Health


Last week the Lancet Public Health published a comment piece by me about the challenges it faces in the near future. This comment was linked to a research article that found a huge increase in elderly people with care needs in the UK population over the next 10 years. This article predicted that 10 years from now there will be a 25% increase in the number of people aged over 65 who have care needs, which corresponds to a numerical increase of 560,000 people. The largest growth will be in dementia-related disability, which may perhaps have been a slightly stinging finding for the government given that Prime Minister May had released a deeply unpopular policy for paying for dementia care in the same week. The article and my comment received some media coverage (see e.g. here), focusing on the impending massive increase in care needs and the risks to the NHS. My article made the point that this growth in elderly people needing care comes at a time when a unique combination of policy challenges confronts the incoming government: an underfunded social care service, an NHS in crisis, a looming workforce shortage, and the risk that Brexit will lead to an immediate loss of staff and a long term reduction in the number of staff entering the NHS. I made the simple point that the British health and social care system needs more money and a commitment to expand the local workforce to make up for the looming drop off in European staff. This is particularly pressing for the social care sector, which unlike the NHS employs large numbers of very low paid staff who have a very high turnover rate and are very often European. Once Brexit hits that turnover is going to bite, because new staff simply won’t be there to replace the high churn rate. There is no solution to this problem except to increase pay and improve working conditions to ensure this sector of the economy can attract British workers and retain them.

The problem is not limited to social care, however: something between 5-10% of staff in the NHS are recruited from Europe, which means that even if the final Brexit deal allows existing staff to stay, over the medium term natural attrition will mean that the NHS needs to increase local recruitment to cover that 5-10% of new staff who are not being recruited from Europe. Worse still, Brexit will hit just as the health workforce hits a wave of retirements of staff recruited from the baby boomer generation, and as junior doctors show increasing signs of burnout and the nurses association is talking about striking to preserve pay and conditions (the strikes themselves will not necessarily be a crisis – though I’m sure Jeremy Hunt can turn them into one! – but the underlying problems they signify will be). It takes 10 years to make a new doctor and about 7 years to make a new nurse, so the entire workforce planning system in the UK needs to be restructured and enhanced rapidly in the next 1-2 years if the UK health and social care system is to be ready to handle this. To be clear the issues are huge: A rapid increase in disability and health risks in elderly British people occurring after a decade of leakage of staff back to the EU, as a generation of older staff retire, and just as the cut to the nurse’s bursary and NHS funding leads to a shortfall in new staff, with no way to make it up through EU recruitment. This will affect every aspect of coverage, quality of care, equality of access, and timeliness of access in a system that is already struggling to handle basic pressures.

Today the Nuffield Trust released a report that adds to the pressures revealed by the article I was commenting on, by discussing additional health system pressures that will arise from leaving the EU. This report finds that:

  • If the Brexit agreement does not properly support UK citizens abroad and the welfare sharing arrangements they benefit from, 190,000 elderly Britons will return home and cost the government an extra 500 million pounds a year
  • If these elderly Britons return home they will require hospital beds equivalent to two new hospitals to care for them
  • If the NHS cannot continue to recruit nurses from the EU there will be a shortfall of 20,000 by 2025
  • The 350 million pounds a week that can be saved by leaving the EU was a myth, but in the first two years after leaving there may be more money to pay for health and social care – if the government is willing to spend it

The publication I commented on predicted an extra 560,000 people with care needs by 2027; this Nuffield Trust finds 190,000 more elderly people the study didn’t cover, and suggests they will have significant care needs currently being (basically) paid for by Europe, and it quantifies the shortfall in staff I identified. It’s worth noting that the NHS employs 320,000 nurses, so the 20,000 shortfall is about 6% of the workforce, but this 6% shortfall comes also when a large number of nurses will be retiring, and about the same time as the current reduced nursing student cohort hits the workforce. A lot of these numerical details are very hard to predict, but it appears likely that there is going to be a major reduction in a nursing workforce that is already not well stocked by OECD standards. Nurses are the bedrock of a functioning health system, and although there is no international evidence on the best nursing levels, a rapid decrease in numbers is only a bad thing, especially if combined with a rapid increase in health care demand.

This problem will face whoever wins the election in two weeks, since a lot of these pressures are the result of a Brexit decision we are supposed to believe is set in stone, and population ageing. But any party that does not have a plan to increase the health workforce, to restore funding to social care, and to improve payment, retention, credentialling and work conditions for the workers at the bottom of the social care heirarchy, is not serious about the depth and seriousness of the crisis the NHS faces. Although the Tories like to talk about working better rather than increasing funding, the reality is that the NHS desperately needs more money; and so long as Labour continue to dance around the issue of exactly how they will handle free movement, they present no serious plans to handle the looming workforce crisis. The British people voted for Brexit without having any clear information about what it would mean for the social care sector, while Boris Johnson flounced around the country in a bus that was advertising a clear lie. Now the election looms, and both parties have to come up with policies to handle this unavoidable crisis on a 10 year deadline. I think from a brutally practical standpoint, the real winner of this election will be the party that loses it, because whoever wins is going to be held responsible not just for Brexit’s short term economic damage, but for the long-term health and social care crisis that neither party is properly prepared to deal with.

The NHS needs more money and more staff. Without it, unless the winning party can deliver a truly miraculous Brexit deal, the UK health and social care system is heading for two decades of increasing and unavoidable crisis. I’m not confident that anyone in British politics is ready to deal with this problem, or even listening to the warnings. Let’s hope, for the sake of Britain’s elderly population, that I’m wrong.

In the wake of the Republicans’ catastrophic inability to repeal Obamacare, many people have begun to accept that the Patient Protection and Affordable Care Act is the new basis on which the US health system will be built. This means that for the foreseeable future, assuming the Republicans are not able to suddenly develop a competent and coherent health financing agenda, progress towards universal health coverage (UHC) in the USA will depend upon improvements of and reform to the free market system as it is regulated by Obamacare. Obamacare is unusual among developing nation health financing systems for its heavy reliance on private insurers as the fundamental providers of risk pooling, as opposed to most other health financing systems where some form of government insurer provides the overwhelming majority of national health financing. For a lot of critics of Obama and Clinton from the left this is seen as a failure, and a sign that they are neoliberal sellouts: under this view of health financing reform, no market-based system will work and Obama sold out his own supporters when he put forward a plan that did not include single payer or a public option. For conservative policy makers in non-crazy countries – for example the UK[1] or Canada – and also in developing countries moving towards UHC, this offers an opportunity to see whether a free market approach to health financing can deliver the key goals of universal coverage and financial risk protection. The problem for conservative thinkers on health care is that there seems to be very little evidence that free market systems work, and the problem for left wing critics of Obamacare is that there is no evidence single payer could have been delivered in the modern US political environment. So for both far left critics and moderate right wing admirers of Obamacare the obvious question is: can UHC be achieved without a single payer system?

