John McCain: The Robin Hood of Health Care

by publius

As we all remember from childhood, Robin Hood was the original working class hero. He, um, redistributed from the rich to help the poor. From reading Tony Pugh’s McClatchey piece on the candidates’ health care policies, you would think that John McCain is a modern-day progressive Robin Hood on health care. (I first saw the article in the print edition of the Houston Chronicle).

The article begins by describing a mother (Ms. Espinoza) who has employer-based health care for herself, but can’t afford to add her children (they remain uninsured). After Pugh describes to her the candidates’ rival health care plans, she ultimately decides that McCain’s policy sounds better. It’s outrageous and depressing, but it’s not her fault — it’s the fault of people like Pugh who need to do a better job describing the real-world consequences of these policies.

I’ll get to the policy side below, but first the politics. In one sense, McCain’s health care proposal shouldn’t be understood as policy at all — it’s merely a political weapon. It lets him say something in response to questions from the public and the press about health care. What’s troubling, though, is that the proposal may not be bad politics, assuming the public remains misinformed.

To the general public, McCain’s health care “policy” is “I’ll give your family $5000 — go knock yourself out.” And if that’s all you know, it doesn’t sound that bad. Having an extra $5000 is better than not having it (or $2500 for individuals). The problem is that McCain's tax credit shouldn't be analyzed in a vacuum. The same policy that would provide families $5000 would create enormous collateral damage — indeed, it would ultimately cause families to pay significantly more money for significantly less coverage (more on that below).

The political challenge, then, is figuring out ways to tell the truth in simple compelling terms — after all, it’s not demagoguery if it’s true and important. The public needs to understand that McCain’s policy isn’t just “here’s an extra $5000.” The promise of extra cash, though, is probably why Ms. Espinoza (depressingly) preferred McCain’s approach. True, she's only one person — but we shouldn’t overestimate the ability of people to understand complex policy issues that can be obscured through, say, lying or lazy reporting.

So that’s the politics — below is my more detailed policy gripe with Pugh’s portrayal of McCain’s proposal:

In introducing McCain’s plan, Pugh writes:

McCain's plan takes a different approach. It follows Republican orthodoxy of trying to make the private-insurance marketplace more affordable and competitive by radically altering the tax treatment of health-care benefits.

But McCain's not actually trying to make good coverage more affordable. He's trying to encourage people to buy various inferior plans that, not surprisingly, are cheaper. Simply put, McCain's plan would increase the price of good coverage. Next:

For years employers have been able to exclude the cost of health benefits from their employees' taxable incomes, but self-employed workers and those who buy private coverage don't have the same tax benefit. To level the playing field, McCain no longer would exempt employees' health benefits from income taxes. Instead, he'd provide refundable tax credits of $2,500 for individuals and $5,000 for families to help purchase private insurance.

Note the Robin Hood-esque “to level the playing field.” It’s true he’s leveling a field alright — he’s making (currently subsidized) employer-based health care as crappy as individual plans are.

The upshot is simple — people will have less and worse coverage while paying more for it. The reasons why are more complex:

First, $5000/$2500 credits don’t cover the premium costs for policies that employees currently have (roughly $12,000/$4400). So unless premiums come down by a lot, people will pay out more than they do now under employer-based plans.

Second, people wouldn't even really be getting $5000/$2500 in the first place. You have to factor in the tax hikes that will offset these credits. Because McCain would treat employer-based health care benefits as taxable income (it’s currently exempt), people’s taxes would go up. This increase will eat into the $5000/$2500 credit, and often swallow it altogether.

Third, and most critically perhaps, McCain’s plan would encourage many employers to drop coverage altogether. As Ezra Klein has explained, the types of plans that people would be encouraged to buy are cheap, high-deductible, low-quality coverage. That’s fine if you’re young and healthy, but not so good if you’re not. So, healthy people will leave employer-based plans, leaving behind the sick and expensive to drive up average costs. Over time, employers will just stop providing coverage, leaving people at the mercy of the individual market where they have less bargaining power and less information.

Fourth, the tax credit will become worth less and less through time because it’s indexed to inflation (and premiums have been rising much faster than inflation). And I haven’t even mentioned pre-existing conditions, S-CHIP, and the uninsured.

Upshot — people will have less and worse coverage while paying more for it.

Pugh does at least mention the threat to employer-based health care but goes on to add a Robin Hood line that obscures the point:

Critics say that McCain's plan will hasten the decline of the employer-based health system by steering younger, healthy people into the private market. Health economists applaud the proposal, however, because it would make the tax code more progressive by removing an exclusion that disproportionately benefits higher-income workers with more generous health plans. In fact, some higher income people with generous plans would end up with higher tax bills under McCain's proposal.

True, it makes the tax code but more progressive, but for a highly unprogressive and harmful end. Again, you can’t view this stuff in a vacuum. You must see -- and reporters must explain -- that there other consequences.

