Insurance Premiums Under Reform Steady or Lower

The CBO analysis of the change in health insurance premiums under reform (2016), compared to what premiums would have been without reform, shows what common sense would indicate -- most premiums would be about where they would have been without reform, some would be lower, some would be higher due to the insurance itself covering more and thus lowering out-of-pocket costs.

For the group that sees higher premiums under reform, out of pocket costs will be much lower due to reform. The only group that would see these higher premiums are those in the individual market that don't qualify for subsidies and would be required to purchase better insurance than they currently have.

Not only will this group have better coverage -- they will get a lower overall average cost! While they will pay more in premiums and get more insurance, they will save money under reform on the administrative costs of that insurance and in out-of-pocket expenses. The net result will be less total spending on health care even for this group.

Since the effects of reform analyzed by the CBO are so much better than the rhetorical claims of reform opponents, it is worth reporting:

The Senate Democrats' health care overhaul bill would substantially reduce premium costs for 57 percent of people who buy subsidized coverage through new exchanges, while rates would hold steady or decline slightly for large and small employers, a long awaited analysis from the Congressional Budget Office showed Monday.

People who buy their own coverage but don’t qualify for government subsidies, however, could see increases of 10 percent to 13 percent, mainly because the coverage offered in the exchanges would cover more benefits compared with what is currently purchased, and thus would be more expensive. The analysis compares rates with what they would be under current laws, and focuses on 2016 as the time when the provisions of the new legislation would be fully implemented.

Update: A Majority Wants a Public Option

This CBS poll from November 17th shows a majority of 51% wants a public option:

What kind of Health Care Bill should Congress pass?

One WITH a public option: 51%
One WITHOUT a public option: 16%
No bill at all: 26%

Further: "When Americans are asked directly about a public option for the uninsured, overall support is at 61%."


Update 12-7: On a related note, when asked in a CNN poll to distinguish why they oppose health care reform in new poll questions, it turns out that about 1/5 of the opposition to the current version of health care reform in poll questions comes from those who oppose current reform because it is "not liberal enough." Other recent polls show similar outcomes.

(11. As you may know, the U.S. House of Representatives recently passed a bill that would make major changes in the country’s health care system. Based on what you have heard or read about that bill, do you generally favor it or generally oppose it?) ...

12. (IF OPPOSE:) Do you oppose that bill because you think its approach toward health care is too liberal, or because you think its approach toward health care is not liberal enough?
Nov. 13-15
2009

Favor (from Q.11) 46%
Oppose, too liberal 34%
Oppose, not liberal enough 10%
Oppose, other reasons 3%
No opinion 8%

This shows that about 56% of those polled want a version of health care reform that is at least as "liberal" (generous) as the currently proposed House version of reform.

See Your Own Sentators on Health Care Reform

The speeches are ongoing before the vote at 8pm tonight on whether to bring the Senate health reform bill to the floor to begin debate and amendments. This motion to bring the bill to the floor for consideration itself requires 60 yes votes.

You can see the speeches of your own Sentators here.

Update: Senators Lincoln and Landrieu have indicated they will vote for bringing the bill to the floor. Since Conrad and Lieberman have also, it should succeed now with 60 votes and come to the floor.

California Regents Threaten to Embark on the Wrong Course

Via the NYTimes: Regents Raise California College Tuition 32 Percent.

Like housing and medical care, higher education was also swept up in our 3-decade-long credit bubble. Prices were able to escalate wildly for the same reason as medical and house prices.

This is why the adjustment from a credit bubble collapse is so wrenching -- relative prices for especially valued goods like medical care, education and housing move seriously out of alignment with median incomes during periods of very easy credit.

There is no easy way to fix that. It is wrenching. It will entail many job losses, pay cuts, closings in the bubble industries, or...massive government subsidy which costs the broader economy over time.

Higher education is a special case, in that it is significantly subsidized by the states.

I was struck by this paragraph:

Mark Yudof, president of the system, said the University of California now received only half as much support from the state, per student, as it did in 1990. Even with the higher student fees, the system needs a $913 million increase in state financing next year to avoid further cuts. If that extra money is not provided, next year’s freshman enrollment will most likely be cut.

