New Massachusetts Polling Data: What’s the Lesson?

Paul Krugman doesn’t like the Rasmussen poll on the popularity of health reform in Massachusetts.  I’ve cited that poll in the past, so I have an obligation to present contradictory information.  Besides, when Krugman talks, I listen.  Since many people consider the reform we’re likely to get similar to that which was enacted in that state, it’s an important issue.

Krugman cites the Boston Globe/Harvard School of Public Health poll and finds this to be its essential conclusion:  ” 79 percent want (reform) to continue.”  That’s much stronger than the tepid support in the Rasmussen bill, and it’s important.

I had a somewhat different interpretation, however, when I read the write-up in the Globe that Prof. Krugman cites.  “79 percent of those surveyed wanted the law to continue,” the article says, “though a majority said there should be some changes, with cost reductions cited as the single most important change that needs to be made.”

Then there’s this:  “In another question, residents were nearly evenly split over whether Massachusetts could afford to continue with the law as it stands: 43 percent said the state could not, and 40 percent said it could.”

Lastly, the money quote (literally):  “A national survey by Kaiser released this month found that Massachusetts has the most expensive family health insurance premiums in the country, averaging $13,788 in 2008.”

Some of us knew that already, but it’s important to repeat it in this context.

Granted, the Senate bill has more cost containment in it that the original Massachusetts bill, especially in the latest draft (and thanks in part to progressive opposition to the bill, in my opinion.)  But I still think it’s weak on cost controls, and that many people are wildly overestimating the effect of those that it does contain.  But it’s worth noting that many of the bill’s proponents have been touting the idea that mandates themselves will help keep premiums under control.  I think that argument has been seriously undercut by results in Massachusetts.

The Senate Deal: The Price of Everything

The CBO finally scored the redrafted Senate health care bill, saying it will cost $871 billion over the next ten years. Not that anybody waited for the numbers before cutting a deal. This was never really about the numbers. It was about coming in below an arbitrary figure and passing the bill by an arbitrary date.

The CBO Director’s Blog writes that  “(t)he changes with the largest budgetary effects include expanding eligibility for a small business tax credit; increasing penalties on certain uninsured people; replacing the ‘public plan’ … with ‘multi-state’ plans  … deleting provisions that would increase payment rates for physicians under Medicare; and increasing the payroll tax on higher-income individuals and families.”

In other words, the bill now has more breaks for business but harsher punishment for uninsured individuals, it eliminates the already-weakened public option, it pays doctors less – and it costs the Federal government $23 billion more.

Hey, what’s not to love?

The idea of raising payroll taxes on higher earners is a good one.  But if you take that new revenue, add the unfair tax on higher-cost benefit plans (studies demonstrate its unfairness), throw in the pay cut for doctors, and toss the higher individual penalties on top of that, it still doesn’t offset the fiscal recklessness behind killing the public option.

Why would the public plan have saved the government money?  Because, as the CBO puts it, “it was expected to exert some downward pressure on the premiums of the lower-cost plans to which those subsidies would be tied. ”  In other words, it would have made other insurance cheaper by creating real competition.  If it’s costing the government this much money to lose the public option, can you imagine what it’s costing the rest of us as individuals?

Remember: the CBO score doesn’t include the personal value of  these policies for each of us. The Senate’s new bill won’t just increase the Federal budget. We’ll also pay higher premiums because we lost the public option, and face more out-of-pocket payments from the excise tax.    Wasn’t it Oscar Wilde who said a cynic is someone who “knows the price of everything and the value of nothing”? It’s pragmatic to take the best deal you can get, but it’s cynical to avoid the battle and then claim it’s the best deal you can get.  The main thing dividing progressives right now is that some see pragmatism and others see cynicism.

Another question:  If Joe Lieberman can single-handedly be credited with most of these changes, is it fair to call him the Twenty Billion Dollar Man?  Maybe.  But remember, it’s easy to hate Joe Lieberman – and it’s a distraction.  The Administration and the Senate leadership made a series of choices that give him this power.

Some say that the public option was always doomed – that the Administration cut a deal in which they’d make a half-heated attempt to fight for it and would then let  it die, placating the always-compliant liberal wing with another mantric repetition of the phrase “we didn’t get everything we wanted, but …” In that scenario Joe’s the Bad Cop to the President’s (and Harry Reid’s) Good Cop.  If Joe Lieberman didn’t exist it would be necessary to invent him.  “Hey, I wanted to help you out – here’s a cup of coffee – but my partner here …”

Think that’s unfair ?  I certainly hope so, but that gets us back to the string-of-blunders interpretation. Reality’s probably somewhere in the middle:  mismanagement and a back-room deal or two. (We know there was a deal with Big Pharma.)

