Atul Gawande in the April 5 New Yorker: Now What?– Gawnde and Berwick on the Same Page

In the April 5 New Yorker Atul Gawande writes about the backlash that health care reformers can expect in the months ahead.  He reminds us that when Medicare passed “it faced a year of nearly crippling rearguard attacks.”

Few remember that the American Medical Association was absolutely opposed to the idea of providing medical care for all elderly Americans. They guild didn’t want the government involved, calling Medicare “the most deadly challenge ever faced by the medical profession.”  The Ohio Medical Association, with ten thousand physician members, declared that it would boycott Medicare, and a nationwide movement began. (The opponents changed their mind a year later when they realized that, thanks to Medicare, their salaries had climbed by 11 percent in just on year.)

“Race proved an even more explosive issue,” Gawande reports. Hospitals were told that if they wanted Medicare dollars, they would have to integrate. Two months before coverage was to begin, “half the hospitals in a dozen Southern states had still refused to meet Medicare certification.” But LBJ stood firm on the issue.

Today, Gawande observes, the issues are different. “The medical world will wage no civil resistance. This time, the threat comes from party politics.” I would add that we are talking about more than a disagreement between Republicans and Democrats. These days the majority of Republicans in Congress are conservatives, and for them, this is an ideological issue–which explains why the opposition is so fierce.

As Gawande writes: “The major engine of opposition, remains the insistence that health-care reform is unaffordable,” I agree.  Conservatives will continue to attack reform on many fronts, but as is so often the case in a debate between liberals and conservatives, beneath the rhetoric, the debate is all about money. Conservatives fervently believe in an individual’s right to accumulate as much wealth as possible– for himself and his family.. Liberals also believe in individual rights, but they are at least as concerned with equality—which sometimes means sharing the wealth.

As Jon Cohn reported after chatting with conservative protestors on the Capitol lawn the day before the bill passed, to them, health care reform “is about having their money taken for the sake of somebody else's security. When they hear stories of people left bankrupt or sick because of uninsurance, they are more likely to see a lack of personal responsibility and virtue than a lack of good fortune.”

How to Protect Reform

Gawande believes that the battle to save the legislation has just begun. If Republicans regain power, he warns, they will repeal essential parts of the legislation and “gut coverage for the uninsured. . . . The best way to protect reform,” Gawande wisely suggests, “is to prove the skeptics wrong”—and demonstrate that we can, indeed, afford to insure everyone. The truth is that there is plenty of money sloshing around within our health care system. We just need to rescue the healthcare dollars that are being squandered, and use them to pay for more effective care. Gawande points out that we know what to do: “the reform package emerged with a clear recognition of what is driving costs up: a system that pays for the quantity of care rather than the value of it. This can’t continue.”

And it doesn’t have to. He offers an example: “Recently, clinicians at Children’s Hospital Boston adopted a more systematic approach for managing inner-city children who suffer severe asthma attacks, by introducing a bundle of preventive measures. Insurance would cover just one: prescribing an inhaler. The hospital agreed to pay for the rest, which included nurses who would visit parents after discharge and make sure that they had their child’s medicine, knew how to administer it, and had a follow-up appointment with a pediatrician; home inspections for mold and pests; and vacuum cleaners for families without one (which is cheaper than medication). After a year, the hospital readmission rate for these patients dropped by more than eighty per cent, and costs plunged.”

This is what HealthBeat reader Pat S. likes to call “high intensity, low tech medical management.” (Thanks to Pat for directing my attention to this paragraph.)  It’s hand’s on.  It addresses public health. And rather than requiring a multi-million dollar piece of medical equipment manufactured by GE—plus a bevy of specialists and technicians to tend to the machine while no one listens to the patient– all you need  are some vacuum cleaners and nurses willing to make home visits.

What more could you want?

There is just one catch. “An empty hospital bed is a revenue loss, and asthma is Children’s Hospital’s leading source of admissions,” Gawande explains. “Under the current system, this sensible program could threaten to bankrupt it. So far, neither the government nor the insurance companies have figured out a solution.

Berwick: Pay Hospitals for Empty Beds?

But Don Berwick, the man that President Obama has picked to head up the Centers for Medicare and Medicaid (CMS) has.

Here, I’m thinking about a conversation that I had with Dr. Berwick a couple of years ago.  He was talking about a hospital in Sweden where the hospital director bragged about how many empty beds he had. This meant he was doing a good job—patients were not staying in the hospital longer than necessary, and they weren’t bouncing back. “Of course,” Berwick told me, “if he ran a hospital in the U.S. the man would be out of a job.” We reward hospital CEOs for growing revenues. But perhaps, under health reform, we will begin thinking about things differently. Berwick suggested. Maybe we’ll even consider “offering bonuses to hospitals with empty beds.”

Make no mistake—I’m not suggesting that this is what Berwick will do when he becomes director of CMS. Though in December, he did suggest “The best health care is the very, very least healthcare that we need to gain the long and full and joyous lives that we really want. And the best hospital bed is empty not full. . .”

Medicare’s goal is to change the way it pays hospitals so that it is paying for efficiency and value, not volume. That means that total hospital revenue should be falling, not rising. As a society, we do not want our hospital industry to be a growth industry—we cannot afford it. But we will need to find creative ways to reimburse hospitals so that efficiency doesn’t leave them in the red.

“Far From Being a Government Takeover”  Reform Will Take Place on the Ground

Gawande and Berwick both understand that less intensive, less invasive—and less expensive—healthcare can sometimes be more effective than the most aggressive care. They also realize that in order to find solutions to specific problems, such as  too many inner-city children suffering from respiratory diseases winding up in the hospitals, we will have to  experiment.

“The most interesting, under-discussed, and potentially revolutionary aspect of the law is that it doesn’t pretend to have the answers,” Gawande observes. “Instead, through a new Center for Medicare and Medicaid Innovation, it offers to free communities and local health systems from existing payment rules, and let them experiment with ways to deliver better care at lower costs. In large part, it entrusts the task of devising cost-saving health-care innovation to communities like Boise and Boston and Buffalo, rather than to the drug and device companies and the public and private insurers that have failed to do so. This is the way costs will come down—or not.“That’s the one truly scary thing about health reform,” he adds.  “Far from being a government takeover, it counts on local communities and clinicians for success.”

In December, Berwick made the same point. The legislation can’t lay out a master plan, he argued  “How could Congress possibly know enough to specify for every community, the exact design for care that is safe, effective, timely, patient-centered, equitable and sustainable?” Berwick asked.  “The legislation does contain long sections focusing on quality,” Berwick acknowledged, "and there legislators lay out possibilities. But it is up to health care communities to test, adapt and perfect these strategies in real world.”

Here we are talking about the pilot projects that Medicare will be sponsoring under the reform legislation. As I have discussed in earlier posts, under the new bill, if a pilot project is successful, Medicare will be able to roll it out nationwide—without having to go through Congress. In the past, lobbyists have blocked initiatives that they feared might cut into someone’s revenue stream. Under reform, they will no longer have that power. And with Berwick overseeing Medicare, we can be quite sure that the pilots will be both creative and well-designed –with the real world in mind.

What’s interesting is that Berwick and Gawande are on the same page. They understand that the  ultimate power to re-design our health care system will reside, not in Washington, but in the communities where medical professionals and other healthcare leaders will implement those pilot projects, changing how we pay for care, what we pay for and ultimately, how care is delivered.

Private Insurers Will Follow

If they succeed in improving outcomes while trimming costs, private insurers will follow Medicare’s lead. They, too, want to save money, but they don’t want to show up on the evening news, portrayed as the villains who are denying Americans the care they need. If they simply incorporate Medicare reforms that are working—paying for visiting nurses and vacuum cleaners, for instance—rather than immediately hospitalizing every child suffering from asthma, they can share in the praise, without taking the risk.

Medical professionals should be in the vanguard of change, and Gawande accepts the challenge: “We are the ones to determine whether costs are controlled and health care improves—which is to say, whether reform survives and resistance is defeated,” he writes. “The voting is over, and the country has many other issues that clamor for attention. But, as L.B.J. would have recognized, the battle for health-care reform has only begun.”

