Stay on the High Road

The "Go for it" taunt made me wince. Sorry to see that it was apparently part of the prepared remarks as well. It's a needless bit of dancing in the end zone, if you ask me, and out of character for Obama.

You never want to provide headlines for the other team to put on the locker-room bulletin board. Also, his credibility with independents is too fragile yet to act so cocky.

Obama does this sort of thing from time to time -- cutting remarks like "You're likable enough" to Hillary Clinton and "I won" when in a Roosevelt Room meeting with Dem and GOP leaders last year on the stimulus.

When I saw this, my mind went immediately to the image of President Bush's callow challenge to insurgents in Iraq to "bring it on." Which they did.

Quick Health Care Reform Post-game Show

I grieved the loss of the public option last year. My fear over the past month was more political: that the Democrats would once again get scared of offending someone rather than realize that people respect parties and politicians who disagree with them if one knows where they stand. So winning this vote, as weak as the actual legislation is, should work as a confidence-builder.

Most of the Democrats in Congress have spent their entire careers cowering in fear of someone calling them a “liberal.” It took new blood, someone like Al Franken who hadn't had time to get into the DLC-Frum-Carville defensive crouch, to get impatient and demand that Obama do some spadework on this. And then Pelosi's sharp-elbowed personality, which I hadn't ever found endearing before, was put to good use.

As for the legislation itself, I'm persuaded by the analysis that it's a foot in the door, and an important re-definition of the federal role in health care. We’re closer to a single-payer system now.

Also, back to the politics, I think Obama’s detachment during 2009 was part of a longer-term plan to establish his bona fides as a post-partisan. The country doesn't blame him for his failure to get GOP votes, and the next two issues, immigration and financial reform, are going to be trickier for the Tea Partiers to oppose.

The Healthcare Elephant in the Room

Since my home in the 8th Dimension has been without electricity for five days now (and still counting), it's given me lots of time to think up a new post.

Apparently there's some sort of discussion going on about healthcare reform, so I figured that would be a good topic.

But I don't want to comment on the proposed reform(s) in Congress. For sure, my political philosophy gives me a point of view. But I think most of the arguments over these bills are really fueled by philosophy rather than an actual disagreement over facts that can be ascertained. There's plenty of blogging already on that, I'm sure.

Nor did I want to blog about whether conceptually we have a systemic cost crisis on our hands. For the record, I don't understand why everyone gets so freaked out about a rising percentage of GDP going to healthcare. For individuals on the margin, this is a legitimate issue. But as a country, where else do people think that money should be spent by individuals? More entertainment? Travel? Bigger (or second) houses? More food? More technological gadgets? Defense?

I personally think that Americans generally have the type of healthcare system we want already. We want to have hospitals be somewhat local even if they're half full, we want lots of extra tests to make sure no one misses even a low-probability terrible outcome, we want to be seen by specialists even if the outcome isn't better, we want lots of intensive end-of-life care rather than be told it's time to give up, etc. We have more disposable income per capita than other countries, so this is how we spend it. I'm not too worried about healthcare eventually becoming 100% of GDP-- I'm a strong believer in Herbert Stein's Law. ("If something cannot go on forever, it will stop.") How it would stop and what Americans would agree to live without, no one knows.

Wait, I guess I did want to blog about that part a little bit.

Here's the part I had in mind -- a simple math exercise to analyze how to cut healthcare costs if that is one's goal.

The first place most people would look are medical devices, pharmaceuticals and biotechnology products. The prices are more visible to most healthcare consumers and often have a sticker-shock effect. Not to mention all the political rhetoric. Unfortunately, it turns out that these products comprise only about 10% of healthcare spending.

These industries have average after-tax profits of about 15%. So, in other words, of that 10% contribution to healthcare spending about 1.5% is pure profit. This means that even if all those industries were nationalized and run permanently on a breakeven basis, healthcare spending would drop only 1.5% in the first year. Then presumably, the cost trend would resume.

Where does the real money go? This is the elephant in the room that everyone seems to be avoiding but must be obvious to anyone who has studied the issue. About 35% of healthcare spending goes directly to physicians - the largest single slice of the pie. How do other countries keep costs down? This is where.

In Canada, physicians make 40% less than their U.S. counterparts. In Germany, the average physician annual income is $80,000. This is less than electricians and plumbers make in Germany.

If you want to take 5% or 10% off of healthcare spending, this is how you can do it. Cutting physician salaries by 20% would take seven hundred basis points out of healthcare spending. (The other way to do it would essentially be to ban end-of-life procedures but this is very difficult to imagine happening. About 25% of the Medicare budget is spent on the last four weeks of 5% of enrollees' lives. But you never know going in which ones will pull through.)

Some people argue that physicians in those countries haven't accumulated huge debts as medical schools are heavily subsidized. This is a true point, but the math doesn't work. If the average doctor enters the field with $200,000 in debt, that's only 18 months of average salary to pay off. It's not enough of an argument (on its own) to justify the high salaries compared to the rest of the world.

Why does no one want to acknowledge this when the math is so obvious? I believe it is because doctors are well respected both as a profession and (almost always) when it comes to one's personal physicians, and because everyone in Congress knows this is a lobby that cannot be defeated politically.

Image: State Library of New South Wales via Flickr.