Contents:
David Theroux, President of the Independent Institute
Ladies and gentlemen, my name is David Theroux and I’m the President of The Independent Institute. I’m delighted to welcome you to our very timely event tonight, especially in the aftermath of the first Presidential Debate yesterday evening. Independent Policy Forums, as many of you may know, is a forum of lectures and dates and presentations that we hold on a regular basis here at our conference center in Oakland.
Our program today is entitled, “Replacing Obamacare and Curing the Healthcare Crisis”, and we’re delighted to have our dear friend and colleague John Goodman. He’s author, as you may know, of the very important new book called Priceless: Curing the Healthcare Crisis, which is by far the most comprehensive and thorough and insightful book on healthcare. John is the president, founder, president, and CEO of The National Center for Policy Analysis, and I’ll say a little bit more about him in a moment.
For those of you who are new to the institute hopefully you all got a registration packet. You’ll find information about The Independent Institute in there. We’ll give you some of our publications, more information about John and the book Priceless. The institute is a public policy research institute. We’re an academic research institute. Everything that we do goes through peer review as far as our publications. We produce a lot of books such as Priceless. We have a quarterly journal that we publish called the Independent Review. This is the current issue. The Independent Review is edited by the renowned economist and historian Robert Higgs, and we’re hoping that John will contribute to it one of these days. We haven’t had the pleasure of that yet but we hope we will. More specifically most Americans according to the polls want to repeal and replace the Patient Protection and Affordable Care Act known as Obamacare. However, exactly what reforms contribute to the problem like high costs and poor quality access and so forth in healthcare is not clear, and we believe that John’s book Priceless addresses this in detail, not just the Affordable Care Act but the whole range of government involvement in healthcare and the problems with healthcare per se. Our view is that to create a vibrant market that would treat the sick as well as those who may get sick sometime in the future we have to be very concerned about incentives, we have to be concerned about how to be able to access innovation, and we have to be concerned about overcoming barriers that are created by government entities and special interests that use government to restrict competition. And this of course relates to insurance. It relates to Medicare and Medicaid, it relates to hospitals, it relates to private practice, general practitioners, the specialists, and so on and so forth.
The Wall Street Journal and the National Journal among other media have called John the “Father of Health Savings Accounts,” which is certainly the case. His health policy blog is the premier healthcare blog on the Internet where pro-market and pro-private-sector solutions to healthcare problems are routinely examined and debated by top health policy experts throughout the country and around the world. I believe this is your ninth book. Right? And John regularly appears on many national radio and television talk shows, Fox, CNN, PBS, and so on. His articles have appeared in the, Investor’s Business Daily, National Review, Kaiser Health News, and many other publications. Just this past Sunday we had an article by John on health savings accounts in the San Francisco Chronicle, and we’ll plan on sending everyone a copy of that article if you haven’t seen it.
So I’m very pleased and delighted to have my old friend John here this evening. [Applause]
Thank you David for that very, very kind introduction. I thought our office was being a little bit generous when we suggested some of those remarks but I enjoyed every word of it. If you Google the John Goodman Health Policy Blog you’re going to discover two things, first it’s about the only health policy blog that approaches health policy from an economic point of view. The people at my blog believe that the reason we’re having all the problems we’re having in healthcare are because we have distorted economic incentives. And when we respond to those incentives we do things that may cost more, lower quality, and make access more difficult than otherwise would have been. And if we’re going to solve these problems we’ve got to get the economic incentives right, and if we don’t do that we’re not going to solve the problems. The other thing you’re going to see at this blog is that it’s the only health policy blog of any persuasion whatsoever that has a sense of humor. I don’t know what it is about the field I’m in, it’s just dominated by a bunch of sour pusses, you know? And a lot of them not only have no sense of humor they don’t even understand when I’m joking, and this includes people like Paul Krugman at the New York Times which some of you are familiar with. He has no sense of humor at all and so, and I’ve gotten in trouble with him a couple of times because I wasn’t being serious and he thought I was. So we created this yellow yield sign, it’s for the humor challenged, it’s a satire alert. And we’ll put it up occasionally so that people like Krugman knows, you know, hey don’t take this too seriously. We feel like if we don’t make you smile at least once a day we’re not doing our job at the blog, and we’ll do things like we had a post the other day on how Obamacare is going to push all of you into HMOs, they’re going to ration your healthcare, and underneath that from YouTube we had Aretha Franklin singing “Say a Little Prayer for You.” And then we had a post on end-of-life care and underneath that was Bob Dylan singing “Knocking on Heaven’s Door.” And then we had this incredible exchange between the doctors and the insurance guys and they just went back and forth, and back and forth for about 50 or 60 comments, and finally this one doctor got so exasperated he said, you know, “You insurance guys are killing our patients.” I thought that was interesting. So I re-posted some of that and underneath that comment we had Lesley Gore singing, “You’d Cry Too if it Happened to You.”
Now we’re accused sometimes of being irreverent and sometimes insensitive, and I guess the most insensitive thing we ever did happened about two years ago. There was a man who walked into the Parkland Hospital Emergency Room in Dallas, and he waited 19 hours and died before he ever saw a doctor. And we thought this was a real tragedy and we also thought that it could happen in other cities as well, so we posted a little something on it. But underneath it we had Lionel Richie singing, “All Night Long.” And that probably was insensitive. Yeah, you should groan on that one.
I like to have my cell phone with me even when I’m talking because you never know when there’s going to be an emergency. That wasn’t serious. But this is serious. There are more cell phones in the United States than there are people. Even the panhandler down on the street corner probably has a cell phone but he probably doesn’t have very good access to healthcare. If something goes wrong with my cell phone there are dozens of shops in Dallas, Texas, that I can walk into without any appointment and I can get high quality/low cost quick repairs done on my iPhone. And in fact there are even shops that will send someone to my condo and they’ll repair my iPhone in my home. And there’s a national chain and it’s called iHospital and employees are called iDoctors. But if something happens to me did you know the average wait to see a new doctor in the United States is three weeks across the country? In Boston where we’re told that we have universal coverage the average wait is two months to see a new doctor. Did you know that one out of every five individuals who walks into a hospital emergency room leaves without ever seeing a doctor simply because they get tired of waiting? So my question to you is why is the market so kind to my iPhone and so mean to me? And I think the answer is that this iPhone is bought and sold and repaired in a real market with real prices where entrepreneurs know they can make millions of dollars if they solve our problems. Whereas over in healthcare we have so completely suppressed the market for year after year, decade after decade, that no one ever sees a real price for anything, no patient, no doctor, no employee, no employer. We bought into this notion, it’s the same notion that other developed countries have bought into, it’s the idea that in order to make healthcare accessible it’s got to be free at the point of delivery. And so we completely suppress the role of prices in healthcare believing that people should never have to choose between money and healthcare. Just as they do in Canada, just as they do in Britain we primarily pay for care in this country not with money but with time. And what we’ve overlooked is that when you completely suppress the price in the healthcare system you make all of the non-price barriers to care ever more important.