I'd like to raise a broader point, so let's leave aside for now the obvious -- a 32% tuition increase will cut the freshman enrollment in a rather large way.

Let's look at this from another angle.

Presumably some efficiencies are already in place. Witness auditorium-sized classes.

So...some classes that can be combined into larger classes are already combined.

But...that doesn't imply the next step is to drop students.

After all, more students bring more tuition revenue.

The only way fewer students could help the total system budget is if many classes are dropped, and even some schools or colleges closed.

It might make more sense for individual colleges and universities to have significant campus-wide pay cuts, layoff a portion of professors, administration and staff, combine more class together even when it's difficult and requires some creativity and new curricula, and try to hold onto every student possible.

Of course, that would place the valuing of education itself above the short-term interests of some employees.

But if we choose to value education itself as the top priority, more options would become available.

I think one academic tendency is to overvalue course variety. This is one of several academic problems in education that have to do with too much teaching and not enough independent study and creativity among students.

For instance, a creative alternative for some graduate-level courses would be self-study using existing course materials. There is stimulation, and then there is grad school, which at times is definitely an overload. If a student doesn't have what it takes to do self-study, they don't belong in graduate school.

This is a great time to think about real education reform.

U.S. Asks China Not to Destroy World Economy

Finally, after years, even economists like Krugman are publicly recognizing that the Chinese peg of their currency to the dollar is more than a nuisance or a developing-country tactic. It's a profound handicap placed on American manufacturing.

The peg threatens American recovery. It is in effect a Chinese trade war against America, ongoing for years.

Many economists haven't yet really wrapped their minds around the reality that if exports are heavily subsidized (relative price held down) by a currency peg during an imbalance, then it is no longer "free trade."

We do not have free trade with China.

"Free trade" is effectively an ideology in recent times. Economists understand the advantages of free trade -- how it increases most everyone's absolute wealth (buying power in goods). It's understood the disruption and economic damage the raising of trade barriers would cause. All true.

But not enough. The thinking simply needs to continue beyond this basic level of understanding.

When a government intentionally bends a nation to accomplish an international goal of gaining manufacturing jobs at the expense of other nations (at the expense of jobs in other nations), this is a kind of powerful trade interference. It becomes in effect a trade war.

Damage to the U.S. isn't the only result of this managed effort. The peg actually threatens Chinese stability by extending a reliance on an unsustainable imbalance.

And that raises an open question.

Does China have the smarts to recognize that both alternatives that could follow from maintaining the currency peg are quite harmful to China itself?

It's a multi-trillion dollar question.

Here are the two alternative scenarios I see if China maintains the peg.

Either:

A) As Martin Wolf points out, the U.S. is truly forced, without choice, to initiate major tariffs within a few years:

“Yet we do not have that much time. If the US domestic economy remained weak and unemployment high, while our trade deficit soared, particularly our bilateral deficit with China, the pressure to ‘do something’ would become irresistible. I would have to consider the sort of actions that Richard Nixon took in 1971. To force revaluations by Germany and Japan, he threatened a 10 per cent import surcharge. With great regret, I might feel obliged to do the same. I would then argue that China’s determination to thwart needed adjustment in exchange rates had become intolerable. The US is entitled to protect itself against such mercantilism. The trading system would be terribly damaged. But the alternative would be unbearable.”

OR

B) If somehow the U.S. government delayed such a response for little longer based on "free trade" fallacies, then the buildup of political pressure in the U.S. due to joblessness would only lead to a more drastic final U.S. response than the one Martin suggests.

Ideology -- the mental error of trying to maintain "free trade" when the U.S. faces in reality a kind of ongoing trade war -- can only withstand reality only up to a certain limit, at which point the ideology, or illusion, collapses and great political energy is released. America could actually be pushed into a genuine change in ideology.

China by nature should be a natural ally of the U.S. Only the paranoid right has needed to see China as a serious rival.

That could change.

