Source: https://gregscandlen.wordpress.com/
Timestamp: 2019-04-20 23:00:16+00:00

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Real Health Reform: Our Money, Our Health, Our Choice!
Okay, here is something different from me. I am writing a book, “The 100 Year Quest,” about how the Progressive Movement has been trying to get its hands on health care for the past century. To get from 100 years ago to today, we have to understand how FDR’s Supreme Court changed the Constitution so that it would be unrecognizable to the people who wrote it. It took them only seven years, from 1937 to 1944. What follows is the chapter dealing with what they did.
It is longer than my usual posts, but you may find it useful.
From time to time some of us wonder how we got here. We hear quaint expressions like “Freedom of Contract” and ask, whatever happened to that? How is it that two people are no longer allowed to enter into an enforceable contract without running afoul of some governmental restriction?
A recent example is that I can no longer agree to a contract with a health insurance company that does not cover contraceptives. Why? If I and an insurance company are both willing to sign such a contract, how is it that the government says we cannot?
Social Security. The first and most important decision was affirming the Constitutionality of the Social Security Act. At the time it was enacted it was no sure thing that the Supreme Court would uphold it. It was unprecedented for the federal government to provide such a sweeping social safety net, and several of the key New Deal programs had been thrown out, including the Railroad Retirement Act in 1935, the National Industrial Recovery Act, also in 1935, and the Agricultural Adjustment Act in 1936.
The issues involved in the decision were profound. As Larry Dewitt, historian for the Social Security Administration, wrote in 1999, “The basic problem is that under the ‘reserve clause’ of the Constitution (the 10th Amendment) powers not specifically granted to the federal government are reserved for the States or the people…. Obviously, the Constitution did not specifically mention the operation of a social insurance system as a power granted to the federal government.” The authors of the bill opted to dodge this issue by relying on Congress’ power to tax on one hand and to spend money to “provide for the general welfare” on the other. The authors went so far as to write separate titles keeping the raising of revenue and the spending of money apart, as if they had nothing to do with each other.
The other curious thing about this episode is that the Court accepted that under its “general taxing power” Congress could institute an entirely new form of taxation – the payroll tax. Just a few years earlier, in 1913, the nation thought it was necessary to adopt an amendment to the Constitution (the 16th) to impose an income tax. Apparently the new thinking was that such an effort was too cumbersome for enlightened Progressivism to bother with.
Elimination of Freedom of Contract. Article 1, Section 10 of the Constitution states, “No State shall… pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts….” The courts have never found this to be an unlimited right of contract, but there was an ongoing dispute over when a state’s policing power could override the due process clause of the Fourteenth Amendment in regulating contracts. Law professor David E. Bernstein writes that in the late 19th and early 20th Centuries “The Supreme Court gradually accepted the notion that liberty of contract was an enforceable constitutional right under the due process clause.” Progressivism and the rash of labor law regulations in the 20th Century eroded this protection. Bernstein writes “By 1934, a majority had formed willing to broadly expand the ‘affected with a public interest’ doctrine to the point where just about any regulation of prices was constitutional.” After 1937, the Roosevelt Court eliminated virtually any limitation on the government’s power to violate contracts.
Interstate Commerce. Article 1, Section 8 of the Constitution reads, “The Congress shall have the power… to regulate Commerce with foreign Nations, and among the several States, and with the Indian tribes.” It would seem this applies to goods and services passing between jurisdictions, not within the jurisdiction. But the Roosevelt Court decided otherwise.
The most famous, and outlandish, case here was Wickard v. Filburn, decided unanimously in 1942. In this case, an Ohio farmer who was growing wheat for his own consumption exceeded the quota set by the Agricultural Adjustment Act of 1938. Filburn argued that Congress had no jurisdiction over what he did on his own farm, since his wheat never left his farm and was not used in “commerce.” The Court reasoned that by growing his own wheat, Filburn was failing to buy wheat that might have been sold across state lines, so his activity affected interstate commerce, and could so be regulated.
Santa Cruz Fruit Packing Co. v. NLRB (1937). While 37% of its products were intended for interstate commerce, the products had not yet been actually shipped. The Court ruled that the Feds could regulate them well before the commerce actually took place.
