The Healthcare System Sinking In

It's probably not really worth mentioning, but Joe Baker's column in yesterday's Newport Daily News is an astonishing bit of cheer leading for the policies of the Obama administration. Most of it has to do with the economy and how wonderfully the stimulus program worked. Perhaps it's enough to note that he claims the recovery on which he's so bullish is "in the rebound a lot quicker than was being forecast when we were in the pits of despair last year."

My recollection is that, in the pits of despair, economists were predicting a clear recovery before 2010. If we find ourselves emerging from the darkness only a couple quarters later, that'll be wonderful, but I'd advise against managing your finances as if flush times are just around the corner.

What's really astonishing about Baker's essay comes when he decides that singing about rainbows in the economy isn't adequately partisan:

Republicans who went to the wall in an attempt to kill the health care reform measure were hoping for a rising backlash from its passage. But that hasn’t materialized, and as the reality of the program sinks in and nobody sees the dire consequences predicted by its opponents, methinks a lot of the remaining anger will float away.

Does this guy get his news purely from Obama press releases? Put aside the fact that he ignores the delay on most of the bill's provisions. One gathers that Baker missed the financial statements of major companies expecting billions of dollars lost to their bottom lines because of the legislation. Moreover, on the same day that Newport County's major daily paper handed its readers Baker's bubblegum, the state's major daily paper was informing its own of the following, on its front page:

While some experts are predicting better times for hospitals from the national health-care overhaul, an analysis conducted for the Hospital Association of Rhode Island predicts that the state's 11 acute-care hospitals stand to lose $465.7 million over the next 10 years.

The study found that any gains from more patients coming through the doors with insurance will be more than offset by cuts in payments the hospitals receive from the federal government, according to Edward J. Quinlan, the association’s president.

An accompanying article suggests that the government has a history, in this area:

Quinlan traces the hospitals' troubles back to the passage of the federal Balanced Budget Act of 1997, which led to steep cuts in Medicare payments. The association estimates that over 13 years, the cuts have resulted in a loss of $700 million. Medicare payments used to provide hospitals 14 percent more than the cost of care, providing a necessary buffer to help pay for general hospital expenses. Now the payments are about 89 percent of the cost of care.

Just wait until employers start dumping their workers into publicly subsidized programs. And just wait until this guy's ilk get the reins firmly in their hands:

Health-care reform may bring some relief. But Nick Tsongias, an executive board member of HealthRIght, which supports comprehensive health-care reform, says there's an even deeper problem to address.

"I think the business model that the hospitals are operating under is now obsolete," he says. ...

... increased competition isn't necessarily beneficial, says Tsongias. In fact, he says, it can be harmful. For example, Landmark Medical Center started a coronary-care unit, but had to close it down because it contributed to financial losses so severe the hospital had to seek protection from the courts, he says.

"It certainly poorly serves the public if the way we determine how many hospitals we have, and what the appropriate array of services are ... is through survival of the fittest," Tsongias says.

Competition leads to efficiency. Indeed, Tsiongas's complaint is that it drives down prices to the point that only the most effective providers can continue to profit from a particular good or service, and what ultimately makes them effective is that consumers wish to spend their money with them. I'm not an expert in hospital finance, but I'd wager that the reason hospitals have chased a narrow collection of identical services is that a mixture of government regulations and insurance company policies have created inadvisable incentives through mandates and the speed and percentage of payments.

The better approach to lowering costs and broadening care would be to allow consumers to pay more directly for the services that they want and need. Further embedding the "insurance" model — really a "healthcare services plan" model — and giving government regulators a more direct responsibility for and authority over the healthcare system will only yield additional strains on providers and higher costs. Which will only yield fewer providers and even higher costs.

I'd much rather live in Mr. Baker's world, in which one can trust that the cool smart guy running the show in Washington would manage of our every worry. We could all relax and be taken care of. Unfortunately, in the world that I've observed, that's just not realistic.