Medical Grand Rounds, Vol 4, No. 41

July 1st, 2008 by DrRich

Welcome to Medical Grand Rounds, Volume 4, Number 41, July 1, 2008. This week, bloggers from across the Internet have submitted articles that will help us celebrate the 232nd birthday of the United States of America. Their patriotic postings, organized according to their relationship to the Founding, follow:

Lists of Grievances

Annie at Home of the Brave sets the tone for this week’s Grand Rounds. She does a brilliant job showing what the Founders might have said about the current state of the American healthcare system, in What They Were Saying: A Riff on the Declaration and Resolves of the First Continental Congress. The First Continental Congress, of course, met in 1774 to petition King George for a redress of grievances stemming from the Intolerable Acts. The King rebuffed their petition and a shooting war broke out the following year, which led to, well, quite a bit. (Faced with their own intolerable Acts, many doctors, in stark contrast to the Founders, simply keep their heads down and continue making those little marks on their Pay For Performance checklists.)

Ian Furst of Wait Time & Delayed Care is Canadian and knows something about healthcare and the bureaucracy (not that doctors in the U.S. have any excuse not to know the same thing). Ian analyzes the results of England’s 4-hour ER wait-time guarantee, and shows once again how bureaucrats tweaking one variable in a complex system always manage to create interesting unintended consequences. But, since these unintended consequences will always require further bureaucratic activities in order to produce corrections, they guarantee perpetual growth of the bureaucracy, and thus are seen, by the people who really matter, as exceedingly good things.

Speaking of the proper limits of government, Doc Gurley considers, in her post, Hope and Death, the implications of the California Assembly’s latest bill, essentially requiring doctors to tell patients when they are terminally ill. This information, no doubt, would substantially lower patients’ expectations, and patients with low expectations can be managed very cheaply. (Which explains the legislative impetus to become involved in such matters.) But as Doc Gurley points out, the definition of “terminally ill” is often in the eye of the beholder, and the definition favored by those running the healthcare budget may be quite different from the definition patients (and doctors, if left to their proper medical functions) would favor. Doctors not wanting to break the law (or expose themselves to yet another, particularly promising, form of healthcare fraud) will predictably begin shading the definition of “terminally ill” toward the cost-saving side, i.e., making the determination somewhat earlier than traditional (or proper). DrRich predicts that our faithful public servants will soon take note of the prolonged anguish that will ensue as a result of the newly prolonged (by legislation) duration of terminal illnesses, and their bureaucratic compassion will move them to legislate a mitigation; namely, a law requiring the easy availability of physician-assisted suicide.

The Happy Hospitalist this week offers one of his patented, in-depth analyses of the utter mess that Medicare has become, in This is What You Voted For. For a system that produces the exact opposite of what it says it wants to produce, you can hardly beat Medicare. Happy says, “Look out America, get ready for even lower access to cheap effective [primary] care and a highly expensive and wasteful proceduralization [by specialists] of your friends and family. . .Well America, this is what you voted for. I hope you’re ready to live with the consequences.” Taking into account the bizarre incentives, Byzantine inefficiencies, and systematized grievances that are provided in such luxurious abundance by Medicare, Happy (and DrRich) can only marvel in dazed wonderment that anyone thinks that turning the whole healthcare system over to these people is a good idea. Imagine our honored forebears clamoring to turn over the entire colonial economic system to the perpetrators of the Stamp Act!

And anyone who still thinks any government knows how (or can know how) to run a healthcare system should become a regular reader of Dr. John Crippen’s NHS Blog Doctor, to get a taste of what healthcare across the pond is really like. His recent posting, The Rise of the Healthcare Professionals, describes just a few examples of the systematized dumbing-down of healthcare that has accompanied England’s NHS, and will accompany any system in which codified policies, procedures, and guidelines, handed down from on-high and strictly enforced, replace genuine medical thought.

Inalienable Rights

DrRich has always been amused by those boutique diseases that doctors occasionally invent in order to justify new avenues for payment. Psychiatrists (in DrRich’s humble opinion) have been particularly adept at this game. Dr. Shock MD PhD gives us his opinion on the latest such neo-diagnosis - Internet Addiction. Dr. Shock, we are happy to note, is not enamored with this new disease, and to his very great credit finds in America’s founding documents an inalienable right to the Internet. All self respecting bloggers must unite against declaring as a disease the robust appreciation of the Internet!

