to the government.
    Each of the businesses added the VAT to the price when they sold to the next business in the chain, so they didn’t lose anything.
    For example, the dressmaker charged the retailer $330 for a $300 dress, gives the $30 to the govt and comes out even. (IF there were no VAT he woudl have charged $300 for the dress–that is it’s market value.)
    The only person who doesn’t pass along the tax to the next customer is the customer who buys the dress from the retailer. She’s not going to sell it to anyone and so she simply pays the tax without getting the money back from someone else.
    Meanwhile the government reaps a large amount of money: $10 plus $20, plus $30, plus the final $40.
    But no one in the chain actually paid a tax–they just took say, $20 from the person on line behind them, gave it to the govt, and charged the person they sold to an extra $20.
    That’s how the businesses become merely the CHANNEL through which the tax is paid–but it doesn’t cost them anything.
    I hope that’s clearer.

  14. As noted yesterday, I did my weekly DKos diary on this last week; Trying to Split the Difference – SinglePayer-MultiPlan:
    Yesterday it was being suggested that somehow single-payer/single-plan would be more susceptible to lobbyists then this proposal which is single-payer/multi-plan. Why? I don’t see any difference. Single payer-single plan also proposes having and independent technocratic regional board or a national health boards, so no difference there. Either plan needs to be funded, whether it is by a VAT, or payroll deduction, or straight (progressive) income tax, the money goes into the Treasury. The policy and funding goes through White House and Congress. Either way lobbyists, alas, involved. No difference there either.
    The big difference is single payer says the private for profit insurers are part of the problem, and yes, fights to get rid of them altogether. This plan tries to tame them with regulation they will find no less unacceptable than being put of business. It is a fantasy that one is somehow more politically acceptable than the other, though fears that lobbying will game the legislation and plans does suggest that a phony version of this is what would acceptably pass.
    We are left with the only real pure policy difference being the idea that the added layer of a choice of plans has value added. On this I may go off the single-payer mantra and say maybe (If they were not-for profit, and completely regulated as proposed; no compromises).
    But again, there is nothing really “fresh” about this. Despite their borrowing the vouchers terminology from the U.S. Education debate, what this really is a trying to shoehorn the current system with private for profit insurers into a France or Germany like system. The hope is that the for profit insurance companies are too powerful for HR-676 to even be considered, but that they will allow themselved to be regulated into good behavior (comprehensive quality coverage, community rating; guaranteed enrollment, etc).
    Meanwhile Maggie has now spent two big postings on two academics and their book.
    Meanwhile the grassroots movement for single payer, PNHP, CNA, hundreds of Union endorsements, John Conyers & 90 congressmen, Nationwide Grassroots campaign, etc. etc. gets dismissed.

  15. Dr. Steve B.–
    I hate to complain but I really wish you would read the posts all the way to the end before commenting.
    In the posts, I explain how a VAT insulates this plan from lobbyists.
    With a “dedicated” VAT
    providing all of the the funding, the plan would never have to go to Congress for appropriations. The VAT would also keep up with overall inflation in the economy.
    If we have a single-payer (Medicare for all)plan run by the government it would have to go to Congress for funding,just as Medicare does now.
    And inevitably lobbyists would determine what it covered, how much we paid for products and services, etc–just as they do now with Medicare..
    I too see some pluses to single-payer, but first we would need to seriously reform Medicare (before expanding it to all) and we would also need campaign financing reform.
    Finally, I’m afraid you can’t dictate what books I am going to read. Or what I am going to review.
    I’m famliar with the arguments for single-payer. I have interviewed one of the heads of PNHP, have read many many pages about single-payer. I just don’t agree that it is a feasible solution at this point in time.

  16. If all insurers offer the same comprehensive benefits to everyone, why do we need any of them? A single payer administering payment for health care services and product makes much more sense.
    Forcing insurers to compete on quality, not price? Why should any payer be competing on anything? Quality of care is determined within sound, ongoing doctor—patient relationships. Competition for the dollar bill between insurance companies based on this leads to interference with decision making within doctor—patient relationships. This occurs now. It is out of bounds. Decision making within doctor—patient relationships needs to be financially unconflicted for everyone involved, and it needs to be “off limits” to any payer.
    VAT is absolutely regressive. There is a big difference in living when one has to worry about how much money is in his/her pocket when they go grocery shopping. This seems to not be a consideration in this plan being touted here.
    “Under a VAT system, consumption is taxed throughout a chain of production, not just at the point of consumer purchases.” Would each layer of this taxation be passed on to the next company in line so that the purchaser actually winds up with a compounded tax amount?
    Is this book, “Health Care, Guaranteed,” simply another in a series of health care reform proposals, which are nothing more than convoluted tweakings of our dysfunctional system, designed to keep the insurance companies in play?
    If you wish to read a truly bold, refreshing health care reform plan, which will provide clear and equal access to vital, comprehensive health care for everyone living in America in an affordable manner; which is based on the “medicine” of medicine being primary, not the “business” of medicine; and which will halt the the inexorable yearly increases in health care spending, then you should read EQUAL HEALTH CARE FOR ALL. Of course it was written by a doctor of all people, who believes that the “business” of medicine, the dollar bill, should be removed from its place of primacy and be placed in a secondary supportive role for guaranteeing clear and equal access to sound, ongoing doctor—patient relationships for everyone. The dollar bill is currently an obstruction to health care for many, many people. EQUAL HEALTH CARE FOR ALL stops this.
    R. Garth Kirkwood MD

