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As difficult as it may be for most of his readers to believe, not everyone appreciates the erudite writings or well-reasoned analyses habitually offered up herein by DrRich. And despite the fact that DrRich takes great pains to express himself cordially even when addressing particularly contentious issues, and that he assiduously avoids personal attacks on his opponents, and indeed usually attributes lofty motives to them (focusing instead on their counterproductive methods or naive premises), it is not at all rare for DrRich to be the recipient of some rather negative, even personally hostile, communications.

And of all the topics likely to engender such negative feedback, none gets a more vociferous response than this: DrRich’s contention that among the many mandatory features that will necessarily comprise any Progressive healthcare system, the most obligatory, compulsory, requisite and non-negotiable of all will be the imperative to forbid individuals from having any meaningful control over their own healthcare destiny.

There are two basic reasons individual autonomy in healthcare must be stifled.

First, in order to achieve the most efficient and most effective outcomes within a Progressive healthcare system, all healthcare decisions will have to be made by a Central Authority, wielding its concentrated organizational and scientific expertise to maximize the public good.  Allowing these carefully calibrated decisions to be modulated by imperfect individuals (i.e., by non-experts) will fatally undermine the entire effort.

Second, and far more importantly, when one has at last devised a centrally-controlled, “universal” healthcare system (again, for the purpose of maximizing the public good), then allowing individuals to spend some of their own money on healthcare services that have not been officially sanctioned for them by the Central Authority will wreck the very legitimacy of that system. That is, to permit such individual prerogatives is tantamount to admitting that, perhaps, the Central Authority is actually NOT providing all useful healthcare services to all people (when, by definition, it is). Allowing individuals to purchase “extra” healthcare is a signal to the unwashed masses that there is “extra” healthcare to be had, and that the Central Authority may be holding out on them.

To say it another way, an essential feature of any Progressive healthcare system will be to carefully manage the expectations of the subject citizenry. To have certain subjects running around purchasing extra healthcare will fatally damage those managed expectations, and thus will fatally damage the Progressive healthcare system itself. Hence, it is imperative that individuals be constrained.

This fact has caused DrRich to say, many times, that the real battle over our new healthcare system will be the battle over whether Americans will be permitted to spend their own money on their own healthcare. Left-leaning readers take great umbrage at such a thought, since it is tantamount to accusing them of working toward a great tyranny. Most left-leaning Americans are still Americans, and therefore despise tyranny, and it is perfectly understandable that they would be angered at such an accusation. This is why, DrRich thinks, most left-leaning Americans will themselves be horrified when they at last glimpse where a Progressive healthcare system is inevitably taking us. Unfortunately, DrRich fears, such a realization on the part of well-meaning, left-leaning Americans will come too late to do us any good.

DrRich has attempted to document the efforts of Progressives to limit individual healthcare prerogatives, and while he himself finds the evidence compelling that they are deadly serious about doing so, he apparently has not made the case to the full satisfaction of many of his readers. So let him offer up the latest, particularly compelling, piece of evidence.

Last week, Washington DC District Judge Rosemary Collyer ruled that elderly Americans do not have the right to drop out of Medicare and purchase their own health insurance, unless they also forgo all Social Security payments, and repay the government any Social Security payments they have already received.

The notion that Americans MUST accept Medicare, of course, dates back to the Clinton administration, which in 1993 promulgated a rule in its Program Operations Manual System (POMS) to that effect. (DrRich has described how the Clinton healthcare reform plan intended to aggressively restrict individual prerogatives, and despite the failure of Hillarycare the Clinton administration still took several steps to do so.)  The lawsuit in question was filed by three elderly Americans (one of whom is Dick Armey), who wish to drop out of Medicare in favor of self-purchased health insurance, without having to sacrifice (and repay) their Social Security benefits.

Interestingly, Judge Collyer in 2009 denied a motion by the Obama administration to dismiss the suit, noting that “neither the statute nor the regulation specifies that Plaintiffs must withdraw from Social Security and repay retirement benefits in order to withdraw from Medicare.” Her preliminary ruling thereby confirmed the plaintiffs’ main contention.  So most observers assumed that the judge’s final ruling would also be in favor of the plaintiffs.

It was not. In her final ruling last week, Judge Collyer found a new interpretation of the Medicare statute itself that upholds the POMS rule. The Medicare statute, she now argues, specifies that people who are entitled to Social Security are automatically “entitled” to Medicare, and therefore if one elects to receive the Social Security payments one is owed, one must also accept Medicare. She flatly rejects the notion that when Congress says “entitled” it is implying anything optional, as in, “You can have it if you want it.” When you’re dealing with Medicare, she says, “‘entitled’ does not actually mean ‘capable of being rejected.’” When Congress says “entitled” Congress means you must have it – that it’s mandatory. Judge Collyer ends by sympathizing with the plaintiffs (or laughing at them – DrRich cannot tell for sure): “Plaintiffs are trapped in a government program intended for their benefit.”

The apparent change in Judge Collyer’s reading of the Medicare statute between 2009 and 2011 is disturbing. What made her originally read the plain language of the Medicare statute just like any literate American would, but then two years later read it as if she had to twist it into a presupposed “right” answer? We will never know, of course, but the turnabout seems troubling to DrRich.

It is instructive that the Obama administration would go to such lengths to prevent old farts from dropping out of Medicare. Medicare is not only in the red, but is a great fiscal threat to our national well-being. One would think they’d welcome the idea that some of our elderly might want to pay for their own health insurance, and save Medicare a lot of money. Instead, they fought it tooth and nail, even though the fight reduced them to absurdity. The Obama administration’s chief argument against the lawsuit was that the plaintiffs were lucky to receive such a boon as Medicare, and therefore suffered “no injury” by having to accept it, and so had no standing before the court. The judge herself ridicules the argument of the Obama administration: “The Secretary extolls the benefits of Medicare and suggests that Plaintiffs would agree they are not truly injured if they were to learn more about Medicare…The parties use a lot of ink disputing whether Plaintiffs’ desire to avoid Medicare is sensible.”

So as it now stands, seniors (unless they are rich enough to walk away from Social Security altogether) must accept Medicare. Admittedly, for most elderly Americans this is not a big deal – of course they’re going to accept Medicare. But, as DrRich has pointed out, current law already makes it nearly impossible for patients on Medicare to self-pay for denied medical services. Once you are on Medicare, you will get the medical services the Central Authority approves for you – and nothing more. In the not-too-distant future, this restriction is likely to become much more apparent to Medicare recipients. When and if the day comes when we would like to buy ourselves some medical care which the Central Authority would rather we did not have, we old farts will find that we are “entitled” neither to pay for our own healthcare, nor to drop out of the government program that so restricts us.

And at the risk of angering his readers yet again, DrRich asserts that we are one giant step closer to the day when it will become illegal for all Americans to spend their own money on their own healthcare.

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It should by now be obvious to everyone that, in its great push to take over the American healthcare system, our government will do everything it must to eliminate private practice physicians. This is necessary because Obamacare (or any government-controlled healthcare system) simply cannot operate unless physicians cooperate completely with the Central Authority. Physician behavior absolutely must be controlled, and so doctors who insist on acting independently must either be reeducated or eliminated.

(Don’t get too exercised about DrRich’s language here – he is talking mainly about forcing recalcitrants into early retirement, or career changes. The other kind of “elimination” probably will not become necessary.)

Accordingly, under Obamacare all doctors are to be driven into federally-sanctioned organizations that will operate strictly under government directives. The current parlance for such an organization is the “Accountable Care Organization.”

The ACOs will be run by administrators who (theoretically) will become expert at navigating the morass of rules and regulations now being conjured up under Obamacare.  These administrators will interpret the rules and regulations in such a way as to determine The Way It Must Be Done, and then will pass The Way It Must Be Done down to the ACOs’ clinical chiefs (doctors who perhaps used to practice medicine, and maybe still do, a little, but who are now mainly brevet administrators), and the clinical chiefs will finally pass the restrictive rules of engagement down to the doctors who will actually take care of the patients. These doctors, struggling in the trenches, will attempt assiduously to follow those rules without exception, if they would like to keep their jobs as well as avoid a federal fraud rap. The patients, of course, will get whatever they get, but always with official assurances that whatever it is they get, it will be of the highest quality.

As DrRich has pointed out, doctors have very little leverage under this kind of system. Not only do they have the full weight of the federal government pushing them toward their fate as functionaries within ACOs, but they also are being pushed to so assimilate by their own professional organizations. Indeed, thanks to the New Age medical ethics which their professional organizations have promulgated on their behalf, joining collectives such as ACOs is about to become the only ethical way of practicing medicine. (DrRich has shown that this is explicitly so, and that Dr. Berwick agrees.) Doctors who try to make a go of it on their own will not only be practicing extra-legally, but also extra-ethically.

So this is where we are headed.

But we’re not there yet. Far too many physicians are still fundamentally independent-minded; there is still a lot of work to be done to get all the doctors to assimilate into the Borg.

And a major step in this direction will be to eliminate Independent Practice Associations. While the systematic emasculation of IPAs has been going on for years, it is to accelerate rapidly under Obamacare.

IPAs are groups of doctors who own independent medical practices, and who join together to provide bulk services to health insurers at rates of payment that are negotiated collectively. IPAs have a long and respected history for over a half-century. But they have been on the Fed’s hit list since at least the Clinton administration.

The rules under which IPAs must operate in legally negotiating with insurance companies have become complex, illogical, restrictive, arbitrary and ultimately ironic. The full weight of the federal government has been brought to bear against IPAs, apparently to protect the large and powerful health insurance companies, not to mention government health insurers, against “price fixing” by independent doctors – while simultaneously imposing price fixing by those same insurers upon the IPA physicians .

So: not only is it a violation of anti-trust for two random doctors to have a cup of coffee and mention anything to each other about their respective reimbursement rates, it is also illegal for fellow members of an IPA (who are joined together in collective bargaining with insurers) to do so. Indeed, the only kind of negotiation that is apparently allowed (“apparently” because the actual rules are not explicit but implied, and change arbitrarily depending on which administrators are running the Federal Trade Commission) is called the “messenger model” of negotiation.  The messenger model is necessitated by the fact that physician members of the IPA are not allowed to communicate with each other about rates, so each IPA must hire a “negotiator” who communicates between individual physician IPA members and the insurer. Furthermore, physicians are not allowed to declare to the insurer what level of reimbursement they will accept (because that would be price fixing), but rather, they can only hear the proposed reimbursement rates from the insurer, and accept or reject them. And in recent years, rejecting the offer by insurers, especially government insurers, has sometimes been determined also to be physician price fixing. This system, for reasons unfathomable to DrRich, is NOT to be considered price fixing on the part of the insurers.