The bottom line is that McCain’s “$5000 in every pot” is good politics. Or at least, it will be until the public’s understanding is corrected and it becomes the major liability that it should be. I suspect that some wonks think McCain’s policy is so absurd that people will see through it. But Ms. Espinoza didn’t, and others won't either.

Comments

[hilzoy]

Man, that was a dreadful article. Thanks for flagging it.

Obama's plan would be great for the woman described in the article. She keeps her existing plan, but her kids are covered. McCain's would make her existing coverage more expensive, probably by considerably more than the tax credit.

The article also says this: "Critics say that McCain's plan will hasten the decline of the employer-based health system by steering younger, healthy people into the private market. Health economists applaud the proposal, however, because it would make the tax code more progressive by removing an exclusion that disproportionately benefits higher-income workers with more generous health plans. In fact, some higher income people with generous plans would end up with higher tax bills under McCain's proposal."

Do "health economists" say this? Not the ones I read. The ones I read make the point attributed to mere "critics": that McCain's plan would basically destroy the present system of health insurance by setting in motion an adverse selection death spiral.

They would also quarrel with this point: "What many health experts find most attractive about McCain's plan is the potential for containing health-care spending.

"I consider it the most important of his cost-containment ideas," Ginsburg said."

-- To say again what I've said in the past: the vast majority of health care dollars are spent on people who are really sick. These people will have blasted right through their high deductibles. Catastrophic coverage plans, like those McCain's plan encourages, will not affect spending on these people at all. It will just discourage people from getting stuff like, oh, checkups and pap smears.

Which is, like, totally what we want. She lied.

[redwood]

The bottom line is that McCain’s “$5000 in every pot” is good politics. Or at least, it will be until the public’s understanding is corrected and it becomes the major liability that it should be. I suspect that some wonks think McCain’s policy is so absurd that people will see through it. But Ms. Espinoza didn’t, and others won't either.

I don't think it is just the 5K in every pot. Even after reading your excellent explanation, publius, I still don't like submitting my detailed FSA claims via email to someone I don't know our "Human Resources" department.

I want to see the government relieve employers of handling health insurance.

but it's just like the Republicans to crash the system.

[cleek]

I still don't like submitting my detailed FSA claims via email to someone I don't know our "Human Resources" department.

in general, FSA is the worst implementation of a good idea that i think i've ever seen.

last year, my company got smart and gave us debit cards linked to our FSA accounts - it was so convenient i couldn't beleive it. this year, they got rid of the credit cards and we're back to fighting the insurance company for every fncking receipt we send them. if there's no debit card again next year, i'm going to simply skip it altogether - avoiding the headache and paperwork will be more than worth it.

[Mudge]

McCain's plan has enormous problems, but he fails to include the health insurance from that great employer, the United States government, in the mix. When McCain's own health insurance is reduced to $5000 a year, with him competing for coverage as an individual with substantial health problems, he can then talk about fairness. Let him sit in a Veteran's hospital waiting room.

[Bernard Yomtov]

I think these criticisms are a bit overdone. While I would prefer a more comprehensive approach, I think McCain's plan, as I understand it, is actually better in many ways than what we have now.

He proposes to substitute a universal refundable tax credit for the current hodge-podge of tax treatments of health insurance. In that sense it's not a health care proposal at all, but a tax reform proposal. Why do I think that's worthwhile?

First, there is the progressive issue Publius mentions. Employer-paid insurance tends to go with better-paid jobs. For those who buy insurance themselves, the premiums get lumped with other medical expenses and produce a much smaller, often non-existent, tax benefit. In fact, if you don't itemize - likely if you don't own your home - you will get no tax benefit at all. In that sense the credit does indeed level the playing field.

Second, the effect on those who have employer coverage needs a little more careful examination. Critics, including Publius, make two claims: that the tax on employer-paid insurance will wipe out the credit, and that employers will drop insurance altogether.

As to the first, so what? A $2500 credit more than offsets the tax due on the employer-paid premium. Publius cites $4400/yr as the typical cost of individual coverage. No matter your tax bracket, paying tax on an extra $4400 in exchange for a $2500 credit is a good deal. The $5000 family credit is less profitable percentagewise, but you still come out well ahead. A 25% tax rate gives you $2000 profit (you have a $3000 tax bill and a $5000 credit).

The big issue is the death spiral. Will employers drop coverage? Maybe, but is it totally clear? That would be a substantial pay cut. Some employers might be able to get away with it, but in general it seems unlikely. You don't have to be a market purist - I'm not - to think that there would be great pressure to keep the insurance.

This might be true even if the alternative is a compensating raise. Group policies are cheaper than individual ones, and the whole pre-existing condition issue is less of a problem. Even young healthy people might have good reason to prefer the employer plans, even at some extra cost.

While I by no means think this is a solution to our health care problems, I do think that, taken strictly as a change in the tax code, it's not a bad idea.

[tdaulnay]

McCain's plan would be the best choice, in the long run. It would, as noted, lead to adverse selection and the death of employer-sponsored health care. That, in turn, would lead us to single-payer health care, run by the government. Single-payer is not clearly better than employer-sponsored health care, but it does have a clear advantage over what will result from McCain's policies.

