A Fresh Look at Healthcare Reform; Part II of II

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

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

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

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

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

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

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

Why Not Just Raise Income Taxes?

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

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

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

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

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

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

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

The VAT Provides an Incentive to Reduce Waste

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

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

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

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

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

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

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

How The Guaranteed Health Access Plan Slashes Administrative Costs

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

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

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

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

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

The Institute for Technology and Outcomes Assessment

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

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

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

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

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

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

Protecting Our Health Care System From the Lobbyists

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

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

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

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

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

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

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

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

Comments

[Dennis Cotter]

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

[Kevin]

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

[Barry Carol]

Ann,

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

[Maggie Mahar]

Larry, Barry and Anne--
Thanks for your comments.

Larry--I agree--the whole structure of the plan is very appealing. Its relative simplicity is brilliant, and there are nice checks and balances.

I wouldn't want to see state plans, but I,too, like regional oversight of the insurers. At the same time, everyone, nationwide,
gets the same high level of benefits.

Barry-- I agree that first names creates a friendlier atmosphere on the blog.
And I've also known very good CEOs who called everyone by their first name. It's a sign of their confidence.

Anne-- I agree that "lower level" is not an appropriate way to describe nurses--or anyone on a medical team.

I very much doubt that Barry meant to denigrate nurses.
But in a corporate world
"personnel" are sometimes referred to as "upper-level" and "lower-level" usually based on how much they make.

This is one of the many things I don't like about the corporate world--it's money-driven. But I suspect that's where the phrase is coming from, not from any belief that nurses should be subordinate . .

[Ann Malone]

Uh, Barry, did you really mean to say this?:

"...how it could discourage nurses and other lower level people from speaking up..."

That "higher-than-thou" kind of thinking it extremely unhelpful. Why in heaven's name should there be an acceptable notion of lower or higher among members of a multi-disciplinary health care team?

Isn't collaboration the name of the game, central to quality care as well as to job satisfaction?

Nurses, CNA's, lab technicians, dietary and housekeeping staff, PT's, STs, and OTs are colleagues who each contribute valuable skilled services to the care of the patient. It's about how well you perform in your particular role on the team not how many letters you might have after your name.

And btw I happen to think that the alphabet soup after so many nurses names is ridiculous and confusing, not only to the public but to many in the health care community... (some nurse colleagues of mine teasingly refer to the FAAN as "Farthest Away from Actual Nursing").

Barry, I hope you take this feedback in the constructive spirit in which it is being offered! And I hope you don't really believe that nurses or any other hc team members are "lower" than the doctor.

[Barry Carol]

While I’m not an MD, I do have an MBA, so maybe I’ve earned a little respect too. However, I’m an informal guy by nature, and I actually prefer to be called Barry. Even though people who participate in these blogs don’t (for the most part) know each other personally, I think informality projects a friendlier atmosphere and encourages a free flow of ideas. At the same time, the blog operator should enforce reasonable civility and decorum.

I’ve dealt with literally hundreds of senior executives over the years including CEO’s, COO’s, and CFO’s, and I’ve found that those who not only tolerate but actually encourage others, including low level employees, to address them by their first names are among the most effective leaders. Rank sensitive formality is more typical in the chain of command military structure. In the civilian world, it smacks of pomposity. In the medical world, I could easily see how it could discourage nurses and other lower level people from speaking up when they see doctors making mistakes or not following proper procedures.

[Ann Malone]

Gheez, It appears that Doctor Kirkwood's buttons have been pushed in a big way and that's too bad b/c he's raised useful points in this discussion and has received thoughtful responses from Maggie, uhm, I mean from Ms Mahar.

To Dr K, a friendly word of advice: the use of all caps (the way in which you consistently type in your book title) when communicating on the internet comes across as shouting, so perhaps that pushed some buttons as well...?

[R. Garth Kirkwood MD]

Ms. Mahar:

I know exactly what shared-decision-making is; I do not need to read any more of your cleverly written tripe.

Your note about my mention of EQUAL HEALTH CARE FOR ALL is offensive. It is totally correct for me to promote new and refreshing ideas for true health care reform. After all, this entire discussion started with your promotion of another book, which describes a reform plan for our health care system.

In the future, please address me as Doctor Kirkwood. I have earned that degree and the respect, which comes with it. Your patronizing use of informality, first names in your responses, I believe is a tool to deflect detailed, provocative critique of your rhetoric.