There’s an easy way for the President and Sen. Reid to disprove the Good Cop/Bad Cop Scenario, of course:  They can fight like hell to win concessions in the House/Senate conference, to bring the  final bill more in line with the House version.  That would mean, at the very least, a public option and no excise tax.

Think they will?  Me neither – but I think they should be pressed to do so.  I expect that the House will be put under enormous pressure to cave and accept the bill as it is.  I think the President and other party leaders assume the left can always be counted on to cave in for the good of the country.  I also think that anyone who points out the flaws in this bill will be subjected to another round of scoldings from party leaders and their supporters, charged with not understanding how the world works. Wouldn’t it be better to debate the tactics on their merits instead?

Because that last charge is the biggest miscalculation of them all.  Many of the people being lectured  over this bill are the same people who have been right about matters of both policy and politics for most of the last decade.  (And about the politics – the Democrats are going to get killed if they pass this bill.)  So it was particularly satisfying to see Markos Moulitsas respond forcefully to Chris Matthews for his wave-of-the-hand dismissal to those who saw the last decade’s events more clearly than he did.

That doesn’t necessarily make them right today, of course, but I think they are.  And speaking personally, I’m not talking about “killing the bill” – I’m talking about getting a better bill.  I believe it will take a credible threat  – a “fear factor” – to get that done.

Is Truth the Next Casualty in the White House’s Push For the Senate Bill?

Many of us admire the wealth of talent on display in the White House, so it’s disappointing when there’s a breakdown in the accuracy or completeness of information being put forward by members of this Administration.

Take Jason Furman, the Deputy Director of the Administration’s National Economic Council. We understand that emotions are running high about the Senate health bill, but Mr. Furman’s recent brief in support of that bill isn’t just rhetorically overheated (although it’s certainly that.) What’s less excusable is the way he overlooks some significant new findings that undercut his argument. He’s entitled to his opinions, and even to his emotions. But it’s his responsibility as an economic advisor to know and report the facts, too, and in this case he’s failing to carry out that part of his job.

Here’s what Mr. Furman said – and didn’t say – in a recent blog post on the White House web site.

He opens with sarcasm – an unfortunate tactical decision when addressing one’s potential allies. “(O)pponents of reform are testing the age old adage that if you only say something enough times you can somehow make it true,” writes Mr. Furman. “Yesterday, we heard a new version of the old, tired refrain that the health reform bills in Congress would raise taxes on the middle class.” Here are the rest of his statements, and the facts that undercut them (as available in data from the Joint Committee on Taxation and several other sources):

Statement: “First, the health insurance reform bill being considered in the Senate does not raise taxes on families making less than $250,000 – in fact it is a substantial net tax cut for American families.”

Fact: In 2019, six years after this bill takes effect, the excise tax will affect one in five taxpayers making $50-$75,000 per year. The average tax impact on people in this income bracket will rise to $1,100 in 2019. Overall, more than 24 million taxpayers (or “tax units”) will be affected by 2019.(1)

The CBO found that the tax would impact 19% of all employees with health insurance by 2016.

Statement: “(T)he excise tax levied on insurance companies for high-premium plans, the so-called ‘Cadillac tax,’ will affect only a small portion of the very highest cost health plans – a total of 3% of premiums in 2013. The vast majority of health plans fall below the thresholds set in the Senate plan and would be completely unaffected by the provision. “

Fact: the Communication Workers of America, using figures provided by the Joint Committee on Taxation, found that 27 percent of single plans and 22 percent of family plans will be affected by the tax in 2019. (Report available in pdf form here.) And a recent Mercer survey (discussed here) found that 19% of all benefit plans – that’s one plan in five – could be affected by the tax in its first year.

Mr. Furman is either unaware of these figures, or – as is more likely – he’s playing a misleading game with numbers. He says that 3% of premiums will be affected, but what he doesn’t say is that this is because only the premium above a certain level is taxed. Here’s the financial reality for working Americans, once the games are set aside: At least one in five employees will be hit with a new tax, and studies show that on average this will add $958 to their benefit costs in 2013 (also from the CWA report). Both the average cost and the number of people affected will keep going up each year.

(And, as an aside, let’s stop using the phrase “Cadillac tax.” Like the phrase “death tax,” it’s a misleading and emotionally charged phrase designed to manipulate people’s perceptions of the issue.)

Statement: “In addition, the Senate plan provides special protections to plans held by workers in high-risk professions – like police and firefighters – as well as by those over 55.”