Now what do you mean by a non-price barrier to care? I mean how long does it take you on the telephone to get an appointment with a doctor? And then how many days do you have to wait before you can see that doctor? And then how long does it take you to get from your home or your office to the doctor’s office, and once you get there how long do you have to wait in the waiting room in order to see him? By the way, I think it’s kind of interesting that for all of the other professionals, for the lawyers and the architects and the engineers I mean that room is called a reception area. Right? But for the doctor we call it a waiting room. True.
As it turns out those non-price barriers to care are more important than the fee the doctor charges, and by that I mean there are bigger obstacles to getting care than the fee the doctor charges, and this isn’t just true for the middle class it’s also true for people who are poor, and there are a number of studies that we can talk about if you’d like.
Now in the United States today there are almost 50 million people who have food stamps, and they can walk into any supermarket you and I can walk into, they can buy almost any product that you and I buy, and they pay the same price that you and I pay. They get to the checkout counter and they put the food stamps down and they put money on top of it and they consummate their transaction. And you never, never hear it said in this country that low-income people do not have access to supermarkets. Right? I mean the worst that can happen is they have to get on a bus and go a few blocks in order to get to the supermarket, but you never hear of supermarkets saying we’re not going to take any new food stamp customers. Right? That just doesn’t happen. But there are in this country about 60 million people on the Medicaid program and basically they’re the same people, and what’s the biggest problem people have in Medicaid? Is finding a doctor who will see you. Right? I was in Boston not long ago and as I sometimes do when I’m in another city I struck up a conversation with a female cab driver and I ask her how Romneycare was working for her, and she said well my problem is I can’t find a doctor who will see me. And I said well why is that? And she said well I went down a list of 20 names before I could find one who would see me. She was on Massachusetts Medicaid, which is Mass Health, and I said well 20 names, I said were you going down the Yellow Pages? And she said no, no, I was going down that list that Mass Health gave me. Alright, that’s what people on Medicaid are experiencing, and it might not be quite as bad as it is in Boston but the same problem is nationwide. And so basically what people on Medicaid end up doing is going to community health centers or going to the emergency room of Safety Net hospitals where they’re probably not going to wait 19 hours but it would not be unusual. The average wait in Dallas at Parkland Hospital is four, five, six hours depending upon the day of the week. If you walked into Parkland with a migraine headache you could be there for eight hours before anyone sees you. That is what it’s like over in the healthcare sphere as contrasted with what we’re doing with food stamps.
Now at the same time all of that is going on we have a proliferation across the country of these walk-in clinics and I assume you have them here in San Francisco, the Minute Clinic, and CVS pharmacy, and the Wal-Mart, and shopping malls, and the reason for the name Minute Clinic is they’re just signaling to you they know your time is valuable as well as your money. And these clinics, by the way, provide not only low-cost accessible care but also high-quality care. And by that I mean the nurses following computerized protocol with their customers for what they’re able to do they adhere to best practices and to the accepted protocols of better than traditional primary care physicians. So it’s consistent care, high quality care. In Dallas, Texas if you have an earache of you have a sore throat the Minute Clinic is going to charge you about 75 dollars. But Medicaid only pays half that much, and the problem is that unlike the food stamp market over in healthcare we make it illegal for the Medicaid patient to add money to the rate that Medicaid pays. It’s not only illegal it’s a matter of criminal law. So if the nurse takes cash on top of Medicaid she probably would end up in prison, and therefore we don’t find any Medicaid patients in Dallas going into Minute Clinics or anywhere else. They’re down at the emergency room waiting four, five, or six hours. We can greatly expand access to care for low-income people just overnight if we would just allow them to buy healthcare the same way they buy food stamps. It’s such a simple idea, and by the way the same is true of Medicare for the seniors and the disabled.
So, if we want to solve the problems of healthcare, one of the first things we have to do is liberate patients from the kinds of silly ridiculous restrictions like that. And the second thing we need to do is to liberate the doctor. Have you ever noticed that it’s really hard to get a doctor to talk to you on the telephone? Now if I call my doctor friend up and I’m inviting him out to dinner and I’m paying then yeah I’ll probably get a return call. But it’s real difficult to get a doctor to talk to you about a medical condition on the phone. This telephone, not the iPhone, but the telephone in general has been used by other professionals for almost 100 years. Right? The lawyers, accountants, architects, engineers. So it’s a very handy way to communicate with clients. Why doesn’t the doctor want to talk to you on the phone?
Audience Member
I can’t charge for it.
Dr. Goodman
Very good. Medicare has a list of about 7,500 tasks that it pays doctors to do, and it just so happens that the telephone isn’t on that list or at least is not on there in a convenient way, and the way Medicare pays is the same way that Blue Cross pays and the employers and insurance companies, so none of them are paying doctors to consult with you by telephone. If you’re a doctor and the third-party payers are constantly trying to push down your fees you can’t afford to spend a lot of time on non-billable hours. You can’t afford to do very many tasks for which there’s no payment at all. And so that’s the main reason why you don’t get to talk to your doctor. Now we get to the end of the 20th century and all of the other professionals discover e-mail, everybody is e-mailing everybody these days. Even the corner liquor store e-mails me if they have a bottle of wine they know I want. I even get e-mails from the Minute Clinic. Back in August they sent me an e-mail saying school is about to start, you know, your kids need a vaccination. And I got an e-mail from them the other day saying it’s flu season, have you got your flu shot yet? But I don’t get any e-mail at all from my regular doctor. And why is that? You were so good a minute ago. This is an easy pop quiz. You just keep repeating that answer you’re going to get an A+ on this exam. Yeah, e-mail is also not on that list of 7,500 things that Medicare pays for. There is no worse way to pay a professional, to create a long list of things that you’re going to pay for and then by implication if anything not on the list you’re not going to pay for and so if it’s not on the list they’re not going to do it. Doctors are the only professionals in our society who are not free to re-price and repackage what they’re offering to the market. Okay? Every other professional can change what they offer, and they can change the price. If demand changes, technology changes, or anything changes they can respond to the market. Doctors cannot. Doctors are slaves to a third-party payment system over which they have virtually no control at all.
Let me give you one more example because I think it’s fascinating. Some of you may already know of Jeffrey Brenner in Camden, New Jersey. No? Surely you’ve heard of him. You’ve heard of him. Okay.
Audience Member
Didn’t know the name but yes.