  17. Maggie,
    I’m pretty sure that your explanation of how the VAT works is not correct. I believe the actual way it works is as follows, taking your example: First, the wool manufacturer charges $100 and adds a VAT of $10 for a total of $110. He pays $10 to the government. Second, the cloth manufacturer charges $200 plus a VAT of $20 for a total of $220. However, he gets a credit for the $10 VAT paid at the first stage of the process and only owes the government $10 on the $100 of value added at the second stage. Third, the dress manufacturer charges the retailer $300 plus a VAT of $30 for a total of $330. He receives a credit for the $20 paid at the first two stages and only owes the government $10 on the $100 of value that he added. The retailer sells to the end consumer for $400 plus a $40 VAT but receives a credit of $30 for the tax already paid at the first three stages of the production and distribution process, so he also only owes the government $10 on the $100 value that he added. The end consumer pays $440 and the government collects a total of $40 or 10% of the total value of the product. Each entity in the chain only owes the VAT on the value that it adds. That’s why it’s called a value added tax.
    By contrast, a national sales tax would only be collected at the final stage on the end selling price which is much less workable once the tax rate gets much beyond the high single digits.
    Since, in your example, if I am correct and the government collects only $40 on the $400 dress and not $100 as you suggest, Emanuel’s proposal won’t raise enough money. If it winds up only applying to 40% of the GDP or so as in Europe, it is unlikely to raise more than $500-$550 billion. Add $200 billion for elimination of the tax preference for employer provided health insurance and we have $700-$750 billion of revenue to finance, by your estimate, $1 trillion of obligations even assuming the large administrative savings that you outlined are realized. I don’t think it works at a 10% rate. At a 15%-16% rate, it might. Perhaps you could check this out with one of your economist contacts.

  18. Why not a VAT or national sales tax of 25% and do away with all income,FICA, and Medicare taxes.
    I would want the money collected shielded both from lobbyists and Congress.
    One major question?
    How can you guarantee that a VAT collected by the federal govt does not get sidetracked into the general fund as all other money collected by the govt?
    DO you actually trust the govt to manage the money?
    ANother problem with this system is the lack free market economics to keep costs down. If you want conservatives to rally behind any reform, you need a free market incentivized system without third party interference.

  19. I did read all of the post, and some of your other commenters, including the arguments around the VAT. You missed my point, so I apologize for not being clear enough:
    1. single-payer/multi-plan (e.g., Emanual) or single-payer/single-plan (HR-676, PNHP, etc.) can be paid for by VAT. There is no inherent linkage of one plan to the one payment mechanism. So if it is the “dedicated” VAT that is somehow keeping the lobbyists at bay, then same dedicated VAT can be used to fund either system.
    2. If it is the indepdendent boards setting the requirement that are keeping the lobbyists at bay, again, those can (and are proposed) for both types of plans. No inherent difference.
    3. But you and Emanual are kidding yourselves if you think that making it a “dedicated VAT” is going to keep the lobbyists at bay. Whether is the dedicated payroll dection for Social Security and Medicare being used to subsidize Reagans tax cuts, or dedicated Tobacco settlement money going to public health or dedicated lottery money going to education… the lobbyists and politics are never kept at bay. HR-676 happens to use payroll deduction because that was familiar from Medicare and because it allows “shared” cost by employers and individuals. But it is not an inherent feature to single payer per se. It could be the same VAT as Emanual proposes.
    My personal preference is do away with all the special separate taxes (usually regressive) and just pay for everything (military security, social security, health care, interest on the debt, etc.) from the same more progressive income tax + an estate (accumulated wealth) tax. But again, can use any which payment mechanism for either plan.
    I still don’t hear an argument for why this plan is going to be more politically acceptable then single payer… unless the restriction on the for profit plans are so compromised (so they dont fight them as much as they would single payer), that it is no better then the pre-compromised Wyden or Clinton type plan.
    Again, unlike some of my single payer colleagues, I can see a policy argument about having “competition” and “choice” of plans. If they really really were like the French or German non-profit regulated utlity model. I just don’t see how this makes it easier to get past the insurance companies, pharma, Republicans and coservatives.

  20. In considering possible health insurance financing approaches, I think it is interesting to look at the Dutch system that became part of their health insurance reform approach in 2006. As described in the most recent issue of Health Affairs, working people pay a 7.2% payroll tax on the first €31,200 of wages. The employer reimburses the employee for that payment with the reimbursed amount subject to ordinary income tax. On top of that, each adult pays a basic insurance premium of €$1,100 with subsidies for low income people. Insurance for children is free. There are many insurers to choose from. At recent exchange rates, €1 was worth approximately $1.56.
    The French also use a payroll tax, which, I believe, is approximately 13%. According to Ezra Klein, however, the much praised French system only covers about 75% of healthcare costs. The Germans have a payroll tax of, I think, 14.5%. Both are capped. That is, they don’t apply to all wages earned by high income people. All of these financing mechanisms get high marks (from me anyway) for transparency as compared to trying to finance health insurance or healthcare from progressive income taxes. Income tax financing, in my opinion, is more appropriate for general functions of government like defense, law enforcement, and the court system. Transparency is important because it improves the efficency of resource and capital allocation across the economy.