This week’s issue of the Journal of the American Medical Association has published an opinion piece addressing this issue. Entitled Achieving universal health coverage without a single payer: Lessons from 3 countries, it gives a brief overview of how Singapore, Germany and Switzerland have achieved UHC with at least nominally non single-payer systems. It attempts to address some of the key differences between these systems and the USA, and some ways in which the health market in those countries is different. Since JAMA is behind a pay wall, I thought I would give a brief summary of a few of these points.

First the article opens with a clanger, asserting that “Universal coverage is a top priority not only for Democrats but also for President Trump,” which does lead one to wonder how critical the authors are. It then goes on to dismiss summarily one of the key ideas raised by Republicans for making private health coverage more affordable in the US: high risk pools. The intention of a high risk pool is that patients with high cost or pre-existing conditions be offered insurance from a special fund financed by the government, thus removing them from the main private insurance risk pool and enabling insurance companies to reduce the cost of mainstream health insurance products. The problem with this model is that it is enormously expensive and there is no evidence that it works. The article points out that no US government will be able to justify the amount of money required to properly finance high risk pools, and that it probably costs upwards of 8 billion US$ a year to do this. It also notes that – contra Paul Ryan’s assertion that pre-ACA high risk pools worked great – most of the state-based high risk pools in the pre-ACA era were hideously expensive and did not work. The article also points out that a preferred strategy of some left-wing critics of Obamacare – shifting high risk patients onto Medicare – may also not work, since Medicare is already a high risk pool and expanding it by dumping in the highest cost patients will be impossible without increased funding (the article uses the language of sustainability, about which I’m suspicious because of its origins, but it cites well-respected sources on the challenges of continuing to finance Medicare if it is treated as a high risk pool).

So given this, the only way that a private system will be able to achieve universal coverage is if everyone is enrolled in insurance, and insurance is properly financed. The article describes the systems in Singapore, Germany and Switzerland, and how each of them force all their citizens into insurance coverage. For example, about Singapore it says:

Singapore institutes compulsory contributions from employers on behalf of their employees to create medical savings accounts. Employees maintain these accounts for health care expenses such as health and disability insurance premiums, hospitalization, surgery, rehabilitation, end-of-life care, and outpatient services. Those failing to pay their premiums are subject to garnished wages and other legal actions that can force payment of back premiums, penalties, and interest. Unemployed or low-income individuals are eligible for government subsidies that enable them to pay for the premiums.

and it points out that Germans are enrolled automatically in “private” funds that take a guaranteed 7.3% of their income. It’s hard to imagine any such plan being popular in the modern US, where the individual mandate has been subjected to years of withering don’t-tread-on-me type criticism and the idea of paying an income-based premium is terrifying to the GOP’s donors. In Switzerland and Singapore, where the systems do not use tax-based payments, they have government subsidies for (according to the article) up to a quarter of their population. So these systems – which by all accounts are functioning, affordable and tolerated by their citizens – share Obamacare’s key tactics of means-tested subsidies and individual mandates.

The article also makes the point that these systems have a very healthy free market structure, with much more vibrant private markets than the USA:

Germany in 2015, for example, had 124 sickness funds and 42 private health insurance companies, and the average resident of Switzerland in 2011 could choose from 59 health insurers offering coverage, with the 5 largest insurers covering 43% of the population. By comparison, in California, a state with approximately half Germany’s population, only 7 firms covered more than 95% of privately insured individuals in 2011, with the 3 largest firms covering 75%. In Massachusetts, with a population slightly smaller than Switzerland’s, 3 insurance companies enrolled 79% of individuals with private insurance.

I think this might be pushing the comparison a little bit, because many of the “sickness funds” in Germany are likely union-run or industry-based mutual associations with very strict management criteria, non-profit structures and guaranteed membership, and they may be regionally based so not actually directly competing with each other[2]. Also, I’m very confident that all three countries studied have rigorous price regulation and strict government oversight of providers (hospitals and clinics), so that they cannot for example price gouge the insurance provider for an infamous $500 band aid as they can in the USA. It’s much easier for private insurers to compete with each other for market share when they know what the cost of the insurance payout is likely to be, and can be confident that the provider won’t charge them arbitrary amounts, and I suspect that this certainty also removes a whole layer of administrative staff at both provider and insurer, for which the US system is infamous.

Having given an overview of these systems the article draws a simple conclusion and gives a firm recommendation: Obamacare needs tougher enforcement of a more punishing individual mandate. I think this conclusion is only partially correct, missing the role of price regulation and cross-subsidization from general taxation that protects these private markets.  So I think that the article is a little strong in concluding that the USA can definitely achieve universal health coverage without at least, for example, introducing a public option to every market place (or at least the rural areas). But it does make the point that a better regulated insurance market with better subsidies and a much tougher mandate would likely encourage competition, and achieve universal health coverage (or close to it) without driving up costs. It certainly seems that the architects of Obamacare knew this and had a long term plan for its expansion and improvement, and assuming the world survives Kim Jong Il’s birthday this weekend, hopefully the Democrats will be back in power in the USA soon enough to begin taking the next steps along that road. I’m not convinced yet, but it is still possible that Obamacare could show the way to a genuinely private, free market alternative to achieving UHC without single payer. In my view, however, if Obamacare (and human civilization!) does survive the Trump presidency, it is likely to become an increasingly state-regulated and state run system, rather than a robust private market place, because introducing a public option, slowly squeezing out private provides, and then making health insurance premiums fully means-tested and tax-based, is a much more reliable way to make everyone happy.

Still, for genuinely interested conservative policy-makers outside of America (whose “conservatives” have no interest in anything resembling policy), the next few years of Obamacare offers an exciting opportunity to develop new pathways to UHC. Given the complexity of movement towards UHC in some low income countries, and the very limited government finances in many of them, it would be interesting to see whether Obamacare’s roll out, expansion and improvement offers a new and more viable pathway to UHC than those currently on offer. I’m not holding my breath, but it will be interesting to see what lessons we can learn from this new and quite unique approach to one of America’s (and the developing world’s) big remaining problems.