Dr. Goodman
Alright, Camden is supposed to be one of the poorest spots in the whole country. If you live in Camden you’re either on Medicare, or you’re on Medicaid, or you’re uninsured. There’s virtually no private insurance there. Brenner is this entrepreneurial doctor. He’s a researcher. He’s curious about why things work the way they work, and so Brenner is going through the hospital records and he discovers that 1% of all of the people who live in Camden are responsible for 30% of all of the spending by the hospital. So he goes down the list of the 1% and he discovers this one patient who is just a total mess. This guy weighs more than 600 pounds, he is a diabetic, he is an alcoholic, he’s a drug addict. Half of the year he’s in the hospital and the other half of the year he’s abusing himself. So Brenner takes this guy under his wing and he gets him off alcohol, gets him off drugs, gets him in AA, finds out he’s a Christian and gets him going to church, gets him to sign up for some welfare programs so he has some financial stability in his life, and lo-and-behold, the guy isn’t going to the hospital anymore. And since he’s not going to the hospital his expense to the system goes down, down, down, saving tens of thousands of dollars. So this was so successful Brenner set up this little clinic and he started doing it for other people. Brenner told me that he can drive down the streets of Camden and he can point to whole buildings and tell you how much an entire building is costing Medicare and Medicaid because people with bad lifestyles tend to cluster together, birds of a feather and all of that.
In any event, Brenner today is saving you taxpayers millions of dollars by getting patients to really change their lifestyles, change the way they’re living. And my question to you is this: how much do you think Medicare gives Brenner in return for all of the millions of dollars he’s saving us as taxpayers?
Audience Member
Zero.
Dr. Goodman
Very good. And how about Medicaid? How much do you think Medicaid gives him for all of that? Yeah right zero. Why? Because social work, and that’s what mainly Brenner is doing—I mean there’s some medicine but mainly what I’m describing to you is just social work. We just happen to save millions of dollars. And that it really isn’t on the list of 7,500 things that Medicare pays for because whenever you pay a professional by task you’re never going to think of everything you need to be thinking of. Again, a crazy way to pay anyone.
So, what I said in my blog was that we need to let Jeffrey Brenner become a millionaire. He called me up and thanked me for that by the way. But what I argued was if he saves the system a dollar let’s let him keep 20 cents. Okay? Or 25 cents or something. And when I told the guys in Washington about this they said well why would we want to do that? And I said—I mean he’s already doing what we want him to do for nothing. Why would we want to pay him? And I said because if you just pay him, if you let him get rich then you send the signal out to all of the rest of the doctors in the whole country and the message would be if you could figure out a way to save taxpayers money and raise the quality of care we will, we’ll do something back for you. We’ll pay you in a different way. You tell us how you want to be paid and we’ll pay you that way.
So the second thing we need to do is to liberate the doctors and then the third thing is to help the entrepreneurs. I’m often asked if free markets can work in healthcare. In fact, there are lots of people who think they can’t. But what I’ve discovered is that the only healthcare markets that are really working and working well are the markets where we have a free market and where basically the third-party payers are. So you show me a healthcare market where there’s no Blue Cross, no employer, and no Medicare, and I’ll show you a market that’s probably working really, really well. Cosmetic surgery is one of those markets. Just looking around the room here I would guess that most of you don’t know much about this market. Give it another ten years, and even you will have an interest. Alright, here’s a market where people are paying with their own money and what do you do? You get a package price. You don’t have to wonder what it’s going to cost. They tell you in advance. By package I mean it covers the doctor, the nurse, anesthetist, the facility. You have price competition. Over the last 15 years we’ve had a huge increase in the number of procedures like 700% or 800% increase. At the same time we’ve had all kinds of technological change of the type that we’re told increases costs everywhere else in the system and yet the real price of cosmetic surgery is just kept—it keeps coming down over that 15-year period. Lasik surgery same thing. You have package prices, you have price competition, quality competition, and by the way those two things tend to come together. In Lasik surgery there is a huge increase in number of procedures, all kinds of technological change, and yet over the last ten years the real price of Lasik surgery has gone down by 25%. I’ve already mentioned the walk-in clinics.
There’s TelaDoc of Dallas which actually does provide you with a telephone consultation, developed outside of the insurance system. We do this for employees. We pay a dollar a month per employee. If I’m in another city and I need a prescription I call up. It costs me 30 dollars and the doctor, I don’t know what doctor is going to answer the phone but he can call up my medical records, he can see what I’ve been doing, and he can prescribe what I need. And they have two million customers right now. It shows you what markets do, what entrepreneurs can do when the third-party bureaucracies just are not in the way.
This is totally different from the approach of the Obama administration, which has no faith at all in entrepreneurs or in markets, but thinks that from Washington they can figure out what is the best way to practice medicine and then tell all the doctors what to do. You probably heard Barack Obama say what he wants to do in healthcare. It’s the same he says he wants to do in education. He says we’re going to go find out what works and then we’re going to do it, by which he means we’re going to experiment and have pilot programs and demonstration projects and then the things that work we’re going to copy them all over the country. Now the only difference between healthcare and education is that in education we’ve been doing this for 25 years with no success whereas in healthcare it’s only been, you know, five or six years with no success. The Congressional Budget Office has looked at all of this on three separate occasions and they’ve said none of the pilot programs are working, none of the demonstration projects are working. You’re not going to lower costs/raise quality by thinking you can do, experiment artificially designed in Washington and then copy them. There are in our healthcare system many, many examples of high-quality care. There are centers of excellence. But I know of not a single one that was created by the buyers of care. Every single one has been created on the supply side, by an entrepreneur or a small group of entrepreneurs who figures out how to do it better and is succeeding. Never is this happening because some bureaucratic insurance entity tells them that medicine should be practiced in a different way.
Let’s talk about Obamacare for just a moment. People are very concerned and rightfully so. I believe there are six big problems with Obamacare and they’re so big that even if all of the Republicans leave town and leave the capital building to the Democrats they’re going to want to do something about these six problems, and if they don’t they’re going to be hearing from all of their constituents. And the first problem is that Obamacare is going to require all of you to buy an insurance plan whose cost is going to grow at twice the rate of growth of your income. Now Barack Obama didn’t create this problem. We’ve been living with this problem for 40 years: real spending per person on healthcare has been growing at twice the rate of growth of our income, and it’s not a uniquely American problem, and we’re not the worst, in fact we’re sort of in the middle of the pack among developed countries. But all of these countries are going up an impossible path, and you don’t need to be an accountant or an economist, or you don’t need a pocket calculator to know if you’re buying something and its cost is increasing at twice the rate of growth of your income it’s going to be crowding out everything else that you can buy. And as a matter of fact, if we continue on this path, by the time today’s young people reach the retirement age there’s going to be nothing left but healthcare. They’ll have nothing to eat, nothing to wear, no place to live, but they’ll have lots and lots of healthcare. Alright, you don’t take that too seriously because we’re not going to get that far out before we figure out some better way to do it.
Again, Obamacare didn’t create the problem but it locks us onto the path. It makes it harder for you to do the kind of adjustments you would normally do. Normally if your insurance premiums were really going up for any other kind of insurance you would go for a smaller package of benefits, a higher deductible, you would do something like that. But you’re going to be limited in your ability to defend yourself in that way.