  21. drsh, Dr.SteveB, Garth and Barry-
    Thanks very much for your comments. I appreciate the fact you’re hanging in on what is a very complicated topic.
    And let me say, I’ve written at length on Emanuel’s solution not because I think it is the Final Answer, but because I believe that:
    a) ethically, it is on track by striving for a high level of benefits for everyone and
    b)the notion of using vouchers of equal value to pay insurers would force them to compete on quality, not price–which would bring out the best in the best insurers. (The other insurers would simply drop out of the game).
    Finally,as I’ve said, the VAT is the best answer I have seen, so far, to the problem of insulating healthhcare from annual Congressional appropriations .–See my comment below to dr.SteveB. )
    Responding to your individaul comments:
    DRSH — regarding whether you can trust the government to dedicate the VAT solely to health care.. .
    That’s a good question. The evidence suggests that we can. Both the Medicare tax and taxes for the Highway Trust Fund are dedicated. So legislation can be written in a way that makes it impossible to “raid” the VAT.
    As to what keeps costs down: the fact that it would be very hard to get Congress to raise the VAT from, say 10% to 11% to 12%
    means that you have a cap on health care spending.
    Under the VAT funding, Healthcare spendiing can rise only as much as inflation in the rest of the economy here we buy other goods and services.
    Putting healthcare on an overall budget creates a discipline that conservatives would like.
    Insurers then have to try to figure out how to achieve good outcomes while working witin a budget. (IF they don’t have good outcomes customers will know. The regional board will publish their results, and insures will lose customers. Ultimatley, if their outcomes are worse than average for no acceptable reason, the Regional Board will no longer let them offer insurance in that region.)
    Dr. Steve —
    You write: “Again, unlike some of my single payer colleagues, I can see a policy argument about having “competition” and “choice” of plans. If they really really were like the French or German non-profit regulated utlity model”
    I agree. And I also agree that the Wyden plan hands the key of the kingdom to the private insurers.
    They are not “really, really” regulated. I see the Wyden plan as a real threat to true reform.
    But I think that private insurers could be strictly regulated.. And I think that politically, it would be easier to sell the idea of regulating them (like old-fashioned utilities) then simply doing away with the entire insurance industry (very, very messy).
    At the very least, the idea of tightly regulating insurers is one you could sell to the public. The public doesn’t like insurers.
    When you try to argue for single-payer, the public is likely to be scared by the idea of Great Change, adn all of those jobs lost in the insurance industry.
    And the public is likely to respond to the conservative argument that tha replacing the industry with government would mean,not only a huge loss of jobs, but massive incompetence– you just can’t trust the government to do anything right. (Katrina).
    Re: the VAT
    Could a VAT insulate a single-payer plan from Congress and lobbyists?
    To be honest I don’t know, though I think it would be much harder.
    First, let’s consider how the VAT insulates: Because it is a tax on goods and services, it grows with overall inflation. So you don’t have to keep going back to Congress for new appropriations to keep up with normal inflation.
    An income tax, by contrast, doesn’t track inflation. Wages have been flat to down for most workers for years. When the stock market is booming, govt revenues from income taxes will rise, but when the market goes bust, reveneues from capital gains and dividends drop sharply. This is not a stable situation.
    In theory, a VAT SHOULD insulates a single-payer system. Like Emanuel’s system, the single-payer system wouldn’t have to go to Congress for appropriations if it was funded by a VAT.
    But it seems to me that if a health care system is totally run by the government–the way Medicare was before we had Medicare Advantage–Congress is going to be very involved in deciding what “Medicare-for- all” covers.(Today, Medicare covers anything the FDA approves, and the FDA approves anything that a powerful manufacturer wants approved).
    Congress will also be very involved in how much various specialities are paid. (Certain well-paid specialites have powerful lobbies so they are paid much more than primary care physicians).
    And we know, from what happened to AHRQ if we have a comparative-effectiveness institute within a single-payer govt-run system, and the lobbyists don’t like its recommendations, congress will find a way to kill it.
    For example, Congress hasn’t claimed the right to micro-manage insurers in Medicare Advantage–even though it is paying them. (And so those insures are doing things that hurt on healthhcare— competing on price while shifting costs to the sickest patients.)
    AS private companies, under Emanuel’s plan those private insures would had a right to decide how they should pay doctors to get the best outocmes. (Very likely, they would decide to pay doctors more who provide preventive care, manage chronic disease and, in general, provide care that we know is effective, while paying less for procedures that are “iffy”–unproven, risky without clear evidence the benefits outweigh the risks, etc.
    Even though the private insurers in Emanuel’s plana are tightly regulated and overseen by the Regional boards, THEY STILL ARE PRIVATE COMPANIES.
    And the Regional Boards give them quite a bit of leeway to figure how to get better outcomes while all receiving the same premiums per patient (plus risk-adjustment if they wind up with more sick or old patients), and while all offering those patients the very rich menus of benefits.
    Figuring out how to pay hospitals and doctors to get the best quality care is a particularly interesting problem, and no doubt different insurers would experiment with different ways of getting there.
