Ezra Klein defends against Megan McArdle’s told-you-so on health care reform.
Yesterday, Megan McArdle linked to the study showing that Illinois children on Medicaid have trouble getting appointment with specialists and wrote “proponents of health care reform are gnashing their teeth, while opponents grimly say ‘I told you so.’” Really? Why?
The study gets at two problems: In an effort to control costs, Medicaid pays doctors too little, and too many uninsured people go without care. These are exactly the sort of problem health-care reform is designed to address. Most directly, the law dramatically expands coverage and increases Medicaid reimbursement rates, particularly for primary-care doctors. That doesn’t do much for the specialists, who were the subjects of this study, but it’s a start.
More importantly, the law is thick with efforts to control costs in the health-care system itself — and in Medicaid itself — which is the only approach that’s really sustainable over the long-term. They may or may not work, but people who believe they’re our best hope, at least for the moment, aren’t gnashing their teeth at this study. They’re saying, “See? This is what I’ve been trying to tell you about. This is why we had to pass that law.”
I remain skeptical that any of these essentially demand side policies are going to do the trick.
As Megan notes some hospitals are claiming that Medicaid reimbursements are running below their marginal costs. That is, they would do better to leave a bed empty than fill it with a Medicaid patient.
I find this maddening. Not for the usual moral implications sort of way. Just in the fact that I am faced with a business which cannot profitably perform this service at a reimbursement rates far, far, far above the median wage.
There is nothing that can be done? Really? Nothing?
I can’t put an out of work construction worker in that room with a thermometer and pay him 7.50 an hour to take that patient’s temperature. I cant hire a 16 year-old kid to haul around one of the blood pressure monitors, hook each patient up to it and then type the results into some old rusty laptop.
You have got to be kidding me. There is this much money on the table and there is just no profitable use you can put it to?
Are you running a business or a hole in the ground where profit goes to die?
I mean crap, can’t I at least hire someone with a iPhone to walk into each room and ask the patient a series a questions, record on the iPhone camera and the email the results to a triage nurse in India who can give me a heads up on what’s wrong with this patient.
We have lots of unemployed workers in America. We have lots of people who want some form of medical care. There is no way to get these two groups of people together. Just NO WAY?!
I hate to keep going with this but a fair number of my Medicaid patients might be old, illiterate or not have access to the internet. I can’t pay some kid to type in their symptoms into FirstConsult and at least find out something?
This is just a joke. I have workers. I have capital. I have customers. There should be some transactions going down here.
I don’t know how to see this as anything other than a serious supply side catastrophe.

20 comments
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Friday ~ June 17th, 2011 at 2:42 pm
Joshua Probert
Hear, hear.
Friday ~ June 17th, 2011 at 2:55 pm
foosion
Build more medical schools, train more doctors, allow foreign doctors and other medical professionals to practice here, give more responsibility to nurses and others, relax patent protection, etc., etc.
Also do everything listed in your post
Friday ~ June 17th, 2011 at 3:20 pm
Roland
Regulatory and credential constraints on the supply side mean that I can’t buy a night in a hospital for the price of a night at the Plaza. Did you know you need a doctorate to be a physical therapist? And that dental hygienists can’t clean teeth unless a dentist is on the premises?
Friday ~ June 17th, 2011 at 4:28 pm
engineer27
Re: dental hygienist freelancing; Yglesias is on the case.
Friday ~ June 17th, 2011 at 3:42 pm
hinheckle jones
Roland forgot to say “and OMG if a 16 year-old kid hooked up a blood pressure monitor to a patient it would be a federal crime”. The state of medicine today is due in large part to regulatory failure.
Saturday ~ June 18th, 2011 at 10:35 am
Th
“The state of medicine today is due in large part to regulatory failure.”
The state of medicine is regulated just like the doctors and hospitals want it regulated. Huge barriers to entry mean a low supply and high prices. Just what the doctor ordered. But, maybe this is what you mean by “regulatory failure.”
Maybe hospitals will begin solving the supply problems by hiring back all the workers they just fired.
