The Jones Plan: A Reality-Based Approach to Healthcare Reform

To provide affordable, quality health care for all Americans in a
manner compatible with economic reality and American ideals.

The first priority is to set priorities. For healthcare reform, we propose these:

1. First, undo the mistakes of the past to restore efficiency, affordability, innovation and competition to our healthcare system.

2. Focus on maximizing Americans’ “health,” NOT on “coverage,” “insurance,” or even “healthcare.”

3. Control costs before extending benefits.

4. Make incremental improvements, testing changes on a small scale before they are deployed nationwide or permanently.

The single most essential measure to allow our battered healthcare system to recover economically is to get rid of Medicare/Medicaid price controls and central planning, and allow healthcare providers to compete based on quality, reputation and price. Unless and until we do that, efficiency will continue to decline and costs will continue to increase. Let me give just a few brief examples of how Medicare/Medicaid price controls (aped by the private insurance companies) have damaged our healthcare system, compromised the doctor-patient relationship, and injected massive inefficiency into our healthcare system:

[NOTE: Throughout this discussion, references to the policies of Medicare should be assumed to apply to Medicaid, other government programs and the major private insurance companies unless otherwise stated.]

1. Ever wonder why you can’t get your doctor on the telephone? About half of the problems patients have to see a doctor for could be far more quickly and efficiently resolved with a simple phone call or email. But doctors can’t care for patients by phone or email because Medicare doesn’t reimburse for that. And because payments keep declining (relative to inflation), while the complexity and costs of getting paid keep increasing, to stay afloat doctors are forced to dedicate every working minute to revenue-generating office visits and procedures. You might say, “Well, Medicare just needs to reimburse doctors for time on the telephone and email.” But that misses the point: central planning and price control is fundamentally inefficient, and no amount of tinkering with the plan or prices can ever change that. Central planning and price controls never worked in the Soviet Union, and will never work in American healthcare.

2. Many elderly and disabled patients have multiple medical problems. Those patients and their doctors would prefer to address all their problems in a single long visit every few months. But because Medicare and insurers will only pay a maximum fee per visit, and those fees have not kept up with inflation while time-wasting bureaucratic burdens have steadily increased, doctors are forced to schedule more frequent and shorter visits, just to stay afloat. This requires many patients to come for much more frequent visits than would otherwise be necessary. That wastes physicians’ staff time checking patients in and out more often; wastes doctors’ time getting re-oriented, saying “Hello, how’s your garden?” and reviewing past records for these patients at every visit; and wastes the patients’ time and transportation costs to visit the doctor more frequently.

3. Simply because of Medicare price controls, medical records are now approaching infinite size and zero value! In the old days, when a patient moved to a new doctor, their past medical records usually contained mostly useful information (assuming your could read it). But because (1) Medicare, logically enough, pays more for a more complicated visit, and (2) the only way Medicare can judge the “complexity” of a visit is by the complexity of the documentation recorded, to “game the system” so as to get larger payments for more complex visits, doctors, their billing agents, and the software companies who produce “electronic charting” software, now all dump ever increasing amounts of worthless medical jargon into patient records, so as to make the service appear more “complex,” and therefore get larger payments. Any meaningful information in medical records is increasingly buried in mounds of worthless verbiage whose only purpose is to “beef up the chart” to support higher payments!

To summarize, Soviet-style central planning and price controls have made our healthcare system massively inefficient and in many ways downright dysfunctional, even dangerous. The single most essential measure to allow our battered healthcare system to recover is to get rid of Medicare central planning and price controls, and allow healthcare providers to compete based on quality, reputation and price. The fact that many will consider this a radical idea only reveals how pathetically disconnected from both economic reality and American ideals our battered healthcare system has become.

What we have proposed so far may seem pretty obvious to anyone with a basic understanding of economics and human behavior. To understand the remainder of our proposal, it is important to understand how our healthcare system got into its current sorry state, and that requires a little history. Once you understand how this Gordian knot was tied, the solution to its untying becomes obvious.

You must also bear in mind a fundamental economic principle: for our free-market economy to function efficiently, the consumers of goods and services must also be the payers for those goods and services. Only then will consumers be incentivized to “comparison shop,” thereby forcing suppliers to compete for their business.

The short story:

1. Historical factors resulted in massive abuse of insurance and a disconnection between the consumers and payers of medical services. The disconnect between consumers and payers then inevitably led to the failure of free-market competition to control prices and quality.

2. Medicare’s response to the resulting inefficiency and cost escalation, rather than addressing the core problems (the disconnect between consumers and payers and abuse of insurance), was to impose central planning and price controls on the healthcare system.

3. As any economist would have predicted, price controls and central planning have resulted in continuously escalating costs and inefficiency as providers, rather than improving services and lowering costs to compete for patients in a free market, squander ever-increasing resources “gaming the system” -- the only way to survive in a pathological system with perverse incentives.

The slightly longer story, with historical context:

[NOTE: This discussion focuses on the role of physicians. The role of hospitals is beyond the scope of this discussion, but rest assured: the hospital industry is subject to exactly the same fundamental laws of economics and human behavior; and has been subjected to the same Medicare price controls and “central bureaucratic planning” as physicians, with the same disastrous results.]

