Rational Arguments

In yesterday’s health care summit, malpractice reform was all the rage.  It’s especially frustrating, because I cannot, for the life of me, understand why some people feel that it’s the magic bullet for reducing health care costs.  My frustration was lessenned by Sen. Durbin’s pretty darn good summary of the problem with that line of thought:

Of course that didn’t stop the continued assertions that – REALLY – malpractice costs were the biggest and baddest problem in all of health care.  And then Senator McCain was kind enough to whip out the examples everyone knows and loves:

And the — and the point is that we don’t have to go very far. There’s two examples right now of medical malpractice reform that is working. One’s called California, the other called — called Texas.

Sigh.

Well, I tackled Texas a little while ago.  You can go reread that one if you like.  And today, Kevin Drum was kind enough to explain the problem with using California:

We passed a law called MICRA in 1975 that limited noneconomic damages in malpractice cases to $250,000. Adjusted for inflation, that cap is now about the equivalent of $60,000. Nonetheless, its impact on malpractice premiums has been negligible. The chart below comes from the Foundation for Taxpayer and Consumer Rights, which definitely has a dog in the fight since it was founded by insurance industry scourge Harvey Rosenfield, who championed Proposition 103, an initiative that implemented state approval of insurance rates. It was passed in 1988.

Still, the results are pretty clear. After 1975, malpractice premiums continued to zoom upward, rising at an even higher rate than in other states. But after 1988 (that’s the green line for easy reference), California premiums leveled off while rates in the rest of the country continued to rise. The reason for this is pretty simple: large damage awards are actually pretty rare and don’t make up a huge proportion of total malpractice payouts. Capping them changes the picture, but it doesn’t change it that much. But it does substantially cut into trial lawyer income.

So what you’re seeing is that capping awards in 1975 did little to decrease the premiums in California over the next 13 years.  Allowing government regulation of insurance premiums since 1988, on the other hand, has done quite a bit to keep rates from rising.  So which method are the Republicans clamoring for?  Can you guess?

I said it about Texas, so I’ll say it again to be complete:  There are probably some examples that can support the cause of tort reform, but California sure ain’t one of them.  Please stop using it.

I was going to make a witty comment on how “I love getting the emails that accuse me of lying or dishonesty”, but the truth of the matter is I don’t.  And believe me – I get plenty of them.

I’ll say this again for everyone’s benefit.  I have no ulterior agenda other than discussing health care reform.  I’m not interested in how it advances political agendas.  I’m not interested in getting anyone elected.  I’m not trying to deceive you in order to achieve some “other goal”.  This is it.

I hope many of you notice, as well, that I don’t post any reader responses telling me how awesome I am, or how correct I am.  I get those, too, (thank goodness), but the purpose of the Reader Response isn’t to convince you I’m right.  It’s to provide another perspective, sometimes acknowledge my prior posts require a change, or to respond to a common meme that needs rebuttal.  This is one of those.

A reader responds:

This is in respose to your February 5th blog post “Reader question – Doesn’t Texas prove you wrong?” which includes a graph of Texas Doctors per 100,000 people which you copied from the Public Citizen web posting “Liability Limits in Texas Fail to Curb Medical Costs.” It is disappointing that you relied on incomplete data from one graph to conclude that “Since tort reform, the number of doctors remains stable. . .” which is NOT TRUE. That graph shows “Doctors per 100,000 people” which has trended up and then a bit down since tort reform, but you neglect to consider the explosive population growth in Texas. Actual new numbers of licensed physicians per year have increased tremendously since tort reform (I will append the data but cannot cut and paste it here); The TMB stats for new physicians licensed: FY2001=287, 2002=321 2003 (tort reform passed)=430, 2004=553, 2005 – 2009 = 622,652,687, 641,820 respectively. In my county we added 403 new physicians between 2003 and 2007. Without the physician increase following tort reform, we would be even further behind per capita. The U.S. Census Bureau statistics that I accessed show that from Aug 1, 2000 to July 1, 2008 Texas population increased 16.7% (20,851,811) which is over twice as much as the U.S. increase of 8% for the same time frame. So the ACTUAL NUMBER of doctors has INCREASED, which has kept our per capita number of doctors from declining.