So this question is really a question of smarts. Are they smart enough to see the train coming down the track? Are we smart enough to sound the horn instead of patiently waiting for China to answer a diffident phone call?

---------
Posts on China can be found under the label "China" in the right hand column.

About 15% of American Households Need Food Aid

The U.S. Department of Agriculture reports on American food "insecurity" (inadequate food available without aid at times during the year):

"Eighty-five percent of American households were food secure throughout the entire year in 2008, meaning that they had access at all times to enough food for an active, healthy life for all household members. The remaining households (14.6 percent) were food insecure at least some time during the year, including 5.7 percent with very low food security—meaning that the food intake of one or more household members was reduced and their eating patterns were disrupted at times during the year because the household lacked money and other resources for food....

About one-third of food-insecure households (6.7 million households, or 5.7 percent of all U.S. households) had very low food security, up from 4.7 million households (4.1 percent) in 2007, and the highest level observed since nationally representative food security surveys were initiated in 1995. In households with very low food security, the food intake of some household members was reduced, and their normal eating patterns were disrupted because of the household’s food insecurity. The other two-thirds of food-insecure households obtained enough food to avoid substantial disruptions in eating patterns and food intake, using a variety of coping strategies, such as eating less varied diets, participating in Federal food and nutrition assistance programs, or obtaining emergency food from community food pantries or emergency kitchens....

...Prevalence rates of food insecurity and very low food security were up from 11.1 percent and 4.1 percent, respectively, in 2007, and were the highest recorded since 1995, when the first national food security survey was conducted. The typical food-secure household spent 31 percent more on food than the typical food-insecure household of the same size and household composition. Fifty-five percent of all food-insecure households participated in one or more of the three largest Federal food and nutrition assistance programs during the month prior to the 2008 survey."

(Update 11-16) Bend the Cost Curve with Easy, Incremental Changes

There is a way to get politically-favorable reform that will have profound effects in just a few short years.

I say "favorable" since currently a significant part of Congress and America is quite concerned about reform that does not bend the cost curve (reduce health care inflation). Right now, health care reform is a challenging situation only because this group concerned with health care inflation is not confident in the proposed reforms.

It would help greatly if the proposed pilot programs in Medicare were aimed in the legislation to arrive at real outcomes in specified time periods, such as moving Medicare 100% to "paying for quality" within 8 years.

Below is a specific way a pilot program could proceed to accomplish exactly that.

Reforms to reduce health care cost inflation in Medicare have often been shot down by providers and medical suppliers over the years, since the reforms are seen as significant change and seem threatening to easy profits.

Medicare sets the practices for health insurance, as private insurers follow its lead in implementing changes in payment.

So it's a good time to highlight the last new idea I added to the bottom of How to Pay for Outcomes Over Time.

Instead of comprehensive payment reform all at once, which is politically impossible.... Why not just make a few small but effective changes in how Medicare pays for certain treatments each year.

Incremental change would provoke little or none of the type of opposition that has shot down reforms in the past.

In fact, Medicare could make quite small changes that the great majority of doctors would consider reasonable and support.

And these little changes would slow health care inflation within 1-3 years.

You can find out how to implement paying for outcomes over time incrementally in the 9-22 update at the end of this post.

Here's the section in brief:
--------------------------------

Reading this brief Peter Orszag interview it occurs to me to point out an easy, low-stakes way to gradually move from pure fee-for-service towards more pay-for-outcome-over-time.

The objective is to transition with small changes anyone could like and which doctors universally (or near universally) could support.

Reform without big, sudden change would be much easier to implement politically.

Start with a very short list of narrowly defined conditions (such as a severely arthritic knee which needs replacement, or certain heart conditions) and implement small success payments, such as 5%-15% of the normal full cost of complete treatment. The success payment would be made after the treatment is shown successful as indicated by no need for extra treatment(s) beyond the normal follow ups needed for that specific condition within a certain specified time period for each specific condition in the list.

The initial payment, made when the main treatment is complete, would be the remainder of the full cost of complete treatment. For example, if the success payment is 10% (before we also add a bonus percentage for outcome quality), then the initial payment would be 90%. Thus the complete payment for a successful treatment in this example would be the total of 90% + 10% + the bonus percentage.

