Health Care Reform: Is the expedient the enemy of the best?

In 1994, ABC News aired a report describing the way that tobacco manufacturers recovered nicotine from the pulp of stems and leaf scraps, concentrated it, and added it and the pressed scraps back into tobacco leaf used in cigarettes. The manufacturers knew that nicotine is addictive and they carefully controlled the amount to maintain tobacco demand (aka addiction).  For a variety of reasons, including these revelations, a few years later a majority of state attorneys general brought suit against tobacco manufacturers to recover state health care expenditures (primarily the states’ shares of Medicaid expenditures) attributable to smoking-related disease. As the process that resulted in the Tobacco Master Settlement Agreement evolved, there was an attempt to reach a global settlement at the federal level that allowed the FDA to regulate nicotine. Sponsored by Senator John McCain, it failed to pass.

Efforts to negotiate a global settlement agreement died for a number of reasons. Not least was the inability of the public health community and tobacco control advocates to coalesce to support it. The wedge issue for many was the mere idea of negotiating with the tobacco companies or doing anything that would allow them to stay in business. Particularly galling was tort reform that would have prohibited class action suits, punitive awards, and future state prosecutions against tobacco manufacturers that was included in the bill along with FDA regulation of tobacco. Many public health and tobacco control advocates took positions that were very similar to Senator Dennis Kucinich's principled stance on health reform. Here is a quote by tobacco researcher and committed tobacco control advocate, Stanton Glantz (a researcher and advocate that I very much admire and respect), from Allan Brandt’s book The Cigarette Century (p. 424): “The fundamental reality of tobacco is that the way to beat them is to beat them. I have never found a single instance anywhere, anywhere, where a compromise with the industry served the public health.” Glantz’s objection was mainly to the tort law concessions contained in the proposed global settlement agreement.

One of the most effective tools the tobacco companies had in opposing the global settlement agreement besides money and power was the emotional response of tobacco control advocates. Their righteous anger interfered with their ability to hammer out a second-best solution in a world where first-best (regulation AND beating the tobacco industry) was not an option.  

We waited another 10 years for FDA regulation of tobacco. The good news is that the tobacco manufacturers did not obtain the tort reform concessions that were in the original proposed global settlement agreement. However, they are certainly not “beaten.”  Moreover, many adolescents have become addicted and will die because of the wait. I don’t know if the wait was worth it. I suspect it was now that we know that the tort law concessions were successfully eliminated. We can’t know for sure because there is no counterfactual.

You can read the entire story of tobacco regulation in this book by David Kessler and this book by Allan M. Brandt. I highly recommend both books. You can read about the methods tobacco companies use to avoid regulation here. I also recommend a visit to Campaign for Tobacco Free Kids website. Here is a good online article about the economics of tobacco regulation by Jonathan Gruber. And here is an excellent article by Alan Blinder that provides good insight into the reality of how bills become federal law (although some of you may disagree that economists should have more voice in the process).

So why am I telling you about tobacco regulation?

The Hobson’s choice before us with regard to health care reform is to hold out for something that has fewer sops to Pharma and the health insurance industry or to accept a second-best alternative that would start the US on the road to something that delivers over time universal access to affordable health insurance and health care.  There is no reason to think that the path from this starting position could not lead where we want to go. There are countries that provide universal cover through a combination of public and private insurance with no public option, but with strict regulation of private insurers. Some who oppose the current reform bill rightly worry about the effect of the individual mandate on individuals with low incomes. My understanding (from Kaiser Family Foundation’s Website, click all 3 bills and then check "mandate") is that financial risk is limited to 8% of income above certain cut points with hardship and other exclusions and a relatively low penalty for non-compliance. This is not meant as unequivocal endorsement of the bill. It is simply pointing out that it is not draconian.

Not having a reliable crystal ball, I honestly don’t know what is the right thing to do. But I do know that in the presence of uncertainty, the optimal path is almost always from where you are, not from where you would like to be.

My fear is that a desire to stick it to pharma and private health insurers (and perhaps even Democratic lawmakers who are more center than left no matter what the right says) and the emotions this evokes  on the far left will cloud judgment, leading some to oppose a bill that is not nearly so bad as it is portrayed.  Moreover, it contains many provisions that can and will be fixed over time. There may be short-term windfall profits for Pharma and private insurers, but this is unsustainable and I believe will be remedied. The same forces that would give us a better bill 5-10 years from now will be operating (possibly faster with health care reform enacted now) to shape a more efficient system. Increasing the public share of health care finance, even if initially diverted to private insurers, is the best way to concentrate lawmakers’ attention on restructuring the system.