I stand by my point.  The important statistic is the number of doctors per population, not the total number of doctors.  When the population increases, the total number of doctors should increase.  I don’t give anyone credit for that.  In the same way, I wouldn’t ding Texas if the population went down and the total number of doctors went down.  What is important is the number of doctors per population.  If Texas was a more desirable place to practice, then the number of doctors moving in should go up faster than the population, even if it were growing.  That’s not really happening.

Another way to put it.  I love when during an election, someone trots out the line that “there are more CT scanners in California than in all of Canada.”  Yes.  There are also more people in California than in all of Canada.  What’s important is not the total number, but the number per population.

Nevertheless, please do keep the emails coming. I really do learn from many of them.

It’s been a hard few weeks for those of us who work in health care policy.  But then, someone sent me a gift.  She didn’t mean it as such, but that’s not my problem.

A reader writes:

I’ve read your site and seen you go on and on about how malpractice isn’t the problem with health care costs.  Can I tell you how tired people are getting about your distortions?  How can you say that when there are clear examples that it’s true.  For instance, Governor Perry and Speaker Gingrich said:

Texas, for example, has adopted approaches to controlling health-care costs while improving choice, advancing quality of care and expanding coverage. Consider the successful 2003 tort reform.

Everyone knows that Texas has brought down health care costs, which is how you get more people insurance.  They’ve attracted doctors to the state.  But you deny it, even when Republicans say it over and over (and your liberal media ignores it).

When will you admit the truth?

Wow.  Where to start?

Look, I didn’t do all this work on my own.  But other people have.  I’m using their graphs (or creating some from their data) and cite them at the bottom.

Let’s start with what Texas did.  They capped non-economic damages on malpractice lawsuits at $250,000.  It’s pretty much what they Republicans want to do with health care reform as well (see their plan).  And, yes, let’s be honest and say that when you cap damages, the total cost of payments goes down.  For instance, here are the total malpractice payments made in Texas from 1997-2008 according to the National Practitioner Data Bank.

As you can see, total malpractice payments dropped by about two thirds since reform was enacted in 2003 (the line).  Is that good?  I don’t know.    That depends on the goal.  One goal is that it should result in cheaper malpractice insurance; it did.  But such insurance dropped on average by only 27% for physicians.  Where did the rest go?  Did the insurance companies keep it as profit?  Let’s push that off for another day.  Because no one is denying that capping damages will lower malpractice payments and therefore lower premiums.

The contention under dispute is that capping damages will be “health care reform”.

Did tort reform lower the costs of care?  Not according to the Dartmouth Atlas of Health Care (Selected Medicare Reimbursement Measures):

Hmmm.  It appears that Medicare costs per enrollee went up faster than the national average.  In fact, Texas reimbursement rates in 2007 were the second highest in the country.

Did tort reform lower the rates of uninsurance in Texas?  Not according to the US census:

In fact, Texas has the highest rate of uninsured people in the United States.

Did tort reform result in health insurance costs going down?  Not according to the Agency for Healthcare Research and Quality, Medical Expenditure Panel Survey:

Did tort reform result in doctors flocking to Texas to practice? Not according to the Texas Department of State Health Services:

So let’s recap.  If you believe that tort reform will work than you must believe that (1) it makes doctors want to practice there and (2) lowers medical costs which will then (3) lower the cost of insurance and (4) result in fewer people being uninsured.  And, it seems, many of you believe Texas proves this to be true.

You couldn’t be more wrong.  Since tort reform, the number of doctors remains stable, health care costs have gone up (along with insurance costs), and the number of uninsured remains the worst in the nation.

There are probably some examples that can support the cause of tort reform, but Texas sure ain’t one of them.  Please stop using it.