Another example, for clarity: for a certain condition, upon treatment an 88% initial payment (88% of the full fee) could be made, and if the patient does not need further treatment (other than normal follow up and normal therapy) for that condition during the specified success time period, a 12% success-over-time fee payment would be made after that time period. The outcome quality would then be used to also generate an additional bonus percentage payment. --- For instance, in our example of an 88% initial fee, the success payments might total 14%, for a grand total of a 102% successful treatment payment. For this condition, some patients might not be treated successfully and would thus result in a payment of only 88% of the full fee, while most patients on the other hand would be treated successfully and would result in a payment of 102%.

This outcome-incentive system could be implemented initially for a short list of 5-20 specific, moderately-expensive narrow conditions which have clear enough typical outcomes such that it is easy to specify what is a good outcome-over-time in terms of a no-relapse, or success, time period. Any success bonus percentage (above the normal full fee) can vary according to what is shown to work well over time by experience.

Gradually, several new conditions/success-criteria could be added each year to the list, perhaps by vote of panels of doctors.

This is a simple, limited version of pay-for-outcome-over-time which would have low stakes, and allow a gradual implementation.

Slowly, over time, a pay-for-outcome system could come into being, improving quality and value.

Note: Several ideas from comments have been incorporated into the Pay-For-Outcome-Over-Time system, which was developed over several months. Note also that comments are forwarded to me, and I respond usually. Also, anyone can contact me via email at: halbhh45@gmail.com

Health Care Around the World

The Great Debate is Ongoing

C-span broadcast the frothy surface of the Great Debate on health care reform.

The superficial debate in the House isn't the Great Debate I refer to, though it can be interesting to see just what your own representative is saying. Neither is the Great Debate those discussions and debates conducted in blogs and think tanks and staff meetings.

The real Great Debate is still progressing within the minds and hearts of many Americans across the country.

If you ask a neighbor what should be done about health care, and if neither of you are in a hurry and you show a willingness to listen, you may well hear a more nuanced view than many of the two minute shots from Congress. Often, deeper philosophical points will be raised. None of us live forever. You can't take it with you. And that's only the beginning.

It is one of the greatest debates that can happen, because it is a debate about whether or not we want to be a community as a nation. Will we be only an alliance of loosely related and separate communities, or will we think of all Americans as a part of our own personal community?

Do we want to join together, as a nation, to include everyone in our community and take care of them in terms of health care?

This is the real debate.

This reminds me of a famous question along these lines asked long, long ago.

It is one of the ultimate human questions, and it was asked directly to the deity:

"Am I my brother's keeper?"

Republican Rationing Rhetoric

One Republican Representative during the grand House debate on the reform bill today just spoke of going fishing not long ago with his 82-yr old father, who recently had triple-bypass surgery.

Having asserted that reform is trying to make American health care like Canadian and British health care, he concluded that under the coming reform he might not have been able to go fishing with his father if his father had faced a system like this, like British health care.

He finished with a crescendo against "rationing," etc.

There's a problem with this line of argument.

1. There is no rationing anywhere in reform, nor any mechanism that would allow it.

While there is no rationing scheme anywhere in proposed legislation, the most plausible assertion about rationing is that the IMAC panel, which suggests reforms for Medicare, could potentially suggest some sort of rationing scheme someday. But, the legislation explicitly forbids IMAC from even considering rationing. Rationing is disallowed. It's not in sight. It's not on the horizon.

I wrote a scathing post against rationing here months ago.

Rationing: A failure of Knowledge...

A few weeks later I had a lengthy discussion with a very skeptical ideologue about whether and how there could be any rationing. Finally, rationing via IMAC proposals was his most plausible scenario.

But then Congress explicitly prohibited IMAC from considering rationing in its legislation.

So not only is there no rationing proposed, it is even prohibited for future consideration.


2. The British system actually is nationalized health care, where the government owns most hospitals and employs most doctors.

Nothing remotely like that is anywhere in this reform.

Hospitals and doctors remain private, as now.

