As President Obama said while campaigning to be President of the United States, “You can put lipstick on a pig, but it’s still a pig!”  How true.  Yesterday President Obama reached for the lipstick to dab on four proposals suggested by the Republicans to the massive pig of a health care proposal clinging to life.  The four proposals are:

1. Use undercover medical professionals to conduct investigations to fight waste and fraud in Medicare, Medicaid and other Federal programs.
2. “Demonstrations of Alternatives” to the current malpractice mess.
3. Increasing doctor reimbursement for Medicare.
4. Expanding Heath Savings Accounts (HSA).

The pig smiled.  She thought she looked beautiful.  Just don’t try to put a bikini on her because, as President Obama famously said, she’s still a pig.  Let’s look at the President’s magnanamous attempt at bipartisanship in detail.

1)  Undercover Medical Professionals to Uncover Fraud

It is estimated that somewhere in the neighborhood of $100 billion is lost or stolen each year from Medicare and Medicaid.  This program has been in place for 40 years.  If those numbers are consistent over that period, that’s $4 TRILLION.  Gone. Stolen from you and me.  How much better shape would we be in if we had that money back?  That’s government efficiency for you.

The President of the United States is the chief law enforcement officer in the country.  The amount of Medicaid and Mediecare losses each year are four times the entire budget of the Department of Justice.  How’s this for a proposal?  Create a Medicare/Medicaid fraud unit within the FBI and fund it so that we can stop thses losses.  If you stop the fraud, it’s free money.  What you save in fraud should more than pay for the FBI funding.  Why take medical professionals and give them law enforcement duties.  Are you going to ask police to operate on you?  Mr. President it’s your job to enforce the laws and prevent this widespread fraud.  You don’t need a new act of Congress.  Just Do It!

2) Tort Reform –No; “Demonstrations of Alternatives” — Yes

Trial lawyers are one of the biggest contributors to the Democratic Party.  Do you think such “Demonstrations of Alternatives” will amount to anything other than hush money?  “Shut up , we’re looking into tort reform.”  The counter argument is that Americans have a right to their day in court when they have been injured.  True enough, and I am reluctant to arbitrarily limit their awards through a fixed dollar limit.  I would take aim squarely at the lawyers.

John Edwards, one-time Senator and presidential candidate, was involved in about 63 cases as a personal injury attorney and amassed a fortune of about $70 million.  In one particular case, he stood before the jury and took on the persona of a child in the womb crying out for oxygen to appeal to the emotions of the jury and win the case.  Oddly enough he voted against a ban on partial birth abortion.  Gee, in the once case it’s a child who can actually speak while still in the womb!  But on the other hand it is just a mass of tissue at birth that can be disposed of with the trash.  We have learned a lot about the moral character of John Edwards.  He is the poster boy for the old joke, “How do you know a lawyer is lying?  His lips are moving.”

Here is a simple solution to tort reform.  Fixed fees for attorneys and loser pays.  The lawyers should set their hourly rate and bill according to hours worked, not how much they can squeeze out of the jury.  The award should be for the benefit of the injured party, not the lawyer.  The second part is to prevent frivolous lawsuits.  The loser pays the legal fees of the winner.  The argument here will be that the tables will be turned and no one will sue corporations for damages because of the risk of paying their legal fees.  Right now lawyers are running a lottery fishing for lawsuits of any kind becasue they know that most corporations will settle for less than it would cost to defend the suit, even if they know they are right.  All customers of that corporation pay more for their products (e.g., drugs, medical devices) and the lawyer gets rich.  I am sure that if such a proposal as this gets passed a new market for “legal fee insurance” will open up where a plaintiff with a strong case can buy insurance to cover the cost of the other sides legal fees if they do lose.

3) Increasing Doctor Reimbursement for Medicare

So much for bending the cost curve down.  The real way to curtail spending on health care is to eliminate 3rd party payers.  (see It can be done).

4)  Increase Health Savings Accounts

These plans exist today, however, they are not all available across state lines (see It can be done).  I had such a plan in New York while employed by a company, but when I went out on my own I could not buy the same plan in New York State.  We don’t need ObamaCare, we just need states to allow these plans to exist within their borders or allow individuals to buy across state lines.

