Detroit, dialysis and special needs

Charlie LeDuff has written an essay on the state of the worst bits of Detroit. If you're feeling sturdy, you can follow it with a Robin Fields review of the state of America's universal care system for dialysis provision.

Have you read them both? No, Scotch is not a good solution.

Both essays made my skepti-sense tingle. It feels like we're missing some context, that we're probably getting a simplified view. The dialysis experience described here, for example, is not what the insured middle class gets. Even so, I think there's fundamental truth in both stories.

The dialysis problem feels most "easily" fixable. Health Care Reform, once it survives Limbaugh and Palin, can absorb this isolated program. Yes, it will survive. Mega corporations are now pivoting to life in a post-HCR world. They control Limbaugh, he will do their will.

Detroit is harder. Everyone who can leave has left. The remainder are the disabled and the children of the disabled, enmeshed in a nest of poverty. To a first approximation, it's a densely concentrated adult special needs community, with a high concentration of special needs in children as well. (I know a special needs community well. You would be wrong to read this as a condemnation.)

I think there are fixes for Detroit. We need to look for lessons from New Orleans pre and post Katrina, lessons from the most impoverished aboriginal communities, and lessons from war ravaged cities like 1980s Lebanon and 2010 Baghdad, lessons from 1970s Harlem. Detroit can be improved, but it will take decades ...

Slow hard work. There is no lack of challenge in the world.

The Health Savings Account preventive visit scam

I got stung this time. I was a mark.

Darn it.

My excuse is that this scam was a subtle one. I'd classify it as an occult emergent fraud. It's the third one I've met from Anthem Blue Cross/Blue Shield; health insurance is a breeding ground for these things.

The trick starts with making a "preventive care" or "routine physical" visit a "free" part of a health savings account insurance plan. These are commonly included in HSA plans ...

... A recent industry survey found that in July 2007 over 80% of HSA plans provided first-dollar coverage for preventive care. This was true of virtually all HSA plans offered by large employers and over 95% of the plans offered by small employers. It was also true of over half (59%) of the plans which were purchased by individuals. All of the plans offered first-dollar preventive care benefits included annual physicals, immunizations, well-baby and well-child care, mammograms and Pap tests; 90% included prostate cancer screenings and 80% included colon cancer screenings ...

At first, and even second, glance this looks like a nice benefit. After all, HSAs are all about having individuals feel the true cost of care, so we will inevitably reduce our use of preventive services. Making those "free" seems to make a care plan less harmful.

The catch is, as I recently discovered, is that it can be quite tricky for an adult to get this benefit. The responsible physician has to choose to bill a care episode as "preventive". These visits, however, pay poorly -- they're only cost effective if they can be done very quickly. A physician, meanwhile, is legally and ethically responsible for overall patient health. Any adult over thirty, and many younger, has health problems that can, at the least, be reviewed to confirm all is well enough.

So the physician is biased to doing at least a moderate amount of work, which makes the preventive care payment uneconomical. So these visits will usually be charged as something other than preventive care, which means they come from the general HSA pool -- not the free preventive care visit. (Immunizations and such will be covered, but not the physician fee.)

This should be possible to study. What percentage of adult males, we could ask, actually manage to get their visits billed as preventive care services?

In my particular case I was steamed about being charged a Level III fee when I had worked quite hard to get my "free" preventive care visit -- including confirming with Anthem that it would be covered. I even complained about it to the physician's billing office. It was only when I worked out the angles that I realized I'd been stung, and that I just needed to shut up and pay up. It wasn't my physicians fault, or the fault of their billing office. It was just the way the system works.

I doubt anyone planned this out. It's just a happy coincidence that an expensive (to Anthem) benefit ends up not being used. The emergent fraud aspect is that once an unintended scam like this emerges, nobody will work very hard to fix it.

See also:

• Verizon scam: Emergent fraud earns a fine
• Emergence: how entropy and incentives create scams
• Emergent fraud: Anthem and automatic payment denials
• Memphis mortgages, complexity attacks and long term consequences
• Anthem - Putting the Hell in Health Insurance
• Causes of the crash of '08 - how much fraud?

Update 11/7/10: The "13 month preventive medicine" visit is a variant of this scam. Marketing and legislative presentations will claim a yearly physical is part of a plan. This does not, however, mean that one can schedule a covered preventive medicine visit on Nov 1 and March 3rd. In practice a "year" means "no less than 365 days apart". Many people fall prey to this trick.

Emergent fraud: Anthem and automatic payment denials

Anthem, so someone wrote, puts the Hell in Health Care. Today's particular slice of Hades is a lovely example of how fraud evolves when natural selection meets entropy. Nobody has to plan this kind of scam, it just happens when you add incentives to markets.

I uncovered this example when I phoned to double/triple/quadruple check that a costly (age sucks) preventive medicine procedure was covered by my consumer driven health care plan.

Indeed, I was told, it is. I didn't hang up though. I'm too paranoid experienced. I pressed a bit more. The pleasant representative let slip that there was one catch.

When she said this, I swear I heard her pray that the call recording would go unheard, lest her children go unfed. Imagination, I'm sure.

The catch is that the claim will always be initially denied. It will, however, be promptly paid after a customer calls to "Appeal". If a customer doesn't appeal, however, they will have to pay the claim themselves.