The anonymous blogger who writes How to Cope With Pain wonders in Can I Still Blog? whether blogging is an inalienable right - and concludes that while it may be a right, the fact that something is a right does not necessarily relieve you of the attendant risks or consequences. So that’s why all those other physician-bloggers choose to remain anonymous! Is it too late to inform you that DrRich is actually a 58-year-old housewife from the upper Midwest who learned everything she knows about medicine from Dr. Kildare reruns?

Alvaro at Sharp Brains talks about the inalienable right of men and women to own functioning brains - and what they can do to keep them - in Why We Need Walking Book Clubs.

Theresa Chan at Rural Doctoring tells a painful story, in Another Reason Why Healthcare is Going Down the Toilet, documenting how some patients (and patients’ families) feel they have an inalienable right to all the time and toil they desire of physicians, and for free.

The Spirit of the Individual, That Which Made America Great

Rob, at Musings of a Distractable Mind, shows us that the independent, creative spirit that made America what it is remains alive and well - even in PCPs! DrRich has long maintained that PCPs need to think outside the box in order to salvage their profession, and in What are You Going to Do? Rob demonstrates thinking that is, uh, way outside the box.

Over at Insure Blog they’re talking about another aspect of the right to fend for yourself - this time, using a patient’s own cloned immune cells to treat cancer. This research, which comes from the UK, is not funded by the National Health Service, nor has the NHS expressed the least interest in it. So, one might say, the British government is keen to remain “independent” of potentially expensive cancer cures. Read about it in Interesting Cancer News.

David E. Williams at the Health Business Blog tells us about an idea whose time has surely come - enticing patients to take their medication by rewarding them with chances in a lottery. Now, what can be more American than that? Go read You gotta play to win.

Kim of Emergiblog reminds us in Give Me Empathy, or Give Me . . . Another Nurse, how, when we are sick and frightened, nothing can soothe us like the presence of a confident, knowledgeable and empathetic nurse. The continued empathy of nurses is quite remarkable to DrRich, who notes that nurses are under as much stress from the bureaucracy as are doctors. Add to that the stress from being expected to follow orders from those harried, frustrated, angry, not-always-clear-thinking doctors, while still doing the right thing for the patient - dual responsibilities that are not always 100% in alignment. Continued empathy under such challenging conditions can only be attributed to individual character and dedication.

Kerri of Six Until Me reminds us in My Own Shoes that knowledgeable, intelligent and rational patients will always take doctors’ recommendations under advisement, but may ultimately decide that their own personal situation is best served by some deviation from those recommendations. Such patients are not being “non-compliant;” they are considering the doctor’s advice within the context of the totality of their lives (which will always include data their doctors can never fully understand), and exercising their own individual judgment.

Christian Sinclair at Pallimed reports on the practice of hospice medicine during the ongoing Midwestern floods. His report reminds us of America’s greatest asset - the dedication, ingenuity and spirit of individual Americans - which is always most impressive under the toughest of circumstances.

Christine of You Don’t Look Sick tells us how patients can take a major step toward declaring their own independence from a hostile healthcare system - by taking charge of their own medical records. Great advice for any patient.

Standing Up To Powerful Authorities

Dr. Mintz takes on the all-powerful popular media in telling us the truth about the 8 drugs that doctors wouldn’t take. It is very popular to bash the drug companies these days, and accordingly, any negative news about (expensive) new drugs is invariably hyped far beyond any objectivity. DrRich would likely say that this behavior is just another example of covert rationing. But Dr. Mintz more usefully provides the objective truth about these “never drugs.” Perhaps, as a follow-up, he should write about the 8 sources of medical news that doctors (at least the smart ones) wouldn’t read.

JunkMD over at Progress Notes sounds like he’s just about ready to tell the feds what they can do with their latest pay cut. In They Just Don’t Get It, he is fed up both with his Medicare-age Senators and with fellow citizens who expect him to just sit there and take it. Maybe, he allows, it’s time to consider retainer medicine. “Opponents of this model wonder who will see the patients who can’t afford a retainer physician. Well, if none of us are in business, it won’t matter.” That sounds about right to DrRich.

DrRich his own self offers an alternative (and most uplifting) explanation for the fact that doctors apparently owe the IRS multi-millions of dollars in unpaid taxes. Rather than merely being tax cheats, perhaps these physicians are emulating their forebears who nobly defied oppressive Acts of Parliament by throwing tea into Boston harbor. But then again, perhaps not.

