Lawmaker, know thyself

In our current system, where regulation of business is regarded as constitutional, this is always the message given by lawmakers (a class which includes the voters that elect and tolerate them) to prospective entrepreneurs: "I will allow you to create things that will enhance the value of my life only according to my rules." This works, for the most part, because the most talented producers can figure out a way to make some money even with one hand tied behind their back. And we never learn what we missed by shutting-out of the regulated field the less-talented, but still valuable and productive, entrepreneurs. What values might have been created are lost in the limbo of "out of sight, out of mind."

But what if some entrepreneur simply said, "No, thanks, I don't think I'll make something of value to you on those terms. You'll just have to do without."

First of all, the rule-makers don't acknowledge this possibility. In their experience, people who can make money will always choose to make money; they don't believe that money-makers care HOW the money is made. Lawmakers assume that any "no" is merely positional bargaining, and that all that is needed to get things moving is compromise -- and compromise is all they were hoping for. And in fact, this is how businesses operate today, by means of maintaining relationships with lawmakers and endeavoring to get the lawmakers to point their guns at someone else (see, for example, the use of antitrust laws). Lawmakers do not acknowledge principles; lawmakers figure that a producer will always take the chance to create a million-dollar fortune even if the producer knows that, if things were unregulated, he or she could make ten million. After all, one million is better than nothing! And it's a larger fortune than any lawmaker could ever create.

However, let's assume for the sake of argument that lawmakers have stopped evading facts and have explicitly acknowledged to themselves that producers have free will and can simply say "no." You'd figure this would upset the lawmakers, right? I mean, people need widgets, including lawmakers. No-one wants to "do without" -- isn't that right?

Wrong. We saw the answer to this question in Atlas Shrugged. The lawmakers don't care about making their own lives better. They only care about cutting talented, productive people down to size. The motive is egalitarianism -- equality of result -- no matter how horrible the result.

They do not want to own your fortune, they want you to lose it; they do not want to succeed, they want you to fail; they do not want to live, they want you to die; they desire nothing, they hate existence, and they keep running, each trying not to learn that the object of his hatred is himself . . . .

- The Ayn Rand Lexicon, "Envy/Hatred of the Good for Being the Good"

The response by "reasonable" people to a statement like the quote above from Atlas Shrugged, is: "Don't go to extremes! We need the government to protect us from bad people, but you just want anarchy!"

If this is your objection, I have a thought experiment for you.

Consider a thing, a product, a service, that enhances the value of your life. Let's say it's your iPhone (I have no reason in particular for choosing that example -- I don't own one). Now answer a single question: where did it come from?

Someone invented it, then made it, then offered for sale. You went to work, earned money, and decided to spend some your money on purchasing it.

Unless you made the iPhone yourself, you didn't have a right to a single molecule of that product until you persuaded the person who made it to voluntarily give it to you -- by offering the iPhone producers something they preferred more than hanging on to the iPhone you wanted: your money.

If you don't own an iPhone, but you are glad the thing has been produced and only wish you had enough money to afford it -- and you have no intention of stealing the money in order to afford it -- then I am not talking to you. If, however, you resent this situation; if you think there is something wrong with the fact that whoever chooses to produce a thing owns that thing, and is entitled to retain ownership of that thing until someone persuades him voluntarily to part with it; if you don't think it's fair that someone gets to be rich just because he was able to think up the iPhone, while you weren't able to -- then you are envious, I AM talking to you, and I am describing a matter of fact. An extreme and accurate fact.

I submit that many people will destroy evidence of their own relative incompetence even at the price of wrecking their own lives. They would willingly give up cars and walk to work if they never again had to see a single billionaire chauffered to his private jet in a Bentley. They would smash every iPhone if in return they received a guarantee that everyone else was just as miserable as they were.

I further submit that this motive animates every regulation of business. It is pure resentment that some people are productive and talented enough to provide products and services so valuable that many people are willing voluntarily to pay for them -- and that these producers grow rich as a result of their own competence, effort, and merit.

A preview of life under universal "coverage"

"Hi Mr. Proprietor," said Mrs. Customer. "I'd like to buy some of your latest and greatest health care!"

"So, sorry," he replied. "But I'm afraid I'm fresh out of health care. My customers cleaned me out of my last health care widgets last month."

"Wow! What happened, did you throw a big sale?"