    Congress simply couldn’t interfere in that process.
    And when I talk about different insurers competing on quality, here is what I mean:
    Some might compete for customers by offering them more access to “experimental” drugs; others might offer them free “shared decision-making tools” (some private sector insurers do this now), some might offer free smoking-cessation clinics; othersmight guarantee that
    all hospitals in that insurer’s network would offer palliative care.
    Congress couldn’t interfere
    with how private sector companies choose to compete on quality.
    (And note, insurers could do things that they would never do today like “offering free smoking cessation clinics”–even though this would attract poorer, and by and large sicker customers –because under Emanuel’s plan, the govt would pay an extra risk-adjustment bonus to insures who wound up with sicker patients.
    Today insuers would never offer something that attracted sicker or poorer patients.
    By contrast, if we had a single-payer gov’t run system,
    drug company lobbyists would push hard to have the single-payer insurance offer access to experimental drugs.
    Private insurers, on the other hand, would have an incentive , under Emanuel’s plan, to try any and all of these ideas to see if they could get better outcomes–which would lead to larger market share and ensure their place as one of the plans offered by the regional board.
    Bottom line: Emanuel’s plan could tell Congress that it doesn’t have any right to interfere in a private-sector market where insurers are competing.
    But I don’t see how you can tell Congress that it doesn’t have a right to micro-manage a govt-run program. . . .
    I do think that trust between doctor and patient is essential to better health care. And I think that doctors– and their ideas–should be in the vanguard of reform. Meanwhile, we need to remove the dollar from the transaction–that’s what my book is about.
    But very, very good insurers can add value. See my reply above to Dr. Steve.
    Today, good insurers who offer the shared-decision making tools and coaches developed by the non-profit Insitute for INformed Decision-Making are adding value.
    Some doctors also have
    signed up for the program. Some 80 breast cancer clincis in New England are using it.
    Mass General and Dartmouth Hospital also are using it.
    But the vast majority of physicians and hospitals are not integrating it into their practice–in part because they know that reserach shows that when patients have full informaiton about risks and benefits, time to think about those risks and benefits, plus videos and pamphlets that help them understand the risks and benefits—and decision-making coaches who let them articulate their own priorities, hopes and fears–some 20% to 40% decide not to go ahead with the elective procedure.
    Some doctors see this as a threat to their authority and their fee-for-service business.
    As more doctors become familiar with this program I hope this will change.
    But by buying the program for their customers, some insurers are actually adding value . . . .
    Ideally doctors and good insurers would work together on programs that could improve outcomes. (As I’ve indicated, the less-good insurers who don’t want to compete on quality would probably just drop out of the market under Emanuel’s plan.
    On how a VAT works and how much money it would raise:
    You are right, at each point the seller gets a credit for the tax he hs paid.
    But the numbers do work– Emanuel’s 10 percent VAT raises enough money
    I went over the numbers in detail with Emanuel.
    I also explained the costs and savings in my last comment responding to you . Don’t want to repeat myself.
    If you don’t believe me, let me put it this way:
    On the cover of Emanuel’s book, Larry Summers, former Secretary of the Treasury, calls Emmanuel’s book “the most important book on health care policy written in the last decade.”
    Safe to say Summers understands how much a VAT would raise in this economy and how much we spend on healthcare. I doubt he would feel comfortable endorsing the book if Emanuel had the math wrong.
    Also, Emanuel originally developed this plan with Stanford economist Victor Fuchs. It was first published in NEJM in 2005 and by the Brookings Institute in 2007.
    Again, probably someone would have mentioned it if the math didnt’ work.
    On how other countries finance healthcare:
    The plan you favor, which involves a payroll tax on only the first $45,000 of wages is, I’m afraid, terriby unfair to low-income and middle-income famlies
    It wouldn’t be nearly as unfair in the Netherlands because they have very few high income families.
    But in this country, we do, and so we raise taxes for Medicare by taking 1.45% of wages- with no limit.
    If you are a CEO earning $2 million, you pay 1.45% of $2 million.
    If we are looking for a model for heatlhcare, it’s worth taking a look at Sweden.
    According to people like Dr. Don Berwick in the U.S. (founder of the Institute for HealthCARe improvement) and the economist from the London School of Ecnomics who spoke at the conference I attended in Berlin and host of other European at that conference, Sweden has the highest quality healthcare system in the world.
    What is remarkable is that, even though it has the oldest population in Europe, medical care amounts to only about 9 percent of Sweden’s gross domestic product (GDP), a figure that has remained fairly stable since the early 1980s.
    (We spend more than 16 percent of GDP on care– and our results are not as good. )
    The life expectancy of the Swedish population continues to rise. In 2005 the life expectancy was 78 years for men and 82.8 years for women. This can be attributed to falling mortality risks for both heart attacks and stroke
    Currently, they fund health care through income taxes but they realize that,given their aging populaiton, the income tax base may not grow fast enough So they are thinking about using some of the revnue from their VAT tax to fund healthcare.