Yes, there will be some pain, but the backlash will be quick and strong. And the end result will give us a civilized health care system.

[Quiddity]

Under McCain's plan there is no pooling of risk which means that once you get sick with a variety of (chronic) diseases, you will never be able to afford health insurance for the rest of your life.

[Harold Pollack]

Great post--I hope to add more on my own blog....

Some points on the substance.

1. I'm not sure it's right to call McCain's proposals a "plan" at all. They have left most of the difficult moving parts unspecified. Compared with the Obama, Clinton, or Edwards proposals, McCain has
clearly slapped something together with very little supporting detail. Some elements of the McCain plan are pure window dressing. For example, the ability to market plans across state lines is
superficially appealing, but a nonstarter when one really gets into it.

2. I would wager that 75% of American health economists support Obama. (I write this as someone who teaches health policy at a major university.) Many only wish he were more willing to go further towards individual mandates. True, most don't like the regressivity of the healthcare deduction. Nobody would design the system from scratch to have a tight link between employment and coverage. Yet employers offer economies of scale in administering coverage and offer much better risk-spreading than an individual market provides. Employers also provide better quality control and monitoring than individuals can achieve on their own. The McCain plan unravels key advantages of employer-based coverage without offering anything in its place to accomplish the same tasks. (By the way, outside the economic profession, does anyone else care about the inefficiencies fostered by deductibility of employer-based health coverage? I think Ezra Klein was the latest to ask this question. Good one.)

3. Ms. Espinosa is precisely the wrong person to have a catastrophic plan. Data from the RAND Health Insurance Experiment suggests that low-income families will be less likely to obtain important preventive care, including mental health, vision, and dental care under these plans. She is also less likely to have services such as regular blood pressure checks. I am concerned that requiring low-income people to pay marginal costs of care will lead people to be less healthy. There is little evidence that people make these decisions well.

4. If someone in her family does get sick, she is likely to discover that her "catastrophic" plan doesn't actually prevent catastrophe. The McCain plan does not include the regulatory oversight required to (a) prevent adverse selection, and (b) ensure that the content of these insurance plans is adequate to protect families against large financial risks. Because she is likely to get hit with significant deductibles and copays in the event of serious illness, I suspect she
would be in for a rude surprise if she really needed her health coverage. What happens, for example, if one of the Espinosa children contracts severe asthma? How, if at all, will she receive financial help in paying the resulting higher insurance premiums and the resulting higher payments to medical providers? By the way, what happens to state and local governments under the McCain plan? Will they be left holding the bag providing primary or secondary coverage to people with preexisting conditions?

The McCain plan specifies that the federal government will work with states to establish Guaranteed Access Plans (GAP) to address these issues. Every detail here is left unspecified.

5. Ms. Espinosa would get large subsidies for her and for her children's health coverage under an Obama plan. In dollar terms, she would almost surely get larger subsidies and more comprehensive coverage under what Obama proposes. I suspect the choices and financial implications were not properly explained to her.

I agree that explaining all this can pose a serious political challenge, exemplified by Ms. Espinosa's response.

[Bernard Yomtov]

By the way, outside the economic profession, does anyone else care about the inefficiencies fostered by deductibility of employer-based health coverage? I think Ezra Klein was the latest to ask this question. Good one.

Harold,

I don't know about the inefficiencies, but I certainly care about the inequities of the tax treatment of employer-based health care. I speak as one who pays for his own health insurance.

[publius]

Harold - thanks. That's good stuff -- and I should have focused more on how McCain really hasn't provided any details (I feel like Tyler Cowen pointed this out too).

Bernard - I appreciate the feedback as well. I agree that the death spiral is the big issue. But, even looking at the credit itself, isn't it a pretty big problem that it's indexed to inflation? seems like it's going to be worth less and less

[John Spragge]

Two points:

1) All insurance has a moral hazard: insurer non-performance. Private insurers collect the premiums up front; they have no incentive, aside from their own sense of ethics and reputation, to pay out when you get sick. Employers, who have an interest in their employees staying alive and healthy and showing up for work have an incentive to go to bat for their employees, and the market clout to back it up. Who would take on this role under John McCain's system?

2) An individual consumer has some control over their costs in a free market system, because where providers charge more than users can or will pay, the unmet need will attract market participants who will find ways to cut costs and provide the service for less. Microsoft charges a manageable amount for Office, because they don't want their customers migrating to Open Office. But the medical system in the United States and other countries remains dominated by a "professional" model, meaning that doctors (and lawyers) belong to the last of the medieval craft guilds. The medical system has enough ability to prevent the entry of low-cost providers to make McCain's goal of cost-cutting a pipe dream. In the end, only four ways to cut costs exist: simplify billing by moving to a single-payer system; allow/encourage doctors to compete on price; reduce legal bills by restricting malpractice claims to cases of genuine malfeasance by doctors; finally, let people die. Either of the last two measures requires a level playing field, a sense that we all play by the same rules and accept the same risks. In other words, in my view, only two workable solutions exist: a genuinely open and entrepreneurial system, or something very similar to single payer.