There was a time when doctors “took care of sick folks” and those same sick folks paid the doctor at the end of the visit. If a doctor over-charged, patients negotiated a lower fee or went to another doctor, just like they did with the furniture salesman or appliance repairman.

Then came the temporary wage-and-price controls of World War II, and the subsequent post-war industrial economic boom. There is no good reason why employers should be involved in health insurance; in general, that only increases complexity and costs. But during the war, employers were prevented by wartime price controls from competing for employees by raising wages. They were forced to compete by offering fringe benefits such as paid health insurance. Then during the post-war economic boom, the big manufacturing companies were flush with profits. Consequently the unions, at the peak of their power, were able to demand and get generous fringe benefits. Those benefits often included employer-paid health insurance.

These employer-paid insurance plans generally included coverage for small and modest expenses, such as office visits, tests and minor medical procedures. Use of insurance for such expenses is an inefficient abuse of the fundamental concept of insurance, because it injects a profit-seeking third party and additional complexity and paperwork into every transaction. But the employers paying for the insurance didn’t mind because (a) employees appreciated not having to worry about these expenses, and (b) coverage for office visits didn’t cost much because doctors were still in the habit of competing on price for patients’ business. The insurance companies certainly didn’t mind because, big expense or small, they always get their cut for juggling the money.

How doctors got caught with their hands in the cookie jar:

At this point, due to the widespread miss-use of medical insurance, the payers of medical services became increasingly disconnected from the consumers of those services. Doctors soon discovered that, although a patient might complain about $50 for an office visit, they could send a bill for $250 to the patient’s insurance company; and oddly enough, the insurance company would usually pay it without question. So they started doing that more often. Can you blame them? The patients were perfectly happy for their doctors to buy big new mansions next to their banker’s, and park shiny new Cadillacs in front of their offices, as long as someone else was paying. Of course, this couldn’t go on forever…

That was the situation when Medicare first appeared on the scene, in 1965-66. Initially, Medicare functioned essentially like other insurance companies, albeit one created by the federal government explicitly for seniors (or more precisely, Social Security beneficiaries). And since seniors are mostly retired and have time to vote, and because many were recently retired from jobs that provided medical insurance that covered minor expenses such as office visits, Congress enshrined that fundamental abuse of health insurance in Medicare.

Initially Medicare, like the private insurance companies, pretty much paid whatever bills doctors submitted, without questioning. How could they question the bills? They didn’t understand “medicalese,” and they had no idea what the items on the bills represented or how much they were worth. So the doctors smiled and dug deeper into the cookie jar…

If Medicare hadn’t been involved, the fundamental problem of insurance abuse (and the resulting payer-consumer disconnect) would almost certainly have been corrected by free-market forces. Due to increasing costs, the insurance companies would have been forced to increase their rates dramatically for policies that included frivolous coverage, forcing most patients back to only catastrophic coverage (the only valid purpose for insurance). Or the insurance companies would have been forced to limit coverage for office visits and other minor medical expenses to, say, $1000 per year, or a limited amount per visit; beyond that, patients would have to pay out-of-pocket. In either case, patients would again have been forced to comparison shop; and doctors would again have been forced to compete on price.

But that’s not how it came down. Congress was afraid to tell Grandma she might have to shop around again for a doctor she could afford. So instead of taking appropriate measures to correct the root problem of insurance abuse and the resulting consumer-payer disconnect, Congress, through Medicare, radically compounded the problem by imposing price controls and central bureaucratic planning on medical goods and services. This occurred incrementally, primarily during the period from 1983 through 1992. Inevitably, efficiency has been going down, and costs rising much faster than inflation, ever since.

If doctors had been offered to change to the current Marxist system “in one fell swoop,” back when Medicare first began to introduce price controls and bureaucratic meddling, in exchange for soaring healthcare costs, ever declining physician incomes, public scorn, and the opportunity to run on hamster wheels all day, they would have screamed in unison, “NO WAY.” Like most things that rot you from the inside out, this happened gradually and insidiously.


Before proceeding with the solution to this mess, it's important to point out one other way that price controls combined with miss-use of insurance have resulted in both massive inefficiency and increasing frustration for both doctors and patients. This shows how one misguided attempt to solve a problem only causes more problems:

How were the bureaucrats at Medicare to set prices when they had no clue what they were pricing? At that time most physicians’ bills just included items like “office visit,” “professional services,” “blood tests,” “x-rays,” etc. In order to apply price controls, Medicare had to force physicians to break up their charges into precisely defined units that would be defined the same for all physicians. For example, “office visit, level II,” “chest x-ray, 2 views, with interpretation,” or “complete blood count with microscopic differential.” Since Medicare had no idea how to micro-define what physicians do, they adapted a pre-existing set of “CPT codes,” previously cataloged by the AMA for other purposes. That might have worked, except for the facts that:

1) Not all physicians think alike or naturally categorize what they do in the same way, and
2) Since medicine is a rapidly evolving and innovative science, no bureaucratically maintained system of codes could ever be current or complete.

This band-aid on bailing wire approach to “fixing” Medicare by forcing doctors to micro-dissect everything they do into fuzzily-defined and out-of-date “codes” has caused all the following regrettable consequences:

1) At the end of every patient visit, doctors (or expensive specially trained staff) are forced to waste significant time browsing a catalog of codes, hoping to find some that both reasonably describe what the doctor did AND that Medicare (or other insurance) will deem worthy of payment. (This is less of a problem for specialists, most of whom deal with only a few hundred codes, instead of thousands.)

