On Aug 11, 2009, John Mackey had an article in the WSJ called “The Whole Foods Alternative to Obamacare.“ I found it annoying and oversimplistic for many reasons, and I’m going to go through the article to make my points. But I have to make a point before everything else: these do not need to be alternatives to a public plan, and to represent them as so is disingenuous.
He starts with a quote:
“The problem with socialism is that eventually you run out
of other people’s money.”
A more relevant quotation to the public debate about health care reform would be H.L. Mencken’s: “Nobody ever went broke underestimating the intelligence of the American public.”
Truly, the Thatcher quote is obnoxious for this topic. First of all, the real problem with medical care is that people run out of their own money. That’s why we have insurance. Second, insurance couldn’t work without other people’s money; sharing money (i.e. sharing risk) is the whole idea. I am sure that Mackey understands the concept of risk-spreading, so using this quote – without acknowledging how it relates to the basic structure of insurance – strikes me as almost intentionally misleading. A lot of debate about health care reform appears to rest on spurious rhetorical flourishes (“death panels” and “socialism,” for instance), and that is disturbing to me.
With a projected $1.8 trillion deficit for 2009, several trillions more in deficits projected over the next decade, and with both Medicare and Social Security entitlement spending about to ratchet up several notches over the next 15 years as Baby Boomers become eligible for both, we are rapidly running out of other people’s money. These deficits are simply not sustainable. They are either going to result in unprecedented new taxes and inflation, or they will bankrupt us.
While we clearly need health-care reform, the last thing our country needs is a massive new health-care entitlement that will create hundreds of billions of dollars of new unfunded deficits and move us much closer to a government takeover of our health-care system. Instead, we should be trying to achieve reforms by moving in the opposite direction – toward less government control and more individual empowerment. Here are eight reforms that would greatly lower the cost of health care for everyone:
Again, I want to stress that the following reforms are not “alternatives.”
Before we get to them, though, I just want to point out how Mackey implicitly argues here that government control = more expensive health care. This is not necessarily true. There are numerous problems with Medicare/Medicaid, and they surely create a lot of debt, but they also have been able to slow the rate of price increase and have undeniable ability to force hospitals, etc., to lower costs.
In addition, I fail to see how a public option is necessarily counter to individual empowerment. HMOs are privately-run but were and are railed against for harming individual empowerment. The point is, empowerment is great, but it’s not that easy, and it’s possible to achieve along with universal health care. One shouldn’t make an argument based largely on aligning one’s viewpoint with vague positives.
Reform #1:
• Remove the legal obstacles that slow the creation of high-deductible health insurance plans and health savings accounts (HSAs). The combination of high-deductible health insurance and HSAs is one solution that could solve many of our health-care problems. For example, Whole Foods Market pays 100% of the premiums for all our team members who work 30 hours or more per week (about 89% of all team members) for our high-deductible health-insurance plan. We also provide up to $1,800 per year in additional health-care dollars through deposits into employees’ Personal Wellness Accounts to spend as they choose on their own health and wellness.
Money not spent in one year rolls over to the next and grows over time. Our team members therefore spend their own health-care dollars until the annual deductible is covered (about $2,500) and the insurance plan kicks in. This creates incentives to spend the first $2,500 more carefully. Our plan’s costs are much lower than typical health insurance, while providing a very high degree of worker satisfaction.
HSAs actually sound like a very good deal, especially at first glance. High deductibles are very smart for insurance, as a low deductible generally doesn’t save money for the insured individual (for something like home or auto insurance, it’s more than made up for in higher premiums plus increased rates any time you make a claim). In addition, that high deductible would normally only cover the costs of regular, predictable health care expenses, which it doesn’t make sense to insure against in the first place (i.e. we don’t insure autos for tune-ups). I personally have an HSA, as they particularly make sense for the young and healthy – unless something unforeseen happens, I will come nowhere near my deductible each year.
But therein lies the issue(s). People who suggest that patients pay for a larger share of their health care are trying to reduce moral hazard (which means that, if you aren’t paying for it, you don’t care how much it costs – thus patients will be fine with unnecessary lab tests, MRIs, colonoscopies, etc., as long as insurance is footing the bill). Reducing moral hazard is a good goal, but it’s unclear how effective high deductibles can actually be at it. In health care, 80% of costs are accounted for by 15% of the population. This means that most of health care costs don’t come from the regular, predictable costs that high deductibles would make us shoulder ourselves – they come from expensive, chronic conditions like diabetes, asthma, heart disease, and cancer, for which the deductible will be only a drop in the bucket. Moral hazard won’t be solved because these people still aren’t paying for the bulk of their costs.
