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From the ominously-titled book, “New Rules,” by Donald Berwick MD and Troyen Brennan MD:

“Today, this isolated relationship [between doctor and patient] is no longer tenable or possible. . . Traditional medical ethics, based on the doctor-patient dyad, must be reformulated to fit the new mold of the delivery of health care. . . The primary function of regulation in health care…is to constrain decentralized individualized decision making.”

Unfortunately, Dr. Berwick’s straightforward formulation of the appropriate role of the individual physician in our reformed healthcare system is not isolated to thinkers of the Progressive persuasion. The notion that most clinical decisions can be usefully made by a centralized authority is attractive even to some conservatives.

For example, a few years ago the noted economist Arnold Kling strongly defended the idea. “My own view is that a remote third party probably can use statistical evidence to make good recommendations for a course of treatment.”

Now, Kling is no far-left radical, pushing for centralized control of healthcare (and everything else). Indeed, he is now with the Cato Institute, and before that he taught economics at George Mason University. So he has earned his conservative and/or libertarian chops.

And to be fair, he is not really calling here for “remote third parties” to have final authority on what’s best for individual patients. Rather, he thinks patients should make that decision for themselves, weighing the recommendations of data-driven guidelines promulgated by remote experts, against the ego-toss’d recommendations from their all-too-fallible doctors, or, as Kling sarcastically refers to them, their “heroic personal saviors.” (Such sarcasm, regular readers will know, is as abhorrent to DrRich as it probably is to you.) Kling is saying: trust patients, armed with good evidence-based recommendations handed down from experts, to make the right decisions for themselves.

In concept even DrRich supports this latter notion. Indeed, a chief theme of this blog has been that doctors have been coerced into such a compromised position by the government and the insurance carriers that wise patients will no longer simply trust their doctors’ advice explicitly. As things now stand, patients who place full reliance on their doctors, assuming that they’ll get all the information they need to make good medical decisions, are putting themselves in peril. Smart patients will seek out all the information they can about their own medical conditions, so they can confirm that their doctors are indeed presenting them with all their reasonable options, and so they can more intelligently evaluate those options. And certainly, expert-endorsed guidelines would be an important part of that research.

But Kling’s remedy – that patients rely on the treatment recommendations made by expert panels as a remedy to the conflicted advice being doled out by their own doctors – is seriously flawed.

The first flaw, of course, is the idea that remote third parties, wielding evidence-based data, can make good treatment recommendations for individual patients. Evidence-based guidelines, almost by definition, are designed to improve the average outcome across a population of individuals, and are specifically designed not to optimize outcomes for each individual within that population.

Second, Kling apparently assumes that the remote third parties who are producing evidence-based treatment recommendations will be acting in a completely objective and unbiased manner. But this can never be the case. A major theme of the Covert Rationing Blog this past year has been to demonstrate that a) clinical science is probably the least exact of the sciences; b) the design and interpretation of clinical studies is inevitably attended by significant bias; and c) therefore, no matter who is producing them – whether it is medical professionals or GOD panelists (Government Operatives Deliberating) – these guidelines will always be produced with a particular agenda in mind. To assume that such agendas will be primarily – or even remotely – related to optimizing the outcomes of individual patients will often be a serious error.

Third, the idea that patients, even very intelligent patients armed with “perfect information,” can by themselves reliably sort through the morass of conflicting evidence and conflicting opinions that invariably inform any set of clinical recommendations (whether made by vaunted teams of completely objective experts from on-high, or by one’s inherently flawed, conflicted and ego-driven personal physician) is simply false. This would be the case even if the healthcare system were perfectly aligned to help patients. Which, of course, it is not. (It is aligned to affect the covert rationing of healthcare.)

Finally, while the advice patients get from their doctors is indeed biased, more and more it is biased (thanks to heavy-handed coercion) in favor of those same central authorities that are commissioning the expert panels.

As a result, patients – especially when they are sick and least able to fend for themselves – are generally incapable of negotiating the gratuitous complexities and hidden hazards laid out before them by a hostile healthcare system, a system which silently prays they will, in frustration, just go buy themselves some alternative medicine remedy, then crawl under a bush and die while contemplating their qi. Indeed, patients are as incapable of successfully navigating such a system as are accused felons of navigating a complex and hostile legal system that’s bent on sending them away for 15-20 years.

It is for this very reason that accused felons are assigned an advocate, an individual who is ethically and legally obligated to take their part, to help them navigate all the legal hazards, to do everything possible to see they are treated fairly, and that they are given every reasonable chance to prove their innocence. Lawyers, as much as we physicians might like to castigate them, are absolutely critical to a civil society.

And this is the reason why patients (according to traditional, though now quaint, medical ethics) are also supposed to have a personal advocate, an individual who is obligated to take their part, to help them navigate all the medical hazards, to do everything possible to see that they are treated fairly and that all available medical options are made open to them, and that they are given every reasonable chance of a good clinical outcome. Patients, in other words, need doctors who are devoted to the classic precepts of their profession. Such doctors, as much as Kling and others might like to diminish their importance, are also absolutely critical to a civil society.

But, as we have seen, and as has been publicly celebrated by Dr. Berwick and others, severing the classic doctor-patient relationship has been Job One under our system of covert rationing – whether that rationing is managed by insurance companies or by the government. Doctors simply cannot be allowed any longer to place their patients first. They’ve got to place the needs of their true masters first. They’ve got to keep the government and the insurers happy or they’re out of a job. They are no longer permitted to tailor clinical choices to best fit their individual patients, but they are simply to apply treatment directives as they are handed down by (from now on, government-appointed) panels of experts.

And this brings us back to Kling. DrRich of course agrees with his notion that patients ought to be armed with the high-quality information they need to determine their own medical destiny. DrRich can even agree that relying solely on the information provided by today’s doctor is generally not advisable. But DrRich cannot agree with the reason it’s not advisable. Doctors aren’t so much inherently flawed by ego and other intrinsic character flaws (at least, no more than any other group of humans), as they are operating under duress, under imposed constraints, and under external coercions that systematically and purposefully prevent them from discharging their professional obligations.

Nor can DrRich agree with Kling’s proposed solution. No centralized set of recommendations, evidence-based or not, can fix this problem for patients – especially when the expert bodies that make those recommendations are controlled by the same entities that have, with malice aforethought, killed the medical profession for the express purpose of stripping patients of their advocates, and therefore, of their medical options.

DrRich has trouble seeing a solution to this problem that is not radical. He does not see how doctors can resume their rightful place as their patients’ advocates and remain in what has become of the traditional healthcare system. Perhaps enough doctors to make a difference will leave the traditional healthcare system, shedding themselves of the third parties who now control their behavior, and re-establishing their practices (and revitalizing their profession) with a new commitment to the doctor-patient relationship. If not, then perhaps some brand new profession will establish itself (call it “personal healthcare advocates”) to fill the great void that threatens the safety of every American patient.

So yes, let individual patients weigh all the evidence and choose the healthcare option that suits them best. But unless they have a personal advocate to help them navigate the morass of biased choices – whether that advocate is their PCP like it’s supposed to be, or some new variety of professional advocate – those options will be limited to whatever healthcare is deemed best by the central planners.

A fine economist such as Dr. Kling should realize that a remote third party can no more make good recommendations for individual patients trying to survive in the rough and tumble of the healthcare system, than can a remote third party make good recommendations for individual businesses trying to compete in the rough and tumble of the marketplace. It is one thing for Progressives to hold to such a notion. It is far more disturbing to see respected conservative thinkers doing so.

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It should by now be obvious to everyone that, in its great push to take over the American healthcare system, our government will do everything it must to eliminate private practice physicians. This is necessary because Obamacare (or any government-controlled healthcare system) simply cannot operate unless physicians cooperate completely with the Central Authority. Physician behavior absolutely must be controlled, and so doctors who insist on acting independently must either be reeducated or eliminated.

(Don’t get too exercised about DrRich’s language here – he is talking mainly about forcing recalcitrants into early retirement, or career changes. The other kind of “elimination” probably will not become necessary.)

Accordingly, under Obamacare all doctors are to be driven into federally-sanctioned organizations that will operate strictly under government directives. The current parlance for such an organization is the “Accountable Care Organization.”

The ACOs will be run by administrators who (theoretically) will become expert at navigating the morass of rules and regulations now being conjured up under Obamacare.  These administrators will interpret the rules and regulations in such a way as to determine The Way It Must Be Done, and then will pass The Way It Must Be Done down to the ACOs’ clinical chiefs (doctors who perhaps used to practice medicine, and maybe still do, a little, but who are now mainly brevet administrators), and the clinical chiefs will finally pass the restrictive rules of engagement down to the doctors who will actually take care of the patients. These doctors, struggling in the trenches, will attempt assiduously to follow those rules without exception, if they would like to keep their jobs as well as avoid a federal fraud rap. The patients, of course, will get whatever they get, but always with official assurances that whatever it is they get, it will be of the highest quality.