The Freedom From Misinformation Act

Dean Moyer of The Back Pain Blog helps one reader declare her independence from misinformation by answering the question Can Herniated Discs Really Heal?

Dr. Paul Auerbach at Medicine for the Outdoors tells those who are exposed to the smoke from wildfires (now raging in California) how to stay healthy. Being aware of oncoming threats in this case is a bit more complicated than “one if by land, two if by sea,” but is no less important.

When DrRich was a medical student, the only decent doctor show on TV was Marcus Welby, MD - a series that was heavy on personal interaction but weak on medical information. So cracking the books was the only good option for learning a little medicine. Today, medical students have many more options. Monash medical student, for instance, is fighting misinformation (his and ours) by reviewing episodes of House.

David Harlow of HealthBlawg reports on the launch of the Massachusetts eHealth Collaborative’s latest Health Information Exchange (HIE). An HIE is more about interdependence than independence, but then, our Founders also banded together (vowing to hang together so as not to hang separately), in their struggle for autonomy.

And Dr Penna reports on new information on Genetic Risk Factors for Alzheimer’s Disease. If you decide to get the test, don’t tell the government or United HealthGroup.

The Obligations of the Individual in a Free Society

Marshall, the Episcopal Chaplain at the Bedside, reminds us in Returning to those Hard Conversations that doctors caring for the terminally ill should more often just say the plain truth, even when it’s painful (for the doctors) to do so.

Dr. Val and the Voice of Reason informs us that it’s plain to both the Surgeon General and to any beat cop that “most people just don’t know what it means to be a good citizen anymore.” Read her plain-spoken interview with Sgt. Zlotkus here, then go do the right thing.

Tories

Some, when a growing conflict reaches the point of no return, will always side with the more powerful disputant. In the Colorado Health Insurance Insider, Louise writes about why doctors are unhappy, and postulates that as a result many physicians now say they are in favor of universal, single-payer (i.e., government) healthcare. DrRich simply notes that after the American Revolution, thousands of Americans who had favored continued rule by the King moved to Canada and got what they desired; and finds it interesting that today’s Americans who want the sovereign power to take over healthcare could do exactly the same thing (if they were to lose the “healthcare wars,” as unlikely as it now may seem), and with precisely the same result.

Am Ang Zhang of The Cockroach Catcher blog tells us about the systematic abuse of the diagnosis of Post Traumatic Stress Disorder by “an alliance of antiwar psychiatrists, VA hospital administrators, and patients who never saw combat or even Vietnam service but found that reciting the PTSD symptoms would result in the awarding of disability payments.” Read about it in PTSD: Diagnosis du Jour. Even John Adams has an opinion about this one.

Picnic Advice, or Don’t Be Stupid

RLBates of Suture For a Living wants to make sure we have a happy 4th. She posts again this year on fireworks safety - a matter whose importance she, a plastic surgeon, unfortunately knows all about.

The Samurai Radiologist at Not Totally Rad offers advice on keeping kids from ingesting foreign objects in Coming Soon to a Child’s Stomach Near You. SR helpfully reports on a missive he received from a concerned parent who is dismayed by the existence of such a thing as Kellogg’s Lego Fruit-Flavoured Snacks: “I just spent the first three years of my son’s life trying to get him not to eat blocks, and now you’re telling him they taste like [fornicating] strawberries. Thanks a lot assholes.” Picnic advice like this you can’t get just anywhere.

What Doesn’t Kill You Will Make You Stronger

Americans have learned repeatedly that adversity produces strength. So, if the rising prices of food have you down, Walter, at Highlight Health, urges you to be of good cheer! In The Upside of High Food Prices he describes how more people are eating local produce - and eating healthier. He neglects to point out (though DrRich will kindly take up the slack) the other problem caused by cheap food that is now being mitigated. We refer, obviously, to the fact that cheap food is the chief source of what has become the latest scourge-of-society: obesity.

Service and Sacrifice

Fighting for what you believe in is always costly, and the cost is never more apparent than in Healthline’s posting on Suicides in US Troops. If you know a serviceman or servicewoman this holiday, let them know how much we all love them and value their service and sacrifice.

The Most Important Aspect of Any Holiday

Bongi at other things amanzi offers us the sad and most affecting story of little k. On this holiday - or any holiday - the best lessen we can take away from k’s story is to gather around us those we love, give them a hug, then count our blessings and thank God for every one of them.

