Growthology

Developments in Health Care Reform

Last month, the Kauffman Foundation released our report on recommendations for health care reform. Included in this report is a discussion about Accountable Care Organizations in Medicare and their potential to provide better care at lower cost.

From our report:

Policy Recommendation	Description	Deployment
Expanding Accountable Care Organizations	The Affordable Care Act seeks to promote ACOs, networks of providers that are accountable for and reimbursed based on patient outcomes.	Policy makers of both parties should continue the ACO and Accountable Care Community (ACC) experiments for a sufficiently long period to assess whether their promise is fulfilled.

Sarah Kliff reports that Oregon is undertaking a dramatic reform to its Medicaid program, and has received $1.8 billion of funding from the federal government to get going. What is Oregon trying to do? Implement "Coordinated Care Organizations" in Medicaid, a close cousin to the ACOs present in Medicare. I think this is a step in the right direction.

Valuing Health Care

Today, the Kauffman Foundation is releasing a new report, Valuing Health Care: Improving Productivity and Quality Kauffman. The press release and link to the report is here.

The report touches on ideas for improving an assortment of aspects of the health care ecosystem, namely health care data, medical research, regulatory and legal reform, and patient involvement. If you are short on time, you will want to at least review the executive summary and tables of policy recommendations.

When you hear that the Kauffman Foundation’s report on healthcare is partially about ‘big data,’ you might scratch your head, because about a year ago, McKinsey & Co. released a report that focused on this exact issue. Section 3 of the McKinsey report talks about big data in certain industries, with the first being healthcare. After an overview, they provide 15 ‘levers’ of future developments centered around data that they project will cut healthcare costs.

There is some overlap of ideas between the reports. But our report is broader in scope and I think expends more effort on detailing exactly how reforms might be implemented and identifying who specifically should lead the change. Another key distinction is that our recommendations derive from discussion amongst a wide group of experts drawn from academia, industry, nonprofit groups, health organization executive suites, medical clinics, labs, and law.

Entrepreneurs and the Affordable Care Act

All eyes in Washington this week will be directed toward the Supreme Court’s oral argument in the case challenging the constitutionality of the Affordable Care Act.

Would-be and future entrepreneurs have stakes in the outcome, and not everyone is likely to be positioned the same way.

For many potential entrepreneurs, the most important issue is or should be access to affordable health care insurance. Prior Kauffman-supported research (carried out by Vivek Wadhwa) has established that the median age for successful high-tech entrepreneurs is 39, an age that is probably not too dissimilar for entrepreneurs in all industries. Entrepreneurs this age are thus most likely leaving established companies where they already have health insurance, taking only COBRA’s 18 months of insurance with them if they leave to launch another firm, or relying on their spouse’s health insurance if their spouse is working. In this uncertain economy, many would-be entrepreneurs may be deterred from launching the venture of their dreams either because their spouse is not working, is working but has no family health insurance, or the entrepreneur is fearful that his or her spouse could lose their job and thus health insurance for both of them in the future.

The ACA directly addresses this concern by providing subsidies for health insurance purchases through exchanges, and through the individual mandate. If the individual mandate is allowed to go into effect, theoretically it will keep health insurance premiums below what they would otherwise be because it will require healthy individuals without insurance who make little use of the health care system to purchase insurance, broadening the risk pool and lowering rates for all. If the Supreme Court invalidates the mandate, individual insurance rates are sure to go up and thus make it costlier for would-be entrepreneurs to leave their current jobs to start a new venture (though as long as the Supreme Court leaves untouched the “guaranteed issue” requirement under the ACA, at least those individuals will be able to purchase insurance at some price).

For current entrepreneurs with businesses employing less than 50 workers, the decision should have no immediate effect, because the law’s mandate that firms provide insurance or else pay a penalty of $2,000 per worker only applies to companies with more than 50 workers. But the continued presence of that mandate plus penalty, at the margin, should discourage growing firms from hiring more than 50 workers, and to contract out as much as possible to avoid the mandate/penalty. Any court decision that invalidates these provisions (which I understand not to be directly at issue though they could be struck down if the individual mandate is invalidated and the Court decides that the rest of the law is not “severable” from the individual mandate) would remove these disincentives.

So, along with the rest of America, entrepreneurs have a clear stake in the outcome regardless of their current positions or levels of activity.

A Modern Labyrinth, Only Without the Minotaur

The interminable debate over health care reform has understandably focused on the outcomes of patient care: life expectancy, survival rates from various diseases, etc. Frequently, these are discussed in comparative terms--Sweden spends X amount on health care compared to the United States but has a life expectancy nearly three years longer; patients in the U.S. have better five-year survival rates for this type of cancer but not that one. And so on. (Notwithstanding that comparisons of life expectancy across countries can be misleading. The U.S. has a more heterogenous population than other countries, particularly in Scandinavia. And historical inequities have undoubtedly contributed to the continuing disparities we see in the U.S., something no health reform bill will remedy. I also haven't seen much reference to studies showing that pharmaceuticals have added much more to U.S. longevity than actual programs. But the former is attacked while the latter are celebrated.)

Yet what about the process of patient care? Is it important? Should we care about it? I ask because we have a family friend who is now at the beginning of her third pregnancy. She has seen the same OB/GYN for the previous two pregnancies; she also has an endocrinologist who helps manage the pregnancy. She has seen both doctors for five years and has been on the very same medication for all those years. And yet, neither office seems capable of smoothly administering the necessary processes. After labs were drawn at her first OB/GYN visit, the office called the next day with the results yet didn't leave a message. Nor did they call back. Our friend only discovered that they had called, a week later, because she happened to scroll through caller ID. Worse, when she called the office, curious about her lab results, the nurse said, "Oh, yes there is a message here for you: your results are abnormally high."