Neither is single payer in this reform. Nor is there a slippery slope towards single payer. Analytic experts believe this form of "level-playing-field" public option has little chance of crowding out private insurers if such insurers choose to be efficient.


Essentially the problem with Republican rhetoric is they are arguing against stuff that isn't there, just like before with the "death panels."

It hasn't changed. They are still arguing against imaginary stuff that isn't there.

Republicans would be doing great if the things they are arguing against were actually in the legislation!!

If we faced actual socialism, they would be doing a fine job defending us against it.

Instead, many Republicans currently are like Don Quixote, full of passion, seeing dangers everywhere and tilting their lances at windmills.

Will this matter?

Can't Republicans just argue against straw men, imaginary reform, that isn't in the legislation?

I think that's actually an open question. This is the age of the Internet.

Bloggers, both individual and those associated with major news sites, can just paste the videotaped comments of representatives in a blog post and then lay open the distortions, lies or incompetence...and more and more people are looking to see such reporting...

I think Republicans can get away with this practice less and less.

Non-ideological bloggers like yours truly will pin them to the wall.

Why?

Because I believe in America.

See, I know that a national drift towards defamatory ideological rhetoric is far more dangerous to America than more government regulation of health insurance.

The danger in such speech is its corrosion of the national character.

AARP and AMA Endorse House Health Reform Bill (and pharma-supported writer offers a critical "news" story on it)

The AARP has endorsed the House Health Reform Bill (labeled by some political spinners as the "Pelosi" bill).

What does this mean? It means some very smart analysts have carefully looked over the House version of reform legislation and decided it is good from the point of view of on seniors on Medicare (and acceptable for their kids and grand kids).

AARP Vice President Nancy A LeaMond said the House Democrat's measure met the organization's top goals for reform, including strengthening Medicare. The AMA also endorsed the bill.

Update: already (and it makes sense since the House version of reform reduces profits slightly for drug makers via allowing Medicare to negotiate prices), the backlash begins. To counter the spin from the pharma-supported writer of this "news" story, let me point out the corrupt current law that Medicare cannot negotiate drug prices (did you know that?), that it's reported that so-called Medicare Advantage programs pay only about half of their federal subsidies out as health care benefits (the other half of the Medicare Advantage subsidies to private insurers are kept by those insurers to line their pockets), that the AARP working to review and coordinate supplemental health insurance policies (Medigap) is a great idea and highly beneficial to its members, and finally point out that the AARP board members receive no compensation. But did you expect this instance of backlash to appear in a "news" section of the Tribune, to be on the Tribune news service? Consider the byline at the bottom of the story, and reader comments.


How close are we to the day when you can only get the straight story from certain writers, and cannot rely consistently on your local newspaper to be honest?

We are already there.

Meanwhile, the fringe is becoming more and more disassociated from reality. This makes sense since health care reform is the ultimate social issue.

(Update 11-5) The Great American Health Care Bubble (and why we spend twice as much as Europe per person)

Sometimes it pays to step back and look at the big picture in a fresh way -- sometimes you see something new.

Sometimes the air clears and you see the mountain.

A new thought about health care costs hit me recently.

I'll lay out a broad insight which has profound implications in the second half of this post, but first I'd like you to see how certain commonly reported numbers about health care in America fit together.


Why American Care Costs Twice As Much

We often hear health care costs Americans "about twice as much as the high quality care in Europe."
Here is a graph showing health care spending by nation. (click here for more) (Source: Organization for Economic Cooperation and Development via the NYTimes Prescriptions blog)
(click on graph for larger version)


So European health care costs roughly 1/2 as much as American health care and has similar (high) quality.


Wasted Procedures

Now, many will have heard that about 30% of health care in America is for wasted procedures.

For example this NPR piece: "Of the $2 trillion-plus spent on health care in this country each year, about 30 percent, or $660 billion is wasted."