"Not exactly. I was seeing a ton customers for awhile, it was crazy busy and my hours were ridiculous." He yawned and stretched. "I'm actually exhausted."

"Yes, you do look tired," she said, peering closely at his face. "So why do you think there was a run on your store?"

"Well," he began, scratching his chin, "I suppose it all started right after the government gave people those Medicinos -- you know, that special money that can only be used to buy health care. I guess they're kind of like food stamps."

"That certainly makes sense. I mean, I have lots of Medicinos too, a fistful -- and I am ready to spend! When do you think you'll get some more health care in stock?"

"It's not going to happen. You see, the other big reason for the shopping spree is that all the stores had to reduce their prices or we'd get fined by the government. Same thing happened to my suppliers -- all the health care manufacturers were under price controls, supplies were so cheap, it was great for awhile. But there was a run on all their stock, too. I actually tried to offer some of my manufacturers higher prices so I could get stuff for my best customers, but I was told I'd better shut up about that or I'd get arrested for helping my customers 'jump the queue.'"

Mrs. Customer gasped. "That must have been scary!"

"You bet. Actually, this is my last week in the health care business -- I'm opening a computer store in a few weeks."

"You're kidding!" Mrs. Customer exclaimed. "Well, can you refer me to another store nearby that has some good health care in stock?"

"Gee, that's a tough one," said Mr. Proprietor. "Everyone has pretty much sold everything they had and then closed shop. I heard the government tried to offer one of my manufacturers some special subsidies to stay in business but my contact over there said the subsidies came with so many rules -- and such huge penalties for breaking them, even by mistake -- that she just didn't want to deal with it. As a matter of fact, two of my best suppliers told me they're shutting down their health care factories to start manufacturing smart phones and Blu-Ray players."

"Now wait a minute," said Mrs. Customer, frowning. "The whole problem was supposedly that everyone was looking in the health care store windows but couldn't afford to buy anything -- that's why they gave us all these Medicinos. The experts said there were actually too many health care supplies. So somebody around here must still be making and selling health care."

Mr. Proprietor paused for a moment to consider, and then said, "You know, I think there's one store still open -- "

"Excellent!" Mrs. Customer interrupted. "Can you give me directions?"

"Hang on a minute! You might not want to go. It's about 100 miles away and the owner over there is out of stock, too. You'd have to sign up for her waiting list to buy some health care when she gets her deliveries in a few months. She got special permission from the government to jump to the head of the line when the health care manufacturers have more supplies -- but only if she sells her new stock to the really sick people first. You don't look so bad, so I think you'd be pretty far down on her list."

"But I need to buy some health care now! I've been feeling under the weather and there's a bad flu virus going around!"

Mr. Proprietor shrugged. "I don't know what to tell you. I'm in the same boat, I'm really worried -- I have two kids and I haven't figured where to buy health care, either. I suggest you take a few days off work and wait it out -- hopefully, you just have a bad cold. My mother always gave me chicken soup -- don't laugh, it really works!"

Mrs. Customer stared. Mr. Proprietor stared back.

"So," Mrs. Customer finally said, "You're saying there's really no health care around here to buy, and that my best option is to get on the waiting list 100 miles away and hope I can buy some health care in a few months?"

"I think that's about right. There's just a serious health care shortage and I don't really see an end in sight."

"But how can there be no health care to buy?" Mrs. Customer wailed. "After all, I have comprehensive health insurance and can pay for anything!"

It's safer to steal

Imagine you're really, really sick, and you're out of money to pay for treatment. Maybe you lost your job. Maybe you never had one. Maybe you've exhausted all the treatments covered by your insurance policy and have to pay for further treatment on your own.

Whatever. You're out of money and you're still really sick and if you don't find a way to pay for further treatment you'll die.

Obviously, you're not alone on the planet. There are other people around who have money and who don't need what they have as urgently as you need it. In a free country, you would be free to ask them for money. You could campaign for little donations from a lot of people (this is how people justify health care taxes, by the way -- it's only a little bit contributed by a lot of people instead of a lot contributed by patients who actually need the health care). You could approach a rich philanthropist for a donation. You could try to find a health provider who offers free or reduced-fee health care.

In short, in a free country, you would be free to seek charity.