Number two, it’s a bizarre system of subsidies. The hotel that I’m staying in down the street is an example of what’s about to happen. I don’t know if you’ve ever noticed but when you walk into a hotel most of the people that you see are making about 15 dollars an hour. These are the maids, the waiters, the waitresses, the busboys, the custodial people, and these people are not making a lot of money but let’s say they’re making $30,000 a year. Obamacare is going to require that hotel to provide insurance to these employees and for the family coverage. It’s about $15,000. So it’s going to require the hotel to provide a benefit that’s equal to about half of what they’re now making. So I can see the meeting now: “Employees, there’s bad news and good news. The bad news is we’re going to cut your wages in half, the good news is you’ll have this lavish healthcare plan.” There is no new subsidy in this legislation for that hotel or those employees because they’re just going to be caught. But now if for some reason the hotel isn’t providing the insurance, and so they have to go over into this new health insurance exchange then there are lavish subsidies, and people at this income level only have to pay about 2% of their income, and the government pays for all the rest. So that’s like a $13,000/$14,000 benefit provided by the federal government versus a $50,000 penalty over here at the place of work. At the same time if you take the few people in the hotel that make considerably more money, say a manager who is making $100,000 a year, that manager gets no subsidy in the health insurance exchange. But if the hotel provides the insurance to the manager the hotel can pay those premiums with untaxed dollars which means they’re escaping let’s say a 25% income tax, a 15% FICA payroll tax, I don’t know what your income tax is, state income tax here in California is, it’s high I see. Okay, alright, so with that income tax now the ability to avoid all of that is like the government is paying for half the cost of the insurance. So, everybody with above-average income is going to want insurance to continue from their employer, and if you have below-average income both you and the employer would be better off if you find your way over into the exchange.
How do you get over there? I don’t know because I don’t know enough about employee benefits law or labor law, and I’m just not creative enough but, you know, the hotel may make them all independent contractors. They may make them all part time. It may divide in two so we have two corporations, one employs the higher-income folks and provides insurance, while the other employs the lower-income folks and doesn’t provide insurance but pays a $2,000 fine instead. And the problem with that is that I can envision the whole industrial structure of the United States changing just in response to health insurance subsidies, which is not how you want important decisions to be made. It’s not how you stay competitive in international economics.
The third problem is the insurance exchange itself where people are going to be participating in a system where insurers have terrible perverse incentives. And they have to charge everybody the same premium regardless of healthcare costs and expected healthcare costs. And you don’t have to be in the business to think, or think very long about it to realize that, you know, these companies are going to make profits on healthy people and take losses on sick people. And so what are they going to do? They’re going to try to attract the healthy and avoid the sick. And this isn’t a new phenomenon. This is going on right now anyway, it’s just going to get worse.
I like to contrast health insurance with casualty insurance. You all see on TV casualty insurance ads all the time. You’ve seen the black actor standing in front of the town that’s just been destroyed and he says, “It took two minutes to destroy this town,” and then he says, “Are you in good hands?” Okay? That’s the Allstate ad. So what’s that ad saying to you? He’s saying we know you don’t want to think about insurance until something bad happens but if the bad thing happens we’re going to be there for you. That’s the way they’re advertising it. Aflac, everything the duck is doing it’s something is going wrong. Right? Something bad is about to happen. It’s all about bad stuff. My favorite print ad is the Chubb ad where the guy is in the canoe and he’s about to go over Niagara Falls backwards and it says, you know, “Insurance doesn’t matter until it matters.”
In Washington D.C. where the federal employees participate in an Obamacare-like exchange and have been for a long time, there is an open season in the fall when all of the employees get to choose a new health plan. They also see ads, in this case for health insurance, and these ads never ever ever talk about anything bad that might happen to you, which means they never talk about why you might really want insurance. They never mention cancer or AIDS or heart disease, or any other expensive-to-treat condition. Why? Because they are not interested in attracting you to their plan if you have one of those problems. What they like to do is picture young healthy families and the implicit message is if you look like the folks in this photo you’re the kind of person we want. And if you don’t look like those folks, we’re not sure that we have a good fit here.
The bad incentives do not end at the point of enrollment. After people are enrolled, the incentives are to over-provide to the healthy because you want to keep the ones you have and attract more of them, and to under-provide to the sick because you don’t want the ones that you have and you certainly don’t want to attract any more of them. A lot of you probably have not stopped to think about this fact, that our healthcare system is not only bureaucratic but it’s potentially very unfriendly. And if you’ve got a lot of problems it can be very difficult to deal with. In the world you’re now living with though you have certain protectors and defenders, you have an employer and you have an insurance broker, but just think to yourself what happens when the broker goes away? What happens when the employer gets out of the way? Then you’re going to be on your own.
Audience Member
Well you have government.
Dr. Goodman
Well, you know, you know how much you can rely on those guys. Now the fourth problem is over on the other side of the insurance market, it’s on the buyer’s side, and we had the Supreme Court ruling on the mandate and a lot of going back and forth about whether it’s constitutional or not constitutional, but you know, the reality is that this is a really weak mandate to begin with. Now if you don’t, if you don’t buy the insurance the IRS is not going to be able to go garnish your wages. It’s not going to be able to attach an asset. The only thing it can do is just withhold your refund. So a weak mandate, weakly enforced, plus the IRS said the other day they’re not going to hire a lot of people to go around and audit tax returns to see if people are insured. It was a virtual announcement that they’re going to ignore the mandate as a practical matter. And what that means is that we as buyers of health insurance will have reverse incentives, and our incentives will be to stay uninsured until we get sick and then buy the insurance, and get the bills paid, get our medical care, and then drop the insurance again. In Massachusetts these are called jumpers and dumpers. You jump in when you need the insurance and you get everything done and then you dump the plan when you don’t need it anymore. But if we all do that, if the only people with insurance are people who are sick and generating high medical bills then insurance is going to be horribly expensive and private insurance will not be able to survive.
The fifth problem is that we’ve way over promised. Obamacare promises what it cannot deliver, and according to the projections in another year and a half we’re going to insure about 30 million new people, and if the economic studies are correct they will double, they will try to double their consumption of healthcare. And then all of the rest of you will be forced to have more generous insurance than you otherwise wanted. There’s a whole long list of preventive services that you’re supposed to get with no deductible, no copayment. A study from Duke concluded that if we gave everybody in the country all of those preventive services that the average primary care physician in the United States will be spending 7 1/2 hours of every working day just doing that and not taking care of any real problem, just giving screenings to healthy people. So what I’m describing to you is a huge potential increase in demand. There’s no increase in supply, no new doctors, no new nurses, no new clinics to speak of, and that means a big rationing problem. And it means that those non-price barriers, those waiting times are going to grow, and it’s going to take longer and longer to get anything in the system, and if you’re in a plan that pays below market you’re going to be in trouble. And what I mean by a plan that pays below market is Medicare for the elderly and the disabled, Medicaid for the poor, and if the Massachusetts example is followed people in the newly subsidized healthcare plans. These are the most vulnerable people, and they’re going to have increasing difficulty finding a doctor who will see them. I bet you when the Democrats voted for this they thought they were helping those people. They’re going to be surprised to learn that the most vulnerable populations are going to have less access to care because of this bill, because, because of giving all of these benefits to the middle class the vulnerable populations are going to have less than they had before.