Next Week’s Grand Rounds

Next week Grand Rounds will be hosted by The Blog that Ate Manhattan.

Posted in Uncategorized | 15 Comments »

Are Doctors Garnishing Tax Payments to Recover Funds From Medicare?

June 25th, 2008 by DrRich

The Wall Street Journal recently reported that Congress is urging Medicare administrators to assist the IRS in garnishing payments to doctors (and other “contractors”) who owe federal taxes. The Government Accountability Office estimates that providers owe more than $2 billion in back taxes, and withholding Medicare payments to providers is seen as an expeditious method of collecting those owed monies.

DrRich is shocked (shocked) not only that a body of Solons such as Our Congress could so egregiously misinterpret the actions of forthright American physicians, but also that the WSJ itself (a bastion of American capitalistic thought) could fail to recognize the true nature of those actions.

For DrRich suspects there is an alternative explanation that places the alleged tax deficiencies of American doctors in a somewhat different, and far more heroic, light. Namely, when (if) doctors are withholding tax payments, they are not doing so as common tax cheats. Heavens, no. Rather, they are doing so for entirely justifiable and noble (if illegal) reasons.

First, they are trying to break even. In contrast to what is seen with most of the revered professions (wherein the payment due to the professional is transparently negotiated, or is simply “set” by the professionals themselves according to what the market will bear), the pay of physicians is determined by Acts of Congress. Even now, before the next set of impending, Congressionally-determined physician pay cuts, Medicare does not reimburse doctors enough to cover the overhead of most office visits.* Some say this makes the business of office practice economically dicey. In fact, it is already impossible for a stand-alone, independent primary care doctor to make a living caring for Medicare patients.

Second, Medicare has successfully inculcated the Fear of God into physicians regarding the now-federal crime of healthcare fraud. The penalties for committing healthcare fraud are so onerous that merely being accused of it is enough to induce most physicians to beg for a settlement deal, regardless of the strength of their defense, and regardless of the fact that most such settlements are personally and professionally ruinous. And the opportunities to be accused of fraud are unlimited for even the most fastidiously honest among physicians. (The arcane E&M coding rules, which have been formally proven impossible to follow, afford the opportunity for the feds to point the fickle finger of fraud, quite arbitrarily, toward any American doctor who treats Medicare patients, at any time.) Not wanting to appear fraudulent to Medicare is foremost in the minds of American doctors (which pushes “wanting to help their patients” down to Number Three on physicians’ priority list, right after “wanting to avoid spurious malpractice suits”).

As a result of these two considerations, it is conceivable** that some physicians, wanting to continue the noble practice of caring for Medicare patients, but at the same time wanting to be fairly reimbursed for same (at least to the extent of breaking even), have made a simple calculus. Inasmuch as the government owes them fair reimbursement for services they render to government entitlees, and inasmuch as the government has not been forthcoming with said fair reimbursement (and promises to be even less forthcoming in the very near future), therefore (some physicians may have concluded), they will simply exercise whatever opportunities they may find to recover some of these owed funds on their own initiative. For much the same reason that Congress is proposing to garnish Medicare payments to doctors, perhaps some doctors are garnishing tax payments to the IRS.***

It would indeed be telling if physicians who reach such conclusions (if indeed there are such physicians) have decided to recover funds they feel the government rightfully owes them, not from Medicare, but instead from the IRS. These doctors would obviously have concluded, quite logically, that dealing with the wrath of the IRS is far, far less intimidating than dealing with the wrath of the federal healthcare fraud establishment, whose tactics would make the average American physician beg for the rights and considerations afforded to your average Guantanamo detainee (especially since last week.)

Small wonder that the relatively meek and unassuming IRS has asked for the help of their nastier federal brethren in cracking down on recalcitrant doctors.

Whatever the correct explanation for it, however, the prospect of the IRS and Medicare teaming up in enforcement efforts ought to send chills through every American physician, and should stimulate among them significant second thoughts about their career paths.

Speaking of which, here’s a second thought they should consider, and soon.

*These comments, as usual, pertain almost exclusively to PCPs. Specialists (such as DrRich when he still practiced), are doing just fine, what with the procedure-based reimbursement system their brethren on the RUC have arranged for them. Unlike PCPs, who lose money every time a Medicare patient darkens their door, specialists can make up for lowered per-unit reimbursements by cutting corners and increasing the volume of procedures they perform. It’s not particularly pleasant (or safe), but it is what it is, and the specialists have learned to get by.