First we have to survive the Trump presidency, though.


fn1: Caveats on the use of “non-crazy” should be inserted here, especially after Brexit

fn2: Interestingly, these sickness funds sound a lot like the non-profit mutuals that Obamacare was supposed to encourage, and which US “conservative” critics of Obamacare constantly sneer at and declare completely unviable.

By now everyone has learned the news that after 17 days of massive effort to try and force it through the legislature in the dead of night the Republicans have given up on their godawful attempt to repeal and replace Obamacare, and have accepted that Obamacare is now the “law of the land.” Having made no effort at all to reach out to Democrats, and after trying to push it through the Senate using a reconciliation process that was explicitly designed (and admitted) to negate Democrat votes, Trump’s first act of contrition for his and Paul Ryan’s failure was to blame the Democrats for not working with him. He went on to repeat the lie that Obamacare is “exploding” (it’s probably not) and openly admitted that he is going to try and hasten its collapse through executive action, following the logic that a program initiated by Democrats that is screwed into the ground by a Republican government will somehow be seen to be the Democrats’ fault.

Trump initiated this process of screwing Obamacare on his first day in office, when he passed a notoriously vague executive order that instructed all responsible departments to not comply with the details of the law to the extent they could legally get away with. A lot of people were duly concerned about this, because there are a lot of aspects of Obamacare that rely on administrative guidance that can be modified by the government in power. So this week’s New England Journal of Medicine has a short editorial by Jost and Lazarus about whether Trump can actually successfully undermine the workings of the act through administrative action alone. The two authors appear to be lawyers, one with a connection to the Constitutional Accountability Center, which supports the cause of “progressive constitutionalism” (which appears to be the idea that the Constitution is a living document whose interpretation can change over time), so presumably their understanding of constitutional law is fairly good.

The authors point out that reaction to Trump’s executive order ranged from fear to snorts of derision, and proceed to show at least one way in which it has failed bigly. One of the big fears expressed in initial response to the order was that the Inland Revenue Service (IRS) would stop collecting taxes it is required to under the “mandate”, the unpopular part of the law which punishes through the tax system anyone who does not purchase insurance. This was probably Trump’s intention in passing the executive order, but it turns out the IRS ignored him: it admitted on February 15th (a month after the order was signed) that it was still collecting mandate taxes, and that it’s sole response to the order has been to shelve a planned crackdown on tax evasion related to the mandate.

The authors point out why this should be unsurprising: government agencies are required to enforce the laws of the land, and there is a long-standing history of jurisprudence forcing them to. They point out that in fact

it is one thing to delay temporarily a legal requirement or to phase in a new law to facilitate adjustments by affected people or entities; it is quite another to refuse outright to enforce a law already in force, with the aim and effect of undermining that law. The Supreme Court has said that courts may step in to correct any such “abdication” of the executive branch’s duty to faithfully execute the law.

Apparently the highest court in the land has built up a body of precedent which requires government agencies to enforce government law, and the authors seem quite confident that if agencies don’t do this, court action would likely force them to. They go further than this, though, considering the hypothetical case in which the IRS bends the definition of “financial hardship” sufficiently to enable anyone affected by the mandate to be exempted from it on the basis of “financial hardship” (apparently some devious Republicans had considered this oily move). They write:

In a critical 2015 Supreme Court case upholding nationwide availability of ACA “premium assistance” tax credits for eligible low-income insurance purchasers, Chief Justice John Roberts held that courts and agencies must interpret and apply individual provisions of a law — indeed, of the ACA in particular — so as to further its overall “legislative plan.” Roberts concluded: “Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them. . . . [W]e must interpret the Act in a way that is consistent with the former, and avoids the latter.”

This might seem quite reasonable to outsiders, but apparently in America the idea that government agencies must act according to the legislative intention of the law of the land is novel and requires clarification from the Supreme Court.

(Also note that this statement was made by justice John Roberts, a conservative judge appointment by Bush Senior, not one of those quisling liberals who think all toilets should be unisex because they’re radical feminists!)

In conclusion the authors are unconvinced that Obamacare can be undone by administrative action alone, though they concede it could become less generous and function less smoothly as a result of meddling. But the Republicans need to be careful here, since administrative overreach in this regard is likely to be punished by the courts, stacking further humiliations on Trump’s already woeful record of mistakes and inactions. Worse still, there is a big and growing split in the Republican movement over Obamacare, and signs that some of the 19 states that resisted the Medicaid expansion are going to cave, further entrenching Obamacare’s role. In particular Kansas, whose economy has been completely wrecked by Republican Crazy Caucus economic ideals, is desperate for money and is very close to taking the Medicaid expansion because balancing the budget will require the extra money. Virginia’s governor is also trying to get that state covered, and activists are using failure to take the expansion and its associated funds as a stick to beat Republicans locally. With Trump’s popularity nosediving, the collapse of the American Health Care Act showing the impossibility of reform through Congress, and many of the areas that voted for Trump most vulnerable to executive action, it is unlikely that vulnerable Republicans are going to want to push this issue at a local level. So the conclusion of this opinion piece in the NEJM is that while Obamacare won’t work as well under Trump, it is unlikely to be seriously damaged. And the longer it continues to function, the harder it will be for Republicans to repeal it or to continue to even talk about it. My guess is that over the next two years – and especially as the mid-term elections approach and it begins to look like a wave election is going to swamp a lot of Republican congress people – we will see more states take the Medicaid expansion, and moderate Republicans begin to talk strong talk about repairing the existing law rather than destroying it. Whether any of them survive the mid-terms will be another question entirely – but if they don’t, they will be replaced by angry Democrats, raising the possibility that after a wave election in 2019 the Dems might be able to force a veto-proof bill across Trump’s desk, requiring him to sign a public option into law.

Regardless of what happens at the next election, though, it appears that there is no easy way for the Republicans to undermine Obamacare enough to destroy it, and it would be increasingly reckless of them to try. Obama’s legacy looks to on increasingly solid ground, and I think it’s now safe to say that he was one of the greatest of the modern presidents. Who would have thought a Kenyan Muslim could go so far!?