The final problem is the problem of seniors. It’s really true that over the next ten years Obamacare takes 716 billion dollars out of Medicare to pay for new insurance for young people. And where is that money coming from? Mainly they’re going to squeeze the payments to doctors and hospitals. So, according to the Medicare actuary, in a short amount of time Medicare fees will fall below Medicaid for doctors, which means if you’re a senior you’re suddenly going to look less desirable than welfare mothers for the doctors. What all of you are going to think about, if you haven’t thought about it before now, how many of you have a concierge doctor? Anybody? How many of you know what one is? Okay, alright, so you have thought about it, somebody has told you about it. Well, you’re going to need one.
Audience Member
What’s the concept?
Dr. Goodman
Well, for about $1,500/$2,000 the concierge doctor sees you the same day or the next day, provides your care: he becomes your agent, spends more time with you. But before a concierge doctor became a concierge doctor he was seeing 2,500 patients, and now he’s only seeing 500. Okay? He’s giving them more time, more attention, but he left 2,000 behind. Well what happens to those people? Well their problem just got worse. So the more doctors that convert to concierge practice, the worse it gets for everybody else, and we’re going to get two-tiered medicine very, very quickly.
Now let me just go to what I think are some solutions to all of this and then we’ll open it up and hear what you have to say. I went to Capitol Hill about a month ago and suggested to the doctors in the House and the Senate that they need a health contract with America, and it ought to have a few simple ideas that people can understand because nobody understands Obamacare. Right? I mean you can’t explain anything about Obamacare in simple words.
So the first idea was that we don’t need a mandate but let’s have tax fairness. Let’s give everybody in the United States the same tax deal if they purchase private health insurance. And I think we could replace everything we’re doing now, the tax subsidies and the spending subsidies with, for adults, about a $2,500 refundable tax credit. For a family of four it will be $8,000, again refundable tax credit. You get it even if you’re not paying taxes. And that’s for private health insurance. And to put this in perspective typical large employers are now spending about $16,000 on family coverage. This credit is only $8,000. So it pays for the core insurance that we want people to have. If they want everything else: they want in vitro fertilization, acupuncture, fine, but they’re going to pay for that with after-tax dollars, unsubsidized dollars, they and their employer. And it will occur to them that that last $8,000 every dollar they spent is a dollar they could have spent on something else. And it will occur, it will occur to a lot of people in the insurance business if they can figure out a way to provide a plan that only costs $8,000 they’re going to have a lot of takers. So, everything would radically change if we could do this. That’s the tax fairness component.
Then the universal coverage component is something that no one ever talks about but if, except at the NCPA and at The Independent Institute, at the Independent Institute. If people turn you down, and there will be people who will turn down the $8,000 offer, then what do we do with that money? We send it to local safety net institutions in the area where the uninsured live. So money follows people. If everybody in San Francisco gets private insurance we don’t need to send money to safety net hospitals. All the money pays premiums for private health insurance. But if everybody in San Francisco decides not to be insured then that same money goes over to safety net institutions. So you fix the federal subsidy, it’s the same for everybody, and you send it depending on the choices that people make.
And then the third thing we need to do is we need to promote portable insurance, which is what the middle class says they most want. It’s the thing that’s most missing in our system. Every poll shows this. They don’t get it under the current system. They don’t get it from Obamacare. But by portable insurance I mean insurance that travels with you from job to job in and out of the labor market. And did you know in California right now it’s illegal for an employer to buy Blue Cross individual insurance. That employer has to buy Blue Cross group even though Blue Cross is selling individual insurance that people could own and take with them. It’s against the law for the employer to buy the individual insurance. Well we just need to turn that around. That’s exactly the opposite of what we should be doing. And California is not unique, Texas is the same way and so are the other states.
Then two more things; we need a generous health savings account. Already it’s been a marvelous success. There are 27 million people with these accounts. Obama is about to allow the flexible spending accounts to rollover so it’s no longer use or lose it. That will add another 35 million people. So we’re getting lots of people with an account where they’re controlling money and this forces the supply, the providers of care to change what they’re doing. But we need it to be even more flexible. We need it for the chronically ill. The studies show that asthmatics and diabetics and other chronic patients can manage their own care with a little bit of training, and if they can manage their care they ought to manage the dollars that pay for that care.
And then finally, we need real insurance, and by real insurance I mean that you ought to be able to insure against the possibility of getting a pre-existing condition. And that’s what happens when I buy life insurance. If I buy life insurance then I get a prostate cancer test and it turns out bad for me I don’t get kicked out of the pool. My premium isn’t selectively raised. I get treated just like everybody else. That’s what we need to do in healthcare, and if people for some reason have to move from one insurance plan to another and health condition has changed, so now the new premium is going to be higher, the original insurance ought to pay that extra premium. Now that’s what I call real health insurance. Some people call it change of health status insurance. But in any event it allows each of us to get from the insurance world what we really want and need to protect ourselves in this new environment.
So those were my, my five ideas for a health contract with America. The doctors put it up at the health caucus website, but I must tell you that on the Republican side even though they talk about repeal and replace they’re totally committed to repeal, there’s almost no enthusiasm for replace. So, if the Republicans win this election, Obamacare will get repealed but there is no appetite for any kind of major reform, which disappoints me. David introduced me as the Father of Health Savings Accounts so let me just conclude on this note. The most important thing about the health savings account idea in my opinion is empowerment. That again we’re dealing with a system that is very bureaucratic and can be very unfriendly. And my view has always been that if you control the money and you have the power to make your own decisions this system is going to work a lot better for you than if you cede that money and that power to some impersonal bureaucracy. You’ve been a very good audience. Thank you very much. [Applause]
Alright, you really wanted to ask a question.
Just clarification—the microphone, go ahead.
Audience Member
Dr. Goodman, you talked about it being illegal for an employer to buy individual insurance. You must be talking about not for himself but for his employees he cannot buy an individual plan.
Dr. Goodman
Right.
Audience Member
And when did that law—
Dr. Goodman
Well, the states have enacted those laws because they think they have to under the federal HIPAA law. And basically they’ve all, they’ve all done that, and what I really mean by saying it’s illegal is I mean they cannot buy the individually owned insurance for their employees with pre-taxed dollars. So it’s, that’s what they can’t do.
Audience Member
Okay.
Dr. Goodman
And right behind this gentleman is another gentleman.
Audience Member
Case in point, I had to have some blood work done back when I had a $4,000 deductible. And they couldn’t figure out how to tell us. And a certain blood test was $950 retail rate and billed for $550 for the insurance rate to get done, it was negotiated. I checked with two other labs and one was $350 and the other was $180, and that’s the same work done for $180. But I got no incentive from Blue Cross for saving them any money because it went against the deductible. So there was no encouragement.
Dr. Goodman
That’s a real statement about Blue Cross isn’t it?
Audience Member
I could say a lot of other things but this is mixed company.
Dr. Goodman
Well, what I think you’re going to find is there are very, very few real entrepreneurs in health insurance.