  22. On the FT review:
    Once again, Allan asserts without evidence or facts.
    Clive Crook is a graduate of the London School of Economics who has written extensively about healthcare reform.
    Some months ago, I attended a salon style dinner of NYC health care experts (Presidents of hospitals, etc.). Crook was asked to moderate the discussion.

  23. I find your argument regarding shared decision making weak for several reasons:
    1) You say that good insurers who offer the shared-decision making tools and coaches developed by the non-profit Institute for Informed Decision-Making are adding value. Who is the employer of these coaches? Which entities support the non-profit Institute for Informed Decision-Making? I suggest that, although the words you use sound good, there is a perceived need to retain the insurance industry and to keep it very profitable by interfering with the doctor—-patient relationship. In my view, the health insurance industry is simply not necessary and needs to be sacrificed for the well-being of our country and its people.
    2) Within a sound, ongoing doctor—patient relationship, decision making is always shared— between the doctor and the patient and most (if not all) of the time with the patient’s immediate family members. If the patient requires more info, there is the 2nd opinion from another qualified doctor, who will examine the case in detail as opposed to a “coach,” who operates from a set of statistics that may bear little relation to the individual case at hand. Also available to the patient is the myriad of info on the internet, and from the various societies that are already set up to help people better understand their disease, as well as from the doctor, whom they are seeing. Patients can bring any additional info that they believe the doctor has over-looked to her/him for further discussion regarding the best choice for further care.
    3) Within a sound, ongoing doctor—patient relationship, if the doctor needs to share decision-making, he/she seeks consultative help. This means from specialists, who some policy experts and medical think-tanks believe are over-utilized. (A false concept, in my view)
    4) Shared decision-making is not just a threat to doctors’ authority but is also an absolute obstruction to the functioning of sound, ongoing doctor—patient relationships. Doctors train for years and years to develop the expertise to treat sick people. The last thing they need is “coaches” interfering.
    Shared decision-making, as you describe it, has great potential to add value to the coffers of the insurance companies but adds further misery to the already severely damaged doctor—patient relationship and will further separate patients from their doctors. It is therefore, in my opinion, a financially-conflicted health care business concept, which is undermining to the fundamental basis of health care.
    Health care policy “experts” just can’t seem to leave the doctor—patient relationship alone. It is a mutual trust developed between two people, the doctor and the patient, and it requires substantial work from those two as well as tremendous support from a health care system to function properly. But it does not need interference from “coaches,” who share in decision-making. Local peer review, strict quality assurance investigation from a single payer, and mandatory ongoing physician education can assure that doctors are doing their job properly. (not to mention the constant threat of malpractice litigation, another health care business that needs to be totally revised)
    If you really want to stop the inexorable rise of yearly health care spending while providing clear and equal access to vital, comprehensive health care for everyone, then develop a system that controls all health care businesses and makes them truly not-for-profit. My book, EQUAL HEALTH CARE FOR ALL, shows a straight-forward approach to accomplish this in a manner, which would require markedly LESS government involvment than our current system.
    R. Garth Kirkwood MD

  24. Garth–
    Shared Decision-Making was invented by doctors– Dr. Jack WEnnberg and Dr. Jim Weinstein. (Weinsten
    became involved after his daughter, who was diagnosed with cancer at age 3 died at age 11. Weinstein gave up a chair at U. of Michigan’s medical school to go to Dartmouth to work with Wennberg.
    Weinstein felt that, during his daughter’s illness, he and his wife were not given enough opportunity really share in the decision-making. He felt that they were pushed, by the doctors, to authorize treatments that were very, very painful.
    An orthopedist, he also felt that his own patients often didn’t really understand the risks of surgery. Informed consent
    wasn’t good enough.
    They needed to be making an “informed choice.”
    And insurance companies are not the only ones using these decision-making tools. As I mentioned, Mass General and Dartmouth use them.
    And 80 breast clinic cancer in the Northeast are using these aids.
    They are not a threat to the doctor-patient relationship; they are meant to enhance the doctor-patient relationship, and many physicians are embracing them–particularly a younger generation of doctors.
    Before rushing to judgment, please wait and read more about the process.

  25. A quick shout-out of thanks to Maggie, SteveB, Barry, Lisa, Garth, and all the other constructive commentors.
    I’m particularly grateful that Maggie states the dangers of the Wyden plan; we’ve gotta stop it before it gets real momentum.
    I believe Rep Conyers along with co-sponsors of HR 676 are speaking on the House Floor in Congress to highlight the MANY important differences between HR 676 and other so-called reform bills such as Wyden’s.

  26. The operative words of your reply are “informed choice.” Informed consent is a legal form required to offset malpractice litigation–that is why it is not good enough– and I believe most doctors involved know, on some level, that it is not good enough. If they choose to use it in place of what is good enough, then that choice, to not fulfill the duties of the doctor—patient relationship, is theirs and they suffer the consequences. It is the absolute duty of the doctor to make sure his/her patients achieve a level of understanding that identifies informed choice. It requires that the doctor develop the skill and patience to explain in English, what is going on. This may require repetitive explanations to the patient and to one or more family members. That is a physician’s responsibility as part of the doctor—patient relationship, no matter how much time it takes or how inconvenient it becomes. Farming this process out to “coaches” lets the doctor off the hook for performing one of the most important duties of the doctor—patient relationship. Inadequacy of the doctor in this regard will not be improved by having coaches, who do not have the level of training of doctors, who do not know the details of the case and how various problems interact, and who may well have an inherent bias to lean towards not doing aggressive procedures, becoming part of this decision. Neither informed choice nor the doctor—patient relationship will be enhanced by this process of farming out a physician’s obligation, which is inherent in the mutual trust, inherent in the doctor—patient relationship. Your statement that the younger generation of doctors is embracing this does not make it the right way to proceed. That is your justification for their inadequacy. They should have spent and be required in medical school and residency to spend a lot of time in understanding and then accepting, on their shoulders, the doctor’s duties in the doctor—patient relationship, which will then form the underlying structure of how they will run their private practice. Informed choice must occur between doctor and patient. Any doctor’s inadequacies or bias need to be improved by the doctor, not farmed out to a 3rd party.
    You did not answer my question. Who will employ these coaches?
    Insurance companies are in it for the money. Any program that they institute has one major theme: to enhance their bottom line dollar profit. Therefore, it is financially conflicted, which I believe is not good.
    Regarding the two hospitals (health care businesses) that you mention, What is their motivation for developing this program? Are they truly not-for-profit? I do not know. But I bet a look at their annual reports would show a hefty profit, which doesn’t include the massive salary packages of their CEOs. Are their administrative decisions made for the sole purpose of enhancing the doctor—patient relationship first regardless of the effect on their bottom line dollar earnings or the other way around?
    Part of the reason for the regrettable loss of sound, ongoing doctor—patient relationships is due to the doctors themselves. If you farm out the duties of the doctor—patient relationship, you will finish its destruction and you will lose the most important part of our health care system. Everyone, who participates in our health care system in any way, must have their feet held to the fire, to restore the primacy of the doctor—patient relationship in favor of the dollar bill. Doctors are not excluded from this. In my view, for a great health care system, everyone needs to work toward restoring the basic fundamental altruistic trust, which underlies good medicine. If you don’t do that, you got nothing except farmed out pieces of complicated cases. I reject out of hand any process or procedure, which interferes with (or farms out) a doctor performing his/her assigned duties defined by a sound, ongoing doctor—patient relationship. (Chapter 2, EQUAL HEALTH CARE FOR ALL)
    R. Garth Kirkwood MD