2) Inevitably, once they had the coding-of-services requirement in place, the Medicare bureaucrats were unable to resist the temptation to achieve even more “cost reductions” by (a) deeming many of the codes unworthy of payment for various thinly contrived reasons or (b) paying specific codes only when the bill also included specific diagnoses or other “supporting documentation.” This requires physicians and their staff to waste even more time fiddling with codes and combinations of codes, and re-submitting bills multiple times in maddening efforts to simply get paid for services already provided.

3) The problem I just described would be bad enough, but it is magnified many times over by the fact that virtually all the private insurers have aped Medicare’s policy of paying only certain codes and combinations of codes, but every insurer pays for somewhat different codes and code combinations!

4) The net effect of the foregoing is that Medicare and insurance company micro-requirements now constrain or compromise patient management at every turn. Doctor: “I think you might have disease Z, but to be sure we need to get test X.” Patient: “But Doctor, will my insurance pay for test X?” Doctor: “I don’t know, but I’ll have my staff check into it. Come back next week and we’ll see. In the meantime, take this pill and hope you don’t croak.” Does that sound vaguely familiar? Have you had enough of it yet?

If the current oppressive system of price controls and bureaucratic micromanagement had been applied in a single blow, both patients and physicians would certainly have stood up in unison and said “NO WAY.” It is only because the current regulations were applied incrementally over many years, each step seeming at least tolerable, that we have allowed our healthcare system to morph into its current over-priced, inefficient, dysfunctional state.

So now that we understand how the Gordian knot was tied, it’s untying is amazingly simple -- you just reverse the misguided measures that created the knot in the first place:

1) Get rid of Medicare (and private insurance) price controls.

2) Get rid of “CPT coding,” “ICD coding” and the central planning and micromanagement of healthcare by Medicare and insurance companies that depends on it.

[NOTE: Some might complain that such coding is necessary to support valid medical purposes such as quality monitoring, epidemiologic studies, etc. In fact, these codes are virtually worthless for such purposes because (a) hurried doctors (or their assistants or billing agents) rarely have time to consider the nuances of specific code definitions, so they tend to grab any code “in the right ballpark” that they think might get paid; and (b) since reimbursement is based on the codes, they are highly susceptible to “gaming,” so as to maximize reimbursement.]

3) Allow doctors to simply bill for reasonable broad categories of services, e.g., “professional services,” “blood tests,” “office procedure,” etc.

4) End the insurance miss-use that caused the pathological disconnection between consumers and payers in the first place. That is, patients should pay doctors and then seek reimbursement from their insurance companies (including any publicly funded insurers such as Medicare and Medicaid). That way, patients are forced to economize, just like they do at the appliance or grocery store. Insurance companies are forced to argue and negotiate with their true customers, the patients. And doctors are relieved of endless arguments with Medicare or insurance bureaucrats. The privacy and integrity of the patient-doctor relationship is restored.

Note that in our current system, doctors do have the option to "opt out" of Medicare and private insurance contracts, and take only cash-paying patients. More and more doctors are doing that out of financial necessity, due to ever-declining reimbursements and ever-increasing bureaucratic hassles imposed by Medicare and insurance companies. However, because the majority of patients have some kind of insurance, it is difficult for a doctor to attract patients without accepting the insurance contracts. Doctors are stuck in a dilemma: accept Medicare and insurance contracts to attract patients (tolerating the dwindling reimbursements and bureaucratic meddling); or go cash-only, and lose access to the majority of potential patients.

If wealthy people want to pay high prices for “comprehensive coverage” so they never have to fumble with their credit card at the doctor’s office, they should have that right. But most policies affordable to average people, and certainly any taxpayer funded health insurance, should either not cover non-catastrophic costs such as office visits, or should have low limits and/or significant co-pays or deductibles on such coverage. Only that will restore consumers to their proper role as payers of healthcare services, and allow providers to once again compete based on price, quality and reputation.

Note that, just as the misguided policies of the past incrementally injected inefficiencies into the system and ramped up costs, reversing those misguided policies will reverse those inefficiencies and will lower costs:

1. Getting rid of price controls gets rid of the “coding problem.” Doctors will no longer have to waste ridiculous amounts of time and resources trying to shoe-horn everything they do into fuzzily defined and out-of-date codes dictated by bureaucrats, just so they can get paid.

2. Getting rid of the coding problem gets rid of the problems of insurance adjudication and bureaucratic interference in the doctor-patient relationship. If doctors aren’t forced to dissect their services into specific codes, then insurance companies can’t refuse to pay specific codes, or argue with doctors and patients about what specific tests or treatments a patient is entitled to. Medical decision making goes back to the doctor and patient, where it belongs.

Will Congress have the courage to enact these simple measures that are so desperately needed to restore sanity, efficiency and affordability to our healthcare system? My guess is, yes, but only if citizens demand it loud and clear and in large numbers. It won’t be painless. Some constituencies will be displeased, many people will be temporarily unemployed, and many will have to be retrained.

A substantial fraction of our total healthcare work force is currently employed primarily or exclusively just to cope with the needless complexity and inefficiency imposed by Medicare (and private insurer) central planning and price controls. For example, you would be amazed what a massive industry and work force has developed purely to support the requirement for every medical bill to be “properly coded” in order to be paid! Schools all over the country offer degrees in medical coding! The “Medicare Economic Cancer” has tentacles everywhere!

