Search This Blog

Wednesday, December 9, 2009

Government-Run Health Care Is Here

Andrea Stone

WASHINGTON (Dec. 8) -- So what if the Senate ditches the public option? Even without so-called "socialized medicine," there still will be plenty of government-run health care to go around.

Never mind that the public debate and advocacy ads depict nightmare scenarios of "government bureaucrats" denying medical care, the recent controversy over breast cancer screening being only the latest. Taxpayers already cover nearly half of the nation's health care spending.

The government paid 46.2 percent of medical bills in 2007, according to the federal Centers for Medicare & Medicaid Services. By 2016, under current law, taxpayers will bear more than half.
Federal, state and local governments combined shell out more than $1 trillion a year for health care. That's an estimated $3,871 this year for every man, woman and child -- regardless of whether they get direct government help.


• Medicare, the federal health insurance program for nearly 43 million seniors and disabled people, will cost the government more than $500 billion this year alone. It remains wildly popular even though government experts say the program is hurtling toward bankruptcy unless premiums or taxes are raised or costs brought under control.

During the height of the public tizzy over "death panels" last summer, President Obama spoke at an AARP town hall about a letter he received from a woman decrying "socialized medicine" and warning, "don't touch my Medicare."
"That's what Medicare is," Obama said with a chuckle. "A government-run health care plan that people are very happy with."

One option being considered in Congress is to allow uninsured people between ages 55 and 65 to buy coverage through Medicare.

And Tuesday, the government announced that for the first time Medicare would cover the cost of HIV screening.

• Medicaid, the state-administered program for low-income people, will cost taxpayers $386 billion this year to provide health care for more than 42 million people. Some of those are poor seniors and people with disabilities who also get Medicare.

Another idea being debated is to allow more people to qualify for Medicaid.
• Other government programs. In 2007, the federal government spent $137 billion to provide health care to veterans, children, Native Americans, active-duty military members and their dependents, and drug users.

Tax dollars also went to fund public health services, federal workers' compensation and maternal and child health programs.

"The government has a pretty substantial role, no doubt," said John Holahan, director of the Urban Institute's Health Policy Center. And most are happy with the care they receive.
"People are very satisfied with Medicare," said Holahan, citing numerous surveys. "If you begin to talk to veterans about giving up (VA health care) and getting private insurance, they go ballistic."

The taxpayer-financed share of health spending is near 60 percent, Steffie Woolhandler and David Himmelstein of Physicians for a National Health Program wrote in a recent paper in the journal Health Affairs. They note that federal estimates don't include health care-related tax subsidies and public employee health benefits.

In the United States, "tax-financed costs exceed total costs in every nation except Switzerland," Woolhandler and Himmelstein wrote. That's hardly a hands-off approach.

Federal income-tax subsidies for health care, including the hotly debated exclusion of employer-provided health insurance from taxes, reached $186 billion last year, Holahan wrote in a paper with Stan Dorn last year. That exemption helped 61 percent of those under 65 pay for their health care.

Indeed, "only 5 percent of the insured population in the United States does not receive some kind of government subsidy, either directly or through a tax benefit," Holahan and Dorn wrote.

No wonder some call ours a "health care nation."

Friday, December 4, 2009

Obama Health Overhaul May Fail to Cut Spending on Medical Care

By Catherine Dodge and Nicole Gaouette

Dec. 4 (Bloomberg) -- White House Budget Director Peter Orszag says the medical-system overhaul now being debated in the Senate puts in place “crucial steps” to help slow the growth of U.S. health-care spending.

As the lawmakers struggle to reach consensus on the nation’s most far-reaching health legislation in four decades, some economists and analysts don’t share that confidence in either the Senate or the House bills.

“None of the bills so far would reduce total health-care costs as a percentage of the economy,” said David Walker, U.S. comptroller general from 1998 to 2008. “If there’s one thing that can bankrupt the country, it’s health-care costs.”

The bills would expand coverage to millions of the uninsured. Yet neither measure definitively moves away from the fee-for-service payment system, which encourages more care, Walker said. While the measures call for a new government entity to compete with insurers and curb costs, the impact is likely to be limited because Democratic leaders scaled back the so-called public option to win over reluctant lawmakers.

And both measures call for hundreds of billions of dollars in savings from Medicare, the federal insurance program for the elderly, an idea some Republicans dismiss.
“We’re going to have to reduce Medicare spending by about $400 billion over a 10-year period to get the math right,” Senator Lindsey Graham, a South Carolina Republican, said on ABC television’s “This Week” on Nov. 29. “We haven’t reduced Medicare spending by 40 cents, so that’s not going to happen.”

18% of GDP

A report last month by the chief actuary at the agency overseeing Medicare found that the $1 trillion bill passed on Nov. 7 by the House would boost spending through 2019 by 0.8 percent more than if no overhaul were carried out.

Unchecked, the money Americans spend on insurance, hospital bills and medicine -- now about 18 percent of the gross domestic product -- will be a third of the economy in 25 years, the Congressional Budget Office says.

Orszag and Nancy-Ann DeParle, the White House health-reform coordinator, last week sought to blunt the criticism, in a conference call with reporters. DeParle said the Senate bill “will have a big impact on the growth of health spending.”

Orszag cited a proposal in the $848 billion Senate bill to tax high-end insurance plans, which may encourage companies to offer less-expensive policies. He singled out studies to determine the most effective drugs, devices and treatments, as well as incentives to promote quality care over more care.

‘Aggressive Pilot Projects’

“What the legislation reflects is an aggressive set of pilot projects to emphasize quality,” he said.

Both bills fulfill Obama’s promise not to raise the federal deficit. The CBO said the House and Senate measures would each reduce the budget gap by more than $100 billion.

A Nov. 27 analysis by economist Jonathan Gruber of the Massachusetts Institute of Technology found that families would save at least $500 a year on insurance premiums in the non-group market under the Senate bill.

Days later, a CBO study concluded that while Americans in the nongroup-insurance market -- the one most affected by the overhaul -- would see premiums rise, those increases would be largely offset by government subsidies.

That bolstered President Barack Obama’s vow in a Sept. 9 address to Congress that his plan “will slow the growth of health-care costs for our families.”

Still, there’s a difference between lowering individual insurance expenses and curbing the growth in health-care spending, said Robert L. Laszewski, an Alexandria, Virginia- based consultant to the insurance industry.

‘Gutless Wonders’

The CBO study doesn’t allay concern over rising medical spending, said Uwe Reinhardt, an economics professor at Princeton University, who backs the legislation. While the Senate bill lays the groundwork to slow spending growth, Congress would need to make many more tough decisions that could take years to have an impact, Reinhardt said.

“They are a bunch of gutless wonders,” he said. “They can’t cut any spending.”
The Senate bill is better at controlling spending, economists say, and that sets up a clash when House and Senate lawmakers meld their legislation.

House Democrats rejected the excise tax on pricey insurance plans, saying consumers would end up paying. They opted for a surtax on millionaires, which is unlikely to curtail health spending.

Cost-Cutting Commission

The Senate version also gives more power to a Medicare commission to limit costs. If Medicare spending exceeds target growth rates, the board would propose ways to scale it down. The health and human services secretary would implement the proposals unless Congress passed legislation reducing growth to the target rate.

Victor Fuchs, a Stanford University economist, said much of the congressional legislation shifts spending from one group to another. Prohibiting insurance companies from excluding those who are already sick increases premiums for healthy people, said Fuchs. Mandating that businesses offer coverage, as the House bill does, will shift costs to workers.

Reinhardt said the battle to contain costs will continue.

To “get that growth curve down in my view is a decade-long fierce campaign that may not be winnable,” he said.

To contact the reporters on this story: Catherine Dodge in Washington at; Nicole Gaouette in Washington at

Tuesday, December 1, 2009

Opinion: Health Care Reform's Lowered Expectations

John Merline

Posted: 12/1/09

Dec. 1) -- Perhaps it's a sign of how far health care reform has drifted off course. Or of how worried Democrats are about getting health care reform passed.

How else to explain the Senate leadership's joyful response to a Congressional Budget Office report that finds that their reform plan will do little to lower insurance costs for millions of Americans, will raise premiums for millions more, and will cut costs for others only through heavy government subsidies?

That's not exactly what the public was promised when the health care reform train got rolling.

Consider: When President Barack Obama was campaigning last year, he rightly focused on the rising burden of health care costs. As he put it then: "Skyrocketing health care costs are making it increasingly difficult for employers, particularly small businesses, to provide health insurance to their employees."

And he made a very clear promise to voters: Elect me, and I will cut your premiums by $2,500.

"If you like your current health insurance, nothing changes, except your costs will go down by as much as $2,500 per year," he said.

So what did the CBO find in its review of the Senate plan?

By 2016, employees in small firms (fewer than 50 workers) could actually see their premiums climb 1 percent higher if the Senate reform bill is enacted than if it isn't. At best, the CBO figures, they could see premiums that are 2 percent lower than they would be without reform.

Employees of large companies, meanwhile, would either see no effect, or a slight 3 percent drop in premiums in 2016 compared with no reform.

But keep in mind that already sky-high employee premiums are set to climb rapidly for the next several years. A recent Commonwealth Fund study says they will nearly double by 2020 without reform. So, at best, the Senate plan would make a very small dent in a very large premium increase.