DrRich is not sure he has this entirely right, because it is far more complex than he has allowed, and indeed, the rules are manifestly changeable and unclear, even to professional IPA negotiators.

In fact, it has proven to be very easy (and progressively easier as the years have gone by) for IPAs to get into serious trouble with the FTC, and incur massive fines, for “violations” that are not only fundamentally harmless to any party, but that had been perfectly acceptable behaviors in the recent past. To get the full flavor of the runaway prosecutorial zeal with which the FTC has been acting against IPAs, DrRich strongly recommends that you read this article in the December Reason Magazine by S. M. Oliva. (Many thanks to concerned reader Robert R. for pointing DrRich to this article.)

When the FTC decides to prosecute an IPA for price fixing or other violations-du-jour of the negotiating process, the IPA’s only reasonable course of action is to cave in immediately, sign a consent decree, pay the always-huge and always-arbitrary fine, and then abjectly accept whatever reimbursement rates the insurance company is willing to pay. This resolution to federal charges is unattractive, but at least it gives the IPA some chance of continued survival.

And if you don’t like the terms of the consent decree being imposed upon you, for God’s sake keep your mouth shut about it. When the director of a Colorado IPA recently told the press that her organization had done nothing materially wrong, but had signed the consent decree because they simply could not afford to fight the FTC in court (a truism for any IPA), the FTC sanctioned her as an individual, and barred her from negotiating with insurance companies for two years (effectively ending her career, simply for exercising her right of free speech). Even one of the FTC’s own commissioners, in a dissenting opinion, agreed that this latter action had been a travesty. (It was carried out nonetheless).

And so, operating a medical practice in an IPA has been a pretty dicey thing for several years now.

But Obamacare escalates the risk to a whole new level.

While dealing with the FTC is itself a decidedly nasty proposition, it’s nothing compared to dealing with the Justice Department. And Obamacare brings the DOJ into the fight to eliminate “price fixing” by doctors. That is, a violation of arbitrary and unpredictably changeable rules during IPA negotiations is not just a civil matter anymore, but is potentially (at the discretion of the Feds) a criminal matter.

It looks more and more like the handwriting is on the wall for IPAs, or for any independent, private practice physician who wants to take care of insured patients.

So, once again, DrRich begs his physician friends to consider the alternatives. Think about getting out now, dropping out of the system altogether while you still can, and establishing a direct-pay practice before that, too, is rendered illegal. The window of opportunity is closing.

And, sadly, you may want to re-read DrRich’s helpful suggestions regarding black market healthcare, as that may become the only viable alternative to the Borg – and much sooner than DrRich had previously thought.

Why Big Health Insurance Supported Obamacare, Part III

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As we have seen, the fact that the health insurance industry was going to support healthcare reform after the 2008 elections was a foregone conclusion.  The question was: How would the insurance industry support healthcare reform?

When the time came, the support the insurance industry gave to President Obama’s efforts to reform healthcare followed four simple rules:

1) Do not actively oppose Obamacare. In stark contrast to its behavior during the Clinton’s effort to reform healthcare in 1993-94, this time the insurance industry never engaged its vast public relations resources to stifle healthcare reform.  There was no Harry and Louise this time. (Actually, Harry and Louise – the original actors – did make a brief appearance, but now, like the insurance industry itself, they were older, wiser, and sadder, and this time they fully supported the proposed reforms.)

2) Submit quietly to demonization.  A key strategy of the Democrats in passing Obamacare was to remind Americans repeatedly that the for-profit health insurance industry is fundamentally evil.  This strategy was based on the time-honored precept that it is easier to get the unwashed masses to cooperate through hatred than through reason, and so, to gain their cooperation, one must give them something to hate. Obviously, this strategy meant that the health insurance industry had to accept its role as the bad guys in the reform debates without complaint, and without engaging in any serious self-defense.

3) Offer subdued public support to Obamacare. The AHIP (America’s Health Insurance Plans) issued public statements that cautiously supported President Obama’s healthcare reforms. But its support had to remain subdued and tepid, since Satan can’t be seen leading the hymns.

4) Whenever necessary, rise up and demonstrate to the world just how evil you really are. At the end of the day, this was the most important role the insurance industry played in advancing Obamacare. It was certainly their most active role.

It was not a difficult role to fill. Since 1994 the health insurers had engaged in the sorts of truly evil, inhumane, and reprehensible practices that are naturally engendered by covert healthcare rationing, and that harmed or killed many of their subscribers. The only difficult part was choosing which reprehensible behaviors to feature, and when to do it.

In at least two key moments during the fight over healthcare reform – June, 2009 and February, 2010 – when the proponents of reform felt their momentum lagging, the insurance industry intervened with gratuitous behaviors whose chief function was to remind Americans just how unremittingly wicked and inhumane they really are. In the second case, at least arguably, the insurance industry turned the reform effort from apparent defeat to almost certain victory. Indeed, it is not too much of an exaggeration to assert that, in the end, the health insurance industry saved Obamacare.

June, 2009: Say Hello To My Little Friend

The debate over Obamacare entered a new phase in May and June of 2009.  It was during those months that the opposition to healthcare reform found its voice, and it began to seem as if perhaps the Obama steamroller could really be slowed, if not stopped. People were even beginning to say that many Democrats in Congress, after getting an earful from their constituents when they held their summer town hall meetings, would abandon any idea of supporting President Obama’s healthcare reforms.

Supporters of Obamacare decided it was time to invoke the demons.  So in mid-June, the House Subcommittee on Oversight and Investigations called three health insurers to testify on the practice of rescission, and to face not only indignant Congresspersons, but also some of the people who had been personally harmed by their practices.

“Rescission” is when an insurance company voids subscriber’s health insurance (after happily accepting premiums from that subscriber, often for many years) once they get sick. Under some circumstances, rescission might be justifiable. It is legal and proper to cancel a policy if the subscriber is found to have purposely lied on the insurance application about a prior illness that is material to the current illness.

But health insurance companies for years have actively and aggressively practiced rescission on subscribers whose insurance applications contained inadvertent and non-material inaccuracies.  (Just to put it in perspective, this kind of bad behavior is to be expected under a system of covert healthcare rationing, which again, is rationing by whatever means you can get away with.)

Furthermore, the health insurance industry does not merely engage in occasional unfair rescission practices; it has industrialized the process. It employs health insurance detectives whose job is to comb the prior medical records of subscribers who are newly diagnosed with certain, expensive medical conditions, looking for even trivial discrepancies on insurance applications, which they can inflate to “fraudulent” omissions, thus voiding the policy. These health insurance detectives are paid by commission, according to how much money their efforts can save the company. Many of them find it a very lucrative career.

So, at the cost of perpetrating a bit of inhumanity, rescission can save insurance companies a lot of money.

Consider some of the individuals who testified in Congress along with the insurance companies that day

• A nurse in Texas had her insurance canceled after she was diagnosed with breast cancer because she had failed to reveal that, years before, she had consulted a dermatologist about acne.
• A man (whose surviving sister had to testify) had his insurance canceled before he could begin expensive cancer therapy, because he had not revealed (and indeed he had not known) that a prior CT scan had showed gallstones and an aneurysm – conditions unrelated to his cancer.
• A woman had her insurance canceled – and due to the rescission could not find replacement insurance – because she failed to reveal that, at one time, she had been on medication for irregular menstruation.

During the hearing, the three health insurance executives were caused to listen to these and other incredible stories describing some of the inexcusable pain, suffering and death their unfair rescission practices had caused, and then were forced to listen to withering commentary by stunned Republicans and Democrats on the Subcommittee, whose own investigation had found that the three companies on the docket had retrospectively canceled the policies of 20,000 sick subscribers over the past 5 years.

After these heart-rending testimonies and the blistering attacks from extremely angry congresspersons, the executives were challenged by Chairman Stupak (D-Michigan) to now commit to discontinuing the practice of rescission unless intentional fraud could be shown.

All three replied, in turn, “No.”

Such a reply, in such a setting, almost defies belief. The only possible explanation, in fact, is that the insurance industry was stepping up to the plate, and embracing its assigned role as the Evil One in the great healthcare debate.

Even the most stone-hearted insurance executive can see that canceling the health insurance of a newly-diagnosed cancer patient, because she’d forgotten she’d required acne medicine before the prom 20 years ago, is just a bit unfair. But how did these three executives react? They did not attempt to deny such reprehensible behavior, or to explain it, or to defend it.  They were simply defiant about it.

One is put in mind of Tony “Scarface” Montana, bereft of friends, family, allies and bodyguards (albeit because of his own actions), hopelessly surrounded by an army of heavily-armed assassins, screaming, “Say hello to my little friend!” then launching defiantly into a wild, bloody and spectacular suicide.

One cannot for a moment believe that that Richard A. Collins, chief executive of UnitedHealth’s Golden Rule Insurance Co., Don Hamm, chief executive of Assurant Health, and Brian Sassi, president of consumer business for WellPoint Inc., would have been stupid enough to publicly defy Congress over such an indefensible practice, if doing so was against their own long-term interests.  Appearances to the contrary notwithstanding, they were not auditioning for a remake of Scarface.

This is not how an industry behaves which wants to court the goodwill of Congress at a critical juncture in its life cycle. This is not the strategy of an industry that wants Congress to defy its own party’s President and defeat healthcare reform, or that is begging Congress to give them another chance to figure out how to bring healthcare costs into check. This is not the behavior of any industry that wants to elicit any sort of favorable action from Congress. Indeed, these executives would have seemed more sympathetic and deserving if they had proposed instead to place live puppies on a spit and roast them over an open fire during half-time at the Super Bowl.

There is only one explanation for their astounding public defiance on this matter. Which is, it must have suited their long-term interests.

Recall that at the time of this remarkable hearing, there was growing skepticism about President Obama’s healthcare reform efforts, not only on the part of Republicans, but also on the part of a critical minority of Democrats in Congress. And for the first time since the election, there was some question about whether his reform plan would succeed in gaining sufficient support.

What must the health insurance industry do in the face of this faltering support for its desperate end-game? It must act to bolster Obamacare.