If you want to get even more detail, read Liability Limits in Texas Fail to Curb Medical Costs (where I brazenly copied a lot of this from) and Defensive Medicine and Disappearing Doctors.  And, if you are really engaged in this topic, read Tom Baker’s The Medical Malpractice Myth.

Arguments Discussions about health care reform are unavoidable for me over the holidays.  But the most frustrating one for me concerned the ability of friends and family to somehow merge their anger about the lack of malpractice reform and the USPSTF’s trying to recommend that early screening mammograms might be unnecessary.

Understand that most people who support malpractice reform do so because they thing that it’s adding significantly to health care costs.  It’s doing so because of the practice of defensive medicine (emphasis not mine):

Both of my parents are physicians in Massachusetts, and, while they may be biased in their opinions about the merits of malpractice, they emphasize that it has caused them more and more to practice defensive medicine.

Simply put, defensive medicine is the use of medical practices designed to prevent malpractice.  A 25 year-old kid may come to a physician complaining of chest pain.

The likelihood that they have a life-threatening condition is as close to zero as can be doctors will order an MRI just so that they cannot be sued later on for not following procedure.  What that means is that insurance pays $1,000 for an unnecessary procedure, which could’ve been spent on something worthwhile.  Physicians study and work for 8 years post-college in order to ply their trade, and in a lot of situations, are equipped to make decisions without the need for costly tests.  Defensive medicine leads to hundreds of billions of dollars in wasted medical spending – money that could spent elsewhere.  Tort reform should be a major consideration in reforming the healthcare system.

Now understand, not all “defensive medicine” is bad.  Sometimes, doctors pick up something that seemingly validates the practice.  It’s just “waste” in that people believe that the expected cost of the extra tests outweighs the benefits; therefore, it has to go.

This is pretty much the same argument now being used by the USPSTF.  They are saying that screening mammograms for 40 year old women may pick up things once in a while.  But the costs (in terms of potential harms) may actually be greater than the benefits.  They don’t mention it, but I will – the financial costs may not be worth it either.

This week I can’t count the number of times people who absolutely think that malpractice reform will be the savior of health care costs – because it will allow doctors to stop ordering such tests – were absolutely sure that the actual practice of stopping ordering these tests is rationing of the worse sort.

Look, I’m not saying that screening mammograms for women in their 40′s are awesome or horrible.  It’s obvious that the data are murky at best.  But what’s the point of malpractice reform if we can’t even talk about reducing the ordering of tests for things for which the benefit is ambiguous at best?  What tests did they think we were going to save money on?

Another issue that’s still unresolved as the Senate takes up its version of health care reform: what to do about the medical malpractice system.

And when we spoke recently, Dr. Carroll said that, while he thinks that system needs an overhaul, fixing it probably won’t make much difference in the total cost of health care.

Dr. Aaron Carroll is Sound Medicine’s regular analyst for the health care reform process.

Listen to the interview!

I’m getting a lot of emails about the Republican health care bill.  Many are saying I’m being unfair.  A surprising number are pointing me to this press release from John Boehner:

In a letter delivered tonight, CBO estimated that the GOP health care plan would reduce average private health insurance premiums per enrollee in the United States relative to what they would be under current law.  Specifically:

•    For the small group market (generally businesses with 2 to 50 employees), the GOP plan would reduce premiums in 2016 for example by up to 10 percent.
•    For the individual market, the GOP plan would reduce premiums in 2016 by up to eight percent.
•    For the large group market, the GOP plan would reduce premiums in 2016 by up to three percent.

Can we first agree never again to use press releases from politicians as evidence in an argument? Please?