And people would be free to not engage in charity. Some sick people don't want to take the chance of relying on charity, perhaps most. What if you ask, you make your best case, and no-one agrees to finance your health care? Do you just give up and die? And how do you deal with the humiliation of having spent all that time and effort begging for help, begging to stay alive -- and then you fail?

Really, it's much safer to just force someone to give you the money you need. Since this is theft, and most people cannot bear to be thought a thief, particularly when it's a self-assessment, some evasions are in order.

Such as -- it's not my fault if people won't accept the fact that other people need their surplus money. Such as -- it's not my fault if people refuse to agree that morality requires you to spend some part of your life earning money to pay for other peoples' health care. Such as -- I'm not stealing from anybody, I'm just exercising my democratic right to vote for a government that supports the use of tax dollars for health care. Such as -- it's not my fault when the government uses guns to heard recalcitrant taxpayers to jail, because citizens should realize that taxation is the price of enjoying all the benefits of society.

But of course, if it walks like theft and talks like theft, it's theft. As soon as you point a gun at someone who was minding their own business and demand that they give you money, it's theft.

The refusal to rely on charity is, at the end, to believe that it's safer to steal.

Eureka!

I have found it! I finally understand what's wrong with our health care system!

The problem is . . . wait for it . . . we're all paying too much money for a crappy product. The providers are taking advantage of us. They know they have what we need -- health care -- and they're going to charge us an arm and a leg for the poorest-quality product they can get away with delivering.

The obvious solution is two-fold:

1) Health care purchasers must be hard-bargainers on price. That is, offer a take-it-or-leave it price for the services offered for sale.

2) Health care purchasers must control the product being offered for sale. That is, restrict providers to selling only those products purchasers are willing to buy, and at the price purchasers are willing to pay for it.

In practice, given our insistance that the government foot all health care bills, that means that governments must slash the prices they are willing to pay for health care, and health care providers must be restricted to producing only certain products.

That's pretty simple.

Except . . . what if the providers say "No?"

But that's unthinkable, so no-one is thinking about it. The health care services will always be there. Doctors, nurses, care-givers, pharmaceutical company executives and employees, insurance company executives and employees, medical device manufactuer executives and employees, hospital executives and employees, none of these people have any other options open to them but to stay in their current lines of work.

I mean, isn't that true of everyone? No-one has any choice about what they do for a living?

So that settles it. The solution is to make providers take less money for producing more, and we know for a fact that they won't say "no" because they're all locked into their jobs.

Of course, there's the issue that the only way to "make" someone do something is to stick a gun in their face. But we don't have to deal with the issue of pointing guns at health care providers because they'll cave into our demands long before we'll have to unholster our guns. And we've holstered our guns in some really pretty euphemisms that blend in with all the rest of the help-the-less-fortunate rhetoric we're spouting, so it's easy for providers to evade that the guns are there. Plus, we can threaten to stop liking the health care providers unless they look at the situation through altruist-colored glasses, so they'll all rally around the battle cry that capitulation to our demands is the moral thing to do, guns or no guns. In sum, we don't have to worry about our guns scaring the providers out of the health care field because we do a bang-up job helping the health care providers ignore the guns.

No problem.

Not sure why I didn't think of this sooner.

Scapegoating doctors

Now coming to a socialized medical system near you . . . scapegoating doctors.

I wrote a day or so ago that all the problems attributed to fee-for-service payments for health care would resolve themselves if health care consumers -- patients -- were directly responsible for paying for what they purchase. We have fee-for-service problems because, ultimately, it is the government that is paying the fees.

But let me elaborate on that a bit. Government money comes from taxes. To the extent government charges fees for services like the post office, and makes a "profit," it's only because taxpayer money provides the "capital" for such a concern to be in business in the first place.

Unless you're in an explicit dictatorship, money from taxes is dependent on votes. So policitians have to pretty much lie to voters about how much things cost, because voters finance the government with their taxes and in general, when presented with a new tax, tend to throw the bum who suggested or implemented it out of office.

["Uh, where's the part about scapegoating doctors?" -- I'm getting to it.]

In Massachusetts, all taxpayers know that their taxes are supposed to be paying for the health care of every Massachusetts citizen. They also know that the 2006 health system reforms are costing hundreds of millions more dollars than projected. (We're all shocked, I know.)