40 thoughts on “Atul Gawande in the April 5 New Yorker: Now What?– Gawnde and Berwick on the Same Page

  1. Maggie,
    It’s the doctors ordering the unnecessary highly profitable bypass surgeries, angioplasties, MRIs, chemotherapy and radiation that are the problem. Then, insurers must pay the bill and premiums soar. In my line of work, I see scores of unnecessary $5000 epidural injections and back surgeries at $150,000.
    Insurers seem to have no problem denying care that is not medically necessary in chiropractic offices. I never see denials of care provided by MDs for heart conditions, cancer or back conditions, in spite of compelling evidence such as the following. There is a lot of room for savings. Frankly, it seems that insurers only have the courage to deny when it’s a DC and NOT when it’s an MD.
    Consider the following:
    The former 17 year editor of JAMA recently stated that most treatment of metastatic cancer with chemotherapy is virtually useless and only gives “false hope” together with more “real suffering.” He added that the motivation is often “profit” and that such behavior is “almost unthinkable.” Here is an excerpt plus a link to his full article:
    August 11, 2009
    How to Rein in Medical Costs, RIGHT NOW
    By GEORGE LUNDBERG MD
    ” We must stop paying huge sums to clinical oncologists and their institutions for administering chemotherapeutic false hope, along with real suffering from adverse effects, to patients with widespread metastatic cancer. More billions saved.
    ” Death, which comes to us all, should be as dignified and free from pain and suffering as possible. We should stop paying physicians and institutions to prolong dying with false hope, bravado, and intensive therapy which only adds to their profit margin. Such behavior is almost unthinkable and yet is commonplace. More billions saved.
    George D. Lundberg MD, is former Editor in Chief of Medscape, eMedicine, and the Journal of the American Medical Association. He’s now President and Chair of the Board of The Lundberg Institute
    Source:http://www.thehealthcareblog.com/the_health_care_blog/2009/08/how-to-rein-in-medical-costs-right-now.html
    The former editor of JAMA also recently stated that many coronary bypass surgeries and angioplasty/stenting procedures are not needed and that patients could instead be treated with “intensive medical therapy.” This means drugs and dietary changes. Many need only dietary changes. Here is an excerpt plus a link to his full article:
    August 11, 2009
    How to Rein in Medical Costs, RIGHT NOW
    By GEORGE LUNDBERG MD
    ” Intensive medical therapy should be substituted for coronary artery bypass grafting (currently around 500,000 procedures annually) for many patients with established coronary artery disease, saving many billions of dollars annually.
    ” The same for invasive angioplasty and stenting (currently around 1,000,000 procedures per year) saving tens of billions of dollars annually.
    George D. Lundberg MD, is former Editor in Chief of Medscape, eMedicine, and the Journal of the American Medical Association. He’s now President and Chair of the Board of The Lundberg Institute
    Source:http://www.thehealthcareblog.com/the_health_care_blog/2009/08/how-to-rein-in-medical-costs-right-now.html
    If insurers do not want to be the whipping boys, then they should stand up to the medical profession for once and stop paying for care that is not medically necessary.
    Here’s the best study on the huge amount of money wasted on spine treatment:
    GROSS OVERUTILIZATION OF SPINAL INJECTIONS AND SURGERY
    The following are excerpts from the invaluable highly referenced 2009 online medical journal article “Overtreating Chronic Back Pain: Time to Back Off?” The authors include Richard A. Deyo, MD, MPH; Sohail K. Mirza, MD, MPH; Judith A. Turner, PhD; Brook I. Martin, MPH. The link to the full article is http://www.medscape.com/viewarticle/58695.
    This study documents gross overutilization of invasive, highly expensive epidural injections and spinal surgeries. In most cases, inexpensive and relatively safe chiropractic procedures would make far more sense.
    There is much more of the same on my organization’s webpage at http://www.azchiropractors.org/free-reports-and-articles.html should you want to read further. It is all scientific and evidence-based.
    There is no mystery as to why medical inflation is soaring. There is gross overutilization of unnecessary and unjustified medical and surgical treatments and diagnostic tests. Someone needs to just say no. Insurers have done so with the few aberrant chiropractors who have over utilized, but not with MDs. They have a blank check. They are never questioned.
    When is the last time an insurer denied chemo and radiation for metastatic cancer even though no evidence existed to show treatment would prolong life? When is the last time an insurer denied an epidural steroid injection prescribed by an orthopedic surgeon even though the evidence is very weak? When is the last time an insurer told a doctor to try medication and diet for three months before going forward with a prescribed coronary bypass? I bet none of these have ever happened. As long as doctors of any type have free rein and a blank check, nothing will ever change with the upward spiral of medical inflation. We have the solutions, we just sorely lack the courage.
    Anyway, that’s my opinion.
    Thanks for your all your great work. I’m an avid reader.
    Best regards,
    Alan M. Immerman, D.C.
    President and Executive Director
    Arizona Chiropractic Society
    3515 East Carol Avenue
    Phoenix, Arizona 85028
    Phone: 602.368.9496
    Fax: 602.368.8954
    Email: ACS@AZChiropractors.org
    Please be sure to visit our webpage:
    http://www.AZChiropractors.org

  2. .
    Here is something everyone should read…
    Way back in the Spring of 2007 Maggie wrote the following article that was published in the Dartmouth Medicine Magazine:
    Maggie Mahar : Spring 2007 : The State of the Nation’s Health
    http://dartmed.dartmouth.edu/spring07/print/atlas.php
    So when it comes to intimate knowledge about both Dr. Berwick and Dr. Elliot Maggie does have a large extensive cache of info to draw from to keep everyone abreast of the future battles that will undoubtedly develop over the coming years.
    ~OGD~ @ TPMCafe blog…
    .

  3. My apologies to Bruce Fryer. There was a problem with the commenting system yesterday and his comment was lost on the system. He posted the following Comment:
    Bruce Fryer said:
    I predict that in 2012 the cost of this bill will be a major debate. Which means we have 2 years of work to make it a non-issue by measuring and showing results. And it’s not hard with 30-40% administrative overhead, ineffective treatments, over treatments, etc. etc.
    To which I replied:
    Maggie Mahar said:
    Bruce Yes– I think you’re right. And I’m very hopeful that in the next two years Medicare will be able to demonstrate significant savings. Moreover, Berwick will be able to explain to Congress– and to the American people– how this will save billions in the future.

  4. Alan:
    You are right someone needs to say no to the MDs for procedures which are considered of little or no benefit, other than prolonging life.
    I believe insurers should come up with a combination medical and life policy, such that the medical benefits start off high and reduce as people age.
    In its place is a life insurance policy which increases as people age.
    In that way, descendants have a better chance of inheriting wealth, rather than debt.
    What do y’all think?
    Don Levit

  5. Don –
    The one thing that puzzles me about your proposal for a declining benefit for health insurance, offset by a rising life insurance benefit, is that as people age they are much more likely to require high cost health care and consequently need higher, not lower, health insurance benefits.
    I fully agree that doctors need some help in being able to make decisions for rational use of health care resources. Unfortunately, that help probably has to come from the government, since private insurance’s attempt to do that in the 90′s foundered on the shoals of public opinion, competition among insurance companies, and a few ill considered changes directed more by cost containment than good medical science that undermined what was otherwise a good effort. Government potentially has the power to do this and to allow private insurers to ride their coat tails, especially now that the IPAB plan potentially breaks the power of lobbyists and special interests to twist congress into refusing to make rational decisions because they hurt someone’s pocketbook.