Monday ~ June 20th, 2011 at 10:01 pm
Semper Why
So… your solution to hospitals statement that they lose money per Medicaid patient is to make them increase their personnel costs by forcing them to rehire people?
Perhaps you should ask some doctors what they think of the current regulator climate. I don’t think “it’s great – I’m alone in my field for 80 miles!” is going to be the response.
Friday ~ June 17th, 2011 at 4:11 pm
Brett Ruiz
Fantastic article. It reminds me a lot of Michael Cannon’s work over at Cato.
If supply remains constant and demand increases you’re gonna get rising prices. No question about it. PPACA doesn’t do anything to increase supply so there is no possible way it can lower costs or provide healthcare for more people without cutting service to others.
Friday ~ June 17th, 2011 at 4:33 pm
Holly Balcom
I’ve worked for both health insurers and hospitals as an analyst, and neither one seemed to care about this issue. The hospital was focused on buying more high-margin surgery robots, and the insurer was desperately trying to avoid the sick patients.
After being a Kaiser patient the solution is clear: telemedicine. Set up a bunch of Nurse Practitioners (in some low-wage US state) who only do email/phone consults and electronically prescribe orders and drugs. Their throughput would be very high vs a traditional dr’s office. Kaiser does email and telephone visits because their doctors are salaried and they decided it’s a more efficient use of their time. 70% of the time I don’t need a face to face visit, I just need some advice and a sudafed.
Why don’t more insurers pay for electronic visits? Why don’t more clinics set up something like I described? Funnel your low-margin visits into that system and leave your expensive doctors to “practice at the top of their license” (ie do things that make the hospital money)
Friday ~ June 17th, 2011 at 4:34 pm
engineer27
That is not entirely true. Some of the efficiency and effectiveness of care initiatives could allow the same base of providers to treat more people, effectively increasing supply by an incremental amount. However, nothing approaches Karl’s suggestions.
I am guessing he gets as much mileage out of this post as he did from this other one.
Saturday ~ June 18th, 2011 at 7:31 am
Th
“No question about it. PPACA doesn’t do anything to increase supply” Not True! There are a whole series of efforts in the PPACA to increase supply. http://www.larkinhoffman.com/news/article_detail.cfm?ARTICLE_ID=661
Friday ~ June 17th, 2011 at 4:44 pm
jme
Not disagreeing, really, but it’s also worth mentioning the following: how long would the general public tolerate more lax regulation on the supply side in the face of news stories along the lines of “16 yr old improperly hooks up blood pressure monitor, patient dies because no one noticed a rapidly dropping bp”?
I mean, that’s why we’re here in the first place, right?
Saturday ~ June 18th, 2011 at 1:49 am
Naveed
True, there certainly would be many of those stories. The situation now though is easily just as bad. What you aren’t talking about are the stories that would go away. Such as:
50+ Million Americans uninsured
http://www.usatoday.com/news/nation/2010-09-17-uninsured17_ST_N.htm
60% of bankruptcies prompted by medical bills
http://articles.cnn.com/2009-06-05/health/bankruptcy.medical.bills_1_medical-bills-bankruptcies-health-insurance?_s=PM:HEALTH
Shortage of doctors.
http://online.wsj.com/article/SB10001424052702304506904575180331528424238.html
Shortage of nurses putting patients at risk.
http://www.msnbc.msn.com/id/4587667/ns/health-health_care/t/shortage-nurses-putting-patients-risk/
Not to mention the people who don’t seek medical treatment or regular care like myself who can’t afford it. Are people who don’t get treated at all better off? The thing is if you want better care then pay for better care but many people can’t get any care at all and even moderate care would be leaps and bounds better than no care. If you want cheap and quick fast food go to McDonalds, if you want the best of the best then go to the best and pay for it. Perhaps we should only allow restaurants that serve “quality food” stay in business.