[janinsanfran]

Messaging to Ms. Espinoza is not too hard: "John McCain will give you $5000 so you can pass it on to his buddies in the insurance companies. That make you feel safer?" Not convincing.

But wait a minute, can't say that. "Barack Obama will create a lot of rules so you will have an insurance company to deal with when your kids get sick. That make you feel safer?" Not convincing.

As long as candidates just invent epicycles created by the need to protect the profit in health care provision, people aren't going to get better health care.

[rea]

restricting malpractice claims to cases of genuine malfeasance by doctors

(snark)Yeah, we all know that present law provides for liability without fault on the part of doctors (/snark)

[von]

Publius, there's a lot wrong with this analysis (IMHO). Let's focus on one aspect, however:

Second, people wouldn't even really be getting $5000/$2500 in the first place. You have to factor in the tax hikes that will offset these credits. Because McCain would treat employer-based health care benefits as taxable income (it’s currently exempt), people’s taxes would go up. This increase will eat into the $5000/$2500 credit, and often swallow it altogether.

If I understand this paragraph correctly, you're complaining that people who already receive health care from their employer will not be able to enjoy the full health care credit when buying insurance because the credit will have already have been used up by the insurance they already have. Have I got that right? And, if so, why is that a negative?

(Leave aside for the moment your view that employers may drop health coverage.)

(And also leave aside your implied view that we prefer that the primary providers of health insurance be employers -- a position that McCain fundamentally disputes.)

[von]

restricting malpractice claims to cases of genuine malfeasance by doctors

(snark)Yeah, we all know that present law provides for liability without fault on the part of doctors (/snark)

When you have doctors leaving the field rather than pay malpractice insurance premiums -- as is already occuring in certain states (particularly among Ob/Gyns) -- it's a signal that something is wrong with the malpractice laws.

[hilzoy]

Medical malpractice is not a large part of medical costs, nor is it in any way out of control. See here, here, and here.

It turns out that one of the best ways to deal with it, which actually does lower costs, is to, well, explain that you made a mistake and apologize. See here:

"At the University of Michigan Health System, one of the first to experiment with full disclosure, existing claims and lawsuits dropped to 83 in August 2007 from 262 in August 2001, said Richard C. Boothman, the medical center’s chief risk officer.

“Improving patient safety and patient communication is more likely to cure the malpractice crisis than defensiveness and denial,” Mr. Boothman said.

Mr. Boothman emphasized that he could not know whether the decline was due to disclosure or safer medicine, or both. But the hospital’s legal defense costs and the money it must set aside to pay claims have each been cut by two-thirds, he said. The time taken to dispose of cases has been halved.

The number of malpractice filings against the University of Illinois has dropped by half since it started its program just over two years ago, said Dr. Timothy B. McDonald, the hospital’s chief safety and risk officer. In the 37 cases where the hospital acknowledged a preventable error and apologized, only one patient has filed suit. Only six settlements have exceeded the hospital’s medical and related expenses.

In Dr. Das Gupta’s case in 2006, the patient retained a lawyer but decided not to sue, and, after a brief negotiation, accepted $74,000 from the hospital, said her lawyer, David J. Pritchard.

“She told me that the doctor was completely candid, completely honest, and so frank that she and her husband — usually the husband wants to pound the guy — that all the anger was gone,” Mr. Pritchard said. “His apology helped get the case settled for a lower amount of money.”"

[von]

Medical malpractice is not a large part of medical costs, nor is it in any way out of control. See here, here, and here.

"Medical malpractice is not a large part of medical costs" may (or may not) be correct, but it doesn't answer my claim that doctors are doctors leaving the field rather than pay malpractice insurance premiums. See here, here (word document), and here. Nor does it address my conclusion that this indicates that something is wrong with the current med/mal system.

It turns out that one of the best ways to deal with it, which actually does lower costs, is to, well, explain that you made a mistake and apologize

Two things that a doctor is incentivized not to do by the current med-mal system.

[hilzoy]

I cross-posted the last with von, so I didn't see his points.

About this one: "your implied view that we prefer that the primary providers of health insurance be employers -- a position that McCain fundamentally disputes."

Personally, I really, really do not prefer that our health insurance be primarily provided by employers. I think it's horrible for employers, horrible for people (oh goody, when one of life's major bad events -- losing your job -- strikes, now it comes with extra added loss of health insurance!), bad for the economy in that it hurts labor market flexibility and discourages self-employment and entrepreneurship, etc.

That said, it is, for better or worse, the system we now have. And if you want to replace it, it would be a good idea to have something decent to put in its place. This is especially true since the present individual market for health insurance is pretty dysfunctional: some people just can't get insurance at all; for those who can, it's really, really expensive; and there are also scummy insurers who write policies in such a way that when you actually need them, it turns out that a whole lot of coverage is excluded in the fine print.