But once the system adjusts, those people will be contributing valuable goods and services to our economy, rather than wasting their time meeting senseless requirements that only drive costs up, efficiency down, and doctors and patients mad. It may be painful, but it must be done if we want to restore quality and affordability to health care.

At this point we have solved the fundamental problems of low efficiency and high costs. Those problems must be addressed before we tackle the problem of providing healthcare to the millions of citizens who currently cannot afford it. To do otherwise would be national financial suicide and would help no one in the long run.

Other Valid Roles of the Federal Government in Improving Healthcare

There are several other measures that can be taken by the federal government to improve the quality and efficiency of American healthcare.

1. Measures need to be taken to support patients in their role as “comparison shoppers” for medical goods and services in our free-market healthcare economy. This could probably be most efficiently accomplished through an “American Health Quality and Education System,” or AHQES (similar to the system proposed by Dr. Guy Clifton [11]). The AHQES would be a federally funded, non-partisan agency with the mission to:

a. Systematically evaluate and publish data on the effectiveness, costs and risks of treatments and diagnostic tests.

b. Systematically develop and publish standard patient educational materials to educate patients on the various diseases, tests and treatments; and on their costs, risks and benefits.

With the information provided by AHQES, consumers would be empowered in their proper role as comparison shoppers for medical goods and services.

Note that that the AHQES has NO ROLE in determining which tests or treatments are "approved" for use or reimbursement. Such decisions belong exclusively to doctors and patients.

2. Standards for Electronic Medical Records (EMR): The federal government should take measures to encourage the rapid development of standards for Electronic Medical Records. Such standards are needed:

a) to ensure that any doctor, regardless of what EMR system she is using, can access all records of a patient, even though they may have been created by other physicians using different EMR systems.

b) to ensure that accurate data on all patients’ diagnoses, tests and treatments, and the benefits and adverse effects of those tests and treatments, are available (with appropriate privacy protections) to AHQES (and private research institutions) for ongoing analysis and continuous improvement of our knowledge regarding the costs and benefits of tests and treatments.

As in other industries, the people best qualified to produce the actual standards are the EMR software companies themselves. The only role of the federal government should be to mandate the creation of sufficient standards to ensure (a) the interoperability of systems from different vendors, and (b) the availability of the data required by AHQES and other researchers for the advancement of medical science. (NOTE: to ensure patient privacy, any data made available to researchers would be stripped of all patient-identifying information.)

3. Insurance industry regulations: The following insurance regulations could most effectively be promulgated at the federal level, to prevent certain egregious practices by insurers, and to guarantee portability and continuity of insurance coverage.

a. Insurance regulations should be changed to require insurance companies to charge individuals no more than they charge large groups for similar policies.

b. Insurance should be portable across state lines.

c. Once a policy has been granted, price increases should be limited (e.g., no more than inflation or age adjustments); and insurers should not be able to cancel policies because of poor health.

d. Individually purchased medical insurance should be tax-favored (or not) the same as employer-provided insurance.

e. Congress should encourage or promote high-deductible insurance policies in combination with tax-exempt HSAs (Health Savings Accounts).

f. Congress should impose only the minimum insurance regulations needed to prevent egregious practices, to promote insurance policy portability and continuity, and to promote competition in the insurance industry. Specifically, Congress should certainly not prohibit “any annual or lifetime limit on coverage,” or otherwise attempt to impose socialism as a business model on the insurance industry. The long-term effects of such meddling in the free market would be as disastrous as Medicare central planning and price controls have been!

4. To provide a medical “safety net” for all Americans, Congress should consolidate existing government health programs (CHIP, Medicare, Medicaid, Veterans Administration health services, etc.) into a simplified and federally managed “healthcare safety net” for those who need healthcare they cannot pay for. The details of such a system are beyond the scope of this discussion, but it should probably consist of vouchers (similar to "food stamps") for insurance or care that can be spent in a free-market healthcare economy.

5. Changes in Prescription Laws: The requirement for a doctor’s prescription for most medications should perhaps be modified or removed. Prior to the 1951 Durham-Humphrey amendment, you could obtain any medication (except narcotics) without a doctor’s prescription. Although highly beneficial for the medical profession, this law is detrimental for multiple reasons:

a. It increases net costs by requiring patients to encounter a physician, even when they know perfectly well what they need, or just need refills of a medication they’re already using with good results.

g. It encourages dependence on physicians and discourages patient self-education and self-reliance in their healthcare.

c. It violates our fundamental human right to decide for ourselves, as free intelligent beings, what to do with our bodies and how to take care of ourselves.

There are reasonable “middle ways” short of outright abolishing the requirement for prescriptions. For example, patients might be required to demonstrate basic knowledge of the effects, benefits and risks of any specific medication before self-prescribing. Another option would be to require physician prescription only for those medications that have a high risk of serious adverse effects and/or require regular monitoring or testing for dosage adjustments or safe administration. Based on my primary care experience, however, such testing and monitoring is poorly performed by most physicians; and could probably be done more reliably by software that patients and/or pharmacists access at pharmacies or on the Internet.