As DrRich has pointed out, doctors have very little leverage under this kind of system. Not only do they have the full weight of the federal government pushing them toward their fate as functionaries within ACOs, but they also are being pushed to so assimilate by their own professional organizations. Indeed, thanks to the New Age medical ethics which their professional organizations have promulgated on their behalf, joining collectives such as ACOs is about to become the only ethical way of practicing medicine. (DrRich has shown that this is explicitly so, and that Dr. Berwick agrees.) Doctors who try to make a go of it on their own will not only be practicing extra-legally, but also extra-ethically.

So this is where we are headed.

But we’re not there yet. Far too many physicians are still fundamentally independent-minded; there is still a lot of work to be done to get all the doctors to assimilate into the Borg.

And a major step in this direction will be to eliminate Independent Practice Associations. While the systematic emasculation of IPAs has been going on for years, it is to accelerate rapidly under Obamacare.

IPAs are groups of doctors who own independent medical practices, and who join together to provide bulk services to health insurers at rates of payment that are negotiated collectively. IPAs have a long and respected history for over a half-century. But they have been on the Fed’s hit list since at least the Clinton administration.

The rules under which IPAs must operate in legally negotiating with insurance companies have become complex, illogical, restrictive, arbitrary and ultimately ironic. The full weight of the federal government has been brought to bear against IPAs, apparently to protect the large and powerful health insurance companies, not to mention government health insurers, against “price fixing” by independent doctors – while simultaneously imposing price fixing by those same insurers upon the IPA physicians .

So: not only is it a violation of anti-trust for two random doctors to have a cup of coffee and mention anything to each other about their respective reimbursement rates, it is also illegal for fellow members of an IPA (who are joined together in collective bargaining with insurers) to do so. Indeed, the only kind of negotiation that is apparently allowed (“apparently” because the actual rules are not explicit but implied, and change arbitrarily depending on which administrators are running the Federal Trade Commission) is called the “messenger model” of negotiation.  The messenger model is necessitated by the fact that physician members of the IPA are not allowed to communicate with each other about rates, so each IPA must hire a “negotiator” who communicates between individual physician IPA members and the insurer. Furthermore, physicians are not allowed to declare to the insurer what level of reimbursement they will accept (because that would be price fixing), but rather, they can only hear the proposed reimbursement rates from the insurer, and accept or reject them. And in recent years, rejecting the offer by insurers, especially government insurers, has sometimes been determined also to be physician price fixing. This system, for reasons unfathomable to DrRich, is NOT to be considered price fixing on the part of the insurers.

DrRich is not sure he has this entirely right, because it is far more complex than he has allowed, and indeed, the rules are manifestly changeable and unclear, even to professional IPA negotiators.

In fact, it has proven to be very easy (and progressively easier as the years have gone by) for IPAs to get into serious trouble with the FTC, and incur massive fines, for “violations” that are not only fundamentally harmless to any party, but that had been perfectly acceptable behaviors in the recent past. To get the full flavor of the runaway prosecutorial zeal with which the FTC has been acting against IPAs, DrRich strongly recommends that you read this article in the December Reason Magazine by S. M. Oliva. (Many thanks to concerned reader Robert R. for pointing DrRich to this article.)

When the FTC decides to prosecute an IPA for price fixing or other violations-du-jour of the negotiating process, the IPA’s only reasonable course of action is to cave in immediately, sign a consent decree, pay the always-huge and always-arbitrary fine, and then abjectly accept whatever reimbursement rates the insurance company is willing to pay. This resolution to federal charges is unattractive, but at least it gives the IPA some chance of continued survival.

And if you don’t like the terms of the consent decree being imposed upon you, for God’s sake keep your mouth shut about it. When the director of a Colorado IPA recently told the press that her organization had done nothing materially wrong, but had signed the consent decree because they simply could not afford to fight the FTC in court (a truism for any IPA), the FTC sanctioned her as an individual, and barred her from negotiating with insurance companies for two years (effectively ending her career, simply for exercising her right of free speech). Even one of the FTC’s own commissioners, in a dissenting opinion, agreed that this latter action had been a travesty. (It was carried out nonetheless).

And so, operating a medical practice in an IPA has been a pretty dicey thing for several years now.

But Obamacare escalates the risk to a whole new level.

While dealing with the FTC is itself a decidedly nasty proposition, it’s nothing compared to dealing with the Justice Department. And Obamacare brings the DOJ into the fight to eliminate “price fixing” by doctors. That is, a violation of arbitrary and unpredictably changeable rules during IPA negotiations is not just a civil matter anymore, but is potentially (at the discretion of the Feds) a criminal matter.

It looks more and more like the handwriting is on the wall for IPAs, or for any independent, private practice physician who wants to take care of insured patients.

So, once again, DrRich begs his physician friends to consider the alternatives. Think about getting out now, dropping out of the system altogether while you still can, and establishing a direct-pay practice before that, too, is rendered illegal. The window of opportunity is closing.

And, sadly, you may want to re-read DrRich’s helpful suggestions regarding black market healthcare, as that may become the only viable alternative to the Borg – and much sooner than DrRich had previously thought.

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One of DrRich’s most dearly held theories, which he has expounded upon at length, is that the American health insurance industry supported Obamacare from the very beginning (and continues to do so) because the President’s plan offers them a graceful exit strategy from their now-defunct business model. Without Obamacare, the health insurance industry was headed toward sure oblivion. With Obamacare, they are headed toward – something else.

The remarkable and sustained actions the insurance industry took in support of Obamacare, DrRich continues to submit, is all the evidence that one should need to conclude that a deal has been struck. But even DrRich has had to admit that it has never been entirely clear what, exactly, the deal was. What were the health insurance companies promised in exchange for their support?

One obvious benefit for the insurance industry is the one last windfall they will enjoy when the individual mandate kicks in, and a few tens of millions of mostly-healthy Americans are coerced into purchasing health insurance for the first time. This windfall should not only temporarily boost the insurers’ bottom lines and their stock prices, but will likely push out for a few years the timing of the industry’s ultimate demise. So that part of the “deal” is pretty clear.

The remaining question is what will happen when that “last windfall” runs its course. Here, DrRich has speculated on two possible outcomes. Perhaps the health insurance industry will declare, at the appropriate moment (after profits have been made, stock options exercised, golden parachutes deployed, &c.), that they just can’t make a go of it anymore. This, obviously, will leave the government (whether it is controlled at that particular moment by Democrats or Republicans) with no choice but to step in and take over, lock, stock and barrel. DrRich has called this single-payer end-game the Amtrak Model.

On the other hand, the end-game could follow the Public Utilities Model. Here, the health insurance companies will be converted, either all at once or gradually, into public utilities. Public utilities operate as private companies, but the rates they can charge, the profits they can make, and the products they can offer, are all determined by the government. Such an outcome would be only a quasi-single-payer healthcare system, and so might be easier to justify to a Tea-Partied-up American public.

Either option would provide a graceful exit strategy to our health insurance industry, and either would be far more attractive to them than the ignominious oblivion they would have faced without Obamacare.

Last week, we were informed that what Obamacare has in mind for the insurance industry is the Public Utilities Model. That evidence came in the form of the Medical Loss Ratio (MLR) rule that was formally issued by the HHS, in accordance with a provision of Obamacare.

Under Section 10101 of the Affordable Care Act (Obamacare), beginning in January, 2011, insurers are required report to HHS each year what percentage of their revenues from premiums they spend on a) clinical services for enrollees, b) “activities that improve health care quality,” and c) all other costs. Depending on the size of the group market (and a few other factors), insurers must spend either 80% or 85% of premiums revenue on actual health care. (This amount, in health insurance parlance, is called the “medical loss.”) So only 15% or 20% can be spent on administrative costs, marketing, profit, and other non-clinical expenditures.

Behind the scenes, there was a great amount of jockeying over the past six months to convince the National Association of Insurance Commissioners (NAIC, the organization designated to propose the MLR rule to HHS) as to what constituted clinical and quality-improvement activities and which did not.

The health insurance industry tends to insist that every activity it undertakes is aimed at improving healthcare quality, whereas congresspersons and policymakers and consumer advocates insist that very little of what health insurers do has anything to do with anything except profit and greed. So, for instance, insurers claimed that the “healthcare hotlines” they have set up for subscribers are a quality measure, and should be included under medical loss; whereas opponents of the insurance industry claim it is purely an administrative function.

(DrRich does not know whether opponents remembered to advise the NAIC how certain insurers have utilized such hotlines in the past. For instance, in 2002 Kaiser Permanente paid workers at three northern California call centers bonuses for limiting the number of doctors appointments they set up, and for limiting the duration of patients’ phone calls. Kaiser admitted that workers at the hotlines received between 2 and 4% of their salaries as bonuses if certain criteria were met. In order to receive their bonuses, the hotline workers were expected to make appointments for less than 35% of the callers, to spend an average of less than 3 minutes and 45 seconds per call, and to escalate less than 50% of their calls for further evaluation.)