This doesn’t mean that disappointed voters shouldn’t let BHO and the Democrats know how badly they have failed (so far) to provide “change we can believe in.”  But is joining ranks with the Republicans to defeat the current bill the best way to do this?  I’m pretty sure that if this bill is not enacted, pharma and private health insurers will still be there and no less powerful when the battle is rejoined. Why not take the first step now with something that is “good” by most measures and leverage it to something that is best for all of us, especially the currently or soon-to-be uninsured?

Comments

[ecrive]

A compelling argument.

Your blog reminds your readers that delay is the deadliest form of denial. Two additional historical antecedents apply here: one involved delay an done involved quick action.
The first is from the 1974 crescendo of activity around health care reform. Writing at the time, Alice Rivlin reported
“Unions formed the main support for the Health Security Bill, once espoused and now abandoned by Senator Kennedy; and union spokesmen are holding to their original position that national health insurance should (1) provide free care for everyone without any cost-sharing; (2) be run by the Federal Government without any role for private insurance companies, even as intermediaries; and (3) replace fee-for-service medicine with health-maintenance organizations . ‘Creeping incrementalism is not the answer to America’s health care crisis,’ Leonard Woodcock of the United Automobile Workers told the Ways and Means Committee. ‘There is room for give and take,’added Andrew Biemiller of the A.F.L.-C.I.O., ‘but if Mills-Kennedy is the committee’s idea of compromise, then I say, in all candor, we will oppose it.’ “

Source: Alice M. Rivlin. Agreed: Here comes national health insurance. New York Times Jul 21, 1974

And how did the union leaders' strategic insight advance expanded health care coverage?

Alternatively, consider the Social Security Amendments of 1983, passed under President Reagan (R)that instituted case-based hospital payments (Diagnosis Related Groups, DRGs). There were substantial overpayemnts initially, with windfall profits to some hospitals. However, over time, as you suggest in your blog, these were and for the present legislation can be rectified and/or recalibrated.

[Maxine Udall (girl economist)]

It is a very old battle. I'm always amazed that the rhetoric never changes. Your examples are so relevant to the discourse. Thank you, Ecrive.

[rjs]

im glad you posted this, maxine, cause i was going to add a comment taking you in this direction on your previous health care post, but due to a brief flutter in the local power supply, that incompleted comment was lost, and thus discouraged, didnt return to try again...since youre already onto the kucinich objection, i can start from there, on whatever tangential track my train of thought takes me on this time...and bit of serendipity also comes into play here, because after reading hundreds, i just found a healthcare post that comes closest to articulating my thinking yet...
http://laglux.blogspot.com/2010/03/reintroduction-of-house-calls.html

i have to admit i was disinterested when health care reform was first introduced, assuming it was a done deal with democrats in control, but i did have a nagging question: "would someone please explain to me how we can get MORE healthcare? the number of doctors and nurses is fixed, you're not gonna magically create more healthcare professionals by spending more money, the hospital equipment and the people who know how to run it is fixed...the doctors seem to be overworked already, & there arent any collecting unemployment...you might be able to add a few more hospital beds, but that doesnt guarantee that youll squeeze any more "healthcare" out of the system components already in place..."

what seemed necessary to me was to come up with a better way of allocating the healthcare that we have, rather than the current rationing in the hands of the insurance companies, & restrict the unnecessary procedures now being performed because they are profitable to hospital systems milking medicare or insurance; (being insured, i know this happens firsthand)...quoting myself again, answering the charge that the plan would result in rationing: "there is no such thing as a free lunch...the choice isn’t between rationing and not rationing...it’s between good rationing and bad rationing...given that the US has health care costs per capita twice that of any other country, and gets worse results by many measures, it’s hard to argue that we are now rationing very rationally..."

after watching the reform plans morph over the past several months, ive come to think the health care system we have now is terminally ill, and must be euthanized as painlessly as possible for the individuals involved; im in agreement with dennis that the insurance companies are the problem, and ill go the draconian route to say that health care insurance should be eliminated completely, and the health care insurers should be dismantled…in their place should be an program similar to medicare in which everyone would be enrolled, with an overseeing agency that would somehow determine how best to ration the health care we now have until such time as more health care professionals can be trained; i certainly dont know enough to suggest a structure…i would also buy into many of lawrence lux’s ideas outlined in the last paragraph of the blog post i linked to, and to those i would add that everyone should have to pay something, a co-pay or deductible, for each health service they receive; this should be graduated on ability to pay, ie, those well off pay more, as there are too many unnecessary visits and procedures being done today by those insured because those procedures and visits are being paid for by some else's money…just as everyone has to pay something for their own food, even those on food stamps, so also should everyone pay something for their own health care…

im old enough to remember being dismayed the first time i heard health care referred to as an "industry", and old enough to recall when doctors made house calls, so maybe ive got an archaic concept of what a viable health care system should look like for this country…but the one thing i can say with confidence, is that what we have and what has been proposed by our dysfunctional congress falls far too short of ideal to be acceptable…

[Maxine Udall (girl economist)]

rjs, Always great to see you here!