Preferring (a) that we not replace the employer-based system with this, but take some steps to make sure that there's a decent alternative, is different from preferring (b) an employer-based system period. I can't speak for publius, of course, but the fact that I really do not like employer-based systems in no way prevents me from signing on to (a) above.

[hilzoy]

von: we have to stop cross-posting like this. ;)

Actually, the best fix for the incentives against apologies is to make them inadmissible in court. According to the NYT article (my 4th 'here' in my first comment today):

"To give doctors comfort, 34 states have enacted laws making apologies for medical errors inadmissible in court, said Doug Wojcieszak, founder of The Sorry Works! Coalition, a group that advocates for disclosure. Four states have gone further and protected admissions of culpability. Seven require that patients be notified of serious unanticipated outcomes.

Before they became presidential rivals, Senators Hillary Rodham Clinton and Barack Obama, both Democrats, co-sponsored federal legislation in 2005 that would have made apologies inadmissible. The measure died in a committee under Republican control."

One real problem, though, is human nature: I think people just have a very hard time (a) apologizing at all, when something goes seriously wrong, but also (b) realizing that it can actually make the risk of liability better, not worse.

Lawsuits ought not to be the only way of figuring out what on earth went wrong, and left you with (say) only one leg. They really shouldn't. At present, though, they often are.

Also: I don't think it follows from malpractice premiums being high that malpractice lawsuits are out of control. There's another agent lurking in their somewhere, between the malpractice awards and the doctors paying premiums.

Finally, I also think doctors should do a much better job policing their own. A small number of doctors account for a large proportion of malpractice awards. Figuring out which of them are incompetent, and which are just unlucky, is something doctors are better able to do than any other party. They should just do it, however uncomfortable it makes them. The alternatives are worse.

[Bernard Yomtov]

even looking at the credit itself, isn't it a pretty big problem that it's indexed to inflation? seems like it's going to be worth less and less

Sure, but that's pretty easy to fix as the proposal goes through Congress. The inflation measure the credit is indexed to is hardly a core part of the proposal.

I think I would boil down my previous lengthy comment to this: McCain is proposing simply to change the tax treatment of health insurance costs, and I think his proposal is more equitable, on many grounds, than the current arrangement.

[Bernard Yomtov]

people who already receive health care from their employer will not be able to enjoy the full health care credit when buying insurance because the credit will have already have been used up by the insurance they already have. Have I got that right? And, if so, why is that a negative?

Actually, as I pointed out above, those who receive health care from their employer will come out ahead, because the credit will more than offset the additional tax liability.

[von]

Hilzoy:

Actually, the best fix for the incentives against apologies is to make them inadmissible in court. According to the NYT article (my 4th 'here' in my first comment today):

"To give doctors comfort, 34 states have enacted laws making apologies for medical errors inadmissible in court, said Doug Wojcieszak, founder of The Sorry Works! Coalition, a group that advocates for disclosure. Four states have gone further and protected admissions of culpability. Seven require that patients be notified of serious unanticipated outcomes."

The NY Times piece is misleadingly written, because the typical apology statute does not actually cover what one would want it to cover -- i.e., an admission of a mistake. Here, for instance, is California's "apology" statute (emphasis mine):

1160. (a) The portion of statements, writings, or benevolent gestures expressing sympathy or a general sense of benevolence relating to the pain, suffering, or death of a person involved in an accident and made to that person or to the family of that person shall be inadmissible as evidence of an admission of liability in a civil action. A statement of fault, however, which is part of, or in addition to, any of the above shall not be inadmissible pursuant to this section. (b) For purposes of this section: (1) "Accident" means an occurrence resulting in injury or death to one or more persons which is not the result of willful action by a party. (2) "Benevolent gestures" means actions which convey a sense of compassion or commiseration emanating from humane impulses. (3) "Family" means the spouse, parent, grandparent, stepmother, stepfather, child, grandchild, brother, sister, half brother, half sister, adopted children of parent, or spouse's parents of an injured party.

Regarding the following claim by the NY Times:

Before they became presidential rivals, Senators Hillary Rodham Clinton and Barack Obama, both Democrats, co-sponsored federal legislation in 2005 that would have made apologies inadmissible. The measure died in a committee under Republican control."

This, too, seems seriously misleading. As I understand it, the proposed Obama-Clinton legislation was Senate Bill 1784. I've only briefly looked at the bill, but it doesn't seem to include an "apology statute." So far as I can tell it only protects apologies made in the context of settlement negotiations (which may already be protected under other laws) or made in connection with a new, nationwide reporting database for malpractice claims. Unless I've missed something -- certainly possible -- the Times is simply in error in calling this an apology statute.

[von]

Preferring (a) that we not replace the employer-based system with this, but take some steps to make sure that there's a decent alternative, is different from preferring (b) an employer-based system period. I can't speak for publius, of course, but the fact that I really do not like employer-based systems in no way prevents me from signing on to (a) above.