In a recent post on Marginal Revolution, Alex Tabarrok wrote about CDHPs (which are essentially the same thing/overlap with HSAs). He offers evidence, first, that HSAs/CDHPs represent significant health care savings (12-21%), and, second, that they do not cause a reduction in preventative care: “Generally, all of the studies indicated that cost savings did not result from avoidance of inappropriate care and that necessary care was received in equal or greater degree relative to traditional plans. All of the studies reported a signficant increase in preventative services for CDH participants.” (This evidence is from a study by the American Academy of Actuaries, by the way.)
At first, I felt incredibly frustrated by this, as it directly contradicted evidence I’d just read from a Rand study. “How are we supposed to figure these things out if the evidence is all over the place,” I despaired. But then I took a look back at the description by David Dranove of the Rand study.
Rand found that, if everyone enrolled in a CDHP/HSA, the total savings would be 2.5-7.5%. That’s nothing to sneeze at, but it’s also not the great savior of health care costs, either. Note that this does not contradict the percentage given by Tabarrok, since Tabarrok’s percentage refers only to the savings of the relatively small number of mostly very healthy and young people who currently have HSAs, not how it would be if enacted as a major reform. Second, Dranove writes, “once Rand enrollees initiated a visit to a provider, their spending was largely independent of their deductible and copayment. Even patients with the highest deductibles appeared to delegate all medical decision making to their providers. Thus virtually all of the Rand cost savings resulted from individuals who elected not to visit their providers.” (David Dranove, Code Red, pp132) This, too, does not necessarily contradict the study Tabarrok cites; in fact, it may just belie their cost savings – the Actuaries’ study focused only on those patients who went to their doctors. The risk is that CDHPs gain their savings because people don’t go to the doctor when they have to pay.
There is a real problem with the tension between asking patients to shoulder more of their regular, predictable costs (good) and the consequences of people not using preventative services (bad). Any system of reform will have to tackle this in an imaginative way, taking into account the incentives at play. (Incentives incentives incentives!!!)
The other problem with HSAs is that, if they aren’t enacted across the board, it increases the problem of adverse selection. As stated, HSAs make the most sense for young, healthy people, so it siphons these people away from regular indemnity insurance. But indemnity insurance needs those people to spread costs around from the old, unhealthy people. Insurance companies can only afford to provide coverage of all the patients who need expensive care because they can also get premiums paid from patients who don’t need any care. As an insurance company covers more unhealthy patients and fewer healthy ones, they quickly lose the ability to be a viable corporation. Adverse selection is a problem with wide-ranging implications and consequences, and I won’t get into all of them. Suffice it to say that HSAs might seem good for the individuals getting them, but they could be useless or even bad for the health care system as a whole. As currently constructed, that is. I’m not going to close the door on high deductibles and copays, but it’s certainly more complicated than Mackey makes it out to be.
Reform #2:
• Equalize the tax laws so that employer-provided health insurance and individually owned health insurance have the same tax benefits. Now employer health insurance benefits are fully tax deductible, but individual health insurance is not. This is unfair.
Agreed. Though personally I think it should all be taxed. If I remember correctly, taxing ESI (employee-sponsored health insurance) would more than pay for Medicare. Notice that this would not be a new tax. It would be the cancellation of a tax break.
Reform #3:
• Repeal all state laws which prevent insurance companies from competing across state lines. We should all have the legal right to purchase health insurance from any insurance company in any state and we should be able use that insurance wherever we live. Health insurance should be portable.
I’ve got no problem here – but feel the need to remind you, again, that this does not need to be an alternative to “Obamacare.”
Reform#4:
• Repeal government mandates regarding what insurance companies must cover. These mandates have increased the cost of health insurance by billions of dollars. What is insured and what is not insured should be determined by individual customer preferences and not through special-interest lobbying.
Here’s where I think Mackey truly lost it. You’d have to be insane to think that insurance companies choose their coverage based on customer preferences. Guess what customers would prefer? To not have their coverage continually denied. There is an obvious conflict between what customers would prefer to have covered and what insurers can get away with not covering.