Sunshine Anthracite Coal v. Adking (1941). The federal government could regulate the price of coal that was not sold across state lines because the price in one state affected the prices in other states.
United States v. Darby (1941). Congress could regulate the wages, hours and working conditions of workers in a local lumber mill because the products might be shipped in interstate commerce.
Insurance as Commerce. For most of American history insurance wasn’t considered “commerce” at all, let alone interstate commerce. Commerce was defined as the buying and selling of goods by merchants, according to David Kopel and Rob Nateson in the National Law Journal. This understanding was the basis for a Supreme Court ruling in Paul v. Virginia in 1869, and was repeatedly affirmed over the years. But this understanding was turned on its head in a narrow four to three ruling in 1944 in United States v. South-Eastern Underwriters Association. The case ruled that the Sherman Anti-Trust Act applied to the insurance industry and that fire insurance companies were subject to Federal regulation under the Commerce Clause.
Chief Justice Stone wrote a strongly dissenting opinion that relied on the traditional understanding of the word “commerce” and argued that Congress was well aware of this understanding when it passed the Sherman Act, so did not intend for it to cover the insurance industry. Plus, he argued, the states are well equipped to regulate insurance, while the federal government has no such experience or expertise. The ruling, he said, would “loosen a flood of litigation” and cause great disruption in an otherwise stable industry.
Congress largely agreed with the Chief Justice and immediately (on January 25, 1945) enacted the McCarran-Ferguson Act to return to the states the sole power to regulate and tax the insurance business.
Still, the precedent had been set, and this one ruling empowered Congress to directly regulate insurance whenever it chose. It has frequently made use of the power in the years since.
This series of cases set the stage for an entirely new American governance having little to do with the system established by the Founders. It was a revolution as profound as that of 1776, only no one sets off fireworks to commemorate the occasion.
People like shopping on Exchanges. They like private exchanges better than public ones – 73% said they are likely to stay with the coverage they selected on a private exchange, vs. 57% who said the same about a public exchange. Of course, staying with your current coverage may not be a good thing if the cost changes substantially, as seem to be happening on the public exchanges. While the bureaucrats are encouraging people to look around for the best deal each year, they seem to ignore the real problems with doing so – changing insurance plans every year is extremely disruptive to families and continuity of care. Under Obamacare, it means learning all over again what benefits are covered, what providers are included, what drugs are covered, how to file a claim, how to appeal a denial, how to locate customer service, and so on.
Health care services are woefully behind in the transition to digital. While 80% of consumers said they would like digital services to help manage their care, only 23% said they currently have that.
The report also suggests that non-traditional providers such as retail firms like Target and tech firms like Google and Amazon have the potential to take “significant market share” as “consumers associate them with efficient, effective, and delightful customer experience.
More important for Obamacare, younger people consider “price to be paramount in their decision-making..” while the elderly are “largely unmoved by price variations…” This suggests Congress made a very big error in limiting age differentials in premium pricing and getting the young to subsidize the elderly – the older people don’t care that much about price, but the younger ones care a whole lot.
Overall this report is just another rock on a growing mountain of evidence that Americans are no longer content to be passive recipients of whatever the health care establishment wants to do for (or to) them. They want to be in control of their health care as they are in every other aspect of their lives.
The Journal of the American Medical Association (JAMA) has just published a new study on the ability of price transparency to lower costs.
The study, by Christopher Whaley et. al., was very large, involving over 500,000 individuals in 253,000 households. They were covered by 18 large self-insured employers, which adopted the Castlight Health price transparency platform sometime between 2010 and 2013. The employers represented a wide range of industries and offered a variety of health benefit designs. Every state in the country was represented.
The population was split into two groups – those who searched the Castlight platform prior to getting services, and those who did not. Each searcher could get estimates of personalized out-of-pocket costs based in their own plan design. They could also get non-price information such as provider qualifications and patient satisfaction ratings. The services studied were limited to three frequent but elective categories – lab tests, advanced imaging (MRIs and CT scans), and clinician office visits. The two populations groups could be compared both before and after the Castlight platform became available to them.
Before either group had access to the price transparency platform, the study group (those who eventually became searchers) had higher costs than the control group in two categories – 4.11% higher for lab tests, 5.57% higher for imaging, but 0.26% lower for office visits.