Sure, there's no logical contradiction between the two. And I'll never convince you or Publius that the McCain fix is better than the Obama fix. The task I assume is narrower. Publius' argument seems to rest on the notion that, under Publius' criteria, McCain's proposal is worse than the current employer-pays system. I think that's incorrect; that, even applying Publius' criteria, McCain's proposal is better than the current employer-pays system, even though it may not be exactly to Publius' liking.

[Phil]

When you have (a) doctors leaving the field rather than pay malpractice insurance premiums -- as is already occuring in certain states (particularly among Ob/Gyns) -- it's (b)a signal that something is wrong with the malpractice laws.

Er, even stipulating (a), above, does not lead to the idea that (b) is the correct conclusion. We'd need to know a lot more about the rates at which malpractice is actually occurring, and how much and how often insurers are having to pay out, to get there. You jumped far too many steps there.

[von]

Finally, I also think doctors should do a much better job policing their own. A small number of doctors account for a large proportion of malpractice awards. Figuring out which of them are incompetent, and which are just unlucky, is something doctors are better able to do than any other party. They should just do it, however uncomfortable it makes them. The alternatives are worse.

The current system also contains disincentives for this, although states are getting better at protecting peer-review processes.

[von]

Er, even stipulating (a), above, does not lead to the idea that (b) is the correct conclusion. We'd need to know a lot more about the rates at which malpractice is actually occurring, and how much and how often insurers are having to pay out, to get there. You jumped far too many steps there.

That's ridiculous, Phil. If you stipulate that "doctors [are] leaving the field rather than pay malpractice insurance premiums", my conclusion that this indicates a problem with the malpractice laws may not be correct -- i.e., one can argue alternative explanations -- but it's not jumping "far too many steps".

In any event, my post on June 16, 2008 at 10:06 AM provides three cites -- some admittedly anecdotal -- that support both my premise and conclusion.

Do you have some data that suggests an alternate conclusion?

[hilzoy]

von: I think you're right that it doesn't protect all apologies. But it does institute a program (in Sec. 935) that requires this:

"`(7) ensure that if a patient was harmed or injured as the result of a medical error, or as a result of the relevant standard of care not being followed, an account of the incident or occurrence, as described in paragraph (4)(A) shall be disclosed to the patient not later than 5 business days after the completion of root cause analysis;

`(8) disclose information contained in any report submitted to the patient safety officer as described in paragraph (4)(A) upon the request of the patient with respect to whom the report has been filed;

`(9) offer, at the time of disclosure of an incident or occurrence in which it was determined that a patient was harmed or injured as a result of medical error or as a result of the relevant standard of care not being followed, to--

`(A) negotiate compensation with the patient involved in accordance with subsection (d);

`(B) provide, at the discretion of the health care provider involved, an apology or expression of remorse; and

`(C) share, where practicable, any efforts the health care provider will undertake to prevent reoccurrence;"

And none of those apologies can be used in legal proceedings as an admission of guilt.

So I think it's more like: create a program within which both negotiations and apologies are among the standard options in case of medical error, and then immunize them.

[hilzoy]

Offhand, I can think of a number of possible reasons for high malpractice insurance premiums.

(a) too much actual malpractice.

(b) too many lawsuits relative to the amount of actual malpractice. (Malpractice laws badly suited to recovering actual damages efficiently.)

(c) insurance companies charging more than they need to, possibly to make up some shortfall elsewhere, possibly for some other reason.

Neither (a) nor (c) would indicate a problem with the malpractice laws.

The NEJM article I cited above found this:

For 3 percent of the claims, there were no verifiable medical injuries, and 37 percent did not involve errors. Most of the claims that were not associated with errors (370 of 515 [72 percent]) or injuries (31 of 37 [84 percent]) did not result in compensation; most that involved injuries due to error did (653 of 889 [73 percent]). Payment of claims not involving errors occurred less frequently than did the converse form of inaccuracy — nonpayment of claims associated with errors. When claims not involving errors were compensated, payments were significantly lower on average than were payments for claims involving errors ($313,205 vs. $521,560, P=0.004). Overall, claims not involving errors accounted for 13 to 16 percent of the system's total monetary costs. For every dollar spent on compensation, 54 cents went to administrative expenses (including those involving lawyers, experts, and courts). Claims involving errors accounted for 78 percent of total administrative costs.

Conclusions Claims that lack evidence of error are not uncommon, but most are denied compensation. The vast majority of expenditures go toward litigation over errors and payment of them. The overhead costs of malpractice litigation are exorbitant.

If "claims not involving errors accounted for 13 to 16 percent of the system's total monetary costs", that seems, to me, like good evidence that the problem is not too many claims not involving errors. (I mean, any tort system is going to have claims made by people whose claims for compensation are, in fact, unwarranted, whether or not they realize that when they file suit. It would be nice if we could reform torts so that all and only suits with merit were brought, but unless we can hire God to sort them out, I don't see how.)

Personally, I go with: too much actual malpractice, too few alternatives to legal battles for people who just want either information about what went wrong or some kind of acknowledgement, and perhaps -- I don't know -- something by the insurance companies. But surely the first two.

