The Congressional Sandbox
March 25, 2010
Recently, President Obama signed into law, a massive bill extending health care to millions of American citizens who would otherwise be unable to obtain insurance coverage. The authors tried, valiantly, to include even more citizens in the coming years. They did their best to reform private insurance regulations and create fair competition among medical insurance carriers. Though they fell short in this endeavor, someday, with portability across state lines and intelligent modification of anti-trust exemptions, they will, hopefully, create an even playing field for both the insurance industry and the customer. This will not, however, solve the problem of paying for health care in this country without bankrupting the entire economy. Unfortunately, as Bill Thomas, retired Republican Congressman and chairman of the ways and means committee, explained to the naive President Bush, Medicare and Social Security are inextricably linked. Bankrupt one and the other will soon follow.
After years of Democrats and Republicans slowly bleeding both programs, President Clinton, on advice from staffers like Robert Reich, actually studied the research that had been done under the previous three presidents. To his amazement, he found that the system would not be insolvent in thirty years as so many had predicted, if only the funds were not constantly shifted into the general fund and wasted on less worthy projects. In fact, he found that the surplus taken in by Social Security, over the years, had amounted to almost a trillion dollars, yet not one penny of the money had been left at the end of each year! All that was left, each time, was a worthless IOU from a government with absolutely no accountability to its senior citizens, a government that had no intention of repaying its loan and that planned to embezzle every penny of any future surpluses. He realized that if he could actually balance the federal budget, that he would not have to loot the Social Security Fund.
With both President Clinton and the Republican Congress actually trying to balance the budget without giving the other adversary any credit, the two sides managed to finally accomplish this daunting feat. True to his word, Mr. Clinton left over two hundred billion dollars of surplus in the Social Security coffers at the end of his second term. For a short time, even with long awaited Republican tax cuts on the horizon, the surplus seemed safe. Then came 9/11 with unfunded wars in Afghanistan and Iraq. With relentless privatization, useless weapon systems and massive political corruption, Republicans, refusing to raise taxes for their wars, "borrowed" every penny of surplus funds and every penny for the next seven years. One and a half trillion dollars of senior citizens' retirement funds looted for the sake of their government's foreign adventures, virtually ensured the approaching insolvency of the Social Security System, after all. In a few short years, the "Baby Boomers" would reach "maturity," claiming their rightful share of the money that they, themselves, had "invested" in the retirement plan. The money was gone! The government would blame it on the "fact" that the previous, "undeserving" generation of Seniors had not contributed enough to the fund. In actuality, these citizens of both the "Greatest Generation" and the Korean War, had added to their sacrifices and unselfishly contributed more than two and one half trillion dollars toward the welfare of their children and grandchildren. It is precisely what their generation had always done, sacrificing for future generations and to protect their government and their country's way of life.
The problem that this generation could not foresee, was that there had been a change, an imperceptible change in the workings of the government. It was not to be found in the childish antics of an incompetent president, here and gone in eight horrible years, but in the way the two major parties do business. Republicans, despite a keen understanding of the economics of "pay as you go," and knowing that they are the only deterrent to the Democrats' spending themselves into oblivion, don't seem to care. Busy hurling and condoning racial and sexual epithets aimed at their opponents, instead of lending their considerable expertise to a momentous, but mediocre bill, they did their best to destroy it. They are still doing their best to protect the insurance industry and to destroy Medicare, just as they contributed to the destruction of Social Security.
Until the introduction of Medicare Part D, after vehemently opposing the initial Medicare bill itself, Republicans did their best to ignore the Democrats' abuse of the program. Democrats, for years, controlled Medicare cost committees, preventing either competitive bidding or reasonable pricing for durable goods, oxygen and, especially, medical laboratory work. Over the years, they have been responsible for hundreds of billions of dollars in overpayments. In 2003, the Republican legislature enacted measures to investigate competitive bidding and its effect on quality and availability of medicare products. Early results were encouraging, but the proposed bidding scheme was so complicated and incompetent that it proved to be untenable. Democrats fought bitterly against cost constraints in these areas. They could not afford to lose these cash cow donors to their campaigns.
At the same time, when it looked like Republicans would step up to the plate and actually provide Seniors with a long awaited prescription drug plan, they announced that the "authors" of part D would be none other than Tom Delay and Billy Tauzin. Democrats were all too familiar with the two congressmen who had gerrymandered so many congressional districts in Texas. In fact, except for Karl Rove, no two Texans were considered as unscrupulous as the two representatives. True to their reputations and to their inability to properly author a House bill, they asked the pharmaceutical lobby to write the bill for them. To make matters worse, Tauzin, not one to worry about political or moral correctness, accepted a two million dollar a year position as president of the same lobby as soon as his retirement permitted.
