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Outlook: Health-Care Reform

Alec MacGillis
Washington Post Staff Writer
Monday, June 1, 2009 11:00 AM

Washington Post staff writer Alec MacGillis, was online Monday, June 1, at 11 a.m. ET to discuss his Outlook article about health-care reform.

Archive: Transcripts of discussions with Outlook article authors

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Alec MacGillis: Hello everyone, and thanks for joining us this morning. I'm here to discuss a piece that I wrote for our Outlook section yesterday, looking at the regional dynamics of universal health care -- specifically, the fact that health care reform of the sort that Congress now seems to be heading toward will, among other things, represent a wealth transfer from North and East to South and West. That's because the rates of uninsured residents are so much higher in the South and West, and because the employer-provided benefits that people do have are also more valuable in the North and East -- thanks to higher rates of unionization and more costly health care markets, among other things -- which means that if universal health care reform is paid for partly by taxing employer-provided benefits, the cost will fall disproportionately on people in the North and East. I'm glad to take any questions on this, or other aspects of health care reform -- or on anything else political, such as Judge Sotomayor, whom I've also been writing about. Fire away.

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Anonymous: Actually paying for health care reform is really the end of "kumbaya" and forces us to figure out who wins and who loses. Do you think "single payer" will get a fresh look since it is the only plan that can cover everyone and still save money?

Alec MacGillis: This really was the main thrust of my piece, that there are all sorts of winner and loser dynamics in the emerging plans that haven't really been fully absorbed yet, including the one I focused on, the regional tilt to this. As more people become aware of these dynamics, it will greatly complicate the debate and, who knows, may make it hard to get this done. But I doubt that it will necessarily spur a wholesale turn to single payer. For all its benefits, it, too, would have no shortage of opponents.

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Alexandria, Va.: Dear Mr. MacGillis:

Assuming that your are correct that current proposals for reform would lead to transfer of wealth from blue states to red states, how should this observation affect the debate on health care reform?

Alec MacGillis: This is a very good question, and one I'd have liked to get into in my piece if I'd had the space. In the broadest sense, it seems as if this dynamic is just something that people should be aware of, because my sense is that right now, even plenty of people with a vote or stake in the matter in Washington or elsewhere don't fully realize just how big the regional disparities and impacts are. For instance, one would hope that a Southern or Western congressman would appreciate the wealth transfer that his state would be benefiting from under universal health care before he or she opposed reform -- if he or she were to oppose reform anyway, that would be fine, but it should be with awareness of the home-state impact. Similarly, if congressmen from the North are pushing to pay for all this by taxing health benefits, they should be aware of the effect this could have on some decidely middle class constituents of theirs who happen to have relatively costly health benefits just because they live in a high-cost market. One person who seems quite aware of the regional impacts is Sen. Olympia Snowe, who has spoken out about the need for some kind of cost adjustment in taxes or subsidies to account for higher health care costs in a state like Maine. But of course, doing that would only raise the price tag of the whole package. There are no easy answers.

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Topeka, Kan.: I would like to know the real reason why single payer health insurance is off the table. Is it because our Congress is beholden to the insurance lobby?

Alec MacGillis: I'm getting a lot of questions along these lines, just another sign that there's a very strong constituency out there for single payer, which has some strong economic arguments in its favor. Yes, the most obvious obstacle in its way is the insurance lobby -- any proposal that threatens to utterly undermine your whole reason for existence is a pretty good motivator to go all out on lobbying. But politicians who might be inclined to back single payer are also very aware of the hurdles they'd face making the case to a majority of Americans. As flawed as the current system is, there are still a heck of a lot of people who are reasonable satisfied with their current arrangement and scared of any drastic change. That is why so many reformers now think the trick is to go with a more incremental approach, and why the real fight has come down to the incremental planks that are seen as possibly being the first step toward single payer, like the public-insurance option alongside the private-insurance status quo.

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Ellicott City, Md.: I'm a liberal, and I think the health care system is broken and needs fixing. That said, I think the idea that a "single payer system" will save us money is a fantasy. There are a lot of unmet health care needs out there, if we have a plan to meet those needs it will cost money. IT solutions won't save that much (they'll cost more in the short run), administrative simplification can only save so much. If payments to providers drop to Medicare levels (or lower) we'll see a lot of hospitals closing doors and doctors retiring. It's not that simple.