And individual buyers, who already have the hardest time getting affordable coverage, could see premiums climb as much as 13 percent higher as a result of the reform – mainly because of new insurance regulations and government-mandated benefits. About half (18 million) would be spared these extra costs because of new federal subsidies included in the plan.

As Urban Institute scholars noted here Monday, one problem with both the Senate and House reform plans is the lack of an aggressive public option that would inject meaningful competition and lower premiums. But the bigger problem appears to be a lack of concentrated focus on what reformers used to call "bending the cost curve." Now it's considered a success that reform won't cause "insurance costs [to] go up across the board as a result of this legislation," as Sen. Evan Bayh, D-Ind., put it.

Admittedly, cost cutting is far more politically challenging than extending new government benefits. But with insurance premiums already too high and rising fast, why should the public be expected to celebrate a plan that fails to provide meaningful relief to so many?

Saturday, November 28, 2009

GM: Bailout or Bust?

This post has little to do with health care--well actually it does if you consider the ramifications of GM failing and not funding it's health care obligations to thousands of retirees--however, I feel it is an important issue when considered in a historical context of the automobile and GM in America over the last 100 years.

This is a paper that I wrote with the help of some of my classmates in our MBA class on economics for managers.


We have been asked to consider whether General Motors should have been ‘bailed out’ by the American tax-payer or whether it should have been allowed to suffer the economic consequences imposed by a free-market system on any other company or enterprise that cannot produce or compete efficiently in a competitive market. Unfortunately, we are tasked with this assignment after-the-fact that the “bailout” has occurred and—of course, being a very recent development—there has not been enough time transpired or historical evidence accumulated to argue the point one way or the other. Therefore, we are left with the task of retrospectively and hypothetically arguing the positions using the economic principles taught to us from our course in micro and macroeconomics.

Now most economists, students of economy, and free-market ideologues would (or should) rightly argue that in a truly capitalistic and free-market economy, it is the forces of the market that should dictate those firms that survive and those firms that do not survive based solely on their ability to produce and compete efficiently in the market. However, the birth and death of firms in the market—unlike the birth and death of stars—does not happen in a vacuum and there are other and compelling factors to consider including political, national, social, cultural, historical, philosophical, and even emotional factors when trying to decide whether we let a firm like General Motors die or survive. Like the social and cultural conundrums of abortion and the death penalty, there is not a black or white or right or wrong answer that can or will be agreed upon—regardless of the ultimate outcome.

Before we lay out the arguments both for and against the ‘bailout’ of General Motors, we must fill in the vacuum and provide a backdrop or context within which we can effectively and pragmatically present, analyze, and discuss the arguments and evidence for and against the ‘bailout’. What follows are two brief discussions on the impact of the automobile in the 20th century and a brief history of the automotive industry in America and General Motors.

The Automobile and the 20th Century

Of all the revolutionary inventions and innovations of the last century, it can safely be argued that it is the automobile that has had the most profound effect in shaping western society in general and American society in particular.

It was the automobile that facilitated the emergence of American suburbia as it allowed workers and their families to live further away from the congested urban cities that they worked in. It also allowed those that lived in rural areas much easier access to goods and services and other creature comforts that were only available in the larger towns and cities. The automobile allowed for much greater mobility and made America and the world smaller. This allowed for greater commerce and opportunity which increased the standard of living for all and especially for those that were directly involved in the automotive industry. Indeed, it can be argued that the automotive industry—primarily GM, Ford, and Chrysler—created an entire relatively prosperous middle class, especially in the Midwest, from workers and people that otherwise would have never had such an opportunity considering their education level and class status.

Apart from the greater mobility and commerce that the automobile allowed, it also spawned or facilitated a variety of other and no less important developments and related industries including, parts, paint, and tire manufacturing, parts retailers, dealerships, road building and maintenance, an interstate highway system, gas and service stations, auto racing, and even drive-up and drive-through eating establishments.

The automobile not only radically changed the way we lived, but it also altered the way we fought wars with the introduction of mechanized infantry and tanks and the ability to transport troops and supplies quickly and in much greater quantities. The automobile allowed for the more rapid transport of the injured and sick to hospitals, but conversely also introduced more severe injuries and deaths and in much greater quantities.

Finally, apart from the direct effects and consequences of the automobile in shaping our world, there have been innumerable indirect benefits—and consequences—derived from the automotive industry including technological spin-offs from research and development and pollution. One cannot talk about the automobile without talking about advances in materials and materials science, propulsion systems, petroleum science, engineering, manufacturing processes, environmental sciences, and even advances in medicine and surgery through the improved understanding and treatment of trauma. Indeed, one could even argue that were it not for the automobile, the other two revolutionary inventions and innovations of the twentieth century that have radically changed the world to make it even smaller—air travel and the internet—could have never been developed.

Today, every American enjoys an affluence and position—and some would include freedom— in the world that would have never been possible without the introduction of the automobile and it’s far reaching and long lasting effects on our society. Indeed, some have even made the cogent argument that were it not for the automobile and its related industries, technological spin-offs, and the production capacity of our automotive industry, we could have possibly lost WWII.

A Brief History of GM and America’s Relationship with the Automobile

In the introduction above we have outlined the impact of the automobile on the 20th century and in particular, how the automobile has shaped American society and culture. From early horseless carriages in the late 1800s to the 57 “Chevys” and “T-Birds” in American Graffiti to sleek “Caddys” and fast pony cars (Camaros and Mustangs) in the 70s and 80s to big Suburban SUVs in the 90s all the way to Martian land-rovers and futuristic Camaro-Transformers, nothing has captured the attention of the American people or has defined our culture like the American automobile.

Americans have always loved their cars and the American automobile has been a symbol of freedom and affluence for most of the last 100 years, not only in America, but also abroad and one cannot talk about the American automobile without talking about “the Big Three” or General Motors, Ford, and Chrysler. Out of the several hundred car manufacturers in the early 20th century, it was these three that survived to become the predominant “car makers” in the United States for most of the century. Indeed, General Motors dominated the world market and was the largest car manufacturer in the world until very recently and held that position from 1931 to 2007.

In 1896 the Duryea brothers and their Duryea Motor Wagon Company sold 13 cars and from 1901 to 1904 Ransome Olds and his Olds Motor Company sold hundreds of Oldsmobiles. By 1927 Henry Ford had produced and sold 15 million Model Ts and was producing 60% of America’s cars. General Motors was formed in 1908 by William Durant and Pierre DuPont as a holding company for Buick and by 1909 he had acquired several car companies including Oldsmobile, Cadillac and a truck company that would later become GMC Trucks. In 1910 Durant lost control of his company (General Motors Company) and a few years later started another car company called Chevrolet. Through Chevrolet, he was able to wrest control of his old company and reorganize it as the General Motors Corporation. Not long after, he again lost control for good as a result of a crash in the market for new vehicles (sound familiar?). After the exit of Durant, Alfred P. Sloan took over and led GM into its postwar global dominance.

While Henry Ford is credited as being the “father of the American automotive industry” with his revolutionary design, low prices, and production innovations, it was Durant and his General Motors Company that quickly surpassed the Ford Motor Company with successful marketing and by offering the consumer variety not only in models, but changes from year to year within models.

Sloan is credited as being the ‘genius’ behind the success of GM through his marketing and management structure innovations which brought huge success to the company through most of its existence, but which would prove to become unwieldy and ultimately lead to the eventual collapse of one of the largest corporations in the world. Consider that in 2008 General Motors was selling 9 million automobiles a year globally in over 120 countries and by 2009 General Motors was broke.

By 2008 General Motors, Ford, and Chrysler were feeling the impact of the greater economic recession and the precipitous drop in demand for cars, compounded by intense competition from Toyota, Nissan, and Honda (the Big Asian three) and volatile gas prices. In October of 2008, the “Big Three” were asking for loans from the government and in June of 2009 GM was forced into reorganization through Chapter 11.

Before we leave the history of the automobile in America and present the arguments for and against the ‘bailout’ of General Motors, we must briefly discuss the history of the United Auto Workers or UAW which is inextricably tied—for better or for worse—to the history of the automobile industry and the history of the “Big Three” automakers.

The UAW was founded in 1935 in Detroit, Michigan under the American Federation of Labor and was one of the first labor unions to organize African-American workers. In December of 1936 the UAW staged a sit-down strike at GM’s Flint, Michigan plant which was not settled until February of 1937 and which had become violent with the strikers and their families taking over the plant and resisting attempts by the police and other officials to evict them. GM was chosen as a target for a strike because it was the largest employer of auto workers at the time. The settlement of the strike and the recognition of the UAW by GM instantly boosted the legitimacy, prestige, and power of the UAW which they would continue to leverage and hold to the present day. The BBC would later comment that the strike at Flint “was the strike heard around the world”. A month later Chrysler recognized the UAW and it was not until 1941 that Ford finally recognized them. UAW membership went from less than 30,000 before the strike at Flint to over 500,000 the following year and in the 70s boasted membership of close to 2 million. Today the UAW has about 480,000 members and is still capable of bringing the auto industry to its knees.

America Should Have ‘Bailed Out’ GM

Since GM and the other two motor companies came to Washington pleading for money last year, there has been raging and acrimonious debate in the media, on the internet, in political circles, in academic circles, in business circles, and in private homes regarding whether we should have bailed out the car companies or not. While some of the arguments are based solely on the strict application of economic principles, much of the argument has become mired in or based on political and philosophical ideology which has complicated the argument both ways. Also complicating the debate is the fact that—as goes in most socio-political debate—data and evidence, even from the same exact source, are routinely taken out of context, spun, and presented as statistical and economical evidence both for and against the proposition!