Or from the Health Care Blog: Fee-for-service incentives are a key reason why at least 30% of the $2.5 trillion expended annually for American health care is unnecessary. (I like Maggie Mahar's version here.)
Here's a RAND report: "On average, it appears that one-third or more of all procedures performed in the United States are of questionable benefit."
It is not always obvious to non-scientists just what is of "questionable benefit." I recommend to everyone the NPR story about hysterectomies in Maine.
Once you read or listen to that, you'll begin to suspect what is going on.
For those wanting a broad and precise picture, I strongly recommend this brief summary article. For a quick glance only see this graph (note the shockingly higher costs in Miami are adjusted for age, community health, etc., so the pattern of health care practices in some cities or areas doing more procedures for certain health conditions than is done in other localities -- more treatment without better results -- isn't about age or gender, etc. It's about local medical cultures and practices).
So we lose about 30% of health care dollars in this way. Another way of expressing this is that only 70% of American health care procedures are medically needed as demonstrated by health outcomes versus other treatment regimens.

High Prices (are only a piece of a broader measure)
Next one might ask, what of the fact U.S. medical prices for procedures are generally higher than those in other nations?
At first it may seem the fact that many individual health care procedures cost more in the U.S. than in other countries is an additional, separate factor in costs.
But the cost of a procedure is only a fragment of a more complete measure of cost -- the total cost to effectively treat a specific condition.
We know that other countries have wasted medical procedures also. Might there sometimes be a good reason American doctors cost more? If a doctor is more effective, so that he's on target with his diagnoses and treatments and finishes treating a patient successfully sooner, then such a doctor should be paid more per procedure than one who is less effective on average.
A doctor that treats a certain narrow condition successfully 90% of the time in 2 hours is delivering more value per hour than a doctor that treats the same narrow condition successfully 60% of the time in 2 hours. (See how to structure payment to increase quality instead of quantity of care.)
Talking about the expense of wasted procedures is another way of talking about the relation of effectiveness and pay rates (e.g. -- which higher pay rates correspond to relatively effective treatments and consultations?).
More highly skilled workers earn more because they produce more (more good results in the same hours of work). If many U.S. doctors are going to earn relatively high pay per hour, eventually some insurers will begin to require that they are highly effective -- as prices get high enough the practical cost will eventually bring comparisons and valuing. One change that may aid the valuing of treatment will be the increased number of patients reform will bring, which will allow doctors to increase revenue by treating more patients instead of doing more treatments per patient.
If a doctor or group of doctors quickly treat patients in an effective manner (various successful or good outcomes with less total treatment than other providers), then their high rate of pay per hour is justified.
Under the coming move from paying for services (fee for service) to paying for quality (such as paying for outcomes over time) to talk of both pay rates and of wasted procedures is to discuss the same issue (value, or the cost to treat a certain condition) from different angles. It is the most realistic and practical to work towards increasing health care providers true productivity (the proportion of successful treatments and number of patients benefited).
Treating more patients nationwide for only a little more total health spending can be done if incentives and innovation raise the average level of treatment effectiveness.
The best way to balance the system is to pay for outcomes instead of simply for services.
This kind of reform is actually the direction the health care market is moving towards in scattered locations. Some providers are already adopting their side of such changes. Insurers, including Medicare, need to catch up. Medicare is a big force, and the progress of Medicare in adopting already existing innovations will help greatly.

Administrative Waste (it's bigger than you'd guess)
Now, many of you will also have heard that we waste about a quarter (-25%) of health care dollars on administration and overhead for insurers and medical providers to fight with one another over reimbursements, and also for insurers to screen out preexisting conditions, etc.