I am pretty sure I know how this scam came to be.

The plan I'm in was, I believe, once part of a small consumer-driven healthcare plan startup that was acquired by a larger company. The two companies would have had different IT systems. The larger company probably outsourced IT integration, but, as often happens, I expect that didn't go well.

If I'm right then Anthem still doesn't have the right software to manage our kind of plan. When Anthem receives a claim, the software must choose between paying for claims that should be denied, or denying claims that should be paid.

You can imagine how long it took to make that decision, and how different the outcome would be with different incentives.

Since they really aren't crooks, just regular people in a hard job, they wrote Appeals process documentation so their agents would pay on Appeal. Probably 95% of their customers do appeal.

Five percent or so, however, probably don't appeal. They pay, or go bankrupt, or whatever. That five percent is pure margin. That margin probably made someone a VP.

Fixing the problem would unmake a VP. There's no money for IT anyway.

And so it goes.

It's a scam, but there's no intelligent designer. Just evolution in action. Health insurance companies can't help but be evil. It's in their incentives.

related stuff from me:

• Emergence: how entropy and incentives create scams
• Anthem - Putting the Hell in Health Insurance - emergent fraud and the Anthem web site
• Mobile phone fraud - The accidental data charge and other scams
• Memphis mortgages, complexity attacks and long term consequences
• How to use Amazon reviews (and how the system encourages fraud)
• Health insurance: we're defeated by a complexity attack
• Causes of the crash of '08 - how much fraud?
• 21st century deception and the evolution of the emergent mind

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Anthem - Putting the Hell in Health Insurance

My corporate health care insurance is administered by Anthem.

Tonight we tried to find out if a particular physician is in their coverage network.

First I tried their Account Registration. It includes a CAPTCHA test.

Why does it include a CAPTCHA test? Really you don't need to ask. Since CAPTCHA hacking software exceeds human performance, it's really a filter to eliminate humans. Particularly elderly humans who might need expensive services.

I kept failing the test. Emily checked, and I seemed to be typing the correct response. We even tried the audio test. That one would  have impressed Mephistopheles.

So Emily tried their customer service number. Voice recognition of course, no keypad entry. It couldn't understand anything she said. Her voice kept rising, but it didn't help. I tried not to laugh too much.

So I tried the web site again. This time I got a different response: "Sorry, we're experiencing technical difficulties at this time. Please try again later or contact Customer Care. Error ID: 21573301".

Terry Gilliam couldn't have done it better.

It's moments like these that make me more optimistic about the future of humanity. Our civilization is sure to collapse before we can create the sentient machines that will end us. We will be saved by our own greed and incompetence.

PS. The coup de grace came as a post-visit survey. An opportunity to provide feedback! So I started answering questions. The questions kept coming. I noticed the the scroll bar size -- I was only through 15% of what must have been 50 questions. I tried scrolling to the end and submitting. Of course that was rejected; I hadn't answered all the questions. I had to smile at the style of it; sadism with a flourish.

Update 8/27/10: There's an old joke that the best way to improve health insurance plan revenues is to put the registration office on the top floor of a building with no elevators. Only the healthy can join, so that even low rates will be profitable.

The CAPTCHA is the modern equivalent of the top floor office without elevators. In this case there was a web site failure, but I'd wager their web site is always fragile. Since Anthem has already been paid, their incentive is to deny services altogether.

The beauty of these sorts of scams is that they're emergent. They develop in the same fashion as antimicrobial resistance in bacteria, or lousy service in AT&T's flat rate data network. Entropy and funding choices provide the "mutations", the commercial market provides the "selection", the system irresistibly evolves until we get the Anthem web site.

This kind of perverse incentive is built into many systems, but it's particularly strong in the health insurance business. If we recognize and understand these processes we can work around them -- much like modern HIV therapy works with an understanding of the the virus evolves. I suspect oncology is going to go the same way -- using therapies that "guide" the "evolution" of the cancer / tumor ecosystem towards forms that may be most vulnerable to a 2nd wave treatment -- or most compatible with the life of the human "host". (I kind of like that cancer idea btw, I do hope it's really part of modern therapy.)

As a society, however, we're only in the most early stages of understanding the evolution of emergent corporate dysfunction and how to manage it.

Pay for performance in health care and teaching - we know how this ends

It seems pretty clear that if you want better quality healthcare, or better teaching, then you should pay professionals for the results they obtain. "Pay for Performance" is one of the mantras of healthcare reform. We saw the same arguments in 'No Child Left Behind', where paying principles to lower failure rates has worked so well.

There's been a lot of research in many industries about how well Pay for Performance schemes work in practice, but this historic statement from my archives says it best ...

(Thanks to Google, I didn't have to retype this ..)

... The planners tried various expedients,” wrote Alec Nove in his economic history of the Soviet Union. They issued instructions that user demand should be met; they modified bonus systems so that it was not enough to achieve purely quantitative targets; they experimented with value-added indicators. “Each of these “success indicators” had its own defect, induced its own distortions. Thus, insistence on cost reduction often stood in the way of the making of a better- quality product. A book could easily be filled with a list of various expedients designed to encourage enterprises to act in the manner the planners wished, and the troubles to which each of them gave rise...