Arguments for the ‘bailout’ have primarily centered on the expectation of a ‘doomsday scenario’ with catastrophic economic losses and further risks to the economy and other social and political costs associated with the failure of GM and the failure triggering a downward spiral or domino effect on other companies and industries. Those arguments generally fall into four broad categories and include economic arguments, technology and trade advantage arguments, national security and socio-political arguments, and national pride arguments.

Many proponents for the ‘bailout’ argue an economic rationale and point to the risk and costs of a large and rapid influx of unemployed auto workers and other workers from associated industries such as dealerships and parts manufacturers and suppliers into the already large and growing unemployment rolls. They cite the potential loss of 128,000 jobs alone from GM if it were to fail and up to 3 million jobs in a worst case scenario of a domino effect causing the failure of the other two domestic car makers and associated companies and industries. They also point to the fact that a failed GM could cause tens of thousands of retired employees to lose their pension plans and health benefits with additional disastrous results on an already burdened economy and health care system.

Other ‘bailout’ proponents argue that allowing GM to fail could result in the potential loss of sensitive and critical technology and associated comparative advantage in those areas to foreign firms and governments which could also pose potential serious consequences in matters of national security. They argue that throughout our history, ground-breaking technology has evolved from research and development in the domestic automotive industry which has been used in other industries, including national defense. They point to the fact that GM developed the technology for its On-Star navigation system which is being used by our military and is currently developing critical technology in lithium-ion batteries and other alternative propulsion systems. It is not too farfetched, they add, to see that while currently, we may be engaging in friendly competition with our foreign competitors and even some sharing of ideas and technology within a global market, a change in the geo-political winds could easily turn competitors into enemies that could use our own technology against us—industrially, economically, and militarily.

Next, there are those that would argue from a socio-political standpoint that allowing GM to fail would result in the exportation of a large portion of our manufacturing base overseas leaving us dependent on foreign firms and governments for manufactured goods and associated technology—again with a real risk to our national security. They argue that our economy is dependent on a solid manufacturing base and that if we lose GM we will have come dangerously close to becoming a nation of consumers in an economy based on service industries and financial services only while depending on other nations to produce for us—and we have all recently experienced what happens when we rely on financial markets as a source of our economic well-being.

Finally, there are many of us that would argue that, if for no other reason—GM should not be allowed to fail as a matter of national pride, national identity, and national integrity. GM, good, bad, or indifferent is an American icon and has served as a symbol of American prosperity, ingenuity, freedom, and ‘good-old Yankee’ industriousness for the last 100 years. GM, along with Chrysler and Ford are responsible for at least two to three generations of a middle-class in America that never would have gained such prosperity without them. Furthermore, they argue that it was the large production capacity and the technology developed by these companies that helped us win World War II and maintain our prominence on the world stage as the world’s industrial leader.

These three companies have donated hundreds of millions if not billions to American charities and other causes. They have educated and trained thousands of bright young American women and men in engineering, business, and the automotive trades. In 1953, during his senate confirmation hearings[1], General Motors CEO Charles Wilson said “what is good for the country is good for General Motors and what is good for General Motors is good for the country”. Those words ring as true today as they did in 1953. So, if for no other reason—we owe it to them!

America Should Not Have ‘Bailed Out’ GM

There are many free-market ideologues including economists and some politicians and many many angry Americans that feel that we should not have bailed out GM from its dire straits. For the economists and the free-market ideologues, this argument is rather straight forward and based on sound economic principles defined by competitive free markets. It is an emotionless and pragmatic argument based solely on economic rationale without consideration of other social or political costs or consequences. The principle argument is that it is the ‘invisible hand’ of the free market that determines who competes and who doesn’t compete and if GM or any other firm has not been adaptable or flexible enough to remain efficient and competitive, then so be it.

The argument continues with the practical reasoning that as the ‘invisible hand’ determines who competes and who doesn’t compete, it also magically and mysteriously ‘picks up the pieces’ when firms and industries fail or become obsolete as the factors of production move on to other firms and industries and the households change their tastes and demand to accommodate the change and vice versa.

On the other hand are those that are just plain angry and frustrated with our current economic situation and use the argument that we are just tired of doling out our hard earned money to failing enterprises, especially if they are failing because of incompetence or greed or both. Many of these are of a younger generation and have grown up in a relatively stable and prosperous era where globalization is the norm and they are more likely than not to drive a Toyota, a Honda, a BMW, or some other foreign car which to them has been associated with higher quality and higher value. The loss of GM, or Chrysler or Ford means nothing to them—they don’t drive or buy their cars and besides, they wonder—“what have the “Big three” done for me?”

Both of these camps argue that $50 billion dollars is a ridiculous amount of money to pay for a company with a net worth of $-90 billion dollars and that in all likelihood will never pay all of its debt and that that money could better be used for other purposes such as paying for extended unemployment benefits, retraining displaced workers, and investing in other emerging industries that will eventually hire the displaced workers. Many of them also argue that the government has no business in buying and running failing companies just as a matter of mistrust in the government meddling in what otherwise is considered private enterprise.

The opponents of the ‘bailout’ also argue that GM has not been able remain competitive because of corporate arrogance resulting in corporate mismanagement in labor relations, organizational structure, quality control, and production efficiency and costs. They argue that if Toyota or BMW can build a better and cheaper mousetrap, then c’est la vie.


As we noted in our introduction, what we have presented so far has been an ‘after-the-fact’ and hypothetical analysis of the proposition of whether GM should be bailed out or not as if the ‘bailout’ and eventual bankruptcy had not happened. We presented both arguments for and against the ‘bailout’ within a general historical context of the automobile, the automotive industry, and GM over the last century. Of course, the ‘bailout’ has occurred and only the passage of time or history will tell us whether the bailout was a good idea or a bad idea.

Today, all we can do is wait and see what will happen. We have provided compelling arguments both for and against the ‘bailout’ and we can only offer conjecture as to why our government decided for the bailout, but we can look at what has happened to date and offer our analysis, based on the arguments presented above and leave the final decision to each of you.

It is clear to all of us, whether for or against the ‘bailout’, that GM and the other two domestic automakers have made some serious, if not catastrophic miscalculations with respect to their relative positions in their market and have critically, if not foolishly, underestimated their competition. But given this, we also realize that the economic events of the last two years have been anything but typical and have caught us all by surprise—as individuals, as households, as firms and even as a government.

Was this failure of the domestic automotive industry an inevitable outcome after years of corporate mismanagement, poor judgment, and reckless optimism—or was it more likely that a ‘perfect storm’ of economic calamity fueled by individual mismanagement, poor judgment, and reckless optimism, a volatile gas market, and poor government oversight (or more likely, government blindness), that battered the otherwise viable, but marginally competitive ‘Big Three”? We cannot know the answer to that, but the question does offer insight into why we bailed out GM.

While, all of us can acknowledge that foreign automakers have made tremendous strides and significant advances in the automotive industry, especially in the latter half of the 20th century and the beginning of this century, no one can dispute the fact that American automakers have reigned supreme throughout the world for the last 100 years with respect to innovations and contributions to industrial society in general and American society in particular.

Allowing GM to fail with the very real possibility of the entire domestic automotive industry following suit in an uncontrolled chain reaction would effectively represent the national capitulation of our dominance held for over 100 years to foreign interests that have capitalized on patience, competitiveness—and a ‘perfect storm’ to come out on top.

Imagine, an Asian baseball team—patient, innovative, and with good management taking advantage of an injured A-Rod, poor umpiring, marginal management, and an onerous union contract stating all the bench has to play, to win a world series—would we throw the Yankees to the curb and claim that in love, war, economics, and baseball all is fair? We think not.

We can’t decide as a group—let alone as a class or society whether we should have bailed out GM or not, but each of us has decided as an individual. We have provided you with arguments both for and against the bailout and have provided some context within which to ponder the question. Most of you are Americans by birth or by residence and you are all students of economics, therefore—you decide!

[1] Shortly after the war, in 1953 GM’s CEO, Charles “Engine Charlie” Wilson was nominated as secretary of defense by President Eisenhower.

John R. Vigil, MD
Jeff Lambert
Jeff Collins
Natacha Peter-Stein, MS
Tommy Sanchez
Thomas Montano
Marlena Parker
Eric Boatman

Anderson School of Management,
University of New Mexico
EMBA Class of 2011

Tuesday, November 24, 2009

Bitter pill for taxpayers: Drug ads do nothing but boost drug prices

Melly Alazraki Nov 24th 2009 at 4:40PM

A new study published in the Archives of Internal Medicine found that direct-to-consumer drug advertising may be associated with increased drug prices -- and little else. Specifically, researchers looked at blood-thinner (anti-clotting) drug Plavix, which is commonly prescribed for heart conditions. They found that advertising aimed at consumers did not actually increase the use of the drug. However, because of the increased expenditure for advertising, the price of the drug increased, and so did the reimbursement cost of Plavix for Medicaid patients.

"The cost of drugs to public and private health insurance programs has been a long-standing source of concern among policy markers," wrote the study's authors, Michael Law of the University of British Columbia and his colleagues. Indeed, several members of Congress have asked the GAO recently to examine allegations of price gouging on drugs, especially in light of the ongoing debate over health-care reform legislation.