I guess Speaker of the US House of Representatives Paul Ryan (aka the Zombie-Eyed Granny Starver) must be an avid reader of this humble blog[1], for within days of me posting a heart-felt plea for someone in the Republican camp to reveal their health policy principles, the GOP’s Granny-Starver-in-Chief gave a presentation on national TV to explain them. This presentation, intended to explain the Republicans’ Obamacare repeal-and-replace strategy (the American Health Care Act, or as Townhall.com call it, “Swampcare”), involves Ryan with his jacket off, a sure sign that he’s very serious, and it even has powerpoint! A fragment of it can be viewed here, and it’s clear from this monstrosity that Paul Ryan, the great and serious policy wonk of the Republican majority, doesn’t understand how health insurance works. Or worse still, he does understand, and he thinks that insurance is A Very Bad Thing.

From this presentation we can see two health policy principles that the Republicans appear to cleave to: That health insurance is bad and health savings accounts (HSAs) are good; and that the government should be the insurance provider of last resort for society’s sickest. Let’s look at these two principles and their implications.

Do Republicans really think health insurance is bad?

It appears from this keynote presentation of Ryan’s that they do. He makes clear that the healthy are subsidizing the sick and that this is a bad thing, and suggests that this is a bad thing and is the reason that Obamacare prices are rising. The tone of Ryan’s voice, the expression of exasperation, and the follow-up comment that “this is not working” and that the Republican plan will “fix this” are all keys to his belief that health insurance is a bad thing. The healthy, under his formulation, should not subsidize the sick. This is backed up by comments by Rep. Shimkus in the house energy and commerce committee, who when asked about requirements on insurance plans asked “What about men paying for prenatal care”, following up with the rhetorical “Should they?” (That Washington Post article also mentions similar comments from a 2013 committee, where a Republican asked why men should have to pay for maternity care). This isn’t just a glib and nasty comment, it’s a policy position. Note that Shimkus didn’t say anything along the lines of “Pregnancy is a lifestyle choice and our plan will not require insurance companies to cover lifestyle choices.” Rather, he gave an example of someone having to pay for coverage of a problem they will never themselves suffer.

But this is the entire point of insurance: Generally you buy insurance on the assumption that you will never have to use it, knowing that your insurance company will use your premiums to pay for someone who does have to use it. In the case of health insurance, since we all get sick everyone knows that their insurance is contributing to coverage for people who will suffer conditions that most of us will never suffer. Men pay for breast cancer treatment, women pay for prostate cancer treatment, people who are fated to die in a bus crash at 43 pay for alzheimers care that they themselves are doomed never to receive. That’s how insurance works. Once you start saying that people shouldn’t have to pay for things they won’t themselves experience then you are changing the entire nature of insurance. Or, you don’t understand how insurance works.

It’s clear to me from these comments that the Republicans are actually seeing insurance as a Health Savings Account. An HSA is designed so that no one can take out of it more than they have put in, and they use the money in the HSA only on care for the conditions they themselves face. With a well-run HSA the healthy don’t subsidize the sick – rather your current self subsidizes your future self. In this formulation, no one ever has to worry that their money will be used to pay for a treatment they themselves would not face, and no one can get angry about the healthy subsidizing the sick, since it’s only their own future sickness they’re subsidizing. HSAs never suffer from justice issues either – you won’t find a healthy supposed marathon-running non-smoker like Ryan being forced to use their premium payments to cover lung cancer for a sedentary smoker, because they won’t be subsidizing anyone.

So here we have Republican principle number one: Health insurance bad, Health Savings Accounts good.

Government as insurer of last resort

Paul Ryan also touted an alternative method for handling people who are rejected from health insurance plans due to pre-existing conditions, which he described as state-based insurance plans that would cover high risk people. Under this scheme the states get about $10 billion a year to run high risk insurance pools for those very sick individuals. This would enable the health insurers to reject these people, and/or would make a special form of insurance that was better able to handle these high cost cases, enabling health insurance funds to offer lower premiums to everyone else and thus to widen their risk pool. This insurer of last resort model is consistent with the idea of health insurers as a type of health savings account management company: They set a premium for people with pre-existing conditions that is prohibitively high, and then those people “choose” not to pay for the premium and instead run to the government’s high risk pool for coverage. Ryan touted the Wisconsin Health Insurance Risk Sharing Plan (HISRP) as an example of a “good high risk pool” that was shut down by Obamacare, presumably suggesting this as a model for the AHCA.

This is unfortunate for several reasons. The first is that HISRP was cross-subsidized by a tax on all insurance premiums charged in the state, meaning that in fact the healthy were subsidizing this program for the sick; the second is that doctors and hospitals charged lower prices to HSIRP recipients, i.e. they allowed the state to regulate what they were able to charge, which is anathema to Republicans. This is also not an idea that is absent in Obamacare, which offers states funds to set up high risk pools[2], so it’s not clear how this policy is an innovation compared to the current policy.

The other big problem with this high risk insurance pool idea is that it doesn’t work precisely because the people in the pool are too sick. Recent assessments of Obamacare’s state-based pools found that they were running out of money far faster than expected, and many state pools have had to go back to the government for more money. Elsewhere I have read estimates that the AHCA’s proposed funds will only cover about 400,000 high risk individuals, when America has about 2 million people who need them.

Still, this is a policy principle, and it’s not necessarily bad in and of itself – but it does require that the government be willing to offer a potentially open-ended assurance to states that these risk pools will be funded. This might be a good policy idea, but it doesn’t seem like it’s going to be compatible with either a) the Republicans’ historical antipathy for welfare programs and b) the reconciliation process’s restrictions on what funds are available for the plan. It’s the sort of thing that is easily sold as a sop to people concerned about the impact of reform on high-risk individuals, and then easily defunded in practice. If you doubt that, remember this: Paul Ryan’s nickname among his critics is “Zombie-eyed Granny Starver.” Also remember that Ryan is a confirmed liar, who lied about his marathon times to make himself sound like a champion when in fact his marathon times are really average, and you can’t trust liars when they promise to pay you back in future.

What’s wrong with confusing health insurance and health savings accounts?