  27. Maggie,
    I plan to buy and read Emanuel’s book when I get some time later this summer. To raise $800 billion from a 10% VAT, however, (plus $200 billion from eliminating the employer tax preference for health insurance), the VAT would have to apply to 55%-60% of our economy vs. about 40% of the economy for the broad based VAT taxes in Europe.
    While it lends itself best to manufacturing activity of the type you illustrated in your example a few days ago, the concept could be complicated by the following factors:
    It would significantly increase the price (cost) of big ticket items like new homes and college tuition. Moreover, if the VAT applied to new homes but not existing homes, it would distort the housing market or cause the price of existing homes to increase enough to offset their now favored tax treatment which would be a windfall for current owners of existing homes. College tuition, already increasing faster than inflation virtually every year, could push a college education even further out of reach for the middle class unless financial aid were increased commensurately.
    Necessities like food, energy and medical care would need to be exempted, taxed at a much lower rate, or subsidies like a more generous Earned Income Tax Credit would be required to protect lower income people.
    How would financial services transactions like stock trading, ATM transactions, etc. be taxed – based on the associated fee or the value of the transaction?
    Would government provided services like law enforcement, the court system, and elementary and secondary education be taxed? If so, how and on what basis?
    Personal services, where providers are basically selling their time would find it comparatively easy to avoid the tax, at least to some degree. I’m talking about everyone from doctors and lawyers to construction tradesmen, especially, those who serve the residential market to beauticians and personal trainers.
    Add all of these up, and it’s easy to see how even a broad based VAT usually doesn’t touch more than about 40% of the economy which is why I think it will be tough to raise the money contemplated. Even if the experts have signed off on the proposal’s credibility, touching enough of the economy to raise $800 billion at a 10% tax rate will be extremely difficult to push through the political process even with a Democratic President and a Democratic Congress with a significant majority in both houses.

  28. plan’s like dreamaway that allows you to eat all you want and painlessly lose weight while you sleep.
    first. VAT is not fair and does not have a high compliance rate. It is inherently regressive and takes a higher percentage of income from low income people, which violates the definition some of us use for fairness. Second, compliance with such sales taxes is much more daunting than with income tax, as anyone who’s ever paid cash to have his house painted can attest to.
    more interesting is assertion that insurers would have to provide benefits for payment provided. if that worked, we’d be paying less than 100% of average cost for Medicare advantage program. In point of fact, insurers can walk if they’re not adequately compensated, so can providers. if you deny that, why not just pay insurers $10 annually for each of us and require them to provide broader array of services than medicare now does. that would quickly solve all our cost problems.

  29. Garth–
    Dartmouth and Mass General are both excellent hospitals. When they put money into “shared decision-making tools and coaches (they employ the coaches) they are not going to help their bottom line.
    A fair number of patients are going to decide not to have the elective procedure. (Research shows 20% to 40%)
    So they wind up with less business. And they don’t make any money on shared decision-making. They do it because they think it’s the right thing to do.
    This in no way abrogates the doctor’s responsiblity. He has the first conversation with the patient where he talks about the possibilty of the elective surgery–and why he would recommend it. Or thinks the patient should consider it.
    He gives the patieint the pamphlet and video to take home.
    On the video, the patient sees something the doctor can’t show him–other patients who had the procedure or didn’t have the procedure, and how they feel about it.
    How many orthopedists introduce their new patient to a patient who had a hip replacement a year ago and regrets it? Hip squeaks, rehab took longer than he anticipated, whatever.
    Then the patient talks to tehedecision-making coach, once twice, three times. Maybe over a week or two weeks. Maybe 3 hours, maybe 5 yours. It takes a lot of time (more time than most doctors have) because it’s not just about explaining the procedure,risks and benefits–which most good doctors at least try to do.
    It’s about getting the patient to articulate HIS OR HER own fears and hopes. The patient may be embarassed to tell the doctor: “I’m just really afraid of being in pain. The idea of surgery–someone cutting into me–and recovering from surgery just terrifies me.
    If there’s any choice I really don’t want to do it.
    But I know the doctor thinks I should. I don’t want to disappoint him. I don’t want him to think I’m a wimp.” (A great many patients worry about “disappointing” their doctor)
    Or, a woman may say “look, I just want to get it over with. I know I could have a lumpectomy, but I’d rather have the masecttomy. I’ve never liked the way my breasts look anyway. (This is what a woman says, on the video to a coach. Very few women woudl say that to a doctor. The coaches knowo how to make people feel relaxes, and unembarassed so that they open up and say waht they are really feeling, even if it sounds silly.
    The coaches are specailly trained in is called “non-directive” counseling. Most
    doctors are not, by temperament or training,
    Many doctors say things to patients like “If you were my father, this is what I would recommend.”
    That’s Very Directive.
    The coach also spends a lot of time asking the patients questions to make sure that he understands odd: what “Of the 60% who received, 20% suffered X”
    means. This takes time. They have various “teaching tools” for doing this.
    Finally, after going through the process with the coach, the patient goes back to the doctor to talk over the final decision. By now, the patient is probabaly going to feel freer to be candid with the doctor. Together, they decide what is best for this particular patient.