Prescription drug prices are cited as one of the three top reasons for Medicaid expenditure growth, and prescription drug costs have increased by an average of 15.4% per year between 1994 and 2004. Meanwhile, spending for direct-to-consumer drug advertising has increased more than 330% in the last 10 years, the authors write.

Bristol-Myers Squibb (BMY) and Sanofi-Aventis's (SNY) Plavix has annual sales of $9.5 billion last year. The researchers chose Plavix because there was no consumer advertising for the drug from 1999 to 2000. Then, from 2001 to 2005, U.S. spending on consumer advertising for Plavix exceeded $350 million, an average of $70 million per year.

The researchers examined data from Medicaid programs in 27 states. Despite all of that advertising, the use of Plavix by patients in those states' programs did not change. More precisely, since Plavix sales were growing, the ad campaign did not accelerate that growth. However, the price of a Plavix pill increased by 40 cents, or 12%, after the ad campaign began. "Overall, this change resulted in an additional $207 million in total pharmacy expenditures," the authors wrote. Add in the additional revenues from the rest of the states' Medicaid programs, and the cost to taxpayers would be much higher. (Perhaps sufficient to cover the cost of the ad campaign?) This latest research builds on results of an older study which also showed drug advertising to consumers had only minimal impact on sales.

Those who are in favor of direct-to-consumer advertising of brand-name drugs argue that advertising makes patients more knowledgeable, allowing them to ask for treatments from their doctors. The opponents of this practice claim that more often, such advertising misleads consumers about the benefits and risks of many drugs. Neither side ever questioned whether ads would increase medication use or not.

Most countries in the world do not allow advertising of prescription medications directly to patients. Meanwhile, Americans spend most than other nations on health-care -- 16% of U.S. GDP in 2007. It seems that both sides in the direct-to-consumer advertising debate are wrong in their estimates of the effect of drug advertising on use. But the research does support what both sides agree on -- that consumer advertising costs contribute to that higher American health-care bill, as the Los Angeles Times wrote.

Not everybody fully agrees with the study's methodology and findings; some suggest, as the authors of the study themselves do, that there need to be more studies done on the matter.

Thursday, November 12, 2009

How Small Business Will Suffer With "Obamacare"

SMALL BUSINESS HAS fought the health-care bill as too costly.

That made Saturday's vote bitter to many of the nation's roughly 30 million such entrepreneurs, if welcome to some."With unemployment at a 26-year high, the punitive employer mandates and atrocious new taxes will force small business owners to eliminate jobs and freeze expansion plans at a time when our nation's economy needs small business to thrive," Susan Eckerly, senior vice president of one of the most powerful small-business lobbying groups, the National Federation of Independent Business, said in a statement Saturday.Added Molly Brogan, spokeswoman for the National Small Business Association: "We have serious concerns about the bill's cost-containment and the long-term implications of the employer mandate and the surcharge tax."

Action now shifts to the Senate, and with many specifics still in doubt, small-business groups are planning to lobby heavily there.The House bill mandates that employers with payrolls above $500,000 must contribute -- for each full-time employee -- 72.5% of the premium cost for single coverage and 65% of the premium cost for family coverage. The penalty for failing to do so is a 2%-to-6% tax on employers with payrolls between $500,000 and $750,000 and an 8% tax for employers with payrolls above $750,000.

The Senate, by contrast, has bills that don't have employer mandates but are highly focused on provisions that give tax credits to those that do contribute to premium costs. One bill from the Committee on Health, Education, Labor and Pensions rewards employers for paying more than 60% of their employees' premiums with tax credits of as much as $1,000 for each single-coverage employee and as much as $2,000 for each family-coverage employee.

Outside Washington, meanwhile, small-business owners are weighing their options and responses.Sharon Evans, chief executive of CFJ Manufacturing Inc., a promotional-products company in Fort Worth, Texas, said she pays 65% of health-insurance premiums for her 100 employees. If she were mandated to pick up more of the cost, as the House bill requires, she said she would consider dropping insurance and paying a penalty. And various tax rebates, as envisioned by prominent other versions, don't necessarily pass muster with her."If you're going to make me pay $100,000 to get everybody insured and you give me an $8,000 tax rebate, well, the answer to that is, pardon my French, 'Hell, no,' " she said. "That's not going to help me out."

Carolyn Morse, president of Powerlung Inc., a Houston medical-device manufacturer, said she hopes a tax credit would help alleviate the cost of paying 100% of health-care expenses for her six employees."I would be in a better position to maintain a status quo, rather than go to my employees and say, 'Guys, you're going to have to pay,' " Ms. Morse said.Under all the bills in Congress right now, Ms. Morse's health insurance would be subsidized, but the amount she would receive would vary based on the amount of the premiums.

The House bill provides that employers with fewer than 10 workers who average an annual wage of $20,000 or less get a full credit of 50% of premium costs. That credit amount decreases as employee count and average salary increases, becoming null once the employee count hits 25 or the average salary hits $40,000.Currently, many employers who don't offer health insurance blame the cost-prohibitive premiums. And those who do say expensive insurance is hindering expansion and hiring.

Premiums for single policies rose 74% for small businesses in the past eight years, a 2009 Kaiser Family Foundation survey found. Firms with fewer than 200 workers are expected to pay an average of $12,696 for family-plan premiums and $4,717 for single-person premiums this year.The price of health insurance is a big concern for Mike Draper, president of Smash, a print-screening and design firm in Des Moines, Iowa. Unlike some business owners, Mr. Draper, who pays 100% of the premiums for his 15 workers, supports a mandate requiring employers to provide health insurance -- as long as small companies get to offer better insurance plans at a more attractive price."If the government offers to pay for 50% of my insurance, I'll say 'sure,' " Mr. Draper said. "But from a macro level, I don't see how that will bring cost down -- that's just selling the same crap but subsidizing it."

Thursday, October 29, 2009

Some Thoughts on Healthcare Reform

by economist Steve Landsburg, from his new blog Landsburg is known for his brilliant economic articles in

The American health care system desperately needs reform. But there are certain inescapable truths that would-be reformers would do well to heed; otherwise they risk making things worse for everyone, and particularly for the poor.

Here are a few of those truths.

1. Insurance is not part of the solution; it's part of the problem. Many people-and especially poor people- get too little health care in this country. That's largely because many other people-and especially rich people-are overinsured. People with insurance demand more health care, which drives up prices. More insurance coverage will make this problem worse, not better. There are good alternatives to insurance. For example, as David Goldhill points out in a magnificent Atlantic Monthly article called "How American Health Care ..., we could take, say, half of what's currently being spent on insurance and Medicare and use it to give each American family close to a million dollars to put in a health savings account. We'd probably want to couple that with insurance for catastrophic events that cost more than, say, $50,000.

Or, less radically (and therefore less effectively, but at least it's a start) we could restructure medical insurance to look more like car insurance-where nobody asks how you spend your claim check. If you're diagnosed with colon cancer, then instead of paying $X million to doctors and hospitals, the insurance company would pay $X million directly to you. That way, at least some of us would shop around for better prices and forgo treatments we don't think we need-lowering demand and making medical resources easier for everyone else to afford.
The last thing we need is more of the inefficient sort of coverage we've got now. The very last thing we need is to make that coverage universal.

2. Somebody has to say no. Nobody would want to live in a world where we all get unlimited health care, because in that world, health care would be all we could afford. That means we despearately need someone to say "no" from time to time. In a world of health savings accounts, we'd tell *ourselves* "no"; in the world we live in, our insurance companies do it for us.
We all know horror stories of claims delayed and claims denied, and many of those stories are true. They have to be, because no system is free of mistakes. Sometimes insurers say "yes" when they ought to say "no" and sometimes they say "no" when they ought to say "yes".

Now, we could always opt for insurers who err more on the side of "yes"-in exchange, of course, for higher premiums. But almost nobody wants that. I know this because I believe that insurers are consumed by greed, and would therefore happily offer any product as long as consumers were willing to cover the cost. Auto insurers compete on exactly this basis: Some companies hand out claims more easily than others, and their premiums reflect this. But when it comes to health insurance, it appears that the market is pretty satisfied with what we've got.

When your health insurer denies a claim, it's performing a valuable public service. If health care is going to stay affordable for anyone, somebody has to sometimes say no. And as much as we bitch and moan (sometimes rightfully, because some of those denials really are unwarranted), we really wouldn't prefer it any other way.

3. A public option can only make things worse. A government run insurance system can only do one of two things: Mimic the private insurers, or do something different. If it mimics the private insurers, it serves no purpose. If it does anything different, it can only be worse.

After all, what can it do different? Approve more claims? But where will the money come from? Higher premiums? But we've already agreed that if people wanted that kind of insurance it would already be offered. A more efficient bureaucracy? But if there were a way to save money by streamlining the bureacracy, why wouldn't all those greedy private insurers have adopted it already? Does anyone believe that the major insurance companies are too lackadaisical to make an easy extra buck?

You might say that the private insurers, unlike the government, won't always pass cost savings on to the consumer. But that too underestimates the greed of the insurers-and their willingness to undercut each others' prices in the endless competition for customers.

So if public insurance is going to provide anything that private insurance doesn't already provide, it will to have to do it by dipping into general tax revenues-maybe not at first, but surely soon. And that way lies madness.