  6. Pat:
    You are right on with your analysis.
    The main objective would be to pay for medical care that provides for additional quality of life, not to simply look at the “quantity” of life.
    I can see where some people may want to have the plan I suggested, or, a more expensive plan, in which one can select equally between life and/or health coverage.
    The point is to have a policy which is not a use it or lose it proposition, from strictly a medical benefits standpoint.
    Don Levit

  7. Don & Pat S, Alan,Golden Olden,John B.
    Yes, as Pat says, when people become older they need more health care. It’s not just a matter of prolonging life but improving quality of life with things like hip replacemetns, pain medications, medications that address depression, physical therapy, eye operations, devices that improve hearing, etc.
    We now spend most of our health care dollars not on trying to rescue people during their final weeks or months of life, but on managing chronic diseases over a period of many years — diabetes etc.
    And I don’t think we want to encourage people to cut back on their own health cares in order to leave money to their children.
    The desire to inherit has a long and ugly history in Western literature— see Dickens, George Eliot,etc., and I am afraid that this is literature that holds a mirror up to life.
    Warren Buffet, who is a very wise man in many ways, decided not to leave any money to his children. Instead, he has given much of his fortune to the Gates Foundation, to be used to address healthcare problems in some of the poorest parts of the world.
    Buffet is on good terms with his children. And they’re not waiting for him to die. Nor will they be squabbling over his property after he dies.
    Alan-
    Yes, Lundberg is very good on the low-hanging fruit.
    People like Lundberg, Berwick, Fisher & Wennberg at Dartmouth, Gawande, Zeke Emmanuel in the White House, Bob Wacther at UCSF, pallliative care pioneer Diane Meier –I could name many others–are all on the same page. This does not mean that they agree about everything.
    But in general, they all understand the problem and what needs to be done. What so many very intelligent people within the medical profession who have studied the problems and who have hands on experience are in agreement, that tells you that we know what to do. We
    just have to have the will to do it.
    Berwick has the will–and a true talent for inspiring optimism and courage in others.
    Btw, years ago my husband had severe back problems (virtually paralyzed by pain– couldn’t walk) that were solved by chiropracty. No problems since.
    Thanks for the kind words about the blog.
    Olden Golden– Thanks for providing the link to the Dartmouth Medicine story.
    This is indeed, the culture that Don Berwick is coming from–a medical culture which understands that, he is puts it “the Best C-T scan is the one you don’t need.”
    Our goal: to be healthy enough to need as little healthcare as possible.
    John B- lol

  8. Maggie:
    I appreciate your opinion on people not getting care in lieu of leaving benefits to their children.
    However, I believe this is an option that some people would like to have.
    Are you suggesting people should not have this option, based on your experience and knowledge of literature?
    Don Levit

  9. Good work Maggie. Maybe we need a forum of people who over a period could come up with a plan that could be looked at as a model. What would an ideal health care system look like? Start over and design one, no matter how blue sky. Really, what would an ideal system look like??Clifton Meador

  10. The desire to inherit has benefitted your cause very well. I doubt we would ever of heard of Jay Rockefeller if hadn’t been a product of inheritance. Same with Ted Kennedy he probably would have been a felon with a different last name. I would prefer we all stand on out own merits, but that is not the world we live in on the left or the right. If it’s not wealth, it’s connections, name recognition and outright nepotism.

  11. Jenga:
    If you are referring to the wealth gap in this country, I would agree that it is far too skewed toward the wealthy.
    I understand that the top 5% of the wage earners own as much wealth as the bottom 95%.
    With 70% of our economy based on consumer spending, it is no wonder that consumption used to be a disease.
    There are all different levels of inheritance, and some you could even label as benign.
    For example, let’s say one gives up quantity of life, in potential years, in lieu of quality.
    Doesn’t his heirs deserve some compensation for making this sacrifice?
    Don Levit

  12. “We should stop paying physicians and institutions to prolong dying with false hope”
    Who ever said that has not experienced cancer in their family. I would hate for insurance providers to be the one to decide if additional chemotherapy for the purpose of prolonging life should be given or not. What evidence are they going to base that decision on? The problem is clinical studies of drugs that only helped a handful of patients, say 5 to 10% of the participants are deemed “not statistically significant” and considered a failure. What if you are one of that 5-10%? That drug is your life saver! Other times, patients are prolonging life while waiting for a new drug to become clinically available. There are many reasons that only a patient and his family can understand. Patients now are becoming more and more informed, thanks to the wealth of information available on the internet. Patients should be the only one who has the right to say when enough is enough. It may look like “false hope” to the casual observer but it could mean life to the one that matters the most or additional 2 months of time with your family which can be a lot if you count each day as a gift.
    Maggie – I just discovered your blog a few months ago and I want to thank you for the wonderful insights you have provided regarding our healthcare system. It has opened my eyes to a lot of things.

  13. Prolonging dying or giving false hope is not and never will be a Black and White issue. Most of the time just varying shades of Gray. It was not a Black and White issue when Obama’s Grandmother had her hip replaced after a fall. Some would call it futile and expensive. I can tell you this though, if we think it is a good thing to let someone die in a bed of their own feces because they can’t transfer or hand out a death sentence by withholding fixing a hip fracture in the name of financial savings, I want no part of such a system. I won’t participate in anyone’s care and will do something else.

  14. Don–
    It’s not that people shoudn’t be able to deny themselves care in order to leave more to their chidren.
    I’m concerned that some of their middle-aged children would encourage them to do this.
    Very sick people need to make decisions about how they want to proceed based on discussions with pallaitive care specialists who are focused only on meeting that particular patient’s emotional, physical and spiritual needs–with no financial interest in what patients decide. INnother words, palliative care specialsits should not be charged with saving money for the health care system– or with encouraging patients to fight to the end.
    Today, the palliative care specialists’ only goal is to help the patient identify his hopes and fears–how long he/or she wants to fight death and under what circumscances, if death is inevitable, he/she might be able to accept death with as little anguish as possible.

  15. Maggie:
    Agreed.
    My only addition to what you wrote would be your encouraging people to think more collectively.
    This approach seems to work in many areas, including health care decisions.
    Important decisions represent the values we hold dear.
    Those values, in my opinion, at least ideally, are implemented in context, in relation to our environment, and in relationships with our family and close friends.
    In effect, Maggie, we are not alone, even when it comes to life and death situations.
    That is my take on this issue, and others are certainly willing and able to think differently.
    When actually faced with such important decisions, it is virtually impossible to predict how we will actually respond.
    Don Levit