The regulators are all posturing by saying things like, "we always knew we were in for a two-part process: first, make sure everyone has someone else paying their medical bills, then deal with the explosion in costs that will necessarily follow." (See p. 20 of the Recommendations of the Special Commission on the Health Care Payment System.) As if that's what taxpayers consciously voted for when they were being told that covering everyone would lower health care costs by eliminating the care that providers give to people who can't pay for it. As if any taxpayer who cries "foul" is somehow forgetting the bargain he made. It's insulting.

But I digress. The regulators, in accord with this "process" everyone supposedly agreed to, are now explicitly tackling the skyrocketing costs associated with the plan. So they came out with their Recommendations on how to curb costs.

This is where the doctor scapegoating comes in. The regulators recommend that Massachusetts move to a "global payment system," which is not the dreaded "capitation" system of HMOs past because the regulators insist that it isn't (see p. 29 of the Recommendations). Under global payments, providers would be paid a set fee to handle all of a patient's care for a given time period. So, $20,000 per year to take care of me, let's say. I have no idea if that's a figure that the regulators would come up with, it's totally random. The move to global payments would be accompanied by various measures meant to ease the pain on providers transitioning away from fee-for-service -- but it would also be accompanied by "pay for performance" in some form or other ("P4P" -- see p. 35 of the Recommenations).

P4P means that providers have to achieve certain health care quality outcomes in order to receive their global payment in full.

P4P means that if providers -- DOCTORS -- don't check the regulators' boxes, they won't get paid.

P4P means doctors lose even more autonomy than they have already. It means that when a doctor is trying to diagnose you and to decide on a course of treatment, she has to consult a regulator's list of do's and don'ts or see her compensation go down. Ask yourself if you want a bureaucrat deciding your treatment, or if you want some politician who is answerable to taxpayers to make the decision whether to spend money on your treatment.

P4P is just another way of slashing doctors' monetary and intangible compensation, which means it's going to reduce access to health care in Massachusetts. The doctors who were good enough to make money allowing them to retire, will retire. Other doctors who think they can make enough money doing something else, will do it.

The doctors who are willing to practice under P4P, who are willing to get paid for following instructions instead of exercising the judgment developed by their training and years of experience, are not the kinds of doctors Massachusetts patients are going to want to have. P4P will attract doctors who think that thinking is too hard, who think that they'd rather have a job that doesn't require them to think too much.

And when waiting times go up, quality declines because its delivered by doctor-bureaucrats, and costs continue to spiral because now people are getting sicker, the regulators will blame the doctors.

They'll blame doctors for not producing quality health care for less money and with their brains outlawed.

Doctors, you have been warned. In Massachusetts, you are about to be excoriated for not doing more with less.

Please please please pretty please don't take this lying down. Go on strike.

Here's a good one

Here's another beaut from the Recommendations of Massachusetts' Special Commission on the Health Care Payment System:

Considering a group of 45 core measures that represent the most important and scientifically credible measures of quality, the 2008 National Healthcare Quality Report (NHQR) found that nationally the median level of necessary care received was just 59 percent (AHRQ 2008).

Imagine you're a patient. You're really worried about some symptom or other and you went on WebMD and you're sure it means you have cancer. You insist your doctor perform a test, and she refuses. Your symptoms worsen, you show up the following year, this time your request for a test is honored, you get the test for the more obvious symptoms, and sure enough you have cancer but now it's untreatable and you're terminal. Now I ask ya -- would you give a f*** if the doctor was operating on the assumption there was only a 59% chance that the first time you asked for it, the cancer screening was "necessary?"

Fee-for-service nonsense

I am just beginning to educate myself on the nitty-gritty of the Massachusetts health care system. I have been trying to resist the urge to blog on what I read as I read it, because everything is so new to me – I assume that at some point all this information clong will resolve itself and I’ll have a sense of the essentials of what I want to spend time blogging about.

HOWEVER, I couldn’t resist on this one. So sue me.

The Special Commission on the Health Care Payment System recently published recommendations on, essentially, getting rid of fee-for-service payments for health care (the “Recommendations”). What is really meant by this is: getting rid of fee-for-service payments in a system where payment for health care services by third parties is the only system permitted by law. Everything that the Recommendations asserts is wrong with the fee-for-service model assumes that it is a third party, and not the consumer, paying for the service consumed. NEVER is that assumption questioned; I guess there’s no one at the table in that particular debate who questions the propriety of requiring payment of medical bills by someone other than the patient. At least, no one whose voice is recognized or heard.