Now it’s true that in and of itself favoring HSAs over health insurance as a policy tool isn’t necessarily bad. Singapore uses them as part of its health financing system, and China tried them (though I think they moved away from them to a more standard social insurance system), and they could probably theoretically be made to work. They come with obvious equity issues for people born without money, and also they have their own free-rider issues when dealing with people who don’t pay into them but then become sick, but they can probably be made to work. But to make an HSA system work will almost certainly require that they be mandatory (as I think they are in Singapore) and government-subsidized for the young poor. They suffer from many the same problems as private superannuation plans, in that the people who should be paying the most into them – young people – are simultaneously the people with least need of them and the least money to do so, so typically the best way to implement them is mandatorily and by stealth. Of course the Republicans hate mandating anything (except unwanted pregnancies), so they won’t be fond of forcing people onto HSAs; but it is true that HSAs are consistent with general Republican ideas about personal responsibility, no free lunches, etc.

The problem though is that to make HSAs a centerpiece of American health policy requires a root-and-branch reform of how the private markets work. The new Republican bill doesn’t do this, and continues to leave the private markets in the hands of traditional health insurance companies. But it’s clear that the Republican policy-makers are thinking of health insurers as administrators of a kind of HSA program, while the health insurers think of themselves as (and actually are) traditional health insurance companies. This is a big problem, because the policy requirements of HSAs and health insurers are completely different, and confusing one for the other is a disaster. This means that health insurance companies are setting premiums on the basis of an assumption that the government will work to expand the risk pool, or at least not to impede its expansion, while republican policy makers are thinking that insurance companies are setting premiums on the basis of the future underwriting risk each enrollee’s individual future health risk profile presents. So the Republicans have no interest in setting policies that will encourage the healthy (i.e., poor young people) into the market, and may even be trying to find ways to encourage sick people to enrol and pay more (such as through the first-year penalty on insurance for people who let coverage lapse). For example, if they could set policy legislatively rather than through reconciliation, Republicans might pass a law that allows health insurers to set premiums based on each person’s individual future risk profile (so e.g. young women pay more than young men because they will get pregnant), but the insurance companies would prefer to set premiums on the basis of actuarial risk and the size of the risk pool, which is a more instantaneous calculation. This could create policy conflicts that prevent insurers from properly setting prices while simultaneously discouraging young people from entering the risk pool.

Health policy in America for the past 100 years has been built around health insurance markets, not HSA markets. The republicans, by thinking of health insurance as a type of HSA, risk making policies to encourage a market that doesn’t really exist, while the health insurance market struggles to function without proper government subsidies. A good example of this is the way the subsidy design in the Republican plan does not vary by state. Republicans seem to be completely ignorant of the fact that premium prices vary by state, since they depend on the size of the risk pool in each state and the relative balance of healthy and unhealthy, old and young, and also the cost of health services in each state. So Alaska is much more expensive than California. Lawmakers who understood health insurance as a risk pool mechanism would get this, but policy makers who think that health insurance premiums are set as if they were HSA fees will not – HSA fees depend on the future health risks faced by an individual, so may not vary much by state, while health insurance premiums depend on the instantaneous balance of healthy and high-risk individuals in a geographic area, so vary a lot by state.

This confusion is a recipe for trouble, and a sign that despite having six years to sharpen their understanding of these issues, supposedly intelligent and committed Republicans haven’t bothered.

What does this say about the media’s love of Paul Ryan?

The media love to treat Paul Ryan as a serious Republican policy thinker, when in fact he is nothing better than a fraud and a shonkster, a hired salesperson for the policy preferences of his rich patrons. He doesn’t have any deep policy ideas, and he doesn’t care to or need to – his only legislative goal is to dismantle welfare programs and spend the money saved on tax cuts for the rich. He is also a confirmed liar and a fantasist, with no personal integrity – hardly surprising since he comes from a party that has long suffered from “family values” politicians who cheat on their wives and anti-gay politicians who solicit in bathrooms. But the media is labouring under the impression that America has two serious parties, rather than one serious party and one gang of frauds and criminals who occasionally get hold of the machinery of the state long enough to loot it for the benefit of their rich patrons. We now know that these pirates in the GOP aren’t even patriotic – they’re tools of the Russians and the Turks, and have moved from selling their domestic policy to the highest bidder, to selling their foreign policy to whatever foreign agent will help them win power. But so long as the media needs to keep pretending that the Republicans are a serious party and not a gang of wreckers and criminals, they also need to find people within that party they can treat as serious even when they’re not. Paul Ryan, with his fake sincerity and his ability to act like an idiot’s idea of a smart person, and his sleazy aura of seriousness, offers them someone to elevate to the level of “thinker”, even though he has repeatedly shown himself to be incapable of the task. Charles Pierce, who invented the term Zombie-eyed Granny Starver, summarizes Ryan:

Every time he produces a “budget,” actual economists collapse in helpless laughter and other Republicans hide behind the drapes. As a vice-presidential candidate, Joe Biden made him look like a child, and Ryan was unable even to carry his own precinct for the Republican ticket.

Since Obamacare reared its ugly head Ryan has consistently and repeatedly squibbed on the basic responsibility to produce an alternative policy, and now he has unveiled this one – and claimed it’s the best chance Republicans will get to repeal Obamacare – he has confirmed what anyone with any sense already knew: he hasn’t got a clue, and doesn’t care to make the basic effort required to have a clue. So will the media finally recognize this and give up on him – and hopefully by extension all the frauds and liars on his side of the chamber – or will they continue their love affair with him, and continue to sell the American people short? My money’s on the latter, because even though the past three months have made clearer than ever before that the Republican party is just a gang of crooks, the media will never admit their role in enabling these frauds and scoundrels over the past 30 years. They have to hit rock bottom before they can admit their problem and make amends, and I’ve no doubt that discovering their favourite policy wonk knows nothing about anything is nowhere near rock bottom for the US media.

We have a long way to go yet before the Republican party and its enablers are properly shamed for the damage they have done. Let’s hope that Obamacare repeal fails before we get there.

 


fn1: Maybe that’s why his health policy knowledge is so bad! But at least he won’t use OLS regression on count data like good ‘ole Barry

fn2: Funnily enough Ryan, a confirmed liar, didn’t mention that Obamacare set up a state-based high risk pool in Wisconsin when it closed the existing high risk pool. The new one has about 1100 enrollees – because most of the 21,000 enrollees in the previous one became eligible for Medicaid or individual insurance plans under Obamacare. This is an interesting bait-and-switch that Republican shonksters like Ryan use: at the same time as they are proposing to do away with a government entitlement and kick the poor over to the mercies of the free market, they attempt to gee up some outrage about how the Democrats unwound a government entitlement that people really liked. I guess I shouldn’t be surprised that a shameless liar like Ryan has no shame, but it still disappoints me every time I see it.