And the fact of the matter is insurers can easily all refuse to cover certain procedures/conditions, and there is no alternative for consumers. TMJ is a good example. Historically, most health insurance companies wouldn’t cover it, claiming it’s a dental issue. Most dental insurance companies wouldn’t fund it, claiming it’s a medical issue. By now, about 20 states have enacted laws requiring some coverage of TMJ procedures, making sure that those with the disorder aren’t just screwed. The same goes with hurricane homeowner’s insurance on the gulf coast – when I worked at an insurance agency in Texas, not a single private insurer would insure coastal homes. All homes on the gulf coast had to be insured by the government. (And there’s a big difference between deciding to buy a home on the coast and having to live with a chronic condition you never asked for.) The point is, we are pretty much at the mercy of insurers. Mackey shows a real ignorance of power relationships here.
I will say, though, that the ability of large companies to self-insure and thus be exempt from federal insurance regulations (ERISA) does contribute to the fact that small companies (who cannot afford to self-insure) must pay more expensive insurance premiums. I won’t go on, but it’s a problem.
Reform #5:
• Enact tort reform to end the ruinous lawsuits that force doctors to pay insurance costs of hundreds of thousands of dollars per year. These costs are passed back to us through much higher prices for health care.
I think this isn’t a bad idea; certainly something needs to be done about malpractice. Texas has enacted caps on how much one can sue for medical malpractice, and the number of suits have reduced. Arbitration agreements are a good idea, too. But it’s not mutually exclusive with a government-run plan.
Reform #6:
• Make costs transparent so that consumers understand what health-care treatments cost. How many people know the total cost of their last doctor’s visit and how that total breaks down? What other goods or services do we buy without knowing how much they will cost us?
Easier said than done, buddy. The ability to comparison-shop would be great, and definitely hospitals should be clearer about how much basic services (like stitches in the ER) will cost. But the problem with most of the services you’d be comparison-shopping for (i.e. the cheapest back surgery) is that so much of the cost is unknown. How long will you be in the hospital? Will you have a difficult recovery? What drugs are you going to need, and for how long? What tests will be run, and how many? These aren’t things that a hospital administrator is going to be able to tell you before the fact. There is a huge variance in how much the same fundamental procedure costs for different individuals.
When you buy some groceries at Whole Foods, all the costs are known, but that’s not the case with hospitals. It would be like calling up Whole Foods to ask how much your mushrooms are going to cost, but not only do you not know how many you’ll be buying, but you also don’t know if your recipe requires button mushrooms or truffles.
Certainly there are ways to aggregate data and find out which hospitals offer the lowest average costs. Many insurance companies already do this, but they don’t release the data because that’d be giving away their secrets to the competition. Different insurers negotiate costs for different amounts, and it’s in the individual insurer’s best interest to keep those deals hidden. In addition, even if you did know the aggregate, average data, it still wouldn’t tell you exactly what your costs will be. The comparison shopping can only go so far.
That being said, I think letting consumers in on the aggregate data would be an excellent idea (and could be handily done by the government, no less!). Another problem with it, though, would be whether consumers would listen. They already don’t appear to listen much to the hospital consumer report card stuff. This really highlights an issue that I see as the flip-side to Atul Gawande’s (and others’) call for a revolution in medical culture. We also need a revolution in patient-consumer culture. As it is, most people don’t really understand medicine or science and can’t make informed choices like they would on which kind of apple to buy. According to some studies I’ve read about (and which seem intuitively true to me), patients make most of their shopping decisions based on anecdotal evidence from friends – i.e. such and such hospital because my uncle got good care there, such and such doctor because my colleague likes her. If we want an improvement in both quality AND cost control, consumers are going to need to take a larger hand in understanding and using evidence.
Reform #7:
• Enact Medicare reform. We need to face up to the actuarial fact that Medicare is heading towards bankruptcy and enact reforms that create greater patient empowerment, choice and responsibility.
Again with the conflating. Is empowerment necessarily going to cause prices to go down? There are actual issues, even discussed by fellow libertarians (like Arnold Kling), which talk about what causes huge health care costs, and Mackey seems to think that ignoring them and vaguely mentioning “patient empowerment” will do the trick.
Reform #8:
• Finally, revise tax forms to make it easier for individuals to make a voluntary, tax-deductible donation to help the millions of people who have no insurance and aren’t covered by Medicare, Medicaid or the State Children’s Health Insurance Program.
Sure, why not?!