In this light the stark, defiant, public “no” uttered by the three insurance executives makes sense. “Look at us,” they were saying, “See how evil we are! We are utterly devoid of human decency, ethical obligations, or a sense of fair play. If we behave this defiantly when we are in the position of mere supplicants to your eminences, just think how we will behave if you fail to rein us in with new reforms!  Abandon all hope, those of you who rely on us for your healthcare, and behold the congressional dogs that placed us in this position of power over your very lives!”

Given the headwinds the healthcare reform effort was to face during the next nine months, it is difficult to say with any certainty how much good the insurance industry did in June, 2009, when it took such an extraordinary step to remind Americans just how incredibly evil it is. But when the time came to help boost the President’s reform efforts, nobody can deny that the insurance industry stepped up and did its duty.

February, 2010: Raising Obamacare From The Dead

Things looked especially bleak for healthcare reform in early February of 2010.  The incredible, possibly Constitution-defying, machinations Congress employed in its desperate attempt to pass healthcare reform had disgusted a majority of Americans, and momentum was clearly shifting to the opponents of Obamacare. And when Republican Scott Brown incredibly won the Senate seat in Massachusetts, robbing the Democrats of their crucial, filibuster-blocking 60th vote, many thought healthcare reform was dead.

But then out of nowhere, in early February, Wellpoint’s California subsidiary, Anthem Blue Cross, announced it was raising its already-astronomical health insurance premiums by as much as 39%, a move that promised to greatly increase the number of Californians who are uninsured.

The demoralized Democrats in the administration greedily capitalized on this new opportunity.

Kathleen Sebelius immediately fired off a very public letter to the company, demanding that they justify this unconscionable rate increase. And Wellpoint, lustily assuming its assigned role as villain, was delighted to reply, equally publicly.

We’re in a recession, Wellpoint brazenly asserted, and in a recession, like it or not, people exercise their prerogative to drop their health insurance. The only people who don’t drop their health insurance are the sick people, or those who are likely to become sick, which means that our cost per subscriber goes way up. So naturally, we have to increase premiums. By a lot. It’s just business. That’s just the nature of our current, unreformed healthcare system. So choke on it.

Wellpoint was also kind enough to mention (for anyone dense enough to have missed the point) that the need for higher insurance premiums would be nicely mitigated if everybody was mandated by the government to purchase health insurance.

Wellpoint’s anounced premium increase immediately triggered great volumes of delighted outrage by thankful Democrats, who desperately needed a large dose of “evil insurance company” at just that time. Wellpoint’s action reignited the proponents of healthcare reform, who were inspired to remind all Americans that this is what would happen to everyone if healthcare reform failed, and the greedy insurance companies had their way.

Stunned Republicans, seeing their impending victory over Obamacare evaporating before their eyes, could only issue a few lame and uncomfortable attempts to diminish the significance of Wellpoint’s unfortunate action.  But to little avail. The momentum had shifted. At least arguably, it was Wellpoint’s decision to announce an unconscionable rate increase at this extremely critical juncture that put healthcare reform back on the road to adoption.

From a pure business standpoint, there was no good reason for Wellpoint to stir the soup at that moment. Wellpoint is the most financially sound private health insurance company. While its California subsidiary did lose money in 2009, overall the company performed quite well, and reported a very nice profit growth for the year. And with several of its competitors in trouble, Wellpoint stood to do comparatively well for the foreseeable future.

Furthermore, it has since been learned that Wellpoint’s math was bad. An independent actuary working for the California Department of Insurance reported on May 5, 2010 that the company had made “numerous errors” in calculating is rate increases, and further, that Wellpoint could cut its rate hikes substantially, and still meet its required 70% medical-loss ratio threshold.

It stands to reason that if Wellpoint really wanted healthcare reform to go away, they would have first checked their math before announcing seismic rate increases, and then, if such astounding rate increases were really needed, they would have waited a few months – while Obamacare died – before announcing their rate hike.

The last thing they would have done is to throw the reformers a critical lifeline just as they were going under for the last time.

In any case Wellpoint’s action, especially at that moment, seems entirely gratuitous. Wellpoint could only have chosen to do its demon dance, at such an inopportune moment, in order to revive Obamacare during its darkest hour.

And that’s precisely what happened.

In the final post in this series of articles, we will take a look at the implications of the insurance industry’s support of Obamacare, as we who find Obamacare less than desirable contemplate what we ought to do about it.
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Why Big Health Insurance Supported Obamacare

Part I – Another Reason He Should Have Kept the Bust

Part II – Why the Health Insurance Industry Supported Obamacare

Part IV – What It Means That the Health Insurance Industry Saved Obamacare
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Now, read the whole story.

DrRich explains it all in, Fixing American Healthcare – Wonkonians, Gekkonians and the Grand Unification Theory of Healthcare.

Now on Kindle!

Why Big Health Insurance Supported Obamacare, Part II

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The fact that the health insurance industry supported Obamacare from the very beginning was entirely missed by the mainstream press. This is perhaps understandable, since a) the mainstream press does not understand the dynamics of the healthcare system, and b) during the Obamacare drama, the health insurance companies had been assigned, and had graciously accepted, their vital role as the Forces of Evil. To the famously credulous members of the mainstream press, it was easy to imagine that the insurers were actually among the opposition.

But the insurance industry supported Obamacare from the start – and even before the start. During the Presidential race of 2008, for instance, managed care companies donated far more money to both Barack Obama and Hillary Clinton than to any Republican candidate, even though both of these Democratic candidates publicly castigated the insurance companies for producing most of the problems in American healthcare, and promised to institute reforms that would drastically cramp their style and reduce their profits.

Why would the insurance industry support the very candidates whose chief healthcare strategy was to demonize them? Quite simply, it was because the insurance industry had nowhere else to go.

By the time Mr. Obama became president, the once proud, self-confident, and even arrogant American health insurance industry had been completely humbled. Like the old Soviet Union twenty years earlier, it still may have looked formidable from the outside, but it was really an empty shell.  The industry had run out its string; it was entirely bereft of ideas. Its business model was completely broken, and it desperately needed an exit strategy. And it was due to the need to find a serviceable exit strategy that the industry supported Obamacare.

To understand what landed the insurance industry in this sad state of affairs, it is necessary to review its recent history.

The Rise of the For-Profit HMOs

When the Clintons set out to reform the American healthcare system in 1993, the health insurance industry initially claimed to support them. The Clintons had promised them a vast new market – the millions of heretofore uninsured Americans whose premiums would be paid, presumably, by the government.

But the alliance fell apart the moment the insurance industry began reading the massive tome of regulations the Clintons finally produced, and found in it much they didn’t like. Chiefly, they they didn’t like the parts that ceded full control of their industry to the government. So Big Health Insurance immediately turned against the Clintons, and spent millions of dollars introducing us to Harry and Louise (a “typical” American husband and wife who were viewed in numerous TV commercials discovering various appalling provisions of the Clinton plan). In the end, when the Clinton’s reform plan went down to ignominious defeat, the powerful health insurance industry, appropriately, got most of the credit.

Most of us Americans were happy at the time that the Clintons’ plan had been defeated, but during the debate over healthcare reform we had become convinced that the old way of doing healthcare wasn’t any good either. The healthcare system, we all knew by now, was bankrupting us.  And something needed to be done about it. But with the Clinton plan off the table, what were our options?

In the ashes of the Clintons’ failed effort, the health insurers saw their golden opportunity.  And they presented the American people with a savior. The savior was, of course, them.

The insurance industry made its pitch in a new guise which we Americans had never seen before. For the big fee-for-service insurance companies had transformed themselves into HMOs, and had fully assimilated the language of managed care. These were not the touchy-feely, non-profit HMOs that had been puttering around in the healthcare system for a decade or so.  These were meat-and-potatoes, for-profit HMOs, run for the most part by hard-nosed business executives, and newly formulated for a new era of American healthcare.

And here is what they said: “Citizens! We all – employers, patients, physicians, hospitals, manufacturers and insurers – have just dodged a bullet. Thanks to us, the frightening socialist reforms of the Clintons have been soundly defeated. But where does this leave us? We stand now between Scylla and Charybdis, between the specter of nationalized healthcare on one hand, and the continued profligacy of traditional fee-for-service medicine on the other. And we cannot countenance either. But here,” they continued, “is a third way. A painless way, based on the sound principles of managed care, open markets, and free enterprise. Let healthcare become a business like any other business, and the market forces will find ways not only to cut costs but also to improve quality, and with no government intervention.”

The offer, in other words, was to turn healthcare over to the business professionals now running the New Model HMOs, who were cocky with the certainty that they could harness the efficiencies of the marketplace to control costs, make a big profit at the same time, and be feted as saviors to boot. Because we’re Americans and we know the benefits of capitalism, and because the other choices we faced looked even worse, we all said, “Go for it.”

This change led to the most rapid transformation the American healthcare system has ever seen, and within a few short years, the majority of Americans were enrolled in HMOs, or some other species of corporate managed care.

So HMO executives set out to control the cost of American healthcare, and to make a spectacular profit doing it. And for a few years, they seemed successful. Healthcare inflation slowed dramatically in the late 1990s, and HMO profits soared.

But it was all an illusion.

The Fall of the For-Profit HMOs

The initial impressive profitability of New Model HMOs was due to the one-time reduction in cost you always get when you implement efficiencies of scale (made possible by merging enterprises), and by instituting the new standardization techniques favored by managed care theory. These steps reduced the cost of healthcare for a while, but the underlying rate of healthcare inflation (which is mostly caused by new medical technologies and an aging population, neither of which are cured by managed care) was pretty much unchanged. So by the early 2000s, when these one-time cost reductions had been fully realized, healthcare inflation was right back on the same unsustainable trajectory it had been on before.

Unfortunately for the HMOs, the big profits they enjoyed throughout the 1990s could not last. Their rapidly expanding valuations were attributable not to their efficient management of healthcare, but instead, to the frenzy of mergers that rapidly ensued, and to the acquisition and privatization of not-for-profit public assets for a tiny fraction of their true value.

So not long after the turn of the century the for-profit managed care companies were getting very nervous. For the very first time in their history, HMOs were faced with the prospect of having to earn their profits, profits sufficient to satisfy their shareholders, by actually managing the healthcare of sick people. This is something they had never accomplished before, and, by the time the election of 2008 approached, they knew they never would.