Reports have been filtering out recently of a study that found a relationship between US unemployment rates and deaths due to opioid use. The Washington Post reported on these results, suggesting that there is a connection between unemployment and death due to “diseases of despair” (their words), and citing the unfortunate Case and Deaton study that found increasing mortality rates among non-hispanic whites in the USA. The implication is that some kind of post-2008 economic depression-related despair has driven the white working class to drugs, with an attendant high death toll. This is particularly poignant in light of the recent election, since some of the states (like West Virginia) that voted heavily for Trump are also heavily affected by opioid abuse. The implication here is that the economic despair supposedly driving Trump voting is also driving high mortality in these communities, which have also supposedly been hollowed out by globalization, immigration and Democratic neglect (only Democrats can neglect poor white people; Republicans ride in to save them with trickle down economics while Democrats abandon them for groovy inner-city Black Lives Matter activists and funky Chicago law professors). But is any of this true?

The news reports are based on the findings of a study by Hollingsworth, Ruhm and Simon, Macroeconomic conditions and opioid abuse, published in my bete-noir, the National Bureau of Economic Research (NBER) working papers series. This is where economists publish their brain farts before they are shot down in peer review, and this paper is a typical economist brain fart. This study suffers from the usual problems of NBER papers: it has a ludicrous model, uses the wrong modeling approach, does some dubious data manipulation, and probably isn’t representative. Worse still, the study is based on a failed and useless model of drug addiction that eschews a balanced understanding of drug addiction in favour of a lazy just-so story about the causes of drug addiction that has no basis in reality. I will briefly discuss the modeling problems that make this study useless, and then discuss in more detail the problem of its underlying theoretical structure.

Modeling problems with the study

The study is a classic example of how economists just cannot handle data well. First, the authors have presented a ludicrous model which has an enormous number of explanatory variables – one for every county in their data set, one for every year, and an additional term for the combination of states and years – which means that the model has a huge number of terms to be estimated. Worse still, they do not include age or sex in the model, so they don’t adjust at all for differences in age structure between different counties and states or ethnic groups. Non-heroin opioid addiction in the USA seems to be clustered in rural whites, and probably reflects addiction pursuant to pain relief for real health problems. If so the problem is likely more prevalent in older groups (which have higher levels of chronic pain) who may well be more vulnerable to early death – so adjustment for age is important in these studies. The authors find mortality rates in whites increasing much faster than blacks or hispanics but this could well be because these groups are younger and thus earlier into their drug addiction, or simply less likely to die. This complexity is further compounded by the authors decision to impute drug types to drug-related deaths where the drug is not specified – they simply statistically estimate what drug caused the death, which makes all their results highly vulnerable to the quality of the model by which they impute 30% of all drug-related deaths. So the authors have estimated a model with a huge number of terms and have not properly adjusted for the age structure of the population. This is extremely important, since the CDC has shown that opioid-related mortality is much higher in older people, and if areas with many old people also have high unemployment there will be a spurious relationship between unemployment and mortality if age is not adjusted for.

Incidentally, this paper gives completely different crude opioid mortality rates to the CDC, probably because it uses a subset of states with unusually high mortality rates. So there is a huge generalizability problem right there.

The other big problem with the model is that, of course, being economists, the authors do not use the correct modeling approach. Opioid mortality is a rare even with very small numbers of deaths when disaggregated by race at the county level – even the authors admit that many of their data points have zero deaths – but the authors have chosen to divide the counts of mortality by the population of the area, to get crude rates, and then to model these using ordinary least squares linear regression. As I have repeatedly said here, OLS regression is completely the wrong method to use on data that is constrained. In this case the data is constrained to be greater than or equal to zero, and is likely very close to zero in most cases. OLS regression assumes a completely different probability structure to the correct method, Poisson regression, and applying OLS regression to rates means that you are assuming all zero rates have the same probability. In contrast, a Poisson regression adjusted for population size models a zero count with a different probability depending on the population size, so a zero event in a large population has a different meaning to a zero event in a small population. It also models a non-linear relationship between the underlying death rate and the unemployment rate, which is crucial to understanding how the underlying death rate is related to unemployment. By not using a Poisson regression for rare events the authors have mushed together a bunch of very different mortality patterns as if they were all the same, and completely changed the nature of the relationship between unemployment and mortality.

Big no no!

So the modeling is completely flawed, but this isn’t the worst part of this study. The worst part of this study is that the underlying theory is completely flawed.

Opioid use is not a disease of despair

The fundamental problem with this model is the assumption that macroeconomic conditions drive opioid use. Figure 1 shows the observed and modeled number of monthly deaths due to heroin overdose in New South Wales, Australia between 1995 and 2003, taken from Degenhardt and Day, Impact of the Heroin Shortage: Additional Research (I prepared this figure for this technical report).

Figure 1: Monthly observed and modeled heroin overdose deaths in New South Wales, 1995-2003

This figure shows a clear rapid peak occurring in 1999, followed by a gradual decline and then a sudden downward step in January 2001. This downward step is even more evident in heroin possession offences (Figure 2, also prepared by me, from Gilmour et al, Using intervention time series analysis to assess the effects of imperfectly identifiable natural events: A general method and example, BMC Medical Research Methodology 2006; 6:16).

Figure 2: Observed and modeled trend in heroin possession offences in New South Wales, 1995-2003

Is it really conceivable that trends in unemployment were so intense over the 8 years of this data series that they caused heroin possession offences to more than double, and heroin mortality to double, within 2 years, and to then decline by 50% before halving in one month? What are the macroeconomic effects driving this phenomenon? In fact youth unemployment in NSW declined consistently over the 1990s, and was at a historic low when heroin mortality peaked. What changed over the 1990s was the availability of heroin, which was flooding the market in the mid-1990s; and what changed in 2001 was that new models of drug interdiction and cooperation between police agencies led to unprecedented success in fighting drug traffickers, so that in the early ’00s they pulled out of Australia in favour of easier targets. The result was a sudden precipitous decline in heroin availability, a massive increase in cost, a temporary increase in street-based sex work and cocaine use, and a rapid flight of young people from the market. This occurred against a backdrop of readily available harm reduction services and widespread, free methadone treatment, to which many drug users fled when the price skyrocketed.