Mackey further explains where he’s coming from:
Many promoters of health-care reform believe that people have an intrinsic ethical right to health care—to equal access to doctors, medicines and hospitals. While all of us empathize with those who are sick, how can we say that all people have more of an intrinsic right to health care than they have to food or shelter?
Health care is a service that we all need, but just like food and shelter it is best provided through voluntary and mutually beneficial market exchanges. A careful reading of both the Declaration of Independence and the Constitution will not reveal any intrinsic right to health care, food or shelter. That’s because there isn’t any. This “right” has never existed in America.
I don’t believe in intrinsic or natural rights, so this argument just feels beside the point to me. I have to point out, though, that market exchanges seem to often do a pretty poor job of getting people food and shelter. America has a lot of homeless citizens while the Soviet Union had essentially none. We might decide the consequences of the market system are better than the communist one, but the communist one was undeniably better at giving everyone food and shelter.
And I see health care in the same light as food and shelter – everyone should have access to it. Not because it’s an “intrinsic right,” but because I don’t want to live in a society that sits by idly as fellow human beings go without essentials. I don’t want to live in a society that lets people go hungry (although now obesity affects America’s poor more than malnutrition, but that’s another topic), or have to sleep on the street, or allows them to go bankrupt (or die) from illnesses they can’t control and can’t pay for. It’s a cruel world out there, and we’re in it together, and I think the best society makes sure we all have the basics.
We can’t just ignore the fact that people don’t start from a blank slate, that historical processes affect the range of one’s opportunities. Providing equal availability and quality of food, shelter, education, and medical care would put people on vastly more of an equal footing to create/take their own opportunities, and yet many who support equality of opportunity don’t typically support such reforms.
Finally, the lack of nutritious food and shelter comes back to bite us in terms of health care, even if (especially if) the people lacking it don’t have insurance. Who do you think mostly populates emergency rooms? And how do you think that very expensive care is paid for? By raising premiums on those who do pay or by federal funding. As any good CEO should know, sometimes a hefty investment will decrease costs in the long-run.
Even in countries like Canada and the U.K., there is no intrinsic right to health care. Rather, citizens in these countries are told by government bureaucrats what health-care treatments they are eligible to receive and when they can receive them. All countries with socialized medicine ration health care by forcing their citizens to wait in lines to receive scarce treatments.
Although Canada has a population smaller than California, 830,000 Canadians are currently waiting to be admitted to a hospital or to get treatment, according to a report last month in Investor’s Business Daily. In England, the waiting list is 1.8 million.
Uh oh, Mackey’s dropping the rationing-bomb. The debate about rationing really drives me up the wall, so you’ll just have to excuse me as I scream from the rooftops: THE U.S. SYSTEM RATIONS!!!!!!!!!! It may be a different system of rationing, but wouldn’t you rather have a reasoned, thought-out, cost-effective system of rationing, rather than just letting a lot of poor people get sick and possibly die?
I will say that England’s NHS is likely not the system we want to emulate, but it’s far from the only option. Also, Bob Wachter addresses the rationing issue very, very well. He quotes Stalin: “One death is a tragedy, a million is a statistic.”
At Whole Foods we allow our team members to vote on what benefits they most want the company to fund. Our Canadian and British employees express their benefit preferences very clearly—they want supplemental health-care dollars that they can control and spend themselves without permission from their governments. Why would they want such additional health-care benefit dollars if they already have an “intrinsic right to health care”? The answer is clear—no such right truly exists in either Canada or the U.K.—or in any other country.
This could potentially be an interesting argument, but he offers so little data that I can’t even really comment on it. Do the Canadians have HSAs like the Americans? Are the funds in them still tax deductible? Which benefits are they voting for, exactly? This is the kind of claim that Mackey needs to back up.
Rather than increase government spending and control, we need to address the root causes of poor health. This begins with the realization that every American adult is responsible for his or her own health.
Unfortunately many of our health-care problems are self-inflicted: two-thirds of Americans are now overweight and one-third are obese. Most of the diseases that kill us and account for about 70% of all health-care spending—heart disease, cancer, stroke, diabetes and obesity—are mostly preventable through proper diet, exercise, not smoking, minimal alcohol consumption and other healthy lifestyle choices.
Sigh. I’ll direct you to two maps which show the correlation between obesity and poverty. The obesity map and the poverty map. That’s a high degree of correlation and points to a deeper problem than people just not getting off the couch. It’s certainly easy to point the finger at individuals, but it’s not always effective.