Fact: Two new papers in the respected journal Health Affairs (summarized here) have concluded that the Senate bill does not do enough to offset these factors, and that people are most likely to be subjected to this tax because of the industry that employs them or the age mix of employees in their plan. According to one of the papers cited(2), only 3.7 percent of the variation of premiums for family plans is determined by a plan’s benefit design.

What does that mean? Health plans don’t usually cost more because they offer extravagant benefits. They cost more because they include people whose medical expense are higher – older workers, chronic disease sufferers, and women. Other important cost drivers include the size of the employer and the part of the country where the employees are located.

Statement: “(F)or the small sub-set of plans that are affected, the primary impact of this provision will be to increase workers’ wages. Getting a pay raise is not what most people would call a tax increase.”

Fact: In a survey of employers conducted by the Towers-Perrin firm (pdf), only 9 percent said they would increase salary or direct compensation if health care reform reduced their benefit costs; 78 percent said they would keep the savings in the business as profit.

Mr. Furman quotes a list of economists who believe that wages will go up if benefits are cut. That’s a theoretical assertion based on multi-year comparisons of wage and benefit trends. But theories are theories and reality is reality. It’s hard to give a theory – especially one that’s based on data from a different economic climate – more credit than real-time, real-life survey results like these.

What’s more, even a small increase in wages – which are taxable – would never offset a similar loss in benefits, which aren’t taxed. Once you add in the much higher deductibles and cost sharing that will result from this tax, people will wind up deep in the hole.

Statement: “Finally, supporters of the status quo are supporters of continuing the hidden tax of $1,000 that the millions of Americans who get insurance through their job or buy it on their own are already paying each year to cover the costs of caring for those without insurance.”

Fact: None of the groups or experts opposing this tax are supporting the “status quo.” This is the kind of rhetorical gamesmanship that has become all too common in Washington lately. Opponents of this tax simply suggest that it be removed, as is proposed in the Sanders-Franken-Brown Amendment, and replaced with the more rational and progressive taxation policy in the House’s bill.
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Peter Orszag committed a similar, if less egregious sleight-of-hand on Monday when he cited the excise tax as one of four “fiscally responsible” measures likely to contain costs – ignoring the new Health Affairs report which challenges that assumption. As we’ve already mentioned, that study shows that generous benefits- the very cost tax supporters claim it will contain – only account for 3.7% of the variations in premium for a family plan.(3) That means this tax will hit a lot of plans that aren’t generous at all.

Is it really possible that neither Mr. Furman nor Mr. Orszag have heard of these studies – and neither has anyone who works for them?

Policy experts like Furman and Orszag are free to represent their Administration or push a political line. But, like generals testifying before Congress, I believe they also have a responsibility to lay the facts out fully before the American people. They work for us. If they want to tell us why they don’t accept these new findings, fine: they can make their counter-arguments. But pretending that these studies don’t exist should not be an option. Either these White House officials are ignoring critical information, or they and their teams are unaware of some important new studies affecting their areas of policy expertise. I don’t know which explanation is worse.

Either way, we expect more from this Administration.

(1)Joint Committee on Taxation data, as summarized by the Communications Workers of America (pdf)
(2)Jon Gabel, Jeremy Pickreign, Roland McDevitt, Thomas Briggs, “Taxing Cadillac Plans May Produce Chevy Results,” Health Affairs (Dec. 3, 2009)
(3)Ibid.

(Disclaimer:  I’m actively involved in a campaign to eliminate the proposed excise tax, and any writing I do on that topic should be read with that understanding.)

Elmendorf vs. Orszag: A “Teachable Moment”… for Geeks and Nerds

This week a bitter confrontation between individuals from two distinct social groups offered our nation a rare and precious “teachable moment,” an opportunity to grow beyond those things which divide — or unite — us as a people.

Those individuals, of course, are OMB Director Peter Orszag — a geek — and the CBO Director, ubernerd Douglas Elmendorf. Their struggle is our struggle. Through it we can learn not only about ourselves, but about how to understand and talk about … numbers.

That’s right. I said we can talk about numbers. Wait! Don’t go. This doesn’t have to be boring! Numbers can be exciting!

First, the conflict. As NBC’s First Read reported: “Peter Orszag accused Congressional Budget Office Director Doug Elmendorf of ‘overstepping’ in a Web post Saturday … Orszag, a former CBO director, accused Elmendorf of playing into a stereotype that the CBO often overestimates cost and underestimates savings.”

This is war … between two analytical types whose names sound like characters in a Tolkien novel.