6. Changes in FDA New Drug Approval Requirements: The cost to develop new treatments could be greatly reduced, and innovation much increased, through some simple changes in FDA requirements:

a. The requirement to prove “effectiveness” of new drugs should be removed. Proof of safety would still be required, and until effectiveness was proved, a drug could only be advertised as “experimental.”

Prior to the Kefauver-Harris amendment of 1962, a manufacturer was only required to prove safety of a new drug, not effectiveness. Proof of effectiveness is much more costly and time-consuming, so much so that it now costs approximately $1 Billion dollars and takes 12-15 years to get a new drug approved. Since many new drugs, after approval, are found to be effective for other problems beyond that for which effectiveness was initially tested, the effectiveness requirement tends to prevent new drugs from being tested for other diseases when efficacy cannot be proven for what initially seemed the most promising use.

Proof of effectiveness would still be required before a treatment could be advertised as "safe and effective."

b. Reciprocal approval should automatically be provided for new drugs that have been approved in foreign countries with sufficiently rigorous approval requirements.

7. To discourage unhealthy or risky behavior, and increase fairness, the public “safety net” should be financed to the maximum extent feasible through targeted taxation of products and behaviors that contribute to disease and disability. And insurance companies should not be prevented from charging more to patients with unhealthy lifestyles.

8. Americans have a God-given right to die in freedom, as surely as we have a God-given right to live in freedom: Now that modern medicine has robbed us of our innate, God-given right to die with dignity from natural causes, we must develop legal and socially accepted ways to die with dignity when our bodies are so decrepit and our brains so demented that meaningful life is no longer possible. Some argue that “only God” should decide when someone dies. But it is only our “playing God” that keeps people “alive” far beyond their capacity to be fully human. “Playing God” is exactly what created this problem.

Old-time doctors called pneumonia “the old man’s friend.” In the days before antibiotics and intensive care units, pneumonia was the old person’s ticket to the promised land. Nowadays, no matter how chronically miserable and demented, the nursing home patient usually gets transferred to the hospital where, at enormous expense and profit, their misery gets prolonged another few months. It is time we ended this systematic torture and abuse of our old folks.

9. Federal licensing and regulation of physicians, pharmacies, hospitals, insurance companies, etc: Clearly, the efficiency and competitiveness of these professions and industries would be increased if licensing and regulation was moved to the federal level, allowing all parties to compete across state lines.

10. Narcotics laws and the high cost of getting high: Half of the people in federal prison are there for drug-related offenses; and most primary care physicians squander a significant fraction of our professional time and organizational resources dealing with “drug seekers” attempting to obtain narcotics under false pretenses. Furthermore, our current epidemic of AIDS and chronic hepatitis C (both very expensive chronic diseases) is caused primarily by the fact that addicts are forced to satisfy their cravings surreptitiously. It is a national embarrassment how our “American Addiction” fuels narcotics trafficking, terrorism and gangsterism around the world, and is currently causing the murders of thousands of innocent Mexicans caught in the cross-fire. History has proven time and again that banning addictive substances is futile, so why does our government persist in this fabulously expensive and internationally embarrassing folly?

CLEARLY:

a) All addictive substances should be decriminalized.

b) All addictive substances with significant health or safety impacts should be controlled (e.g., to prevent sale to minors and to ensure proper labeling and product consistency).

c) All addictive substances with significant health or safety impacts should be taxed enough to pay for the damages they cause, but not so much as to induce boot-legging and smuggling.

11. Tort reform: People opposed to tort reform are quick to point out that the cost of malpractice insurance premiums and judgments accounts for only a small percentage of total healthcare costs. That is true, but the actual cost of our perverse tort system is much higher, because every doctor has either been the victim of a groundless lawsuit, or has seen a close friend or colleague endure that trauma.

My personal impression is that the practice of “defensive medicine” (ordering excessive tests or treatments purely to reduce the risk of lawsuits) is widespread, and probably contributes at least 5% and possibly 10-20% of total healthcare costs. This problem is not unique to healthcare; frivolous lawsuits cause higher costs and decreased efficiency throughout our economic system. This is another systemic problem best addressed at the federal level. Congress should, at least:

a) Put reasonable caps on payments for non-monetary damages.

b) Enact the “loser pays rule,” which requires the losing party in a civil suit to pay the legal costs of the prevailing party. Although the great majority of malpractice suits are won by the physician, “winning” is small consolation when your name has been drug through the mud, you’ve lost thousands of dollars in defense costs and lost practice time, spent many sleepless nights worrying, and now feel like you have to second-guess every decision you make, lest it trigger another groundless lawsuit. If plaintiff patients and their attorneys knew they would have to pay the bill when their long-shot at the jackpot fails, they’d be far less inclined to play that slot machine; doctors would sleep much better; and our total healthcare costs would decline another 5-20%.

References

[1] HSC Community Tracking Study Physician Survey in 1996-97, 1998-99 and 2000-01. Center for Studying Health System Change.

[2] Losing Ground: Physician Income, 1995–2003. Center for Studying Health System Change.

[3] Relationship Between Regional Per Capita Medicare Expenditures and Patient Perceptions of Quality of Care. Floyd J. Fowler Jr, PhD, et al. JAMA. 2008; 299(20):2406-2412.

[4] Aaron Catlin, et al, and the National Expenditure Health Accounts Team, “National Health Spending in 2005: The Slowdown Continues,” Health Affairs, January/February 2007, Vol. 26, No. 1, pp.142-153.