**Note to IRS and CMS agents: Hi, fellas. DrRich has no personal knowledge, direct or indirect, of any of this sort of illegal behavior; he is simply taking known facts and extrapolating them to their logical conclusions.

***It is a law of history that bad law and bad regulations eventually create contempt for authority, and progressively render various illegal actions rationalizable, reasonable, justifiable, and finally, ethical. Even those who sympathize with physicians on this matter (and DrRich suspects these are few indeed), would say that that the rationale for not paying owed taxes has progressed certainly no further than the “rationalizable” stage, if that. But the natural tendency of governmental authority to progress toward arbitrariness is the very thing that  led Jefferson to muse that continued societal vitality might require revolutions every few generations. I’m just sayin’.

Posted in Healthcare economics | No Comments »

Healthcare Economics, Explained At Last

March 17th, 2008 by DrRich

Dr. Gaulte of Retired Doc’s Thoughts recently suggested that DrRich might want to weigh in on the Fuchs-Emanuel “Universal Health Care Voucher” proposal for financing American healthcare. Specifically, Dr.Gaulte allowed that he has trouble implementing his normally reliable “follow-the-money” rule to figure out whether this voucher system makes sense, or why neither the Republicans (who like vouchers) nor the Democrats (who like universal healthcare) have ever addressed - much less supported - the Fuchs-Emanuel proposal.

DrRich is humbled that anyone (much less the perceptive Dr. Gaulte) would seek out his opinion on a matter of such a complex fiscal nature. However, having had the audacity to entitle his recent book “Fixing American Healthcare,” and the even greater audacity to advance a Grand Unification Theory of Healthcare, DrRich (try as he might) cannot reasonably shrink from Dr. Gault’s comparatively “simple” request.

So.

Distilled to its essence, the Fuchs-Emanuel proposal postulates a certain unfortunate truth about healthcare economics, and then offers a new way of financing healthcare aimed at rectifying that underlying problem. Accordingly, DrRich will offer his commentary on the Fuchs-Emanuel voucher proposal in two separate posts. In the present post we will consider their analysis of present healthcare economics. In a later post we will consider the voucher proposal itself.

The Fuchs-Emanuel view of healthcare economics

Fuchs and Emanuel argue that the widely discussed ideal of “shared responsibility” - wherein individuals, the government, and employers all will contribute their fair share in bearing the financial burden for healthcare - is inherently a “myth.” To support their contention that shared responsibility does not and cannot exist, they focus their analysis mainly on American businesses. (Their argument extends to government-funded healthcare, but their focus on business is reasonable since at least until recently, most Americans got their health insurance through employee benefits.)

Fuchs and Emanuel make a convincing case, supported by plenty of data, that there is a direct trade-off between wages and healthcare costs. Simply put, businesses treat employee health insurance premiums as a straightforward employee expense, that is, they put those expenses into the same bucket as wages. Since limiting the size of the overall employee expenses “bucket” is critical to any business, changes in wages tend to become the inverse of changes in health insurance premiums. Their data show that that, for decades, wage changes have moved in the opposite direction of changes in insurance premiums. The result is that companies aren’t really paying their employees’ insurance premiums; the employees themselves are paying, directly out of their own pockets, in the form of lost wages. Indeed, because of the soaring cost of healthcare, inflation-adjusted wages have actually fallen over the past 30 years.

But employees believe they are getting healthcare for (nearly) nothing - so why should they tax themselves, or agree to any other changes in healthcare policy, to get what they’re already receiving for free? The “myth” of shared responsibility distorts the public’s view of how healthcare is paid for, and places a roadblock in the way of any meaningful reform. Somehow, Fuchs and Emanuel say, we must make the public understand that the entire cost of healthcare is already being taken from their own pockets. Otherwise we are all stymied.

DrRich comments:

The Fuchs/Emanuel synthesis of healthcare economics is unquestionably accurate. In fact, DrRich believes that their synthesis, to a large degree, is essentially trivial. It ought to be completely obvious (and would be if not for our dysfunctional educational system and for the lies that political leaders of both parties pass off as truth) that neither businesses nor the government have access to funds that don’t ultimately come out of the pocket of individuals. The government gets its money from taxes. Companies get their money from selling stuff. Any expenses incurred (healthcare or otherwise) must be provided by individuals, either through an increase in taxes or the price of goods (or, in the case of the employees themselves, in reduced wages). That’s just basic economics.