By that time they had tried everything. Beginning in 1994, filled with confidence and enthusiasm and cheered on (initially, at least) by the public and by public officials alike, the health insurance companies had more than 15 years of more-or-less unfettered freedom to institute any efficiencies they wanted to. In the ensuing years insurance companies tried all kinds of legitimate ideas for reducing healthcare costs, such as managed care, gatekeepers, clinical pathways, disease management programs, pay for performance, wellness programs, medical homes, and even a ruthless consolidation of the industry to achieve “efficiencies of scale.”

They also tried every sneaky and underhanded idea they could think of for reducing costs, like cherry-picking the healthy patients, treating chronically ill patients like pariahs so they would go away, making access to specialty care as inconvenient as possible, forcing doctors to sign “gag clauses” to prevent them from telling their patients about certain treatment options, browbeating primary care physicians into zombie-like compliance with handed-down care directives, refusing to cover expensive-but-effective medical services, and canceling the policies of tens of thousands of patients after they get sick, based on trumped-up technicalities. Indeed, they tried everything short of dispatching teams of Ninjas in the dark of night to slaughter their most expensive subscribers in their beds.  And finally, when all else failed, they instituted huge and unsustainable annual increases in premiums, to the point of driving their customers out of the market. (This latter move, of course, was an open acknowledgment that the industry had entered its death spiral.)

All these efforts were to little avail. The cost of healthcare continued to skyrocket, entirely unabated. And by 2009, when President Obama began his push for healthcare reform, the insurance companies knew they had no prospect of long-term profitability. Their business model was no longer viable, and, while telling soothing stories to avoid shareholder panic, they were urgently casting about for an exit strategy.

A drowning man will cling to any piece of flotsam that comes his way.  What the insurance industry found floating by was Obamacare.

What Health Insurers  Get From Obamacare

In return for its support in the healthcare reform battle, President Obama offered the insurance industry the graceful exit strategy it so desperately needed.  Under Obamacare, for at least a few years the insurers hope to get One Last Windfall – namely, profits from the influx of previously-uninsured Americans whose premiums will be paid, or at least subsidized, by taxpayers.  Here, the insurers are relying on the likelihood that the inflow of new premiums will, for a year or two at least, greatly outweigh the outflow of money they will have to spend caring for these new subscribers. Obviously, they will use every trick in their well-worn book to stave off expenditures for these new subscribers for as long as they can, but if they actually knew how to avoid paying healthcare costs indefinitely, they wouldn’t be seeking a government bail-out today. In any case, an inflow of new subscribers will be a very temporary source of profit for insurers. Hence, at best it is One Last Windfall.

What happens to the insurers after they exhaust this last windfall is still up in the air. Obamacare may, of course, eventually transition to a single-payer system, an outcome which many conservatives desperately fear, and many liberals fervently desire. In this case, there may very well be some final compensatory buy-out (or a buy-off) for the insurance companies. But more likely, the insurance companies under Obamacare will continue to exist essentially as public utilities. That is, they will exist as companies chartered by the government, which administer healthcare under the direction of the government, with the products they may offer, the prices they may charge, the profits they may keep, and the losses they may incur, determined solely by the government.  It’s not glorious, but it’s a living.

And it’s much better than where they would have ended up without Obamacare. Which is why they supported it from the start.

Now that we know why the insurance industry supported Obamacare, in the next post we will explore how the industry, at no small cost to its own public image, supported the President when it counted most.

__

Why Big Health Insurance Supported Obamacare

Part I – Another Reason He Should Have Kept the Bust

Part III – How the Health Insurance Industry Saved Obamacare

Part IV – What It Means That the Health Insurance Industry Saved Obamacare

________________________________

Now, read the whole story.

DrRich explains it all in, Fixing American Healthcare – Wonkonians, Gekkonians and the Grand Unification Theory of Healthcare.

Now on Kindle!

Podcast:

Since the late 1990s, American physicians have labored under a set of tortuous documentation requirements imposed upon them by our government. The E&M guidelines (for “evaluation and management”), apply to the documentation that physicians are now obligated to provide in support of their Medicare billing. The E&M guidelines, first instituted in 1995 and revised in 1997, were part of the Clintons’ great fraud reduction initiative. Ostensibly, the strict documentation requirements reduce the opportunity for fraudulent billing.

While doctors initially railed against the E&M guidelines, they now suffer them in relative silence. The E&M guidelines have become, in fact, just one more hurdle which doctors must navigate as they pick their way through the vast obstacle course that now defines the practice of American medicine. Indeed, younger doctors accept the odious documentation requirements as a matter of course, knowing nothing better, just as children born into the direst third-world slums accept their abject poverty without notable complaint.

But occasionally, physicians of a certain age, dimly remembering how it ought to be, will still complain about these guidelines. One of these is revered fellow blogger DB, who (unlike DrRich) is still in the trenches, and must deal with – and try to teach trainees how to navigate through – this abomination on a daily basis. Accordingly, DB is periodically moved to remind us of what he graciously believes to be the unintended consequences resulting from the E&M guidelines, which is to say, DB seeks to remind us that current medical documentation requirements get in the way of good and efficient patient care.

For some, however, even this sort of mild-mannered, exceedingly polite objection is not to be countenanced. One of DB’s correspondents fired back at him:

“The templates are there to serve as a guide, not a hinderance. If you don’t like your “guide” then work to change it. You shouldn’t look at this “guide” as a form of billing, but rather as a guide in making sure you have covered your bases when seeing the patient. Proper documentation can lead to quality care and positive patient outcomes.”

This, indeed, is the official government position on E&M guidelines. It is so official, in fact, that it moves DrRich to wonder whether Cass Sunstein has actually implemented his well-documented anti-conspiracy strategy, and thus has dispatched armies of government-approved agents to monitor and actively counter “untruths” which are unfriendly to government aims, wherever they are found.

In any case, DrRich is not as polite (or as circumspect) as DB, and so he will say it outright.

The E&M guidelines were established for the specific purpose of controlling the behavior of physicians, to further the goals of covert rationing.

First and foremost, they create a Regulatory Speed Trap of the first order, so that with each and every patient encounter the item that will be foremost in the physician’s mind is not the needs of the patient, but in filling out the complex documentation in such a way as to avoid the appearance of committing a fraud. In practical terms, this means filling out the documentation so as to blend in with the masses, so that one’s records will be passed over by the sharp eyes of the greedy forensic accountants (who are paid by commission for detecting instances of substandard documentation, which are now construed as “fraud”), or even worse, by the sophisticated software now being deployed to detect ever-more nuanced gradations of “outliers.”

A classic post by The Happy Hospitalist describes the mysteries of E&M documentation better than any other attempt DrRich has seen. HH’s description of the documentation hoops through which physicians now must jump is detailed enough that it’s actually difficult to read. Which is the point.

Through their utter opacity and complexity, only partially reflected by the 48 pages of dense prose that comprise them, the E&M rules (for “rules” is what they are) in fact greatly magnify the doctor’s opportunity for making inadvertent documentation errors, and thus of producing a “fraudulent” bill. HH’s post nicely demonstrates how writing a progress note according to the E&M rules requires assembling a complicated set of “elements” from Column A and Column B, as from a Chinese menu, for each of four subject areas of the patient encounter – the history, the physical exam, the assessment, and the plan. Then somehow, one must translate the result (which reads like – and often is – a computer-generated form letter) into the proper, fully-supported billing code.

Even if this mess led to a straightforward means of determining proper billing codes (which it does not), it results in a medical progress note that is virtually undecipherable. This means that when another doctor (or even the same doctor on a different day) tries to read the progress notes to figure out what’s been going on with the patient (which used to be the point of medical progress notes, before they became primarily a vehicle for auditors), they cannot. Compliance with the E&M guidelines can thus actively confound patient care.

When the E&M guidelines were first introduced, they were recognized immediately by doctors as a complete abomination. Indeed, the great hue and cry from angry physicians (and the arrival on the scene of a new Republican administration) caused the Secretary of HHS to appoint a special commission to review the E&M guidelines in 2001. The commission concluded that indeed, the E&M guidelines were entirely counterproductive to patient care, and in June, 2002 voted (20-1) to recommend abandoning them altogether.

But HHS declined to follow the recommendations of its own commission, instead leaving the E&M guidelines in force “temporarily,” and vaguely promising to revise them “soon” in order to make them less dangerous to patient care – knowing full well that the saurian lassitude of the bureaucracy would easily outlast the fleeting indignation of the medical community.

(This simple example ought to teach us how difficult it will be to roll-back any of our new healthcare reforms in the future, even ones that are officially deemed to be harmful.)

Accordingly, not only has HHS failed to take (or, alternately, succeeded in not taking) steps to revise the E&M guidelines, they also have vigorously pressed forward with audits and prosecutions for the federal crime of healthcare fraud, based on physicians’ inadequate compliance with them. And, as the bureaucrats must have predicted, there has not been any substantial noise from doctors about revising these guidelines for several years now.

What’s more, there never will be. Save for the occasional exhortation from an old fossil (sorry, DB), the E&M guidelines have been fully absorbed into modern medical practice. They have become normal.

Accordingly, a multi-million dollar industry has sprung up to help physicians better comply with these coding guidelines. Physicians across the country are spending the time and money allotted for their continuing medical education learning to become better accountants, rather than better physicians.

Which brings DrRich to his last point: It is not actually possible to follow the E&M guidelines to anyone’s satisfaction.

There is, in fact, no “correct” way to code, because correct coding is impossible. This verity was proven a few years ago when a group of specialized government-sanctioned coders took a sample of typical doctor-patient visits, coded them according to their own E&M guidelines – and they all got different answers. (The results of this study were published in the Annals of Emergency Medicine in September, 2002.)

Obviously, then, since there is no “right” way to comply with the coding rules, any doctor toward whom the fickle finger of fate points the Feds is very likely to be found guilty of abuse, if not outright fraud. And what we’ve got here is a well-documented, openly acknowledged, peer-reviewed and published Regulatory Speed Trap.

Here’s what happens to doctors who are found to commit coding abuse (which is to say, to any doctors who are visited by Federally-sanctioned auditors):

1) A small sample of their patients’ charts is audited.
2) The error rate (with the auditor determining retrospectively what an error is) is calculated for that sample, then that rate is applied by extrapolation to all the Medicare billing the doctor has done for the past 6 years (the statute of limitations).
3) For each violation in coding the doctor is calculated to have committed during those six years, the doctor must pay a) triple the amount of restitution, and b) $11,000.00 (per coding violation).