Update 8/19/10: See also Fake graduation rates and other predictable outcomes of no child left behind

Teachers, doctors and pay for performance

In one paragraph, Gail Collins summarizes an important issue with basing teacher compensation on student performance:

Gail Collins - Teachers Always Show Up - NYTimes.com

... while it’s important to make teachers accountable, telling them their jobs could hinge on their students’ grades on one test is a terrible idea ... The women and men who go into teaching tend, as a group, to be both extremely dedicated and extremely risk-averse. The stability of their profession is a very important part of its draw. You do not want to make this an anything-can-happen occupation, unless you are prepared to compensate them like hedge fund traders...

The same is true of physicians by the way.

The real problems aren't simply incompatible personality traits however. The real problem is that these systems are dominated by Goodhart's law.

As Texas demonstrated many times, the easiest way to improve outcomes is to game the system. With both students and patients this is done by changing the denominator -- either by reclassification (change who takes tests) or by purging the problems (zero tolerance discipline) and filtering the candidates (programs appealing to elite students, wealthier families).

The same things happens in health insurance (risk assumption). Rescission is one way to change the denominator, another one is to promote (inexpensive!) alternative therapies that appeal primarily to health people. Putting the enrollment office on the second floor of an elevator free building is the classic approach to denominator bias.

These effective strategies don't have to be consciously applied. The "invisible hand" will reinvent them time and again.

There are many ways to improve the performance of teachers and physicians that reduce the appeal of system gaming solutions. They don't have the simplistic appeal of "pay for performance" however.

So we'll suffer through a lost decade before, once gain, letting these mistaken policies quietly die.

If computer technology had developed like health care technology

If computer technology had developed like health care technologies home computers would cost millions. Everyone would have one, but the nation's computing insurance company would be facing disaster.

See also: Staggering towards health care access ...

Health care reform – the road ahead

Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.
Winston Churchill, 1942.

One way or another I'm gonna find ya
I'm gonna getcha getcha getcha getcha.
Blondie.

In the original Senate version of the Health Care reform bill we find this clause …

Subtitle D: Improvements to Medicaid Services - (Sec. 2301) Requires Medicaid coverage of: (1) freestanding birth center services …

Yes, there are a lot of funny bits in this sausage. We don’t know the half of ‘em, but I do know my family will pay for them. Now that the bill done (for now) I can say that the wingnuts were right about some things; my team’s “$250,000 and above” slogan was nonsense. “One way or another” upper 30th percentile “tax-equivalents” [1] will go up.

I’m good with paying for this; I expected to pay for it when I campaigned for Barack Obama. Altruism aside, there are tangible personal benefits for my family:

• We’re no longer lashed to my employer. Since I expect to be an involuntary entrepreneur within 8 years this is rather good.
• Not all of our children are equally suited to life in the post-modern world. This bill increases the probability that they will, at least, receive health care after my warrantee expires.
• Now my insurance provider doesn’t have to be demonic to survive
• America is less likely to turn into Haiti of the North. I really don’t like broken glass topped walls.

What’s next? We’ve been stuck in the headlights for a generation, but now we’re moving. We might be charging towards the oncoming truck, but even that may be an improvement on standing still. At least with motion comes opportunity.

The question isn’t where we need to go. We’ve known that for at least thirty years. We’re going to the same place as everyone else on earth – good enough care for everyone and luxurious care for those with money. The question is how we get there.

Until now the American people have been completely unwilling to think about health care cost. It would have been nice if we could have cut costs before increasing access, it would have been nice if we’d come up with a reform plan that made it easier to cut costs, it would be nice if we weren’t charging towards the right fender of that oncoming truck. Nice – but not going to happen in a world where the GOP has gone mad.

Now, however, we’ll all be, at last, considering costs and value. It won’t be pretty, but if it were pretty it wouldn’t be real.

That’s progress.

See also:

Post-passage commentary

• Summarizing the Patient Protection and Affordable Care Act – in two pages and 10 titles (worth a scan, really)
• Best health care reform commentary (all the things I don’t need to say)
• Health insurance companies only the demonic survive (Just before passage, but fits here. Now insurance companies can explore non-demonic options.)
• How the Health Care Overhaul Could Affect You - Graphic - NYTimes.com (try it – it’s great)

Older general discussions that are still relevant

• Discovering medical prices and the problem with paying cash
• Health insurance we're defeated by a complexity attack
• The hidden insurance problem they can play the game better than we can
• Gawande and NEJM cost of care roundtable

The future: “pretty good care”, aka “good enough care” – where we’re going

• Health care reform – lessons from Quebec (pretty good care)
• Healthcare Reform The One Slide Presentation
• Staggering towards health care access

[1] Federal “Taxes” rarely include anything so obvious as a rate increase. Tax equivalents include

• actions that shift services burdens to the states – which either reduce state services or increase state or local taxes
• unfunded federal state or local mandates of all varieties including regulatory or reporting burdens
• means testing that remove tax breaks (the AMT is the mother of means testing)
• elimination of tax dodging programs such as the Flex plan we enroll in (I’ll be glad to see that evil scam die)
• user fees
• service taxes (such as the 10% tanning tax – which, amusingly, is aimed squarely at the Tea Party demographic of less educated paleskins).

Summarizing the Patient Protection and Affordable Care Act – in two pages and 10 titles

You may have heard that the Senate passed a health care bill. It is likely that it will be further amended by the House, and of course there will be challenges, but it is probable that the directives in the bill will be turned into law.

