Ian Morrison

Insight comes from unlikely sources.  Lady Gaga nailed the health reform dilemma.  We have a healthcare delivery system that is an orgy of profligacy and excess that offers the false promise of making ugliness, disease and death all optional.  And, we the public love all of it, as long as it’s free, at least to us as individuals.  We want high tech, high quality, high expectations met, highly trained professionals delivering high standards, paid by someone else.  And the magic fairy that will pay for all of this? Health insurance. Give everyone an insurance card and they can have their everything and it will be free, or close to it.

But wait, isn’t the cost of insurance tied to the costs of care?  Doesn’t the sum of all healthcare costs for a covered population (plus administrative costs) divided by the number of people equal the premium.  Doesn’t the premium come out of my pocket as taxpayer, employee or individual?  How can I have everything, as long as it’s free?

Short answer is: you can’t.

We are caught in a Bad Romance with healthcare.

The brutal truth is that the average American household cannot afford the average costs of care.  With household income stagnant to declining at $50,000 a year and typical total healthcare costs at $15,000 per household, average people cannot afford the average costs of care.  Even if we were to fully accept the notion that rich people have to subsidize poor people (which still seems a bit of a stretch to some on the right) you would think that in a wealthy country like America, the average household could afford the average cost of care.  But as the healthcare debate showed both in Massachusetts and at the national level, nearly all of us need a subsidy to make health insurance affordable. (Say what?)

How can “affordable care” mean we need to subsidize nearly everyone?

Well, that’s a problem.  There are really not enough rich people to go and tax.  And those rich people are not having a good year.  The revolting people of Massachusetts were independent voters who are paying their taxes and mortgages and mandatory health insurance premiums and who when asked to step up and pay taxes for a healthcare bill that wouldn’t help them any, said no to big government.  (By the way, they also said yes to a telegenic, former nude centerfold who outhustled the dullest politician in America by a factor of 10 to 1).  And they baulked at being asked to pay federal taxes to subsidize the mean-spirited people of Texas and Alabama who really don’t want to be forced by the federal government to cover poor people through Medicaid expansion or insurance exchanges or worse yet a public option.

Health reform may be dead.  Sensible centrists like my friend and fellow futurist Jeff Goldsmith, the always sane and insightful Bob Laszewski, and my physician policy wonk pal Bob Wachter have all written eloquently on this blog about the possible political path forward.   I will not repeat their points with which I nearly always violently agree.

Nor do I particularly want to unleash a flurry of rehashed mini-essays from all of you regular contributors about how health refom should or shouldn’t go from here.  I know that each of you believe that your idea is the right one.  I get that. And I am in reverential awe of the time you pour into these pages.

We should all be very grateful to Matthew Holt for creating this blog.  His vision has created a meeting place for all of you out there who care deeply about healthcare and about politics and policy of healthcare.  (I should say by way of full disclosure that I had the pleasure of working with Matthew for many years, hired him from Stanford to join the Institute for the Future, and played some modest mentoring role in his professional development.  Matthew was also the inspiration of IFTF’s then dress code: “no shirt, no shoes, no salary”.)

So my plea to all you healthcare bloggers of America is this:  Please turn your attention to the central problem.  How can American healthcare delivery be better, faster, and cheaper in the future not more expensive and worse.  And please no ideas about giving people insurance cards subsidized by someone else (especially not the Chinese or my children) as in the current proposals.

This community must have some good ideas about how to get us out of this mess.  We are caught in a Bad Romance.

Ian Morrison is an author, consultant and futurist based in Menlo Park, Calif

Now we are down to the really fun part of healthcare reform, when they actually write the final bill and figure out ways to pay for it.  And to honor the 40^th Anniversary of Monty Python’s Flying Circus’s debut, Congress and the Administration have entered the silly season where final policy is turned into law.

I love the American healthcare system, not because it is the best in the world, but it is the funniest.  The laughs keep coming.  Here are a couple of my latest favorites.

Taxing Cadillac Plans.