Also, Mackey’s mention of alcohol and tobacco (and, though he doesn’t say it, sugar and fat) would be a great time to bring up the special-interest lobbying he wants to eliminate.
I’d also like to make a very special tangent. Mackey says we need to “address the root cause of poor health,” and here it is: having a body. We need to recognize that our bodies aren’t built to last. As we gain the technological ability to stave off the inevitable, costs are going to continue to rise.
Recent scientific and medical evidence shows that a diet consisting of foods that are plant-based, nutrient dense and low-fat will help prevent and often reverse most degenerative diseases that kill us and are expensive to treat. We should be able to live largely disease-free lives until we are well into our 90s and even past 100 years of age.
Certainly I agree that we should be eating plant-based, nutrient dense, and low-fat diets and making healthy choices. But we can’t just expect everyone to make good choices and then complain when their poor choices affect us negatively. We are part of a society, not rugged, individualist islands, whether we like it or not. And I think the economists have it right on this one: we should incentivize healthy behaviors and preventative care. A wide-scale incentivization policy would probably best work by including the government.
Health-care reform is very important. Whatever reforms are enacted it is essential that they be financially responsible, and that we have the freedom to choose doctors and the health-care services that best suit our own unique set of lifestyle choices. We are all responsible for our own lives and our own health. We should take that responsibility very seriously and use our freedom to make wise lifestyle choices that will protect our health. Doing so will enrich our lives and will help create a vibrant and sustainable American society.
Look, I don’t know what plan will solve the health care crisis. But I do know that any plan that does will have to recognize and address the extreme complexity of issues at work and will also create a careful system of incentives for the various players in the system (PCPs, specialists, hospitals, insurers, government, patients, employers, etc). Mackey’s article strikes me as worthless and counter-productive on this front.
Can gender bias be okay?
May 4, 2009 · Leave a Comment
A male friend of mine, who hopes to work in women’s health someday, alerted me to a story about David Garfinkel. Dr. Garfinkel is an OB/GYN from NJ who claims his former medical group practice fired him because he is a man.
The given reason for his termination was that he wasn’t bringing in enough business; however, Dr. Garfinkel counters that he was bringing in a high level of obstetric business and simply needed to time to build his gynecology practice. The medical group has since hired several female OB/GYNs. Garfinkel is suing, first to get out arbitration agreements, and, second, for gender bias.
I know little about the law, and so I will not address the current labor laws that affect the case. My question is about what the laws should be: should it become acceptable for medical groups to openly prefer a gender in fields like gynecology and urology? Can patient preference legitimize discrimination?
The most obvious comparison is to ethnicity, but I don’t think the comparison can go very far. It would be unacceptable to discriminate against African-American doctors due to patient discomfort based on ethnicity. In this case, the patient preference should be considered personal bias (and thus a personal problem) and not a public issue, since a physician’s ethnicity can not reasonably be expected to affect the doctor-patient relationship and level of care.
The case is not quite the same with gender, though. We live in a society that regularly segregates based on sex; we use gendered bathrooms and changing rooms almost without exception. We are socialized to feel more comfortable with our bodies and nakedness when exposed to the same sex, and to feel potential humiliation and fear when exposed to the opposite sex. Thus, when a woman feels less comfortable with male OB/GYNs, or chooses not to see them at all, this preference is based not on personal bias against men but rather on internalized societal norms. As such, the gender difference does affect the doctor-patient relationship, and it does so for most people, rather than only for outliers. As long as our society segregates based on sex, we can expect this to be an issue in medicine. Accordingly, it seems a little unfair to treat such gender discrimination in gynecology or urology as identical to gender discrimination in other workplaces.
For full disclosure, I should mention that I am a woman who vastly prefers seeing female gynecologists, and this affects my feelings on the matter. I believe that women should be able to make a personal choice for female rather than male physicians; however, I do not think gynecology and urology should be forceably segregated. (Choice is important; I do know women who prefer male physicians.) Medical practices should not hire strictly along gender lines, but they should be able to take their patients’ choices and preferences into account when hiring, as long as these are demonstrated and not assumed preferences. However, it does strike me as unfair and wrong to fire a male OB/GYN due to perceived and undemonstrated preferences. I will be very interested to see how this lawsuit turns out.
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Tagged: gender bias, news, OB/GYN