It is conceivable that this bill will have some implications for the future of health care, so it is useful to learn what is in it. It is quite a large bill.

Uwe Reinhardt, a well known health economist, recommended a summary prepared by the Congressional Research Service [1]. Even the summary takes a while to read. One can, however, get a sense of it simply by looking at the headings. I’ve excerpted them below. There are quite a few odd bits in there, but the scope of this bill is occasionally breathtaking.

Patient Protection and Affordable Care Act – Summary of Senate Bill – Library of Congress March 2010

Title I: Quality, Affordable Health Care for All Americans
Subtitle A: Immediate Improvements in Health Care Coverage for All Americans
Subtitle B: Immediate Actions to Preserve and Expand Coverage
Subtitle C: Quality Health Insurance Coverage for All Americans
Part I: Health Insurance Market
Part II: Other Provisions
Subtitle D: Available Coverage Choices for All Americans
Part I: Establishment of Qualified Health Plans
Part II: Consumer Choices and Insurance Competition Through Health Benefit Exchanges
Part III: State Flexibility Relating to Exchanges
Part IV: State Flexibility to Establish Alternative Programs
Part V: Reinsurance and Risk Adjustment
Subtitle E: Affordable Coverage Choices for All Americans
Part I: Premium Tax Credits and Cost-sharing Reductions
Subpart A: Premium Tax Credits and Cost-sharing Reductions
Subpart B: Eligibility Determinations
Part II: Small Business Tax Credit - (Sec. 1421, as modified by section 10105)
Subtitle F: Shared Responsibility for Health Care
Part I: Individual Responsibility
Part II: Employer Responsibilities
Subtitle G: Miscellaneous Provisions

Title II: Role of Public Programs
Subtitle A: Improved Access to Medicaid
Subtitle B: Enhanced Support for the Children's Health Insurance Program
Subtitle C: Medicaid and CHIP Enrollment Simplification
Subtitle D: Improvements to Medicaid Services - (Sec. 2301)
Subtitle E: New Options for States to Provide Long-Term Services and Supports
Subtitle F: Medicaid Prescription Drug Coverage
Subtitle G: Medicaid Disproportionate Share Hospital (DSH) Payments
Subtitle H: Improved Coordination for Dual Eligible Beneficiaries
Subtitle I: Improving the Quality of Medicaid for Patients and Providers
Subtitle J: Improvements to the Medicaid and CHIP Payment and Access Commission (MACPAC)
Subtitle K: Protections for American Indians and Alaska Natives
Subtitle L: Maternal and Child Health Services

Title III: Improving the Quality and Efficiency of Health Care
Subtitle A: Transforming the Health Care Delivery System
Part I: Linking Payment to Quality Outcomes under the Medicare Program
Part II: National Strategy to Improve Health Care Quality
Part III: Encouraging Development of New Patient Care Models
Subtitle B: Improving Medicare for Patients and Providers
Part 1: Ensuring Beneficiary Access to Physician Care and Other Services
Part II: Rural Protections
Part III: Improving Payment Accuracy
Subtitle C: Provisions Relating to Part C
Subtitle D: Medicare Part D Improvements for Prescription Drug Plans and MA-PD Plans
Subtitle E: Ensuring Medicare Sustainability
Subtitle F: Health Care Quality
Subtitle G: Protecting and Improving Guaranteed Medicare Benefits

Title IV: Prevention of Chronic Disease and Improving Public Health
Subtitle A: Modernizing Disease Prevention and Public Health Systems
Subtitle B: Increasing Access to Clinical Preventive Services
Subtitle C: Creating Healthier Communities - (Sec. 4201, as modified by Sec. 10403)
Subtitle D: Support for Prevention and Public Health Innovation - (Sec. 4301)
Subtitle E: Miscellaneous Provisions - (Sec. 4402)

Title V: Health Care Workforce
Subtitle A: Purpose and Definitions - (Sec. 5001)
Subtitle B: Innovations in the Health Care Workforce - (Sec. 5101, as modified by Sec. 10501)
Subtitle C: Increasing the Supply of the Health Care Workforce
Subtitle D: Enhancing Health Care Workforce Education and Training - (Sec. 5301)
Subtitle E: Supporting the Existing Health Care Workforce - (Sec. 5401)
Subtitle F: Strengthening Primary Care and Other Workforce Improvements- (Sec. 5501, as modified by Sec. 10501)
Subtitle G: Improving Access to Health Care Services - (Sec. 5601)
Subtitle H: General Provisions - (Sec. 5701)

Title VI: Transparency and Program Integrity
Subtitle A: Physician Ownership and Other Transparency - (Sec. 6001, as modified by Sec. 10601)
Subtitle B: Nursing Home Transparency and Improvement
Part I: Improving Transparency of Information - (Sec. 6101)
Part II: Targeting Enforcement - (Sec. 6111)
Part III: Improving Staff Training - (Sec. 6121)
Subtitle C: Nationwide Program for National and State Background Checks on Direct Patient Access Employees of Long Term Care Facilities and Providers - (Sec. 6201)
Subtitle D: Patient-Centered Outcomes Research - (Sec. 6301, as modified by Sec. 10602)
Subtitle E: Medicare, Medicaid, and CHIP Program Integrity Provisions - (Sec. 6401, as modified by Sec. 10603)
Subtitle F: Additional Medicaid Program Integrity Provisions - (Sec. 6501)
Subtitle G: Additional Program Integrity Provisions - (Sec. 6601)
Subtitle H: Elder Justice Act - Elder Justice Act of 2009 - (Sec. 6702)
Subtitle I: Sense of the Senate Regarding Medical Malpractice - (Sec. 6801)

