The Maanga

The difference between Conservatives and Liberals, we are often told, is their divergence in terms of tolerating the lack of equality in outcomes or opportunities in order to achieve the other. It’s a philosophical dichotomy that has been reduced to rhetoric in the modern American electoral politics, as one would have expected. And, if one were to look for academic vestiges of such a polity being put to popular vote, the Healthcare plans of Senators McCain and Obama offer a rare textbook case.

John McCain’s plan aims towards a fundamental change in process and hopes that will enable desired outcomes. At it core, the health plan is actually a tax plan. Currently, if you have an American job your employer typically contributes to a traditional plan[1] and that money is tax free. What McCain wants to do is eliminate this tax break and consequently generate an estimated $3.6 trillion over the next decade. This money, the plan claims, will be used to pay for refundable tax credits for Americans obtaining private insurance. That is, if you are one among the 50 million uninsured in America, you can use this credit to buy insurance for yourselves. If, on the other hand, you happen to have an American job that also provides insurance, which you are more likely to, you can use this credit to offset the cost of paying taxes on your employers’ premium or alternatively to buy coverage on your own. This is important — research has repeatedly shown that one of the reasons for the high cost of healthcare in America is the way insurance plans are designed and bundled. The McCain plan, I assume, will help individuals use their tax credits to buy CDHPs or Consumer Driven Health Plans to suit their specific needs and they  can design the plan themselves, online. Much like buying an air ticket or choosing a mutual fund. The campaign though does not harp on CDHPs or the individual design of the health plan — possibly for the fear of being labelled too close to the insurance companies.

Instead, the campaign focuses on how the current tax structure benefits the rich, since the real value is dependent on the employee’s tax bracket. Senator McCain argues, his plan will offer equal credit to all Americans. This it’s claimed is a just allocation of federal resources. Further, he argues, actually his plan does, that since the tax credit is refundable, even the poor qualify. In other words, the present tax structure benefits those who pay taxes and have a job — this plan instead works like a watered down negative tax structure where everyone receives a credit to purchase insurance regardless of where they obtain it. There is also a proposal for inter-state insurance purchases. This is put forward as a mechanism to circumvent the heavily regulated states that make the cost of premiums very high.

Barack Obama’s plan is simple. The onus is on the employer — as it has been for long time in America — the employer either provides the employee insurance cover or pays tax. That revenue, it is claimed, will finance the reminder. Senator Obama also does what most liberals instinctively desire: he will offer a new plan. A new federal health plan drawn along the lines of the existing Medicare program has been proposed in conjunction with a new national health insurance exchange that is modelled on the Massachusetts Connector. It’s a repository/counseling/grievance center that would offer a choice of private insurance. And then, there are mandates that are proposed to insurance companies — they need to change their underwriting practices such that they can’t leave those with existing conditions outside the net.

The universal adoption of electronic medical records(EHR) and improved disease management[2] practices are also touted as cost saving measures. Further, the Obama plan intends to pay providers on the basis of performance. How this is possible when the Senator wants to fundamentally change the single biggest incentive for these measures, namely better/more efficient underwriting, is something one can’t fathom. The plan also seeks to ‘negotiate’ prescription-drug prices and spend on research to study the relative merits of treatments plans. To work the numbers on this plan is impossible at this time because one does not know the tax rates for employers choosing the pay route — and the plan essentially assumes there is an optimal point which will enable the smooth rollover of funds into helping the uninsured.

It’s highly unlikely that someone decides to vote after a careful analysis of their health plan options which includes working their tax numbers and possibly answering several moral questions along the way. However, if one were to intuitively decide on a philosophical basis, this appears the most easy decision one can make.

[1] — Currently, most employers still offer traditional plans with HMO or PPO or POS. However, if research is to be believed, the next 5 years could see them being rapidly replaced with CDHPs.