[5] Hoover, Donald R., et al. "Medical Expenditures during the Last Year of Life: Findings from the 1992-1996 Medicare Current Beneficiary Survey." Health Services Research. 37: (December, 2002):1625-1642.

[6] Wikipedia definition of “insurance” (http://en.wikipedia.org/wiki/Insurance)

[7] ‘The Cause of My Life’ - Inside the fight for universal health care. By Edward M. Kennedy. Newsweek, Issue date July 27, 2009.

[8] Lifestyle Risk Factors and New-Onset Diabetes Mellitus in Older Adults, The Cardiovascular Health Study. Dariush Mozaffarian, et al. Arch Intern Med. 2009; 169(8): 798-807.

[9] Lifestyle Risk Factors Predict Healthcare Costs in an Aging Cohort. J. Leigh, H. Hubert, P. Romano. American Journal of Preventive Medicine, Volume 29, Issue 5, Pages 379-387.

[10] 111TH CONGRESS; 1ST SESSION H. R. 3200; (A Bill) To provide affordable, quality health care for all Americans and reduce the growth in health care spending, and for other purposes. Full text available at http://energycommerce.house.gov/Press_111/20090714/aahca.pdf and also at http://www.opencongress.org/bill/111-h3200/text.

[11] Flatlined - Resuscitating American Medicine, by Guy L Clifton, M.D. Rutgers University Press, 2009.

[12] H. R. 3962 To provide affordable, quality health care for all Americans and reduce the growth in health care spending, and for other purposes. (http://docs.house.gov/rules/health/111_ahcaa.pdf).

[13] Bending the Cost Curve (http://cboblog.cbo.gov)



Tuesday, January 11, 2011

Poverty in America and Social Policy


The following (slightly edited and expanded) was originally posted as several reader comments on the New York Times, in response to Tina Rosenberg’s article of January 3, 2011, titled
To Beat Back Poverty, Pay the Poor
http://opinionator.blogs.nytimes.com/2011/01/03/to-beat-back-poverty-pay-the-poor/
I think the problem in the US (with cash transfers to the poor), and what scares conservatives is this:
1. Bureaucrats and politicians in the US who are doling out tax money always seem to develop a curious linguistic deficit: they forget how to say "no." Any strict rules regarding the eligibility requirements necessary to make such programs effective in lifting people from poverty would likely be watered down or disappear.
2. From conservatives' perspective (paranoid or not), that is because the objective of "social liberals" in the US is not to liberate the poor, but to maintain a dependent class who will vote to keep them (the bureaucrats and politicians) in office, and personally well above the poverty level.
We have seen this in the past, with "welfare" programs that only created a hopeless underclass of people with a multi-generational culture of entitlement expectation, but with no work ethic or economic skills.
I don't believe that conservatives, Republicans, or whomever can or would resist a program that demonstrates a strong ability to sustainably elevate people from poverty or solve other major social problems. But they certainly can/will resist programs that commit massive amounts of federal dollars for decades for unproven liberal adventure (e.g., Obamacare).
Those who wish to promote such programs as "conditional cash transfers" or "workfare" should design short-term, limited-scale test programs, to be advanced and expanded as they prove themselves. That's the difference between, e.g., the highly successful man-on-the-moon program and the disastrous Obamacare.
One big problem with cash transfers I’ve seen in the US is that, because the great majority of the poor are above the subsistence level, the money tends to be spent on “luxury” items that may actually be detrimental. For example, food stamp user’s grocery carts are often loaded with the most toxic “foods” (sodas, chips, pastries, ice cream, etc.). If actual cash was provided, much of it would no-doubt be spent on cigarettes, alcohol, drugs, junk food and Nikes.
Riddle me this: How do you reconcile the following facts anywhere within the realm of human sanity?
1. Our government now pays "food stamp" subsidies averaging ~$125/month to MORE THAN 40 MILLION Americans.
2. NOBODY IS STARVING in America. I've worked as a physician in emergency and primary care in 3 states in the South for 30 years. I’ve never seen a single starving person, or anyone suffering malnutrition from lack of food.
3. The number one health and nutrition problem in America is our RAMPANT OBESITY EPIDEMIC. Obesity greatly increases your risk of diabetes, hypertension, cardiovascular disease and cancer.
4. Stand by any check-out line in an inner city supermarket, and you will observe that the great majority of food-stamp users are SERIOUSLY OBESE.
5. At the same time that those of use with a grain of sanity left get our wallets raided before we even see the paycheck, to buy more groceries for millions of obese people, we also get further robbed to provide free health care to take care of all the diabetes, hypertension, cardiovascular disease and cancer our government is so generously facilitating with our hard-earned incomes.
I’m sorry, Folks, but it’s just been too long since the revolution.

