Republican Party of Olmsted County, Minnesota

(Mankato Town Hall 8/20/2009)

In 1960 health care accounted for $1 of every $20 spent in the US economy. It is currently $1 of every $6. By 2025 it is projected to be $1 in $4. Before General Motors (GM) went bankrupt it is estimated that $2,000 of the cost every new car could be accounted for in health benefits for GM workers.

(Mankato Town Hall 8/20/2009)

Medicare pays providers for each episode of care or each procedure. However, Medicare does little to determine whether a given procedure is necessary (or whether it even happened.) The result is that providers are given an incentive to perform high volumes of expensive procedures and/or outright fraud. This is best shown in geographic disparities in Medicare reimbursements, with high use regions receiving much more per Medicare beneficiary than low-use regions. At Tim Walz’s Mankato Town Hall on August 20, Douglas Wood, MD from Chair of Mayo’s Division of Health Policy and Research, emphasized this several times.

Minnesota is an overall low-use region. Because of this there is bipartisan consensus within the state that it is important to reform Medicare payments so that they no longer encourage over use and waste. The entire Minnesota Congressional delegation (Democrats and Republicans) signed a joint letter to President Obama expressing concern over the geographic disparities in Medicare payments.

This begs the question, if Medicare is so flawed, how could it be in our interest to expand it in a public option?

(Mankato Town Hall 8/20/2009)

Many preventive measures involve performing tests on large numbers of people to prevent disease from occurring in very few. For most preventative measures, there is no cost savings and many cost more money than they save (Cohen, NEJM 2008; 358:661-663). While Tim Walz was accurate that preventative measures are not cost saving for the most part, President Obama has repeatedly stated that they are, most recently in his speech to the joint session of Congress on Wednesday, September 9, 2009.

(Mankato Town Hall 8/20/2009)

The argument in favor of tort reform (limiting malpractice claims against physicians) is that physicians are currently ordering unnecessary tests as “defensive medicine” to prevent lawsuits. Some opponents of tort reform will claim that the costs of malpractice insurance premiums and malpractice settlements are a small compared to overall health care costs. That is clearly true; however, supporters of tort reform in general aren’t arguing that insurance premiums are the problem, but the extra testing and the incentive to order more.

Nevertheless, states that have enacted tort reform (Missouri and Texas for example) have seen malpractice insurance premiums go down, but health care costs have continued to rise. “Defensive medicine” may be contributing to over testing and other over use of health care. However, the contribution of “defensive medicine” is probably small compared to the main drivers, which are that patients are separated from cost (by third party payers) and that many physicians are paid on fee-for-service by insurance and government programs.

(Mankato Town Hall 8/20/2009)

The Veterans Administration’s medical records are considered a model for other providers and over the past year the VA has scored well on a variety of quality measures.

(Mankato Town Hall 8/20/2009)

At the Mankato Town Hall on August 20, 2009 one of the first questions for Congressman Walz was whether abortion coverage would be expanded by health care reform. Congressman Walz answered that “abortion is not in the bill.” In his address to Congress, President Obama said “no federal dollars will be used to fund abortions.”

It is true that abortion is not specifically mentioned in the House bill (H.R.3200), but the house bill does allow the U.S. Secretary of Health & Human Services (HHS) to include abortion as a benefit in the government-run health care option. It would also permit federal subsidies to be used to purchase private insurance that covers all abortions.

(MPR Midday 8/19/2009)

In many areas there are few health insurance providers. Minnesota has only 5 insurance providers for the entire state. However, the reason there are so few providers is government regulation which prevents the purchase of insurance from other states. This benefits state governments who can make insurance regulations that suit them and it benefits large insurance carriers who experience reduced competition when smaller carriers are forced out of the state by those regulations. In Minnesota, regulations passed in the early 1990’s increased the requirements for health insurance companies to provide insurance to small businesses. Numerous insurance carriers left the state.

(MPR Midday 8/19/2009)

The implication from this is that insurance companies engage in excess profit taking or that excessive insurance administrative costs are driving up health care. Tim Walz implied this when he said “I want to have a system that’s fair and we all share in our responsibility. What that means though is that the status quo some people aren’t going to get $70-$80 million dollar salaries maybe because that money is not going to the care of the people it’s not going to producing outcomes.” (Access Minnesota 8/9/2009)

However, insurance company profits and administrative costs are not rising at the rate of health care costs overall. To quote from an article by David Goldhill in The Atlantic “For fun, let’s imagine confiscating all the profits of all the famously greedy health-insurance companies. That would pay for four days of health care for all Americans.”