After the search tool became available, the study group’s costs went down – 16.93% lower than the control group for lab tests, 14.97% lower for imaging, and 0.76% lower for office visits. These are for situations where the patient had cost sharing responsibilities. When there was no cost sharing, the results were 14.13% lower for labs, 13.63% lower for imaging, and 2.26% lower for office visits.
Looking at both the before and after comparisons, the savings were significant — in the 20% range for labs and imaging, but not as much for office visits.
The study authors did not look at other metrics, such as health outcomes or patient satisfaction. But they did test for selection. The two groups were nearly identical in age, gender, health condition and use of services. The control group had slightly higher household incomes than the study group ($75,233 vs. $73,149) and somewhat higher medical spending ($559 vs. $495) in the year prior to access to the search program.
In other words, economizing behaviors continue even after the cost sharing is ended. This helps answer one of the objections critics have made about Health Savings Accounts. They have stipulated that having a high deductible may lower spending, but once the deductible has been met, they say, people will go wild consuming care that is suddenly free to them. That sounds plausible, and even I have been puzzled that HSA programs seem to save money across the board, not just on the lower cost services. Apparently thrifty habits persist.
Of course, according to OECD, the United States has one of the lowest rates of OOP payment in the industrialized world (see chart below). And I am astonished to learn that Uwe is now a fan of fee-for-service payment. So am I. It will be nice to have an ally in academia. He goes on to complain of “cost shifting” by employers, but as an economist he surely knows there is no cost shifting, or more accurately all health care spending is already cost-shifted. Every penny the employer spends on health care is a penny taken out of wages. Employers concern themselves only with total compensation – the more they spend on paying for health services, the less they have to spend on take home pay.
But the most important error he makes is supposing that health care consumers need to have price transparency before they are allowed to control their own funds. That is exactly wrong. The reason we don’t have price transparency is because of third party payment. Consumers don’t know what things cost and don’t care because they are not paying the bill directly. The only way transparency will ever happen is when consumers demand it, and they won’t demand it until they control the money.
Meanwhile, the evidence is piling up that when people can control their own funds they do a very good job of using the money wisely – far better than any third party payer has done in the past fifty years.
I’ve been pretty hard on Dr. Atul Gawande over the years.
During the Obamacare deliberations he wrote an article in the New Yorker about McAllen, Texas that became mandatory reading in the White House. It purported to show that for some unexplained reason McAllen had much higher costs than other locations in the United States. This was evidence, the White House said, that physicians are greedy and need to be controlled by bureaucrats. It was a poorly researched article that relied solely on Medicare data and failed to account for unique conditions in that city. As it turned out, when you include non-elderly spending, McAllen isn’t particularly costly and the area has an extreme shortage of physicians, so people tend to go to the emergency room instead.
A few years later he wrote another article in the New Yorker about how marvelously efficient the Cheesecake factory is, and bemoaning that American hospitals can’t do likewise. I posted some comments about how mistaken the analogy is on the NCPA Blog.
So I was prepared for the worst when I sat down to read his latest, an excerpt from his new book published in Slate. It was about end-of-life care, and after Zeke Emanuel’s writing about his determination to die at age 75, I expected to read more about how old folks aren’t worth spending a lot of money on.
In fact, the article is a moving and sympathetic telling of the case of one woman with metastatic ovarian cancer. She is a wonderful, cheerful 72-year old lady with profound problems. Gawande has many treatment options available to him, and he works with her to find the best match of what he can do with her own priorities – fears, hopes, level of comfort.
There are no sweeping generalities, no implicit policy prescriptions, no judgments about her. It is a love story between a caring physician and his patient. She is depicted as a whole person whose emotions are far more important than lab tests. I urge you to read the article for an example of medicine at its best.
“Interactions … begin with this assumption: The patient is the source of all control. We act only when the patient grants that privilege, each time.
These physicians are at their absolute best when they are dealing with actual patients. They are the epitome of health “care.” But once they sit down to write policy, they turn from Dr. Jekyll to Mr. Hyde. Which reminds me, one again, that for all the talk of Accountable Care Organizations, Bundled Payments, Interoperable Health Records, and Population Health Management, the essential, irreplaceable transaction in medicine is between one doctor and one patient. Nothing else comes close.