It is not unusual for audited doctors to be hit with hundreds if not thousands of coding violations over a 6-year period, and the fines will almost always amount to well over 7 figures, if not 8. Even rich doctors usually can’t afford that kind of damage. However – if it’s just abuse the doctor has committed and not fraud – often the Feds may offer a settlement deal in the low 7 figures.

And here’s what happens if the coding violations are judged to be fraudulent (which, unfortunately, often appears a somewhat arbitrary designation):

1-3) All the above.
4) Jail

In summary, DB makes a very legitimate point, and has made this point several times over several years. Namely, the E&M coding rules are highly counterproductive to patient care. They produce medical records that are fundamentally undecipherable regarding actual medical content, even by medical professionals; and they distract physicians, with every patient encounter, into a fraud-avoidance exercise.

Sadly, however, DrRich does not believe that merely pointing out the harm being caused to thousands of patients each and every day by the E&M guidelines will do any good. Believing that it might do some good to call the Feds’ attention to it assumes that the harm is an unintended consequence, or at least, that it would be considered too high a price to pay.

This, DrRich feels obligated to reiterate, is demonstrably not the case. The Feds know that the E&M guidelines are harmful to patient care. Their own commission came to that very conclusion in 2002. The Feds know that failing to comply perfectly with the E&M guidelines in each and every case does not really indicate fraud and/or abuse, but is the necessary outcome when you institute a complex set of rules that not even the government’s own coders can interpret. Reminding the Feds of these facts, in public, may make them angry, but it will not change their position on E&M guidelines.

That the Feds continue to impose the E&M guidelines on physicians, despite the harm that they know this causes, tells us something very important about their underlying motives. When you are in the business of covertly rationing healthcare, controlling the physicians is Job One. And as George Orwell observed for us, when you want to control the behavior of some population, a critical step is to control the mode, the rules, and even the very language of communication.

That physicians continue to comply with such oppressions, despite the harm they know this causes, and (with notable exceptions) without serious complaint, tells us something important about them, too. DrRich would rather not say what that is.

________________________________

Now, read the whole story.

DrRich explains it all in, Fixing American Healthcare – Wonkonians, Gekkonians and the Grand Unification Theory of Healthcare.

Now on Kindle!

Podcast:

The following is a close approximation of a talk DrRich gave to a gathering of some of the world’s most promising young cardiac electrophysiologists, in Nice, France, on June 15, 2010. He was asked to talk to these young physicians about physician-industry relationships. The organizers of this gathering apparently did not know, as anyone who reads this blog would know, that DrRich should never, ever be allowed an opportunity to influence promising young physicians.  But, what’s done is done.

* * * * * * * *
A worldwide controversy is now roiling over the appropriate relationship between physicians and industry. Superficially at least, this controversy has to do with the undisputed fact that a physician’s relationship with industry can unduly influence his or her behavior.

That is, this controversy is said to be related to the conflicts of interest (COI) that are always inherent, to some degree, in such relationships.

I believe there is a deeper, and far more disturbing, reason behind this controversy, and I will address it in a short while.  But let’s first talk about COI, because it is ostensibly the chief concern, and it is in fact a very important issue.

A COI is present when an individual has a sacred, fiduciary duty (i.e., a duty of trust) to Entity A, but then develops a secondary relationship with Entity B, which (by creating self-interest, competing loyalties, or even just an inability to be objective), threatens to interfere with the primary duty to Entity A.

Physicians, especially academic physicians, have (at various times) at least three primary fiduciary duties that must take priority. These are: a duty to patients when practicing medicine; a duty to students (i.e., actual students, colleagues, or the public) when teaching; and a duty to society (and truth itself) when conducting medical research.  It is clear that ties with specific companies and their products can easily create important COI that may interfere with each of these primary fiduciary duties, and it is equally clear that physicians have commonly allowed this interference to happen.

Far more often than we like to imagine, doctors have allowed bias to creep in when recommending a course of action for their patients, in imparting knowledge to trainees, colleagues or the public, or when designing, analyzing or reporting results of clinical trials. And typically, most doctors who exercise inappropriate bias have convinced themselves that they are really acting in the best interests of their patients, students or society at large. For it is quite difficult to be objective about one’s own COI.

And there is no question that industry has become adept at the gentle art of creating COI among physicians (subliminally whenever possible), and have carefully incorporated the creation of such conflicts into their business models.

Obvious abuses we have all seen include doctors “shilling” for companies or their products at national meetings; clinical guidelines committees seeded with biased members; unbelievable amounts of money (well above “fair market value) being paid to key doctors for consulting services; long advertisements disguised as CME events; and ghost-writing scientific papers, then recruiting prominent physicians to sign on as “authors” after the fact. There are many others.

Such ongoing abuses of our fiduciary duties ought to be deeply embarrassing to us in the medical profession.

And if it’s not embarrassing, it is at least becoming painful. In the US, physicians who are discovered doing some of these things are being called out publicly, being investigated by Congress if not the Justice Department, losing their prestigious academic positions, and having their reputations destroyed. It is hard to be sympathetic toward them.

Despite all the negative attention – both public and legal – that such COI have brought to our profession in recent years, many of us continue to have tin ears.  A recent example, which has caused a stir in the blogosphere if nowhere else, happens to relate to the EP community. (Thanks to Larry Huston of Cardiobrief who did the heavy lifting on this one. )

Recently, the ACC/HRS collaborated in the launch of a new website, called AFibProfessional.org, which is described as “a unique collaboration to address atrial fibrillation for the cardiology community.” The site has only one corporate sponsor – Sanofi, the maker of Multaq.

At the time of launch, all the content on this new website consisted merely of old, recycled material from older ACC and HRS websites, with a single exception. The single exception was a slide lecture by a prominent electrophysiologist, who we all know and love, on “Managing Atrial Fibrillation.”  This lecture makes a strong case for the off-label, off-guideline use of Multaq. The lecture was posted without any COI disclosure statements, though the lecturer, it turns out, has significant financial ties to Sanofi.  When the matter became a public issue, the lecture was pulled from the site, and the ACC promised to investigate. A few days later, the investigation apparently completed to the ACC’s satisfaction, the lecture was reposted, this time with a COI disclosure.

While one hesitates to suggest malfeasance here, it certainly looks bad.  For the ACC and HRS to co-sponsor a brand new website that , by all appearances, is chiefly a vehicle for advertising Multaq suggests, if nothing else, that we in the medical profession, and our professional organizations, still don’t get it. If we don’t police our own COI, it will be policed for us.

What remedy should be applied?  A reasonable approach would be to recognize that physician-industry ties will always bring at least some COI, and to manage the problem by strictly limiting inappropriate COI, and fully disclosing any that remain.

Accordingly, a number of groups – most prominently the Institute Of Medicine – have recently made formal, and tough, recommendations regarding physician-industry relationships. The final “rules” under which we will all have to live are still being negotiated.

But it is highly likely that they will include many if not all of the following:

-    Doctors should not accept any gifts, no matter how small, from industry. These include trivialities such as pens and notepads, and more substantial gifts such as meals and travel.
-    Doctors should not give presentations in which content is controlled or influenced by industry.
-    Doctors should not consult for industry without a written contract, nor should they receive more than “fair market value” for consulting activities.
-    Doctors should not accept drug samples from industry.
-    Doctors who have a financial interest in a product or company should not participate in clinical trials in any capacity that involve that product or company, including patient enrollment, data collection, analysis or reporting.
-    Doctors who have industry ties should not participate in the development of clinical guidelines.
-    Medical schools and professional organizations should not accept direct funding, or attributable funding, for CME.
-    Any interaction with industry will be fully disclosed, and made publicly available.

What this “full disclosure” will look like can be seen in the Physician Payment Sunshine Act, a law which is pending in the US. Under this act,  all “transfers of value” totaling $100 or more in a year to any physician will be reported by each company to the government annually, along with each physician’s identifying information. Such “TOV” includes food, trinkets, entertainment or gifts; travel; consulting fees or honoraria; funding for research or education; stocks or stock options; ownership or investment interest, and any other economic benefit.  This information will be posted on a public, searchable government website. Companies will be fined $10,000 for each incident of an unreported TOV.

You younger physicians will be spending your careers in a COI environment that is significantly different from that which we, your elders, have experienced. Activities that have been acceptable, and even encouraged, will now cause you to be publicly stigmatized, or worse. This matter is in great flux, and you need to pay close attention to it as the rules are changing. In the meantime, you need to choose your interactions with industry very carefully, and very circumspectly.

Everything I have just discussed assumes that the real issue regarding doctor-industry relationships is COI. Indeed, everything I have discussed assumes a particular way of looking at industry relationships, which I will call Theory A. Theory A, goes as follows:

Theory A:

-  Medical progress is Good, and benefits mankind.
-  Industry is responsible for a high proportion of medical progress.
-  Industry-driven progress requires the active participation of physicians.
-  Therefore, a well-managed cooperation between industry and physicians is beneficial to mankind, and ought to be encouraged.

If you subscribe to Theory A you believe that, because well-managed physician-industry relationships benefit mankind, these relationships are good. So, fundamentally, it’s the management of these relationships which is at issue. These beneficial relationships produce unavoidable COI, which we must manage by strictly limiting their extent, and fully disclosing the ones that are left.

On the surface, at least, that’s what the debate is about – where to draw the necessary limits.  But just below the surface, the debate is about something else entirely. Beneath the surface, Theory A is rejected outright.

Today we hear prominent voices telling us that merely managing COI does not go far enough. No amount of COI is acceptable, and ALL physician-industry ties should be prohibited.  Among these is Jerome Kassirer, former editor of the New England Journal of Medicine, who says, “The ideal handling of COI is not to have them at all.” For these voices, Theory A simply does not apply. Rather, (I submit) they subscribe to Theory B:

Theory B:

-    The greed of medical industry creates excessive costs, and produces far more harm to society than good.
-    Physician-industry alliances strengthen industry, and increase the harm.
-    Therefore, crippling these unholy alliances is critical to the interests of society.

A corollary of Theory B is that it can only be the State’s job to cripple these alliances.

Proponents of Theory B, noting, not incorrectly, that medical industry is chiefly concerned with profits rather than the public good, conclude that industry will always behave in ways that are counter to the interests of society.  While many proponents of Theory B will agree that industry provides at least some benefits, they are convinced that these benefits are far outweighed by the harm they produce. Therefore, Theory B proposes to stifle, if not cripple, medical industry. And a very useful strategy for achieving this goal is to de-legitimize any practical relationships whatsoever between medical industry and physicians.