Many in the administration subscribe to the notion that we should tax, so-called, “Cadillac plans” as a way of raising money to pay for expanded coverage, and to discourage the sale of excessively expensive insurance.  Economist types like this kind of stuff.  And it allows you to tax those bastards at Goldman Sachs, right?  Well, it turns out that the reason Goldman Sachs have expensive benefits is that a) they are in New York, which has expensive healthcare delivery, and, b) they have little or no cost-sharing because they (presumably) don’t believe in “skin in the game” or capitalism.  Then Axelrod reminds everyone in the White House that the people with the richest health benefits in America (apart from the bankrupt automaker workers who actually make Cadillacs) are school teachers and firefighters.  Brilliant.   The economists are trying to nail Goldman Sachs bankers and it turns out, that the ones who would be punished by the tax are the hard-pressed schoolteachers of the Bronx and all New York firefighters.  So the public employees unions come out swinging: “unfair, not right, we fought for these benefits, and we will actually turn up at Congressional elections in 2010, when all the Twitter crowd stay home watching Rachel Maddow on election day, and never even get off the couch.”  Maybe, we should exempt the Unions… some say. OK, then there is a bit of problem because a lot of the revenue to pay for the coverage comes from the assumptions on revenue from the tax on rich plans, most of which are union plans.

Oh Shit, now what?  OK, why don’t we just have a Goldman Sachs only excessive health benefits tax?

Have you ever dealt with Goldman Sachs?

Here’s how the conversation would go with a Goldman Sachs banker whose benefits you are going to tax:

Goldman Sachs Benefits Manager to Goldman Sachs Banker:  “ Congress has passed an excise tax on expensive benefit plans, and because we are self-insured we are having to pass this tax on to you, so there will be a deduction in your paycheck.”

Banker to Benefits Manager:  “No it doesn’t work that way here. I am too valuable. I need to be grossed up.”

Benefits manager to Banker:  “What does that mean?”

Banker to Benefits Manager: “ Well, highly compensated people like me, when faced with an excise tax imposed on the company, with the intent of discouraging excess compensation that may end up in a net reduction in my pay, under those circumstances, we highly compensated people normally would get grossed up to make us whole again.”

Benefits Manager to Banker:  “Do you need an assistant?”

I am self-employed, nobody’s grossing me up.  But, Goldman bankers would get grossed up.  That’s the way they roll.  It sucks to be you and me.

Tax the Evil Insurers

Great new idea.

For profit health insurers are evil, right?  …..Check.

Non Profit Accountable Care Organizations like Kaiser and Group Health are good guys , right? …..Check.

So tax commercial insurers and give the Accountable Care Organizations a break to encourage the formation of Accountable Care Organizations, right?

No, actually we are going to do it the other way around.

The current proposals impose a tax on fully insured products, there is no tax on the self-funded part of the market, and here’s the really good part, most for profit commercial insurers are heavily concentrated in the self-insured part of the market and most non-profits insurers and accountable care organizations are disproportionately (or in the case of Kaiser, almost exclusively) in fully insured arrangements.

What this means is that the very things you are trying to encourage are undermined.  Industry estimates are that the effect of the tax is a 2-3% rate advantage to the self-funded plans over the fully insured plans causing a cavalry charge to self-funding.  (For example, Kaiser who has 3% of all commercially insured lives in the country, would pay 8% of the tax). The next effect, as Alain Enthoven and others have pointed out, will be to further pump up fee for service incentives, and hurt the small group and individual market which has the most problem paying for health insurance. Perfect.

It’s not like it’s too difficult to treat self-funded and fully insured exactly the same using premium equivalents.  Indeed, in other provisions of the Baucus bill in terms of clawbacks of fees for subsidized workers, the bill treats employers the same way whether they are self-insured or not.

Monty Python couldn’t make this up.

We know you should be treated the same, and we are treating you the same, over here, but we are not treating you the same when it comes to the tax, because we want to give fee-for service commercial ASO business a 2-3% rate advantage over Accountable Care Organizations so that we encourage the formation of Accountable Care Organizations.  Splendid.

It is straight out of the famous Piranha Brothers sketch, where an underling in the Piranha Brothers London gang (modeled on the notoriously violent London East  End Kray Twins) when asked if he was bitter  that the two gang leaders Doug and Dinsdale Piranha had nailed his head to a coffee table, declared:

“ I deserved it.  Doug and Dinsdale are lovely blokes.  They’re cruel but they’re fair.”

Expect a little more of the “cruel but fair” policymaking as the silly season moves ahead.

Ian Morrison is an author, consultant and futurist in Menlo Park, California.