Once those general revenues get tapped, all discipline goes out the window. With all that cash at hand, it becomes harder and harder to deny a claim. Nobody's saying no, and the cost of health care spirals out of control.

Eventually you're left with the health-care equivalent of Fanny Mae or Freddie Mac-an institution with dual mandates to earn a profit (or at least break even) and to serve the public-and therefore an excuse to fail on all fronts. When it loses money, well, that's because it was trying to serve the public. When it fails to serve the public, well, that's because it was trying to be financially responsible. Nothing counts as failure and nobody's responsible. It was Larry Summers who first (and most eloquently) made this observation about the inevitable fate of dual-purpose institutions; once upon a time, he was a very wise man.

I know, I know-the proponents of the public option insist that it will be self-financing. I don't believe them. What happens the first time a powerful congressman demands that his constituent's claims be treated more respectfully? And the second time, and the third? Where does the money come from? But even if you *could* somehow resist that kind of political pressure, what are you left with? A high-claim-approval high-premium option that nobody wants? What's the point of that?

4. It's always the poor who get screwed. Expanded insurance coverage means higher health care prices; universal coverage means higher prices still; universal coverage with a public option blows the roof off. That's bad for almost everyone, but it's hardest on the poor.
Now you might say that we could make up for that by spending lots and lots of public money to buy health care for poor people. The problem with that is that every dollar you spend on health care is a dollar that's unavailable to help poor people in other ways.

When you're poor, it's hard to buy health care. It's also hard to buy schooling, housing, and groceries. It's a false compassion that tries to alleviate one hardship by exacerbating others. If we make it unnecessarily expensive to help poor people buy health care, we handicap our ability to help them buy milk and eggs.

Consider the disaster that is Medicare. It's easy to fool yourself into thinking that Medicare is working because it provides a lot of medical care. But it does so at a titanic cost that crowds out social programs large and small, some of which might have made a real difference in the lives of struggling people. Without drastic reform, the burden of Medicare will crush the next generation. Tack on a publicly run insurance system with its eyes on the Treasury, and you've made that burden all the harder to shed.

I do not know how much we should be collectively spending to help the poor. I do know that whatever we spend should be spent as helpfully as possible. I also know that the way to accomplish that is not to drive the cost of health care through the roof and then spend a fortune trying to help poor people afford it.

It's also worth remembering that political institutions are not notorious for their responsiveness to poor people. When Congressman Smith comes around demanding better service for his favored constituent, odds are that constituent is a person with the means to make considerable campaign contributions. When you move institutions from the private to the public sector, you skew their responsiveness more toward the politically powerful, which usually means the rich.

The answer is less insurance, not more, and private insurance, not public. In the long run, those health savings accounts are probably the best solution. In the interim, the single most effective way to cut health care costs in a hurry would be to eliminate the tax deduction for employer supplied health insurance. That deduction leads to immense overuse of health care resources, especially by rich people. That's one good reason to eliminate the deduction, and here's another: People would start shopping for insurance on their own instead of taking whatever their employers offer, which would make the insurance companies more responsive to consumer demands.

It saddens me that support for universal coverage and a public option has become, in many circles, a sort of litmus test for compassion and caring about the poor. It particularly saddens me to hear the president say that "What we face is a moral issue; at stake are not just the details of policy, but fundamental principles." It's the details of policy that change people's lives. The moral imperative is to get them right.

What an Honor It Is to Belong to the Family of Physicians

A wonderful post from a family doctor in California who despite the daily drudgery and abuse that he no doubt endures daily in a busy practice is able to eloquently share his thoughts and uplift the spirits of many of us who feel unappreciated in today's healthcare environment.

What an honor it is to belong to the family of Physicians.

It's Saturday afternoon and from the window of my office I see an Oncology practice where the physician comes in on Saturday to see patients. I see his head down as he goes from his office over to the hospital. I see his step grow a little shorter each day as he struggles to keep up with the work. He has shared with me how difficult it is to keep the practice going. With the new reimbursement for chemotherapy, many of the agents he gives in the office cost more than the reimbursement.

I see another office of cardiologists. They seem to come and go at all hours. I see them there late at night, going between their office and back to the hospital. I always feel apologetic when I call them with yet another case that I need their help with because of the complexity of the patient. How grateful I am for their dedication and professionalism. Never have they just said no. Even though I know they won't be making it home to their daughters performance tonight, I still call them with cases when I need help. Their sacrifice, like mine is personal.

Across the parking lot I see an office of surgeons. There are days that the parking lot is rather empty as they are in surgery most of those days. One of my good friends has worked with that group. The part of the story not reflected in the parking lot, is the many hours they spend in the middle of the night, caring for yet another patient needing their skill. Many of these late night cases do not have insurance and many of them require long hours of dedication. What dedicated men and women these surgeons are to come in and work three or four hours through the night, trying to get someone through surgery. When morning finally arrives they have a full day awaiting their attention, compassion and skill. Some of them drive nice cars but somehow I don't think it really helps at the end of the day when they return home to find their family sleeping at a late hour.

There's a group of obstetricians and gynecologists at the end of the parking lot. Never have I felt that their lifestyle was something I would desire. I remember assisting them at C-sections and found that we would do one or two almost every night when I was on call. The funny thing with those late-night surgeries is that when morning arrives, you don't get to go home and take a nap. Somehow the rest of the world expects them to work through the next day as if nothing happened. I have five wonderful children and I can thank them for their dedication and professionalism in doing their job.

We are a very special community. No one in our society really understands what we do, nor do they understand the sacrifices we make as we obtain our training and practice our profession. Only another physician really understands the lengths to which this profession reaches into our personal lives and removes little pieces of us each and every day as we give of our time, intellect, compassion and dedication.

I for one, am proud to be a member of such a community. I feel a tremendous sense of brotherhood with other physicians, be they radiologists, pathologists, cardiologist or oncologists. All of us have made similar sacrifices. Some of us have continued training another three, four or five years longer than others who share the same title of Doctor. Ultimately, we all belong to the same organization of healers, dedicating our lives, our talents, and our abilities in caring for others.

I've not met a physicians who was in this for the money. What an amazing group of individuals we are.I reject the concept that there is a limited pool of resources that must be divided up among the different specialties. Each one of us provides a valuable service to complement what the other does. None of us could work very long in this arena by ourselves. We need each other and we complement each other. We actually work well together in providing care and sustaining life.

I salute my colleagues who answer my calls when I need a specialist to help me with a complicated case. I give you only the hardest cases as the ones that I can figure out, I keep myself. How grateful I am to have learned colleagues so willing to assume the responsibility for cases that I have not been able to either figure out or provide what they need due to my limited training.As a profession, we need to remind ourselves that we all share in the healing arts.

We must all reject the concept that for primary care reimbursements to go up, there must be a balanced reduction in the reimbursement to specialists. Only a politician would subscribe to this concept. Clearly, we can do more to ensure cost effectiveness in the system. We've never really been asked to contribute to that by providing peer review of interventions that perhaps may not warrant the expenses. Those decisions are now being made by insurance companies, with executives who care little for the health of their clients.

If the system is going to be overhauled at all, and if we are ever to successfully reform the way medicine is delivered, now is the time. For those of you who think that we should sit back and wait and see what happens, I would say that it is unlikely there will come a time where there is more interest in healthcare than that which we find right now.

Over the next few years, this reform will spell perhaps disaster and perhaps opportunity. Now is the time for us as physicians to link arms and band together as a profession to support one another. No more infighting which serves only to strengthen the arms of those who provide no health care at all yet bleed the system dry.

I for one, will be sending out thank you cards to the specialists I work with this next week, letting them know how grateful I am for their support and their care. I invite all of us to do the same. Reach out and connect as we reestablish the bond that we all share. All of us love the practice of medicine. We enjoy the challenge and the intellectual reward that we receive by the practice of our art. We truly do enjoy helping those around us in ways that few people would understand. What a great profession we have and what dedicated men and women we serve with.

Let's close ranks and support one another and provide a beacon of hope for America over the next year as we speak out and address the issues. True form will come from our experience and our leadership. Before we step into those leadership positions though, let's make sure that we as a profession maintain the respect for one another that we all deserve.What an honor it is to be part of this community who practice the healing arts.

Tuesday, October 27, 2009

Public Option a False Start Without Cost Control

By Fred Hiatt The Washington Post

The “public option” is dangerous not for what it might do but for what it allows the politicians not to do. From the start, the Obama administration has said that health-care reform has to make health care both more accessible and less costly . If Congress does the first without the second — guarantees a new entitlement without controlling costs — it will bankrupt us, because health-care costs are rising faster than the overall economy is growing. So far, though, that seems to be where Congress is headed, for two reasons: First, no one knows for sure how to control costs; and, second, the reforms that are likeliest to work are politically unpalatable.

What are those reforms? The most logical big thing Congress could do would be to tax, as income, the value of the health-care benefits Americans receive from their employers. By not doing so, the government forgoes $250 billion in revenue every year — effectively, its second-biggest health expense after Medicare. It discriminates against people who have to buy insurance on their own. And it encourages overuse of health care, which drives up costs. If employees had to pay taxes on their plan, they might opt for one that cost, say, $12,000 per year rather than $16,000, and push to receive the difference in wages. The government could use the revenue to subsidize health insurance for those who need help. But many unions oppose this change, because they fear it would jeopardize their members’ hard-won benefits, and so Democrats won’t go for it. Sen. John McCain, R-Ariz., embraced the idea as presidential nominee and was irresponsibly attacked for it by his opponent. Now Republicans oppose it so that, were President Obama to embrace it even in part, they could beat him up for retreating from his foolish campaign promise to reform health care without raising taxes on anyone but the rich.