In any case, the NAIC finally made its recommendation on the MLR rule, and on November 22 HHS accepted the proposed rule in its entirety.

For the purposes of this post, the details of the new MLR rule are not particularly relevant. What is relevant is that such a rule was made at all.

The MLR rule sets a federally mandated, one-size-fits all limit on how much of its revenue an insurance company can use for administration and profit. That is, the MLR rule is explicitly the very kind of control that government agencies always impose on public utilities.

For public consumption, proponents of Obamacare have always claimed that insurance expenses – including profits – will be controlled through the competition that will be provided by the new “health insurance exchanges.” If market-like competition were actually simulated through these exchanges, then it is true that the MLR ratio would be driven toward the optimal value.

But the MLR rule establishes, among other things, that market forces are actually not going to be allowed to function in this arena. Rather, the optimal value for MLR will be determined by governmental regulators.

And so, dear readers, it appears that the deal, which proponents of Obamacare struck with the health insurance industry, is beginning to take definite shape. What we’ve got here, increasingly clearly, is the Public Utilities Model – a truly graceful exit strategy by anybody’s reckoning.

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Regular readers will know that DrRich is not enamored with Obamacare. Further, they will recall that DrRich’s chief objection to Obamacare is that it codifies into law the final destruction of the classic doctor-patient relationship.

Under Obamacare, the physician is not only released from her fiduciary obligation to her individual patient (i.e., the obligation to place the interests of the patient above all other considerations), but is strictly forbidden from acting in accordance with it. Indeed, elaborate mechanisms are established to assure that physicians will follow the directives which are to be handed down from omnipotent and immutable government panels, directives which will be explicitly aimed at optimizing collective rather than individual outcomes. And whereas physicians have long been discouraged from making healthcare decisions based on individual considerations and needs, Obamacare makes doing so a felony.

Combine that fact with inevitable future provisions that will prevent doctors from opting out of the system, and patients from spending their own money on their own healthcare, and you’ve got a prescription for a healthcare system (and a society) that are somewhat less friendly to individual needs, and somewhat more tyrannical, than supporters of Obamacare have promised us.

So, as a matter of principle, DrRich is sympathetic toward the newly-elected (and newly-reformed) Republicans who promise they will introduce and vote on a bill to repeal Obamacare.

But let’s be realistic. Even the most zealous Republicans understand that any repeal bill that passes in the House will stall in the Senate, and if it does not, the President will veto it. Indeed, it is this comforting assurance, DrRich thinks, that will induce many Progressively-oriented Republicans to go along with a repeal vote in the first place. By voting to repeal Obamacare, frightened and disoriented Republicans can mollify the Tea Party, without risking an actual abolition of the new reforms. Because if Obamacare were somehow repealed – well, where would the Republicans be then?

The health insurance industry, however, is taking no chances.

DrRich will remind his readers that Obamacare never would have become law in the first place if not for the solid and unrelenting support of the health insurance industry. The industry’s support for Mr. Obama’s effort was unfaltering. And during the long and perilous process that finally brought Obamacare to the President’s desk, whenever the cause faltered and appeared to be lost, representatives of the insurance industry would rise up and take whatever strong and difficult action was needed to get it back on track.

DrRich will further remind his readers that the insurance industry did not support Obamacare out of any principle, or compassion, or any sense of what was moral or right. They did it as a matter of life and death – theirs. For the health insurance industry had run out its string, shot its wad, blown up its business plan, and had nowhere else to turn. It was Obamacare – and its soothing “promise” to allow the industry to survive in diminished form, as a government-controlled utility – that offered insurers their only visible path away from oblivion.

The insurance industry is not about to go back. Furthermore, unlike Nancy Pelosi, Harry Reid and even President Obama, the insurance industry is not satisfied to let the political realities of the day block the Republicans’ efforts at repeal. For all they know, nervous Democrats in the Senate who want to be re-elected in 2012 will allow the repeal bill to go to the President’s desk. Worse, unused to seeing Presidents willing to sacrifice themselves on the alter of principle, the health insurers, in their existential panic, must wonder whether even Obama might finally change his mind and decide that he wants to be re-elected badly enough to sign a repeal bill. These possibilities seem pretty far-fetched to DrRich, of course, but to DrRich the prospect of repeal does not spell Armageddon.

During the long and painful process that saw Obamacare become law, the health insurers clearly demonstrated just how far they were willing to go to keep that process alive. DrRich is certain they will be happy to go at least that far to block repeal.

So it came as no surprise when, just last week, the insurers sent Republicans their first, gentle reminders that they will not countenance any such thing. At the Reuter’s Health Summit in New York, David Cordani, the CEO of Cigna, warned Republicans, “I don’t think it’s in our society’s best interest to expend energy in repealing the law. Our country expended over a year of sweat equity around the formation of it.” And Mark Bertolini, president of Aetna, said that any attempt to repeal Obamacare, or even an attempt to hold up funding for it, would be “problematic.” “We can’t go back,” said Bertolini,  “We need to keep moving, and we need to improve upon what we have.”

These seemingly mild-mannered statements should send a chill up the spines of Congressional Republicans. Any repeal of Obamacare necessarily and utterly relies on the acquiescence of the insurers, on their desire (or at least willingness) to continue with their current business model (possibly with some tinkering around the edges). Republicans, bless their innocent hearts, assume that’s what the insurers want.

But the truth is that the insurers know that their current business model is completely defunct, and far beyond any salvation. They see Obamacare as their only visible lifeline, and any serious threat to Obamacare as a threat to their survival.

The health insurers simply will not countenance a repeal of Obamacare. They will do whatever is necessary to demonstrate this fact to the Republicans. Their initial foray is suitably gentle. But once the repeal effort gets revved up, watch out. The insurers have already graphically demonstrated just how ungentle they can be.

If the Republicans really want to get rid of Obamacare, they’re going to have to propose an alternate solution that, among other things, provides the health insurance industry with a new and viable business model, one that seems at least as good to them as the rather paltry one Obamacare has promised. (If the Republicans want such an alternate solution, they have only to ask DrRich.)

DrRich does not think the Republicans have any idea of what may be coming their way, and from the very industry, no less, they consider to be their chief ally in the healthcare wars.

They should pay more attention.

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In prior posts DrRich introduced his readers to Ezekiel Emanuel, MD, PhD, brother of Rahm, eminent medical ethicist, and one of the White House’s chief advisers on healthcare policy. Dr. Emanuel was one of the authors of that recent paper in the Annals of Internal Medicine which admonished American physicians that resistance is futile. He has also famously called upon American physicians to abandon the obsolete medical ethics expressed in the Hippocratic Oath.

The reason the ideas (and pronouncements) of Dr. Emanuel are important is that he presumably will be a major “decider” in determining who will serve on the GOD panels, and how those panels will operate to advance his (and Mr. Obama’s) program of healthcare reform.

So, before we leave Dr. Emanuel to his important duties, let us take one more pass at the views he has expressed, regarding the direction of American healthcare, which we can expect to see manifested in government guidelines and policies in the coming years.

In particular, and especially relevant to the subject of this blog, let us view how Dr. Emanuel would direct the rationing of our healthcare.

His ideas in this regard were probably spelled out most clearly in an article Dr. Emanuel co-authored in The Lancet, in January, 2009, which proposed a system of healthcare rationing based on what he and co-authors call the “complete lives system.” Most notably, the complete lives system proposes rationing healthcare on the basis of age, in a way that frankly “discriminates against older people” (The Lancet, Vol 373, p 429).

While Emanuel has taken a lot of heat from the right wing for espousing such a thing, his argument for doing so is unique and thoughtful, and DrRich finds it worthy of more careful consideration.

First, we should note that the outrage we often hear expressed at the very idea of healthcare rationing (with each side accusing the other of wanting to ration) only applies to politicians. When healthcare ethicists get together for instance, they (like DrRich) understand that healthcare rationing is utterly unavoidable, and that in fact we’re already not avoiding it. Ethicists argue, instead, about how to do it. In this way, DrRich feels a certain sense of brotherhood with these ethicists (a group which, in nearly every other way, DrRich most often feels a sense of disgust).

So let us consider the ethical argument most often made for discriminating against the elderly in a system of healthcare rationing. Almost always, the argument is a utilitarian one. Saving the life of a 90-year-old might “buy” him only an extra two or three years of life, whereas spending the same amount of money to save a 10-year-old might buy him another 70 – 80 years of life. So society gains much more if it spends the money on the younger person, and withholds it from the older one. From a utilitarian viewpoint the argument for discriminating against the elderly is unassailable.

Non-utilitarian ethics asserts that all individuals have equal value, so discriminating against any person should be avoided, and therefore the 10-year-old and the 90-year-old should have an equal opportunity to receive the medical service in question. (That is, either both should get it or neither should get it.)