  16. Clifton,
    Clifton– Good to hear from you.
    My blue-sky health care system:
    Insurers: I would eliminate for-profit health insurance and encourage non-profits modeled on the best non-profits out there. They would compete with a public option.
    I would encourage non-profit insurers who also delivered care– the Geisinger model.
    Coverage– Everyone would receive a voucher of equal value– the plan proposed by Zeke Emanuel and Victor Fuchs. (No Bronze, silver and gold plans.)
    Vouchers would be funded by a VAT. The VAT would be progressive because while wealther familes would be paying more in taxes (because they spend more) everyone would receive the same comprehensive coverage with low co-pays and deductibles. (Co-pays and deductibles would be set on a sliding scale, based on income).
    Insurers would be regulated in regional Exchanges that would be overseen by the federal govt.
    Medical School Education: I would continue to increase federal funding for loan foregiveness and scholarships while recruiting more low-income and lower-middle income students. (We need more docs coming from low-income families of every race so that the physician work-force more closely represents the diversity of the patient populaition. )
    Scholarships and loan forgiveness would be tied to service with money earmarked for specialities where need more doctors
    as well as regions where we need docs. Student loans would be forgiven only if a student stayed in the specialty or region for 5 years.
    The number of slots for residents in some specialities where we have more than enough doctors would be cut, the number of slots in areas where we need more doctors would be expanded.
    When admitting students, I would be looking for students with a rich academic background, and would be particuarly interested in older students (late 20s, even early 30s).
    I’d put less emphasis on test scores and GPAs. They still would need to be high, but not sky-high. Pre-meds should be able to take philosphy or literature courses in college without worrying that a B will ruin their chances of getting into med school.
    Coursework in Medical school: Everyone would have to take a course in palliative care. Everyone would have to take a course on health care policy focusing on the economics of health care: how can we keep costs down while providing high quality care? Physicians should be trained to see themselves as stewards of healthcare resources.
    Insofar as possible clinical work would emphasizine collaboration– docs and nurses training together.
    I would ask panels of med school professors to come up with suggestions for revamping course work: Which courses are we teaching simply because we’ve always taught them?
    Payment: I’d replace fee-for-service with other models– bundling, capitation, docs on salary– whatever worked in different regions of the country.. Groups could receive bonuses for collaborating in a way that led to better outcomes and lower costs.
    No pay for performance for individuals. (I agree with Don Berwick on this.)
    Over a period of time (20 or 30 years)I would redistribute dollars so that ultimately, all doctors earned roughly the same income–though those who trained for more years would receive higher compensation. Probably no doctor would wind up earning more than, say, $300,000 or $350,000 a year. Those who practice “cognitive medicine” would earn more than they do now.
    Entrepreneuriship (physician-owned clinics, physicians buying equipment to do tests in their offices, etc. etc.)
    would be eliminated or discourated. Too much conflict of interest.
    It would become illegal for doctors to take gifts or fees from device-makers, drug-makers, etc.
    I’d bring back certificate of need, but have the federal govt regulate state programs very closely with stiff penalities for offenders (jail time, not just fines). Hospitals would have to show community need before engaging in expansion, renovation–or investing in equipment costing more than $ X
    I’d take a close look at tax-exemptions for non-profits hospitals. Some would be cut– or eliminated- particuarlly for hospitals in affluent suburbs that see few Medicaid patients and provide little support for public health initiatives.
    If they wanted to fund satellite clinics in poorer rural areas or inner cities, that would be encouraged–and could save their tax exemption.
    All hospitals of a certain size would have to have one or more palliative care teams. Other physicains would be required to let very sick patients and their famlies know that palliative care teams are available if they would like to talk.
    Preventive Care: I’d start a campaign to end smoking–free smoking cessation clinics, free nicotine patches or drugs that help people stop smoking. (Thisi would Not save money– people would live longer. But it would save needless suffering)
    When it comes to prevention and helpig people become healtier this would be my first priority. We know how to help people stop smoking.
    I’d continue reserach on obesity but would train doctors to treat obese patients with kindness and respect. Most simply can’t lose weight and keep it off. Until we figure out how to help them, we should encourage them to exercise–this will improve their health. But forget about dieting.
    Public health– I’d put more money into public schools –into education as well as into gyms, gym teacherss, playgrounds and nutritious lunches and breakfasts.
    INvest in safe parks in ghettos.
    Invest in roof-top gardens growing vegetables and subsidize grocers carrying healthy, perishable foods. (Fish, fruit, etc.)
    In general, if we want to redcue premature, preventable deaths, we need a new War on Poverty.
    Patient and Doctor education: I would begin a campaign explaing to patients and doctors that “more care is not necessarilyl better care–and that it can be risky.”
    I’d also explain that the idea that if just detect disease earlier (with enough diagnostic testing) you can cure the disease just isn’t true.
    I’d aim for less testning in many areas–and less treatment of pseudo-disease.
    I’d put little or no money into direct efforts to lenghten average life-span and focus on improving hte quality of life for older Americans.
    That was fun– thanks for asking!
    Maggie

  17. Maggie –
    Let me make a couple comments on your “Blue Sky” plan.
    First, the vouchers under the Emmanuel plan are not of equal value. They vary in value based on the actuarial status of the insured — people who are older or have health problems get certificates that are worth more. They are equal in that everyone gets the same level of comprehensive coverage, but the dollar values vary by a lot because the likelihood of higher payouts varies by a lot.
    Second, please stop saying that VAT can be a progressive tax based on what it pays for. The regressiveness and progressiveness of a tax is based only on the tax itself, not on how it is used. Health care could be paid through a progressive tax — ie a tax like income tax where lower income people pay a smaller percentage of their income than the wealthy (Obama’s new changes to what is now the “Health Care Tax,” formerly the “Medicare Tax, are progressive) or with a regressive tax — a tax in which lower income people pay a larger share of their income than upper income people. VAT is regressive. It is the same rate for all, but lower income people have their incomes exposed to a higher tax rate because they have almost no discretionary spending and savings. Higher income people can choose to expose themselves to the tax or not — make a choice between a BMW and saving the money.
    Contrawise, if the progressive income tax is used for non-progressive causes — say financing useless wars — it is still a progressive tax.
    That is not to say that VAT is bad. There are lots of issues about VAT that would need to be addressed, including what it was applied to and the use or non-use of circuit breakers for low income people like the earned income credit functions for social security, but the major selling point is that conservatives like it, making it more likely to be adopted. They like it because it IS regressive.
    You can argue that it may be worthwhile for low income people to pay the VAT if they are guaranteed good health care at little or no cost in exchange, but that has nothing to do with progressivity vs regressivity of the tax. The argument for VAT is that it is a novel and regressive tax and, unlike other revenue changes like increases in income tax for high income people, it has a higher likelihood of passage due to conservative support (making the assumption that conservatives do not take the same sort of scorched earth approach as to the recent health care bill, refusing to play ball no matter how many concessions to conservative ideas are made.)
    The goal of your program is progressive, but that has nothing to do with the definition of progressivity in taxation.

  18. Pat wrote:
    If the progressive income tax is used for non-progressive causes – say financing useless wars – it is still a progressive tax.
    Pat, you did a great job detailing the differences between progressive and regressive.
    But taxes are used for progressive and non-progressive causes, for there is no such entity as a specific tax going to a specific cause.
    All taxes go into the General Funds of the Treasury, for the general welfare.
    “The taxation of employees is not a prerequiste to the enjoyment of Social Security benefits. We find nothing in the language of the statute or its application to suggest that the tax on employees is so essential to the operation of the statute.”
    “But if the tax be good, and the purpose specified be one which would sustain a subsequent and separate appropriation from the General Funds of the Treasury, neither is made invalid by being bound to the other in the same act of legislation.”
    “A tax is not an assessment of benefits. It is a means of distributing the burden of the cost of government.”
    Supreme Court of the U.S. Nos. 724, 797, 1936.
    Carmichael v Southern Coal & Coke Company
    http://www.ssa.gov/history/supreme3.html.
    Don Levit

  19. Maggie:
    With the not-for-profit insurers, why not have the reserves owned by the participants, rather than the insurer?
    The balance of the liability can be shifted through reinsurance.
    Don Levit

  20. Don –
    The situation is not quite clean either way in the question of whether taxes from particular sources can be reserved for a particular cause.
    You are right. All taxes, like all money, are fungible.
    While it can be argued that some taxes — FICA, health care tax, gasoline tax, etc. — are “earmarked” for certain purposes, in reality there is just one big pot, as the emptying of the trust funds to pay for other government activity since the 1980′s has shown.
    When people talk about taxes going to some particular purpose — FICA to social security, over half of the income tax to military spending, or a new VAT to health care — they are subscribing to the common notion that taxes can be segregated from each other.
    That concept is questionable in economics and finance, but is very important — indeed, is a basic postulate — in politics.
    As an added point, before people get carried away, social security is in a somewhat special situation, since the government has actually issued treasury bonds to the social security trust for the amount they have “borrowed.” That means that to default on the obligation to pay social security benefits until the “trust” has been exhausted technically is to default on treasury bonds. That would be a new and very exciting world for US finance. (And yes, I understand all the usual about the question of whether the government can actually owe itself money, but this is a situation in which the political is once again very important.)