And they didn’t just throw down. They did it on blogs. The conflict began when Elmendorf blogged that the new Medicare advisory panel charged with reforming payments was likely to generate a paltry $2 billion in savings over the next ten years. Orszag replied by saying, in effect, that short-term savings was never the point, adding for good measure that the CBO had “overstepped.”

While it ain’t exactly rival rap entourages exchanging gunfire outside a radio station, it’s pretty badass stuff for number-cruncher types. Orszag’s post also suggests that the CBO would be wise to restrict itself to “qualitative” and not quantitative projections over longer periods of time – a polite way of say “you can’t touch – or quantify – this.” (His “qualitative” comment even includes a hyperlink … back to the very post it’s embedded in. Is that kind of head trip? Some ultra-hip, self-referential “meta” critique of the blogging medium itself?)

“Playing into a stereotype”? Those are fighting words in any context. The stereotyping in this case is between Orszag as geek and Elmendorf as nerd. While people consider the two terms interchangeable, here’s the difference: A ‘nerd’ is conservative, number-fixated, and highly rational. A ‘geek,’ while equally bookish and intellectual, is more given to flights of intellectual fancy and wild imagination.

A nerd can count. But a geek can dream.

Each of us can be a nerd or a geek at different times of our lives, of course, or even at different times of the day. But in this fracas, that’s how the social divide breaks down. Why? Perhaps it’s because Elmendorf’s job is to calculate the bottom-line effect of any program on the government and its coffers, while Orszag (who once held Elmendorf’s job) is allowed to project the long-term and systematic change that new ideas (like advisory panels) might have. There may be bigger savings in Orszag’s vision (I think there are), but dreaming those sweet dreams isn’t in Elmendorf’s job description.

For those of us who love our policy by the numbers, it’s heady stuff. It’s hard dollars vs. soft. It’s expenditures vs. imagination. Elmendorf is the stone-faced banker who won’t lend the money, while Orszag’s the inventor holding a prototype of the hula hoop. Elmendorf’s the dour landlord who says “Sorry, kids – the theater’s closed,” while Orszag is Mickey Rooney and Judy Garland saying “Hey, kids! Let’s put on the show right here!”

Orszag is the right brain and Elmendorf is the left. Orszag is the … oh, you get the point.

Does any of this matter? Actually, it does. We need to apply both types of rigor, but policy analysis is no different from judicial analysis. Numerical impartiality can be a mask for ideological leanings and other assumptions. Both Elmendorf and Orszag have important roles to play, but I think Orszag is right to look at a larger and more quantitative picture. Real “healthcare reform” will come in ways we can’t quantify yet.

I was also surprised by the ideology that seemed implicit in Elmendorf’s recent testimony about health reform. It was striking that he noted simply the cost to the Federal government, and not the potential for overall savings. Even more noticeably, according to the Wall Street Journal, he commented on the support many health policy analysts have expressed for taxing health benefits (an idea I’m not crazy about). The vast majority of health analysts believe there are great savings to be had, along with improved health outcomes, from structural reforms of the very kind that the Medicare panel represents. Elmendorf’s selective use of health analysts’ thinking reflects either ideology, a mode of thought, or (to be fair) simply his necessary focus as the “expenditure and revenue guy” on Capitol Hill.

It’s not up to me to adjudicate between these two analysts, whatever my biases. I do think Orszag has the cooler job, and perhaps as a result has a broader outlook. But that may only prove that I’m a geek. As for resolving this throwdown, maybe the President can invite the two of them over for a beer. Or an Ovaltine. They can watch sci-fi movies, chill out, and resolve their differences.

In the end, however, health care isn’t about the numbers at all. It’s about human lives. Numbers are only tools to help us achieve the right ends. If those of us who love numbers remember that, this will have been a true “teachable moment.”

Why Tax Health Benefits? Unanswered Questions, Unspoken Assumptions

In a guest post at Jon Cohn’s blog The Treatment, Professor Harold Pollack makes a heartfelt case for allowing some taxation of employer health benefits.  “Don’t take the (tax) exclusion off the table,” he tells Democrats.  As Prof. Pollack rightly says, there’s a heated debate among Dems about the possibility of taxing some health benefits in order to offset some costs (and some political resistance) to health reform.

“There’s no bad guy in this fight,” says Prof. Pollack.  “Democrats must raise more than $1 trillion over ten years to pay for health reform.”  The $1 trillion figure is debatable, especially since we don’t know the final shape of health reform, but the “no bad guys” comment is reasonable enough.  And as he points out, there is some discussion of limiting new taxes to higher earners (e.g. $100,000 for individuals and $200,000 for families).