The bill, of course, was a scam. the prescription drugs purchased with approximately 40 billion dollars, could have been purchased through either the Veterans Administration or the Military for far less than 20 billion dollars. This would have saved almost all seniors from falling into the dreaded doughnut hole. The bill forbade the use of the forty million Medicare members to negotiate better prices. Medicare Part D will thus overspend almost 40 billion dollars this year or approximately 60% of its 68 billion dollar budget! It is projected to squander at least 400 billion dollars in overpayments over the next decade.
The costs to Americans for Medicare's durable goods, oxygen and laboratory tests are not as obvious as prescription drugs. Yearly expenditures for these products must be traced through the quagmires known as Medicare Parts A and B. Expenditures for all of these products are buried in other expenditures. Why are durable goods lumped with physician charges and skilled nursing facility costs? Why are oxygen and laboratory tests buried in hospital, office and home health care statistics? Is it because competitive bidding for these services is so despised by both Democratic and Republican congressmen and senators? Why are competitive bidding schemes for these services so ridiculously complicated? Why can't the VA or Military competitive bidding formulas be used ?
If necessary, why not employ Congressman Pete Stark's idea for durable goods and oxygen prices: check the internet and simply match the average retail prices for the exact same products? This would shave at least 50 to 60 percent off the price tags of many terribly expensive products without taxing the poor beleaguered, overworked members of the Medicare cost committee. Of course, the crafty Mr. Stark, well paid champion of medical laboratories, knows that there are no actual retail prices for labwork since the prices seem to be based on "Medicare allowable" reimbursements. Thus, a capitated contract with an HMO may call for thirty or forty dollars a year per patient for in-house labwork while the same company's PPO or private contract calls for full payment per test. The difference is shocking! The HMO might pay thirty to forty thousand dollars for yearly labwork for a thousand patients, while the PPO or regular group insurance is charged more than four hundred thousand dollars for the exact same tests! As my friend's beloved father always misquoted Shakespeare: "There's something screwy in Denmark!"
Recently, I had a patient admitted to a local hospital for a procedure called "kyphoplasty" in which a vertebra with a compression fracture is rebuilt. The patient was to be admitted as an "in-patient" for which Medicare reimburses the hospital 17,000 dollars. Against physician's orders, the admission was to be changed to an "out-patient procedure." For the out- patient procedure there is no set price. All aspects are itemized, from the five dollar aspirin to the extra five minutes it takes the patient to fart. The reimbursement by Medicare to the hospital would then be fifty thousand dollars! The patient was admitted to another hospital in the neighboring town where the admission was left as "in-patient" and the cost was 17 thousand dollars.
Ironically, private insurances try to reimburse far less for out-patient procedures than for in-patient procedures. That is why so many of the out-patient surgeries are done in "out-patient surgery centers." Overall costs are drastically less than in the hospital setting. Not too long ago, I sat on an executive committee of a local hospital. I discussed the subject of the huge amount of business that the hospital was losing to these out-patient centers. I asked the CEO of the hospital why it was that the hospital could not match the price of the centers. Obviously, if given a choice, for the same price, most patients would prefer the safety of a hospital over a surgery center.
The CEO's answer was very troubling, indeed. He explained that when he had made the offer to various insurance companies to match out-patient center prices, each replied that if the hospital were to lower its out-patient surgery prices, they would receive the exact same reimbursement for their inpatient surgeries. Of course, inpatient hospital care is, in reality, far more expensive than actual out-patient care. The hospital had to continue to charge the more expensive price for both in-patient and out-patient surgeries for most procedures, and thus the extortion tactics of the insurance companies versus the overcharging by the hospital simply resulted in a standoff.
A few very obvious questions beg to be answered. First, how on earth can one hospital be permitted, by Medicare, to bill 50,000 dollars and another 17,000 dollars for the exact same procedure, under the exact same circumstances? Why does Medicare take a different approach to in-patient and out-patient procedures than virtually every other insurance provider? How long can Medicare and its agency survive considering its bizarre behavior with regard to hospital reimbursement, lack of competitive bidding, its grotesque fee schedule for prescription drugs, various goods and lab tests, as well as one of the most incompetent bureaucracies in the civilized world? Added to this fact, is the sad truth that almost every Congressman and Senator, in both parties, has his hand in the Medicare till and that over one and a half trillion dollars was pilfered, in the past eight years, from the Social Security fund, by these same men and women. With no conscience whatsoever, these members of Senate and House have not only robbed Seniors of trillions of hard earned dollars, but they seem to have done this via the famous "rob Peter to pay Paul" scheme. The fact that no excessive returns were promised to the victims is the only thing differentiating their behavior from a "Ponzi scheme." They are, sadly, little better than Bernie Madoff, and it can be argued that if they were not protected members of Congress, most of them would be sharing prison cells with their infamous colleague.