  21. Pat wrote:
    That concept is questionable (taxes can be segregated) in economics and finance, but is very important – indeed is a basic postulate – in politics.
    If you are saying that we are all in this together, then I would agree.
    And, if you are saying that the key concept is not whether or not the trust funds are depleted, but the ability of the government as a whole to sustain itself, I would agree with you.
    But political will to follow through and the ability to pay are two different concepts, in my opinion.
    Political will has more to do with pleasing one’s constituents, which in the case of the trust funds, is a huge percentage of the population.
    Desire, which is willingness, and ability to follow through are two distinct concepts, don’t you think?
    Don Levit

  22. Pat S.
    First of all, under the plan that Emmanuel & Fuchs describe in Health Care Guaranteed, the revenues from the VAT tax ARE segregated and used only to pay insurers for the health care policies that the vouchers buy.
    Moreover, under the plan, the government is not allowed to tap into any other funds to pay for the vouchers.
    So the amount that we, as a nation, can spend on health care in a given year will grow no faster than the amount we spend on other products and services. This puts U.S. health care on a budget.
    The only way to increase the amount we spend on healhtcare would be to vote to raise the VAT tax–never a popular idea.
    As for my use of the word “progressive” :
    Emanuel & Fuchs, the authors of the plan described in Healthcare, Gauranteed call the VAT “progressive” in this article:
    “When applied to social services, VATs are decidedly progressive. Not only will it be used to fund health care for everyone, including low-income Americans who currently have none, but the VAT is also much more difficult for the affluent to evade than income taxes. Furthermore, the VAT can be made even more progressive by adjusting what is taxed–necessity items such as food and utilities that cost the poor disproportionately can be excluded from the base.”
    http://www.washingtonmonthly.com/features/2005/0506.emanuel.html.
    Fuchs is an economist, and has a clear understanding of what “progressive” in the context of “taxation” means. (He also assumes that some adjustments may be needed to make the tax fully progressive–as mentioned above. Others who have embraced the idea of a “progressive VAT” have also written about this in JAMA and elsewhere.
    Their point is that since the wealthy spend more, they will be paying more in VAT taxes, while receiving the same standard benefit package.
    If the VAT is 10%, a family that spends $200,000 a year will pay roughly $20,000 in VAT taxes. Meanwhile, a family with joint income of $40,000 is not likely to spend more than $40,000 to $50,000 a year (assuming they carry $10,000 in credit card debt.) They would wind up paying $4,000 to $5,000 in VAT taxes. Yet, as noted,
    they get the same standard benefits package.
    In today’s market, that package would cost roughly $13,500 to $14,000.
    (Emanuel and Fuchs describe the “standard benefits package” as equivalent to the top quintile of insurance offered by large employers.)
    As Fuchs and Emanuel point out above it is also more diffcult for wealthier individuals to evade a VAT tax.
    Finally, the VAT taxes some passive income at the same rate as earned income. Imagine a couple in their late 50s who have retired early. They have no earned income, but they have investment income– dividends, capital gains, etc. All told, their investments generate income of roughly $200,000 a year and they use that moeny to live on. If they spend it all, they would pay a VAT of $20,000 a year– the same amount that someone who spend $200,000 of earned income woudl pay. (Normally, of course, investment income is taxed at a lower rate–one of the tax breaks for the wealthy in our not-entirely progressive income tax system.)
    The goal of “progressive” taxes is ultimately to redistribute income and wealth–and when a tax is dedicated to a social service, you’re also redistributing services.
    On the question of “equal value”: I say that the voucher will give everyone a policy of “equal value” in the sense that the insurance policies that the voucher puchase provide an equal amount of security and coverage to all Americans.
    (In the book, Emanuel stresses the “equal value” concept–this is not teired insurance.)

  23. Jenga,
    The conservative think tanks in this country are funded–and very well funded–by a small group of families who have consolidated their inherited wealth.
    Traditionally, conservatives refer to inheritance taxes as “death taxes.”
    Finally, traditionally those who are wealthy enough to worry about inheritance taxes are Republicans.
    There is a very liberal branch of the Rockefeller family and of course the Kennedys were liberal–though they are not typical of wealthy Americans. (Irish Catholic, the money made, not in industry, or railroads but by boot-legging.)

  24. Dona A.–
    Thanks for the kind words.
    I entirely agree that the patient should be the one to decide when enough is enough.
    Too often, the family winds up making these decisions–or winds up pushing the patient to keep fighting when the patient is ready to let go. (Studies show that middle-aged children, in particuar, are very reluctant to let parents slip away because the parent represents the last barrier between themselves and the fact that they, too, will die.)
    For the patient to make the decision–and to make an informed decision– someone has to level with the patient about the likely benefits of further treatment, and the odds that he will be cured.
    In those cases where a patient undergoes treatment that will most likely give him another couple of months–in hopes that during that time, another treatment will come along, it’s very important that the oncologist (or a palliative care specialist) make it clear just how likely or unlikely it is that another treatment will come along that would “cure” his cancer.
    This is why palliative care is so important for cancer patients. Usually, oncologists are not trained to talk about death and dying. They are trained to be hopeful. They avoid the “D” word. To some, death means that they failed. Or that the patient gave up fighting.
    Too often, patients and families hang on to the hope that if the patient just manages to live another 2 months– and finds a treatment that give him another 3 months– eventually he’ll find a “cure.”
    A doctor needs to explain that in fact, it is very unlikely that a “cure” will suddenly be found. The patient will die of this cancer–sooner or later.
    Much turns on quality of life during the treatment.
    My favorite oncologist puts it this way to his patients: “I know I can’t cure you. But I can make you sicker.”
    “The question you have to ask yourself is this: ‘In the foreshortened time that I have left, what do I want to do with it? If you want to spend it in my office, with me and my assistants, receiving treatments, that’s fine–we can do that. But there may be something else that you want to do with time . . .”
    Finally, for some patients that extra 3 months may be very important–a woman wants to see her first grandchild born, and the baby is due in two months.
    A mother of young children is likely to want to hang on for as long as possible– in the life of a child 6 months is a long time.
    For someone else, quality of life would be more important than living longer.

  25. Don and Pat S.
    HealthCare, Guaranteed makes it very clear: the VAT tax would be segregated and dedicated to health care only.
    It would not “go into one big pot.”
    As this article on earmarked taxes points out: “Earmarking can be strong or weak. If it is strong, revenue determines expenditure or at least
    revenue must match expenditure . . ”
    That describes the VAT that Emanuel proposes. It can only be used for health care and no other funds can be used for healthcare. So revenue from the VAT determines spending.
    (The quote is from an aritcle in “Fiscal Expenditure.”

  26. Maggie wrote:
    Revenues from the VAT tax are segregated and used only to pay insurers for the health care policies that the vouchers buy.
    That is a very good idea, but can it actually be implemented and pass constitutional muster?
    A tax cannot be applied to pay for specific benefits.
    All taxes go into the Treasury’s general fund.
    Earmarked taxes are bookeeping entries, which, technically get credited to Treasury custodial accounts.
    From there, the amounts are credited to the trust fund (numbers are credited,
    mathematical entries).
    The FASAB, which is the accounting advisor for the federal government states in a paper entitled “Reporting Comprehensive Long-Term Fiscal Projections” on page 52, “Treasury securities are issued to the earmarked fund as evidence of earmarked receipts and provide the fund with the authority to draw upon the U.S. Treasury for future authorized expenditures.
    This means that appropriations are not necessary as long as the trust fuinds show a positive balance, the mathematical credits are higher than zero.
    But, the trust fund expenses are paid by the U.S. Treasury, not by the trust funds.
    Go to:
    http://www.fasab.gov/pdffiles/sffas_36_.pdf.
    Don Levit

  27. Maggie wrote from Emanuel’s article “Earmarking can be strong or weak. If it is strong, revenue determines expenditure, or at least revenue must match expenditure.”
    Can he provide any good third party material which illustrates earmarked funds which are strong and weak?
    I was not aware there were different “intensities” for earmarked funds.
    Revenues do match expenditures, in that earmarked funds can draw down from the Treasury’s General Fund, as long as a positive balance remains in the trust fund (the numbers are higher than zero). No appropriations are necessary.
    Once the trust fund is depleted, a new appropriation must be requested from the Treasury’s General Fund.
    Don Levit