The Pig Lives!

Three of the  four Republican proposals that Presidident Obama likes don’t cost anything.  But he $1 trillion to $2 trillion health care castastrophe is still alive and until we slay that beast and start over we will go from a serious health care problem to a fiscal crisis and end up with both.  If you don’t believe me, read how the model for ObamaCare is working in Massachusetts.

There’s a commercial that has been running recently that shows someone considering the purchase of a consumer item and they ask question after question about the product.  In the next scene they are in the doctor’s office and when the doctor asks if they have any questions they hesitate and then say, “No.”  The message is that you should ask as many questions of your doctor as you would of the salesman selling you a flat screen TV.

What if the flat screen TV were free?  Or what if it was limited to a $20 co-pay?  Would the consumer ask as many questions?  The consumer is probably asking the questions because he or she is about to lay out $1,000 of their own money.  If the TV costs you only $20 do you bother with the questions?  If the TV doesn’t work, you can go buy another for $20, no?

For most of our health care plans we have what is called 3^rd party payer.  We go see the doctor and except for a nominal co-pay, someone else picks up the tab. But what if the health care consumer was put front and center in the process? How would that look?

Insurance as Insurance

We call it health care insurance, but it doesn’t look like any other insurance we may own.  We buy insurance to protect ourselves from financial catastrophe, not to cover everyday expenses.  If our house needs a paint job, we don’t file a claim on our homeowner’s insurance.  If we need gas for our car, we don’t ring up the gecko at Geico.  When we need food we don’t submit the grocery receipt to our life insurance company.  So why is virtually every expenditure related to health submitted to our insurance company?

I was once covered by a health insurance plan, through my company, that cost around $10,000 per year.  I was healthy and didn’t often need a doctor, but that didn’t affect my insurance premium.  I found a plan that was a “high deductable” plan with a Health Spending Account.  It worked like this.  My insurance premium was cut from $10,000 to $5,000.  In addition I opened a Heath Spending Account (HSA) that I could fund with up to $5,000 per year, tax deductable.  So overall, if I fully funded HSA, the cost was still $10,000.  So why do this?

The plan came with a high deductable of $4,000 per year, in other words, the first $4,000 were paid by me, not the insurance company.  I could use the money in my HSA to cover that.  But the kicker is that the money in an HSA rolled over from year to year and if I never used it, I could roll it into an IRA later.  Do you think there is a strong incentive there for me to be involved in my medical care?  Do you think I would ask more questions, before going to the doctor and when I met with him?  You bet I would.

The Broken Health Care System

But how does our government screw this up?  Easy.  When I left that company and was out on my own and tried to buy the same type of policy I found that many plans were available until I told them where I lived.  “You live in New York?  Sorry, that plan is not available in New York for an individual.  It is only available through companies.”  I checked with my state insurance regulator and they said, “Sure, we have a plan like that for individuals.  Do you make over $27,000?  Oh, you do?  Then it’s not available.”

So a plan that involves the consumer in making informed health care choices, which is the only way market forces can truly come into play, was not available for me by government dictate.  But the federal government wants to take over health care and give it to everyone on the model of 3^rd party payer where the consumer doesn’t care a whit what it costs.

Informed Health Care in Action

Fortunately, my experience being involved in health care choices didn’t evaporate with my ability to get the insurance plan of my choice.  I was advised by my doctor that I was of the age to start screening for colon cancer.  The most effective way to do this is through a procedure known as a colonoscopy.  I will spare you the details of the procedure. 

As an informed consumer I looked up the risk factors for colon cancer:

1. A personal or family history of colorectal cancer or polyps.
2. A diet high in fat and low in fiber.
3. Inflammatory bowel disease (Crohn’s disease or ulcerative colitis).
4. Obesity.
5. Smoking

Okay, I have none of the above.  What is the chance of dying of colon cancer?  In the U.S. the chances are 0.017% and that is based on the whole population, regardless of whether or not you have any of the behaviors listed about, or about the same chance as being killed in a car crash.  I decide to have the procedure.