R. Garth Kirkwood MD
http://www.equalhealthcareforall.com
doctork@equalhealthcareforall.com

[Larry Eitel]

I picked up a copy of the proposal yesterday. My fascination is as much with the administrative structures proposed as with the funding pieces. Although regionalized and not state-specific, much of the plan's proposed administrative structure on a national and regional level mimics or replicates ( with less direct day-to-day government involvement) some of the most interesting parts of the 1993 Clinton plan. As can be seen in the Obama plan also, new variants of the health purchasing cooperative or health alliance continue to undergird healthcare reform thinking in the U.S.

Also, the Federal Health Board concept relates directly to Senator Daschle's recent proposals.

So- financing is critical, but I find the proposed administrative structures and processes equally interesting and worth discussing.

LE

[Maggie Mahar]

Garth--
To get a better idea of what shared-decision-making is about, why so many physicians support it (including people like Dr. Don Berwick, head of Institute for HealthCare Improvement), the medical evidence that many electie surgeries and tests are unnecessary, and finally, what originally motivated shared-decision-making,
see http://dartmed.dartmouth.edu/fall07/html/choice.php

Also, we don't accept ads on the blog and while I didn't mind when you plugged your program the first time, we don't want people writing comments in order to promote books, programs, products --

Thanks

[R. Garth Kirkwood MD]

First: In your discussion you have indicated the following:
1) good insurers offer shared decision making tools and coaches,
2) after visiting with these coaches, 20% to 40% of patients are going to decide not to have the elective procedure performed,
3) hospitals pay the salary of the coaches; hospitals are not going to improve their bottom line by putting money into shared decision making tools and coaches; hospitals do this because they think it is the right thing to do.

Since insurers would not have to pay millions of dollars in elective surgery costs if 20% to 40% of patients decide to not have elective surgery performed after using the shared decision making tools and visiting with the coaches, I suggest that the dollar bill is a major driver of this process.
Since hospitals are dependent upon insurers for a huge portion of their revenues, I suggest that the implementation of shared decision making programs by hospital administrators can have significant influence upon the contracts signed between hospitals and insurers.
Why did you not make this connection in your discussion?

Second: Are there other driving factors for hospitals adopting this shared decision making process such as Risk/Management? I understand how this could come about in our current milieu of malpractice litigation. If it is one of the driving forces for this process, I think it should be pointed out.

Third: Do uninsured, indigent patients get to participate in the shared decision making program?

(As an aside, my program, EQUAL HEALTH CARE FOR ALL, effectively deletes the words, "indigent," "uninsured," and "uncovered" from our health care lexicon.)

Fourth: My interpretation of your responses is that you believe that 20% to 40% of people deciding to not have an elective procedure is automatically a good thing.

Every decision made in medicine can have a down side. Do your coaches really discuss the down side of doing nothing?
What are the indications for an elective hip or knee replacement? What are some of the real life complications of doing nothing?

Good patient education in an unbiased manner is very important. If there is a need to enhance this beyond what occurs within sound, ongoing doctor---patient relationships, then so be it. But it should not occur in a setting with a potential financial conflict of interest amounting to cumulative totals of millions of dollars. I believe that is what you have described.

I do not believe in the concept that hospital administrators make decisions to do the "right" thing without first assessing how this "right" thing is going to affect their bottom line. The dollar effect influences their determination of what is right, in my view. I believe that this is one of the fundamental problems with our health care system.

I did a google search for "Hip Replacement Patient Education" and found 193,000 listings. Since many of these are also going to be biased, for example, if they are sponsored by the company that makes the device to be implanted, what can we do to get truly unbiased education for patients? My assessment is that you don't believe the doctor---patient relationship can be unbiased. I believe shared decision making tools and coaches, as you have described it, are no less biased.

R. Garth Kirkwood MD
http://www.equalhealthcareforall.com
doctork@equalhealthcareforall.com

[Maggie Mahar]

Jim--

Your comment seems to have been cut off or garbled at the top.
Let me respond to the part I can read:
Yes, many insurers would probably walk. That's part of the plan.
We have too many insurers selling insurance to too many employers--and that fragmentation greatly increass total marketing, advertising costs and other administrative costs.

The plans that wouldn't walk are the good ones: Kaiser etc. People want choices, so the REgional boards would make sure that enough insurers remained in (or moved into) their region to provide choices. But no one really wants to compare 15 plans.

As for a VAT being regressive--I wonder if you read both posts all the way to the end?

Becuase of the way that the tax dollars are redistributed, the people who would benefit most are low-income people who are now uninsured and low-income and middle-income people who have cheap, poor insurance that is filled with holes.