My flippant answer to the problems in health care has always been “give us back our money and get the hell out of the way.” The point is that the supposed expert managers (employers, insurers, government agencies) we have hired to run things for us have completely botched the job and should all be fired. After all, every penny that is spent on health care comes from us and it is all supposed to be spent for our benefit.
But, other than expanding HSAs I haven’t had any real idea on how to make that happen. Somehow I missed a long-standing proposal by Cato’s Michael Cannon for “Large HSAs.” I just recently came across a paper Cannon had published in 2008 that pretty thoroughly explains the idea.
Increase HSA contribution limits to $8,000 per individual or $16,000 per family.
Remove the requirement that HSAs be tied to a high deductible health plan – or any kind of insurance.
Allow HSA funds to be used to buy any kind of health insurance from any source, as well as pay directly for services.
The rest of the paper walks through the consequences of these policy changes – how employers and employees (and the unemployed) would likely react to the new conditions and the effects these behavioral changes would have on health care spending and availability. It also considers the political reactions.
Cannon supposes that most employers would use the money currently spent on benefits to raise workers’ wages, but the employee could then direct that money to be deposited into her HSA up to the limit. The employee could then buy coverage either from her employer or on the open market, or she could save the money to pay directly for care, or use some combination of coverage and cash according to her own preference.
Cannon makes the point that not all workers want high deductible health plans, some still prefer HMOS or first dollar coverage. So employers who institute HSA programs under current rules are disadvantaging those employees. The Large HSA would enable even these workers to buy the coverage that works best for them.
I would add a point I have made here repeatedly – that some not-small portion of the population is unable to cope with insurance of any kind. They can’t read or understand the contracts, they may have poor impulse control so find it difficult to make and keep appointments weeks in the future, and so on. For this reason I have favored John Goodman’s universal tax credit idea that would be paid to safety-net providers for those people who do not buy insurance. Cannon’s Large HSA proposal addresses this problem even better – it would enable this population to show up at a clinic when they have a medical need and pay for the service when they consume it.
Cannon also makes the important point that sharing risks between people is not the only form of “pooling” available. It is also possible to “pool” over time – so that the young healthy Greg Scandlen saves money to pay the expenses of the old decrepit Greg Scandlen many years later. HSAs facilitate this kind of pooling.
I’m not going to go into all of the discussions the paper explores here. Cannon considers the varying effects on lower versus higher wage workers, considers the issue of indexing the contribution amount, looks at the possible effects on medical costs, and so on.
He is not proposing this as a panacea for everything in health care. He doesn’t address Medicaid or Medicare, for example. The focus is more on creating a more equitable market for working people.
But this is a serious, innovative idea that deserves more attention than it got when it was first published.
Now you got me going. The answer is right under our noses– if we go back about 46 years–before the onset of Medicare and Medicaid. It is not too late. Here is the dream you are looking for, Greg.
The answer is for physicians to take on the care for the poor– for absolutely no pay. No billing, no CPT codes, no ICD-9 codes. Nothing. No physician should earn his living caring for the poor. He should earn his living in his private practice where he can expect payment for services rendered.
And like the way it was before government decided that it could provide health care in an efficient, compassionate, low-cost manner, this free care needs to be done in non-government free clinics (NGFCs)– staffed 95% by volunteer physicians, nurses and support staff and funded by genuine charitable contributions– no government grants, no money extracted from overburdened taxpayers.
Patients self identify themselves as poor, sick and in need of a physician. Then they access the free clinic that is in their neighborhood, staffed by pleasant people who have chosen to be there and are genuinely interested in their well-being and future prosperity. There will be no government bureaucrats filling out forms to see if they qualify for “benefits.” Each clinic will develop its own criteria to decide who is needy and needs the free care.
These patients need to know that the free clinic is not their medical home, but rather a bump in the road on their way to financial independence. Once they are on their feet, they can go to the same doctors who cared for them in the free clinic, but now in their practices. Pay cash– but a fair cash price, not one that is trying to make up for the low fees paid by Medicare, Medicaid and HMO’s. A free market price, just like Jiffy-Lube for their cars.