  28. Here is the definition of regressive tax from the Financial Dictionary:
    “A tax burden that falls more heavily on those with low income. Contrast with progressive tax and proportional tax. Sales taxes because the straight percentage imposed on all sales takes away a higher percentage of a low income household’s available income.”
    Sales tax is the classic example of a regressive tax, as the Financial Dictionary notes, of regressive taxation. VAT is just another take on sales tax, applying to levels of production not usually subjected to sales tax.
    Maggie, the point you are missing here is that the family with $200,000 a year will likely not pay $20,000 of their income for VAT, even if it is 10%. Their budget would more likely include savings (not taxable by the VAT,) spending for things not subject to the VAT like school tuition and life insurance, and so on. In the end, they would have a VAT burden of something like 8 or 9%. A family with an income of $1 million would have a much smaller VAT burden yet, since much more of their income is likely to be devoted to investments and other things, including income tax, that are not subject to VAT. That wealthy family would probably have a VAT of less than 5%.
    Meanwhile, as you point out, the family with $40,000 a year would probably be spending greater than 100% of their income on things subject to VAT, ending up with a VAT of as much 12% in your own example.
    The fact that they would enjoy valuable benefits from the program is irrelevant to the question of whether the tax is progressive or regressive, since the spending goal of the tax is not part of the question of whether it is regressive or not. The fact that the benefits they get would be worth more to them than to the more wealthy families is also not relevant, since the programs money is spent for do not enter into the definition.
    Dr. Fuchs knows that this is a regressive tax. He believes, however, that it is a tax that can be sold politically. His book is an attempt to sell it politically as part of his program.
    I have argued with you about this often in the past. I am going to give up after this attempt. Please consult an economist you know and trust, besides Dr. Fuchs, on this topic and they will explain this to you. Brad De Long, Paul Krugman, and others would be good choices.
    The program you describe is excellent and would be great. The regressive features of VAT could be mitigated by use of a tax credit program such as the Earned Income Credit, put in place to mitigate the strongly regressive features of the FICA tax when the tax was raised under Reagan. The regressive tax could be avoided completely by making a health care tax that is progressive, as Obama has done.

  29. Unfortunately,as Don says, it is very difficult to segregate government funds in a way that holds up in real life.
    We had an unfortunate example here in Minnesota. We have a program called Minnesota Care, an insurance program aimed at low income working people, which is funded by a “dedicated” tax on health care that is supposed to only cover that use. Tim Pawlenty (coming soon to a presidential primary near you) raided the MNCare fund back in 2003 to pay off state operating deficits and avoid raising other taxes, throwing away about $75 million in federal matching funds for the program and kicking tens of thousands of people out of the program and leaving them uninsured in the process. He was challenged in both state and federal court, but courts ruled that, as Don has said, the funds were part of state revenue and therefore could be used as the state saw fit. He then did it again a few years later.
    The only way to truly segregate funds is to create an entity seperate from government to handle the funding. This, however, raises new issues regarding the right to use taxation to finance non-government operations.
    Otherwise, the only brakes on the process are political.
    The Fuchs/Emanuel plan has several other problems as well. It would require a large organization to do actuarial calculations to figure the value of the vouchers, as I alluded to earlier. It would use private insurance, and as such would require considerable supervision to control overhead and benefit packages.
    Most glaringly, the math doesn’t work. The plan proposes to replace all health care payments, including Medicare, Medicaid, and other government programs, with a voucher for private insurance and proposes to finance that with a 10% VAT. Even assuming the unlikely event that the VAT would apply to 100% of goods and services and that it would have no circuit breaker clauses to protect low income people, and that it would somehow apply to parts of the economy that are outside the usual run of goods and services as well as to all government spending, the VAT at best could bring in 10% of GDP. Since health care cost 18% of GDP last year, this is an obvious failure point. Even assuming aggressive implementation of cost controls which the program proposes (including removing malpractice from the court system to supervision of a non-judiciary board,) there would clearly be major shortfalls in the budget for some time, if not forever.
    This is not to say the program cannot be fixed. It just cannot exist as it is proposed in their little book.
    All that said, if it were fixed to address the glaring deficiencies I think it would be a good program. It is essentially a variation of a social insurance program (what people like to call a Bismarkian approach,) and social insurance works very well in many countries.

  30. Pat S.–
    I agree with you when
    you write: “The only way to truly segregate funds is to create an entity seperate from government to handle the funding.”
    Yes. I agree, this is what we would need to do. You write; ” This, however, raises new issues regarding the right to use taxation to finance non-government operations.”
    Pat, I’m told that this could be done.
    Also, when reckoning the cost, you say that the plan sets out to cover Medicare and Medicaid.
    Actually, that isn’t true.
    Coverage of Medicare and Medicaid would be phase in over quite a few years.
    Emanuel is very clear in “Healthcare, Guranteed,
    the numbers they are citing do not cover Medicare and Medicaid.
    (I know this only because I went back to look at what he said this evening.)
    The book came out a few years ago, and since then, many people have said many things about what the books says that just aren’t true.
    I imagine that you read it back then, as I did. When I went back to the book in order to check things to respond to our comments,I realized how much I had forgotten on specifics.

  31. Maggie –
    There is a lot of good in the Emanuel/Fuchs proposal. If it could be made to work and could be adopted, I would be all for it.
    Closer to the topic at hand (Gawande and Berwick on cost control issues,) one of the strengths of the E/F proposal is that it does include a very strong version of an IPAB and Center for Medicare and Medicaid Innovation structure, a feature it holds in common with every well thought out proposal for reform.

  32. Pat S.
    Yes– I think the IPAB and the emphasis on Medicare innovating are at the very heart of reform.
    I also think there is a real possibility that we’ll have a VAT in Obama’s second term (I’m not the first person to say this–read it somewhere recently).
    We will definitely see more tax increases–not to fund health care reform– I think that the funding already in place is enough, assuming that we’re serious about cutting waste. And I think we are. Or at least the White House is, and under Medicare, Berwick will be serious about the waste.
    But we’re going to have to raise taxes to cover ending the war, bringing our troops home, paying toward repairing Iraq etc.
    A friend in the military tells me that the army has stopped recruiting–they can’t afford it.
    But they do need more bodies to replace soldiers who have been in Iraq or Afghanistan too long.
    So now, when re-assigning soldiers they are giving them two choices: Iraq or
    Afghanistan. This includes older soldiers (in their 40s) who in the past have been stationed in Germany, Korea, the U.S., etc.
    This is how bad things have gotten. The wars are costing us billions. And we don’t have the manpower needed.
    Then there’s the deficit . . and unemployment. The private sector is not going to create the number of jobs we need.
    So much has been neglected over the past eight or nine years. Public schools need investment. Infrastructure decaying.
    Poverty growing, especially among children.
    Global warming, the environment.
    I would predict an increase in inheritance taxes, and a further hike in income taxes for the wealthiest Americans–perhaps focusing on investment income.
    But we really need to tax consumption. Encouraging people to shop until you drop hasn’t worked out very well. . .
    We need to encourage saving–among those who have enough discretionary income to save. (Maybe 1/3 to 1/2 of Americans)
    And if we do have a VAT, I hope it’s dedicated to social services in a way that makes it less regressive than an ordinary VAT.
    Or, we might start with a VAT on luxury items.

  33. “Or, we might start with a VAT on luxury items.”
    In the early 1990’s we had a federal level tax on luxury items like yachts, cars that cost more than $30K, expensive furs, etc. Then the sale of boats fell sharply and blue collar boat builders in Maine, home of then Senate Majority Leader, George Mitchell, started to lose their jobs. The tax was ultimately phased out. Beware of unintended consequences.
    That said, I do expect a VAT in the near to intermediate future to deal with the federal fiscal imbalance. One proposal floating around that I’ve heard is a 14% rate as part of a broader tax reform effort that would eliminate the current federal income tax for taxpayers who earn $100K or less. Above that rate, there would be a 25% flat rate with perhaps a 35% rate for incomes above $500K with most current deductions eliminated. It makes good sense to me as long as income from wages, interest, dividends, capital gains, rent, royalties, etc. are all taxed at the same rate. Bring back the broad base and the relatively low rate approach that we had in the late 1980’s because it’s the most efficient from a resource allocation standpoint.
    As for the VAT itself, I’ve argued before that Emanuel’s proposal would not raise anywhere near the revenue he implies, and his book is largely silent on exactly what goods and services would be subject to the tax and what would be exempt. It is highly likely that we would exempt necessities like food purchased in supermarkets, gasoline, medical care, etc. along with college tuition and most government purchases. The broadest based VAT’s in Europe raise about 0.4% of GDP for each one percentage point of tax. In the healthcare financing context, we would probably need a tax rate of 17%-18% to replace the 35% of healthcare that is currently financed by private insurance and that assumes we leave Medicare and Medicaid alone. Healthcare Guaranteed was a fine book with many good reform ideas but the VAT proposal doesn’t pencil out.