Title VII: Improving Access to Innovative Medical Therapies -
Subtitle A: Biologics Price Competition and Innovation
Subtitle B: More Affordable Medicine for Children and Underserved Communities - (Sec. 7101)

Title VIII: Class Act - Community Living Assistance Services and Supports Act or the CLASS Act - (Sec. 8002, as modified by Sec. 10801)

Title IX: Revenue Provisions -
Subtitle A: Revenue Offset Provisions - (Sec. 9001, as modified by section 10901)
Subtitle B: Other Provisions - (Sec. 9021)

Title X: Strengthening Quality, Affordable Health Care for All Americans -
Subtitle A: Provisions Relating to Title I - (Sec. 10101) Revises provisions of or related to Subtitles A, B, and C of Title I of this Act
Subtitle B: Provisions Relating to Title II
Part I: Medicaid and CHIP - (Sec. 10201)
Part II: Support for Pregnant and Parenting Teens and Women - (Sec. 10212)
Part III: Indian Health Care Improvement - (Sec. 10221)

[1] These summaries are written in a programming language for the creation of regulations. The bulk of the omitted material begins with command verbs that tell regulators what to do. I created this summary by regex operations on paragraphs beginning with the command operators which include:

Allows
Amends
Applies
Appropriates
Authorizes
Declares
Directs
Establishes
Excludes
Expands
Expresses the sense
Provides
Reauthorizes
Redesignates
Requires
Revises
Sets forth

It’s a very structured document that resembles generated software code and could indeed be created from a regulatory meta-language.

Best health care reform commentary

I'm waiting for week's end to write mine, but I'll be working from these early commentaries:

• Economist Brad DeLong: The Curious Triumph of RomneyCare
• Physicist Sean Caroll: Obamacare | Cosmic Variance
• Science fiction author John Scalzi: Health Care Passage Thoughts
• NYT Infographic: How the Health Care Overhaul Could Affect You

I think it's pretty damned awesome that the three* most intelligent commentaries I've read were written by amateur blog-only journalists. (Ok, so Sean is probably paid for his science blog).

Incidentally, I expect my "taxes" will rise to pay for this. More on why, how and where the quotes come from in a later post. We're good with that.

PS. DeLong: RomneyCare Passage Aftermath - support Betsy Markey (for her courage)

* I wrote "four" originally but I moved one to the PS and didn't decrement!

Update: The Christian Science Monitor has a detailed breakdown. Well done.

Update 3/24/2010: Leonhardt focuses on the distributive nature. This is why the GOP is enraged.

Update 3/24/2010b: Uwe Reinhardt points to the readable references. He discretely but clearly points out the cost will be higher than the CBO score -- but much less than the Bush Part D boondoggle.

Update 3/28/2010: HCR and labor motility

Health insurance companies: only the demonic survive

Under the current system of incentives, only demonic health insurance companies can prosper…

Demons And Demonization - Paul Krugman Blog - NYTimes.com

The usual suspects have been attacking Obama for “demonizing” insurance companies; but saying that people do terrible things isn’t demonization if they do, in fact, do terrible things.

And health insurers do, because they have huge financial incentives to act in an inhumane way — most obviously, by revoking coverage when people get sick, using whatever rationale they can devise.

Read this report by Murray Waas on Assurant Health (previously called Fortis), which used a computer algorithm to identify every client with HIV, then systematically revoked coverage on the flimsiest of grounds — and appears to have systematically hidden any paper trail showing how it made its decisions…

…  the evidence is that the overwhelming majority of rescissions, not just at Assurant but across the board, are, in fact, without justification…

… And to repeat what I and other have repeatedly explained, you need the whole package to make this work. You can’t end discrimination based on medical history unless you require that health as well as sick people have insurance, to broaden the risk pool. And you can’t mandate coverage unless you provide aid to those who otherwise couldn’t afford it.

Right now, we have a system that creates huge incentives for bad, one might say demonic, behavior: Assurant made $150 million by revoking coverage, almost always without cause…

In this system of incentives and a competitive marketplace, a virtuous corporation will lose out to one that follows the incentives. The virtuous corporation must either abandon virtue or die. Soon, only the demonic survive.

The same incentives, of course, apply in education. If a provider is judged by educational outcomes, the most successful strategy is to use “recission” to get rid of low performing students. Only the demonic survive.

We need to change the system.

Incidentally, it’s typical that the very first (asinine) comment on Krugman’s post is by someone who didn’t read the second to last paragraph. Eliminating patient discrimination while allowing patient choice on coverage timing is a recipe for bankrupting insurance companies. At that point,the patients are demonic.

We need the entire package.

American crisis – imagining a way out

Scott (Dilbert) Adams can’t imagine any way American will survive its 21st century budget crisis.

 

This betrays a certain lack of historical perspective. We’ve been through worse, other nations have been through much worse. Compared to the American Civil War, the Black Death, or even the many versions of “great” Depressions we’re in pretty good shape.