The people who would benefit least would be those who have very good insurance through their employer now, at no cost to them. (Employer pays full premium.)
These are usually higher-income people, and if they are also big spenders (earning $200,000 a year, spend $195,000, a 10 percent VAT will hit them pretty hard.

On the other hand, they will benefit most from wage increases to make up for the loss of benefits and cuts in state taxes. So they, too, will be okay.

[Maggie Mahar]

Barry--

Since this isn't a tax blog, I'm not going to try to answer all of your questions. Suffice to say, a great many developed countries have a VAT and they've figured these things out.

I woud urge you to buy the book, and read it. And also, buy a book about VAT taxes. There are a variety of ways of organizing them, depending on your goals.

[Maggie Mahar]

Garth--

Dartmouth and Mass General are both excellent hospitals. When they put money into "shared decision-making tools and coaches (they employ the coaches) they are not going to help their bottom line.

A fair number of patients are going to decide not to have the elective procedure. (Research shows 20% to 40%)

So they wind up with less business. And they don't make any money on shared decision-making. They do it because they think it's the right thing to do.

This in no way abrogates the doctor's responsiblity. He has the first conversation with the patient where he talks about the possibilty of the elective surgery--and why he would recommend it. Or thinks the patient should consider it.

He gives the patieint the pamphlet and video to take home.

On the video, the patient sees something the doctor can't show him--other patients who had the procedure or didn't have the procedure, and how they feel about it.

How many orthopedists introduce their new patient to a patient who had a hip replacement a year ago and regrets it? Hip squeaks, rehab took longer than he anticipated, whatever.

Then the patient talks to tehedecision-making coach, once twice, three times. Maybe over a week or two weeks. Maybe 3 hours, maybe 5 yours. It takes a lot of time (more time than most doctors have) because it's not just about explaining the procedure,risks and benefits--which most good doctors at least try to do.

It's about getting the patient to articulate HIS OR HER own fears and hopes. The patient may be embarassed to tell the doctor: "I'm just really afraid of being in pain. The idea of surgery--someone cutting into me--and recovering from surgery just terrifies me.
If there's any choice I really don't want to do it.
But I know the doctor thinks I should. I don't want to disappoint him. I don't want him to think I'm a wimp." (A great many patients worry about "disappointing" their doctor)

Or, a woman may say "look, I just want to get it over with. I know I could have a lumpectomy, but I'd rather have the masecttomy. I've never liked the way my breasts look anyway. (This is what a woman says, on the video to a coach. Very few women woudl say that to a doctor. The coaches knowo how to make people feel relaxes, and unembarassed so that they open up and say waht they are really feeling, even if it sounds silly.

The coaches are specailly trained in is called "non-directive" counseling. Most
doctors are not, by temperament or training,
"non-directive."

Many doctors say things to patients like "If you were my father, this is what I would recommend."

That's Very Directive.

The coach also spends a lot of time asking the patients questions to make sure that he understands odd: what "Of the 60% who received, 20% suffered X"
means. This takes time. They have various "teaching tools" for doing this.

Finally, after going through the process with the coach, the patient goes back to the doctor to talk over the final decision. By now, the patient is probabaly going to feel freer to be candid with the doctor. Together, they decide what is best for this particular patient.

[jim jaffe]

plan's like dreamaway that allows you to eat all you want and painlessly lose weight while you sleep.

first. VAT is not fair and does not have a high compliance rate. It is inherently regressive and takes a higher percentage of income from low income people, which violates the definition some of us use for fairness. Second, compliance with such sales taxes is much more daunting than with income tax, as anyone who's ever paid cash to have his house painted can attest to.

more interesting is assertion that insurers would have to provide benefits for payment provided. if that worked, we'd be paying less than 100% of average cost for Medicare advantage program. In point of fact, insurers can walk if they're not adequately compensated, so can providers. if you deny that, why not just pay insurers $10 annually for each of us and require them to provide broader array of services than medicare now does. that would quickly solve all our cost problems.

[Barry Carol]

Maggie,

I plan to buy and read Emanuel’s book when I get some time later this summer. To raise $800 billion from a 10% VAT, however, (plus $200 billion from eliminating the employer tax preference for health insurance), the VAT would have to apply to 55%-60% of our economy vs. about 40% of the economy for the broad based VAT taxes in Europe.

While it lends itself best to manufacturing activity of the type you illustrated in your example a few days ago, the concept could be complicated by the following factors:

It would significantly increase the price (cost) of big ticket items like new homes and college tuition. Moreover, if the VAT applied to new homes but not existing homes, it would distort the housing market or cause the price of existing homes to increase enough to offset their now favored tax treatment which would be a windfall for current owners of existing homes. College tuition, already increasing faster than inflation virtually every year, could push a college education even further out of reach for the middle class unless financial aid were increased commensurately.