I can understand why you and the blogger you referred to think as you do. Before I studied health, I used to think like that, too. :-)

Did you read Alan Blinder's piece that I linked to above? It provides a good sense of the realities of the political process and the extent to which the average economist is probably not prepared for it. :-)

Dr. Lux might want to take a look at Paul Starr's book, The Social Transformation of American Medicine (http://www.amazon.com/Social-Transformation-American-Medicine-profession/dp/0465079350/ref=sr_1_1?ie=UTF8&s=books&qid=1268696518&sr=1-1), before he takes on reforming the medical profession. :-)

I agree with you that a better way of allocating the resources we have would probably go a long way toward fixing the problem of providing affordable healthcare for most people in the US. I also tend to agree that docs are probably part of the problem, but not the whole problem (although putting them on salary might help). :-)

As always, thanks so much for you comments.

[rjs]

i had no illusions that my off the wall thoughts on the direction health care should take would enlighten anyone...i had no background, and neither the political or health care systems were even areas of interest for me a year ago, but being drawn to crisis as a genre about a year & 1/2 ago, and aggregating the debate as i do, i watched in disgust as a generally good idea was gradually got picked apart by special interests and lobbyists, as each attached pieces to the legislation protecting and enhancing their turf...i cant document it all in one comment, but i have become convinced that what this bill has become might ultimately leave the people worse off and more captive than they are...i have discovered our political process to be more corrupt and dysfunctional than even in my most cynical moments could have previously believed, to the extent that im seeing every speech or action as a head fake, to fool the public on one hand while feathering some crony's nest on the other...

all this was brought to the fore for me again over the past two weeks, as i covered the deterioration of the Consumer Financial Protection Agency from a stand alone with muscle to a smaller agency attached to the treasury, to its current form in some back broom closet at the Fed, with attachments protecting payday lenders, car loan schemers, pawnbrokers and other non banks loan sharks...i did a brief post about it yesterday on my other blog, and wrapped it around "funny or die", a saturday night live video, to take the edge off the bad news...

as i started my rambling comment out, maxine, it was just serendipity that you became the lucky one that i dumped my frustration on... ;-(

since visuals are always worth more than words, ill leave you with a link to one...

http://www.visualeconomics.com/wp-content/uploads/2010/02/worldhealthcare.jpg

[Maxine Udall (girl economist)]

"i cant document it all in one comment, but i have become convinced that what this bill has become might ultimately leave the people worse off and more captive than they are...i have discovered our political process to be more corrupt and dysfunctional than even in my most cynical moments could have previously believed,"

I share your concerns, rjs, which is why I posted as I did, more as "here's another perspective" rather than "here is what you should do" (although my previous blog made it pretty clear what I think should be done). And I share your dismay re: the CFPA which IMHO and from a strictly utilitarian perspective is far more important to get right at the start.

I've taken a lot of heat for my position on health reform from people I like and respect. So let me try to lay out some of my reasoning.

1. I'm taking it as given that in a world where one party has decided to obstruct the legislative process and where the leadership of the majority party has made strategic errors trying to be "bipartisan" with a party that has chosen not to legislate and has lost a senate seat in the process, we can't be too picky.

2. To get legislation passed that powerful interest groups oppose, several things are necessary, but not always sufficient: timing, having a bill at the ready, and an electorate that is paying attention. If you doubt this, obtain a copy of Phillip Hilts' book, Protecting America's Health, and read about how we finally got an FDA. That the current bill has already been passed by both houses is icing on the cake.

3. The form of the original legislation has little to do with how something, once created, evolves. The FDA is an example. So is Medicare. When Medicare was enacted in 1965, reimbursement was cost-based. There was no chance of getting it enacted with an alternative cost-containing payment mechanism. I doubt that anyone believed that it would not require this, but it was not politically feasible to put it into the bill. By 1971, cost and quality oversight was established. (http://findarticles.com/p/articles/mi_m0795/is_1_22/ai_74292516/) By 1985, hospitals were being paid in effect a flat rate based on the patient's diagnosis and some other patient characteristics.

4. The forces that are shaping health care markets (out of control costs, increasingly unavailable private insurance, growth of subprime health insurance products aimed at transferring consumer $$ to insurers while keeping the risk firmly on beneficiaries and the hospitals and taxpayers who pick up the tab when costs exceed benefits, waste and inefficiency, etc) will only become more acute as long as the system is fragmented and the federal government has no formal, legally enacted role in the entire market (not just Medicare/Medicaid which are basically high-risk pools). Medicare has already taken steps to alter reimbursement in ways that are likely to reduce waste and fraud and market forces are likely to cause other insurers to follow suit, but we need system-wide changes. Otherwise, it's like squeezing a balloon.