[von]

Hilzoy, I see that section, but I am at a bit of a loss regarding how such requirements would work if the rest of the system remains the same (as this bill provides). A hospital is required to create a report detailing its own potential negligence or error. Presumably, this occurs some time after the incident in question. The report is then shared with the patient, along with apologies, offers of compensation, or the like.

Because there was no immediate apology, likely by this time the patient or next of kin has contacted a lawyer (assuming he or she is interested in the lawsuit). Even assuming that the apology and report are not admissible, as Plaintiff's counsel I would (1) view any offer in the apology as the floor for future negotiations and (2) know that the hospital itself thinks that it made a mistake. (Query regarding 2: Despite the prohibition against using the report at trial, if hospital reps testify contrary to the report at trial, can I introduce the report to impeach on cross examination on the ground that they opened the door?)

This seems to be an apology statute drafted by the Plaintiff's med-mal bar rather than a serious attempt to encourage physicians to apologize for mistakes. It may nonetheless be good policy, but that doesn't make the NY Times any more credible in its description.

[John Thullen]

"apologies inadmissable in court."

If so, I'm sorry for everything.

The insurance companies could incentivize doctors to go the apology route by guaranteeing an "apology discount" on their malpractice premiums.

Hospitals could reinforce this practice by asking surgeons to lean over patients just before they go under and say "Whatever happens, I'm sorry."

Of course someone would have to be incentivized to incentivize someone to convince the above parties to be incentivized to incentivize doctors to incentivize patients to be incentivized.

As always, I'm troubled by our society's vast network of incentives and disincentives. What do I look like? Pavlov's dog?

I tend to do things for my own reasons, said reasons being hazy even from my perspective.

I wonder: if we dispensed with all incentive and disincentive inflation imbedded in the system (the entire system, not just healthcare), would our behavior change all that much?

The economists at this point will begin mumbling about "the margin", I would guess.

I, of course, am the pot calling the kettle black, but I can be persuaded monetarily to shut-up about incentives and disincentives fairly easily.

Where shall we start the bidding?

[Davis X. Machina]

Do you have some data that suggests an alternate conclusion?

CBO 2008 estimate of how much limiting medical malpractice liability would reduce U.S. health care costs: 0.5%

The figures on the fraction of total health care expenditures that goes to malpractice, insurance and settlements together, runs around 1%

How much is administrative overhead, and insurance company profits?

[Phil]

If you stipulate that "doctors [are] leaving the field rather than pay malpractice insurance premiums", my conclusion that this indicates a problem with the malpractice laws may not be correct -- i.e., one can argue alternative explanations -- but it's not jumping "far too many steps".

Fair enough. If you want me to agree that you may have gone straight from initial premise to incorrect conclusion with no intervening steps whatsoever, I'm happy to do that. Consider it done.

In any event, my post on June 16, 2008 at 10:06 AM provides three cites -- some admittedly anecdotal -- that support both my premise and conclusion.

To be specific:

1) Your first link, to the Pittsburgh Business Times, contains a statement by exactly ONE person, Dr. Bryan La Buda, who indicates that he might relocate or get out of direct patient care. It then goes on to state that "The information from the medical society does not directly link any of the [physician retirement and relocation] figures to the medical malpractice crisis. However, Dr. Dench states that anecdotal stories collected by the Pennsylvania Medical Society demonstrate that physicians are leaving the state, retiring early or giving up high-risk procedures."

So your first cite neither proves that physicians are relocating because of medical practice costs, nor establishes that, if they are doing so, that that demonstrates a problem with med mal law rather than, you know, actual rates of malpractice. Strike one.

2. Your second link contains a single paragraph that might actually demonstrate the jump from your premise to your conclusion:

Dr. Nereida Correa, Obstetrician from Bronx, New York
The issue of malpractice insurance has reached critical proportions. In the past few months I have been setting up a private practice in women's health which is my specialty. The premiums for malpractice insurance for full range Obstetrics and Gynecology would be about $59,000 per year part-time or as high as $110,000 for a full-time practice. I am faced with the decision to limit my practice to office gynecology despite the needs of my patients and of my community which is predominantly Hispanic. We all know that beyond the issue of premiums that have put physicians out of business in many areas there is the ever growing fear of frivolous law suits. The legal system and the current practice of awarding settlements and large awards to patients who irregardless of their own personal issues and liabilities expect a perfect obstetrical outcome has devastated some of the best in the profession. No physician enters the medical field with the intent of giving poor care and to be criminalized for a poor outcome in a birth which has no evidence of causality is unfair. In many cases, as data on cerebral palsy has shown, the poor outcomes of a birth are not the result of negligence or poor care but of anoxic events that occur at anytime during the pregnancy. Yet most would vehemently blame the physician or midwife despite their best efforts. The problem has led many physicians out of the obstetrical arena and has essentially made it impossible to be back-up physician for the many midwives who can provide competent and excellent care to women desiring a natural labor experience. By pushing these skilled and caring practitioners out of the field we are allowing the health of all women to be qualitatively impoverished. Soon there will be no one left who can practice obstetrics, and those who want may not be able to afford the luxury of giving full range care to women and their babies.