For instance here: HASC estimates that as much as a quarter of U.S. healthcare spending goes to administrative functions, not patient-centered services.
There are other studies on administrative costs (update: Reuters offers another overview of waste), and they reach somewhat different (but still large) numbers, so I'll demonstrate a broad numerical conclusion myself as follows:
First, consider the known average payout ratio (also called the medical loss ratio) -- that portion American private insurers take in from premiums which they then pay out for actual health care: about 80%. So, private insurers keep on average about 20% of incoming premiums for administration, profits, and the costs of screening out (dropping and excluding) sick people, etc. Next, compare this to the administrative costs of Medicare, which are about 3% to 6%, depending on whether related spending by other federal agencies is included (including the spending from other agencies raises the total Medicare administrative costs to that 6% region).
These two numerical facts together give a rough but clear indication of the non-health-care costs above essential administration diverted by private insurers away from health care.
Compare the total non-medical private insurance costs of 20% to Medicare's broadly-inclusive costs of about 6%, and we get a difference of about 14%.
So for private insurers, roughly 14% of health care dollars are spent in ways that do not pay for or help to organize or administer health care. The remaining 6% of private insurer costs we'll consider necessary for needed administration.
Finally, we must add in the costs that doctors and hospitals pay to deal with the blizzard of insurance claim forms. It takes a lot of administrative workers at hospitals and doctors offices to try to get paid from private insurers for what doctors and nurses do. Insurers often initially deny certain cost items for confusing reasons, and...well, these insurance claim paperwork costs inside doctors' offices and hospitals add up, as numerous articles point out. Put these costs together with the roughly 14% excess costs inside private insurers....and that 25% total administrative waste in the U.S. found by HASC starts to sound entirely plausible, if not low.
Ok. Let's remember this rough number of -25% for administrative waste. Another way of expressing this is that only about 75% of the dollars spent on health care are actually spent on health care and it's organization and needed administration.
Putting Together the Numbers -- How Much Waste Is There?
By this time, those of you that think about numbers and percentages every day in a habitual way like I do will begin to see where I am going with this...
So I'll cut to the chase.
Let's do the math, and get a ballpark look at American health care without all the waste -- without excess overhead, and without medical providers being paid to do unneeded treatments that don't improve health outcomes.
0.75 (rough portion of health care dollars actually spent on care and needed organization) * 0.7 (rough portion of care actually medically indicated by best practices) = about 0.5 (rough portion of health care dollars spent to achieve health outcomes)
Hmmm.... That looks familiar. About 1/2.
That's the same ratio as European health care costs versus American health costs.
Hmmm....
I think we have a winner -- Europe: Point. Set. Match.
But...it appears American doctors and hospitals are reasonably efficient and effective when they get down to it!
Simply reducing administrative waste and treatments that have little benefit compared to alternatives would allow American doctors to deliver European-level costs with American-level take home pay!
Altogether, the real cost problem comes from the way we pay for care and the perverse incentives this structure sets up.
(Update: This American Life examines some of the issues discussed in this post.)

Part II:

The Great American Health Care Bubble (and the beginning of collapse)