Necessities like food, energy and medical care would need to be exempted, taxed at a much lower rate, or subsidies like a more generous Earned Income Tax Credit would be required to protect lower income people.

How would financial services transactions like stock trading, ATM transactions, etc. be taxed – based on the associated fee or the value of the transaction?

Would government provided services like law enforcement, the court system, and elementary and secondary education be taxed? If so, how and on what basis?

Personal services, where providers are basically selling their time would find it comparatively easy to avoid the tax, at least to some degree. I’m talking about everyone from doctors and lawyers to construction tradesmen, especially, those who serve the residential market to beauticians and personal trainers.

Add all of these up, and it’s easy to see how even a broad based VAT usually doesn’t touch more than about 40% of the economy which is why I think it will be tough to raise the money contemplated. Even if the experts have signed off on the proposal’s credibility, touching enough of the economy to raise $800 billion at a 10% tax rate will be extremely difficult to push through the political process even with a Democratic President and a Democratic Congress with a significant majority in both houses.

[R. Garth Kirkwood MD]

The operative words of your reply are "informed choice." Informed consent is a legal form required to offset malpractice litigation--that is why it is not good enough-- and I believe most doctors involved know, on some level, that it is not good enough. If they choose to use it in place of what is good enough, then that choice, to not fulfill the duties of the doctor---patient relationship, is theirs and they suffer the consequences. It is the absolute duty of the doctor to make sure his/her patients achieve a level of understanding that identifies informed choice. It requires that the doctor develop the skill and patience to explain in English, what is going on. This may require repetitive explanations to the patient and to one or more family members. That is a physician's responsibility as part of the doctor---patient relationship, no matter how much time it takes or how inconvenient it becomes. Farming this process out to "coaches" lets the doctor off the hook for performing one of the most important duties of the doctor---patient relationship. Inadequacy of the doctor in this regard will not be improved by having coaches, who do not have the level of training of doctors, who do not know the details of the case and how various problems interact, and who may well have an inherent bias to lean towards not doing aggressive procedures, becoming part of this decision. Neither informed choice nor the doctor---patient relationship will be enhanced by this process of farming out a physician's obligation, which is inherent in the mutual trust, inherent in the doctor---patient relationship. Your statement that the younger generation of doctors is embracing this does not make it the right way to proceed. That is your justification for their inadequacy. They should have spent and be required in medical school and residency to spend a lot of time in understanding and then accepting, on their shoulders, the doctor's duties in the doctor---patient relationship, which will then form the underlying structure of how they will run their private practice. Informed choice must occur between doctor and patient. Any doctor's inadequacies or bias need to be improved by the doctor, not farmed out to a 3rd party.

You did not answer my question. Who will employ these coaches?

Insurance companies are in it for the money. Any program that they institute has one major theme: to enhance their bottom line dollar profit. Therefore, it is financially conflicted, which I believe is not good.

Regarding the two hospitals (health care businesses) that you mention, What is their motivation for developing this program? Are they truly not-for-profit? I do not know. But I bet a look at their annual reports would show a hefty profit, which doesn't include the massive salary packages of their CEOs. Are their administrative decisions made for the sole purpose of enhancing the doctor---patient relationship first regardless of the effect on their bottom line dollar earnings or the other way around?

Part of the reason for the regrettable loss of sound, ongoing doctor---patient relationships is due to the doctors themselves. If you farm out the duties of the doctor---patient relationship, you will finish its destruction and you will lose the most important part of our health care system. Everyone, who participates in our health care system in any way, must have their feet held to the fire, to restore the primacy of the doctor---patient relationship in favor of the dollar bill. Doctors are not excluded from this. In my view, for a great health care system, everyone needs to work toward restoring the basic fundamental altruistic trust, which underlies good medicine. If you don't do that, you got nothing except farmed out pieces of complicated cases. I reject out of hand any process or procedure, which interferes with (or farms out) a doctor performing his/her assigned duties defined by a sound, ongoing doctor---patient relationship. (Chapter 2, EQUAL HEALTH CARE FOR ALL)

R. Garth Kirkwood MD
http://www.equalhealthcareforall.com
doctork@equalhealthcareforall.com

[Ann Malone]

A quick shout-out of thanks to Maggie, SteveB, Barry, Lisa, Garth, and all the other constructive commentors.

I'm particularly grateful that Maggie states the dangers of the Wyden plan; we've gotta stop it before it gets real momentum.