The physicians and taxpayers need protection. If doctors are going to be providing free care in an NGFC, their medical malpractice for work done there will be covered by the federal government via the Federal Tort Claims Act (FTCA). But that is not enough. They need protection from the lawsuit hungry culture that has all but destoyed the medical profession. They need the state to step in and just cover them for malpractice– for their entire private practices. This will cost the taxpayers nothing unless there is a lawsuit– and these will be greatly reduced to episodes where real damage has occurred due to real negligence on the part of the physician. These cases are extraordinarily rare.
If the patients coming from the free clinics need specialty care or hospitalization, they need to access the system of “charity care” that the hospitals already have in place for poor people who have not gotten onto Medicaid.
The free clinics will be inter-connected via a sophisticated computer system. Thus surgeons who are willing to donate two operations per month will be able to sign on and find a patient who needs him, entered by the primary care doc who identified his problem via studies that were done by labs and radiologists who have donated their services. Obstetricians will identify two pregnant ladies per month, do their prenatal care in the NGFC, deliver them in the hospital and take care of them post-op. The absence of medical malpractice payments will free them up to do this good work.
The details will come easily once the structure is in place. All the pieces are actually there– but just need some realignment. Physicians are already covered by the state when they work in the medical school facilities.
Where will these free clinics come from? Where will they be? Who will start them and staff them? The answer again goes back 46 years– when all the hospitals were named after saints and popes and patriarchs. For the natural place where charity begins is in the faith communities. And there will be no shortage of volunteers, as the baby-boomers are retiring at a rate of 10,000 per day.
On Saturday, June 11th, at 10:30 AM, there will be a meeting of pastors held at the new facility of the Zarephath Health Center, 495 Weston Canal Rd, Somerset, NJ 08890. The ZHC will move from a 900 square foot to a 5,000 square foot facility, ready for the many volunteering physicians who will be looking for a place to see the poor. The purpose of the meeting is to teach pastors how they can start a free clinic associated with their church.
The pastor of the church who has watched his congregation grow from 150-2,000 in the past 7 years– as people, rich and poor, are attracted to a church that cares for the poor.
The social worker who is also the builder who used many volunteers and thankful former patients to put together a clinic with 5 exam rooms, a dental room and 3 intake rooms where kind volunteers will just sit and hear the stories of the patients that come.
The physicians who have manned the ZHC for the past 8 years– who have learned much about the poor and what they really need.
The former FTCA administrator who now works for Echoclinics.org, a philanthropic group whose stated goal is to facilitate the starting of 10,000 free clinics by 2030.
The community activists who have convinced 6-7 legislators in NJ to write the New Jersey Volunteer Physician Protection Act to make this concept a reality.
It will be a time of interaction and real problem solving. Let me know if you want to be there, and I’ll have an extra sandwich for you!
NJAAPS.org — watch my discussion of this idea with Judge Andrew Napolitano, and my testimony to a Senate health sub-committee.
This nation was founded on the principles of “natural law” and many believe fashioned after the writings of Thomas Aquinas. Thomas Aquinas, theologian and philosopher, realized and wrote about the capacity of human reason to grasp what is right: our morality. He wrote that truth was understood through reason and human reason was the basis for all law. He even recognized and wrote about the law of economics, the idea of a fair price. If the suppliers’ costs are not covered, the business cannot succeed, reasonable and rationale.
Natural law stands as the foundation of our constitution and is the basis of our founders’ passion for every American’s right to self-determination. Man should be able to formulate his /her own destiny within the confines of a reasonable legal system. The law defines our inherent obligations to each other and the public at large but does not compel us to practice self-sacrifice.
I believe that most Americans believe themselves moral. Most of us want to do the right thing. We vote that way and define our relationships that way regardless of our politics.
Reason or natural law would have it that “the right thing,” basic human nature does not allow for irresponsibility. How is it reasonable that any human would not want to take care of his/her own personal needs as best he/she can? Protect himself and his family? How is it possible that it is immoral for me to not want to accept my neighbor’s personal responsibility? It is not.
If personal responsibility is the moral paradigm that is the underpinning of American freedom, it cannot be moral that any person be allowed to dispose of that obligation. Morality and reason demand that I work for myself first. My morality demands that I not allow my neighbor’s indifference to his/her own needs mandate my personal contribution.
American morality has no place for personal irresponsibility. If we are going to turn our economy around and provide the framework for American world leadership we must come to terms with our personal morality. Anything less will bankrupt our pockets and our sense of reason. Personal responsibility is our American duty.

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