The Stock Reveals Obamacare's Real Winners and Losers
Fat chance patients will have better health care.
2:30 PM, Mar 24, 2010 • By STANLEY GOLDFARB
Do you want to know what our new health care system means? All you need to know is that the price of Tenet Healthcare Corporation’s stock, one of the largest for-profit hospital systems, was up 9 percent two days ago. So much for bending the cost curve.
But let’s examine five cost containment initiatives that some are arguing will bend the cost curve.
Create a competitive insurance market
Those of us who care for patients understand that it really does not matter what is done to reduce the cost of insurance over the near term; the cost of providing care for sick patients will not fall. If insurance payments fall, there may be a brief period where things look rosy, but the inexorable train of ill patients requiring high technologic care will not slow. Hospital costs will not fall and as insurance company assets are depleted, insurance costs will either rise or insurance companies will go out of business. If the costs are not passed along, then hospitals will go out of business. So why did Tenet’s stock price go up? Because none of this will happen. Costs are just beginning to rise.
What is it that a lower cost insurance plan could even theoretically do to reduce costs? Let’s say for some logic defying moment that it does work and costs fall. How will that occur? If it leads to fewer visits to the doctor’s office. But why this is a good thing is a bit unclear. How many visits are enough? It means that we will ration care in a manner that is not based on reducing unnecessary care, whatever that is, but simply reducing all forms of care.
It will not mean fewer trips to the emergency rooms. Emergency room visits are now made up by the same proportion of uninsured-insured. Currently, 85-90 percent of patients that visit emergency rooms have health insurance.
It will not mean fewer hospitalizations. The United States now has fewer hospital days per thousand persons than Canada, a long established government-run, cost-constrained system, has.
If patients demand less care, then one can assume that health care costs will fall as we will deliver less care. But what is in the new plan to get patients to seek less care? It must be that patients will pay more money to get health care. So we are asking patients to make an economic decision in place of a medical decision. If that is so, why not just have high deductible insurance policies or health savings accounts as the principle vehicle for cost containment?
Changing the politics of reform
This argument strains credibility. “Congress will have to get serious about holding costs down in the system,” because it is now in control of American health care. Sure, just as the government has been able to do for all other entitlement programs.
Medicare "bundling" programs
Here is the proposal: “Instead of getting paid for everything they do to help a diabetic, hospitals will get paid once for treating that person's diabetes and all related conditions over a certain period of time.” This sounds great, except these plans demand that one not spend more during an episode of care, or for a population of patients that the secretary of Health and Human Services determines should be spent on care for a given group over a given time period. This will lead some to avoid really sick patients, as only a few outliers will throw off an entire plan’s statistics. These few can make the system’s performance look terrible. The assessment of these plans made up of only 5,000 patients will take decades to be built, but they will be completely unreliable because of their relatively small size.
A tax on "Cadillac plans"
Again, this proposes that since the high end plans will be taxed, lower end plans will be implemented. So, if your family’s plan will be worth $27,499, you will not pay the tax. If it is worth $27,500 you will pay the tax. It seems to me that there is a pretty simple solution to avoid a tax on $27,500 plan.
To be sure, a cheaper insurance policy, if that actually occurs, would not make Tenet Healthcare Corporation’s stock rise. Rather, this reflects a clear understanding by sophisticated investors that there will be more business for doctors and hospitals. What will happen here is this: Since more health care is funded, more health care is desired, and this will result in less health care being available per patient. This will drive up prices and utilization.
The new, “independent” medical commission
This commission will determine care and decide what services are “in” and what are “out.” Congress supposedly can only cancel these recommendations if it finds a substitute mechanism to fund the activities it restores. Now, one might believe this system would work, but our experience with Congress gives little confidence that it will be able make hard choices. Moreover, just envision the first bone marrow transplant patient that this commission consigns to “no therapy.” Insurance companies tried this in the 90s and were vilified. Just imagine that particular congressional hearing
In addition to Ezra Klein’s five step plan, there are other proposals to save costs. Medicare Advantage will go away with our new health care legislation, but that accounts for $200 billion of the $500 billion to be eliminated from Medicare. Most of the rest is to come from increased efficiencies and productivity. Increased productivity means less is spent per patient. This means we deliver less care per patient. There are those who say less care is better care. It is true that there are treatments that do not prove to be effective. Unfortunately, we cannot identify what treatment does not work well until it is introduced, utilized, and, finally, assessed. We might eliminate some treatments with this approach but new treatments are then proposed and need to go through the same cycle before we know their true benefit. This cycle of assessment of benefit is a rational approach to care, but it is not very likely to reduce costs unless we also stifle innovation as we eliminate older approaches to care.
Some assume that we will now have a European style system and reduce the cost of care just as they do. Sounds great until one learns that the rate of escalation of health care costs in the U.S. is about in the mid-range of cost escalation rates in the developed nations. Spain, for example, has more rapidly increasing health care spending than the U.S. Our care is more expensive per patient than any other nation, but it is not growing faster.
What is next, then? A reasonable health insurance plan is about $5,000 per year. If 30 million people get such a plan, that will cost $150 billion per year and 1.5 trillion per decade. This may be paid for with taxes, fees, Medicare cuts and student loan savings. But bend the cost curve? Fat chance.
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