DrRich believes that most people would sympathize with the idea that if only one life can be saved, saving a young person’s life might make more sense than saving a very old person’s life. He thinks that even most 90-year-olds he has known would agree with this proposition. The problem, DrRich believes, is with the rationale we use for making such a decision.

The utilitarian argument for discriminating against the elderly in a rationing system rests on the idea (as does all utilitarian ethical reasoning) that individuals are not of equal value, at least, not from society’s point of view. And since they are not equivalent in value, it is right and proper for some agent of society to determine the relative value of individuals, so that resources can be distributed accordingly.

Obviously, utilitarian ethics opens the door for differentiating the intrinsic values of individuals for reasons other than age. That is, if you can devalue the elderly to optimize the public good, then you can also devalue the disabled, the stupid, the lazy, the left-handed, and the obese (for instance) to optimize public good.

Emanuel’s “complete lives system,” he argues, is NOT a utilitarian one. Emanuel would favor treating the 10-year-old over the 90-year-old not to maximize public good, but to maximize the opportunity of individuals to enjoy “complete lives” over the entire age spectrum. That is, under his system all individuals are taken as having equal intrinsic value. And during the course of their lives, everyone experiences an equal spectrum of priorities – first, the priority of a 10-year-old, and later (if lucky enough to live that long) the priority of a 90-year-old. While in practical terms this still means discriminating against the elderly, it does so in a way that cannot be extended to other groups of people (i.e, the disabled and so forth), and that, in fact, yields equal age-based priorities across individuals through the course of their complete lives. In other words, when one considers the entire course of an individual’s complete life, he or she is treated the same as any other individual during the entire course of their lives.

In this way, Emanuel asserts, the complete lives system is not a utilitarian system; while it would allow us to withhold medical care from the elderly, based on their age, it would do so in a way that would not open the door for discriminating against others, for other reasons.

DrRich understands this reasoning because he proposed something entirely similar in his book, as an option for dealing with the age issue in a rationing system. In fact, since DrRich wrote his book a few years before Emanuel published his “complete lives system,” it is entirely possible that Emanuel got his idea from yours truly.

DrRich does not expect any thanks from Dr. Emanuel in this regard, however, and in fact he wishes to thank Dr. Emanuel for showing him the fatal flaw in such thinking. Indeed, thanks to Dr. Emanuel, if DrRich were to produce a new edition of his book, he would propose no such thing.

For, no sooner does Dr. Emanuel propose his complete lives system as an alternative to utilitarian ethical reasoning, than he demonstrates, in the very same article, how easily his system can be twisted to the ends of utilitarian ethics.

Specifically, Emanuel argues that a healthcare rationing system should also discriminate against the very young, and asserts that his “complete lives system” justifies such discrimination (since every individual, at one time in their lives, is very young). But in explaining why it would be desirable to withhold medical services from the very young, Emanuel reveals that his rationale, in fact, is entirely utilitarian:

“Consideration of the importance of complete lives also supports modifying the youngest-first principle by prioritizing adolescents and young adults over infants (figure). Adolescents have received substantial education and parental care, investments that will be wasted without a complete life. Infants, in contrast, have not yet received these investments.” (The Lancet, vol 373, p. 428)

So, Emanuel holds that it is OK to discriminate against infants, toddlers and young children on the grounds that society has not “invested” a lot of resources in them yet. That is, their worth to society is not all that great.

This provision is extremely disturbing, to DrRich at least. For it essentially discards the notion that all human lives are of equal intrinsic value, in favor of the idea that an individual’s real value ought to be determined by their worthiness to the collective. And so society has the right and the duty to determine which individual lives are valuable enough to save, and which are not. Note that the rationale for discriminating against the elderly in the complete lives system was framed specifically to avoid having to do this.

In DrRich’s view, this provision against the young entirely negates the purported ethical premise of “complete lives.” This provision is what finally places the state, the insurers, or the GOD panels in the position of assigning intrinsic value to individual human lives, from a distance, as a matter of policy. If this can be done based on extreme youth, then it can also be done based on any other factor which some empowered panel decides will influence the worth of individuals to society.

The above figure, from Emanuel’s article on the complete lives system, reduces the question to a stark graph, with age on the X axis and value to society on the Y axis. Your age is determined by God. Your value to society is determined by the state.

It is easy to envision other, similar graphs, with your worthiness to society plotted on the Y axis, and certain personal features other than age plotted on they X axis – your income, your IQ, your disabilities, your BMI, etc.

DrRich reminds his readers that eugenics has been, from the beginning, an intrinsic part of the Progressive program. The idea that society can (and must) be perfected hinges, to a large extent, on the idea that mankind can (and must) be perfected. And perfecting mankind will require at least some culling of the herd. Indeed, early Progressives unabashedly embraced eugenics as an essential feature of societal perfection – and said so. Theodore Roosevelt, Woodrow Wilson, Bertrand Russell, H. G. Wells, and Margaret Sanger are only the most well-known of the Progressives who openly extolled eugenics.

Openly espousing eugenics became politically inadvisable after the Nazi atrocities came to light. But, since you can never achieve a perfect society while you are “carrying” a large proportion of people who are defective in their bodies, or minds, or thoughts, finding an acceptable way to eliminate such undesirables remains intrinsic to Progressivism.

DrRich believes that gaining control of the healthcare system, and gaining control of who gets what, when and how, provides both a new venue and a new language for Progressives to bring their program to fruition.

He humbly suggests that Dr. Emanuel’s “complete lives system” is an example of this new language, and that it offers a glimpse of what a system of Progressive healthcare rationing will look like.

Why Big Health Insurance Supported Obamacare, Part III

Podcast:

As we have seen, the fact that the health insurance industry was going to support healthcare reform after the 2008 elections was a foregone conclusion.  The question was: How would the insurance industry support healthcare reform?

When the time came, the support the insurance industry gave to President Obama’s efforts to reform healthcare followed four simple rules:

1) Do not actively oppose Obamacare. In stark contrast to its behavior during the Clinton’s effort to reform healthcare in 1993-94, this time the insurance industry never engaged its vast public relations resources to stifle healthcare reform.  There was no Harry and Louise this time. (Actually, Harry and Louise – the original actors – did make a brief appearance, but now, like the insurance industry itself, they were older, wiser, and sadder, and this time they fully supported the proposed reforms.)

2) Submit quietly to demonization.  A key strategy of the Democrats in passing Obamacare was to remind Americans repeatedly that the for-profit health insurance industry is fundamentally evil.  This strategy was based on the time-honored precept that it is easier to get the unwashed masses to cooperate through hatred than through reason, and so, to gain their cooperation, one must give them something to hate. Obviously, this strategy meant that the health insurance industry had to accept its role as the bad guys in the reform debates without complaint, and without engaging in any serious self-defense.

3) Offer subdued public support to Obamacare. The AHIP (America’s Health Insurance Plans) issued public statements that cautiously supported President Obama’s healthcare reforms. But its support had to remain subdued and tepid, since Satan can’t be seen leading the hymns.

4) Whenever necessary, rise up and demonstrate to the world just how evil you really are. At the end of the day, this was the most important role the insurance industry played in advancing Obamacare. It was certainly their most active role.

It was not a difficult role to fill. Since 1994 the health insurers had engaged in the sorts of truly evil, inhumane, and reprehensible practices that are naturally engendered by covert healthcare rationing, and that harmed or killed many of their subscribers. The only difficult part was choosing which reprehensible behaviors to feature, and when to do it.

In at least two key moments during the fight over healthcare reform – June, 2009 and February, 2010 – when the proponents of reform felt their momentum lagging, the insurance industry intervened with gratuitous behaviors whose chief function was to remind Americans just how unremittingly wicked and inhumane they really are. In the second case, at least arguably, the insurance industry turned the reform effort from apparent defeat to almost certain victory. Indeed, it is not too much of an exaggeration to assert that, in the end, the health insurance industry saved Obamacare.

June, 2009: Say Hello To My Little Friend

The debate over Obamacare entered a new phase in May and June of 2009.  It was during those months that the opposition to healthcare reform found its voice, and it began to seem as if perhaps the Obama steamroller could really be slowed, if not stopped. People were even beginning to say that many Democrats in Congress, after getting an earful from their constituents when they held their summer town hall meetings, would abandon any idea of supporting President Obama’s healthcare reforms.

Supporters of Obamacare decided it was time to invoke the demons.  So in mid-June, the House Subcommittee on Oversight and Investigations called three health insurers to testify on the practice of rescission, and to face not only indignant Congresspersons, but also some of the people who had been personally harmed by their practices.

“Rescission” is when an insurance company voids subscriber’s health insurance (after happily accepting premiums from that subscriber, often for many years) once they get sick. Under some circumstances, rescission might be justifiable. It is legal and proper to cancel a policy if the subscriber is found to have purposely lied on the insurance application about a prior illness that is material to the current illness.