Alec MacGillis: On cue, here's one version of the single payer skepticism. This gets at the key point brought out in a piece in last week's New Yorker by Atul Gawande, the Boston physician who writes for the magazine -- basically, that for all our debates about insurance systems, the biggest challenge when it comes to reducing our costs still lies in the actual delivery of care. Gawande frames his piece by comparing the very high Medicare costs in McAllen, Texas with El Paso, a very similar city where costs are not nearly as high, and what he finds is that high costs are in many cases the result of the business cultures that have developed in the medical community in certain places -- in some places, docs are much more set on squeezing as much money as they can out of patients, and have realized that they can get away with doing so, whereas in other places, the emphasis is more on quality than on profits. Gawande argues that this problem exists no matter whether the insurance system is public or private -- after all, the depressing situation he describes in McAllen revolves around Medicare. Read the piece -- it's surely one of the best health care pieces this year.

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washingtonpost.com: The Cost Conundrum (The New Yorker, June 1)

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Seattle, Wash.: Hi Alec, I've asked this question a hundred ways in a hundred settings, but never received an honest answer. Since America spends about 16 percent of all its income on medical insurance, while the rest of the world spends about 8 percent of all its income on medical insurance, America stands to save half by adopting the system the rest of the world uses. You would think that big businesses and employer groups would jump at the chance to cut a major business expense in half, and transfer the other half straight to the bottom line. But, in discussion after discussion, big businesses and employer groups are the loudest voices against medical insurance reform. The only difference they would see is, instead of cutting a very large check to a Medical Insurance company for "premiums", they would be cutting a check for half that amount to the government for "medical insurance taxes". They would get to keep the difference. Can you explain why these large interests are so strongly against reform that can only help their business interests? Thanks.

Alec MacGillis: This is a good question, but the truth is it would have been an even better question 10 or 20 years ago, when there was much more of this sort of not-entirely logical opposition from employer groups to health care reform. These days, there is much broader recognition among many businesses that health care costs are making them globally uncompetitive -- just look to Detroit. That said, though, there are still plenty employers who think the status quo is better than what they'd be getting under universal health care. For one thing, remember that health benefits are tax exempt. Whereas if the government took care of health care, and employers then were left to compete for workers simply on wages, not benefits, it would be good for workers, in that they might be getting paid more, but employers would be having to pay taxes on those higher payroll costs, and they might not end up saving as much in total wage/benefit costs as one might suppose.

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New Hampshire: Part of what is striking about the national discussion on health care is how much it focuses on the mechanics of payment and how little it focuses on the fairness and morality of the issue. I can think of no other industry that is allowed to say openly that human suffering can be balanced against profit. The airline industry, for example, strives to have zero fatalities, even though they would clearly make more money by having fewer mechanics and maintaining their planes more poorly and saying, "Oh, well, a few thousand dead a year is the price of a healthy bottom line."

Wouldn't it be a different discussion if we talked about what is appropriate and right rather than simply the mechanism? The one theme that is brought up about this -- that the Constitution doesn't guarantee health care -- is wildly unpersuasive when it's examined (e.g., it doesn't explicitly prohibit illegal drug use, either, yet we do prohibit it, apparently constitutionally). I fear we will get so lost in the how-will-we-pay-for-it that we won't concentrate on why we should be willing to pay for everyone to have access to health care.

Alec MacGillis: New Hampshire, you're right that the big moral aspects to this do often get lost in the technocratic and economic arguments. There are many who believe, as Obama stated forthrightly in one of the debates, that health care is a right, not a privilege. That said, even if one accepts that basic premise, the fact is that there if we are going to get health care costs under control over the long run there are going to have to be some very difficult decisions made about just what will be paid for and what will not. You're already seeing these hard decisions being made elsewhere, as in England, where a government body determines whether the government health care plan will pick up the cost of wildly expensive cancer drugs that might extend the life of a patient a few months at most. No one's yet talking envisioning that kind of entity here, though there will be a "comparative effectiveness" panel of some sort that will be making recommendations about care. The president himself broached this touchy subject a few weeks ago in an interview, when he talked about the costly treatments his grandmother got in the final months of her life -- hip surgery and other treatments that, under a cold cost analysis, might have seemed questionable to some, but that to her own family were things that she absolutely needed and deserved to have. This really is where the rubber meets the road.