  34. Barry–
    As I recall, “Healthcare, Guaranteed” is very clear that the VAT would apply to all purchases.
    (I could be wrong, but this is definitely what Eman & Fuchs have said in other places and what Eman has said to me.
    I do remember the luxury tax of the early 1990s. But the problem was not that Mitchell blocked it because of boat-builders in his state. The problem was that many Republicans were not happy about taxing wealthy Americans who are able to buy luxury items. They felt that we were discriminating against people simply because they have worked hard enough to become wealthy. (I understand the argument. I disagree, but it’s not unreasonable.)
    On the flat tax–
    This would eliminate deductions for many things that we want to encourage:
    contributions to charities-
    home-ownership –the mortgage deduction, though we need to regulate mortgage brokers and banks so that they’re not selling people mortgages that htey can’t afford
    –balance for people who live in states where income taxes are high
    –higher deductions for people who have more dependents.
    –deductions for education
    There is a good social reason for most of the tax
    deductions that ordinary people take. The loopholes that don’t make any sense tend to apply to very small groups of people who are wealthy enough to have lobbyists representing their small group.
    Those are the deductions we want to eliminate. But
    we don’t want a flat tax.
    I believe that our income tax policy should encourage certain things that are socially desirable

  35. “I believe that our income tax policy should encourage certain things that are socially desirable”
    Maggie,
    This is a fundamental philosophical difference between conservatives and liberals. Conservatives want to fund the government in ways that do as little economic harm as possible while liberals want to use the tax system as an instrument of social engineering. While I think high income people should pay a higher percentage of their income in taxes than middle and lower income people, I want to accomplish that with a broad base and relatively low marginal rates comparable to what we had in place following the 1986 tax reform legislation when the top rate was 28% on both ordinary income and capital gains.
    While I could see maintaining the deduction for charitable donations, I note that Canada does not allow a deduction for mortgage interest. The UK phased out its mortgage interest deduction in 2000, I believe, and neither society seems to be the worse for it though their people do live in smaller houses on average than Americans do which I don’t think is a bad thing.
    If state and local income taxes were not deductible, it would, at the margin, put pressure on state and local governments to operate more efficiently which means everything from consolidating school districts and police departments to reining in overly generous health insurance and pension benefits. The same is true with respect to tax benefits for college expenses. If the various credits didn’t exist, colleges would feel more pressure to control their costs and would not be able to raise tuition as high or as rapidly as they have historically. The list goes on.
    Regarding the VAT, applying it to everything could never get through Congress, in part, because no other country, including the most socialistic, applies it to everything. Every country has exemptions for necessities or at least much lower rates than the highest rate on non-necessities. Over 100 countries have a VAT and none come close to applying it to everything. We are unlikely to be the first to do so.

  36. Barry;
    Thanks for providing your experience with taxation in other countries.
    You wrote if the various (tax) credits didn’t exist, colleges would feel more pressure to control their costs and would not be able to raise tuition as high or as rapidly as they have historically.
    Do you think the same rationale would apply to providing subsidies for health insurance premiums?
    Regarding where to look to discontinue tax deductions and credits, why not look first at health insurance and medical expenses?
    According to the Government Accountability Office, revenue losses for employer contributions were $187.5 billion in 2006, the nation’s top tax expenditure.
    Deductibility of mortgage interest resulted in less than half the loss of revenues at $68.3 billion.
    See http://www.gao.gov/new.items/d08411t.pdf.
    Don Levit

  37. Don,
    I’ve said many times that I support eliminating the tax preference for employer provided health insurance. I would offset most of the effect on federal revenue by reducing income tax rates, especially in the lower brackets, increasing the standard deduction and possibly increasing the Earned Income Tax Credit (EITC). I’ve seen estimates that the current tax preference is worth over $200 billion per year and it’s a prime candidate for repeal, phase out or at least sharply reducing among most health economists. Of course, labor unions are staunch defenders of the tax preference and they’re a key Democratic party constituency so all we got in the final health reform bill is a slight nod toward scaling the preference back and even that doesn’t start until 2018 and we’ll have to count on a future Congress to allow even that small move to actually take effect.
    I think if the tax preference were eliminated, it would absolutely reduce interest in getting so much healthcare channeled through third party payers. Health insurance should be there for unpredictable costly events, not everyday occurrences like colds and preventive care like flu shots. Insurance should not be paying for the human equivalent of oil changes. If poor people can’t afford to cover a high deductible, give them a direct subsidy similar to food stamps or housing vouchers but let middle and upper income people pay for routine and small bore care out of pocket. While we’re at it, let’s have robust price and quality transparency tools available so referring doctors are in a better position to choose the best and most cost-effective providers for their patients and so patients can make better decisions for themselves for care like imaging, prescription drugs, and other care that can be scheduled well in advance.

  38. Eventually the insurance tie to the employer will have to go in the US, surely, once a Medicare-for-all option is in place. Then employers can genuinely offer a carrot in the form of a special private insurance package if they wish, as they do here in the UK.

  39. Marc, Barry,
    Marc– I agree. I think that, eventually this is what will happen.
    But we can’t do it all at once. For one, it would mean chaos. More importantly, we need to feel our way forward in the dark, figuring out what works and what doesn’t.
    Health care reform will require many corrections as we go along, learning as we go.
    Barry– Middle income people (median income households earn around around $49,000, joint per household—with half of the nation earning less) cannot afford routine care. They can barely afford housing, utilties, etc.
    You are entirely right when you say: that our disagrement on whether tax policy should be designed to encourage certain activies “represents a fundamental philosophical difference between conservatives and liberals. Conservatives want to fund the government in ways that do as little economic harm as possible while liberals want to use the tax system as an instrument of social engineering.”
    Except I would call “social engineering” someting else:
    “designing tax policy to serve the public good.”
    For example: We want to give people tax credits or deductions if they are spending money on higher education. A better educated work-force will serve the country as a whole.
    And, overall, we want to let tax policy counter captialism’s tendency to make the very rich richer while making the poor poorer.
    In our system, we all knw that people msut “have money to make money.” Those who don’t have discretionary income can’t buy stocks in a bull market (we saw that from 1982 to about 1995. There was much money to be made, but only relative affluent Americans had enoguh extra money to invest large amoutns. Middle-class investors only came in after 1995–this means that they paid much higher prices for stocks, and in a great many cases, made money for a few years, then lost what they had made, plus their initial investment, when the market crashed. This is always the case: in a bull market, the rich come in sooner, make money and some (like Joe Kennedy) get out. They sell their shares to naive middle-class investors who buy high –in the middle of a bull marekt–and sell low–when it crashes. They can’t afford to
    ride their losses until the market turns around, some years later. They have to rescue what they can at the bottom.
    A very wise 19th century economist pointed out that “Capitalism is designed to make the smallest number of people possible very rich.”
    This is very true.

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Atul Gawande in the April 5 New Yorker: Now What?– Maybe We Should Pay Hospitals for Empty Beds?

In the April 5 New Yorker Atul Gawande writes about the backlash that health care reformers can expect in the months ahead.  He reminds us that when Medicare passed “it faced a year of nearly crippling rearguard attacks.”

Few remember that the American Medical Association was absolutely opposed to the idea of providing medical care for all elderly Americans. They guild didn’t want the government involved, calling Medicare “the most deadly challenge ever faced by the medical profession.”  The Ohio Medical Association, with ten thousand physician members, declared that it would boycott Medicare, and a nationwide movement began. (The opponents changed their mind a year later when they realized that, thanks to Medicare, their salaries had climbed by 11 percent in just on year.)