(Mankato Town Hall 8/20/2009)

At the Mankato Town Hall, at least one participant pointed out that the same insurance policy sold in Arizona cost one quarter what the policy cost in Minnesota. Another suggested purchasing across state lines as a way to lower health care costs. To that Congressman Walz referred to an article published by the New America Foundation, a non-partisan, DC-based think tank. It was entitled “Across State Lines Explained: Why Selling Health Insurance is Not the Answer.”

The article states (correctly) that allowing purchase of insurance across state lines is effective deregulation because insurance companies would move to the lowest regulation states. Arguing for purchase across state lines is, in effect, arguing for deregulation.

The article then states that deregulation would encourage insurance companies to provide more bare-bones catastrophic-type policies and that the premiums for these policies would go down. This would happen because, young, healthy people would gravitate to these types of policies. The flip side would be that premiums for very complete, comprehensive policies would go up, because sicker people would gravitate to them. Though the article argues that over time the benefits for most people would outweigh the benefits, it is incomplete to say that purchasing across state lines would simply increase costs.The article also states that allowing purchases across state lines would not change the incentive system whereby doctors are paid on a fee-for-service basis and encouraged to perform more tests. However, the article doesn’t consider that having large segments of the population in catastrophic insurance policies and paying out of pocket for many medical expenses could introduce an incentive for providers to become more transparent in their pricing and to lower costs.

This type of catastrophic insurance has been advocated by David Goldhill in his article “How American Health Care Killed My Father.” In it Mr. Goldhill describes how his father died of a hospital acquired infection and blames much of the high cost/low quality character of medicine on the fact that it is disconnected from the consumer.

(Mankato Town Hall 8/20/2009)

This is the same argument as the one saying that purchase across state lines (i.e., deregulation) should be prevented. It is true that consumers should be aware of what is and isn’t covered in insurance policies. However, that is different from prohibiting people from knowingly purchasing catastrophic insurance policy that provide coverage only for very expensive conditions. Tim Walz is claiming that his concern is consumer protection; however, much of the motivation behind regulating the insurance companies is to eliminate catastrophic insurance so that young, healthy people buy more comprehensive insurance than they otherwise would and that they are mixed into pools with sicker people and help support the premiums/costs of higher people.

The merit of this policy can be debated, but is misleading to advertise it solely as consumer protection.

(MPR Midday 8/19/2009)

It appears that Congressman Walz’s intent is to say that he wants more insurance companies competing, but competing to provide very similar, highly regulated insurance policies. This misses the point of true market-based competition. For there to be competition, a range of products must be available and consumers must be able to choose among the products. Consumers must be able to make poor choices occasionally because the transmission of their bad experiences with different suppliers is the mechanism by which poor suppliers are identified. Successful suppliers must be allowed to keep their profits (even if “excessive”) because that is the signal to other suppliers that a particular product or strategy is successful. Tim Walz’s vision of market competition is very different from this, and he would admit that he does not subscribe to this libertarian free market because (in his words) it creates “winners and losers.”

(Mankato Town Hall 8/20/2009)

In his Mankato Town Hall meeting, Tim Walz used the term “winners and losers” in the context of describing why it was important to regulate insurance companies, so that they provided a minimal level of coverage. In his interview on MPR’s Midday on 8/19/2009, Tim Walz used the term “winners and losers” to mean people who could or couldn’t afford to pay for health care. His argument was that denying health care for people who couldn’t pay was creating “losers” based on ability to pay.

This is true in as far as it goes. The free market does limit access to goods and services based on the individual’s ability to pay. What Congressman Walz misses is that this provides market incentive for suppliers to keep their costs within the ability of the consumer to pay. This leads suppliers to innovate to come up with innovative ways to keep costs down and quality up.

Our health care system’s current single biggest “customer” is Medicare, a government program that accounts for 20% of all US health care spending. As stated earlier, Medicare takes no account of what procedures cost or whether they’re necessary. Our system has dutifully responded to this consumer’s pressure by producing more and more expensive care that adds little value.

Putting consumers (and their money) in charge of health care spending would give providers incentives to publish their costs and it would lead to innovation designed to lower costs and improve quality. The counter argument is that it would lead to uneven care (winners and losers). But comparing the quality of the products available to the majority of the population, a strong case can be made that free market “rationing” based on the individual’s ability to pay creates a better outcome than a centrally planned rationing based on the (hopefully) well-intentioned planned of experts.