But health insurance companies for years have actively and aggressively practiced rescission on subscribers whose insurance applications contained inadvertent and non-material inaccuracies.  (Just to put it in perspective, this kind of bad behavior is to be expected under a system of covert healthcare rationing, which again, is rationing by whatever means you can get away with.)

Furthermore, the health insurance industry does not merely engage in occasional unfair rescission practices; it has industrialized the process. It employs health insurance detectives whose job is to comb the prior medical records of subscribers who are newly diagnosed with certain, expensive medical conditions, looking for even trivial discrepancies on insurance applications, which they can inflate to “fraudulent” omissions, thus voiding the policy. These health insurance detectives are paid by commission, according to how much money their efforts can save the company. Many of them find it a very lucrative career.

So, at the cost of perpetrating a bit of inhumanity, rescission can save insurance companies a lot of money.

Consider some of the individuals who testified in Congress along with the insurance companies that day

• A nurse in Texas had her insurance canceled after she was diagnosed with breast cancer because she had failed to reveal that, years before, she had consulted a dermatologist about acne.
• A man (whose surviving sister had to testify) had his insurance canceled before he could begin expensive cancer therapy, because he had not revealed (and indeed he had not known) that a prior CT scan had showed gallstones and an aneurysm – conditions unrelated to his cancer.
• A woman had her insurance canceled – and due to the rescission could not find replacement insurance – because she failed to reveal that, at one time, she had been on medication for irregular menstruation.

During the hearing, the three health insurance executives were caused to listen to these and other incredible stories describing some of the inexcusable pain, suffering and death their unfair rescission practices had caused, and then were forced to listen to withering commentary by stunned Republicans and Democrats on the Subcommittee, whose own investigation had found that the three companies on the docket had retrospectively canceled the policies of 20,000 sick subscribers over the past 5 years.

After these heart-rending testimonies and the blistering attacks from extremely angry congresspersons, the executives were challenged by Chairman Stupak (D-Michigan) to now commit to discontinuing the practice of rescission unless intentional fraud could be shown.

All three replied, in turn, “No.”

Such a reply, in such a setting, almost defies belief. The only possible explanation, in fact, is that the insurance industry was stepping up to the plate, and embracing its assigned role as the Evil One in the great healthcare debate.

Even the most stone-hearted insurance executive can see that canceling the health insurance of a newly-diagnosed cancer patient, because she’d forgotten she’d required acne medicine before the prom 20 years ago, is just a bit unfair. But how did these three executives react? They did not attempt to deny such reprehensible behavior, or to explain it, or to defend it.  They were simply defiant about it.

One is put in mind of Tony “Scarface” Montana, bereft of friends, family, allies and bodyguards (albeit because of his own actions), hopelessly surrounded by an army of heavily-armed assassins, screaming, “Say hello to my little friend!” then launching defiantly into a wild, bloody and spectacular suicide.

One cannot for a moment believe that that Richard A. Collins, chief executive of UnitedHealth’s Golden Rule Insurance Co., Don Hamm, chief executive of Assurant Health, and Brian Sassi, president of consumer business for WellPoint Inc., would have been stupid enough to publicly defy Congress over such an indefensible practice, if doing so was against their own long-term interests.  Appearances to the contrary notwithstanding, they were not auditioning for a remake of Scarface.

This is not how an industry behaves which wants to court the goodwill of Congress at a critical juncture in its life cycle. This is not the strategy of an industry that wants Congress to defy its own party’s President and defeat healthcare reform, or that is begging Congress to give them another chance to figure out how to bring healthcare costs into check. This is not the behavior of any industry that wants to elicit any sort of favorable action from Congress. Indeed, these executives would have seemed more sympathetic and deserving if they had proposed instead to place live puppies on a spit and roast them over an open fire during half-time at the Super Bowl.

There is only one explanation for their astounding public defiance on this matter. Which is, it must have suited their long-term interests.

Recall that at the time of this remarkable hearing, there was growing skepticism about President Obama’s healthcare reform efforts, not only on the part of Republicans, but also on the part of a critical minority of Democrats in Congress. And for the first time since the election, there was some question about whether his reform plan would succeed in gaining sufficient support.

What must the health insurance industry do in the face of this faltering support for its desperate end-game? It must act to bolster Obamacare.

In this light the stark, defiant, public “no” uttered by the three insurance executives makes sense. “Look at us,” they were saying, “See how evil we are! We are utterly devoid of human decency, ethical obligations, or a sense of fair play. If we behave this defiantly when we are in the position of mere supplicants to your eminences, just think how we will behave if you fail to rein us in with new reforms!  Abandon all hope, those of you who rely on us for your healthcare, and behold the congressional dogs that placed us in this position of power over your very lives!”

Given the headwinds the healthcare reform effort was to face during the next nine months, it is difficult to say with any certainty how much good the insurance industry did in June, 2009, when it took such an extraordinary step to remind Americans just how incredibly evil it is. But when the time came to help boost the President’s reform efforts, nobody can deny that the insurance industry stepped up and did its duty.

February, 2010: Raising Obamacare From The Dead

Things looked especially bleak for healthcare reform in early February of 2010.  The incredible, possibly Constitution-defying, machinations Congress employed in its desperate attempt to pass healthcare reform had disgusted a majority of Americans, and momentum was clearly shifting to the opponents of Obamacare. And when Republican Scott Brown incredibly won the Senate seat in Massachusetts, robbing the Democrats of their crucial, filibuster-blocking 60th vote, many thought healthcare reform was dead.

But then out of nowhere, in early February, Wellpoint’s California subsidiary, Anthem Blue Cross, announced it was raising its already-astronomical health insurance premiums by as much as 39%, a move that promised to greatly increase the number of Californians who are uninsured.

The demoralized Democrats in the administration greedily capitalized on this new opportunity.

Kathleen Sebelius immediately fired off a very public letter to the company, demanding that they justify this unconscionable rate increase. And Wellpoint, lustily assuming its assigned role as villain, was delighted to reply, equally publicly.

We’re in a recession, Wellpoint brazenly asserted, and in a recession, like it or not, people exercise their prerogative to drop their health insurance. The only people who don’t drop their health insurance are the sick people, or those who are likely to become sick, which means that our cost per subscriber goes way up. So naturally, we have to increase premiums. By a lot. It’s just business. That’s just the nature of our current, unreformed healthcare system. So choke on it.

Wellpoint was also kind enough to mention (for anyone dense enough to have missed the point) that the need for higher insurance premiums would be nicely mitigated if everybody was mandated by the government to purchase health insurance.

Wellpoint’s anounced premium increase immediately triggered great volumes of delighted outrage by thankful Democrats, who desperately needed a large dose of “evil insurance company” at just that time. Wellpoint’s action reignited the proponents of healthcare reform, who were inspired to remind all Americans that this is what would happen to everyone if healthcare reform failed, and the greedy insurance companies had their way.

Stunned Republicans, seeing their impending victory over Obamacare evaporating before their eyes, could only issue a few lame and uncomfortable attempts to diminish the significance of Wellpoint’s unfortunate action.  But to little avail. The momentum had shifted. At least arguably, it was Wellpoint’s decision to announce an unconscionable rate increase at this extremely critical juncture that put healthcare reform back on the road to adoption.

From a pure business standpoint, there was no good reason for Wellpoint to stir the soup at that moment. Wellpoint is the most financially sound private health insurance company. While its California subsidiary did lose money in 2009, overall the company performed quite well, and reported a very nice profit growth for the year. And with several of its competitors in trouble, Wellpoint stood to do comparatively well for the foreseeable future.

Furthermore, it has since been learned that Wellpoint’s math was bad. An independent actuary working for the California Department of Insurance reported on May 5, 2010 that the company had made “numerous errors” in calculating is rate increases, and further, that Wellpoint could cut its rate hikes substantially, and still meet its required 70% medical-loss ratio threshold.

It stands to reason that if Wellpoint really wanted healthcare reform to go away, they would have first checked their math before announcing seismic rate increases, and then, if such astounding rate increases were really needed, they would have waited a few months – while Obamacare died – before announcing their rate hike.

The last thing they would have done is to throw the reformers a critical lifeline just as they were going under for the last time.

In any case Wellpoint’s action, especially at that moment, seems entirely gratuitous. Wellpoint could only have chosen to do its demon dance, at such an inopportune moment, in order to revive Obamacare during its darkest hour.

And that’s precisely what happened.

In the final post in this series of articles, we will take a look at the implications of the insurance industry’s support of Obamacare, as we who find Obamacare less than desirable contemplate what we ought to do about it.
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Why Big Health Insurance Supported Obamacare

Part I – Another Reason He Should Have Kept the Bust

Part II – Why the Health Insurance Industry Supported Obamacare

Part IV – What It Means That the Health Insurance Industry Saved Obamacare
________________________________

Now, read the whole story.