Certainly, the failure of individuals to realize they’re actually the ones paying for their (and everyone’s) healthcare is a major root of the problem. The notion that healthcare expenses are “shared” with business and the government makes healthcare feel “free,”and any time something feels free it’s nearly impossible to set limits. It is our now-institutionalized inability to set limits on healthcare spending that promises ruination. (Our “no limits” paradigm is fundamentally what requires us to engage in covert rationing, rather than open rationing, of healthcare.)

As DrRich sees it, however, the actual reasons we are unable to set limits on healthcare spending go deeper than the synthesis described by Fuchs and Emanuel. If we’re going to consider their proposed voucher solution to healthcare financing, we ought to first take a closer look on why such limits have become impossible.

On limits, and why we can’t have them
A fundamental principle in economics is that when we are buying consumable products that we are consuming ourselves - like Caribbean cruises, sports cars, ice cream, or healthcare - we should spend no more on those products than we are able to pay ourselves.

Now, before you click away in anger, be assured that DrRich is not trying to make a political statement here, just an economic one. It is certainly true that some societies have decided to purchase some of these consumable products (healthcare, for instance) collectively. And the collective purchase of consumables constitutes a somewhat different situation that we will address in a moment.

But for consumable products that everyone agrees ought to be paid for by the individual (let’s just take Caribbean cruises as a relatively non-controversial example), the individual must arrange to cover the cost. The reason for this principle is obvious. If individuals could arbitrarily decide to go on a cruise, but leave the cost to others who have no say in whether the cruise happens, the economic system would soon collapse.

Three quick asides on this basic principle:

1) The fact that our economic system is in severe turmoil at the moment - and, according to some, is indeed at risk of total collapse - is precisely because we encouraged too many people to borrow too much money that they have no means of repaying.

2) This principle permits occasional exceptions among small groups. Certain privileged factions, such as politicians, have awarded themselves the ability to take Caribbean cruises on somebody else’s tab whenever they choose. Such a practice will not cause a widespread economic catastrophe as long as the size of the privileged group is carefully circumscribed.

3) However, when those same politicians “forget” that the rules under which they are personally privileged to operate cannot be generalized, and then, say, pass laws that encourage lending institutions to extend those same privileges to the masses, economic turmoil is inevitable. See item 1.

But what about those societies which have decided to collectively purchase certain products and services (like healthcare) that are consumed by individuals? It turns out that these societies must operate under a very similar economic principle: A society should spend no more on such consumable products than it can pay without incurring long-term, multi-generational debt.

In the U.S., we have decided to pay for healthcare collectively. A large chunk of healthcare is provided directly through big government programs like Medicare and Medicaid. But even the “private” healthcare that Americans get through their employers is collectively supported through the tax deductible insurance premiums enjoyed by businesses. So whether your healthcare is provided directly through government payments or through tax-deductible insurance premiums, to a great extent society is collectively footing the bill.

This would not be a problem, economically, if we were doing it on a pay-as-you-go basis. But we’re not. We’re running a huge national debt today, and largely because of healthcare obligations that debt will reach stupendous proportions in the foreseeable future.

Reasonable people can argue over whether having a large national debt is good or bad, but the answer lies at least partially in what it is that the debt has been incurred to pay for.

The ability to borrow money, and carry debt, is important to a vibrant economy. Individuals can borrow even large amounts of money as long as they promise to pay it back and their credit rating is high enough. But if a person fails to pay back what they owe according to a predetermined schedule, society takes steps to stop further borrowing and to force them to repay. If they get in too deep, society ushers them into bankruptcy, and allows them to slowly make themselves whole again. But society does NOT allow them to simply keep borrowing indefinitely.

This is because individuals die. If we were to allow individuals to simply accumulate as much debt as they want until they die, leaving it to somebody else to pay it back, the economic system would soon disintegrate. So before people can borrow money, they need to demonstrate their ability to repay it, or to have their estates repay it upon their death. In this way there is a natural limit to how much individuals can spend on consumable products in their lifetime.

Societies, like individuals, must borrow no more than they can eventually pay back. The difference is that, unlike individuals, society lives “forever.” That is, the accumulation of debt that cannot be paid off in a single generation is not necessarily alarming, because society will “always” be there to pay it off.