  30. Barry–
    Since this isn’t a tax blog, I’m not going to try to answer all of your questions. Suffice to say, a great many developed countries have a VAT and they’ve figured these things out.
    I woud urge you to buy the book, and read it. And also, buy a book about VAT taxes. There are a variety of ways of organizing them, depending on your goals.

  31. Jim–
    Your comment seems to have been cut off or garbled at the top.
    Let me respond to the part I can read:
    Yes, many insurers would probably walk. That’s part of the plan.
    We have too many insurers selling insurance to too many employers–and that fragmentation greatly increass total marketing, advertising costs and other administrative costs.
    The plans that wouldn’t walk are the good ones: Kaiser etc. People want choices, so the REgional boards would make sure that enough insurers remained in (or moved into) their region to provide choices. But no one really wants to compare 15 plans.
    As for a VAT being regressive–I wonder if you read both posts all the way to the end?
    Becuase of the way that the tax dollars are redistributed, the people who would benefit most are low-income people who are now uninsured and low-income and middle-income people who have cheap, poor insurance that is filled with holes.
    The people who would benefit least would be those who have very good insurance through their employer now, at no cost to them. (Employer pays full premium.)
    These are usually higher-income people, and if they are also big spenders (earning $200,000 a year, spend $195,000, a 10 percent VAT will hit them pretty hard.
    On the other hand, they will benefit most from wage increases to make up for the loss of benefits and cuts in state taxes. So they, too, will be okay.

  32. First: In your discussion you have indicated the following:
    1) good insurers offer shared decision making tools and coaches,
    2) after visiting with these coaches, 20% to 40% of patients are going to decide not to have the elective procedure performed,
    3) hospitals pay the salary of the coaches; hospitals are not going to improve their bottom line by putting money into shared decision making tools and coaches; hospitals do this because they think it is the right thing to do.
    Since insurers would not have to pay millions of dollars in elective surgery costs if 20% to 40% of patients decide to not have elective surgery performed after using the shared decision making tools and visiting with the coaches, I suggest that the dollar bill is a major driver of this process.
    Since hospitals are dependent upon insurers for a huge portion of their revenues, I suggest that the implementation of shared decision making programs by hospital administrators can have significant influence upon the contracts signed between hospitals and insurers.
    Why did you not make this connection in your discussion?
    Second: Are there other driving factors for hospitals adopting this shared decision making process such as Risk/Management? I understand how this could come about in our current milieu of malpractice litigation. If it is one of the driving forces for this process, I think it should be pointed out.
    Third: Do uninsured, indigent patients get to participate in the shared decision making program?
    (As an aside, my program, EQUAL HEALTH CARE FOR ALL, effectively deletes the words, “indigent,” “uninsured,” and “uncovered” from our health care lexicon.)
    Fourth: My interpretation of your responses is that you believe that 20% to 40% of people deciding to not have an elective procedure is automatically a good thing.
    Every decision made in medicine can have a down side. Do your coaches really discuss the down side of doing nothing?
    What are the indications for an elective hip or knee replacement? What are some of the real life complications of doing nothing?
    Good patient education in an unbiased manner is very important. If there is a need to enhance this beyond what occurs within sound, ongoing doctor—patient relationships, then so be it. But it should not occur in a setting with a potential financial conflict of interest amounting to cumulative totals of millions of dollars. I believe that is what you have described.
    I do not believe in the concept that hospital administrators make decisions to do the “right” thing without first assessing how this “right” thing is going to affect their bottom line. The dollar effect influences their determination of what is right, in my view. I believe that this is one of the fundamental problems with our health care system.
    I did a google search for “Hip Replacement Patient Education” and found 193,000 listings. Since many of these are also going to be biased, for example, if they are sponsored by the company that makes the device to be implanted, what can we do to get truly unbiased education for patients? My assessment is that you don’t believe the doctor—patient relationship can be unbiased. I believe shared decision making tools and coaches, as you have described it, are no less biased.
    R. Garth Kirkwood MD

  33. Garth–
    To get a better idea of what shared-decision-making is about, why so many physicians support it (including people like Dr. Don Berwick, head of Institute for HealthCare Improvement), the medical evidence that many electie surgeries and tests are unnecessary, and finally, what originally motivated shared-decision-making,
    see http://dartmed.dartmouth.edu/fall07/html/choice.php
    Also, we don’t accept ads on the blog and while I didn’t mind when you plugged your program the first time, we don’t want people writing comments in order to promote books, programs, products —

  34. I picked up a copy of the proposal yesterday. My fascination is as much with the administrative structures proposed as with the funding pieces. Although regionalized and not state-specific, much of the plan’s proposed administrative structure on a national and regional level mimics or replicates ( with less direct day-to-day government involvement) some of the most interesting parts of the 1993 Clinton plan. As can be seen in the Obama plan also, new variants of the health purchasing cooperative or health alliance continue to undergird healthcare reform thinking in the U.S.
    Also, the Federal Health Board concept relates directly to Senator Daschle’s recent proposals.
    So- financing is critical, but I find the proposed administrative structures and processes equally interesting and worth discussing.