So that's crazy. Lab results are out of whack and the office tries once, with no message, to contact the patient? This isn't about incompetence on the part of the physician: he knows nothing about the incommunication and if he did, would be quite upset at the lack of proper care for his patient. Once those results had been discovered, moreover, they needed to be relayed to the endocrinologist who prescribes the medicine. But could the OB/GYN do this? Of course not! Because we don't adequately share information across practices! So our friend had to call up the specialist and request a higher dosage herself. Fine: but lo and behold it turns out the the endocrinologist's office can only do that at the request of another physician's office--and they won't send over the delayed lab results! Still worse, the assistant at the second office says it's no big deal to be without the higher dosage (she's pregnant remember) since they can get our friend an appointment next week! How's that for patient care?

Granted, this is only one story from real life. Undoubtedly, plenty of readers have stories of both horror and helpfulness, and we can't really plan a comprehensive reform package based on a series of anecdotes that may not adequately convey the true state of things.

But our friend's dilemma illustrates a larger problem. Yes, we have issues of cost and uninsured and underinsured. But we have this giant administrative labyrinth built into health care that plagues the system and its core, patient care. The provider-patient relationship is often disrupted to the point of inadequacy and perhaps harm. Bureaucracy deadens accountability and our friend's plight perfectly illustrates this. Competition amongst insurers, controlling costs, a public option--these will not cut through the labyrinth. Neither, it seems, would more consumer-empowered care if consumers can't fight through the administrative maze.

So why do we think that the cure for bureaucracy is more bureaucracy? This is a Washington solution, of course: any broken system can simply be repaired by affixing a new system on top of it. Our laws are written by people who have forgotten (or never knew in the first place) what it's like to be without insurance, to be one catastrophe away from financial disaster, or even to have to attempt to navigate bureaucracy in trying to get your necessary medicine or your own lab results. Instead, Senate delegations journey to hospitals to view "mock code" situations and then issue grave statements on the need for such and such reform. This is their insight into health care? Please.

Boycotters Call for Whole Foods Founder to Be Removed as CEO

Guest post by Charles Johnson 

The ire over Whole Foods CEO, John Mackey's WSJ op-ed on health care has entered a new phase, with union boycotters calling for him to be removed as CEO and chairman by the Whole Foods board. I quote, 

"Mr. Mackey attempted to capitalize on the brand reputation of Whole Foods to champion his personal political views, but has instead deeply offended a key segment of Whole Foods consumer base," CtW Investment Group's Executive Director Bill Patterson said in a statement. 

Meanwhile, the United Food and Commercial Workers Union, which is part of Change to Win, said it will be giving out information to Whole Foods shoppers about health care reform. The group said Mackey's op-ed was an "attempt to undermine Obama's health-care reform."

First of all, the boycott is clearly failing. Whole Foods's stock hasn't fallen a bit since the boycott began. If anything, it's increased! (Which, incidentally, is welcome news to this Whole Foods admittedly extremely small scale stock owner.)

Second of all, why don't we want entrepreneurs injecting their politics into the national debate? If it is acceptable for entrepreneurs to inject their politics into the debate in favor of increasing marginal tax rate, increasing the gax tax, and removing subsidies on fossil fuels? Why isn’t it okay for one entrepreneur, who by all accounts has helped his employees get some of the best coverage available, to weigh in on the health care debate? 

We should be thanking Mr. Mackey for bringing his expertise to bear on a problem of national import, particularly given his experience insuring his own work force!  

(For those interested in greater detail, be sure to check out Megan McArdle's excellent post explaining why the Whole Foods boycott is really a non-starter.)

Health Care & Growthology Mantra for Summer '09

Our friend and economist-blogger-in-arms, Arnold Kling, has an interesting take on how to fix health care in The American, the online magazine of AEI. He writes that,

One illusion about healthcare reform is that the only problem we have to tackle is the uninsured. The larger problem is that those of us with insurance have too much coverage, so that neither patients nor doctors have to pay attention to costs when making decisions. That is going to have to change. 

Such an injection of cost into the market would serve as a signal to would be innovators who can drive down costs. (For more see Paul Howard's "Health Care's New Entrepreneurs," in City Journal.)

You might remember that Kling was a participant in this February's Economics Bloggers Forum. (Kling blogs at EconLog, a popular economics blog.) During one of the panel discussions, Kling was skeptical that one of the barriers to entrepreneurship is lack of health care. He and Bob Litan argued about it, so it comes as some surprise that one of the problems with employer-provided health insurance is "job lock," something of a hobbyhorse of the Kauffman Foundation. Kling writes,

Workers who are concerned about the availability of health insurance may suffer from “job lock.” They might wish to leave their job for self-employment, pursuit of formal education, an opportunity with a smaller firm, or early retirement, but the potential loss of health insurance is a deterrent.

I haven't had the chance to talk with Bob about this, or Carl Schramm -- point being that both know more about health care policy than my doctor and I combined -- but I am torn about the upcoming battle over healthcare reform. Whatever the bill pays for, I am likely to distrust its impact on market incentives, but how it pays may turn me into a full-throated Obamaite (Obamacon?  What are they called?). The WaPo has a great article today about Dem infighting over the revenue plan for healthcare. Growthology mantra for the summer: Taxing employer-provided health insurance is not just a way to pay for reform, it is health care reform. Every entrepreneur knows this is the key to levelling the playing field. Let's hope it happens.