So what to do about poverty in the US?      
Conditional cash transfer programs seem to be effective in much of the undeveloped world, but “poor” is a relative term. There are no masses of poor people in the US living in dirt-floored shanties without water or electricity. We have no starving masses; the obesity epidemic is worst in our poor. Children aren’t dropping out of school for economic reasons; parents don’t take them out of the 5th grade to work in a sweat shop or pick fruit. What is it like to be poor in the US, and what should we do about poverty here?
As a physician and small-businessperson who has worked in emergency rooms and primary care clinics, and nurtured small businesses for three decades, I have met thousands of our nations poor people as Medicaid or uninsured patients and their families; and others as neighbors and employees. As a small child my own family lived in a 3-room share-cropper shack without indoor plumbing. As a teenager, I traveled this great land, hitch-hiking and sleeping under bridges, from one minimum-wage job to another. I have observed there are two classes of poor in the US.
First there are the “upwardly mobile poor.” These people work long hours at menial jobs, such as deboning chickens at Tyson’s for $8-10 per hour. Most of them have a high-school education or less, though intelligence ranges from low to above average. What distinguishes them is their gritty work ethic, their “scrimp and save” financial habits, and their belief in the “American dream.” Those who are younger are “working their way up,” and often succeed. Those who are middle-age and older don’t expect any more for themselves than hard work, relative poverty, and a modicum of comfort in their old age from Medicare and Social Security. But they smile and brag about their children in community college, studying to be nurses and computer technicians.
Second, there are the “hard core poor,” who are trapped in persistent poverty by one or more of the following:
1. A fundamental lack of “adaptive personality traits” such as a strong work ethic, self-esteem, or persistence. They either shun work, or flit from one low-paying job to another, never persisting long enough to obtain any modicum of financial security or advancement. Additionally, these people tend to be less intelligent and more impulsive on average, and tend to make poor choices with adverse long-term consequences, such as dropping out of school, getting pregnant without the necessary resources, buying things they can’t afford, etc.
2. Poor “life skills”: no ability to balance a check-book, make out a household budget, plan for the future, or negotiate simple compromises with a partner, neighbor, landlord or employer.
3. Lack of good “mental hygiene.” These are simple habits of mind that most of us take for granted, although we probably acquire them from family and culture: “positive thinking” (e.g., counting your blessings, seeing the cup as half-full instead of half-empty), accepting responsibility for your situation, understanding how to control your own emotional state, etc.
What can we do to help the poor in our own country? The two types of poor require very different types of assistance.
For the upwardly mobile poor, we just need to make the path upward as easy and obvious as possible. That is, we need to promote a strong economy, with an abundance of both entry-level, mid-level, and high-level jobs. Easier said than done, right?
In times of recession and high unemployment, a strong argument can be made for Keynesian measures such as deficit stimulus spending. But that is a dangerous double-edged sword that needs to be wielded with more restraint and wisdom than our government has shown in the past. In the long run, deficit spending is just as dangerous to our nation as to our households and businesses.
The primary advantage of stimulus spending is its immediacy. That is also probably its greatest danger, because that makes it prone to abuse as a “quick fix,” when recessions are often a natural economic cycle, implying a need for bubbles to burst, lessons to be learned, and for individual and business habits and policies to be adjusted at the grass-roots level. Government has very limited ability to control the economy, and no wisdom regarding its own limitations.
The best thing government should do, in my opinion as a small businessperson, is to keep taxes low. Every dollar spent re-cycles through the economy multiple times, whether it is originally spent by the government, individuals, or businesses. But money spent by businesses is more likely to be invested in new products, services and jobs that will provide long-term economic growth. Many times I would have created new products and hired more employees, if only the government hadn’t robbed me of the money I would have used to do that.
What can we do about the hard-core poor in the US? These people are not starving or living in dirt-floored shanties. But many are trapped in multi-generational poverty by their self-defeating personality traits, relatively low intelligence and education, and lack of basic life skills. Parents with such deficits tend to pass them on to their children. It is extremely difficult to change the fundamental habits and personality traits of adults; and educating adults is far more difficult than educating children. So these efforts should focus most on the children. I suggest the following measures:
1. Tuition and book/supply subsidies for adults to attend community colleges. Cash transfers are questionable, and if used at all should be conditioned on school performance. Since most of these people already have the basic necessities, cash is as likely to be spent on junk food, cigarettes, alcohol, and drugs, as on anything of long-term benefit.
2. Community colleges should provide programs on “life skills” to teach poor adults such basic skills as impulse control, decision-making, household budgeting and how to negotiate with family, friends and employers.
3. Counseling programs should be available to counsel struggling individuals regarding life planning, budgeting, etc. These should be grass-roots volunteer programs. The only such government-sponsored programs I’ve had any experience with were staffed mostly with incompetent counselors who wasted their clients time.
4. Stop the food stamp program, and consider “regressive” taxes on all foods except whole fruits and vegetables (which should be untaxed, and possibly subsidized). The obesity epidemic affects the poor most, and the resulting diseases and disability only exacerbate their plight.
5. End farm subsidies. We spend billions every year subsidizing the corn, beef and dairy products, all of which should be minimal components of a healthy, low-calorie diet. The evidence is overwhelming that the most healthy and nutritious foods are whole vegetables and fruits. Only those foods, if any, should be subsidized.
6. Encourage or subsidize inner-city neighborhood gardens.
7. Subsidize public daycare, so young parents can afford to work; and so educational activities can begin at an early age.