Taxing health benefits got a big shout-out last week from Douglas Elmendorf at the CBO, too.  They may not be bad guys, but advocates for this form of taxation still haven’t answered a fundamental question:  Why use this form of taxation? Why – politics aside – does it make sense to start taxing health benefits?  Health benefits are a relatively small part of overall earnings in America, and the decision to exempt them from taxation was an acknowledgment that we – alone among industrialized nations – don’t provide government health coverage.

Taxation is used for two basic reasons:  To raise revenue,  and to change behavior in a socially productive way.  We tax liquor and cigarettes to discourage consumption, for example.  Early advocates of taxing health benefits used logic and assumptions that aren’t being discussed much these days, especially by liberal advocates.

Their reasoning went something like this:  Americans spend too much money on healthcare, but they’re insulated from the consequences of that expenditures by insurance.  We’ll remove some of that insulation by taxing health benefits.  That will lead to greater awareness of costs, which in turn will change behavior and force down overall costs (or “bend the cost curve,” in the new parlance).

There’s a reason why this logic isn’t getting much exposure these days:  It’s hard to defend. Typical wage earners have little influence over their health care costs.  Doctors make recommendations about care that patients are loathe to reject.  A generation of experimentation hasn’t changed that much, although I strongly support continued work in that area.  But the “facts on the ground” are these:  Doctors, not patients, control health demand.

What’s more, the choice of benefit plan and insurance provider rests with the employer, not the employee.  So the idea that taxing health benefits will “bend the curve” doesn’t seem like a persuasive one.

Perhaps I’m making unfair assumptions about the reasons why some analysts support taxing benefits rather than, for example, increasing taxes on the top 1% of earners.  But the fact remains that even a well-structured benefits tax is less progressive than other new taxes would be.  Liberal analysts like Prof. Pollack need to give their colleagues a persuasive rationale for imposing this form of taxation, rather than another.  And I haven’t heard one yet.

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PS:  As an aside, is it just me?  Sentences like this one from the Treatment post make me uncomfortable: “… (A)ny unions’ hallmark accomplishment was to win generous employer-provided health benefits for their members.”  Not to go all Michael Moore or anything, but in light of other developed nations our union benefits are no longer all that “generous.”  The days of first-dollar coverage for anything are long gone.  Am I missing something?

That said, I do appreciate Prof. Pollack’s call for comity.  The online battle royal gets wearisome sometimes, even for the feistiest among us, so the tone is much appreciated.

A Health Care Bailout For the Middle Class

It’s on. The President’s assuming direct ownership of the health debate. Draft bills are beginning to circulate on the Hill. Dozens of policy details are being debated. Universal coverage is one way to describe the objective, but here’s one that might be better: We need a healthcare bailout for the middle class.

High-income Americans will make out fine, and public programs will be strengthened for lower-income groups. But medical illness caused nearly two-thirds of all bankruptcies, and most of these bankrupt debtors had medical insurance. That raises two questions:

1. What’s the value of “universal coverage” if “coverage” isn’t providing the financial security people need?

2. If we can rescue troubled banks, what are we doing to rescue families whose “toxic assets” consist of unpaid medical bills for urgently needed care?

It’s a mistake to assume that health reform will inevitably ease the financial burden for financially imperiled households. Medical problems caused 62.1% of all bankruptcies in 2007. Three quarters of these bankrupt debtors had health insurance. And 92% of them had medical bills of at least $5000, or 10% of pretax family income.

“10% of pretax family income” is also the figure many health policy analysts say families should be prepared to spend for health care under a mandate. But for many people that was a burdensome figure even before the financial crisis. We can’t assume that a policy forcing them to spend that much will be either effective or politically popular. Nevertheless, AP reports House Dems are floating the idea of “slapping an unspecified financial penalty on anyone who refuses to purchase affordable health insurance.” That’s what is known as an “individual mandate.”

Insurance was originally designed to eliminate financial ruin for individuals by distributing costs among many people. Does it make sense to insist that people buy coverage that won’t necessarily protect them from disaster?

Feelings run high about this issue among us health policy wonks. Most Democratic/liberal analysts insist that reform can’t succeed unless all individuals are first mandated to obtain coverage. The idea’s based on sound economics: If some people can opt out, the healthiest are most likely to do so. Then the system will be burdened with sicker enrollees, driving up costs and making it harder to achieve universal coverage.

That’s why smart and knowledgeable people like Jonathan Cohn can imply, as he does here, that individual mandates are indistiguishable from “good public policy.”

I understand the economics, but here’s the concern: The underlying concept of “shared responsibility” is sound, but in other countries – and in Medicare – that responsibility is mainly shared through the progressive mechanism of taxation. Unless carefully designed, individual mandates run the risk of being overly punitive and politically explosive among middle-income Americans.