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Rockville, Md.: How would taxing health benefits affect people whose jobs have low salaries and good health benefits? Their salaries are already taxed. Their health benefits have a high value, so the tax on them would likely be high as well, assuming they are taxed as "income." They will have to pay the tax on their benefits with cash from their wages. So, you could have a person with a low income paying a huge percentage of their cash income in taxes. You can't eat health benefits. How are they going to eat and live indoors?

Alec MacGillis: This is one of the issues at the heart of my piece. There are a lot of people who fit this description, particularly in the more heavily unionized Midwest and Northeast, where a lot of union workers have seen their compensation gains over the years show up in the form of solid health benefits, not wages. The plan could try to protect these people by adding an income limit to the new tax structure -- that is, tax people with benefits over a certain value, but hold harmless those making under a certain income. The problem with that, of course, is that it greatly reduces the revenue to be gained from taxing health benefits. If one is only taxing benefits over a certain value, and then further reducing that pie by leaving out people earning under a certain amount, one is only going to bring in so much money. It's not like taxes on the incomes of the rich, since incomes climb up into the millions. Even the most gold-plated health insurance package is only worth so much.

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Atul Gawande Article: Wouldn't single payer help with this? If for no other reason than single payer can make general practice care much more economical than it currently is? Or even create a new type of doctor that is in charge of "coordinating care"?

Alec MacGillis: What Gawande would argue is that it's the doctor coordinating care that you refer to here, more than the insurance system, that is the most crucial reform. He points to several places that already have moved in this direction, such as Grand Junction, Colorado and the Mayo Clinic, where a whole network of doctors work closely together to figure out what the best treatments for their patients are, share information -- and, as part of that, try to keep costs down. The new buzzword for this approach is "accountable care organization." It raises some of the same questions that HMOs did -- because at some point, there's still going to be someone saying that a certain treatment is not necessary, and the question is going to be if if that is accurate, or if it's nothing more than a cold-hearted cost-saving business decision. But keep your eye on this approach, because it's what a lot of reformers are now talking about.

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Silver Spring, Md.: How would single-payer affect the dilemma delineated in your column, especially if revenues are obtained as in, say, Scandinavian countries?

Alec MacGillis: We've already talked about single-payer, but I wanted to take this question to make one point about the revenue sources in European countries that do have something closer to socialized medicine. It's worth keeping in mind that the tax systems in many European countries are not nearly as progressive as many of their American admirers might realize. Income taxes are very high by American standards not only for the rich but for the middle class. And many of the countries rely heavily on Value-added taxes, a form of sales tax, which tends to be regressive in its impact. Now, that's not necessarily an argument against their approaches, because the benefits of their systems are so obvious in their own right -- everyone, rich or poor, gets covered. But it's something to bear in mind -- in some ways, the 'progressiveness' of European social welfare nets lies more in the benefits delivered -- which are huge for the poor and middle class -- than in the revenue source, which draws from the middle class and not just the rich.

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Maryland: So because I have a job with benefits, I have medical insurance. I do understand the need to cover people ,but I wonder about the cost. How will user fees be set? One cost for every one or on a scale depending on risks? We already accept that some people pay more for auto insurance based on driver history, why not adjust medical insurance?

Alec MacGillis: The thinking is that under a universal health care system that preserves private insurers, individuals without employer health benefits would be required to buy insurance, but that private insurers would also be required to take them as customers, regardless of their past history. It's unclear to what degree insurers would be able to price their products differently based on a person's history -- some reformers argue that companies should be able to vary their prices based on age, but not on preexisting conditions, since that would defeat the purpose of 'guaranteed-issue,' if people were able to get policies but only at exorbitant prices (though under the new system, many would qualify for government subsidies to help pay the way.) The insurance industry has come around to saying it's okay with guaranteed-issue as a trade-off for an individual mandate -- after all, an individual mandate means a lot more customers for them, and they can't very well say that they want an individual mandate for healthy people. Now, for someone like you who already has health benefits, what does this all mean? Yes, at some level everyone will be bearing the cost of sicker people who previously were unable to get coverage. But by the same token, there will also be more healthy, younger people coming into the risk pool. And insurers will also be spending less money and time trying to screen out sick people from their pools, once they're required to offer coverage to everyone.