Meanwhile, there can be no doubt, that at the present rate of gross overspending by Medicare and in the absence of a "federal insurance commissioner" to oversee insurance premiums, the Congressional Budget Office's naive estimates of cost cutting and slashing of the national debt through our recent health care reform will prove to be a fantasy. Without powerful federal oversight, most state insurance commissioners will continue to collect their salaries from the insurance industry. In those states with mentally challenged legislatures and supreme courts, where commissioners are elected, the salaries will be collected in the form of illicit campaign contributions. In other states, the salaries will be in the form of time honored bribes to be collected later as the lucky "public servants" retire and settle into their high paying new jobs in the industry they had so dutifully protected. The underlying principle is exquisitely simple and infallible: Find me a state with an insurance crisis and I'll find you a crooked insurance commissioner.
Congressional Budget Office nearsighted miscalculations aside, a true melodrama seems to be unfolding before us. Various Republicans, mostly governors, are challenging our new healthcare bill on the basis of interstate commerce issues. They are claiming that the federal government has no right to mandate the purchase of health insurance. They reserve this right to the states. Whether they are right or wrong, in their contention, I believe that they will lose their cases. Precedent and case law are against them, not that either of these increasingly worthless concepts have anything to do with right or wrong. They have come to be used as an excuse for lazy judges to utilize the poor judgement of their predecessors in order to make their decisions. Unfortunately, many of their predecessors had already used bad precedent and case law to make their poor decisions, as well. It is such a bother to have to read the Constitution or the actual laws and to actually have to think about a decision before making it.
The problem with mandatory purchase of health insurance is not in the purchase, it is in the product! As detailed above, the insurance product is of extremely poor quality. Forcing someone to purchase a really poor product, under threat of punishment, is about as clear a case of government terrorism as there is. It represents a "protection racket" in its purest and most literal sense. Unfortunately for the Democrats, it represents legislative racketeering. Fortunately for the Democrats it can be fixed. Unfortunately, I don't believe that the Democrats have any idea how to fix the quality of health care insurance without destroying it.
I have discussed the subject of fixing the health insurance product before. With the introduction of patient rights and access to more prescriptions and treatments, with the addition of a greater percentage of very sick patients and the inability to drop them, the health isurance industry will have to confront those realities faced by every other business. No longer will they be able to keep the patient's entire yearly premium as profit. No longer will they be able to keep two sets of books or bribe a state insurance commissioner to allow unwarranted premium increases. With the addition of these conditions and other escalating costs, even the mighty insurance industry may run the risk of financial collapse.
As I have suggested before, I believe that the insurance industry should enjoy many of the same advantages available to, but unused by the government. By permitting the insurance carriers to band together, using all of their estimated 140 million members to negotiate better prices for prescription drugs, durable goods, oxygen and labwork, not only could their costs be lowered, but the savings could be required to be passed on to the consumers. Current anti-trust exemption merely allows the companies to collude and to fix prices. They could also unite in purchase of "reinsurance" at much lower rates. Everything could be aimed at "fixing the product." Then, it could, at least, be argued that consumers were not forced to buy a profoundly inferior product under threat of punishment.
If Democrats, then, want to resurrect a "brisk" public option, they can negotiate for the concept at the same time. A viable public option cannot be weakened; if it does not feature all the advantages suggested for the insurance industry, it would not survive either. Both private and public options need to enroll as many relatively healthy people as possible. This is, of course, the unavoidable cornerstone of the entire concept of affordable health insurance! It is the underlying, but seemingly forgotten, "other reason" for the requirement for "every American to have health care coverage." A bastardized version of the public option, limited first, to those who cannot obtain insurance or to any other, nonrepresentative segment of society would surely bankrupt itself!
With a well equipped public option and a well equipped insurance industry, face to face, on an even playing field, would our senators and congressmen continue to send their shooters out into the street with empty weapons? Would they still weigh their fighters down with the same wasteful expenditures, huge over-payments and graft? Would they, as their last wretched Chief Executive, have to apologize because they had no money left for ammunition? Or, will it be business as usual, five hundred thirty ,or so, adults, playing in their congressional sandboxes, and refusing to share their toys with each other. Ughhhhh!
Allen Finkelstein, D.O. 3/25/10