In addition, the statement that the free market creates “winners and losers” overlooks the fact centrally planned systems have their own “winners and losers” too.

Deciding that all citizens are entitled to health care automatically means a central body will have to ration health care. At one end of the spectrum you set some minimal benefit that everyone is entitled to (that’s rationing) and at the other end you require everyone to get the same benefit and don’t let people buy it on their own (as in Canada). That’s rationing.

Government systems free of competition tend to be wasteful, inefficient, and slow to innovate.

(Access Minnesota 8/9/2009)

The current system is unsustainable. But it doesn’t follow that proposed changes will make them better. In fact, Washington Post Columnist Robert J. Samuelson argues Health Care reform is really just more of the same.

“One of the bewildering ironies of the health-care debate is that President Obama claims to be attacking the status quo when he’s actually embracing it. Ever since Congress created Medicare and Medicaid in 1965, health politics has followed a simple logic: Expand benefits and talk about controlling costs. That’s the status quo, and Obama faithfully adheres to it. While denouncing skyrocketing health spending, he would increase it by extending government health insurance to millions more Americans.”

(Mankato Town Hall 8/20/2009)

At the Mankato Town Hall, a woman who said she had read all 1,000 pages of the House Bill (H.R.3200) and one particular part that concerned her was added regulation and taxes to plans that didn’t meet the government standards. She was worried that it might not be true that you could keep your existing plan if you chose. You can see the exchange on YouTube.

Tim Walz didn’t directly say that she could or couldn’t keep her plan if she chose, though he implied it by saying that plans that didn’t cover mammograms (his example) wouldn’t be in her interest to have. When she said she was concerned her husband wouldn’t be able to keep his current plan under the new rules, Congressman Walz answered “Where in this bill does it say that he can’t continue to do that.”

This is the same type of half truth as in the question about abortion – citing lack of specific language in the bill as proof that the bill won’t produce a particular outcome – even though other provisions in the bill likely will lead to that outcome.

Factcheck.org states “It’s true that there’s no requirement, but experts say the legislation could induce employers to switch coverage for millions of workers.” That is why President Obama has changed his language when describing the bill. Previously he said “If you like your plan, you can keep it.” In his address to Congress he used more precise language saying nothing in the bills will “require you or your employer to change the coverage or the doctor you have.”

(MPR Midday 8/19/2009)

Medicare is a very popular program. As is Social Security. These programs provide benefits to people above what they pay at the expense of other people. In the private sector this is known as a Ponzi scheme, a type of fraudulent investment in which money from new investors is used to pay off earlier investors. These are also known as pyramid schemes and they eventually collapse, as was the case with financier Bernie Madoff.

So yes, it’s true, people getting something for free are usually very pleased with it. That does not necessarily mean that the program is good for the country as a whole or well-designed or efficient.

(Mankato Town Hall 8/20/2009)

Congressman Walz made this remark in an offhand manner in response to an individual who stated he did not trust the government. President Obama has made similar statements, saying that if the government is as inefficient as advertised, there is no reason for private insurers to fear a public plan.

However, as noted above, in the private sector Ponzi schemes are illegal. In government Ponzi schemes (Social Security and Medicare) are lauded as the most successful government programs in history.

In other words, the government is not efficient with other people’s money. It is inefficient with it and rewarded for doing so. That is dangerous.

(MPR Midday 8/19/2009)

The dramatic increase in health care costs coincides exactly with the introduction of Medicare in the 1960s. As mentioned earlier, (and which Tim Walz has said himself) Medicare encourages overuse and waste because it pays providers almost indiscriminately. So it is not true that Medicare is a passive victim of rising health care costs. Medicare’s pay structure is one of the main drivers of rising health care costs.

If one were to decide that Medicare is indeed going broke because of the “massive increase of the cost of medicine that is outside their control” then that same reasoning should apply to private insurance, meaning that suggesting that lack of competition isn’t the main problem for private insurance.

(MPR Midday 8/19/2009)

The Congressional Budget Office has said that the House bill does not contain costs. Mayo Clinic, in their health policy blog, has stated that a public plan, if it is structured like Medicare, will raise costs. It would seem that opposing H.R.3200 should be easy for Congressman Walz. We’ll see.