Posts tagged ‘VA’

Undercharging for Medicare

For a while now I have argued that if people really are attached to Medicare as it is today, then premiums need to triple.

Along comes this analysis from Robert Dittmar via Hit and Run.  He argues almost all the current federal deficit is created almost entirely by the difference between the cost of government medical services and the premiums it charges.

As a thought experiment, let’s suppose that medical expenditures had been self-financed since the inception of government health care in the 1960s. What would our debt and deficit look like today? To answer this question, I simply added the medical care expenditure deficit back into the total government deficit. The result is depicted in [the figure below[ and is astounding (at least to me). Outside of medical expenditures and revenues, the Federal government sometimes ran a surplus and sometimes ran a deficit from 1966 until 1980. Starting in 1980, and lasting until 1994, the government consistently ran a deficit outside of medical spending, but from 1995 until 2010, it consistently ran a surplus. In 1994, the cumulative excess spending would have reached a bit over $1 trillion. But by 1999, debt due to sources other than medical spending would have been completely eliminated by surpluses! The government wouldn’t have needed to borrow again until 2011.

Of course, this is not entirely a Medicare issue.  Almost by definition, Medicaid and VA benefits are always going to be in deficit, since there are no premiums associated with these.

My normal response would be that the government not do this stuff.  But that is clearly a political impossibility.  We libertarians like to ignore realities like that, but it is true.  As such, I think two things will both be necesary

  • Substantial hikes in Medicare premiums
  • Some sort of system-wide cost reduction

To his credit, I suppose, Obama recognizes the need for the latter.  Unfortunately, he goes about it in exactly the wrong way.  His approach is to federalize the entire health care system and impose the same type of government-set rates on the rest of the health care system that obtain in Medicare.   But this does nothing to solve the government's cost problem.  In fact, it is likely to do the opposite.  To the extent that Medicare gets rates today that are subsidized by higher rates on non-Medicare customers, then forcing the entire health care system onto Medicare reimbursement rates will force an increase in Medicare rates, or a vast exit of health care capacity, or both.

If Medicare is going to continue to be a government program, we need to shift to a system that encourages price discovery and price shopping by medical consumers in the market end of the system.  We should be encouraging high-deductible health insurance plans rather than effectively banning them.

Creative Destruction

On UVA from Walter Russel Mead via Glenn Reynolds

As the NYT article points out, universities all over the country are facing a world of rapid change. This is going to be hard to face. Universities are structured to adapt slowly—if at all. Typically, university presidents have only limited controls, while faculties have a lot of power to resist. Management is usually decentralized, with different schools and departments governed under different rules and accountable to different constituencies. The fiscal arrangements of most universities are both byzantine and opaque; it can be very hard for administrators to understand or properly and fairly value the true cost and contributions of different parts of the institution.

The structural problem our universities face is this: confronted with the need for sweeping, rapid changes, administrators and boards have two options — and they are both bad. One option is to press ahead to make rapid changes. This risks — and in many (perhaps most) cases will cause — enormous upheavals; star professors will flounce off. Alumni will be offended. Waves of horrible publicity will besmirch the university’s name.

Option two: you can try to make your reforms consensual — watering down, delaying, carefully respecting existing interests and pecking orders. If you do this, you will have a peaceful, happy campus . . . until the money runs out.

This kind of organizational change issue is NOT unique to public institutions.  I think if one were a fly on the wall at Sears, or RIM/Blackberry, or AOL, one could describe exactly the same dynamic: insider constituencies were and are successful under the old model, so consensus processes involving these same constituencies seldom lead to change since these changes are inherently threatening to these same constituencies.  A simpler way of saying this is that it is really hard to obsolete oneself.  Just go ask Blockbuster Video.

But there is one difference in the world of public institutions.  In the private world, new success models in the worlds of Sears and AOL and Blackberry are already out there and growing really fast, run by outsiders who have absolutely no stake in the success of the old model (in fact by folks who have a strong economic stake in killing the old models).  But there is no parallel to capital markets and entrepreneurship in the public space.  There is no venue for new-model proponents to get capital and support outside of the old-model institutions.  In fact, if anything, public institutions will rally their political clout, up to and including sponsoring new legislation, to make sure new models are strangled in the crib.

If I were in the VA legislature and really cared about education innovation in the future, I would give up on UVA driving it and instead take 20% of its funding and hand it off to a brand new parallel entity, say UVA 2.0, run by an entirely new team.