Audience Member
I was at a conference about diversity and I had shared a meal with a woman whose words to me were that she believes that we’ve earned the right not only to extend to same sex couples who are no longer fertile and meant that her insurance company should pay for in vitro so that she and her partner could experience in their post menopausal, I’m serious, no heart attack here, and I’m looking at her thinking you want healthcare dollars to pay for what? But using the term reproductive rights in this area?
Dr. Goodman
Well, I wouldn’t be surprised if this isn’t already part of the California law, and if it’s not a mandate I bet anything it’s a mandated option.
Audience Member
And sex change.
Audience Member
In the prison.
Dr. Goodman
Yes sir?
Audience Member
I’m kind of going off that point. How do you sort of I guess, don’t you also have to change the culture around healthcare and get people to think of this less in terms of, you know, rights or rights, and kind of more in terms of having people think of themselves as customers like they would given the other fields?
Dr. Goodman
Well, what I really think is that all we need to do is put money in the hands of people and when people control their own healthcare dollars over on the provider side that’s where the radical change occurs. You don’t have to change the mind of the patient. Just all of a sudden you have competition, posted prices. You know, the Minute Clinic you don’t have to wonder what anything costs, just post it on the wall.
We’ve been discriminating against this side of the room. That’s okay, this is the left side of the room.
Audience Member
You didn’t mention tort reform, which was talked about more a long time ago. I don’t think it even turned up in the debates last night. Could you say something on that?
Dr. Goodman
Certainly.
My approach to tort reform is more radical than probably any that you’ve heard. I’m not interested in these caps and loser pays or anything like that. I want to get rid of the malpractice system completely. I want to get the lawyers out, the judges. That’s not the way to solve the problem of hospital safety. We have a big problem of hospital safety but malpractice is only a fourth of that problem. You know, another fourth of the problem are infections that kill people, that in principle was preventable but it doesn’t count as malpractice. And then maybe almost half of all of the adverse events in hospitals are acts of God. You know, we don’t really know, there’s no obvious way we could have prevented it. Okay? And we’re now talking about 100,000 people a year getting killed this way. Now what I realized was if we only focus on malpractice then all of the doctors are going to run tests and do a lot of things that create other risks for patients just so they are not in that wedge, but they just get pushed into some other wedge. And so our proposal is that you be able to sign a voluntary contract with the hospital. The state legislature blesses these contracts, and let’s say they pick a figure of say $250,000. Okay, you know going in that if you die from any cause other than why you went to the hospital, this is an adverse medical event, and then your heirs or relatives will get $250,000. And there will be no depositions, no trial, no jury, no judge. You just get paid. And if that’s not enough going in you can pay an additional premium and get the amount higher. That’s what I mean by no fault. So we pay off all adverse events and you know exactly what it’s going to be.
So, what then will happen? Well, there will be an insurance company that’s providing episodic insurance for all of the patients and it’s going to be paying off the claims. And if that insurance company is free to do so it’s going to start charging doctors and hospitals more that have more adverse events regardless of what the cause is. So we won’t get into this argument about was somebody at fault. We just, you know, if you’re doing things that cause more deaths in the hospital then you’re going to pay more and if it’s bad enough we won’t cover you at all. You’ll just not be able to practice in the hospital. So that’s my radical tort reform. If you want to read more about it it’s in the book and I think, you know, in Georgia and in Florida there’s some real interest in doing something like this.
Audience Member
John, I have a question.
Dr. Goodman
Okay.
Audience Member
And I have the mic. I have one comment and one question. I loved most of what you had to say today. I really thought it was very inspiring, particularly your sort of perspective on why we can’t get the public sector to acknowledge that creating savings creates value and therefore people should be rewarded for the value that they’ve created. I’ve had that same experience in my career on the private sector. So I don’t think that’s a concept that’s easily embraced from an entrepreneurial perspective. So I’m just throwing it out there. It’s not, that’s not a sort of something that’s unique to why we can’t get the public sector to embrace the savings notion. I think that’s culturally something that’s hard for us. You can comment on it if you like. So that’s the first comment.
The second issue is that I’ve seen statistics that we have about six million people over 75 today. That number is going to grow to over 40 million people by 2020, and most of that is the baby boomer generation. The baby boomer generation has basically had to face the fact that they have been sort of put on their own in terms of their retirement benefits sort of future from the 70s until today. And more than half of those people haven’t really planned for their own future and so there’s a significant portion of that population that doesn’t realize that they’re going to be living at or below the poverty level, and solely dependent on Social Security and Medicare. So how is that, is any of that factored into what’s going on today in terms of how you’re looking at the industry and what some of the remedies are with respect to how we’re going to provide for that sort of, the baby boomers going through the system?
Dr. Goodman
Well, on that second point it just means that it’s going to be really, really hard to reform the system because the baby boomers are going to resist reforms which means, which involves spending less on them. They’re going to want all of those benefits that they really didn’t pay for or they paid 70 cents on the dollar and whatever they think they did, they didn’t pay the full freight. Yeah, and it’s going to be expensive.
Now on the first point you’re right, the whole healthcare system is very bureaucratic and there’s not that much difference between the private and public sector. You know, people talk as though, you know, the half of the spending by the government is really different from the half of the spending spent privately. But do you all know who runs Medicare? It’s run by private insurance. It’s run by Blue Cross. So if you want to know why is there not much difference between the private and the public sector it’s the same entities are running both. And in both cases they’re very bureaucratic. It’s hard to, hard to see much difference between Blue Cross when it calls itself private insurer and Blue Cross when it calls itself Medicare. And you’re right, but so to challenge, you know, Blue Cross is one of the last insurers to come around on the health savings account. Now they offer them.
Audience Member
I had a question on, I often hear Nordic countries, well like Norway, Denmark in terms of healthcare and other welfare programs. Can you comment on whether or not those are actually better or if they differ from what Obamacare is being proposed?
Dr. Goodman
Well, Norway has an exchange sort of like the Obamacare exchange and it’s largely private and, by the way, Switzerland does too. And all of the problems I mentioned here are problems with those systems. They’re not controlling costs very well because, because people aren’t facing real prices. Just because you pay something for health insurance it doesn’t mean that was a real price, and nowhere in the world, at least in the developed world, is anybody ever paying a real price for health insurance. Bruce?
Audience Member
So, my interest is preventive medicine.
Dr. Goodman
Okay.
Audience Member
And obesity is a complete disaster. We’re talking about 30 or 40% of people who come into Children’s Hospital where I work now are obese, and obesity is linked to every possible bad disease that anybody has looked at, more cancer, more brain dysfunction, more heart disease, you name it. It’s linked. And years of expensive diabetes. Obesity alone is going to bankrupt the country. But preventive medicine is going to come very quickly. I have a scientist entrepreneur friend who is putting a machine in every pharmacy in China now. He’s an American but the Chinese are subsidizing these. He’s done 2,000 already. You know, put your finger in a machine and take a finger prick of blood and now you can analyze, analytical methods are getting so cheap and so good. I have another friend who has a company who can analyze 1,000 different proteins in a finger prick of human blood and have analysis. So, it’s going to send the results to your iPhone. Hey, you’re low in the, and most of the problems are bad diet. So it’s going to tell you you’re low in magnesium and that means more DNA damage, more brain dysfunction, et cetera, et cetera, and it sends the results to your iPhone and says the solution is a big plate of spinach because magnesium is color coded. It’s in the center, it’s in the center of the—so anything green has magnesium and you’re not eating enough green or taking calcium, magnesium. However, all of that is going to come in the next decade, possibly two decades. But it’s coming very fast and it’s going to, we’ll all become in charge of our own health, and cut out expensive doctors, cut out expensive drug companies, cut out expensive phlebotomists, and you’re going to control your metabolism. Anyway that’s just a footnote.