I agree that Obamacare isn’t the best solution BUT if anyone paid attention to the system we had now they would realize that it is not structured as a free market system. Why are there no national health insurance companies? Health insurance should be as competitive as car insurance. Why is 8 years of schooling superior to 7 years of schooling? how can anyone determine that? The market should determine that and yes it’s dirty and yes mistakes will be made and yes people who have no business practicing medicine will practice medicine but they will be held responsible for negligence and the success of their practice.
Friday ~ June 17th, 2011 at 4:58 pm
Gepap
Here is Kenneth Arrow on why the health care system is not like all others:
http://stevereads.com/papers_to_read/uncertainty_and_the_welfare_economics_of_medical_care.pdf
Trust is seen as critical in the health care system – if some snot nosed kid gets me the wrong order at Mcdonalds, I am pissed, but so what? At most, I am out a few dollars. if some snot nosed kid listening to his iPod misses something looking at a monitor and then freaks out when it starts going nuts, and doesn’t call someone in time, well, I might be dead, which seems a much worse outcome than being out a few bucks.
I guess my question is why other countries don’t have the same supply issues (if not different supply issues)?
Friday ~ June 17th, 2011 at 7:51 pm
Evan
Because other countries don’t try to sue the pants off anything that moves. Mistakes will be made, even by trained doctors, and sometimes patients will die – there is still a lot of randomness in medical outcomes. Because Americans are so quick to get in the lawyers the whole system has become extremely risk averse.
Saturday ~ June 18th, 2011 at 2:31 am
DocOc
Its less the lawsuits and more the push for patient autonomy. It used to be, your Doctor weighed the various potential treatments, told you what you should have done, and (maybe after a second opinion) thats what you did.
Nowadays, we are supposed to lay out all the potential treatments, all the pros and cons, and let the patient decide. This has been (in my opinion) a total disaster. I’ve seen many people with endstage metastatic lung opt for chemo, even after its been explained the success rate is essentially 0. They say “I’m a fighter, I can beat this.” Even telling them flat out that chemo will do nothing but make their last days on Earth awful, they do it, at a tremendous waste of capital. Whats worse is that I know far too many oncologists who don’t have an ethical problem with recommending extremely aggressive treatment for every form of cancer.
Saturday ~ June 18th, 2011 at 2:23 am
DocOc
I’ve worked in health care for a long time, as a physician and as management, and I can say with certainty that any hospital that can’t cover its costs with a basic medicaid patient is poorly run.
We actively chase medicaid reimbursement where we can, and have several medical billing specialists whose ONLY job is to convince people who qualify to take the time to sign up for medicaid. If we don’t have a bed free, we’ll bunk medicaid patients in the ER if its medically possible rather than turn away the potential revenue by transferring the patient to another hospital.
But the issue described in the original post, specialist being under-reimbursed, is an issue of serious medical pathology or surgical procedures. In short- the sort of patients who can be covered by the suggestions in the post are ALREADY highly profitable under medicaid. The patients who are serious bombs and need specialists are the ones that none of the above suggestions are useful for.
Monday ~ June 20th, 2011 at 11:12 am
mike
I only read this blog occasionally, but man are you trivializing the subject to the point of being meaningless.
Let’s say you hire a kid with an iphone….what about the litagation costs. That kid emails the wrong thing to the triage nurse in india….how much does the hospital get sued for? Ok, provide the kid some training and proper vetting, get him to follow and expert for awhile to get him to learn how to report properly, and record information properly. Have him supervised for several months before letting him do it independently….I just incurred HUGE cost. In the mean time, I now have a flock of people in my hospital that can not respond to emergency situations, security becomes an issue, and privacy issues abound. There is a reason this isn’t done already….it is hard to implement new technology is such a contentious and highly regulated environment. Far harder than you seem to think.
Tuesday ~ June 21st, 2011 at 3:52 pm
ziggy
“I only read this blog occasionally, but man are you trivializing the subject to the point of being meaningless. ”
Which would make this clown an economist in good standing.
My first (and last) visit here — a quick skim tells me it’s not worth the time.
Tuesday ~ November 8th, 2011 at 1:53 am
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