Their motivations to control cost, for the most part, are well intentioned and welcomed.  Or at least welcomed, for sure.

But like all things “health reform”, the devil is in the details.  And it is in these details that lurk the unintended consequences.

My beef today is with the fact that both the House and Senate bills shift enormous burdens on the younger generations. I’m not talking about taxes or deficits right now–that’s the down the line burden-I am talking about key provisions that limit the amount insurance companies can charge older Americans, and the ensuing cost shift to younger people.   Consider the 2 following provisions:

1. Both bills outlaw “preferred underwriting”; that is premium discounts for the young and healthy.

2. Both bills put limits on the premium ratio between age and demographic groups.  In the House it’s capped at 2 to 1, meaning a 64 year old can never be charged more than double what an 18 year old can be charged.  Actuarial estimates would put the actual cost differential at 5 or more to 1.

A study conducted by an evil insurance carrier (Blue Cross) calculated the premium effect to be more than 100% for younger healthier people.

Is it fair to shift this burden to the young in our workforce?  And how will this regulations make our older Americans feel? And what about businesses-is it fair to shift the burden from a restaurant owner with employees who average 30 years old to a machine shop that averages 55?  HOW MUCH OF YOUR PROBLEM IS MY PROBLEM?

If people–whether young or old—understood the impact of these regulations, they would be angry (young) and embarassed (old), I think.

What do you think about this? And what do you think your parents would have to say about it?

It’s not surprising, really.  The $2.5 trillion healthcare economy affects all of us.  In addition to our consumption of all things healthy and thereuputic, millions of Americans support their family directly through the healthcare system–doctors, nurses, techs, therapists, pharmaceutical reps, researchers, yada yada yada.   I’ve heard it argued (I’m not sure where…) that 80% of the cost in the system is in the form of salaries paid to healthcare workers, which means that any attempt to save healthcare costs will be hitting the pocketbooks of millions of people.

Not to mention the most important group of all, the mighty philanthropic and indispensable health insurance brokers…No wonder so many of us want to proceed more carefully!

I must admit that to date I have been strongly in favor of expanding health insurance for all Americans. While we all know that virtuallly no-one is denied care for acute conditions, I think the indirect cost to the economy is greatly understated by the uninsured who postpone preventive or early intervention visits because they cannot afford the care. 

Do it incrementally, do it through the private sector and do it smartly, but I say expand coverage to the uninsured as much as we can.

That is my opinion, or at least I thought it was until last week when I read Charles Krauthammer op-ed “Obamacare: The Only Exit Strategy“.  Perhaps he just set me up in his analysis and the logical arguments he made on behalf of the President and lawmakers seeking reform.  But I must say that I was chilled when I got to the end of the article.  Here are a few snippets:

What’s not to like? If you have insurance, you’ll never lose it. Nor will your children ever be denied coverage for preexisting conditions.

The regulated insurance companies will get two things in return. Government will impose an individual mandate that will force the purchase of health insurance on the millions of healthy young people who today forgo it. And government will subsidize all the others who are too poor to buy health insurance. The result? Two enormous new revenue streams created by government for the insurance companies…

…It’s the perfect finesse — government health care by proxy. And because it’s proxy, and because it will guarantee access to (supposedly) private health insurance — something that enjoys considerable Republican support — it will pass with wide bipartisan backing and give Obama a resounding political victory.

Isn’t there a catch? Of course there is. This scheme is the ultimate bait-and-switch. The pleasure comes now, the pain later. Government-subsidized universal and virtually unlimited coverage will vastly compound already out-of-control government spending on health care. The financial and budgetary consequences will be catastrophic.

However, they will not appear immediately. And when they do, the only solution will be rationing. That’s when the liberals will give the FCCCER regulatory power and give you end-of-life counseling.

 Read the article, and let me know if you react the same way.  It is really eye opening look at unintended consequences…or are they actually intended consequences???

In fact there is some decent poll numbers that support this idea, including 69% in a May CNN poll ,and  65% from Rasmussen in June and 63% back in March.  In it’s purest, most theoretical form with no strings attached I am sure that the number is 95% of the population or more.  How can health insurance for all be a bad thing with no costs or other policy tradeoffs to be considered???

 Ahhh, but we live in the real world, and a real-life political scenario where costs like taxes are considered and potential trade-offs about quality, access, government intervention etc. get added to the mix, support plunges.  Today, support in the polls for the specific proposals under consideration is below 50%…and falling…

As some great philosopher once said,  ”Reality Sucks”… But how can this be???  If we all embrace the Golden Rule of Health Reform, what drives the numbers so low? 

The answer lies in The Law of Unintended Consequences:

The law of unintended consequences, often cited but rarely defined, is that actions of people—and especially of government—always have effects that are unanticipated or unintended. Economists and other social scientists have heeded its power for centuries; for just as long, politicians and popular opinion have largely ignored it.

More accurately, it is FEAR OF UNINTENDED CONSEQUENCES that kills much of the popular support for universal healthcare.

Healthcare is about the most complicated public policy issue there is.  Have a look at a couple of the diagrams that have been floarting around to demonstrate the complexity of the current and proposed systems:

CURRENT SYSTEM (click on map to enlarge)

Current System (www.satvathealthcare.com)

PROPOSED SYSTEM –HOUSE BILL (click on map to enlarge)

Proposed House Plan (from Republican Staff vis Washington Post)

 Why would anyone be concerned that proposed changes to the system might have an unexpected impact in other parts of the system?????

Drawn from Adam Smith and the “invisible hand” of the competitive market, the public’s fear of unintended consequences is based on the invisible, unknown and unanticipated forces that government intervention brings to the market.  Here’s a very plausible scenario as it relates to healthcare reform:

1.  The proposed “public option” or government plan offers better benefits at a lower cost than  private insurers.

2.  The lower cost are achieved by capping the reimbursement rates for medical procedures at 120% of what medicare allows, vs. an average of 140% paid by private insurers in a given region.

3.  As a result of this 20% pricing advantage, benefits are 5% better than average private plans while premiums are 15% lower.  

4.  As a result of these very favorable consumer conditions, the government plan becomes the most popular plan, saving money for businesses and providing affordable coverage for previously uninsured.

5.  As a result, businesses are able to resume hiring employees and hospitals and providers are able to get reimbursed for care provided to the previously uninsured.  With the governments purchasing power, rate increases are capped at the CPI because reimbursements to providers increases at only the same 2.5%.

6.  With the increase in the insured population, and per the contracting terms with the government plan, providers are required to increase the volume of patients in order to avoid long delays.  They also need to see 20% more patients in order to achieve their previous income levels.

7.  Over the course of a decade, incomes earned by Doctors declines by 10% in real terms, while their volume of patients has increased 20%.  Increasingly, services are being provided by Nurse Practioners hired to assist with the volume of patients. 

8.  With declines in income and the added stress brought on my managment responsibilities and the higher volume of patients, the number of applicants to medical schools starts a steady decline.  And the average GPA and test scores of those admitted declines as the best and brightest students pursue careers in fields that offer higher incomes with far less post-graduate education and training.

The bottom line is “Mission Accomplished” for healthcare reform: lower healthcare premiums, better benefits and universal health insurance coverage. 

But the system looks far different than anyone anticipated, and there are many new problems associated with access to care, quality of the care and the freedom, choice and overall medical experience enjoyed by patients.

These are the unintended consequences, and it is our  collective fear of these unknown and unanticipated changes that turn ouroverwhelming teoretical support for the Golden Rule into the more tepid, cautious attitude that is reality for most of us.