Now it's time to lay out an insight that has come to me over the last couple of weeks.
How could American health care costs have skyrocketed so wildly?
Remember the first graph here?
As you can see in that first graph, starting in about 1980 American health care costs took off and left the rest of the advanced nations behind. American health spending shot into the sky.
1980. That's not long after 1978.
Does 1978 ring a bell?
That's when credit card laws effectively changed:
...the 1978 Supreme Court decision Marquette Vs. First Omaha Service Corp. affected the locations of the top 10 credit card issuers. Today, all are located in states with very high interest caps or none at all.
Basically, state usury laws capped credit card interest rates before 1978. With the new Supreme Court ruling in 1978, credit card issuers in the states with the highest allowed rates could now send out cards that could use those higher rates across the nation for the first time.
Armed with the power to gain huge profits via these newly freed interest rates, credit card companies began to look for a lot of new customers. Thus, slowly and inevitably began the Great Credit Bubble, increased over the decades by more and more easy money from around the world.
The means by which health care costs could escalate so wildly over the last 30 years is via the same fundamental enabler which led to the 1980s housing bubble, the 1990s stock market bubble, and the huge 2000s-era housing bubble.
These bubbles have all been enabled by the widening availability of easy money in more and more forms, from credit cards to piggy-back mortgages.
If your health insurance payments or out-of-pocket costs became too large, you could just buy more on your credit cards today and then refinance or take a 2nd mortgage tomorrow.
When there is more and more easy money available, then things that are especially valued like health care or housing tend to suck up that easy money like vacuum cleaners.
Along with the great housing bubble, we've had the Great American Health Care Bubble.
Of course...bubbles normally pop.
For health care, which is powerfully supported by insurance (slowly paying over time), the eventual bursting of the bubble requires a serious recession and time. Time for more and more people to lose their insurance or not to be able to pay for as much insurance.
The bursting of the Health Care Bubble would naturally be in slow-motion, more like the Titanic just after the iceberg -- for quite a while it's not obvious to many on ship what's going to happen....
Senator Olympia Snowe just before the decisive, final Senate Finance Committee vote: “It’s akin to the Titanic — turning the Titanic around before it hits an iceberg.”
But the great ship American Health Care has already hit the iceberg (the recession). Now it's a matter of whether we have the cleverness to do something, or whether most people will just end up out at sea.
The outcome of the health care bubble would naturally be more and more bankruptcies. First progressively more individuals and families, then eventually more and more doctor's offices and hospitals. Bankruptcies spreading and accelerating, everywhere across American health care.
Just like the housing price collapse, we'd have a medical "crisis" starting to really accelerate I believe in 2010.  (but note this perspective is in 2009, and the passage of Health Care Reform is a big unknown, as is the question of such huge supports as Obama's idea of paying 65% of COBRA costs for those losing their jobs....)
Just like the "credit crisis" and housing collapse, we are close to a medical cost "crisis" (a sudden change), where all at once a lot of hospitals and doctors will be facing radical cuts in staff and/or bankruptcy. Insurance does make this happen in more of a slow motion way. But the slow motion will only stretch out the sudden shift out to a period of 6-18 months I think.
A year from now, we could be looking at very different news headlines about the health care system.
Unless...unless government steps in and saves hospitals and such by diverting more money from elsewhere into the health care sector, propping up the high-cost providers of health care. When government steps in during the bursting of a bubble, taxpayers become the ones that take the hit.
Even now, government has already stepped in to significantly slow the sinking of the ship.
Normally, when a person loses their job, they lose their existing health insurance unless they can pay the full health insurance premium themselves without a job, using up savings. Keeping your existing insurance by paying the full premium yourself is allowed under COBRA for up to 18 months. The high cost of COBRA health insurance premiums are a surprise to many people, who do not realize how much their health insurance actually costs until they suddenly bear the full cost by themselves. This high cost that employers have been paying under sharp health care inflation has eaten so much money that pay raises have barely exceeded inflation for many years now.
The stimulus bill included a special provision to pay 65% of the cost of COBRA health insurance for 9 months.
Only this has slowed the sudden crisis of a collapsing health care bubble in the Great Recession.
This delay is temporary.
In fact, the collapse has begun (new nurses are having "sudden" trouble finding jobs).
The fact that American health care costs are unsustainably high today (before any further cost inflation) is yet another reason why Congress should prioritize and emphasize bending the cost curve (and here's how to).
We already send a huge amount of money in our economy to health care. Enough to give everyone excellent care.
If Government props up American health care spending, for instance by extending the COBRA subsidy to a longer time period, and later by subsidizing premiums for many Americans under reform, it also needs to effectively stop health care inflation soon by encouraging Medicare to adopt already existing innovations in payment.
Such change is easy to do incrementally, starting with the treatment of certain common, specific conditions using some method of pay for outcome such as by bundled payments with incentives or other methods already in use. The pay-for-outcome-over-time system I offer on this blog can be used incrementally (starting with certain specific conditions and modest incentives), and is similar in some ways to a bundled payment system with incentives. "Pilot programs" can be an avenue for such modernization of Medicare, if they are set up with the clear understanding that they are meant to be a working process to transform payment over a defined period of time. The goal of payment reform is to improve "Quality" -- to set up incentives that depend on the outcomes of treatment.
The alternative of just supporting the status quo would not be pretty.
Meanwhile....perhaps it is indeed good that most of health care reform happens years from now, and cannot be blamed for the coming massive financial crisis and fallout of the bursting Great American Health Care Bubble.
The natural (and dramatic) deflation (collapse) of the bubble will help bend the cost curve.
The best fact to communicate to the American people is that health care itself has been in a price bubble, and will have to correct.