Let’s address the points anyway, as they provide a good lesson on the difference between the cost of insurance and the cost of care.  I am not quibbling that the GOP bill may bring down the cost of insurance for the Average American.  I can do that easily.  If we kick everyone who is sick out of the risk pool, then insurance becomes very cheap.  Go read this.  After all, insurance for healthy people is cheap!  The problem in America is that if you’re not healthy and actually need care, insurance is very expensive.  So how does the Republican plan lower the costs?  The CBO tells us:

The first source encompasses factors that affect an “apples-to-apples” comparison of the average price of equivalent insurance coverage for an equivalent population under the amendment and under current law. Provisions in the amendment that belong in this category include the medical malpractice reforms and the requirements for administrative simplification assigned to the Secretary of HHS. Those changes would reduce spending related to the delivery of health care services and would thereby reduce health insurance premiums without substantially changing the amount of coverage provided or the mix of enrollees covered. Similarly, the amendment’s subsidies for reinsurance in the small group market would reduce the average premiums charged in that market because those subsidies would reduce the net costs that insurers incurred to provide that coverage.

So the first way they get premium reductions is by malpractice reform.  That will lead to some reduced health care costs (less than $5 billion a year) from less defensive medicine.

The second source of change in average insurance premiums is changes in the average extent of coverage purchased. Those changes can reflect both changes in the scope of insurance coverage—the benefits or services that are included—and changes in the share of costs for covered services paid by the insurer—known as the “actuarial value.” With other factors held equal, insurance policies that cover more benefits or services or have smaller copayments or deductibles have higher premiums, while policies that cover fewer benefits or services or have larger copayments or deductibles have lower premiums. Provisions in the amendment that would reduce insurance premiums by affecting the amount of coverage purchased include the State Innovations program, which would encourage states to reduce the number and extent of benefit mandates that they impose, and provisions that would allow individuals or affiliated groups to purchase insurance policies in other states that have less stringent mandates. CBO’s assessment was that the amendment would not have a substantial effect on actuarial values. However, that assessment represents an important source of uncertainty in this analysis of effects on premiums, because some of the savings from avoiding state mandates of benefits might be used to purchase coverage with a higher actuarial value.

The second way premiums get reduced is by getting states to stop requiring insurance to pay so much.  In other words, the plans can require more out-of-pocket expenses.  This makes premiums less.

The third source of change in average insurance premiums is changes in the characteristics of the people who are enrolled in different insurance pools. If relatively healthy people join an insurance pool, then the average insurance premiums for that pool would tend to decline; conversely, an influx of relatively unhealthy people would tend to raise premiums for that pool. For example, provisions in the amendment that promote the automatic enrollment of workers in health insurance and the coverage of dependents under age 26 in family policies would act to improve the average health status of both the small group and large group insurance markets and thereby reduce average premiums per enrollee in those markets.

The third way is by allowing even more cherry-picking so that only healthy people get into insurance risk pools.  That makes premiums less.

This really shows you why you need to read the full report.  Yes, Mr. Boehner can (in his press release) claim that the average premium will go down.  But that gets accomplished by (largely) increasing out-of-pocket costs and making things even harder for people with pre-existing conditions.  This is not health care reform.  It’s making things worse.

Look, there will always be those who think I’m not willing to listen to opposing arguments.  I promise I will.  I’ve made the case repeatedly that there are many avenues to reform.  Moreover, I’ve tried to make it clear that I believe we all benefit from hearing clear, opposing viewpoints.  They help us to clarify our own thoughts, and sometimes we learn something new.

Because of this, I’ve been desperate to hear a Republican plan for health care reform.  But this is what we get:

“We are trying to make the current system work better,” he said. “We take a step-by-step approach by allowing people to buy insurance across state lines, by allowing small business and other groups of individuals to group together for the purpose of buying health insurance at lower costs like big business and unions can… We need to do something about junk lawsuits.”

Perhaps more telling, a GOP health care reform effort, he said, would be defined by incrementalism. “We do not attempt to cover 46 million more Americans,” he said. “We will cover millions more Americans but we won’t attempt to do this. This is not affordable… what this is going to do is bankrupt America.”

ARGH.

Let’s take this piece by piece:

We take a step-by-step approach by allowing people to buy insurance across state lines

That won’t work.