Proponents of Theory B rarely say what their real goal is. Most of them give lip service to Theory A. One must discern their real motives from their behavior.

Much of that behavior, in practical terms, has to do with controlling the flow of information. Let industry develop whatever it wants (perhaps), but don’t let profit-drunk industry – or its greedy physician spokespersons – instruct doctors and patients on who gets to use industry’s products, or when and how.

That kind of information can only be managed by unbiased sources. Proponents of Theory B invariably refer to government-appointed panels of experts to determine which products of industry are good and bad, and to manage the flow of information about them. Information coming from anywhere else is to be regarded as being charged with bias and greed, and should be ignored, or even suppressed.

Inherent in this viewpoint is the notion that the State is an honest broker, with no bias of its own, except to do what is best for the population. The State, in its disinterested beneficence, is the only civil entity which can pass judgment on which medical information is suitable for general consumption.

But even as a general proposition, no government is an unbiased and honest broker. Politics, according to Harold Lasswell, an early Progressive political scientist, is determining who gets what, when and how. Government officials do not cancel their own human nature when they put on a government name tag. As they go about the business of determining who gets what, when and how, they inevitably – and most often intentionally – create various favored constituencies, fiefdoms, and clienteles to suit their own goal. That goal is to consolidate and expand their own authority. In this way, in the exercise of its political mandate the government always creates co-dependencies, and determines winners and losers. So even in the general case, the government cannot be an honest broker.

But with regard to healthcare, government bias goes far beyond the general case. Healthcare spending is the chief problem governments face today. In the US, projected Medicare expenditures over the next 30 – 40 years will be $35-55 trillion. Numbers like this are deeply destabilizing, and simply cannot be abided, and promise nothing but chaos, revolution, and societal disintegration.

To the State, controlling healthcare spending is an existential problem, a matter of life and death, an issue that justifies any solution that has even a slight chance of working.

Why is the cost of healthcare rising so rapidly? Fundamentally, it is medical progress. Medical progress has greatly increased overall healthcare expenditures. Simply consider, for instance, the many fatal illnesses we have converted to chronic, and chronically expensive diseases – coronary artery disease, kidney disease, HIV/AIDS, various forms of cancer, and heart failure, to name a few.  Medical progress has made great strides in early detection and prevention, and preventive medicine always increases the cost of care.  And thanks at least partly to medical progress, life expectancies are on the rise, and people have many more years to consume healthcare.

Medical progress is very expensive, and the more we have of it the more it costs. The State can only look at medical progress and say, “Medical progress is killing us.”

But it is not politically feasible to come right out and say that stifling medical progress is necessary to the survival of the State. Rather, the State must assert that what it is stifling is greed.

Hillary Clinton gave us the State’s operative formulation in 1993: “There are just too many greedy doctors using too much expensive technology.”  So, to control costs, the State must control the doctors; and the State must control the technology, which is to say, industry.

I submit that an underlying theme within the debate over doctor-industry relationships is a desire to greatly slow or even stop the real threat to the State: medical progress, and the vast expenditures which medical progress produces.

The State has several means for stifling medical progress.  The State can institute increasingly oppressive regulations, which can have the effect of hamstringing industry, but more importantly, has the effect of converting industry to a client of the State, dependent on the State’s favors for its success. The State can demonize industry, trying to convince the public that drug companies and medical device companies are evil entities that would just as soon harm them as help them, and indeed, without the strong hand of the State would prefer to distribute pain and suffering as the more favored pathway to windfall profits. But more to the point of today’s discussion, the State can stifle the doctor-industry relationships that are so critical in steering medical progress in a clinically relevant direction.

So the  interests of industry must be represented as being fundamentally counter to the interests of society, and the doctors who have relationships with industry must be painted as their evil (or, at best, deluded) minions.

Yes, industry is biased, and industry will act on that bias whenever they can get away with it. Industry just can’t help itself. That’s just the way it is.

But the State is also biased. And the State will also act on that bias whenever they can get away with it. The State can’t help itself. That’s just the way it is.

Industry will try to exercise its influence over us by data-driven persuasion, and when that fails they will try to sweeten the persuasion, perhaps even with subtle or not-so-subtle bribes.

But the exercise of persuasion is even more dangerous when done by the State. While the State may also try to influence us with data-driven persuasion, it is very quick to resort instead to propaganda (i.e., the art of information-control by which the unwashed masses are told only what the specialized classes have determined is best for them), and when that fails, the State will resort to its ultimate form of persuasion – the enforcement of new and suppressive regulations at the point of a gun.

So, while industry is indeed biased, and needs to be kept at arms length, de-legitimizing industry altogether would be disastrous.  It would create an open field for extraordinarily powerful forces which are at least as biased, but in the opposite direction. If we value medical progress, we need the balance that industry provides – and that includes not only industry’s products, but its voice.

Medical progress driven by industry-physician collaboration is good for mankind. But that collaboration inevitably creates conflicts. We physicians need to control those conflicts, or the collaboration will be forcibly terminated altogether. Our professional history to date is bleak in this regard, and we only have one chance left to get it right, if that.

But in controlling our COI, we should not allow ourselves to be pushed too far. We should agree to reasonable limits on conflicts, and on full disclosure of any conflicts that remain. But we should draw the line when we are urged to forgo all relationships with industry altogether. We must recognize that industry and its selfish goals provide a necessary counterbalance to even more powerful forces whose goal is to stifle medical progress.

I don’t ask that you accept my synthesis of this problem at face value. I simply ask that you listen to what I am suggesting, and observe for yourself what is happening out in the wild. Then challenge yourself to come up with a better explanation for what you see happening out there. I sincerely hope you can, as I would much rather that my conclusions were not true. So if you do come up with a better explanation, I will greatly appreciate hearing about it.

________________________________

Now, read the whole story.

DrRich explains it all in, Fixing American Healthcare – Wonkonians, Gekkonians and the Grand Unification Theory of Healthcare.

Now on Kindle!

Podcast:

Part 1 of Limiting Individual Prerogatives

Part 2 of Limiting Individual Prerogatives

Part 3 of Limiting Individual Prerogatives
____________

DrRich could go on and on about how our government is intent on restricting the right of individuals to spend their own money on their own healthcare, but (for now, at least) this will be the final post in this series. DrRich has made his point.

Even some of his critics, who have accused DrRich in the past of being overly paranoid on this topic, seem to have gotten it. Some who previously were quite vocal have remained suspiciously silent. Others have fallen back to quasi ad hominem accusations (suggesting, for instance, that DrRich must be a follower of Mr. Beck, with all the horrific connotations that condition entails). And then there is the esteemed Praveen (author of the excellent True Cost Blog), who conceded as follows: “Massachusetts’ attempt to ban direct pay is both unfortunate and unconstitutional. Perhaps you’re right, and the bureaucrats are sneakier than I think.”

So maybe DrRich should just declare victory and move on.

But it is important to make one final point, namely: the notion that our government is intent on limiting our individual healthcare prerogatives is far more than just one of DrRich’s theoretical constructs. Indeed, our government has been acting on this intent for over 15 years. The main case in point, of course, is Medicare.

It has always been recognized that every American citizen “is the proper guardian of his own health,” (Supreme Court Justice Joseph Story, 1873), and accordingly, has a natural right to employ his own individual resources to that end. Roe v. Wade, for instance, was a particularly explicit recognition that a woman has a fundamental right to purchase medical services which she determines to be necessary for her own well-being.

Indeed, when Medicare became law in 1965, Congress also explicitly recognized this right, stipulating that nothing in the new law “shall be construed to preclude [an individual] from purchasing or otherwise securing protection against the cost of any health services.” (DrRich reminds his readers once again that a bold, restrictive statement like this, appearing in legislation, generally heralds an outcome opposite to the statement itself.)

DrRich has already pointed out that under Hillarycare, private medical practice would have been nearly criminalized out of existence. So one ought to expect that the Clinton administration would view an individual right to purchase healthcare as a threat. And indeed, it did. But, as it happens, the erosion of the rights of Medicare “beneficiaries” began even before the Clinton administration. (And even again, DrRich must remind his readers that any universal healthcare plan, even under a Republican administration, will always tend to limit individual liberties.)

In 1991, Medicare administrators published a “carrier bulletin” warning physicians that direct-pay contracts between patients and doctors were strictly prohibited, unless the contract was initiated solely by the patient, and even then, payment rates must be set by Medicare, and further, if the patient later became dissatisfied with that (patient-initiated) contract, Medicare would severely (and retroactively) sanction the physician.

When physicians sued Medicare to prevent this odious new policy from being implemented (Stewart et al. v. Sullivan), the government took the position that it had, in fact, not made any new policy after all, arguing that stuff that shows up in its “carrier bulletin” doesn’t really count. But once this argument was successful in having the lawsuit thrown out in a summary judgment in 1992, Medicare then cynically turned around and immediately made that selfsame new policy “official,” by publishing it in their 1993 Medicare Carrier’s Manual.

But the Feds were still not satisfied. The new, restrictive policy technically still allowed private-pay contracts, as long as the patient initiated them. So the Clinton administration engineered an amendment to the Balanced Budget Act of 1997 – Section 4507 – which prohibited any self-pay contracts whatsoever between Medicare patients and their doctors for medical services which are covered under Medicare. Under Section 4507, which is still the law today, if a doctor provides even one self-pay medical service to a single Medicare patient, that doctor is punished by complete banishment from the Medicare program for at least two years.

The federal government was eventually challenged again in court over Section 4507, but that lawsuit was also thrown out in a summary judgment. The rationale the government offered to the court in justifying its restrictions on individuals’ prerogatives, however, is instructive: “…what you will have is a system whereby the rich can buy what they want and those many beneficiaries who are on fixed income will not be able to afford those services” (United Seniors Association et al. v. Shalala). So again, the interest of the collective (“social justice”) was invoked to justify a law which stifles an individual’s fundamental right to purchase medical services he or she determines to be necessary for his/her well-being.

In any case, since 1997 Medicare patients have been able to purchase Medicare-covered services for themselves ONLY if they obtain that service from a doctor who agrees to opt out of Medicare entirely. This severely limits a patient’s opportunity to self-pay for covered services. The fact that Medicare patients can still buy these medical services from direct-pay physicians, however, is one reason the government hates direct-pay practices, and wishes to stamp them out. More importantly, while some primary care physicians have indeed opted out of Medicare in order to establish direct-pay practices, this path is not a realistic option for medical specialists. So in practical terms, the only “covered services” available for self-pay by Medicare patients, on even a limited basis, are primary care services.