I believe Rep Conyers along with co-sponsors of HR 676 are speaking on the House Floor in Congress to highlight the MANY important differences between HR 676 and other so-called reform bills such as Wyden's.

[maggiemahar]

Garth--

Shared Decision-Making was invented by doctors-- Dr. Jack WEnnberg and Dr. Jim Weinstein. (Weinsten
became involved after his daughter, who was diagnosed with cancer at age 3 died at age 11. Weinstein gave up a chair at U. of Michigan's medical school to go to Dartmouth to work with Wennberg.

Weinstein felt that, during his daughter's illness, he and his wife were not given enough opportunity really share in the decision-making. He felt that they were pushed, by the doctors, to authorize treatments that were very, very painful.

An orthopedist, he also felt that his own patients often didn't really understand the risks of surgery. Informed consent
wasn't good enough.

They needed to be making an "informed choice."

And insurance companies are not the only ones using these decision-making tools. As I mentioned, Mass General and Dartmouth use them.

And 80 breast clinic cancer in the Northeast are using these aids.

They are not a threat to the doctor-patient relationship; they are meant to enhance the doctor-patient relationship, and many physicians are embracing them--particularly a younger generation of doctors.

Before rushing to judgment, please wait and read more about the process.

[R. Garth Kirkwood MD]

I find your argument regarding shared decision making weak for several reasons:

1) You say that good insurers who offer the shared-decision making tools and coaches developed by the non-profit Institute for Informed Decision-Making are adding value. Who is the employer of these coaches? Which entities support the non-profit Institute for Informed Decision-Making? I suggest that, although the words you use sound good, there is a perceived need to retain the insurance industry and to keep it very profitable by interfering with the doctor----patient relationship. In my view, the health insurance industry is simply not necessary and needs to be sacrificed for the well-being of our country and its people.

2) Within a sound, ongoing doctor---patient relationship, decision making is always shared--- between the doctor and the patient and most (if not all) of the time with the patient's immediate family members. If the patient requires more info, there is the 2nd opinion from another qualified doctor, who will examine the case in detail as opposed to a "coach," who operates from a set of statistics that may bear little relation to the individual case at hand. Also available to the patient is the myriad of info on the internet, and from the various societies that are already set up to help people better understand their disease, as well as from the doctor, whom they are seeing. Patients can bring any additional info that they believe the doctor has over-looked to her/him for further discussion regarding the best choice for further care.
3) Within a sound, ongoing doctor---patient relationship, if the doctor needs to share decision-making, he/she seeks consultative help. This means from specialists, who some policy experts and medical think-tanks believe are over-utilized. (A false concept, in my view)
4) Shared decision-making is not just a threat to doctors' authority but is also an absolute obstruction to the functioning of sound, ongoing doctor---patient relationships. Doctors train for years and years to develop the expertise to treat sick people. The last thing they need is "coaches" interfering.

Shared decision-making, as you describe it, has great potential to add value to the coffers of the insurance companies but adds further misery to the already severely damaged doctor---patient relationship and will further separate patients from their doctors. It is therefore, in my opinion, a financially-conflicted health care business concept, which is undermining to the fundamental basis of health care.

Health care policy "experts" just can't seem to leave the doctor---patient relationship alone. It is a mutual trust developed between two people, the doctor and the patient, and it requires substantial work from those two as well as tremendous support from a health care system to function properly. But it does not need interference from "coaches," who share in decision-making. Local peer review, strict quality assurance investigation from a single payer, and mandatory ongoing physician education can assure that doctors are doing their job properly. (not to mention the constant threat of malpractice litigation, another health care business that needs to be totally revised)
If you really want to stop the inexorable rise of yearly health care spending while providing clear and equal access to vital, comprehensive health care for everyone, then develop a system that controls all health care businesses and makes them truly not-for-profit. My book, EQUAL HEALTH CARE FOR ALL, shows a straight-forward approach to accomplish this in a manner, which would require markedly LESS government involvment than our current system.

R. Garth Kirkwood MD
http://www.equalhealthcareforall.com
doctork@equalhealthcareforall.com

[maggiemahar]

On the FT review:

Once again, Allan asserts without evidence or facts.

Clive Crook is a graduate of the London School of Economics who has written extensively about healthcare reform.

Some months ago, I attended a salon style dinner of NYC health care experts (Presidents of hospitals, etc.). Crook was asked to moderate the discussion.