[A]llowing small business and other groups of individuals to group together for the purpose of buying health insurance at lower costs like big business and unions can

That’s called an insurance exchange.  I believe it’s part of every bill we’ve seen.

We need to do something about junk lawsuits.

The CBO already scored this.  Around $5.5 billion a year, at best?  We spent way more than that for health care each day this year.  Malpractice reform is not health care reform.

This is not affordable… what this is going to do is bankrupt America.

There are many reasons to oppose reform.  Bankrupting America isn’t one.  The CBO has scored these bills as deficit reducing.  Even if they’re wrong – and they cost a few billion a year – please.  Health care may bankrupt America, but health care reform will not.

There are conservative ideas for reforming health care.  Some of them might even work.  The American people need to hear them – from their elected officials.  I’m looking at you, Republicans.

I’ve been claiming forever that tort reform does not equal health care reform.  But I am willing to be swayed by good research.  Today the CBO released a report on the economic impact of tort reform on health care costs:

Tort reform could affect costs for health care both directly and indirectly: directly, by lowering premiums for medical liability insurance; and indirectly, by reducing the use of diagnostic tests and other health care services when providers recommend those services principally to reduce their potential exposure to lawsuits. Because of mixed evidence about whether tort reform affects the utilization of health care services, past analyses by CBO have focused on the impact of tort reform on premiums for malpractice insurance. However, more recent research has provided additional evidence to suggest that lowering the cost of medical malpractice tends to reduce the use of health care services…

Enacting a typical set of proposals would reduce federal budget deficits by roughly $54 billion over the next 10 years, according to estimates by CBO and the staff of the Joint Committee of Taxation. That figure includes savings of roughly $41 billion from Medicare, Medicaid, the Children’s Health Insurance Program, and the Federal Employees Health Benefits program, as well as an increase in tax revenues of roughly $13 billion from a reduction in private health care costs that would lead to higher taxable wages.

How much?  $54 billion over 10 years?  What’s that…  $5.4 billion a year on average, compared to $2.4 trillion a year in total health care costs? Let me know when you’re serious about cutting costs.

Do I need to make you a chart?

There’s an excellent piece in the NYT today by David Leonhardt that gets at the issues in malpractice reform in a pretty thorough and balanced way:

Yet most people, I suspect, still aren’t sure exactly what to think. For them, the good news is that the issue has inspired a lot of research by economists and others with no vested interest. And after sifting through years of data, these researchers have come to some basic factual conclusions…

The direct costs of malpractice lawsuits — jury awards, settlements and the like — are such a minuscule part of health spending that they barely merit discussion, economists say. But that doesn’t mean the malpractice system is working.

The fear of lawsuits among doctors does seem to lead to a noticeable amount of wasteful treatment. Amitabh Chandra — a Harvard economist whose research is cited by both the American Medical Association and the trial lawyers’ association — says $60 billion a year, or about 3 percent of overall medical spending, is a reasonable upper-end estimate. If a new policy could eliminate close to that much waste without causing other problems, it would be a no-brainer.

At the same time, though, the current system appears to treat actual malpractice too lightly. Trials may get a lot of attention, but they are the exception. Far more common are errors that never lead to any action.

After reviewing thousands of patient records, medical researchers have estimated that only 2 to 3 percent of cases of medical negligence lead to a malpractice claim.

As I’ve often said (I swear!  It’s been on the radio!) the problem with the malpractice system is two sided – too many cases without merit go to trial, and too few many with merit never do.  Also, the costs of defensive medicine, while real, are often overestimated for political purposes.  Eliminating them completely will not even come close to containing health care costs adequately in the future.

Both health care reform and malpractice reform are important.  But making them one issue and confusing the two will make sure that neither gets the full attention it deserves.

Go read the whole thing.  It’s worth it.  If you really have the time and interest, I’d recommend Tom Baker’s The Medical Malpractice Myth.

UPDATE: Edited thanks to a careful reader.