Friday, August 17, 2012

Obamacare facts: Death panels and rationing

The phrase “death panel” is a politically charged term that originated with Sarah Palin in 2009. Palin coined the term in reference to the Affordable Care Act’s requirement that Medicare pay for end-of-life counseling sessions. Her original Facebook post on the subject read, “The America I know and love is not one in which my parents or my baby with Down Syndrome will have to stand in front of Obama’s ‘death panel’ so his bureaucrats can decide, based on a subjective judgment of their ‘level of productivity in society,’ whether they are worthy of health care.” called “death panels” one of 2009’s “whopper[s] of the year.”

The ACA does not contain the phrase “death panel” and the end-of-life counseling cited by Palin was not mandatory. This does mean that Palin was totally off the mark however.

The ACA does establish an unelected board of bureaucrats who will be tasked with cutting Medicare spending. According to a description of the Independent Payments Advisory Board (IPAB) in the New England Journal of Medicine, the board will consist of 18 appointed members (including three from the Department of Health and Human Services) and will be required to submit proposals to reduce per capita Medicare spending in years in which spending is projected to exceed target rates.

The NEJM notes that the IPAB is prohibited from rationing care, increasing copayments, restricting benefits or modifying eligibility criteria. One of its few options is the ability to cut payments to doctors and, after 2020, specific providers such as hospitals and hospices. Overriding the IPAB’s recommended payment cuts would require a three-fifths vote of the senate. This means that stopping the IPAB’s cuts would be very difficult and most likely require a bipartisan effort.

The NEJM also points out that currently the IPAB’s recommendations for payment cuts for transactions through private health insurance are not binding. These price controls on private medical transactions would have to be approved by Congress, which, the NEJM says, “may not be able to cap Medicare expenditures without addressing private expenditures as well.” This points to price controls for private medical costs as a means of controlling Medicare’s runaway costs.

A consequence of price controls is fewer available doctors. If providers cannot charge a market price, the supply of providers will decrease. This is already happening in Medicaid. The Wall Street Journal reports that 31 percent of doctors already do not accept new Medicaid patients because the entitlement pays them at a lower rate than private health insurance companies.

Price controls are effectively a form of health care rationing. As price controls cause shortages, allotting the available care will fall increasingly fall upon government bureaucrats.

Rationing is the inevitable outcome of price controls and shortages. Donald Berwick, the administrator of the Centers for Medicare and Medicaid Services, said in an Associated Press interview, “The decision is not whether or not we will ration care. The decision is whether we will ration with our eyes open. And right now, we are doing it blindly.” President Obama appointed Berwick during a senate recess to avoid confirmation hearings.

Other countries with government administered health care have followed the price control and rationing model. Canada’s universal health care system has led to long wait times “for practically any procedure or diagnostic test or specialist consultation in the public system” according to the Wall Street Journal. In Canada, only half of ER patients are treated “in a timely manner by national and international standards.” Perhaps this is why the premier of the Canadian province of Newfoundland came to the United States in 2010 when he had to have heart surgery instead of going to a Canadian hospital. In fact, many emergency patients in border areas are sent to U.S. hospitals for treatment.

In England, the Daily Mail reported in 2008 that a government edict to treat patients within four hours of check-in had led hospitals to keep patients in ambulances for up to five hours before being allowed access to the emergency room. The four hour wait as measured by the government did not begin until the patients left the ambulance and entered the hospital. Over 45,000 patients waited more than one hour for access to the emergency room. Leaving patients in ambulances also means that the ambulances are not available for new calls.

In 2011, the Independent reported that budget cuts were forcing the British National Health Service to overtly ration health care. Two-thirds of the national health trusts in the U.K. are rationing treatments for “non-urgent” procedures. Examples of rationing include only allowing hip and knee replacements for patients in severe pain, delaying cataract surgery until the patient’s sight is substantially affected, requiring seven cases of tonsillitis within a year before allowing children to have a tonsillectomy, and mandating “exceptional circumstances” and six months of monitoring before inserting “grommets” in a child’s ears to improve hearing.

These economic laws hold true even in the United States. In Massachusetts, which has been cited as the prototype for Obamacare, the Boston Globe reported in November 2011 that tiered health plans with limited networks that force consumers to endure long wait times or pay more out-of-pocket to be treated sooner are becoming more common in the state. An analysis by the Cato Institute found that since Massachusetts enacted health care reform wait times have increased. Wait times for a doctor’s appointment in Boston, already longer than other metropolitan areas before the reform, have increased while they have improved in other cities. Health care costs in Massachusetts have increased faster than the national average and adverse selection, the sickest people choosing the best insurance plans, has led some insurers and employers to stop offering the most comprehensive plans.

Earlier this month, Massachusetts Governor Deval Patrick signed a health care price control bill into law. The New York Times reports that the new law will cap both public and private health care spending “so that it will grow no faster than the state economy.” The law sets up a commission to monitor increases in spending. The commission can demand an explanation from providers or insurers whose costs exceed the target rate. It can also fine organizations up to $500,000 if it finds that they did not make a good faith effort to reduce costs.

A 2009 Rasmussen poll indicated that only 32 percent believed that Massachusetts health care reform was a success. A more recent WBUR poll found that 78 percent still consider health care costs a significant problem for Massachusetts. Sixty-three percent say that costs have gotten worse over the past five years since the reform was enacted.

The discussion of quality adjusted life years brings the discussion of rationing full circle back to Palin’s original quote. Quality adjusted life years (QALYs) is a calculation that measures “the benefits gained from a variety of medical procedures in terms of quality and life and survival for the patient” according to Oxford University’s Bandolier Journal.

While the ACA currently forbids the use of QALYs “to determine coverage, reimbursement, or incentive programs,” an article in the New England Journal of Medicine is openly critical about the law’s prohibition, saying that the “notion that the country can avoid the difficult trade-offs that cost-utility analysis helps to illuminate” is “magical thinking.” If the law were amended to allow the use of QALYs, it might mean that older patients would be unable to receive certain surgeries because the procedure offered more benefit to younger people. It might also mean that babies like Trig Palin would be passed over for people in a more productive stage of life.

As the demand for health care increases due to more people being covered with health insurance, there are certain to be shortages since the supply of doctors and hospitals is not increasing. Rationing and shortages in such situations commonly take the form of long wait times for treatment and price controls. This has occurred in a multitude of other countries where government-controlled health care has been tried. Given the shoddy, backroom manner in which the ACA was written, it is unlikely to contain any new and different approaches that will work where previous government health care bureaucracies failed.

President Obama and the Democrats may have been able to pass the Affordable Care Act and get it past the Supreme Court. As yet, they have been unable to repeal the laws of economics.

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