Unfortunately, the bolded sentence there, which supports your argument, offers no numbers concerning these alleged "settlements and large awards" given to people who apparently are to blame for their own poor health outcomes. Partial credit.

3. Your third link does, indeed - finally! - attempt to show an actual link between problems with med mal law, increases in premiums, and doctors folding up their tents as a result. To that end, it actually discusses some numbers -- finally! -- regarding differences in payouts and loss ratios between states that do and do not cap noneconomic damages in malpractice lawsuits. But it's inconclusive on the issue, and even indicates that noneconomic damage caps in California may be screwing a number of plaintiffs.

So, yeah, color me unconvinced that your conclusion simply follows naturally from your premise.

Do you have some data that suggests an alternate conclusion?

Do I need some? I'm not trying to convince you of anything.

[publius]

sorry I don't have time to respond to everything but a few notes.

1 - Yes, the tax credit itself is not the overriding problem. My point was (or should have been) that it's less than $5000. McCain is going to go around saying "I'll give you $5000." That's not right -- you have to subtract the tax increase from that. Some will still turn out ahead, others won't. But that's the point.

2 - As for employer-based health care, I pretty much agree with Hilzoy. I don't like it in the abstract, but it's here and it's implanted. And to do away with it in the specific fashion McCain is proposing would be harmful. As Harold noted, employers bring some benefits -- they have more clout, more info, scales, and less transaction costs.

to get rid of it and basically throw people out into the market to buy is bad idea b/c individuals lack the very things that employers have.

And of course, this is only assessing McCain's plans on the merits. He does essentially nothing for the uninsured or those with pre-existing conditions

[trilobite]

It should be remembered that "the young and healthy" who don't need so much health insurance are actually "the young, healthy, and childless." As the parent of two fairly healthy kids, I am very glad to have a better plan than McCain's for their checkups, immunizations, and occasional ER trips.

[publius]

tril - when was #2? :)

[hairshirthedonist]

...patients who irregardless of their own....

irregardless???

[von]

Hairshirthedonist, regarding your 12:37 p.m. note, would you include some sort of cite (even if it's just a directive, i.e., "von", "Hilzoy", "Publius") the next time you make some comment like that. I can't figure out what you're criticizing and/or commenting upon, other than to assume that you're criticizing someone (me?* Hilzoy? Publius? Someone else?) for using "irregardless" instead of "regardless." Is that it?

*I don't think it was me -- irregardless is a bete noir of mine as well -- but I'm never surprised when I find out that I've inadvertently committed the same grammatical sin that I decry in others.

[hairshirthedonist]

Sorry, von. It was from Phil's quote from one of your links - the bolded section. No poster at OW is responsible for the usage. It was more an expression of surprise at the usage than criticism.

[trilobite]

Publius, a little over 2 years ago. Boy, name of Joseph, generally called JJ.

Call sometime. :)

[Texas Dem]

Not to rain on the parade, but if McCain wins this election (and that's a real possibility), there won't be any health care reform. His proposal is clearly just a talking point for the election and the issue will be dropped after he takes the oath of office. It's not a serious proposal and it shoudn't be taken seriously. Even if he really wanted to pursue market reform of health care, there's virtually no chance it would get through a Democratic congress. The details of the plan would scare the shit out of people. It would be a repeat of Bush's social security fiasco. And besides, McCain will be far too busy building our empire in the middle east to worry about health care or the uninsured. A McCain presidency will focus on only two things 1) Iraq and 2) Iran. That's it. No health care. That will have to wait for President Hillary Clinton in 2012.

[astar4u]

you are full of crap, tribolite!!!!

I will take my chances with McCain anyday!!! He is the lessor of the three evils

You mean to tell me, you would rather a person who DISRESPECTS AMERICA and wont even stand attention to the flag or hand over the heart? HOW SAD!!! and can you imagine the disaray our country is going to be in if HE takes over? sad sad sad!

[hilzoy]

astar4u: Funny, that's not what I heard:

"Barack Obama is a PATRIOTIC AMERICAN. He has one HAND over his HEART at all times. He occasionally switches when one arm gets tired, which is almost never because he is STRONG.

Barack Obama has the DECLARATION OF INDEPENDENCE tattooed on his stomach. It's upside-down, so he can read it while doing sit-ups.

There's only one artist on Barack Obama's iPod: FRANCIS SCOTT KEY.

Barack Obama is a DEVOUT CHRISTIAN. His favorite book is the BIBLE, which he has memorized. His name means HE WHO LOVES JESUS in the ancient language of Aramaic. He is PROUD that Jesus was an American.

Barack Obama goes to church every morning. He goes to church every afternoon. He goes to church every evening. He is IN CHURCH RIGHT NOW.

Barack Obama's new airplane includes a conference room, a kitchen, and a MEGACHURCH.

Barack Obama's skin is the color of AMERICAN SOIL."

[cleek]

He is the lessor of the three evils

he rents evil ?