The second big thing Congress could do would be to cede its power to regulate the minutiae of Medicare coverage. Cost control will come from a series of changes, adjusted and readjusted over time, in how physicians and other providers are reimbursed and what they are reimbursed for. Such decisions should be made based on evidence of what works and what doesn’t. But all such changes make one interest group or another — urologists, MRI operators, oxygen tank manufacturers — unhappy. They go to Congress, and Congress blocks the changes. Now Congress is being asked to cede both power and a reliable fund-raising source. And — surprise! — it doesn’t much like that idea.

Which brings us back to the idea of a government-run insurance plan. It allows Democrats to make their base happy, to bash the unlovable insurance companies — and to claim to be taking care of cost control, too, by ensuring competition in the marketplace. The claim merits skepticism. If, as advocates sometimes argue, a public plan operates without favoritism, it will be simply one more entrant in the marketplace. Like other companies, it will have marketing and administrative costs. In some markets served by few private plans, it could offer a useful alternative. But it won’t radically reduce costs. If, as advocates argue at other times, the point is to insure sick people whom private companies, despite all regulatory efforts, find ways to shun, the public plan could offer a valuable safety net. But that wouldn’t save money.

And if, as seems likeliest — and as House legislation mandates — the plan uses government power to demand lower prices from hospitals and drug companies, those providers may lower quality or seek to make up the difference from private payers. Private companies would have to raise their rates, so more people would choose the public plan, so private rates would rise further — and we could end up with only the public option and no competition at all. Single-payer national health insurance may be the best outcome, but we should get there after an honest debate, not through the back door.

So all the attention on whether Obama will get a public plan, as he says he hopes, misses the bigger point. The question is whether he will allow Congress to use the public option as an excuse to dodge the harder reforms, or whether he will insist on true cost control.

Hiatt is The Washington Post’s editorial page editor.

Monday, October 26, 2009

Canadian Patients Feel Wait Of The World

Canadian Patients Feel Wait Of The World

Posted 10/22/2009 07:27 PM ET
From: Investors.Com

Socialized Medicine: A group in British Columbia has offered medical waiting-list insurance to members whose government treatment is on hold — another example of why state-run health care must be avoided.

Canadians have a health care system that should be the envy of no one. It's not free, it's funded by taxpayers, and it isn't truly universal. Two Canadian Supreme Court justices made this clear three years ago when they concluded that "access to a waiting list is not access to health care."
Delayed treatment in an overused system has been the root of much unnecessary suffering. To prevent premature deaths and the needless misery that are hallmarks of Canadian care, the British Columbia Automobile Association began offering waiting-list insurance to some of its members in August as part of a pilot program.

Those who bought the coverage would receive treatment in a private clinic in British Columbia or the U.S. if they were placed on a government care waiting list longer than 45 days.
The program, which took two years to develop, never got beyond the pilot phase, however. The association shut it down when critics howled and government officials checked to see if such a program was actually legal in Canada.

"This is an example of a company that's actively soliciting for clients that have the ability to pay for the privilege of queue-jumping," said Adrian Dix, a member of B.C.'s Legislative Assembly. "In my view, and in the view of the legal opinion that we obtained, it is illegal, and it violated both provincial and national health legislation."

It's hard to understand why an elected official, or anyone else, would knowingly trap people in a system that can't take care of the public it is expected to serve. Yet there are many Canadians who would, in the name of "fairness" and "equality," deny others' right to take care of themselves outside of the collective. They are outraged that some of their countrymen could escape the agony of the waiting lists while others languish in the bureaucratic wreckage.

But the real outrage, to quote Brian Day, former director of the Canadian Medical Association, should be that a government would actually force "a citizen in a free and democratic society to simply wait for health care, and outlaw their ability to extricate themselves from a wait list."
That, however, is the system Canadians have been living and dying with for decades. Only in recent years does it seem that they've had enough of it. First in Quebec and now in B.C., private clinics have been opening to treat those who either don't want to wait or are too sick to endure the system's waiting list. Whether they will remain legal and open will be decided this fall by the courts.

Meanwhile, Canadians keep waiting — and waiting. The Fraser Institute in Canada reports that the median wait time from a general practitioner's referral to actual treatment by a specialist was 17.3 weeks in 2008 (see chart). That's a full week better than the previous year, but far worse than a decade and a half earlier when the wait time was 9.3 weeks.
Despite the decline from 2007 to 2008, the long-term trend indicates that wait times will continue to grow. It's a discouraging pattern that the U.S. will follow if Washington forces any kind of government care on this country.

Health care: How the U.S. system is designed to waste your money

This is a great article. It's what I have been arguing for years (See "What's Wrong With Healthcare Today").

Health care: How the U.S. system is designed to waste your money

Bruce Watson Oct 26th 2009 at 5:10PM

Filed under: Technology, Economy, Healthcare

From: Daily Finance

On Monday, Thomson Reuters released "Where Can $700 Billion in Waste Be Cut Annually from the U.S. Healthcare System," a white paper exploring American health-care costs. The report identified six factors -- administrative inefficiency, provider inefficiency, lack of care coordination, unwarranted use, preventable conditions, and fraud -- that cost the U.S. health-care system roughly $700 billion a year.

That's a shocking figure, but $700 billion is a conservative estimate. The price of waste may be as much as $850 billion annually, the report concluded, and other studies suggest the figure may be closer to $1.2 trillion. Given that the most expensive health-care proposal on the table in Congress would cost about $1 trillion, it's clear that significant industry reform could fund most of the cost of universal health insurance.

Where do these costs come from? As much as $150 billion can be chalked up to inefficient hospital administration. Our hospitals spend 25 percent of health-care revenues on administration -- twice as much as Canada's. Better scheduling and more attention to avoidable errors could save up to $100 billion per year, Reuters says. "If all hospitals reduced their average cost to the average cost of the most efficient 10 percent of hospitals," the white paper says, "operating expenses would [drop] by $73 million per year.

"Another big potential money saver: coordination between caregivers. Duplicated tests and overuse of emergency rooms result in as much as $50 billion of unnecessary expenditures annually. Preventive medicine could save as much as $50 billion. It would be reassuring to pretend that such waste is accidental, but it seems to be part of a larger business plan. Every time a patient has blood taken, the hospital gets to bill for administering the test, analyzing it, and storing additional materials, and the insurer subsequently often challenges the patient over the necessity of the test. By the time the transaction is complete, a few vials of blood have supported doctors, nurses, lab technicians, billing agents, test manufacturers, insurance adjusters, and other health-care professionals; the question of whether the test was necessary in the first place is moot.

One of the central points of today's battle over health-care reform has been the issue of a public option: a government-administered insurance plan designed to encourage competition in the marketplace. Reform's most extreme opponents criticize the public option as a step in an inexorable death march to Soviet-style communism and conjure Kafkaesque fantasies of "death panels" and rationed care in an apocalyptic prophesy of American health care. Reform's most ardent supporters, on the other hand, view the public option as an all-purpose solution to a system with no checks and balances: a government-administered price-setter that automatically injects price cuts, improves service, and increases efficiency.

But the Reuters white paper suggests that the public option is a red herring. The real heart of the debate, it says, lies in wonkier issues like efficiency and oversight. The system is now designed to maximize profits by minimizing efficiency: The longer a patient languishes in the hospital enduring tests and procedures, the more money goes to hospitals, drug companies and the medical industry. As health-care becomes more complex and expensive, insurers reap the harvest. For the health-care industry, making money is the primary goal. Healing the sick is a mere side effect.

While a public option might encourage industry players to strive for efficiency and lower prices, it doesn't directly confront the central issue of waste; nor do the health care proposals on Capitol Hill. The focus on universal health coverage is overshadowing the issue of health-care waste, inefficiency and fraud. In a recent New York Times op-ed, former Treasury Secretary Paul O'Neill warned, "Any health care reform that does not address the pervasive waste and the associated burden of needless suffering for patients and staff alike will give us little to celebrate."

Stealth Socialism

Stealth Socialism

Posted 10/23/2009 07:30 PM ET

Health Reform: Congress' planned health care revolution will be bad enough without a government-run option. With it, Euro-style socialism becomes inevitable. It's time for a bipartisan way out of this disaster.

Last week proved Democrats want as much big government control as possible in the huge medical sector of the economy. The president's advisers said he's still committed to a government-run public option, House Speaker Nancy Pelosi lined up three versions of such a plan and the Senate majority leader announced a public plan with a state opt-out.
Why is the public option back at all? It seemed dead after a study earlier this year indicated such a plan would mean private health insurers could lose nearly 120 million customers.
Described as being "prized by liberals as a fundamental pillar of reform," the public option is really a way to put capitalistic America on a path toward socialized medicine.

Senate Banking Committee Chairman Barney Frank, a longtime co-sponsor of single-payer legislation, said in July, "I think the best way we're gonna get single-payer, the only way, is to have a public option and demonstrate its strength and its power." Why not just enact single-payer? "We don't have the votes for it," Frank replied.

The public option was conceived by leftist organizations such as the Campaign for America's Future years ago because polls showed the American people liked private health insurance and would never go for a direct government takeover. Ex-Sen. John Edwards' presidential campaign embraced it as "stealth single-payer," and the campaigns of Hillary Clinton and Barack Obama followed suit.