 

Not that success is guaranteed, but it’s quite easy to imagine.

 

As a starting point, I’d suggest some subset of this list would suffice:

1. Political reform. I’ve got another post brewing on this. Fourteen years ago I satirized “public incorporation” of representatives, but now we have corporate persons with political rights. We’re in trouble. Many current Senators appear to have early dementia, and our political candidates are often lousy. We need to rethink who we elect, how we elect them, and how old they can be. We should draw on ideas from professional training and licensing and from jury selection.
2. Taxes. We’re going to raise taxes – a lot. We should do a Carbon Tax. We will do a VAT equivalent. We’ll do “death” taxes – again.
3. Immigration - Oh Canada: Canada figured this one out years ago. We have too many decrepit boomers. We  need to balance my generation with vigorous, energetic highly talented youth. So let them in based on professional and academic qualifications and business guarantees.
4. Inflation: 3% should help whittle down those foreign debts. Don’t say you weren’t warned China.
5. Give up on the Empire. The Soviets couldn’t afford their empire. Guess what? We can’t either.
6. Delay Dementia: We’re all going to have to work longer, but we can’t all bag groceries. For one thing, that job’s going to a robot someday. Unfortunately, normal brain aging means most of us won’t be good for much more by the time we’re 72. We need a ton of research into slowing the inevitable onset of dementia. (Ok, so if you die it’s not inevitable.)

Note that my list doesn’t include “controlling health care costs”. That one’s simply inevitable, so I don’t bother with it.

Health care. We lost.

Sometimes, the good guys lose.

We lost this one. We're no closer to universal good enough care than we were four years ago. Maybe further.

It was close. In retrospect, with perfect knowledge, there were alternative routes that might have worked. The route we took had too many opportunities to fail.

I'm saddened, but not surprised. I thought the quality of discussion during the failed Clinton reform was poor (for which I blame Hillary actually), but it was golden compared to this go round. The vast majority of educated middle class Americans had absolutely no idea what was going down. No idea ... and little interest. Without that core support the politics were awful.

So what happened to the educated middle class? Age is a part of it. We're an older, graying, fear-filled nation in transition. The boomers imagine medicare will be there, and gray American hates change.

The collapse of the fourth estate was another contributor. In the 1980s media coverage of the Clinton plan was superb; twenty years later it was almost worthless. It was easy for a fearful, sclerotic, population to stop paying attention.

Above all, though, I finger the same mixture of complexity and corruption that led to the Great Recession. We're paralyzed.

So now what?

It goes to the states. The only congressional action that would help at this point would encourage states to experiment widely and to create inter-state health care plans.

At the state level, I expect real change to come under Republican governors. Only Nixon could go to China, and perhaps only GOP governors can transform American health care.

So maybe losing isn't all bad. I've long believed achieving affordable universal health care in America would require the same kind of massive disruption that destroyed General Motors. That kind of disruption is not politically feasible; but markets will do it. The best GOP governors are capable of wedding the destructive forces of markets to socially desirable outcomes. That's the path that's left to us now.

The health care bill

Odds are something like the Senate bill passed today will become law.

I didn't hope for much, but I did have one selfish desire. I hoped we'd get alternatives to employment based healthcare. I hoped individuals would be able to purchase insurance with large group pricing. It looks like we won't even get that. Instead the cost of open market insurance is expected to increase. Subsidies will offset those costs, but they will have an income cap.

Oh, and we'll be paying for the benefit expansion too - since costs won't be significantly contained.

Sigh.

On the other hand the current debauched system will be shaken up. I think, on balance, we'll move closer to what we need, even though that won't be the fantasy most Americans expect. We'll take two steps backward, 3 steps laterally, and 2 steps forward and we'll make progress. Given how stunned and confused Americans are and the state of the GOP this is probably the best we can do.

We need a better American citizen.

Update: Joe Paduda is even bleaker than I, but still thinks this bill is worth doing.
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Scylla and Charybdis: Corruption, health care reform and climate change.

A combination of flawed institutional practices, the nihilistic devastation of the Party of Beck and Limbaugh, and the political, economic and social importance of health care reform have made corrupt Democratic party senators immensely powerful.

Since these people care about nothing but their own power and privilege, and because they hold millions of Americans hostage, they can extort a heavy price from far more honorable people. They make the Beckians seem almost respectable.

It’s a tooth grinding time for compassionate rationalists. We know the historic price of failure. We know the GOP is ever more the party of unreason. We know too, the deep cost of social and institutional corruption.

Knowing all this, for the sake of health care “reform” we’ve eroded our enamel. Do we go to dentures for the sake of senate action on climate change?

I don’t think we can afford it, and I don’t think it will work. American support for climate policy is as fickle as the weather – by comparison support for health care action is relatively strong. Even if we continue to feed the leeches we still won’t get meaningful senatorial action.

We’re going to have to find ways to act on climate change through a combination of Presidential powers, EPA regulatory authority, and state policy (California still matters – just as in the days of Silent Spring). Perhaps international CO2-based trade tariffs will cause enough American corporate pressure to bring pet Senators into line.

No, it’s time to stop feeding the leeches. We’ve given up a lot, and the price continues to rise.