As it turns out, the ability to accumulate even huge amounts of debt is vital for complex societies like ours, as it permits us to maintain a buffer for economic stability, to smooth out boom-bust cycles, and to maintain reasonable predictability, stability, and steady growth. The ability to carry multi-generational debt enables the government to borrow the money it needs to make multi-generational investments, things like building up the nation’s infrastructure, providing for national defense, advancing medical research, and engaging in other forms of non-commodity spending that will allow society to progress, to grow stronger, and to steadily improve the lives of successive generations of its citizens.

The “right” kind of long-term national debt, then, is a chief enabler of economic growth and prosperity, an investment in the nation’s future. It is appropriate to ask future generations of Americans to share the financial burden of that debt, since they will reap the benefits of the investment.

Things go very wrong, however, when we burden society with the “wrong” kind of debt, the kind that represents an open-ended promise to purchase products and services that are consumed by individuals, such as healthcare. There are two problems with this kind of debt.

First, this kind of debt is not an investment in the future, whose fruits will be realized by our children and grandchildren, and whose returns will more than cover the overall debt obligation. Instead, it benefits only the individuals currently alive who are the direct recipients of the consumable services, leaving no direct benefits but only an ever-increasing debt burden to those who will be left paying the bills decades later.

Second, while there is a natural limit on how much an individual can spend for products and services they consume during their lifetime, once the responsibility for paying for those consumables shifts to society, there is no longer such a natural limit (since societies live forever). The debt can now be borne by multiple generations. Because there is no longer an inherent limit to what an individual can consume, and because it is to the advantage of present and would-be officeholders to eliminate any remaining arbitrary limits, individuals are eventually encouraged to consume as much as humanly possible. And without these limits (whether natural or imposed by rules) the provision of such services to individuals rapidly becomes an entitlement, whereupon the natural checks and balances that apply to other parts of the federal budget are no longer available.

When society faces an accelerating debt burden that is completely open-ended and is not subject to normal checks and balances, that society is dealing with a disproportionate economic variable (DEV) - that is, an economic obligation that grows without limit and completely out of proportion to the growth of the overall economy. Healthcare spending, which unrelentingly consumes an ever-increasing proportion of the GDP, already has become a DEV.

DEV’s are inherently destructive to a society, and for that reason are rare. Indeed, in viable societies the only commonly encountered DEV is wartime spending, a form of spending that is temporarily required for survival. Indeed, the disproportionate spending in wartime is tolerable only because war is temporary. It should be noted, however, that one reason war is temporary is that in a prolonged war, a runaway DEV can cause a country to spend itself into oblivion. (See: the multi-decade Cold War and the demise of the Soviet Union.)

Our government has made apparently irrevocable but unsustainable promises to its citizens regarding future spending for their healthcare. As DrRich pointed out in an earlier post, the GAO now tells us that Medicare alone has created an unfunded obligation that, over the next several decades, will reach an unimaginable 34 TRILLION dollars. The reason this massive debt burden exists is the same reason similar debt burdens exist for companies such as General Motors, i.e., because of open-ended promises for whatever healthcare their future retirees may need, without limits. The threatened result - oblivion - is also the same.

Americans need to admit that there’s a limit to what we can spend on healthcare, even if that limit is liberally defined as “something less than would eventually cause the disintegration of our society.” Our current political discourse disallows us from setting even that modest limitation.

Fuchs and Emanuel accurately describe the mechanism by which Americans have become enabled to ignore the truth, i.e., the myth that our present and future healthcare obligations can be “shared” into feasibility. But the truth is actually far more troubling than merely that Americans are already paying for their own healthcare without acknowledging it. The real truth is that, while individuals are already paying far more than they realize, they’re not paying nearly enough; and that indeed, they can’t pay enough to cover the multi-generational societal obligations we have have already signed up for (even excluding the new healthcare obligations our politicians are promising us, and which many of us seem quite anxious to add).

In this way, shared responsibility is not really a myth. In fact, we all - individuals, businesses and the government - do share responsibility for what we have wrought; and unless we figure out how to reestablish limits (either the natural ones or the kind established by rules), when the bill comes due we will all pay in a very similar manner.

In later posts we will consider how far the universal healthcare voucher system proposed by Fuchs and Emanuel might take us toward resolving our looming fiscal crisis in healthcare.

Note: This is the first in a series of posts that discuss healthcare economics, and the three basic questions we will have to answer before we can devise a way to fix American healthcare. The second post in this series, “Can a Voucher System Fix American Healthcare?” can be found here.

Posted in Fixing American Healthcare, Healthcare economics | 2 Comments »