[maggiemahar]

People who have been commenting on Emmanuel's plan may be intersted in these reviews of his book
(and the plan)

in the Financial Times
http://www.ft.com/cms/s/0/8187ad4a-253c-11dd-a14a-000077b07658.html?nclick_check=1

(You may need to register at the Financial Times to access it, but registration is free and mercifully quick)

and in the upcoming Newsweek:
http://www.newsweek.com/id/139453

[maggiemahar]

drsh, Dr.SteveB, Garth and Barry-

Thanks very much for your comments. I appreciate the fact you're hanging in on what is a very complicated topic.

And let me say, I've written at length on Emanuel's solution not because I think it is the Final Answer, but because I believe that:

a) ethically, it is on track by striving for a high level of benefits for everyone and

b)the notion of using vouchers of equal value to pay insurers would force them to compete on quality, not price--which would bring out the best in the best insurers. (The other insurers would simply drop out of the game).

Finally,as I've said, the VAT is the best answer I have seen, so far, to the problem of insulating healthhcare from annual Congressional appropriations .--See my comment below to dr.SteveB. )

Responding to your individaul comments:

DRSH -- regarding whether you can trust the government to dedicate the VAT solely to health care.. .

That's a good question. The evidence suggests that we can. Both the Medicare tax and taxes for the Highway Trust Fund are dedicated. So legislation can be written in a way that makes it impossible to "raid" the VAT.

As to what keeps costs down: the fact that it would be very hard to get Congress to raise the VAT from, say 10% to 11% to 12%
means that you have a cap on health care spending.

Under the VAT funding, Healthcare spendiing can rise only as much as inflation in the rest of the economy here we buy other goods and services.
Putting healthcare on an overall budget creates a discipline that conservatives would like.
Insurers then have to try to figure out how to achieve good outcomes while working witin a budget. (IF they don't have good outcomes customers will know. The regional board will publish their results, and insures will lose customers. Ultimatley, if their outcomes are worse than average for no acceptable reason, the Regional Board will no longer let them offer insurance in that region.)

Dr. Steve --

You write: "Again, unlike some of my single payer colleagues, I can see a policy argument about having "competition" and "choice" of plans. If they really really were like the French or German non-profit regulated utlity model"

I agree. And I also agree that the Wyden plan hands the key of the kingdom to the private insurers.
They are not "really, really" regulated. I see the Wyden plan as a real threat to true reform.

But I think that private insurers could be strictly regulated.. And I think that politically, it would be easier to sell the idea of regulating them (like old-fashioned utilities) then simply doing away with the entire insurance industry (very, very messy).

At the very least, the idea of tightly regulating insurers is one you could sell to the public. The public doesn't like insurers.

When you try to argue for single-payer, the public is likely to be scared by the idea of Great Change, adn all of those jobs lost in the insurance industry.

And the public is likely to respond to the conservative argument that tha replacing the industry with government would mean,not only a huge loss of jobs, but massive incompetence-- you just can't trust the government to do anything right. (Katrina).

Re: the VAT

Could a VAT insulate a single-payer plan from Congress and lobbyists?
To be honest I don't know, though I think it would be much harder.
First, let's consider how the VAT insulates: Because it is a tax on goods and services, it grows with overall inflation. So you don't have to keep going back to Congress for new appropriations to keep up with normal inflation.
An income tax, by contrast, doesn't track inflation. Wages have been flat to down for most workers for years. When the stock market is booming, govt revenues from income taxes will rise, but when the market goes bust, reveneues from capital gains and dividends drop sharply. This is not a stable situation.

In theory, a VAT SHOULD insulates a single-payer system. Like Emanuel's system, the single-payer system wouldn't have to go to Congress for appropriations if it was funded by a VAT.

But it seems to me that if a health care system is totally run by the government--the way Medicare was before we had Medicare Advantage--Congress is going to be very involved in deciding what "Medicare-for- all" covers.(Today, Medicare covers anything the FDA approves, and the FDA approves anything that a powerful manufacturer wants approved).

Congress will also be very involved in how much various specialities are paid. (Certain well-paid specialites have powerful lobbies so they are paid much more than primary care physicians).

And we know, from what happened to AHRQ if we have a comparative-effectiveness institute within a single-payer govt-run system, and the lobbyists don't like its recommendations, congress will find a way to kill it.

It would be much harder, I think, for CONGRESS TO INSIST THAT IT HAS A RIGHT TO MICROMANAGE WHAT THE PRIVATE INSURERS IN EMANUEL's SYSTEM DO.
For example, Congress hasn't claimed the right to micro-manage insurers in Medicare Advantage--even though it is paying them. (And so those insures are doing things that hurt on healthhcare--- competing on price while shifting costs to the sickest patients.)