DrRich explains it all in, Fixing American Healthcare – Wonkonians, Gekkonians and the Grand Unification Theory of Healthcare.

Now on Kindle!

Why Big Health Insurance Supported Obamacare, Part II

Podcast:

The fact that the health insurance industry supported Obamacare from the very beginning was entirely missed by the mainstream press. This is perhaps understandable, since a) the mainstream press does not understand the dynamics of the healthcare system, and b) during the Obamacare drama, the health insurance companies had been assigned, and had graciously accepted, their vital role as the Forces of Evil. To the famously credulous members of the mainstream press, it was easy to imagine that the insurers were actually among the opposition.

But the insurance industry supported Obamacare from the start – and even before the start. During the Presidential race of 2008, for instance, managed care companies donated far more money to both Barack Obama and Hillary Clinton than to any Republican candidate, even though both of these Democratic candidates publicly castigated the insurance companies for producing most of the problems in American healthcare, and promised to institute reforms that would drastically cramp their style and reduce their profits.

Why would the insurance industry support the very candidates whose chief healthcare strategy was to demonize them? Quite simply, it was because the insurance industry had nowhere else to go.

By the time Mr. Obama became president, the once proud, self-confident, and even arrogant American health insurance industry had been completely humbled. Like the old Soviet Union twenty years earlier, it still may have looked formidable from the outside, but it was really an empty shell.  The industry had run out its string; it was entirely bereft of ideas. Its business model was completely broken, and it desperately needed an exit strategy. And it was due to the need to find a serviceable exit strategy that the industry supported Obamacare.

To understand what landed the insurance industry in this sad state of affairs, it is necessary to review its recent history.

The Rise of the For-Profit HMOs

When the Clintons set out to reform the American healthcare system in 1993, the health insurance industry initially claimed to support them. The Clintons had promised them a vast new market – the millions of heretofore uninsured Americans whose premiums would be paid, presumably, by the government.

But the alliance fell apart the moment the insurance industry began reading the massive tome of regulations the Clintons finally produced, and found in it much they didn’t like. Chiefly, they they didn’t like the parts that ceded full control of their industry to the government. So Big Health Insurance immediately turned against the Clintons, and spent millions of dollars introducing us to Harry and Louise (a “typical” American husband and wife who were viewed in numerous TV commercials discovering various appalling provisions of the Clinton plan). In the end, when the Clinton’s reform plan went down to ignominious defeat, the powerful health insurance industry, appropriately, got most of the credit.

Most of us Americans were happy at the time that the Clintons’ plan had been defeated, but during the debate over healthcare reform we had become convinced that the old way of doing healthcare wasn’t any good either. The healthcare system, we all knew by now, was bankrupting us.  And something needed to be done about it. But with the Clinton plan off the table, what were our options?

In the ashes of the Clintons’ failed effort, the health insurers saw their golden opportunity.  And they presented the American people with a savior. The savior was, of course, them.

The insurance industry made its pitch in a new guise which we Americans had never seen before. For the big fee-for-service insurance companies had transformed themselves into HMOs, and had fully assimilated the language of managed care. These were not the touchy-feely, non-profit HMOs that had been puttering around in the healthcare system for a decade or so.  These were meat-and-potatoes, for-profit HMOs, run for the most part by hard-nosed business executives, and newly formulated for a new era of American healthcare.

And here is what they said: “Citizens! We all – employers, patients, physicians, hospitals, manufacturers and insurers – have just dodged a bullet. Thanks to us, the frightening socialist reforms of the Clintons have been soundly defeated. But where does this leave us? We stand now between Scylla and Charybdis, between the specter of nationalized healthcare on one hand, and the continued profligacy of traditional fee-for-service medicine on the other. And we cannot countenance either. But here,” they continued, “is a third way. A painless way, based on the sound principles of managed care, open markets, and free enterprise. Let healthcare become a business like any other business, and the market forces will find ways not only to cut costs but also to improve quality, and with no government intervention.”

The offer, in other words, was to turn healthcare over to the business professionals now running the New Model HMOs, who were cocky with the certainty that they could harness the efficiencies of the marketplace to control costs, make a big profit at the same time, and be feted as saviors to boot. Because we’re Americans and we know the benefits of capitalism, and because the other choices we faced looked even worse, we all said, “Go for it.”

This change led to the most rapid transformation the American healthcare system has ever seen, and within a few short years, the majority of Americans were enrolled in HMOs, or some other species of corporate managed care.

So HMO executives set out to control the cost of American healthcare, and to make a spectacular profit doing it. And for a few years, they seemed successful. Healthcare inflation slowed dramatically in the late 1990s, and HMO profits soared.

But it was all an illusion.

The Fall of the For-Profit HMOs

The initial impressive profitability of New Model HMOs was due to the one-time reduction in cost you always get when you implement efficiencies of scale (made possible by merging enterprises), and by instituting the new standardization techniques favored by managed care theory. These steps reduced the cost of healthcare for a while, but the underlying rate of healthcare inflation (which is mostly caused by new medical technologies and an aging population, neither of which are cured by managed care) was pretty much unchanged. So by the early 2000s, when these one-time cost reductions had been fully realized, healthcare inflation was right back on the same unsustainable trajectory it had been on before.

Unfortunately for the HMOs, the big profits they enjoyed throughout the 1990s could not last. Their rapidly expanding valuations were attributable not to their efficient management of healthcare, but instead, to the frenzy of mergers that rapidly ensued, and to the acquisition and privatization of not-for-profit public assets for a tiny fraction of their true value.

So not long after the turn of the century the for-profit managed care companies were getting very nervous. For the very first time in their history, HMOs were faced with the prospect of having to earn their profits, profits sufficient to satisfy their shareholders, by actually managing the healthcare of sick people. This is something they had never accomplished before, and, by the time the election of 2008 approached, they knew they never would.

By that time they had tried everything. Beginning in 1994, filled with confidence and enthusiasm and cheered on (initially, at least) by the public and by public officials alike, the health insurance companies had more than 15 years of more-or-less unfettered freedom to institute any efficiencies they wanted to. In the ensuing years insurance companies tried all kinds of legitimate ideas for reducing healthcare costs, such as managed care, gatekeepers, clinical pathways, disease management programs, pay for performance, wellness programs, medical homes, and even a ruthless consolidation of the industry to achieve “efficiencies of scale.”

They also tried every sneaky and underhanded idea they could think of for reducing costs, like cherry-picking the healthy patients, treating chronically ill patients like pariahs so they would go away, making access to specialty care as inconvenient as possible, forcing doctors to sign “gag clauses” to prevent them from telling their patients about certain treatment options, browbeating primary care physicians into zombie-like compliance with handed-down care directives, refusing to cover expensive-but-effective medical services, and canceling the policies of tens of thousands of patients after they get sick, based on trumped-up technicalities. Indeed, they tried everything short of dispatching teams of Ninjas in the dark of night to slaughter their most expensive subscribers in their beds.  And finally, when all else failed, they instituted huge and unsustainable annual increases in premiums, to the point of driving their customers out of the market. (This latter move, of course, was an open acknowledgment that the industry had entered its death spiral.)

All these efforts were to little avail. The cost of healthcare continued to skyrocket, entirely unabated. And by 2009, when President Obama began his push for healthcare reform, the insurance companies knew they had no prospect of long-term profitability. Their business model was no longer viable, and, while telling soothing stories to avoid shareholder panic, they were urgently casting about for an exit strategy.

A drowning man will cling to any piece of flotsam that comes his way.  What the insurance industry found floating by was Obamacare.

What Health Insurers  Get From Obamacare

In return for its support in the healthcare reform battle, President Obama offered the insurance industry the graceful exit strategy it so desperately needed.  Under Obamacare, for at least a few years the insurers hope to get One Last Windfall – namely, profits from the influx of previously-uninsured Americans whose premiums will be paid, or at least subsidized, by taxpayers.  Here, the insurers are relying on the likelihood that the inflow of new premiums will, for a year or two at least, greatly outweigh the outflow of money they will have to spend caring for these new subscribers. Obviously, they will use every trick in their well-worn book to stave off expenditures for these new subscribers for as long as they can, but if they actually knew how to avoid paying healthcare costs indefinitely, they wouldn’t be seeking a government bail-out today. In any case, an inflow of new subscribers will be a very temporary source of profit for insurers. Hence, at best it is One Last Windfall.

What happens to the insurers after they exhaust this last windfall is still up in the air. Obamacare may, of course, eventually transition to a single-payer system, an outcome which many conservatives desperately fear, and many liberals fervently desire. In this case, there may very well be some final compensatory buy-out (or a buy-off) for the insurance companies. But more likely, the insurance companies under Obamacare will continue to exist essentially as public utilities. That is, they will exist as companies chartered by the government, which administer healthcare under the direction of the government, with the products they may offer, the prices they may charge, the profits they may keep, and the losses they may incur, determined solely by the government.  It’s not glorious, but it’s a living.