[2] — Disease Management is another critical area that research has shown will reduce the cost of healthcare. About 3 out of four dollars that payers settled as claims were spent on treating patients with diabetes and heart diseases. A disease management program aims to target people with such specific illness and design incentives that will help bring down their visits to the clinic.

That healthcare in America has become prohibitively expensive was neither avoidable nor is it reversible in the long term. It is a result of the modern human being’s progress that will prove to be eventually self-defeating. Simply because, the modern man’s lifestyle is an evolutionary dead end — much like the peacock’s feathers.

Example: The average use of a CT Scan quadruples when the Medicare program pays for ‘procedures’ and not patients. The physician who uses conventional diagnostic techniques is simply called a bad doctor because he isn’t “thorough”.

maybe, he is smart.

In the United States, about 85 cents out of each dollar spent on healthcare goes directly towards the healthcare expense while about 15 cents goes for administrative and other non-healthcare expenditures. This is actually quite a good ratio when compared with the other developed nations of the world. In fact, the United States has a better ratio when compared to European countries and also has a greater penetration of information systems for healthcare.

Further, the direct return on investment for implementing something like the EHR is impossible to calculate. Even if the calculations are done, the cost of such an implementation will fail to completely take into account the diversity of the the platform — at the payers’ end, at the providers’ end and for the end patient. Simply because, the nature of incentives for each entity is often in direct conflict with another. Which is the reason why payers dislike such systems since it only quickens the process of money leaving their pockets. It is a fact that about three out of four dollars paid out by large plans go towards treating diabetes and heart diseases. The current system deals with such a scenario in a specific manner that aims to cut down costs for the payer and thus for everyone else along the chain. It enrolls such members in a disease management program and further has an Underwriting/Predictive Modeling software which decides on premiums.

Now, Senator Obama wants an EHR for this entire continuum made mandatory [I think that is what he means, though he does not say anything for sure anyway]. How that will magically improve efficiency is something that people have to ask IT vendors who seem to have sold the line quite successfully to several customers and now to the presumptive nominee. IT improves efficiency — but in terms of process. Healthcare is hardly that — because life is hardly that.

Now, given this background, people will obviously ask: Europe spends less than America on Healthcare both in absolute terms and as a percentage of GDP; surely, they are more efficient and hence we can become that too. That may or may not be true. But even if it is, I do not see how the EHR is going to affect the 85 cents  part on actual healthcare expense which is what constitutes bulk of America’s problems. If anything, it will bring more people into the same net and worsen the financial burden. Maybe the Republicans are right in claiming that frivolous law suits are the reason. Even if they aren’t, at least they are aiming at the right slice.

The correct question though, happens to be, why should everyone afford healthcare?

Five years on, where is the oil? And, why are the idiot Americans wanting change and not cheaper fuel?

Like a policeman in Pondicherry said, vellaya iruntha foreign kaaran.

Rushdie has an unusually brilliant take on America in the wake of Sep 11. The lectures ends with a hope:  

“We are living I believe in a frontier time, one of the great hinge periods in human history, in which great changes are coming about at great speed. On the plus side, the end of the cold war, the revolution in communications technology, great scientific achievements such as the completion of the human genome project; in the minus column, a new kind of war against new kind of enemies fighting with terrible new weapons. We will all be judged by how we handle ourselves in this time. 

What will be the spirit of this frontier? Will we give the enemy the satisfaction of changing ourselves into something like their hate-filled, illiberal mirror image, or will we, as the guardians of the modern world, as the guardians of freedom and the occupants of privileged lands of plenty, go on trying to increase freedom and decrease injustice?  Will we become the suits of armour our fear makes us put on, or will we continue to be ourselves? The frontier both shapes our character and tests our mettle. I hope we pass the test.” 

Lectures from 2002 that take care of Wright, Ferraro, Bush, McCain and Hillary. Now tell me, was Obama’s soporific speech really as good as this one?  The only time I woke up was when he talked of former gang bangers, thinking he was talking about Bill Clinton and Eliot Spitzer. But even they turned out to be of the wrong kind.