AS private companies, under Emanuel's plan those private insures would had a right to decide how they should pay doctors to get the best outocmes. (Very likely, they would decide to pay doctors more who provide preventive care, manage chronic disease and, in general, provide care that we know is effective, while paying less for procedures that are "iffy"--unproven, risky without clear evidence the benefits outweigh the risks, etc.

Even though the private insurers in Emanuel's plana are tightly regulated and overseen by the Regional boards, THEY STILL ARE PRIVATE COMPANIES.

And the Regional Boards give them quite a bit of leeway to figure how to get better outcomes while all receiving the same premiums per patient (plus risk-adjustment if they wind up with more sick or old patients), and while all offering those patients the very rich menus of benefits.

Figuring out how to pay hospitals and doctors to get the best quality care is a particularly interesting problem, and no doubt different insurers would experiment with different ways of getting there.

Congress simply couldn't interfere in that process.

And when I talk about different insurers competing on quality, here is what I mean:

Some might compete for customers by offering them more access to "experimental" drugs; others might offer them free "shared decision-making tools" (some private sector insurers do this now), some might offer free smoking-cessation clinics; othersmight guarantee that
all hospitals in that insurer's network would offer palliative care.

Congress couldn't interfere
with how private sector companies choose to compete on quality.

(And note, insurers could do things that they would never do today like "offering free smoking cessation clinics"--even though this would attract poorer, and by and large sicker customers --because under Emanuel's plan, the govt would pay an extra risk-adjustment bonus to insures who wound up with sicker patients.

Today insuers would never offer something that attracted sicker or poorer patients.

By contrast, if we had a single-payer gov't run system,
drug company lobbyists would push hard to have the single-payer insurance offer access to experimental drugs.

But there WOULD BE NO LOBBYISS for smoking cessation clnics or shared decision-making or palliative care BECAUSE THERE IS NOT A LOT OF MONEY TO BE MADE IN THESE PROGRAMS THAT IMPVOVE QUALITY (WHILE REdUCING OSTS) AND THUS LOBBYISTS WHO SUPPORT THESE IDEAS DON"T HAVE THE MONEY FOR MULTI-MILLION DOLLAR CAMPAIGN CONTRIBUTIONS THAT CAN BUY A LEGISLATOR.

Private insurers, on the other hand, would have an incentive , under Emanuel's plan, to try any and all of these ideas to see if they could get better outcomes--which would lead to larger market share and ensure their place as one of the plans offered by the regional board.

Bottom line: Emanuel's plan could tell Congress that it doesn't have any right to interfere in a private-sector market where insurers are competing.
But I don't see how you can tell Congress that it doesn't have a right to micro-manage a govt-run program. . . .

Garth--
I do think that trust between doctor and patient is essential to better health care. And I think that doctors-- and their ideas--should be in the vanguard of reform. Meanwhile, we need to remove the dollar from the transaction--that's what my book is about.
But very, very good insurers can add value. See my reply above to Dr. Steve.
Today, good insurers who offer the shared-decision making tools and coaches developed by the non-profit Insitute for INformed Decision-Making are adding value.
Some doctors also have
signed up for the program. Some 80 breast cancer clincis in New England are using it.
Mass General and Dartmouth Hospital also are using it.
But the vast majority of physicians and hospitals are not integrating it into their practice--in part because they know that reserach shows that when patients have full informaiton about risks and benefits, time to think about those risks and benefits, plus videos and pamphlets that help them understand the risks and benefits---and decision-making coaches who let them articulate their own priorities, hopes and fears--some 20% to 40% decide not to go ahead with the elective procedure.
Some doctors see this as a threat to their authority and their fee-for-service business.
As more doctors become familiar with this program I hope this will change.
But by buying the program for their customers, some insurers are actually adding value . . . .
Ideally doctors and good insurers would work together on programs that could improve outcomes. (As I've indicated, the less-good insurers who don't want to compete on quality would probably just drop out of the market under Emanuel's plan.

Barry--
On how a VAT works and how much money it would raise:

You are right, at each point the seller gets a credit for the tax he hs paid.

But the numbers do work-- Emanuel's 10 percent VAT raises enough money

I went over the numbers in detail with Emanuel.

I also explained the costs and savings in my last comment responding to you . Don't want to repeat myself.

If you don't believe me, let me put it this way:

On the cover of Emanuel's book, Larry Summers, former Secretary of the Treasury, calls Emmanuel's book "the most important book on health care policy written in the last decade."

Safe to say Summers understands how much a VAT would raise in this economy and how much we spend on healthcare. I doubt he would feel comfortable endorsing the book if Emanuel had the math wrong.