And it’s much better than where they would have ended up without Obamacare. Which is why they supported it from the start.

Now that we know why the insurance industry supported Obamacare, in the next post we will explore how the industry, at no small cost to its own public image, supported the President when it counted most.

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Why Big Health Insurance Supported Obamacare

Part I – Another Reason He Should Have Kept the Bust

Part III – How the Health Insurance Industry Saved Obamacare

Part IV – What It Means That the Health Insurance Industry Saved Obamacare

________________________________

Now, read the whole story.

DrRich explains it all in, Fixing American Healthcare – Wonkonians, Gekkonians and the Grand Unification Theory of Healthcare.

Now on Kindle!

Podcast:

A minor dispute – and an extraordinarily (almost disturbingly) polite one – has developed between the only two other electrophysiologists, that DrRich knows of at least, in the blogosphere. DrRich, being the third, ought to weigh in – not because his “vote” would break the tie, but because (as always) DrRich knows best.

Dr. Wes started it all off with a post noting, with some degree of dismay, that “(b)oth the Department of Justice (DOJ) and the Recovery Audit Contractors (RAC) are focusing investigations on Medicare billing for implantable cardiac defibrillator (ICD) surgery.”  Wes, with an appropriate degree of paranoia, concludes,”Consider yourself warned, criminals,” then recalls the halcyon days when the prospect of spending time in court conjured up for physicians nothing worse than malpractice suits.

Dr. John M. counters with a post whose purpose is to “welcome the upcoming policing of cardiac device implants.” John goes on to chronicle several examples he has witnessed of physicians implanting ICDs when, clearly, they should not have. The investigations of ICD implants by the Feds – and their private counterparts, the RACs – John posits, will serve to root out the bad eggs.

To his credit, John allows right off that his post is published “at the risk of exposing my naivete.”

To which DrRich replies, “Indeed.”

When DrRich was young, his grandmother, an immigrant from the Old Country who never shed her rustic habits, and not owning a motor vehicle, kept an illegal henhouse in her garage, buying the silence of her neighbors with eggs. It was from her that DrRich learned that if a rooster is behaving badly – engaging in hen abuse, for instance, or perhaps chasing grandchildren around the yard – one does not deal with it by sending Uncle George’s pit bull into the henhouse to take care of the offender. While the nasty rooster (never one to avoid a confrontation) might well be taken down, so would a lot of innocent bystanders.

John, you are laboring under the charming delusion that the purpose of these new investigations is to carefully review ICD implants and tease out only those unethical and/or poorly-trained device implanters, who are clearly and habitually engaging in untoward medical practices. If this were the case, then you and Wes and all those other honest EPs would have nothing to be concerned about, and the audits would indeed make the world a better place.

But alas, DrRich must tell you otherwise.

First, he urges you to read about his own experience. DrRich is a bit older than you, John, and was around the first time the Feds decided to conduct such an “audit” of ICD implantations. DrRich – like you, as pure as the driven snow – was absolutely certain he had nothing to worry about. But as matters unfolded, the fact that DrRich is not today writing this blog from a federal prison (do they let you do blogs in the penitentiary?) is more a matter of luck than anything else.

This new “audit” is much more intimidating than the one DrRich endured. That one was done by the relatively benign Office of the Inspector General (part of HHS). This one is being done by the Justice Department. So if they finger you, you are by definition, as Wes suggests, a criminal.

DrRich has talked about the Regulatory Speed Trap many times. Regulations inevitably become obtuse by evolution if not by design, so that, if you are practicing medicine, it is likely that somewhere – in the hundreds of thousands of pages of indecipherable and self-contradictory Medicare regulations – you are guilty of failing to comply with a regulation somewhere or other, and thus are guilty of healthcare fraud – which is a federal crime. The only thing that likely separates you from a convicted (or, more likely, self-confessed as part of a plea bargain) criminal is that the Feds haven’t decided to “audit” you yet.

The Feds know this, of course. The fact that they know it is documented in a recent GAO report entitled “Improvements Needed in Provider Communications and Contracting Procedures.” The GAO report notes that the bulletins which Medicare carriers are required to send doctors periodically (to make sure they understand the regulations) are filled with dense, lengthy and poorly organized prose sufficient to make them unreadable. Even if they were readable, the GAO continues, these bulletins would do doctors little good since they routinely announce new regulatory policies well after the implementation date, when doctors will already have been guilty of violating such policies (and thus committing fraud). Finally, the GAO finds that when confused doctors contact the Medicare call centers for clarification on the regulations, they get the correct answer only 15% of the time. (Even the IRS does substantially better than that.) And the Medicare websites, required under the regulations to clarify everything for the providers, universally lack “logical organization and navigational tools,” and as a consequence are nearly unusable.

So even when a doctor prospectively asks for instruction on how to comply with Medicare regulations (so as to avoid committing healthcare fraud and incurring huge fines and jail time), nobody is able to give him/her a straight answer. For, while it’s easy to look at a provider’s actions retrospectively (as the auditors are about to do), and find something in the dense regulations that makes those actions imperfect, it’s not so easy to tell providers ahead of time how to navigate those regulations in pristine fashion. As the GAO report reveals, nobody knows how to do that.

Now, DrRich is not calling the DOJ evil. The Feds are not being evil when they set out to conduct audits of physicians’ compliance with uninterpretable regulations; indeed, from their way of looking at it they are being humane.

They are only doing what they have to do, which is find a way – any way – to reduce healthcare costs. In this instance they do not really want to label hundreds or thousands of electrophysiologists as criminals, and ruin their careers and their reputations and their lives. They just want to ruin a few, and make sure the other ones know about it. This limited-bloodshed approach will accomplish their goal, which is, to make all the other electrophysiologists think twice (or thrice) before using ICDs again, in anyone, ever.

But in this instance it gets even worse. With this audit, in addition to dealing with the relatively-restrained Feds, electrophysiologists will also be dealing with the slavering RACs.

The RACs are a fun tidbit brought to us by the Medicare Prescription Drug Act of 2003. Under the RAC initiative, private contractors are to be sent out to perform audits of billing already done by insurers, health plans and physicians. The objective is to find “overbillings,” which the providers will have to repay along with penalties. Further, the act explicitly allows for prosecutions to be brought for “fraud and abuse,” even if the providers have repaid any overbillings.

The purpose of the Recovery Audit Contractors is, well, recovery. During the 3-year pilot of the RAC initiative, which took place in only 3 states, over $300 million were recovered. This wonderful success is the reason RACs are being turned loose elsewhere.

The RACs are paid by commission. Essentially they are bounty hunters, and they get to keep 20% of whatever they collect. According to the Associated Press, hospitals and providers are just a tad worried that these contractors, being so generously incented, will prove a little overzealous in their enthusiasm to find fraud. But worried auditees should not look for sympathy from the public. “A little zealotry is what we’re looking for on the part of the taxpayers,” said Leslie Paige, spokeswoman for Citizens Against Government Waste. “We think it’s about time.” Indeed – everybody can get behind fighting fraud, which is what makes the fraud gambit such a powerful tool for covert rationing.

DrRich surmises that it is good to be a RAC, and thinks you should consider buying stock in these companies, if you can. These outfits are about to harvest the vast bounty of obfuscation that Medicare has been carefully cultivating in its regulations for over 40 years, and has been carefully fashioning as fraud-traps for a somewhat shorter period of time. The RACs see the vast herds of physicians (violators one and all) placidly grazing all across the fruited plains, just waiting to be harvested. Their chief problem will be in pacing themselves; showing some restraint so they don’t use up their resources all at once.

And so, in addition to the dogged, officious, unsympathetic countenances of the lawyers employed by the DOJ, electrophysiologists this time around can also look forward to seeing the leering faces of the RACs’ commission-drunk forensic accountants. Electrophysiologists will experience the worst excesses of both worlds – the excesses of the state, and the excesses of unfettered for-profit outfits.

John M. can welcome this if he wants, and DrRich will wish him the very best good luck. DrRich, though, is still a little shell-shocked 15 years after his own encounter with federal audits of medical practices, and is very glad he’s only a spectator, and not a participant, this time around.

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Now, read the whole story.

DrRich explains it all in, Fixing American Healthcare – Wonkonians, Gekkonians and the Grand Unification Theory of Healthcare.

Now on Kindle!

Sure, nobody’s read the bill, and even if they had, what Nancy said is true: To find out what’s in the bill, they first had to pass it (so the bureaucrats could translate it into the hundreds of thousands of regulations that would finally determine its meaning). But there’s no need to wait for the regulators to sort it all out. DrRich can tell you what you need to know about our new healthcare system right now!

Healthcare Reform Explained – An Updated Guide For The Perplexed

PCP’s: Here’s All You Need To Know About Our New Healthcare System

Why the Health Insurers Saved the Day

The Individual Mandate Will Stand

The Audacity of Perpetuity

Some Powers of the Immutables

Podcast:

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Part 1 of Limiting Individual Prerogatives

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Have you ever wondered where Obamacare came from? From where, exactly, did those 2700 pages of undecipherable prose arise?