The reality is that drug addiction patterns are driven primarily by availability of the drug and availability of treatments for drug addiction. Far from being a “disease of despair” as the Washington Post described it, with patterns of use determined by social dislocation and poverty, heroin addiction is a disease of opportunity, driven primarily by the presence of the drug, its ease of use, and the economic potential to purchase it. There is no relationship between drug use and unemployment or poverty, and we have known this since Robin Lee did her groundbreaking work on returning heroin addicts after the Vietnam war. I suspect the truth of the American opioid epidemic is much more boring, and much more difficult to explain, than unemployment: It is a problem of availability. I don’t know what causes that problem but my guess is that sometime in the 2000s legislative changes made opioids much more easily available. In 2003 the Medicare Prescription Act was passed, and my guess is that it made it much easier for middle-aged poor people to get access to pain relief – pain relief they desperately needed for a wide array of real problems. With access to affordable opiates but with no corresponding access to specialist pain management professionals a cohort of middle-aged workers became addicted to opioids, and in the subsequent 10 years they started dying. It’s a boring health policy explanation for a terrible problem, and it can only be fixed by improvements in quality of care, access to specialists, and careful attention to modern strategies for pain relief.

Unfortunately this story doesn’t fit with a narrative – popular on left and right – of drug addiction as a disease of despair. In this narrative the left sees drug addiction as a product of an alienating and destructive society, best solved by improvements in welfare and labour rights, while the right sees drug addiction as a consequence of unemployment and poverty, which are best solved by getting everyone into work (since good welfare programs are anathema to the right). For economists both of these stories show the primacy of economics as a driver of social problems, and make a good just so story. But the reality of opioid addiction is that it is a complex health policy problem best solved by careful attention to the way that opioids are dispensed and pain is managed. True, this policy prescription requires potentially quite radical changes in the way that doctors approach chronic illness, poverty and occupational health – but it’s completely boring outside of health policy. Stories of a “generation left behind”, forced to vote for Trump because of the carnage sweeping through their blighted communities, are much more interesting than “oh yeah, we made dangerous drugs cheaper and didn’t train doctors how to manage them.”

This article and the interest it drove are another example of two pernicious problems in modern debate: economists can’t be trusted with health data, and journalists are too quick to believe economists. When this is tied with a problem that is easily amenable to sensationalism and patronizing assumptions, of course you get a narrative that is completely divorced from the truth. In this case we don’t know what the truth of the numbers is, since the economists in question made a model so bad it has no bearing on the truth; and we were led into believing that this model could ever explain the very real problems facing these communities by credulous economists and journalists all too willing to believe lazy stereotypes about drug users and drug use.

Let’s score that as another failure for two of the worst professions, and hope we can make some real changes to prescription laws and pain management so that the people affected by this problem can find better, safer ways of managing their chronic pain. And please, please please, can economists please stop touching health data until they learn a method other than OLS regression?

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The New England Journal of Medicine appears to have plunged deep into the debate on health insurance reform since Trump was elected, and in its 9th March issue has a series of articles and opinion pieces on Obamacare’s effects. This includes a piece pointing out that Obamacare expanded access to treatment for substance addiction, including opioid addiction (a big and growing problem in the US at the moment) and also a research article examining the impact of the medicaid expansion on specific health and health financing outcomes (the findings: it was broadly very positive). It also has a short research article examining the claim that the individual insurance markets have been thrown into a death spiral by the poor design of the law.

This claim has been going around for about a year now, and is generally based around the fact that some insurers have left some markets, and in some cases blamed Obamacare for their decision. For example, Zero Hedge made this claim in 2015, and the National Review took it up in July 2016. Articles discussing the alleged failings of the exchanges typically point to the withdrawal of big companies such as Aetna from some exchanges, suggesting that these companies are withdrawing because the fundamental dynamic of the exchanges prevents them from making a profit. This is important in the US context because for people earning above 138% of the federal poverty line who do not have employer-based insurance, the best and most efficient way for them to get insurance coverage is through a marketplace called an exchange, which is a special clearinghouse for selecting Obamacare-compliant insurance plans that is set up either by your state or by the federal government if your state refused to cooperate with the law. (An example of a generally well-liked exchange in a Republican-run state is Kentucky’s Kynect exchange). Obamacare’s defenders have pointed out that some consolidation is natural in markets when they change, and that new entrants or changing business practices will naturally force some businesses to fail or leave – that’s capitalism! Under this defense, the exchanges are working as intended and there’s nothing to worry about, except that in some smaller states this process may lead to a collapse of competition as only one or two insurers remain – a problem Clinton intended to fix by introducing a public provider in all markets if she won the presidential election.

The new article in the NEJM explores this issue in detail, by collecting data on all the plans that operated in exchanges from 2016 – 2017 and comparing those that left with those that remained. The authors make the particular point that once the exchanges opened the marketplace itself changed, and this had implications for insurers. They say:

In particular, the ACA’s insurance-market reforms required firms to develop and market new products that were attractive to low-income Americans who faced few access and pricing restrictions based on their underlying health status.

This means that organizations that are unfamiliar with these market conditions might struggle. They explain this as follows:

Anecdotal evidence supports the argument that the skills of particular insurers may not have been well suited to these marketplaces. Many of the exiting firms, such as UnitedHealth, have primarily covered enrollees in the self-insured–employer market, in which insurers provide administrative services and are not primarily responsible for bearing actuarial risk or for developing products targeting low-income consumers. In addition, many of the assets that have proven quite valuable in the self-insured market — such as a large national footprint that is attractive to multistate employers — may not be particularly useful in state-based individual insurance marketplaces.

They then present the results of their detailed assessment of the properties of those businesses that entered or left the market place, which they summarize in a table, reproduced as Table 1 below.

Table 1: The characteristics of leavers

This table makes clear that the insurers who left the marketplace in 2016 were offering more expensive plans with narrower networks and lower levels of behavioral health coverage; they were also much more likely to be bigger actors in the market for fully-insured people and much less likely to have experience in Medicaid markets. Overall this suggests that these companies left the exchanges not because the exchanges were flawed, but because these companies were not experienced in targeting low-income Americans who make up a large share of the individual insurance market, and having made a play at the individual market decided to get out when they were out-competed by organizations with more experience in the marketplace. The authors further note that actually a lot of the insurers active in the exchange markets are making a profit and are aggressively targeting new marketplaces – but these insurers tend to be smaller organizations with experience in Medicaid services, and don’t attract the same attention as the big employer-market insurers who failed.