Renegade Republican Sen. Olympia Snowe of Maine may be the one to thank if this new medical entitlement becomes reality, at a time when government accountants warn that Washington is spending the country toward a fiscal doomsday.

The president is reportedly smitten with Snowe's public option "trigger" — an idea that comes down to this: If private insurers charge customers more than Uncle Sam dictates as they deal with all the new costs Washington imposes, the federal government will become their unfair competitor and wreck the private health insurance industry.

With or without a government-run option, the Democrats' radical transformation of the greatest health care system in the world still means reams of new regulations on private insurers, including the likely end of anti-trust protection.

It means fines for those — especially the young — who won't buy what will become high-priced insurance. It may slap uncooperative employers with an 8% payroll tax. And it may impose a $460 billion, 5.4% income tax surcharge sure to kill private sector jobs.

It's time for new ideas, like the expanded private coverage options of the Patients' Choice Act, backed by Rep. Paul Ryan, R-Wis., and Sens. Tom Coburn, R-Okla., and Richard Burr, R-N.C.
As Ryan warns, the federal government would run health care "with the compassion of the IRS, the efficiency of the Post Office and the incompetence of Katrina."

Does the AMA represent us?

Esteemed Colleagues,

I recently had a non-physician tell me that a recent survey by the AMA showed that "physicians in the US overwhelmingly supported universal health care". I explained to him that the AMA members only represented about 15% of all US physicians--at which time he explained to me that it was a random survey of all licensed physicians, including non-AMA members.

Is this true--or have I been locked in a time-warp?

(I actually looked at the numbers and found out that approximately 57% of those responding (of 2000 surveyed), actually supported a "public option", but for the sake of argument, I calculated the numbers and pointed out to him that 1200 respondants that supported the "public option" was hardly an overwhelming mandate and that that number actually represented less than 00.0015% of all US licensed physicians. He then proceeded to educate me on "using random sampling" whereby I had to educate him on "sampling error" and the danger of extrapolating any meaningful data from such an infinitesimally small sample to such a large and heterogenous population.)

What are your thoughts?

dximgr Radiology
Posted Oct 25, 2009 at 4:18 PM
From the first lines of the Wikipedia article on the AMA: "The American Medical Association (AMA), founded in 1847 and incorporated 1897,[1] is the largest association of physicians and medical students in the United States. While its membership has declined in recent years, it claims approximately 20% of practicing physicians as members."The number of physicians in the US is guesstimated at 800K by several sources (but 1.5M by WHO). Assuming the smaller #, the AMA would have 160K members. Sermo advertises about 115K members. But the latter # is growing while the former # is shrinking.These are back-of-the-envelope calculations. Use them at your own risk.

lasermed1 OBGYN
Posted Oct 25, 2009 at 4:47 PM
The AMA does not represent me, nor many of the other physicians on Sermo. And I do not support the current version of "Universal Health Care".

Phillip Surgery, General
Posted Oct 25, 2009 at 5:39 PM
Asking whether physicians support universal health care is rather like asking all Americans, "Are you in favor of automobiles?" Well, . . . .sure. But what make of automobile? And what FORM of universal health care? There's the rub. Devil is in the details.

drjrvigil Surgery, General
Posted Oct 25, 2009 at 6:13 PM
Thanks for the feedback. Hell, if we can't come to a consensus on what "universal health care" is, imagine what the public is faced with when asked the same question. Unfortunately, they are played to by the pied piper Obama...

rarmstrong Surgery, General
Edited Oct 25, 2009 at 7:18 PM
drjrvigil, Even in the current debate about HR3200, the AMA came out in support of it within 48 hours. Now, they didn't run this by their house of delegates first and their was no poll of the AMA members. Word on the street is that someone in the corporate side of the AMA threw their support behind HR3200. There is a lot of history here on Sermo about this topic. For me, the AMA does NOT represent my views, and any claim that they represent American physicians is completely false. Does that help?

drjrvigil Surgery, General
Posted Oct 25, 2009 at 7:47 PM
rarmstrong, yes it does...thanks for all your comments. For anyone interested, I have posted a blog on this subject on my I would love any editorial, articles, or comments from all of you on this contentious subject

rarmstrong Surgery, General
Posted Oct 25, 2009 at 8:13 PM
So, if you are interested, those of us who went to Washington on October 1st to protest what is occurring, at the Million Med March were interviewed by Fox News. Part of those interviews will be on Sean Hannity's show at 9:00 pm EST tonight.

wbarrettmd Family Medicine
Posted Oct 25, 2009 at 8:47 PM
Do youthink your going to get a different response, from the other 62 times this ? has been asked over the last 2 weeks

docrww Rheumatology
Posted Oct 25, 2009 at 9:53 PM
JR, I believe that your classmate was probably citing a recent 'survey' published in mid-Sept in NEJM online, based on subjects in the AMA database of physicians (and it did break-out responses of AMA respondents.).The survey reported 'wide support' or overwhelming support' (depending on which politician was describing it) for "The Public Option" - but not "universal health care."The survey was discussed on Sermo. The 2 authors (who designed and executed the survey, and even described placing phone calls to subjects who didn't respond promptly - something smell funny about that?) belong to 'Physicians for America' - a group that was known as "Physicians for Obama" until May, and the first author, Dr. Salomeh Keyhani, now serves as Chairman of their Foundation ('foundation' - you know, the fund-raising arm) - potential conflicts of interest not disclosed to/by the NEJM or in any of the TNTC press releases. It's the sort of baloney that would have been shredded in our 1st-year medical school journal club exercises as hopelessly conflicted and methodologically corrupt - but of course the lay press and your MBA classmates don't understand the need to read things critically... But so goes health care reform.

drnopain Pain Medicine
Posted Oct 26, 2009 at 9:13 AM

docvicolo Surgery, General
Posted Oct 26, 2009 at 10:56 AM
Universal healthcare should not be synonymous with Free Universal health care but it seems this is what most people think it is............ On the contrary, I hope people will have affordable healthcare that is by all means NOT FREE. People do not appreciate what they perceive as free and tend to abuse the privilege.

wsugaimd Pediatrics
Posted Oct 26, 2009 at 11:14 AM
One thing universal health care will do is provide a massive shift of health care from the private sector to the public (your tax increase) sector. At present, your family plan costing $12,000/yr will rise to about $26,000 by 2019 because of the additional 40% tax. Most employers cannot afford this increase and will drop coverage forcing you into the publlic option. And this option will pay like medicare and medicaid. Remember the 21.5% pay cut coming up in medicare? This means most of us will not participate with the public plan and many will have insurance, none will have doctors. The common misunderstanding is between having insurance and having a doctor. It is not one of the same. Other stats...the government ALWAYS underestimates cost of programs. In 1965, actuaries estimated medicare costs for 1990 to be $10 billion....infact it was $107 billion. Now the program is spending more than its taking in. Washington has 2 options, ration medicare or raise taxes. Best place for data and statistics is and hit the health care in the search bar then hit ibdeditorials. Wealth of information to argue our side of health care.

wsugaimd Pediatrics
Posted Oct 26, 2009 at 11:17 AM
Most of us that sign pay checks on the front are horrified about the socialization of medicine. Those of us that sign paychecks in the back are often clueless.

wsugaimd Pediatrics
Posted Oct 26, 2009 at 11:21 AM
To: AMA Members An overwhelming majority of U.S. senators, Democrats and Republicans alike, are on record stating that the so-called Medicare sustainable growth rate (SGR) is flawed and should be replaced. S. 1776, the Medicare Physician Fair Payment Act, introduced last week by Sen. Debbie Stabenow, D-Mich., would have repealed the SGR, erasing the existing debt and freezing physician payments at current rates for 10 years. Yesterday's Senate vote (PDF) on S. 1776 was an opportunity for every senator to deliver on their pledge of support for repealing the SGR. Instead the Senate voted 53-47 to block consideration of S. 1776. The blame game being spun by some politicians over the outcome of that vote should be seen for what it is—pure political gamesmanship. Notwithstanding all of the hard work conducted by physicians who reached out to senators of both parties, this bill was blocked for these basic reasons: There is growing concern on the part of legislators and the public over expanding federal deficits. Therefore, a number of moderate Democrats and Republicans, although concerned about the SGR problem, simply would not vote for a bill they viewed as having negative deficit implications. The Senate Republican leadership cast this as a test vote on Democrats' health reform legislation. The problem is that another temporary fix of the SGR formula will merely exacerbate the very deficit problem that so concerns many senators. In 2005, the cost of repealing the SGR was $48 billion over ten years and physicians were facing cuts of 3.3 percent. Today, the price tag to permanently repeal the SGR is $245 billion and next year's scheduled cut is 21.5 percent.

wsugaimd Pediatrics
Posted Oct 26, 2009 at 11:21 AM
The AMA shares concerns about federal deficits but we believe the responsible thing to do is to finally stop the Ponzi-like scheme to manage the SGR. Instead, Congress must once-and-for-all fulfill its obligation to senior citizens and the physicians who treat them. They can do this by wiping the slate clean and adopting a realistic baseline not predicated on physician payment cuts of 40 percent over the next several years. This effort to permanently fix the SGR isn't over, but we should acknowledge a few positive developments associated with S.1776 including continuing strong support and leadership by Sen. Stabenow and active support from the AARP and the Military Officers Association of America. We also need to thank the 47 Democratic senators who voted for cloture. We need to take a moment to clear up erroneous trade press reports over an Oct. 13 meeting with Sens. Reid, Baucus and Dodd and senior White House staff. At that meeting, the AMA did not agree to support a Senate bill still being drafted. While expressing our ongoing commitment to achieving meaningful health system reform goals this year, we reiterated clearly the AMA's continuing concerns with a number of provisions of the Senate Finance Committee's recommendations. These concerns have yet to be fully addressed.

wsugaimd Pediatrics
Posted Oct 26, 2009 at 11:23 AM
In other words, the AMA tried to kiss Obama's arse. Instead, it got bullwhipped.