Consider Sen. Kennedy’s new draft proposal. It offers more generous subsidies than other proposals, with a sliding scale of assistance that goes up to $110,000 in income for a family of four. But a lot can happen beneath and near that $110,000 mark, especially in these perilous times. Yearly premiums for family coverage reached $12,680 in 2008 and continue to climb. That’s one reason why families struggling to make ends meet sometimes ‘bet’ that they won’t have catastrophic medical costs. That may be a bad bet, but using the levers of government to force them to pay $8,000 to $13,000 in premiums alone might not be the best solution.

And the assumption that mandates are more politically liberal is just that: an assumption. Mandates could, in fact, be economically regressive. They could also give the GOP a hot-button issue for 2010 and 2012. Proposals like Jacob Hacker’s, which limit out-of-pocket premium costs to $2,500, go a long way toward addressing those concerns. But they’re also costlier from the government side, so they don’t seem to be on the table right now (even if those costs could ultimately be offset by improved compliance).

What’s the solution? At least one proposal that has been anathema to Democrats might help. The Democrats campaigned against McCain’s plan to tax health benefits. But a health tax, like any other, can be either progressive or regressive. (There’s a good discussion of the topic here.)

It’s true that a tax on all workers receiving health benefits could be disastrous. And nobody’s receiving overly luxurious benefits, despite what some partisans claim. As Merrill Goozner observes, there are no “Cadillac health plans” for employees, though that phrase is has become a buzzword. (And Cadillacs are made by GM, where a little help was also needed.)

Here’s one possibility: a health benefits tax that kicks in at high income levels. That could conceivably pay for some Hacker-like caps on premiums. It would also have the added benefit of sensitizing corporate decision-makers to the true cost of medical care in this country. It might even motivate more of them to take a proactive stand on health issues.

There are a number of other possible ways to “bail out” the American middle class in health care, too:

1. Phase mandates in slowly, as overall health costs are reduced through other measures. (This one’s unpopular with a number of analysts, but I think unfairly so. It’s do-able.)
2. Emphasize the public plan option. (If you’re going to lay a heavy cost burden on the middle class, it’s a good idea to give them every choice you can.)
3. Develop innovative ways of helping consumers pay their health debts through easy-to-use financing tools at favorable interest rates.
4. Ensure than health benefits include appropriate caps on out-of-pocket costs.

Universal coverage without universal financial security would be a Pyrrhic victory. The President and Congress can ensure successful health reform by making sure that American families can receive the care they need at a price they can afford.

Health Noir: $10 Million Ransom Demand for Data – and Stranger Crimes Are Coming

(originally written for The Huffington Post)

“Attention, Virginia!” the ransom note begins. “I have your shit! In *my* possession, right now, are 8,257,378 patient records and a total of 35,548,087 prescriptions. Also, I made an encrypted backup and deleted the original. Unfortunately for Virginia, their backups seem to have gone missing, too. Uhoh 😦 ”

“For $10 million, I will gladly send along the password. You have 7 days to decide.”

Someone says they’ve stolen 8.3 million patient records, and now the FBI is on the case. However strange this crime may sound, it was a predictable event. Stranger and more severe crimes are coming, if they’re not here already. I’ve been tracking health data breaches for a while, and it’s one of six scenarios I sketched out (but chose not to publish). It’s important now to ensure that these concerns are given a high enough priority – and proper funding – in future health IT initiatives.

Whatever your position on health reform, nobody wants health data to be the topic of the next private eye novel or film noir. Philip Marlowe wouldn’t be happy working at HHS.

Since they’re now playing out in public, I’ll briefly mention those other five scenarios. They are:

1. Individuals are blackmailed using information obtained from stolen medical records.
2. “Medical identity theft” – using stolen information to fraudulently obtain medical care
3. Stolen information is used to submit fraudulent bills to Medicare, Medicaid, and insurance
4. Electronic funds transfers are intercepted using stolen data
5. Medical data is used to obtain controlled substances and sell pharmaceuticals online

There are no doubt other ideas out there, and inventive minds will find them. Authorities say the Virginia hackers breached the system’s security, but it’s less clear whether they can do what they’ve threatened. Either way, the language in their ransom threat seems to fit the hacker profile of young American kids with time on their hands. We don’t know whether that’s real or a ruse, but it raises a couple of disturbing questions:

– What happens when organized crime gets into the stolen health data business?
– Who says they haven’t already?

Crime syndicates could become brokerages for acquiring and selling health information, which can be traded online.