There are several legitimate reasons a Medicare patient might want to self-pay for a medical service that is covered by Medicare. If Medicare “covers” heart valve surgery, for instance, a patient might want to pay for a new, minimally-invasive surgical approach that is inadequately reimbursed by Medicare, rather than the big, open-heart surgery that Medicare reimburses fully. Or, one might want to self-pay for “covered” psychiatric care, or for treatment for a venereal disease, in order to keep embarrassing or harmful medical records out of government-controlled databases.

Furthermore, it is important to recognize that just because a healthcare service is “Medicare-covered” does not mean that it will be covered for a given patient. Whether a specific individual is covered is often determined by a “medical necessity” ruling, made by a bureaucrat. Section 4507 essentially precludes a patient’s ability to purchase a denied (but “covered”) medical service, no matter how badly they want it, or believe they need it.

One can argue, and with some merit, that at this juncture denials of medically necessary services by Medicare have been relatively judicious, and therefore that the “Section 4507 rule” has not had much of an actual impact. In fact, it is likely that most Medicare beneficiaries do not even know that this rule exists.

But while its impact might be relatively small so far, the Section 4507 rule has now been in place for 13 years – it is well-established. So, once Medicare begins reducing reimbursements to physicians and hospitals, to the point where they can no longer afford to offer certain services to Medicare patients (and Medicare has just recently begun doing so, specifically, for some cardiac imaging studies), those patients will be left in the cold. Services which are officially “covered” by Medicare, but which are reimbursed at such a low rate that they cannot actually be provided to them, will become unavailable even to Medicare patients who are willing and able to pay for those services.

DrRich’s main point, once again, is that our government has a deep and abiding need to limit our individual prerogatives when it comes to our healthcare, and has been acting on that need for a long time. The principle for these limitations on our individual liberties, the principle of social justice, has already been established, and has survived court challenges.

Extending these limitations on personal liberties to Obamacare, and broadening their usage, will not require any major changes in direction, or principles, or policy, but will merely require an expansion of already existent – and even “venerable” – rules, rules which have been an established part of Medicare for many years.

DrRich has expressed the idea that such restrictions by our government on such fundamental individual liberties are a very big deal indeed, and, in fact, signal an end to the Great American Experiment. His critics admonish him, however, that he makes too much of it, that, presumably, our government in its benign wisdom is just doing what’s best for us.

DrRich begs his readers to forgive him if he sees, in such a reply, even more evidence that the only nation in the history of mankind to be founded on the principles of individual freedom is well on the way to abandoning those exceptional principles, for the sake of the same, soothing-but-empty blandishments that have been offered, throughout human history, by well-meaning people who end up producing – or becoming – tyrants.

Podcast:

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Part 1 of Limiting Individual Prerogatives

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Have you ever wondered where Obamacare came from? From where, exactly, did those 2700 pages of undecipherable prose arise?

It is clear that our Congresspersons never read it, let alone wrote it. At the President’s “Health Care Summit” in late February it seemed pretty plain, to DrRich at least, that the only people in the room who had read the bill carefully were Republican Congresspersons Ryan and Cantor. The proponents of the bill stuck to generalities, platitudes, and vignettes about recycling dead people’s dentures. When Ryan and Cantor used their knowledge of the bill to question the President about its details, they were admonished to stop using “props.” The President was not just being mean; he needed to avoid getting into the details because he himself had only a broad general idea of what the bill actually said. This is not a slam at the President; the bill is designed to be fundamentally indeterminate in its meaning, so that the regulators who will later translate it into rules, regulations and guidelines, under which healthcare providers can then be prosecuted, can at that time interpret it as directed. This is what Nancy Pelosi meant when she said, a few days later, that Congress would have to pass the bill so that we all could find out what was in it. (This also explains why none of our legislators read it – except for those pesky Republicans, who were only trying to make trouble. What’s the point in reading a long, boring document whose actual meaning will only be sorted out later?)

So, DrRich asks again, where did this bill – whose actual meaning was elusive even to the President and the legislators who were promoting it – come from? Who actually put the words to the page, and crafted this remarkable piece of legislation?

We may never know the name(s) of the person (people) who held the pen(s) which scratched out the actual words, any more than we will ever know the real names of the individuals who wrote the gospels of Matthew and Luke. But, just as New Testament scholars have been able to trace these two gospels to a common prior source – the so-called “Q document” – it is not difficult for anyone with a smattering of interest in the art of legislative exegesis to trace the source document for our new healthcare law.

The Q Document for President Obama’s Patient Protection and Affordable Care Act, was, of course, Hillary Clinton’s Health Security Act, which went down to ignominious defeat in 1994.

DrRich, who is rapidly developing an expertise in forensic diplomatics, and having spent significant time examining aspects of the Obamacare bill, decided to go back in time, and re-examine Hillary’s original proposal for fundamentally transforming the American healthcare system.

While Hillary’s Health Security Act was widely castigated by contemporaries as being a vast monstrosity of bureaucratic legerdemain, filled with complexity and labyrinthine passages that attempted to hide its true meaning, DrRich, after spending some time with Obamacare, found Hillarycare to be a model of legislative brevity and clarity. In fact, DrRich believes, its very straightforwardness is what killed it.

For instance, Hillarycare is only 1368 pages in length. How could they be so concise?

Even more remarkably, Hillarycare spells out pretty plainly what it actually means to do. For instance, in the Obamacare bill, in order for a reader to assemble the information that the  Independent Medicare Advisory Board is actually to be called the Independent Payment Advisory Board, and that its “advisory opinions” which are to be submitted to Congress for “consideration” are actually formal dictates which must be followed to the letter, and that it can inflict its cost-cutting mandates to all of healthcare and not just to government programs, one must jump around to numerous distant sections in the 2700-page document. In the Hillarycare bill, in stark contrast, the analogous National Health Board (which, like the Immutables, was to have been the Supreme Court of Healthcare, beyond which there was to be no appeal, no revision, and no repeal) is presented in an entirely straightforward way, and all in one place.

And now, having immersed himself once again, however briefly, in the relatively refreshing model of clarity and precision that was Hillarycare, DrRich is convinced that the people who actually wrote the Obamacare bill (and may God keep these invaluable masters of legislative poetry safe, as we will be needing them), simply began with Hillary’s old Health Security Act, disassembled it into various bits, padded each bit with a little more than twice its weight in verbiage, and reassembled the pieces in some nearly random fashion, puzzle-like, into the exceedingly difficult-to-read document that became Obamacare.

That is, Hillarycare is demonstrably the Q document to Obamacare.

Obamacare’s debt to Hillarycare is obvious. Hillarycare included individual mandates requiring everyone to have government-approved health insurance; it reduced private health insurers to government-directed utilities, whose products, rates, and profits were to be controlled by the feds; and it created omnicient and omnipotent panels which were to hand down dictates to let doctors know what services they may or may not provide and under what circumstances.

DrRich, therefore, formally advances the thesis that if you want to understand what Obamacare is actually getting at – what with its inherent and intentional obscurity, obscurity designed with care to provide its proponents with plausible deniability – simply examine the much more straightforward model from which it was derived, namely, Hillarycare.

And this brings us, finally, to the theme of this current series of posts. For Hillarycare strictly limited, in practice, the ability of individuals to spend their own money on their own healthcare.

In this instance even Hillarycare had to be a bit obtuse. For, as DrRich’s critics have pointed out to him so very many times, Americans are jealous of their own personal liberties, and are not likely to simply tolerate a frontal assault on their right to guard their health with their own resources. And of course DrRich agrees with this idea. Indeed, the fact that Hillarycare was insufficiently obtuse on this matter had a lot to do with why it ultimately failed to become law.

The attempt at limiting individual prerogatives under Hillarycare was, to be sure, devious (though not devious enough to fool people). So it began with a straightforward statement declaring that it was not doing what it was actually trying to do: “Nothing in this Act shall be construed as prohibiting…an individual from purchasing any health care services.”

Now first of all, for readers who persist in thinking that restrictive language like this, when it appears in federal legislation, actually means anything in particular, let DrRich disabuse you of that notion with two examples. 1) The legislation that created Medicare contains the following language: “Nothing in this title shall be construed to authorize any federal officer or employee to exercise any supervision or control over the practice of medicine, or the manner in which medical services are provided, or over the selection, tenure, or compensation of any officer, or employee, or any institution, agency or person providing health care services.” (Section 1801, Medicare Act, 1965). 2) Obamacare contains language that prohibits healthcare rationing.

In any case, after making this broad promise in favor of individual liberty, Hillarycare went on to limit individual liberties. It attempted to do this in the Fraud and Abuse section of the proposed law, which sought to dry up most of private medical practice, and criminalize the rest. It provided for strict governmental controls over the fees that could be charged by fee-for-service doctors or private practitioners. And if the feds decided that a private doctor’s fees were too high, they could charge him/her with bribe-taking, a serious federal crime under the new law. Indeed, Hillarycare attempted to make illegal most of the ways patients could go outside the approved system to get “extra” healthcare. Criminal penalties could accrue to both the doctor and patient. According to Paul Craig Roberts, writing in the Washington Times in December, 1993, “Mr. Clinton’s plan turns normal patient advocacy into a federal criminal offense. For example, a doctor who wants an earlier date for surgery for a needful patient can be accused of using wrongful influence and accepting a bribe and sentenced, along with the patient, to 15 years in prison.”

While none of this got much publicity in the general media in 1993-1994 (which goes to show that things really haven’t changed that much), you can be sure that doctors were aware of it. That Hillarycare would make it so very easy to inadvertently commit a federal crime – which would lead to massive fines, loss of license, and jail – was, in fact, one of the main reasons most physicians were so violently opposed to it.

The point DrRich is trying to make here is to demonstrate just how deeply reformers feel the need to control the behavior of physicians (and through physicians, the behavior of patients) in order to gain the control they need over individuals, and just how far they are willing to go to this end. It was partly because the Clintons showed their hand in this regard that their healthcare plan failed.

DrRich will now make two final points, and then end this already-too-long post. First, while Hillarycare failed to become law, many of the over-the-top anti-fraud provisions within Hillarycare actually became the law of the land a few years later, in the HIPAA legislation. DrRich has discussed this in detail in his book, and demonstrated how, during the rest of the Clinton administration, the healthcare police worked diligently to let doctors know that their careers, life savings, and physical freedom were dependent on making the happiness of the government – and not of their patients – their chief concern. This activity stopped during the Bush presidency, and has not yet picked up again under President Obama. But the infrastructure is in place already for an unusually effective coercion of doctors, in order to keep them from providing services, and thus to keep patients from buying those services, that the government does not like. There was, in fact, no need to add this infrastructure to the Obamacare legislation. The only thing that’s necessary is for the government to decide (as it did for a few years during the 1990s) that it’s time to take off the gloves.