This is the time to change course. The midterm elections are ahead, and the party of relative reason is almost certain to lose its Senatorial supermajority. Even if nothing else happens, Robert Byrd will expire.

Losing the supermajority means we can now open yet another front against political corruption in America. No, not against Lieberman – that corrupt sod is safe until 2012 and will be well rewarded thereafter. Forget mere justice, this is about survival.

We need to resurrect old ideas about campaign finance reform and start the long, hard fight against a culture of corruption that has grown up in so many aspects of American life – in politics, professional societies, physicians, the judiciary, corporate governance, the media, and in finance and regulatory authorities.

Personally, I’ll be writing more on this topic in the months to come under a new tag of “corruption”. To start with I’ve asked the Center for Public Integrity to make it easier to find the feed for their latest from the center page. I’ve also become a Facebook fan of the CPI (yeah, there’s irony in using FB to fight corruption).

I’ll be pointing to similar organizations and making some donations*. I’ll even be consorting with the enemy; although the GOP is merely seeking to advance their own immense corruption their attacks on corrupt Dems do provide valuable intelligence we can use.

We’ve given a lot of ground for the millions of Americans held hostage to health care reform. We’re at the cliff’s edge now, we’ve got no more ground to give. We need to push back.

Take your anger against Lieberman, Nelson, and the like – and use it. Not against them – forget ‘em. They’re history. Use your anger against their kin everywhere.

Fight.

* If you donate to any of these groups, you will be spammed mercilessly. Yeah, that’s kind of corrupt too. It ain’t a sweet world out there. Don’t give them a phone number, do give them your spam-only Yahoo email account.

Lieberman explained: He's a lot like Bush

This explains a lot.

Gail Collins - Sorry, Senator Kerry - NYTimes.com

... my favorite explanation comes from Jonathan Chait of The New Republic, who theorized that Lieberman was able to go from Guy Who Wants to Expand Medicare to Guy Who Would Rather Kill Health Care Than Expand Medicare because he “isn’t actually all that smart.”

It’s certainly easier to leap from one position to its total opposite if you never understood your original stance in the first place, and I am thinking Chait’s theory could get some traction. “When I sat next to him in the State Senate, he always surprised me by how little he’d learned about the bill at the time of the vote,” said Bill Curry, a former Connecticut comptroller and Democratic gubernatorial nominee."...

Lieberman is a dull man who's not that interested in understanding the world. He's dull enough to be profoundly corrupted by his insurance company donors, yet still imagine that he's an honest man.

A lot like George Bush Jr.

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Discovering medical prices and the problem with paying cash

Walecia Conrad has written a pretty good summary of the problems of price discovery in medical care services. She mentions several approaches, including online services, calling physician offices, and checking payor (insurance) sites.

None, of course, are satisfactory. I hope she'll dig a bit deeper into price discovery. There are two places she could learn from. One is the problem with discovering how much a medication costs in different forms through different vendors with different coverage plans. Good luck on that one.

The other topic is more amenable to digging. She almost got into it, but perhaps had to set it aside for another day. Ms. Conrad mentions that cash fees for medical services are usually much higher than the negotiated fees insurance companies provide (this is very relevant to health care reform of course).

What she missed is why.

My own recollection, for I no longer deal with this issues, is that payor (insurance) reimbursement is based on a fraction "list price". So imagine that Blue Scythe pays 50% of list price. If costs+margin means a services costs $50 physician must then set "list price" to $100 so they get $50 from Blue Scythe. The "list price" must be validated as a customary charge, so it must show up on bills -- including bills for people who pay cash.

This means people paying cash are providing a huge margin, but this is an unwanted embarrassment for most practices. In my day we wanted to charge people paying cash less, not more.

I think there may be ways around this now. My knowledge is at least fifteen years old! Still, this an area that deserves some journalistic effort.

Health IT Standards - what I would do

I almost never blog about anything that's work related. For example, if you visit my blog page you'll see a "label cloud" with 360 posts on Economics, but I'm no economist.

This post, written as a private citizen, is different. I'm going to write about something that I really do know quite well. It's a sufficiently obscure topic that there are probably only a handful of people who know it as well as I, and I doubt any of them have been invited to participate in the Health and Human Services IT standards process.

I wasn't invited, but I feel a moral obligation to contribute anyway. I can't see a good way to do that, so I'll post my contribution here. Sometimes these posts travel in odd ways.

My unusual expertise is in combining the realms of healthcare "accounting" (ICD-9-CM, HCPCS, CPT) and the realms of industrial ontology (gritty knowledge representation) such as SNOMED. I've been personally grinding these pieces together for over twelve years in various software systems. I know them rather better than I'd like.

The accounting systems matter. Their idiosyncrasies distort health care statistics, change people's insurance, impede and break computerized decision support, dictate care and determine how most clinicians define disorders. They are fashioned in obscure dark rooms, and they alter health care as surely as technical accounting dictates corporate software development.

They matter so much that they are deeply embedded and almost impossible to displace. ICD-9 was obsolete 30 years ago, but it staggers on. ICD-10-CM is a merely improvement that will cost many fortunes to implement.

On the other hand, SNOMED, a language for healthcare, is a very rich tool. Buggy, yes. Imperfect, yes. Even so, it's a powerful tool for anyone who wants to provide cost-effective decision support that will make all health care providers smarter and faster.