This Sounds Like A Really Good Plan

The largest government medical insurance program, Medicare, is threatening to nearly bankrupt the federal government with its rising costs that no one in 30 years has figured out how to manage, short of attempts at price controls (controls which are driving doctors out of the business).  Treat with extreme skepticism mystery double-secret methodologies that the Obama administration promises will cut costs 30% when no such savings have ever been achieved in Medicare.

The largest government run medical care organization, the VA, apparently provides awful service and is rife with fraud and errors due to poor accountability.

So, despite 89% of Americans reporting themselves satisfied with their medical care (one of the highest approval ratings for ... anything I have seen out of a poll) we are going to replace our current system with one run by the government.

Outstanding.

Postscript: You will often get quoted enormous numbers (often as high as 47 million) for the uninsured.  This seems to be the driving force behind the felt need for health care change.  But when someone quotes this number to you, ask for the number excluding a) college students; b) people who make over $50,000 a year who could presumably pay for their own coverage; c) illegal immigrants;  d) people transitioning between jobs and e) people already eligible for Medicare/Medicaid but don't bother to sign up until they are actually sick.  You will get a number a LOT lower, closer to 10-15 million.

If we need to do something more to help 10 million or so poor people, then lets help 10 million or so poor people.  Let's not screw up what exists for the other 290 million or so people in this country.  As I wrote before

But health care is different.  The author above is probably correct that some crappy level of terribly run state health care will probably be an improvement for some of the poor.  But what is different about many of the health care proposals on the table is that everyone, not just the poor will get this same crappy level of treatment.  It would be like a public housing program where everyone's house is torn down and every single person must move into public housing. That is universal state-run health care. Ten percent of America gets pulled up, 90% of America gets pulled down, possibly way down.

Health care reform by hatchet, axe, and saw*.

Update: From Doug Ross

The Kaiser Family Foundation, a liberal non-profit frequently quoted by the media, puts the number of uninsured Americans who do not qualify for current government programs and make less than $50,000 a year between 13.9 million and 8.2 million. That is a much smaller figure than the media report and is also subject to "the 45% rule", wherein that percentage will transition to new jobs within a four-month time-frame.

Sex, Lies, and Videotape

I hesitated to even post this link, because if you haven't been following the Rack & Roll / Manassas Park story for a while, it is so rich and convoluted that it's almost impossible to catch up.  Like starting to watch the Sopranos in the sixth season.  But Radley Balko has a long update.

Here is the short answer.  A group of folks in Manassas Park, VA, both in and out of the town government, want to take the land where the Rack & Roll pool club and bar sits for a lucrative off-track betting establishment.  As part of that effort, they have worked to deny the owner his liquor license and his business license.  The town has also harassed the club with numerous over-the-top raids, including a full-on 60-man SWAT raid.  The town has in the past tried to portray the club as a haven for drug dealing, in part by having police pay the club's bouncer to allow and/or encourage drug deals on the property and then tip police to them.

The owner has been standing up for himself, and has taken to video-taping the premises at all times and recording interviews with employees and customers.  A lot of the back story is here, start at the bottom.

In this most recent update, the owner addresses the other major charge being used to pull his licenses -- that he allowed lewd behavior on site, specifically girls flashing their boobs on the dance floor.  He has impressive evidence that he threw out anyone he caught doing so, and instructed his other employees to do the same.  In fact, the flashing seems to have occurred when the owner was not present, and was led and encouraged and photographed by the club's DJ.  Ironically, the DJ is the Manassas Park vice-mayor.  So the town is trying to shut the club down for activities opposed by the club's owner but encouraged by the town's own official.  Bizarre.  Now the town finds itself the proud owner of a file of soft-core child pornography, in the form of pictures from the club taken by their vice-Mayor of topless girls, several of whom may have been under-age  (apparently VA law allows under-age patrons as long as they are not served alcohol).

OOPS

Kevin Drum, six months ago:

THE BEST CARE ANYWHERE....Thanks to innovations introduced
during Bill Clinton's administration, VA healthcare is now among the
nation's best. It's cheaper than either private healthcare or Medicare,
the quality is top notch, and it operates according to strict
performance standards. Sounds like a great model, doesn't it?

That quality government management and incentives system will do it every time.

Folks on the left are already gearing up to blame the current Walter Reed mess on the current administration, thus scoring points off Bush (fine with me) while not having to question the inherently poor quality of government-managed health care systems.