It would be a mistake to use the threat of these crimes to oppose health IT initiatives, however. These crimes will continue, no matter what, because the exchange of data is embedded in every aspect of our insurance-based health system. Doing nothing will not protect us. It makes more sense to use this historical moment to take bold preventive steps.

If stolen health data fits the pattern of other cybercrimes, publicly reported breaches don’t reflect the full scope of the problem. So what should the Administration and private industry do next?

1. Acknowledge the problem. Don’t lose control of the debate by letting health reform opponents raise the topic first.
2. Provide funding for security software and solutions.
3. Clarify the security levels and procedures expected of all health IT users. (You’d be surprised how many of these breaches occurred because someone left a laptop in an airport or a computer disk on their front seat.)

What should private industry do? Those industries that will benefit from reform and IT initiatives could establish a reward – something like the “X Prize” – for innovative security solutions in healthcare.

Organized crime – or even disorganized crime – has no place in the world of healthcare.

Long-Term Thinking About Health: Seven Trends That Should Concern Us

This country is in a healthcare crisis today — but we’re not thinking enough about tomorrow either. Here are seven trends to watch, starting with the short-term and ending with what may seem more like science-fiction.

The seven trends are: Doctors leaving the public system, a shortfall in primary care, underutilization of medical treatment, “superbugs,” virtual health care, climate change, and radical self-redesign and enhancement.

1. Doctors Leaving the Public System: Medicare dodged a bullet when Congress stopped a substantial pay cut for physicians this month. But doctors continue to leave the Medicare system – in Texas, in Washington State, in Tennessee, and elsewhere. And many doctors already limit the number of Medicaid patients they accept. Shortages will become more acute as SCHIP and other reforms (hopefully) increase the number of Medicare and Medicaid recipients, and they’ll hit lower-income and minority communities first and hardest.

2. Unavailability of Primary Care Doctors: Primary physicians (internists, family practitioners, gerontologists, etc. ) aren’t paid enough. It’s part of a general tendency to under-compensate for “cognitive services” – thinking, talking, and diagnosis. Doctors are economic actors like the rest of us. So the result of this payment bias is a critical lack of ‘cognitive’ physicians who should be the drivers of the medical process. Instead, young doctors are being lured into high-cost specialties. This increases the use of costly (and sometimes unnecessary procedures), according to studies conducted at Dartmouth and elsewhere.

This shortage is already crippling health reform in Massachusetts. The idea of increasing compensation for primary care keeps circling around in health circles, as it is now – along with the concept of a”medical home,” which is a re-articulation of health reform ideas that appear at regular intervals like comets. The thinking is probably correct, but the problem will persist – until there is fundamental reform in the way doctors are educated, compensated, and rewarded with social status. And meaningful reform will be difficult without adequate primary care.

3. Underutilization: Medical policy types are well-versed in the cost problems and health complications that stem from over-utilization of health services. Over-utilization is a central tenet of the McCain health proposals. But, while it occurs – especially in certain specialties – the reverse problem of underutilization is prevalent and growing.

As insurers and employers shift more and more costs to individuals’ pockets people are seeking less and less treatment, as this California survey (warning: pdf file) demonstrates. 38% of respondents said they avoided seeking medical care – either preventive or curative – because of health costs. That’s up from 34% three years ago, and it’s a problem. Failure to seek needed care increases health costs, adds to individual suffering, and can allow untreated contagious conditions to spread. Which gets us to …

4. Superbugs: A study of MRSA “superbug” infections published last year found a dramatic increase in occurrence among Chicago’s urban poor. Crowded living conditions in jails and public housing could be a factor, according to the study’s authors, and illegal tattoos may also be contributing to their spread. Now British hospitals are facing a new superbug called “Steno” that is at least as hard to treat as MRSA.

As new viruses mutate and spread, ready access to preventive and curative medicine becomes more critical. Superbugs would be a concern even if we had a fully functional health system. With the system we’ve got, the impact of new mutated viruses could be serious – and potentially catastrophic.

5. Virtual Health Care: Online healthcare holds great promise for the future – both as a way for people to manage their own health, and as a tool that links doctors and patients in a unified network. But even now, before “Health 2.0” is a reality, we’re seeing a wave of health data losses and thefts. (They’ve become so common that I have a whole blog section devoted to privacy issues.)

The combination of electronic medical records, electronic prescriptions, and other online tools could result in new forms of crime – with scary enough potential results that I’d rather not describe them in public. (Why serve as a think tank for the bad guys?) Virtual health could also cause substantial shifts in the kind of medical care people demand. While that might actually be a thing, failure to plan for it could result in some temporary inconveniences.