So why don't we implement things like SNOMED now? Are there technical issues? Well, there are some technical challenges, but they're not too big. The real problem is the deadweight of ICD-9, CPT and all that layers upon them, such as vast "medical necessity" (LRMP, medical coverage) databases. Since payment is closely bound to ICD and CPT coding, the easiest route to legal maximization of reimbursement is to stay close to ICD and CPT.

I don't think we have the energy to move America quickly to better health care standards like SNOMED CT. Maybe we do, but this kind of change is very hard. Even so, I think we can do it gradually. The trick is to keep the current system in place, while incrementally building up an alternative approach.

For example, consider the "coverage determination" database. This is a reasonably complex set of tables that define relationships between ICD-9-CM (aka "ICD" in the US) codes and CPT codes (AMA owns CPT btw). The tables express rules such as "we will pay for procedure X (CPT) if a patient has condition Y" (ICD).

I think those tables would be simper, and more internally consistent, if the rules were expressed using SNOMED CT. Medicare (CMS) could then publish rules in both SNOMED and, through things called "mappings", ICD-9-CM and CPT too. The transaction systems would still use the ICD and CPT codes of old, but developers could represent the rules internally using SNOMED, thereby facilitating SNOMED use in their clinical systems. This alone would remove a very large hurdle.

State governments could encourage clinicians to include SNOMED CONCEPTIDs (codes) in a new class of public health and/or payor transactions. This would be entirely optional, but transactions could have come with small payments and regulatory rewards.

We could express new ARRA reporting requirements in SNOMED as well as in the traditional ICD and CPT code sets. Again, accept either data set.

Lastly, we could accelerate implementation of SNOMED-founded ICD-11, perhaps even foregoing ICD-10-CM plans and doing an early partial implementation of the full ICD-11 vision.

It's very hard to move things as deeply embedded as ICD-9-CM and CPT. This deadweight is heavy weight. We can't do it all at once, but we could take doable steps that would provide us with better decision support and more portable electronic health records.

We now return you to the regular amateur hour ...

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Health insurance: we're defeated by a complexity attack

It's time again to play spin the insurance wheel.

This year my employer is offering only a "HRA" (Consumer directed) plan. What we used to call a "medical savings account plan". My employer self-insures, so presumably this saves them money.

So we tried to figure out what plan makes sense. My wife and I are both physicians. I'm a wee bit of a computer geek. We have, between us, at least 35 years of post-secondary education.

The enemy has hundreds of analysts and extensive simulations. They can throw up pages of unreadable and meaningless computer generated descriptions.

It's really no contest. The best we can do is run the provided simulations through optimal, average, and disastrous scenarios and assume that the strange seeming results are accurate. The simulations, of course, don't ask about tax brackets, and they mix pre-tax dollars (our premiums) with post-tax dollars (out-of-pocket expenses).

We can offset the post-tax dollars by gambling on Flex dollars -- but then we run the risk of sending the Flex money back to yet another gambling corporation (and probably, eventually, to my employer).

In the end we'll probably pick the middle option and go light on the Flex.

This, like mobile phone services, is a complexity attack. I'm guessing if I worked this one through I'd put it in the large class of emergent frauds - an echo of the crash of '08.

We must, as a nation, figure out a way to beat this stuff back.

Update: EL has been working with pencil, and it now looks like

• The graphical portion of the simulation is probably wrong.
• Disregarding the graphical part, and parsing out rollover of the "HRA" part, and factoring in various combination of pre-tax and post-tax contributions and Flex guesses the plans are more similar than the appear -- but the numbers may be wrong
• The numbers in one resource are quite different from the simulation/web site numbers. They don't add up. On the other hand, one of the simulation numbers is probably wrong.

See also:

• Gordon's Notes: Employment benefit complexity: we are sheep
• Gordon's Notes: The hidden insurance problem: they can play the game better than we can

Update 5/28/10: Our sense of doom was well justified. Midway through the year we found that mental health payments were not handled in the MSA-like plan. They're handled through a separate, traditional, indemnity plan. Since these payments constitute our major healthcare expense, our entire analysis was rendered moot. Needless to say, in all of our review neither my wife nor I saw this in the materials we were given.

About that health care bill …

Joseph Paduda despairs ….

… I'm really disappointed with the Republicans. They are supposed to be the budget hawks, but instead they've spent their time railing against abortion funding, illegal immigrants, and death panels, along with scientific research and taxes on device manufacturers. Instead of attempting to govern responsibly, they've abandoned all morality in their quest to re-energize the lunatic fringe of their once-dominant party…

… While there's plenty of blame to pile at the door of the Republicans, it is the Democrats who are to blame for coming up with a huge entitlement program set up to do nothing but grow…

Well, yes.

The GOP decided that their one and only mission was to make Barack Obama look bad. That meant this bill would attract no more than 1-2 GOP rebels. That in turn meant no constituency could be offended, which meant no serious efforts to control costs.

If we had a less dysrational electorate, then we’d have a better GOP. But we’re stuck with the GOP we’ve got.

So any bill that can pass will give everyone everything they want.

It’s not even lying. Anyone capable of perceiving reality knows there will be a reckoning. This is about building the arena for the real battle to come.

Not pretty, but that’s modern America. It’s the best we can do, and it’s much better than nothing. In stage II, assuming we get this sausage made, we’ll be talking price.