I haven't finished reading through the Recommendations yet, so I could be putting my foot in my mouth here. But my blood is up so I don't care. Here’s an excerpt from the Recommendations, purporting to list everything that is so dastardly about fee-for-service – with my biting commentary added.

FFS rewards overuse of services, does not encourage consideration of resource use, and thus cannot build in limitations on cost growth. If the consumer was directly paying the fees for the services he was consuming, you can bet he would be considering the use of his own resources (his money), and therefore wouldn't be over-using anything.

FFS does not recognize differences in provider performance, quality, or efficiency, and thus does not align with evidence-based guidelines or outcomes. If the consumer was directly paying the fees for the services he was consuming, you can bet he would be taking his money elsewhere if he didn't like the service he got. He votes with his dollars, and so do all the other consumers, and the outcome of the "election" is an evaluation of quality. Cream will rise.

FFS focuses attention on prices, not costs, and fees do not relate to the actual cost of providing care. If consumers are paying their medical bills directly, providers will definitely pay attention to cost, which introduces price competition among providers. Which means the providers will be focused on reducing their costs, because it's for damn sure they're not going to get people to pay increased prices. And, in their capacity as consumers of goods they need in order to provide their services, they will in turn be encourging their providers to pay attention to cost.

FFS is complex and difficult to administer given the wide array of individual health care services and changes in health care delivery and technology. If consumers were paying for their own health care directly, they would become expert on the prices charged for the kinds of services they wish to purchase. Since there wouldn't be one purchaser having to figure out how to get the best deal for every bloody patient on the planet, there wouldn't be a need for that purchaser to consider the fees for every possible health care service. Providers would specialize in their own pricing models, and if the pricing models did not deliver quality care at a good price, consumers won't be directly paying those providers.

Multiple payers negotiate different rates for a service, leading to different rates both within and among providers for the same service. These rates are more often based on relative market leverage, not health care value. Again -- if consumers were paying their own medical bills directly, providers would be dealing with the consumers directly. Consumers would have an excellent reason to pay attention to rates, and providers to compete on the basis of rates. Look at it this way -- consumers currently put a hell of a lot more effort into price shopping for cars and DVDs and computers than they do for health care services. What is Consumer Reports for? Is there an equivalent directed to the health care consumer? (Uh, no.)

Varied payment levels for services leads to variation in profit margins across services; variable margins incentivize volume in high profit services, not value. This one is Economics 101. When consumers responsible for paying their own bills want a desirable good that is limited in quantity, they bid up the price -- check out eBay. When the price goes up on something greedy business flood the market to produce that thing, to try to cash in. When too many greedy businessmen are trying to produce the same thing, the price goes down, and consumers have more money to bid prices up for some other product. Because businessmen are REALLY greedy, they're always looking for ways to make more money, so they try to find the products with higher profit margins. Whatever profit margins exist will be exploited. In other words, every niche market will be filled. Look at how many different kinds of cars and computers there are. However, people who want really specialized products, and who are members of really small markets, will not be the first people that greedy businessmen try to serve. But I'm not saying that like it's a bad thing. The niche markets will NEVER get served if businessmen are not permitted to chase profits in the big markets first.

Some highly valued services are not currently recognized in the FFS system and thus not compensated. What "highly-valued" services are we talking about, here? Why are those services not profitable? I think the complaint here is that primary care physicians make less money than specialists. Feature this -- maybe they should. This one is on physicians, and has less to do with third-party payors than on government-backed monopolies on the practice of medicine. To wit -- get rid of government licensing and let nurses and other less-expensive providers take point on primary care. If that happened, consumers who insisted on having a primary care doctor instead of a primary care nurse would be welcome to pay for it, just the way some people pay for Lexuses -- but the people who buy Toyotas would still get to work reliably and on time.

Caregiver incentives are not currently aligned among acute care hospitals, physicians, behavioral health providers, and other providers. Sorry, can't make heads or tails of this one. My guess is that this refers to different fee-for-service payment regulations for various types of providers. If consumers were paying for their own care directly, there would be a single incentive that everyone could understand and line up behind -- the gawd-almighty dollar. The difference would be that consumers, not just providers and the government, would be watching the bottom line as well.

And as it says on my masthead logo: here endeth the lesson.