The procedure gives me a clean bill of health and the recommendation is to repeat the procedure every 5-10 years.  In processing my insurance claims, to be paid by a 3^rd party, I noticed that the procedure cost $3,000 about evenly divided between the doctor performing the procedure, the anesthesiologist, and the hospital.  So if I have the procedure as recommended, it would cost $10,000 – $20,000 to screen for an illness for which I had low risk, no history, none of the bad behaviors, a current clean bill of health.  No thanks.  If I had the plan that I wanted that could be $10,000 – $20,000 in my retirement plan.  How many other possible diseases should I screen for and pay similar sums?  As a consumer I am making a risk/reward judgment and in doing so, I have reduced health care expenses in the United States by $10,000 – $20,000. 

In the Obamacare plan, that money will be spent because the typical consumer doesn’t care if the procedure is done every year because it has no financial impact on them.  Do you think that is why health care costs continue to rise?  What doctor is going to take a chance that he did not recommend that procedure and find out that you and your trial lawyer are asking him why he didn’t because you contracted colon cancer?

The counter argument will be, “Well what if you get colon cancer and you could have prevented it if you had screened for it?  What is that going to cost and who is going to pay for it?”  Well, with my liberty still intact, I can make some further decisions.  I still have that money, and more of it, in my HSA that I can use.  If the cost of treatment exceeds $4,000 then my insurance company can use that premium money that I have been paying them for years without them having laid out one dime over that period due to my good health and good choices, to help with my treatment.  Or I can make the personal decision, if I am say 80 years old, that I had a pretty good run and I would rather leave my wealth to my family, if the government isn’t salivating to grab that, than to spend it all to eke out another few years.  I can choose to go quietly into that good night.

Liberty and Tyranny

I want to have the liberty to make those choices.  Everyone having the liberty to make those choices will bend the cost curve down.  The medical community, which is a business, will have the incentive to find a way to drive down the cost of a $3,000 procedure to say $300.  If they did so, I just might show up every 5 – 10 years at that price.  That’s how markets work.  If your flat screen TV set, or your medical procedure is too expense the demand drops.  If you find a way to keep lowering (get that?  lowering) the cost the demand will rise.  But if you don’t pay the bill, if you don’t see the bill, you don’t care about the bill.  If you don’t care about the bill and no one else does, then the government gets involved and the problem doesn’t get solved.  Your liberty gets taken away along with your money and the government tells all their stupid citizens what to do, because, after all, government knows best.  Right?

If you look at President Obama’s record on what he says one day and one he says later when reality sets in, are we really ready to believe him when he says,

“Whatever plan we design upholds three basic principles,” he said. “First, the rising cost of health care must be brought down; second, Americans must have the freedom to keep whatever doctor and health care plan they have, or to choose a new doctor or health care plan if they want it; and third, all Americans must have quality, affordable health care.”

He told us we absolutely had to pass his $787 Billion stimulus package or the unemployment rate would hit 9%, but if the package passed, the unemployment rate would be held to 8%.  It didn’t work.  Unemployment is at 9.1% and climbing.  He said bankruptcy for the auto companies would be disasterous for the economy.  After pouring billions into the auto companies, where are they?  In bankruptcy.  It is estimated that his health care “solution” would cost between $1 and $1.6 trillion. Why should we believe it?  What has he told us he would do that has actually come to pass?  North Korea?  Iran?

What confidence do we have that the government can do anything, other than national defense, better than private industry?  The postal service?  Amtrack? Farm subsidies? Earmarks? Speaking of healthcare what about Medicare and Medicaid?  In a report from March 2008:

“We need to act quickly and effectively to address Medicare’s fiscal health, including enacting the steps proposed in the President’s budget, which would postpone the insolvency date of the Part A trust fund for ten years,” said Health and Human Services Secretary Mike Leavitt.

A Modest Proposal

Before attempting to overhaul one-sixth of the U.S. Economy, why doesn’t the Obama Administration fix Medicare and Medicaid?  Show us your stuff Mr. President. Not your charm, not your winning smile. The campaign is over.   Prove that you can make these government programs work before you take on any more massive health care undertakings.