Dr. Goodman
Sure, thank you. No, and I agree with that and what Professor Ames is describing is an example of what I called personalized medicine at my blog and I’ve blogged about this a couple of times over the last week or so. Personalized medicine is different from or the opposite of cookbook medicine, and it’s not just the vitamins and the preventive side. We also can have personalized cancer therapies and personalized monitors in your body that monitor your asthma and your diabetes and so forth.
Zeke Emmanuel is the guy who was the White House Health Advisor for Obamacare. I mean he helped shape the whole program, and he told CNN the other day that personalized medicine is a myth, and even if it’s not a myth we can’t afford it. So it’s the opposite of where Obama wants to go. They want standardized medicine. They want to treat all of you the same way. I call it cookbook medicine. Personalized, where the science is going and technology is going is what you’ve described. Where Obama wants to go is in the opposite direction.
Audience Member
John, why don’t you point out how your proposal would encourage preventative medicine?
Dr. Goodman
Well back to, yeah, the obesity problem and the whole issue of preventive medicine. People are not paying the cost of their own decisions. They’re not paying the cost of their own choices. That’s a dumb system. So in any rational insurance world you can’t have people just intentionally doing things that impose costs on others. And that’s where we are.
Audience Member
Yeah but that’s, so lefties want everybody to be the same.
Dr. Goodman
I know.
Audience Member
Nobody misses out from their bad decisions.
Dr. Goodman
I got it. Go ahead.
Audience Member
I’d like to change your topic. In talking with people about Obamacare or any other broad health policy question and the term cost comes up. Are people willing to address the cost of healthcare labor arrangements? We have the largest number of licenses categories of labor in any industry, and we are overstaffed in much of what we do. Hospitals have 500, 600 separate job descriptions. People are trained in x-ray and get to be an MRI tech they will no longer do any x-ray coverage. It is the heart of our cost bolus that politicians will not address because of the union pressure.
Dr. Goodman
She comments on my blog all the time and makes me confront things like this. Yes, and I hate to see all of those job categories and I hate to see them become a matter of law. And of course once you have a payment system based on them then nobody ever wants to change it because you, that’s how you maximize against payment formulas is allocating assignments to different people. I don’t know what to say except it’s just more, it’s just more bureaucracy. It’s not the way any private firm would operate in a normal marketplace.
Audience Member
I’ve seen a number of people say that Obamacare is going to destroy HSAs. Would you say that’s true and if so could you just briefly explain the dynamics there? I hear that.
Dr. Goodman
Well, it’s very schizophrenic. On the one hand they have limited the amount that you’re going to be able to put into the health savings account. In the individual market if they don’t change the regulations they’re going to wipe health savings accounts out of the individual market, not the employer market but the individual market.
On the other hand I mentioned earlier that, do you all know what a flexible spending account is? A use or lose account? Okay, so at the end of the year you’re spending all the money on glasses, eyeglasses this and that, sunglasses, because if you don’t use it then you lose it. And so the Obama treasury came out several months ago and said we’re considering allowing these accounts to roll over. So, it’s use it or save it. Well that would convert these into a health savings account. So there are 35 million people who have them so it would more than double the number of people out there managing a substantial number of dollars in the health marketplace.
So, I proposed this to the Bush administration, oh back up. Where did we ever get this lose it or use it rule? That was not passed by any Congress. That was a Treasury ruling. So what I said to the Bush folks is okay why don’t you just undo it? Just as Obama appears to be ready to do. They thought that was too radical, Congress would never permit it. So they didn’t even consider it. I think the Obama folks are very nervous about what’s about to happen. They know the pilot programs aren’t working, the demonstration projects are producing poor results. They’re desperate to control cost, and somebody must have said hey the only thing that really works is empowering patients. And as much as you may not like it the Rand Corporation says you can save 30% if you just do this. So I think they’re doing this administratively thinking they don’t have to ask Congress. And so this is, that’s what I mean about schizophrenic. With one hand they’re taking away with the other hand they’re creating new accounts. And but I think it’s an act of desperation.
Audience Member
I think the person who had the individual medicine, the individual care, self-care or whatever I think had an overly optimistic view of human nature. I think, you know, that people just aren’t that interested in having a plate of spinach instead of a steak or something.
Dr. Goodman
Yes, but don’t you think if they bore the full cost of those choices they would get more interested. Alright.
Audience Member
I’m on Medicare—
Dr. Goodman
Wait, wait, wait, wait.
Audience Member
Oh sorry. I’m on Medicare and I’m sure a lot of, many people in this room have had the same experience. When I go to a doctor I fill out all of these forms and sign them on my way in. On my way out I stop by the desk and say what do I pay or what do I sign? They say you’re fine sir, so I just walk out. So I walk out not having a clue what the charge was for the procedure that was occurred on me and I have this feeling of discomfort that somehow something is being ripped off in the system. But I don’t know anyway to ask.
Dr. Goodman
Yes but see just as you don’t know the doctor who you were talking to he probably doesn’t know either, and so the two of you are generating costs for all of the rest of us and neither one of you know what you’ve done. That’s a crazy system.
Audience Member
One of the things, one of the arguments that’s always used by people through our—or even for, you know, single payer, completely socialized medicine is that everyone should have “equal access” to healthcare even though no one has equal access to cars or anything like that. So if we have more free market solutions like savings accounts, you know, how do, how do you convince those people that, you know, in any system you never have perfect equality. Isn’t that kind of a big hurdle that you have to overcome in making this argument?
Dr. Goodman
Well, I think what you have to understand is that free markets create more equal access than you are otherwise going to have. You know, in Britain there’s no equal access to care. In Canada there’s no equal access to care. The wealthy and the powerful get to the head of the waiting lines. But in the United States with food stamps as I said earlier low-income people have the same access to a supermarket that you have. And we really rarely hear a complaint other than the fact that there are not many of them in the poorest areas of town, so somebody has to ride a bus to get to one, but other than that it’s pretty much equal access. And that’s what markets do.
And just one more point on that, you know, we keep hearing about how in Massachusetts we’ve cut down insurance rates in half and we’ve insured all of these people but the wait to see a new doctor in Boston is longer than any other U.S. city. So even though people are nominally insured their access to a doctor is less than in every other U.S. city. Yeah?