Also, Emanuel originally developed this plan with Stanford economist Victor Fuchs. It was first published in NEJM in 2005 and by the Brookings Institute in 2007.

Again, probably someone would have mentioned it if the math didnt' work.

On how other countries finance healthcare:

The plan you favor, which involves a payroll tax on only the first $45,000 of wages is, I'm afraid, terriby unfair to low-income and middle-income famlies

It wouldn't be nearly as unfair in the Netherlands because they have very few high income families.

But in this country, we do, and so we raise taxes for Medicare by taking 1.45% of wages- with no limit.

If you are a CEO earning $2 million, you pay 1.45% of $2 million.

If we are looking for a model for heatlhcare, it's worth taking a look at Sweden.

According to people like Dr. Don Berwick in the U.S. (founder of the Institute for HealthCARe improvement) and the economist from the London School of Ecnomics who spoke at the conference I attended in Berlin and host of other European at that conference, Sweden has the highest quality healthcare system in the world.

What is remarkable is that, even though it has the oldest population in Europe, medical care amounts to only about 9 percent of Sweden’s gross domestic product (GDP), a figure that has remained fairly stable since the early 1980s.

(We spend more than 16 percent of GDP on care-- and our results are not as good. )

The life expectancy of the Swedish population continues to rise. In 2005 the life expectancy was 78 years for men and 82.8 years for women. This can be attributed to falling mortality risks for both heart attacks and stroke

Currently, they fund health care through income taxes but they realize that,given their aging populaiton, the income tax base may not grow fast enough So they are thinking about using some of the revnue from their VAT tax to fund healthcare.

[Barry Carol]

In considering possible health insurance financing approaches, I think it is interesting to look at the Dutch system that became part of their health insurance reform approach in 2006. As described in the most recent issue of Health Affairs, working people pay a 7.2% payroll tax on the first €31,200 of wages. The employer reimburses the employee for that payment with the reimbursed amount subject to ordinary income tax. On top of that, each adult pays a basic insurance premium of €$1,100 with subsidies for low income people. Insurance for children is free. There are many insurers to choose from. At recent exchange rates, €1 was worth approximately $1.56.

The French also use a payroll tax, which, I believe, is approximately 13%. According to Ezra Klein, however, the much praised French system only covers about 75% of healthcare costs. The Germans have a payroll tax of, I think, 14.5%. Both are capped. That is, they don’t apply to all wages earned by high income people. All of these financing mechanisms get high marks (from me anyway) for transparency as compared to trying to finance health insurance or healthcare from progressive income taxes. Income tax financing, in my opinion, is more appropriate for general functions of government like defense, law enforcement, and the court system. Transparency is important because it improves the efficency of resource and capital allocation across the economy.

[DrSteveB]

I did read all of the post, and some of your other commenters, including the arguments around the VAT. You missed my point, so I apologize for not being clear enough:

1. single-payer/multi-plan (e.g., Emanual) or single-payer/single-plan (HR-676, PNHP, etc.) can be paid for by VAT. There is no inherent linkage of one plan to the one payment mechanism. So if it is the "dedicated" VAT that is somehow keeping the lobbyists at bay, then same dedicated VAT can be used to fund either system.

2. If it is the indepdendent boards setting the requirement that are keeping the lobbyists at bay, again, those can (and are proposed) for both types of plans. No inherent difference.

3. But you and Emanual are kidding yourselves if you think that making it a "dedicated VAT" is going to keep the lobbyists at bay. Whether is the dedicated payroll dection for Social Security and Medicare being used to subsidize Reagans tax cuts, or dedicated Tobacco settlement money going to public health or dedicated lottery money going to education... the lobbyists and politics are never kept at bay. HR-676 happens to use payroll deduction because that was familiar from Medicare and because it allows "shared" cost by employers and individuals. But it is not an inherent feature to single payer per se. It could be the same VAT as Emanual proposes.

My personal preference is do away with all the special separate taxes (usually regressive) and just pay for everything (military security, social security, health care, interest on the debt, etc.) from the same more progressive income tax + an estate (accumulated wealth) tax. But again, can use any which payment mechanism for either plan.

I still don't hear an argument for why this plan is going to be more politically acceptable then single payer... unless the restriction on the for profit plans are so compromised (so they dont fight them as much as they would single payer), that it is no better then the pre-compromised Wyden or Clinton type plan.

Again, unlike some of my single payer colleagues, I can see a policy argument about having "competition" and "choice" of plans. If they really really were like the French or German non-profit regulated utlity model. I just don't see how this makes it easier to get past the insurance companies, pharma, Republicans and coservatives.