Physician Responses to Apples are Apples Post

I posted my "Apples are Apples and Oranges are Oranges..." post on Sermo for commentary from real doctors in the trenches--not from the AMA.

dximgr Radiology
Edited Oct 25, 2009 at 8:11 PM
Dr. Virgil: There are several reasons to cast doubt on the WHO rankings. But this is not one of them: "I then pointed out to them that the average population of the European nations they had compared us to was about 50 million (ranging from 9 to 87 million) compared to 350 million in the US and that it was rather disingenuous to compare economies of scale in delivering and administering health care between countries with 9 to 87 million people (Sweden, Spain, France, England, and Germany) and ours with 350 million."Economies of scale allow one to SAVE money as the number of units increases. So if economies of scale played a role (and as I've expressed elsewhere on Sermo I don't think they do), it would lead one to assume the US, with its larger population, would have a lower cost per capita, not a higher one.So unless I'm completely misunderstanding your point, I don't think your reasoning works.

bpoterjoy Pediatrics
Posted Oct 25, 2009 at 8:18 PM
DrJ Your post here is a much longer version of a discussion I have had in non-professional forums. I have grown tired of continually hammering stat-quoters who really have no background in statistics, or who have had no formal instruction in critiquing data. So as to not rehash your well written post, I will simply say I fully agree with your comments. The one thing you left out is this- any meaningful comparison of the US v anyone is difficult not simply on population size, but on demographics- economics, race, social environment, etc. How does one compare the US, with a landmass the size of Europe and a more diverse population to, let's say Norway? I just don't think any comparison is valid. The dilemma is that the average person most likely does not have any exposure to an academic approach to data analysis, and is left with whatever he/she reads online or in the paper, or hears on television, and then quotes the data as if it is gospel.....sort of like the college student writing a term paper....or a med student doing journal club. Speaking for myself, it has taken a decade in medicine to get to reading the hypothesis, methods, and results...

rarmstrong Surgery, General
Posted Oct 25, 2009 at 8:43 PM
John, this subject has, of course been recognized and thoughtfully debated by many here on Sermo. To expect the media, politicians, pundits and others to be educated and honest about these numbers is kind of refreshing but as you have presented, is naive. So, how do you win a debate about health care in America with an uneducated, uninformed and easily inflamed public? You use statistics to lie, dramatize and support your opinion. This is operative, everywhere you look. If you are trying to sort it out...excellent! More of us should work to sort it out. Then, maybe we could form a rational informed opinion on how to proceed. You will not find this type of analysis in abundance inside of the beltway.

lawdoc Psychiatry
Posted Oct 25, 2009 at 9:49 PM
I would like a link to the reference that the editor was concerned about the methodology of the UN. I have often found the statistics problematic, but I have not seen the criticism you reference.Thanks.

theesist Anesthesiology
Posted Oct 25, 2009 at 9:53 PM
I don't know if you ran across these articles when researching for your blog, but here are a couple more that dispute our

slatosky Family Medicine
Posted Oct 26, 2009 at 9:09 AM
it is about expenditure not outcomes. if you take a country that has no medical care and everyone with breast cancer dies from it quickly and compare them to a country with great cancer survival rates you can then conclude that the country with no medical care has a lower percentage of people with breast cancer with a much lower expenditure. this is what was done in this study. If you were a patient with breast cancer where would you want to be.

rosevoran Internal Medicine
Posted Oct 26, 2009 at 9:36 AM
Power & Idealogy, this is what "Health Care Reform" is all about. Rarmstrong is right, statistics are used to lie.... This administration's goal is a socialist makeover of America. Controlling medical care is pivotal in this quest. There is no debating with them. Have you ever wondered why every one concerned (patients, physicians, pharmaceutical companies, DME companies, etc) will take a huge hit with the Obama plan...all except lawyers. There is no debate, this is a power grab.

Isledoc34 Pathology
Posted Oct 26, 2009 at 10:27 AM
One of my college texts was "How to Lie with Statistics". It seems to be the most popular texts in the WH today. Any good Socialist Govt. needs control, power, and money and will obtain their ends by whatever means available...lying being one of the best,

docvicolo Surgery, General
Posted Oct 26, 2009 at 10:34 AM
Nice Post and Comments. But can we really have any serious discussion about healthcare reform without showing our individual personal bias?.......... Not on Sermo. " Statistics is the art of drawing a crooked line from an unproved assumption to a foregone conclusion." (~ Emil Frankel )

jabmd1 Surgery, General
Posted Oct 26, 2009 at 11:00 AM
I think the key to the statistics is to compare the apples. When you compare surivial rates from many diseases the US is tops (especially cancers) To get high survivial you need to SPEND money. You spend the money on the screening, you spend the money on the treatment and you spend the money to find better treatments. I am in agreement with those that posted before me. This healthcare reform debate is all about power and trying to get a 50% majority vote for all time. Once a group of people have an entitlement program in place do you think any politician that wants to revoke it will garner any votes from the group that gets the entitlement.

lawdoc Psychiatry
Posted Oct 26, 2009 at 11:47 AM
Most of the time, it is not the statistics, it is the liars. There is rampant scientific illiteracy in this country, so the statistics are simply misused.Again, I would like to see the the actual comments of the editor. It should always be evident that we, in the USA, have social problems that pass as medical. When Farrakhan recently was encouraging black people to avoid the H1N1 vaccine, the outcomes will be reported as a failure of the medical "system." Why is it, that the failure to teach health as a meaningful course in the schools never gets mentioned as the main reason people don't know how to take care of themselves or know when it is appropriate to go see a doctor? Parents who don't know anything will only teach mis information to their kids.

Isledoc34 Pathology
Posted Oct 26, 2009 at 12:30 PM
Lawdoc, Re: "Why is it, that the failure to teach health as a meaningful course in the school never gets mentioned"... The schools all give sex education and hand out condums "to prevent disease" which is great Health Care. The kids also sing songs to BO which encompasses all of Health Care, doesn't it? It's disgusting, really.

drjrvigil Surgery, General
Edited Oct 26, 2009 at 1:04 PM are absolutely correct that economy of scale allows the ability of producing or supplying a commodity at a decreased price..but this hold true only to a point until discoordination occurs in management, inefficicney rises and average total cost of production increases again forming a U-shaped curve (this is called diseconomy of scale). E.g. General Motors. Hence it is ok to compare economies of scale between 9 million and 50 million, but somewhat of a stretch to go from 50 million to 350 million.

dximgr Radiology
Posted Oct 26, 2009 at 1:06 PM
That's exactly why, Dr. Vigil, I said above (and elaborated in prior Sermo comments) that I don't think "economies of scale" explains much in healthcare comparisons among nations. Economies of scale explain things at the level of the factory. When we talk about larger entities, another economic principle swamps it: Diminishing marginal returns.My point was merely theoretical. IF you believe economies of scale plays a role among national healthcare programs, THEN you'd expect the larger ones to be more economically efficient. But if I read you correctly, you were arguing the opposite: that the US, larger, doing worse than European countries, smaller, was explained by "economies of scale." My apologies if this was not your original claim.(If you wish to make some complicated "U-shaped" curve argument, than it's all an empirical question, and you'd need to provide numbers rather than just say it's all explainable by 'economies of scale'.)

drjrvigil Surgery, General
Posted Oct 26, 2009 at 1:06 PM
bpoterjoy, You hit the nail right on the fact that was one of the main reason that the WHO stopped the rankings because of the difficulties in comparing demographics, race, socioeconomic variables, and etc.

drjrvigil Surgery, General
Posted Oct 26, 2009 at 1:20 PM
lawdoc, here is the link and a summary. Judging health systems: reflections on WHO's methods Philip Musgrove PhD a Summary The attainment values in WHO's World Health Report 20001 are spurious: only 39% are country-level observations. The responsiveness indicators are not comparable across countries; and three values obtained from expert informants were discarded in favour of imputed values. Indices of composite attainment and performance are based on imputations and thus are also meaningless. Member governments were not informed of the methods and sometimes suffered unjust criticism because of the rankings. Judgments about performance should be based on real data, represent methodological consensus, be built from less aggregated levels, and be useful for policy.

drjrvigil Surgery, General
Posted Oct 26, 2009 at 1:36 PM
dximgr I think we are argiung the same thing. Diminshing marginal return is what makes the U curve slope upwards again. Economy of scale can apply to factories as well as organizations (goods vs services). My argument was that while a single payer system may--and the key word is may--work in smaller countries with populations of the European countries, that it is impossible to extrapolate or assume that that type of system would work in a country with a much larger economy of scale and that in fact, there would be the real and likely possibility that applying such a sytstem to our population would result in diseconomy of scale