6. Climate Change: Global warming could change the way we use medical care – and how much we need. As an Australian study found (and we summarized here), overall hospital admissions went up by 7% during heat waves, while mental health admissions went up by the same percentage – and kidney-related admissions increased 17%. That adds up to a snapshot of medical conditions on a globally-warmed planet. Other changes, like a dramatic increase in the occurrence of mosquito-borne diseases, could also take place.

7. Radical self-redesign: ‘Transhumanism’ – the movement to re-engineer the human body – isn’t a well-known term today. But the process is already underway, and it will gain momentum in the coming decades. Choosing our children’s genetic characteristics … building computer technologies into our bodies … extending our lifespans … all of these will come into being in the coming years. This will raise a series of questions in fields like medical ethics and health financing, as we’ve discussed before.

What should we be allowed to do to ourselves and our children? Which changes should be paid for as a social right, and which are a personal choice? Will we create a ‘two-tiered’ race of human beings? These science-fiction questions will become increasingly concrete as we consider the health care reform issues of the coming century.
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(image Creative Commons, courtesy Leo Reynolds)

“Pro-Business” Isn’t Always What You Think. Take Health Reform, For Example.

People who think they know “what business wants” may need to think again – especially when it comes to social issues like health reform. Case in point: A recent study of New York small business owners shows that more than half believe small businesses have an obligation to provide health coverage. What’s more, 51% think they should be required to provide it.

But do they distrust government solutions, preferring to let “the market” solve everything? Apparently not: 72% support the option of joining state-run insurance pools, and a stunning 85% think government should act as a “watchdog” over health insurance companies.

Why? Partly because they know our broken health system stifles innovation. And partly because they know that many American businesses struggle with runaway health costs, or with workers who can’t get treatment for their medical problems. That means they can’t compete on a level playing field, domestically or internationally. And without a level playing field, the free market can’t operate.

Roll over, Newt Gingrich, and tell Ayn Rand the news: Sometimes capitalism can be improved when government and free enterprise work as partners. These entrepreneurs understand that.

Small Business Majority cosponsored the New York survey, whose findings are consistent with an earlier survey the group conducted in California. The California study’s key findings included the following:

1. 80% of those who expressed an opinion felt that employers should pay something to provide healthcare …
2. 75% ranked the availability of affordable healthcare as extremely or very important.
3. 57% regard health care financing as a shared responsibility among individuals, employers and government …
4. 55% were in favor of paying into a statewide pool that would enable their employees to obtain coverage at favorable rates…

“There is a range of political opinion among small business owners,” John Arensmeyer told me. Arensmeyer, the Founder and CEO of Small Business Majority, added: “They tend to be an independent-minded group. But they’re in favor of what works. They see health care as both a moral obligation on their part, and as a problem to be solved.”

The entrepreneurs polled in this study represent the second-most trusted institution in the United States, according to a Gallup poll. Small business is more trusted than organized religion, police, or even doctors. (Congress is at the very bottom – below even HMOs. Man, that’s gotta hurt …)

Arensmeyer explained why innovation’s being stifled by our broken health system. “Somewhere there’s an engineer at a computer firm with a better idea about something,” he said. “She can’t go out and start her new company, though, because she and the people she’d like to recruit all need their health coverage. How can we compete in a global economy this way? It’s crazy.”

Arensmeyer says SBM supports principles of health reform, rather than getting locked into specific models. “”We believe in shared responsibility,” he said. “Everybody needs to be a part of the system for it to work. But it needs to be affordable.”

I mentioned my past concerns with what I felt was an over-reliance on individual mandates in the Clinton/Edwards plans, which could have resulted in onerous burdens for lower-middle-class working families. “In order for a system of shared responsibility to work,” Arensmeyer answered, “it’s got to be affordable for individuals. We think the (now defunct) California bill did as good a job at that as we’ve seen anywhere.”

“The Clinton and Edwards plans didn’t reach the point of specificity,” he added. “The devil’s in the details.” That’s a position I can support, having had the same concerns early on about Massachusetts health reform. (Massachusetts eventually had to concede that 20% of uninsured residents would remain without coverage under their plan.)

Says Arensmeyer, “The Massachusetts experiences reinforces those basic principles: affordability and universality.”

Old paradigms of “left” and “right” are breaking down in social policy. The public’s becoming aware that the “business world” is comprised of different groups with differing and often competing interests.

People picture different things when they hear “small business,” because the entrepreneurial world is diverse. But these encouraging surveys suggest that a wide range of small-business owners, from small-town Main Streets to the Silicon Valley, want comprehensive health reform – with government playing a key role.