And second, the intent of the people who brought us Hillarycare – the same people, in philosophy if not in person, who brought us Obamacare – ought to be very plain to all of us. We know their mindset. They may not have gotten away with limiting individual prerogatives in 1994 – but they certainly tried to.

And while it is true that Americans greatly value their liberty, and will chafe at overt restrictions on their ability to use their own resources for the sake of their own health, DrRich reiterates that actually preventing these restrictions will depend on our continued vigilance, and our willingness to stop the people who so plainly want to stifle our individual prerogatives, for the sake of the control they must have.
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Part 3 of Limiting Individual Prerogatives

Part 4 of Limiting Individual Prerogatives

Podcast:

Now that the great campaign to transform the American healthcare system has passed a critical milestone – the passage of President Obama’s healthcare reform legislation – many Americans find themselves confused about what it all means. What just happened here? What will happen to our healthcare insurance? How much will it cost, and who will pay for it? Why does the whole process seem so darned difficult and confusing?

The confusion is quite natural, since, in fact, nobody really understands what the new legislation says. It is common knowledge that only one or two of our legislators actually read the whole 2700 pages, and those who did only read it so they could make trouble for the President at his Bipartisan Healthcare Roundtable this past spring. (You know who you are, Paul Ryan.)

Remember when Nancy Pelosi said, “We have to pass the bill so we can all find out what’s in it,” and all the Republicans jumped all over her for making such a stupid remark? Well, DrRich is here to tell you that Nancy was displaying uncommon wisdom. Because DrRich now has read large parts of the legislation himself, and can say with confidence that the bill is not merely lengthy, convoluted, and difficult to understand. Rather, its meaning is fundamentally indeterminate.

The indeterminacy of the bill’s language was, of course, intentional. It was done so that, for instance, some legislators could be assured that the bill disallowed Federally funded abortions, and other legislators could be assured that the bill encouraged Federally funded abortions, while the actual language of the bill could be construed to bolster either assertion. Therefore, Speaker Pelosi’s silly-sounding statement was not only correct, but also was probably the most insightful commentary on the bill we’ve heard from any public official.

The bill is now being torn into bits by multitudes of officious bureaucrats, and translated into millions of pages of rules, regulations and guidelines, and then key aspects of those new rules, regulations, &c. will be fought over in courts of law. Once all that is finished, we can all find out what was in it. Just like Nancy said.

In the meantime, whatever the details of our new healthcare system turn out to be, there is a certain clear narrative to our ongoing healthcare saga that, once you understand it, will go a long way toward enlightening you about what’s really going on.

And so, as a public service, DrRich will now explain all this to you in a very simple way, so that – whatever jive you’re hearing from politicians or journalists – you will always get it. For, once you understand a few key concepts, this thing is really pretty easy to follow.

The Fundamental Problem

The fundamental problem with American healthcare is this: None of the pools of money we have created (or ever could create) to pay for our healthcare – whether those pools of money reside with the insurance companies or the government or both – can possibly buy all the healthcare that might benefit all Americans. This means we have to ration healthcare (i.e., intentionally withhold at least some beneficial healthcare from at least some of the people who would benefit from it). But because we’re Americans and Americans don’t ration, we (and in particular, our political leaders) are unable to address this need to ration openly and forthrightly. Therefore, the unavoidable rationing is being conducted covertly.

Until now, most of the covert rationing has been overseen by the health insurance industry. This, indeed, from the very beginning was the primary purpose of modern health insurance companies, as determined by Congress itself when it legislated the formation of HMOs. (See the ruling of the U.S. Supreme Court in Pegram et al. v. Herdrich (98-1949), 530 US 211, 2000.) So, when the health insurers engage in cherrypicking patients, denying medically necessary services, coercing doctors to ration at the bedside, retrospectively canceling the policies of patients after they get sick, and doing everything short of dispatching teams of Ninjas in the dark of night to slaughter some of their more expensive subscribers in their sleep, they are not really being evil. They are only carrying out the job that had been assigned to them by our society. Covert rationing is a dirty, thankless job, but somebody’s got to do it.

The major sin of the health insurers is that, despite their Herculean efforts to harness covert rationing to control costs – and despite the wondrous incentive of greater profits if they do so – they have utterly failed in their assignment. Healthcare costs continue to rise at 3 – 4 times the rise in the cost of living, and within the next couple of decades promises to bring our republic to its fiscal knees (even without all the other stuff that’s making our deficit explode).

This is the healthcare crisis, and it’s real. We simply cannot actually spend $40 trillion on Medicare patients over the next three or four decades (as we’ve explicitly promised the baby boomers). The only real question is whether we will avoid spending all that money thanks to societal disruption and revolution, or by some more civilized means. (The fiscal implosion of our society would of course finally fix our healthcare crisis. Healthcare, far from being an essential and indispensable human need, actually is a luxury, a recent artifact of our advanced, stable, and affluent culture. Runaway healthcare costs, by bringing down our societal stability, will eventually provide its own cure.) Our current “healthcare reform process,” such as it is, is our stab at a more civilized means of addressing our looming impossible fiscal obligations.

What Is Healthcare Reform Actually Going to Reform?

What we are witnessing today is merely a rather messy changing of the guard. The primary responsibility for covert healthcare rationing is going to shift from the health insurers to the government.

The health insurance industry has run out its string. They have had 15+ years of virtually unfettered opportunity to get healthcare costs under control, and they have utterly failed. Over those 15 years, their attitude has evolved from arrogance to concern to abject fear. They finally and starkly realize that they have no clue as to how to control costs. As DrRich has pointed out for three years, the insurance industry has not been looking to block healthcare reform, but rather, was partnering with the reformers in the hope of finding for themselves a graceful exit strategy. They hope to gain one last windfall in profits and stock prices (from mandates and insurance subsidies for the tens of millions of currently uninsured Americans), and once that happens, they hope to settle into the business of administering, and processing transactions for, government controlled healthcare. That is, the insurers hope to become public utilities, since that’s way better than collapsing into oblivion.

So the overriding aim of healthcare reform, with the complete support of the insurance industry, is to conduct an orderly transfer of the pools of money with which we pay for our healthcare – along with the responsibility of managing “risk” and controlling the cost of care (i.e., covert rationing) – away from private insurers and to the government.

Understanding the Players

Government control of healthcare, of course, is precisely what the Republicans accuse the Democrats of wanting, and what the Democrats angrily deny they want.

Understanding the Republicans. Republicans as a group cling to the quaint notion that competition among insurers is all that is needed to reduce healthcare costs; that given the right market incentives, the insurance industry – in its wisdom – will bring healthcare inflation under control. They utterly fail to hear what the insurance companies themselves have said (by their actions): “No mas!”

The Republicans’ arguments ring hollow. It is useless to protest that the Democrat plans will lead to rationing, when not only do we already have rationing, but covert rationing in fact has been the official cost-cutting “plan” assigned to HMOs for decades now. It is useless to protest that 85% of Americans like their current health insurance, when the fiscal reality is that health insurance will change drastically for all Americans over the next decade or so, whether we change it by design or not. It does not matter that a lot of Americans like the health insurance they have now. Keeping it over the long term is not an option.

To a very large extent (DrRich is sorry to say, what with his conservative leanings and all), with such arguments the Republicans have made themselves nearly irrelevant in the current discussion.

Understanding the Democrats. The Democrats were handed the opportunity of a generation. They had a major advantage that Democrats of the Clinton era did not have: the health insurance industry is finished, and the industry knows it. The insurance industry was not going to let this effort fail.

The chief difficulty remaining for the Democrats is that (for their own survival) they must pretend they are not engineering a government takeover of healthcare, when in fact they are. As we have seen, there is not really much choice here. They must take over healthcare even if they don’t want to (though many of them do), because the health insurance industry is finished. The pretense is necessary, however, because the notion of government-controlled healthcare is not something the people – or even many Democrats – want, or are willing to tolerate.

Like the odious job of rationing healthcare (which they have now inherited in entirety), the Democrats must attempt to keep the complete government takeover of the healthcare system as covert as possible.

Which brings us to the biggest problem of all for the Democrats. They now have to take control of covert healthcare rationing. Covert rationing will be much more difficult for a government-run system than it has been for insurance companies. A government healthcare system will not have the opportunity to incorporate the most effective rationing techniques that have been available to the insurance industry – cherrypicking patients, for instance, or canceling the policies of people who get sick. Nor will the government be able to get away with summarily denying patients needed medical services – a standard tactic of HMOs. This is especially true now that chief Republican intellectuals have called everyone’s attention to the possibility of death panels. The unwashed masses, having been duly alerted to the government’s intentions of withholding life-saving healthcare, will now be on the lookout for “unreasonable” denials of care. Any move by the government to refuse to pay for a particular medical service will have to be supported by extremely convincing clinical data (which itself will be very expensive to collect), and even then Americans may not quietly accept such denials. The “death panel watchdogs” will be alert for every move the government makes, and will be quick to howl an alarm.

So the Democrats have won a huge and historic victory. But they are just beginning to figure out what a tiger they have by the tail.

The Bottom Line

As long as we pretend we don’t have to ration our healthcare, any reforms we invent – whether we do it as Republicans or Democrats – will merely add to the confusion, inefficiency, waste, inequity, and ineffectiveness of our healthcare system. How anyone can think that a process so fundamentally grounded in obfuscation and deception as the one we’ve just witnessed will result in anything good is quite beyond DrRich’s comprehension.

Real reform would require us to:

A) Minimize the necessity of imposed rationing by having patients themselves make as many of the spending decisions as possible, using their own money. (Subsidies could be provided to people who don’t have enough of their own money to pay for routine healthcare.)

B) Provide everyone with a high-deductable, catastrophic insurance product to cover non-routine medical expenses. This is where the necessary rationing would take place, but the rationing would be open, transparent, and determined through a public process.

C) Create a private market for “extra” health insurance for those who choose to supplement the universal catastrophic plan with their own funds.

But of course, any plan that relies on both personal responsibility and open rationing is a non-starter. Which is why we are going to get what we are going to get.