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Athens, Ga.: I have a friend in France that says we pay our doctors far more in the US than doctors get in any other country. He says that plus the procedures we routinely include than almost no other country does accounts for much of our cost differential. For example, he said we push everyone in the US to get a yearly flu shot. He said in Europe flu shots are restricted to a very small part of the population. Is there some truth to what he is saying?

Alec MacGillis: You're right, they do things a lot differently over there. But I'm not sure I'd generalize too much from flu shots -- there are some things we spend a lot on here that they don't over there, but then there are things that they offer in many European countries that seem outlandishly indulgent over here, like regular home visits by nurses to check on new mothers. One point on pay: doctors do make a lot more over here, but they also graduate with huge medical school debts, which surely play a big role in the profit-minded entitlement mentality that many doctors take into their works.

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Richland, Ga.: What do you suggest for a contract employee who is paying for his own coverage, and who must have coverage because of a chronic illness (a pre-existing condition) and sometimes exceeds his monthly income from his primary source? How can this be fair, reasonable or sustainable?

Alec MacGillis: What I would suggest is that you root for universal health care reform along the lines of what is being pushed by the Democrats in Washington, because people like yourself are one of the main targets of the reform. The thinking is that insurers would be required to offer you coverage despite the preexisting condition, that they might not even be allowed to charge you more based on that condition, and that based on your income, you would have some level of government subsidy to help pay for your coverage. This is what the government will be spending $1.2 trillion on over 10 years -- to help people just as yourself who are in a simply untenable position in the current system.

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Anonymous: If we were having a meeting to discuss ways to eradicate prostitution, would we invite the brothel keepers to participate in that meeting? If not, then why on earth are we seeking advice from the health insurance companies and the HMOs? Those who are the problem can never, never be part of the solution.

Alec MacGillis: Not to be tongue in cheek, but think of it this way: if we were going to start off by trying to eradicate child prostitution, and not the whole enterprise, maybe we would invite the brothels to the discussion, with some stern words and incentives to cooperate.

The thinking here is that if the private interests can be brought inside the process they'll be less likely to torpedo it from the outside, a la 1993. Now, that may not actually work -- already we're seeing some of the industry groups who made that highly-publicized pledge to help out a few weeks ago saying that their cost-cutting pledge was not as hard and fast as Obama made it out to be. We shall see...

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Vancouver, Wash.: Alec, we have long known that there is a huge disparity between Medicare payments in Florida and Washington state. In my area it is very difficult to source out a general practitioner if you are a new Medicare subscriber. Why do we continue allowing this fiction to exist? Why do we not have a common reimbursement schedule with a small +/- variable and hold these hospitals and physicians feet to the fire. If we fail to curb the annual incredible increases we are soon financially embarrassed as a nation. We absolutely cannot permit "for-profit" insurance companies to ruin this nation.

Alec MacGillis: Good question. The problem in many cases, though, is less the rate of reimbursement for a single treatment than the amount that certain treatments are prescribed. And that's why a lot of the talk in DC these days is about moving to a reimbursement system where doctors are paid not under a fee for service model, with each test or treatment paid for separately, but instead paid for the total cost of treating a given patient with a given condition -- that is, with a financial incentive for curing the patient, so that he or she won't be back a week later for another treatment of the same problem, which under this new payment system would not bring the doctor any added revenue, whereas today he could just bringing in more money with one treatment after another.

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Wheaton, Md.: Is there really any doubt that some sort of health care reform is going to get done this year since Democrats put reconciliation instructions into the budget? Thanks!

Alec MacGillis: The odds of something passing this year definitely increased when the Democrats went with the reconciliation instructions, which as you know mean that they can pass this with a simple majority, not a filibuster-proof 60. But there still is a big desire among many Democrats not to have to go that route, because they worry that the reform will be much more fragile over the long term without at least some support from across the aisle. And, as I said earlier, as the year goes on there will inevitably be challenges to the plans that we can't even foresee now.

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Alec MacGillis: Okay, that's a good one to sign off on for today. Better get back to work in this very busy week of political news. But thanks for all the great questions, and sorry I wasn't able to get to all of them. There's clearly a big hunger for this debate, and we'll do our best to try to clarify it.

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