5. Once coverage is expanded, it is very difficult to take it back, which increases the incentives to make it work right.

6. Despite the apparent venality of lawmakers (and again, I don't know if it's true venality or just really bad judgment in trying to be "bipartisan"), my health policy wonk friends and my friends who work or have worked within various federal health agencies ALL without fail understand what is necessary to provide affordable, adequate cover to everyone, wish to do this, and are not owned by health insurers or Pharma. This causes me to have optimism that once passed, the tinkering will begin and we will end up with something, if not best, at least better.

These are the factors informing my position on this. I believe we would be NUTS to let this opportunity slip through our fingers. It may not come again soon, especially if there's another financial meltdown. I believe that it is an evolutionary equilibrating process, but it can't start until we take the first step and this is the first step.

If Kucinich can elicit a public option or a Medicare buy in, that would be great. But if it fails to pass because he holds out, I think it will be a big mistake and a huge loss. As I said above, there is no reason to think that a PO is necessary for successful universal cover and cost containment.

And...if the consequences of enacting a reconciled bill turn out to be really bad, we can do what the Medicare beneficiaries did back in 1989. They didn't like the Medicare Catastrophic Coverage Act, so they protested, and it was repealed within 18 months of being enacted. (http://content.healthaffairs.org/cgi/reprint/9/3/75.pdf) :-)

[rjs]

"I've taken a lot of heat for my position on health reform"

i hope you dont think that i was giving you heat...i was just expressing my frustration, and using you as a sounding board for it...i understood your position and respected it..& im not pretending to have a tenth of the understanding of the issues involved in health care that you have, either, what ive learned this past year has just been as an adjunct to covering the crisis...

maybe im also trying to explain dennis's position...ive followed dennis since college (not a friend) and know what he's been through, how they pulled the rug out from under cleveland on him when he wouldnt play ball, and i trust that although he may have gone a bit quixotic on this issue; he is telling the truth as he sees it, and its pretty much in agreement with what i have seen...

"the optimal path is almost always from where you are, not from where you would like to be" of course you are right; its just that i dont want to be where i am...

[Maxine Udall (girl economist)]

rjs, No, no, no. I didn't think you were giving me heat. I was just using your comment as an excuse to provide a bit more info about my own position for those who might be interested. And I understand Kucinich's position and your feelings re: where we all are. They are very similar to my own. I'm just really worried that this will slip through our fingers and I have no confidence that next time will be any better. Ecrive's comment above drives home how little things change every time this battle is rejoined.

[Peter Kurze]

Maxine,

"I believe we would be NUTS to let this opportunity slip through our fingers. It may not come again soon."

That summarizes pretty well the only thought that I am capable of having about health care at this point. Sometimes I feel like I can hardly breath. If we can't get a package this weak passed with a majority this substantial and a President as articulate as the one we have now .... I can't really finish that sentence. My new favorite phrase is the "tyranny of misinformation". I worry that the comfort I take from having rational discussions with other rational people might be lulling me into a false sense of security.

I've been thinking about what it must have felt like in Germany in the early thirties or in 1861 as the country slid towards civil war. I find it oddly comforting to consider that times much darker than our own finally yielded to something better.

[rjs]

speaking of tyranny of misinformation:

http://mjperry.blogspot.com/2010/03/almost-1-out-of-3-physicians-may-leave.html

(perry is a professional naysayer with a large following on a couple sites, ive taken his posts to task previously)

[Maxine Udall (girl economist)]

Peter, Thanks for stopping by. You, rjs, and Ecrive make me feel optimistic.

rjs, Don't worry. We'll just let nurses take over if docs quit. Here's the wave of the future: http://www.innovations.ahrq.gov/content.aspx?id=2186

:-)

[rjs]

FYI: a friend sent me an article debunking that "survery":

http://www.dailykos.com/storyonly/2010/3/17/847202/-Doctor-Survey-Touted-by-Right-Wing-Debunked

i seriously doubt that anyone would quit because some fees are limited controlled; much lower paid people are taking pay cuts every day without walking off the job

[Maxine Udall (girl economist)]

rjs, Ken Arrow made the point(AER, 1963) that many characteristics of the medical care market were aimed at signaling trustworthiness on the part of docs. That the "very word 'profit'is a signal that denies trust relations" and that "advice given by physicians about further treatment by himself (sic) or others is supposed to be completely divorced from self-interest." So when I hear that docs are leaving practice because they can't maintain their lifestyle (which is essentially what it's about), I tend to wonder how much of a loss that is for us patients (especially when there are so many lower priced substitutes, at least for primary care (PAs, NPs). I certainly don't want a doc whose primary objective is maintaining or increasing his/her income. I could say the same about investment bankers. As you say, many workers continue to work and do good jobs despite furloughs and pay cuts.

Thanks for the link. I was skeptical of the survey.