This study isn’t definitive and has some limitations – for example it did not compare leavers in 2016 with historical leavers before Obamacare was implemented, and it only compared silver plans (which are the most popular but not necessarily the most profitable, I guess). Nonetheless, it gives the lie to the claim that Obamacare’s exchanges are not working, or at least suggests that they are working well enough to warrant tweaks and improvements rather than complete abolition. Once again the NEJM has shown that Obamacare’s opponents are long on rhetoric and short on facts, and that although this health care law is not perfect, it is doing okay and is certainly a significant improvement on the status quo. Let’s hope that whatever reforms proceed over the next two years will lead to improvements in the areas that are not working, and not wholesale destruction of America’s best chance at universal health coverage in half a century.

It’s unlikely that this blog has any readers, and if it does it is unlikely that any of them are dyed-in-the-wool US Republicans, but just in case there are any out there, I would like to ask you a question. Can you articulate the objectives of a Republican healthcare policy? Can you describe what principles would underlie such a policy, and what methods would be used to achieve it? The new republican “alternative” to Obamacare has been released and it has attracted a lot of attacks from the right as well as the left, with many Republicans decrying it as “Obamacare lite” and complaining that it retains many of the key features of Obamacare: the mandate (now disguised as a fine), subsidies, and regulation. Some of the people attacking it (e.g. Erick Erickson at the Resurgent) seem to believe that repealing Obamacare now and working for a full replacement over the next year would be a good idea, which suggests that chaos in insurance markets is considered a small price to pay to achieve Republican objectives in healthcare policy. But what are they? A recent Vox article on the new plan suggests that it has mistaken the slogan (“repeal and replace Obamacare”) for the actual policy goal, because while the proposed plan would appear to meet the goals of the slogan it doesn’t actually offer any improvements on the actual plan. Many right-wing critics of the plan seem to agree. But none of them seem to be able to articulate what the objectives, principles and methods of a Republican healthcare policy would be. So what are they?

By way of comparison, most of the rest of the developed world and an increasing number of developing countries have achieved universal health coverage (UHC), and it is easy to identify the objectives, principles and methods of this movement. UHC has a specific objective, defined by the WHO as

ensuring that all people have access to needed promotive, preventive, curative and rehabilitative health services, of sufficient quality to be effective, while also ensuring that people do not suffer financial hardship when paying for these services

This is a clear objective – you may not agree with it but you can’t fault that it is clear and definitive. If any quibbling is going to go on here (and it does) it will be over the definition of “financial hardship,” which varies from place to place and time to time, but is at least a thing that can be defined. What is the Republican equivalent of that definition? Where is the Republican equivalent of that webpage?

The movement to UHC has also defined specific principles of health coverage. There is a famous diagram that defines a nation’s health services in terms of the proportion of the country covered, the range of services covered, and the magnitude of financial coverage offered, summarized in the cube shown below.

These are the principles under which UHC is defined and changes in UHC are assessed. Typically as countries move towards UHC they will make sacrifices on one or more dimensions of this cube, but in principle they will be trying to expand the fiscal space to incorporate all of them. For example, the UK National Health Service covers all the cost of medical care and covers all the population, but doesn’t cover all services (e.g dentistry), while the Japanese system includes some co-payments (so doesn’t cover 100% of the fees), but includes dentistry in its services covered. In my opinion this cube needs a fourth dimension, timeliness, but at its basic level this cube describes the goals of the system. In addition UHC as defined by the WHO attempts to achieve equity, although that could be wrapped up in the dimensions of population covered and cost-sharing. In any case, every UHC program can be assessed in terms of how well it achieves the goals defined by the cube, and these constitute the principles of health coverage. This isn’t a perfect model (it excludes quality and timeliness, for example) but it’s a set of principles we can work with.

What is the Republican approach to defining a successful health policy, and how do you aim to assess progress towards your objectives?

Finally, UHC as it is supported by the WHO is supported by a variety of different payment and delivery mechanisms, which are well understood and frequently studied. The people working in this field understand that the goals of the UHC program can be achieved through a variety of methods, which will vary depending on the political, cultural and economic climate in which UHC is enacted. Generally we will see a mixture of general revenue, government-run services, social insurance mechanisms, private insurance mechanisms, out-of-pocket payments, and (in developing countries) NGO funding. The exact mix varies and the drawbacks of the different methods are understood. Within this framework there is a general agreement on the need for regulation and the dimensions we regulate (credentials of health care workers, financial robustness of providers, assessment of drugs and devices) and often the government intervenes to ensure that everything runs smoothly (often through price negotiations, workforce planning, and targets and rules for specific sectors or agencies). Countries select from a wide array of possible regulatory and financing frameworks but all these frameworks are understood and well studied, and as middle income nations move towards UHC they typically select a set of methods from amongst this suite of tools that they think will work best in their setting. Given that Republicans rule out some basic mechanisms – general taxation revenue, government run services, social insurance mechanisms – and a wide array of regulatory structures, what methods do Republicans propose as alternatives?

Looking at how the Republican response to Obamacare has panned out over the past six years, and reviewing the new proposed plan, it seems to me that Republicans have rejected almost all the principles and methods of UHC. They appear to have done so on the grounds of “freedom”, but have never defined what a “free” health system would be. They also haven’t defined the objectives of their healthcare policy at any stage in the debate. Given this inchoate approach to a complex and important policy issue, it’s difficult to understand why they opposed Obamacare – with no objective or principles, how can they argue for or against any policy? I know it’s a fruitless task to expect Republicans to respond to any issue seriously when all they really are is a pack of grifters and con artists, but while those epithets almost certainly are true of the party I do think a lot of its voters are serious about their beliefs. So I want to ask you – what are your objectives, principles and methods? What does a Republican healthcare plan look like and what will it ultimately achieve?

I think the Republican leadership haven’t put even a moment’s thought into these questions, and I don’t get the feeling their “intellectual” wing in the bought-and-paid-for think tanks has either. But maybe there are ordinary Republicans who can answer my questions? If so, have at it! I’ll take a lack of comments as proof you don’t have a clue, rather than evidence that this blog has no readers. So let me know! What do you want, and how are you going to get there?

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