It is clear that our Congresspersons never read it, let alone wrote it. At the President’s “Health Care Summit” in late February it seemed pretty plain, to DrRich at least, that the only people in the room who had read the bill carefully were Republican Congresspersons Ryan and Cantor. The proponents of the bill stuck to generalities, platitudes, and vignettes about recycling dead people’s dentures. When Ryan and Cantor used their knowledge of the bill to question the President about its details, they were admonished to stop using “props.” The President was not just being mean; he needed to avoid getting into the details because he himself had only a broad general idea of what the bill actually said. This is not a slam at the President; the bill is designed to be fundamentally indeterminate in its meaning, so that the regulators who will later translate it into rules, regulations and guidelines, under which healthcare providers can then be prosecuted, can at that time interpret it as directed. This is what Nancy Pelosi meant when she said, a few days later, that Congress would have to pass the bill so that we all could find out what was in it. (This also explains why none of our legislators read it – except for those pesky Republicans, who were only trying to make trouble. What’s the point in reading a long, boring document whose actual meaning will only be sorted out later?)

So, DrRich asks again, where did this bill – whose actual meaning was elusive even to the President and the legislators who were promoting it – come from? Who actually put the words to the page, and crafted this remarkable piece of legislation?

We may never know the name(s) of the person (people) who held the pen(s) which scratched out the actual words, any more than we will ever know the real names of the individuals who wrote the gospels of Matthew and Luke. But, just as New Testament scholars have been able to trace these two gospels to a common prior source – the so-called “Q document” – it is not difficult for anyone with a smattering of interest in the art of legislative exegesis to trace the source document for our new healthcare law.

The Q Document for President Obama’s Patient Protection and Affordable Care Act, was, of course, Hillary Clinton’s Health Security Act, which went down to ignominious defeat in 1994.

DrRich, who is rapidly developing an expertise in forensic diplomatics, and having spent significant time examining aspects of the Obamacare bill, decided to go back in time, and re-examine Hillary’s original proposal for fundamentally transforming the American healthcare system.

While Hillary’s Health Security Act was widely castigated by contemporaries as being a vast monstrosity of bureaucratic legerdemain, filled with complexity and labyrinthine passages that attempted to hide its true meaning, DrRich, after spending some time with Obamacare, found Hillarycare to be a model of legislative brevity and clarity. In fact, DrRich believes, its very straightforwardness is what killed it.

For instance, Hillarycare is only 1368 pages in length. How could they be so concise?

Even more remarkably, Hillarycare spells out pretty plainly what it actually means to do. For instance, in the Obamacare bill, in order for a reader to assemble the information that the  Independent Medicare Advisory Board is actually to be called the Independent Payment Advisory Board, and that its “advisory opinions” which are to be submitted to Congress for “consideration” are actually formal dictates which must be followed to the letter, and that it can inflict its cost-cutting mandates to all of healthcare and not just to government programs, one must jump around to numerous distant sections in the 2700-page document. In the Hillarycare bill, in stark contrast, the analogous National Health Board (which, like the Immutables, was to have been the Supreme Court of Healthcare, beyond which there was to be no appeal, no revision, and no repeal) is presented in an entirely straightforward way, and all in one place.

And now, having immersed himself once again, however briefly, in the relatively refreshing model of clarity and precision that was Hillarycare, DrRich is convinced that the people who actually wrote the Obamacare bill (and may God keep these invaluable masters of legislative poetry safe, as we will be needing them), simply began with Hillary’s old Health Security Act, disassembled it into various bits, padded each bit with a little more than twice its weight in verbiage, and reassembled the pieces in some nearly random fashion, puzzle-like, into the exceedingly difficult-to-read document that became Obamacare.

That is, Hillarycare is demonstrably the Q document to Obamacare.

Obamacare’s debt to Hillarycare is obvious. Hillarycare included individual mandates requiring everyone to have government-approved health insurance; it reduced private health insurers to government-directed utilities, whose products, rates, and profits were to be controlled by the feds; and it created omnicient and omnipotent panels which were to hand down dictates to let doctors know what services they may or may not provide and under what circumstances.

DrRich, therefore, formally advances the thesis that if you want to understand what Obamacare is actually getting at – what with its inherent and intentional obscurity, obscurity designed with care to provide its proponents with plausible deniability – simply examine the much more straightforward model from which it was derived, namely, Hillarycare.

And this brings us, finally, to the theme of this current series of posts. For Hillarycare strictly limited, in practice, the ability of individuals to spend their own money on their own healthcare.

In this instance even Hillarycare had to be a bit obtuse. For, as DrRich’s critics have pointed out to him so very many times, Americans are jealous of their own personal liberties, and are not likely to simply tolerate a frontal assault on their right to guard their health with their own resources. And of course DrRich agrees with this idea. Indeed, the fact that Hillarycare was insufficiently obtuse on this matter had a lot to do with why it ultimately failed to become law.

The attempt at limiting individual prerogatives under Hillarycare was, to be sure, devious (though not devious enough to fool people). So it began with a straightforward statement declaring that it was not doing what it was actually trying to do: “Nothing in this Act shall be construed as prohibiting…an individual from purchasing any health care services.”

Now first of all, for readers who persist in thinking that restrictive language like this, when it appears in federal legislation, actually means anything in particular, let DrRich disabuse you of that notion with two examples. 1) The legislation that created Medicare contains the following language: “Nothing in this title shall be construed to authorize any federal officer or employee to exercise any supervision or control over the practice of medicine, or the manner in which medical services are provided, or over the selection, tenure, or compensation of any officer, or employee, or any institution, agency or person providing health care services.” (Section 1801, Medicare Act, 1965). 2) Obamacare contains language that prohibits healthcare rationing.

In any case, after making this broad promise in favor of individual liberty, Hillarycare went on to limit individual liberties. It attempted to do this in the Fraud and Abuse section of the proposed law, which sought to dry up most of private medical practice, and criminalize the rest. It provided for strict governmental controls over the fees that could be charged by fee-for-service doctors or private practitioners. And if the feds decided that a private doctor’s fees were too high, they could charge him/her with bribe-taking, a serious federal crime under the new law. Indeed, Hillarycare attempted to make illegal most of the ways patients could go outside the approved system to get “extra” healthcare. Criminal penalties could accrue to both the doctor and patient. According to Paul Craig Roberts, writing in the Washington Times in December, 1993, “Mr. Clinton’s plan turns normal patient advocacy into a federal criminal offense. For example, a doctor who wants an earlier date for surgery for a needful patient can be accused of using wrongful influence and accepting a bribe and sentenced, along with the patient, to 15 years in prison.”

While none of this got much publicity in the general media in 1993-1994 (which goes to show that things really haven’t changed that much), you can be sure that doctors were aware of it. That Hillarycare would make it so very easy to inadvertently commit a federal crime – which would lead to massive fines, loss of license, and jail – was, in fact, one of the main reasons most physicians were so violently opposed to it.

The point DrRich is trying to make here is to demonstrate just how deeply reformers feel the need to control the behavior of physicians (and through physicians, the behavior of patients) in order to gain the control they need over individuals, and just how far they are willing to go to this end. It was partly because the Clintons showed their hand in this regard that their healthcare plan failed.

DrRich will now make two final points, and then end this already-too-long post. First, while Hillarycare failed to become law, many of the over-the-top anti-fraud provisions within Hillarycare actually became the law of the land a few years later, in the HIPAA legislation. DrRich has discussed this in detail in his book, and demonstrated how, during the rest of the Clinton administration, the healthcare police worked diligently to let doctors know that their careers, life savings, and physical freedom were dependent on making the happiness of the government – and not of their patients – their chief concern. This activity stopped during the Bush presidency, and has not yet picked up again under President Obama. But the infrastructure is in place already for an unusually effective coercion of doctors, in order to keep them from providing services, and thus to keep patients from buying those services, that the government does not like. There was, in fact, no need to add this infrastructure to the Obamacare legislation. The only thing that’s necessary is for the government to decide (as it did for a few years during the 1990s) that it’s time to take off the gloves.

And second, the intent of the people who brought us Hillarycare – the same people, in philosophy if not in person, who brought us Obamacare – ought to be very plain to all of us. We know their mindset. They may not have gotten away with limiting individual prerogatives in 1994 – but they certainly tried to.

And while it is true that Americans greatly value their liberty, and will chafe at overt restrictions on their ability to use their own resources for the sake of their own health, DrRich reiterates that actually preventing these restrictions will depend on our continued vigilance, and our willingness to stop the people who so plainly want to stifle our individual prerogatives, for the sake of the control they must have.
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Part 3 of Limiting Individual Prerogatives

Part 4 of Limiting Individual Prerogatives