  35. Ms. Mahar:
    I know exactly what shared-decision-making is; I do not need to read any more of your cleverly written tripe.
    Your note about my mention of EQUAL HEALTH CARE FOR ALL is offensive. It is totally correct for me to promote new and refreshing ideas for true health care reform. After all, this entire discussion started with your promotion of another book, which describes a reform plan for our health care system.
    In the future, please address me as Doctor Kirkwood. I have earned that degree and the respect, which comes with it. Your patronizing use of informality, first names in your responses, I believe is a tool to deflect detailed, provocative critique of your rhetoric.
    R. Garth Kirkwood MD

  36. Gheez, It appears that Doctor Kirkwood’s buttons have been pushed in a big way and that’s too bad b/c he’s raised useful points in this discussion and has received thoughtful responses from Maggie, uhm, I mean from Ms Mahar.
    To Dr K, a friendly word of advice: the use of all caps (the way in which you consistently type in your book title) when communicating on the internet comes across as shouting, so perhaps that pushed some buttons as well…?

  37. While I’m not an MD, I do have an MBA, so maybe I’ve earned a little respect too. However, I’m an informal guy by nature, and I actually prefer to be called Barry. Even though people who participate in these blogs don’t (for the most part) know each other personally, I think informality projects a friendlier atmosphere and encourages a free flow of ideas. At the same time, the blog operator should enforce reasonable civility and decorum.
    I’ve dealt with literally hundreds of senior executives over the years including CEO’s, COO’s, and CFO’s, and I’ve found that those who not only tolerate but actually encourage others, including low level employees, to address them by their first names are among the most effective leaders. Rank sensitive formality is more typical in the chain of command military structure. In the civilian world, it smacks of pomposity. In the medical world, I could easily see how it could discourage nurses and other lower level people from speaking up when they see doctors making mistakes or not following proper procedures.

  38. Uh, Barry, did you really mean to say this?:
    “…how it could discourage nurses and other lower level people from speaking up…”
    That “higher-than-thou” kind of thinking it extremely unhelpful. Why in heaven’s name should there be an acceptable notion of lower or higher among members of a multi-disciplinary health care team?
    Isn’t collaboration the name of the game, central to quality care as well as to job satisfaction?
    Nurses, CNA’s, lab technicians, dietary and housekeeping staff, PT’s, STs, and OTs are colleagues who each contribute valuable skilled services to the care of the patient. It’s about how well you perform in your particular role on the team not how many letters you might have after your name.
    And btw I happen to think that the alphabet soup after so many nurses names is ridiculous and confusing, not only to the public but to many in the health care community… (some nurse colleagues of mine teasingly refer to the FAAN as “Farthest Away from Actual Nursing”).
    Barry, I hope you take this feedback in the constructive spirit in which it is being offered! And I hope you don’t really believe that nurses or any other hc team members are “lower” than the doctor.

  39. Larry, Barry and Anne–
    Thanks for your comments.
    Larry–I agree–the whole structure of the plan is very appealing. Its relative simplicity is brilliant, and there are nice checks and balances.
    I wouldn’t want to see state plans, but I,too, like regional oversight of the insurers. At the same time, everyone, nationwide,
    gets the same high level of benefits.
    Barry– I agree that first names creates a friendlier atmosphere on the blog.
    And I’ve also known very good CEOs who called everyone by their first name. It’s a sign of their confidence.
    Anne– I agree that “lower level” is not an appropriate way to describe nurses–or anyone on a medical team.
    I very much doubt that Barry meant to denigrate nurses.
    But in a corporate world
    “personnel” are sometimes referred to as “upper-level” and “lower-level” usually based on how much they make.
    This is one of the many things I don’t like about the corporate world–it’s money-driven. But I suspect that’s where the phrase is coming from, not from any belief that nurses should be subordinate . .

  40. Ann,
    Lower in this context means lower paid (than doctors). Of course, everyone is important, and the system couldn’t function unless each team member can be counted on. Since doctors are the people who order tests, prescribe drugs, etc., sometimes they make mistakes (as well all do). It would be wonderful if every hospital has such a collegial, team oriented culture that anyone feels free to speak up to anyone else without fear of retribution. I think we both know, however, that there are arrogant doctors who don’t like to be challenged, and some hospital cultures are less collegial than others. Moreover, doctors who are not hospital employees but have practice privileges and are paid on a fee for service basis may be less invested in the hospital’s culture. I’m sure you know better than I to what extent this may be a problem for the healthcare system generally even if it may not be a problem where you work.

  41. Does the book look at what would happen if the majority of families starting saving more and spending less? Or if there was simply a drop in consumer spending for some other reason? With less consumer spending, I would assume the VAT would take in less money from consumers, retailers, manufacturers and suppliers meaning that there’d be less money for health care spending overall. Or is the idea that the size of the voucher would shrink and individuals would then make up the difference out of their own pockets?

  42. The creation of a Federal Health Board sounds somewhat reminiscent of DHHS’ National Center for Health Care Technology (1979-82) whose charge was to assess the value of established and new technologies. Although its tenure was short-lived, one should learn from the reasons for its demise.