Audience Member
Sir, first of all, apology. This isn’t so much a question, it’s not about healthcare but after I retired from the Marine Corp I became a defense contractor. But I do believe that the federal government believes in the labor theory of value, Marxist-Leninist, which is to say whatever labor was spent on a project is what it must have been worth and we pay for it. The entire defense contracting system is that, while I’m very proud of the work that many of the defense contractors do for our nation but nonetheless it’s a total fiasco if it took a lot of high-priced labor to produce then that’s what the price is paid and that’s what it’s worth. And I just see an awful lot of measurement of input rather than payment for outcomes. And I think your whole thing, the example, the 7,000 things for which you can be paid whether or not it does any good by the way or not or it changes the outcomes is another example of very early like the late 19th through the 20th century labor theory of value of how the government operates across a sector. Healthcare is just going broke that’s why it’s so obvious.
Dr. Goodman
Well you know, I don’t disagree with that but, in saying there’s some theory behind it, that almost implies that, you know, somebody has given some rational thought to what’s going on. If you take the 7,500 tasks that Medicare pays doctors to do, you multiply it times 800,000 doctors in the United States, and of course they’re not all in Medicare and they don’t all do every task, but potentially on any given day Medicare is setting six billion prices. Think about that, six billion prices. And over in the hospital sector it’s equally bad. It’s hundreds of millions of prices they’re setting over there. There is no way they can get it right and there’s no theory that’s going to guide them to get it right. And what does it mean when they get the prices wrong? It means that doctors, hospitals will do things that make costs higher, quality lower than otherwise would have happened.
Audience Member
Excuse me, just a quick thought. That’s more decisions made than the Soviet whole bureaucracy of price systems that they set. I read some statistics somewhere and it’s like several hundred thousand decisions they had to make.
Dr. Goodman
Right.
Audience Member
You’re talking about—
Dr. Goodman
And we know they didn’t get it right.
Audience Member
There’s a, there’s a story that says that half of each individual’s healthcare is consumed in the last six months of life, and that that point is not available to an economics price-driven solution. Therefore it’s necessary for the state to come in and control that spending in the last six months of life. Could you, could you comment on the truthfulness of that assumption and secondly could you describe in your plan the economics of the last six months of life?
Dr. Goodman
Okay, the way you worded it, and I often hear it worded that way, is I don’t, I think that’s a little bit misleading, but here’s what’s reality. Medicare okay? Medicare is spending about one-third of all of its dollars on patients in the last year of life. Okay? Alright, so a lot of what you and I are paying for as taxpayers is going for the care of people who are about to die. And that doesn’t mean it’s all wasted because, you know, you want a healthcare system to spend money when you have a serious problem. So there are people who benefit from that kind of spending. But obviously there are people who are not benefiting and there’s a lot of end-of-life care that’s very expensive and doesn’t achieve much. I’m an economist. I believe in incentives. I believe that we need to empower patients and give them an opportunity to profit from making good decisions. So if you go to the hospice you don’t generate a big cost for taxpayers. There ought to be some reward for doing that.
Audience Member
Have questions?
Dr. Goodman
Here’s one right here.
Audience Member
Many babies are born prematurely, and a lot of times it’s weeks or months in the hospital. Does Obamacare address that at all? What they’re going to do with and pay for, what they’re not going to pay for? Because the price can be hundreds of thousands if not a million dollars so it’s a big expense.
Dr. Goodman
Well, I’m sure that if Kathleen Sebelius were here she would say oh yes we’re going to be helping out the premature babies because we’re going to get more preventive care to mothers. But the problem with that is that I’ve already told you they’re not creating new doctors and so if we have a rationing problem, if we have access more difficult for vulnerable populations, and remember who has the premature babies? They tend to be the vulnerable population of mothers, and so in fact the whole situation could get worse.
Audience Member
I’ve got a couple of questions about Romney, Romney and Romneycare. First, has he provided any specifics as to how he would deal with pre-existing conditions? And the second I believe he implied last night that Romneycare doesn’t have anything equivalent to the death panels. I don’t believe that’s, I do believe that the Massachusetts system does have some equivalent.
Dr. Goodman
Well no, they do not have anything like a death panel and they’re not telling doctors how to practice medicine in the way that Obamacare apparently will. Let me just say generally on Romney that two years ago I had him in Dallas, he talked to about 600 people, he got a standing ovation, and while he was there I sat down with him and said look, here is what you need to do about healthcare. You need to go out and say here are two or three things that I did in Massachusetts that were really good. And then you need to say here are two or three things that we did that you shouldn’t do. So here’s the good, here’s the not so good. And I wrote it down and e-mailed it to him. He never said no. But I think it was a huge mistake for him not to have done that. He is not locked into one way of thinking about healthcare. He really does take a business approach to these issues. He’s not, he’s not an ideologue on things like this. But he could have been so much better if he would have just listened to me.
Audience Member
Pre-existing conditions?
Dr. Goodman
They don’t know what they’re going to do. But I will say this, if the Republicans want to seriously form a system one of the least bad things in Obamacare is this federal risk pool. Because remember the Democrats on the eve of the passage of Obamacare the only thing they talked about was pre-existing conditions. You know, every single one of them that went on TV they’ve named the name of someone in their district or their state and they’ve talked about the problem, and that was their reason to vote for this trillion-dollar piece of legislation. So, in the legislation is a federal risk pool. It’s been there now for, for almost two years. And what does it do? It allows you if you’ve been uninsured for six months and you can’t get insurance because of a pre-existing condition you can buy into the federal risk pool and pay the same price that a healthy person would pay. Now where are we today two years later? 82,000 people. They thought there would be hundreds of thousands, only 82,000 people. So, that’s, when you think about solving the problem that was their whole excuse for reform for five billion dollars, that’s not too bad, you know, to get rid of the whole rationale for the program.
Mr. Theroux
Okay, one last question. Anyone who hasn’t asked a question?
Audience Member
Well one, real quickly—
Mr. Theroux
Wait, wait for the mic.
Audience Member
Okay. Totally all of this, just to finish up with you, what motivates you to write books about such a romantic and glorious subject?
Dr. Goodman
Well, you know, I never wanted to be in this field. I really didn’t. I never took a course in health economics. My dissertation was in a different area altogether. But it was a field that desperately needed help and so I got into it and I thought okay, this is the last thing I’m going to do in healthcare. And then just things got worse and worse and the need got greater and greater. And it wasn’t being met by other people, and I think what you’re going to see from Pricelesss is it’s a different way of approaching healthcare. It’s not your typical health economics book, and so I feel like we needed that perspective and so that’s why I stayed with it.
Mr. Theroux
If you will join with me in thanking John. [Applause] John really is in my opinion a diamond in a swamp quite frankly on the subject, but he is really making a difference, and so we hope that all of you will get a copy of his book. He’s delighted to autograph a copy and get one for your friends. This is part of our ambition is to get the word out and change the fate of healthcare. So I want to thank John for all of his work, and I want to thank all of you for joining with us tonight and we hope to see you next time. Thank you and goodbye. [Applause]