“Race proved an even more explosive issue,” Gawande reports. Hospitals were told that if they wanted Medicare dollars, they would have to integrate. Two months before coverage was to begin, “half the hospitals in a dozen Southern states had still refused to meet Medicare certification.” But LBJ stood firm on the issue.

Today, Gawande observes, the issues are different. “The medical world will wage no civil resistance. This time, the threat comes from party politics.” I would add that we are talking about more than a disagreement between Republicans and Democrats. These days the majority of Republicans in Congress are conservatives, and for them, this is an ideological issue–which explains why the opposition is so fierce.

As Gawande writes: “The major engine of opposition, remains the insistence that health-care reform is unaffordable,” I agree.  Conservatives will continue to attack reform on many fronts, but as is so often the case in a debate between liberals and conservatives, beneath the rhetoric, the debate is all about money. Conservatives fervently believe in an individual’s right to accumulate as much wealth as possible– for himself and his family.. Liberals also believe in individual rights, but they are at least as concerned with equality—which sometimes means sharing the wealth.

As Jon Cohn reported after chatting with conservative protestors on the Capitol lawn the day before the bill passed, to them, health care reform “is about having their money taken for the sake of somebody else's security. When they hear stories of people left bankrupt or sick because of uninsurance, they are more likely to see a lack of personal responsibility and virtue than a lack of good fortune.”

How to Protect Reform

Gawande believes that the battle to save the legislation has just begun. If Republicans regain power, he warns, they will repeal essential parts of the legislation and “gut coverage for the uninsured.”“The best way to protect reform,” Gawande wisely suggests, “is to prove the skeptics wrong”—and demonstrate that we can, indeed, afford to insure everyone. The truth is that there is plenty of money sloshing around within our health care system. We just need to rescue the healthcare dollars that are being squandered, and use them to pay for more effective care.

Gawande points out that we know what to do: “the reform package emerged with a clear recognition of what is driving costs up: a system that pays for the quantity of care rather than the value of it. This can’t continue.”

And it doesn’t have to. He offers an example: “Recently, clinicians at Children’s Hospital Boston adopted a more systematic approach for managing inner-city children who suffer severe asthma attacks, by introducing a bundle of preventive measures. Insurance would cover just one: prescribing an inhaler. The hospital agreed to pay for the rest, which included nurses who would visit parents after discharge and make sure that they had their child’s medicine, knew how to administer it, and had a follow-up appointment with a pediatrician; home inspections for mold and pests; and vacuum cleaners for families without one (which is cheaper than medication). After a year, the hospital readmission rate for these patients dropped by more than eighty per cent, and costs plunged.”

This is what HealthBeat reader Pat S. likes to call “high intensity, low tech medical management.” (Thanks to Pat for directing my attention to this paragraph.)  It’s hand’s on.  It addresses public health. And rather than requiring a multi-million dollar piece of medical equipment manufactured by GE—plus a bevy of specialists and technicians to tend to the machine while no one listens to the patient– all you need  are some vacuum cleaners and nurses willing to make home visits.

What more could you want?

There is just one catch. “An empty hospital bed is a revenue loss, and asthma is Children’s Hospital’s leading source of admissions,” Gawande explains. “Under the current system, this sensible program could threaten to bankrupt it. So far, neither the government nor the insurance companies have figured out a solution.

Berwick: Pay Hospitals for Empty Beds?

But Don Berwick, the man that President Obama has picked to head up the Centers for Medicare and Medicaid (CMS) has.

Here, I’m thinking about a conversation that I had with Dr. Berwick a couple of years ago.  He was talking about a hospital in Sweden where the hospital director bragged about how many empty beds he had. This meant he was doing a good job—patients were not staying in the hospital longer than necessary, and they weren’t bouncing back. “Of course,” Berwick told me, “if he ran a hospital in the U.S. the man would be out of a job.” We reward hospital CEOs for growing revenues. But perhaps, under health reform, we will begin thinking about things differently. Berwick suggested. Maybe we’ll even consider “offering bonuses to hospitals with empty beds.”

Make no mistake—I’m not suggesting that this is what Berwick will do when he becomes director of CMS. Though in December, he did suggest “The best health care is the very, very least healthcare that we need to gain the long and full and joyous lives that we really want. And the best hospital bed is empty not full. . .”

Medicare’s goal is to change the way it pays hospitals so that it is paying for efficiency and value, not volume. That means that total hospital revenue should be falling, not rising. As a society, we do not want our hospital industry to be a growth industry—we cannot afford it. But we will need to find creative ways to reimburse hospitals so that efficiency doesn’t leave them in the red.

“Far From Being a Government Takeover”  Reform Will Take Place on the Ground

Gawande and Berwick both understand that less intensive, less invasive—and less expensive—healthcare can sometimes be more effective than the most aggressive care. They also realize that in order to find solutions to specific problems, such as  too many inner-city children suffering from respiratory diseases winding up in the hospitals, we will have to  experiment.

“The most interesting, under-discussed, and potentially revolutionary aspect of the law is that it doesn’t pretend to have the answers,” Gawande observes. “Instead, through a new Center for Medicare and Medicaid Innovation, it offers to free communities and local health systems from existing payment rules, and let them experiment with ways to deliver better care at lower costs. In large part, it entrusts the task of devising cost-saving health-care innovation to communities like Boise and Boston and Buffalo, rather than to the drug and device companies and the public and private insurers that have failed to do so. This is the way costs will come down—or not.“That’s the one truly scary thing about health reform,” he adds.  “Far from being a government takeover, it counts on local communities and clinicians for success.”

In December, Berwick made the same point. The legislation can’t lay out a master plan, argued  “How could Congress possibly know enough to specify for every community, the exact design for care that is safe, effective, timely, patient-centered, equitable and sustainable?” Berwick asked.  “The legislation does contain long sections focusing on quality,” Berwick acknowledged and there legislators lay out possibilities. But it is up to health care communities to test, adapt and perfect these strategies in real world.”

Here we are talking about the pilot projects that Medicare will be sponsoring under the reform legislation. As I have discussed in earlier posts, under the new bill, if a pilot project is successful, Medicare will be able to roll it out nationwide—without having to go through Congress. In the past, lobbyists have blocked initiatives that they feared might cut into someone’s revenue stream. Under reform, they will no longer have that power. And with Berw
ick overseeing Medicare, we can be quite sure that the pilots will be both creative and well-designed –with the real world in mind.

What’s interesting is that Berwick and Gawande are on the same page. They understand that the  ultimate power to re-design our health care system will reside, not in Washington, but in the communities where medical professionals and other healthcare leaders will implement those pilot projects, changing how we pay for care, what we pay for and ultimately, how care is delivered.

Private Insurers Will Follow

If they succeed in improving outcomes while trimming costs, private insurers will follow Medicare’s lead. They, too, want to save money, but they don’t want to show up on the evening news, portrayed as the villains who are denying Americans the care they need. If they simply incorporate Medicare reforms that are working—paying for visiting nurses and vacuum cleaners, for instance—rather than immediately hospitalizing every child suffering from asthma, they can share in the praise, without taking the risk.

Medical professional should be in the vanguard of change, and Gawande accepts the challenge: “We are the ones to determine whether costs are controlled and health care improves—which is to say, whether reform survives and resistance is defeated,” he writes. “The voting is over, and the country has many other issues that clamor for attention. But, as L.B.J. would have recognized, the battle for health-care reform has only begun.”

2 thoughts on “Atul Gawande in the April 5 New Yorker: Now What?– Maybe We Should Pay Hospitals for Empty Beds?

  1. I predict that in 2012 the cost of this bill will be a major debate. Which means we have 2 years of work to make it a non-issue by measuring and showing results. And it’s not hard with 30-40% administrative overhead, ineffective treatments, over treatments, etc. etc.

  2. Bruce
    Yes– I think you’re right.
    And I’m very hopeful that in the next two yeasrs Medicare will be able to demonstrate significant savings.
    Moreover, Berwick will be able to explain to Congress– and to the American people–
    how this will save billions in the future.

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