8. Reform our schools! Even when I was a teenager, urban public school was mostly a “baby-sitting service” to keep us off the streets so our parents could work. Many urban schools are much worse now (e.g., see “Waiting For Superman”). Education is key to breaking the intergenerational cycle of poverty. But we need more than the “3 R’s” (readin’ and ‘ritin’ and ‘rithmetic). Traditionally, schools were supposed to provide the 3 R’s, while family and church provided the ethical principles and life skills required for success in life. But many impoverished kids are not exposed to those essential principles at home or church. (For a graphic depiction that is both heartbreaking and inspiring, see “Precious”). For such children, our schools must have a broader mission. (Try getting consensus on those requirements at the national level!)
9. Abolish or radically redesign the SSDI (“disability”) component of Social Security/Medicare. In my experience, only a shrinking minority of the growing millions of people “on disability” are truly disabled or actually benefit from this program. Most are harmed by it; and it is creating another multigenerational category of “entitled” people with no work ethic, but tremendous finesse at gaming the system. This is the inevitable result of politicians’ and bureaucrats’ congenital inability to say “no” to anyone who might complain about, or vote against them. Certainly there are truly needy disabled people among us, and we should take care of them. But it is folly to think our federal government can provide a solution.
In general, all such programs should be done as close to the “grass roots” level as possible, at the neighborhood, city/county and state levels, with little or none at the federal level. Our federal government has demonstrated its excellence at projects where congress can pay billions of dollars to a few hundred engineers to accomplish miracles in a decade or two. For example, creating the interstate highway system, controlling Mississippi river floods, putting a man on the moon, and conquering foreign countries. It has demonstrated its utter incompetence at such grand social projects as Social Security (a bankrupt Ponzi scheme) and Medicare/Medicaid (which have caused healthcare costs to increase at three times the rate of inflation for 4 decades now, creating the most expensive and inefficient healthcare system on the planet).
Finally, we should be humble, and understand both our obligations and our limitations. In Deuteronomy 15:11, the God says, “Since there will never cease to be some in need on the earth, I therefore command you, ‘Open your hand to the poor and needy neighbor in your land.’” No federal bureaucrat or politician will ever know the needs of our neighbors as well as we do.
Dan Jones
PS: The above analysis seems to leave us with the following categories of “poor” in the US:
1. The “upwardly mobile poor.” These are on their way up, and are no problem.
2. The “coping poor.” These people aren’t likely to migrate up the socioeconomic ladder due to a variety of possible factors (age, education, intelligence, personality, minor disability, etc.), but are employed most of the time and meeting their basic needs. The most efficient and effective public policy strategy for these people is to encourage a robust economy, so that ample “low-wage” jobs are available that pay enough for a decent life.
3. The disabled, whose family cannot or will not provide for them. Clearly a “social safety net” is required for these folks, to ensure adequate nutrition, clothing and shelter. (Assuming they want such; some schizophrenics would rather be Napoleon sleeping under the stars than disabled Joe living in a shelter, and I think they should have that right.)
4. The “marginally able” (referred to as “hard core poor” above). These are those who would be “coping poor” if they had better education, life skills or mental hygiene. Clearly, it would be wise to assist these people to migrate into the “coping poor” category whenever possible. Any who can’t, with best efforts, be migrated into the coping category probably actually belong in category 3 (disabled), or category 5 or 6 (below).
5. The lazy or parasitic. These people give poor a bad name. They’re why liberals call conservatives cruel and uncaring, and why conservatives call liberals bleeding heart fools. Such people always have a story, and depending on how inclined you are to believe it, they’re either good people down on their luck, or lazy parasites mooching off the taxpayer.
From any objective psychological or even moral viewpoint, I don’t think “laziness,” as a personality trait, is any more the fault of the individual possessing it than any other disabling mental trait or defect. So for both theoretical and pragmatic reasons, I think these people should just be put in category 4, and be done with it.
I’ve singled out the lazy parasites, though, because they have an effect on the social assistance debate that is disproportionate to their numbers. Those opposed to generous social programs for the poor will always be able to point to such individuals as evidence that assistance is abused or too generous. In effect, such people will always set an “upper bound” on assistance programs for the poor or disabled; and too the extent that their “laziness” is subject to reward and punishment, such individuals may tend to migrate to category 2 (coping poor) or category 3 (disabled), depending on the generosity of benefits and liberality of definitions. At least, that is the theory of social conservatives that gets them branded as “stingy” or “uncaring” by liberals.
6. The criminal. Crime occurs in all socioeconomic strata, but is clearly related to poverty in several ways.
a) Poverty increases crime. It is an obvious truism that most people will steal to prevent themselves or their family from starving. You can argue, and no doubt people do, about the relationship between lesser forms of poverty and crime, but clearly poverty does increase crime, and the associated costs to society.
b) Crime increases poverty. For example, a young person incarcerated is unable to attend school. And having a criminal record decreases employment opportunities later on.
c) Some “crimes” are not defined as such based on any clear-cut moral or social principles, and may needlessly contribute to criminality and poverty. For example, defining drug manufacturing, importing, sales and use as crimes probably has a tremendous net-negative effect on society, as exemplified by our national experience with alcohol prohibition during the 1920’s. About half the people in federal prisons are there for drug-related crimes. And according to a paper in the American Sociological Review (http://www2.asanet.org/media/blacksinjail.html), about 20% of young black men spend time in prison. While in prison those men have no ability to contribute to the finances of their families; and their criminal records decrease their employment opportunities when released.
To close, poverty and near-poverty are significant problems in America that could be improved through effective social programs. Alas, most current federal and state programs appear to have net-negative effects, while squandering fabulous amounts of our nations treasure.
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