Healthcare for Baby-Boomers(TM)

I was always taught to do the right things. Then someone advised me that it is not enough to do the right things; but rather you must do the right things right! In my opinion, this notion needs to be applied to our elected representatives who are responsible for the federal budget. I think they need to demonstrate some fiscal responsibility, hence doing the right things right.

A Basic Budgeting and Spending Model

In a basic budgeting and spending model, you plan your household budget around the amount of income you expect to receive, and the offsetting amount you expect to spend on your living expenses. The goal is to come out ahead at the end of the year. You allocate a monthly spending allowance for all your known expenses such as food, clothing, shelter and transportation. If you are really wise, you allot a certain amount to those unexpected events and their related expenses, as well (i.e. you receive a speeding ticket, the washer breaks down, the roof starts to leak, etc.). Then, if you are being a good steward of your own household, you carefully manage your spending making sure to get the “best buy” when you shop by comparing price and quality to be confident you are getting the best value for the dollars you spend.

For example, suppose that within your transportation budget, you set aside a certain amount for your car payment and another amount for fuel and yet another amount for maintenance. After some careful planning, you realize that if you adjusted your budget to put slightly more in the car payment bucket for a vehicle that obtains much better mileage, you could reduce your monthly fuel budget sufficiently to more than offset the amount of the increase in the car payment. Furthermore, you discover that your maintenance expenses also are reduced because most of your service work is covered under the warranty. Such a decision would be fiscally responsible, right?

Federal Budget Process Escapes Logic

The whole federal budget process escapes logic, in my opinion. It was no problem for Congressional policy-makers to justify raids on the Social Security surplus (when there was one because the baby boomers were feeding it, not drawing upon it) leaving I.O.U.’s.  Was that considered fiscally responsible? Is that doing the right things, right?

Entitlements were created to spend the surplus with little regard for building incentives into the allocation process to insure that the best value would be attained for the dollar spent. There were no economic incentives to insure the quality of care that was delivered. In addition, projections of spending failed to consider the demands and needs of the baby-boomers who created the surplus when they would become the consumers. When the demand for the promised health care services began to exceed the supply of resources to pay for that promised care, who was held accountable?

The debate still hinges on doing the right things, right. It is well and good to spend money to care for those who need care when there is sufficient resources to meet that need, but just as in the household budget example, when times get tough you cut out some things you were able to enjoy when times were good. In this scenario, you are the one held accountable and the incentive is the money you have left at year-end.

Incentives for Accountability

Contrast that with the federal budget process. When spending for an entitlement created during a period of surplus creates a deficit, that entitlement may need to be adjusted, or income must be increased. In the short term, reduced spending is a quicker temporary fix than increasing income. Unfortunately, no elected official is going to get re-elected if he or she is perceived as voting to take something away, even if it is because a mistake was made in estimating the long term effects of the entitlement legislation. There is no incentive built into this model to reward the elected officials for doing the right things right. So we become saddled with an untenable situation in which spending exceeds income with no simple short term or long term resolution available.

Perhaps, my mind is oversimplifying the budgeting process. If you fail to manage your household budget, you are the one that gets hurt, along with any creditors who supported your spending beyond your means. But in the end, you and your creditors should pay the consequences for those decisions and no one else. Should the burden be placed on those who acted responsibly and did the right things, right? I think not.

I believe we need to hold our elected representatives to the same standard since they work for us. We need to instruct them to create incentives to get maximum value for the tax dollars spent for health care. We should demand that they not only do the right things, but that they should be done right!

We were exposed to mountains of rhetoric on health care reform during the past two years. The dilemma has been surfacing routinely in election years for as long as I can remember, and I have been involved in health care for more than 30 years. Is access to healthcare an entitlement–one of our inalienable rights–or is it a responsibility? In my experience, the arguments are more often  emotional rather than rational. It seems much easier to fix the blame than it is to fix the problem.

Now, we have the most sweeping reform of the health care system since the creation of Medicare. Will it fulfill the promises that were made to gain the support necessary for passage? Will it really deliver affordable health care to more than 30 million Americans that were previously uninsured and reduce the escalating costs of health care at the same time?

During the last 30 years of my life, the cost of health care has continued to escalate at an alarming rate, taking an increasingly larger share of the gross domestic product of this country. The health care sector has become one of the largest consumers of our financial resources. Yet, today a growing portion of our population still cannot afford health care insurance. We must ask, “Why?”

Society of victims

At the risk of sounding callous, I believe the crux of the dilemma is the lack of accountability. I believe we have become a society of victims. “Whatever my current problem, it is not the result of anything I might have done, but it is the other guy’s fault.” A physician friend who served in the emergency room of a major metropolitan hospital related a chilling story that illustrates my point. A colleague had pulled duty in the ER every day for a week and thought it was strange that the same woman was sitting in the ER waiting area every day. Finally, his curiosity got the best of him and he went to her and asked what was wrong and why she was there. To his inquiry she reportedly replied, “I come here every day because one day one of you will make a mistake with me, and I will be rich.”

Whether the story is true or not is less the issue than the possibility that in this day and age it might be true. Many health care professionals have related stories to me regarding the expensive diagnostic tests they feel obligated to employ as part of their regimen in the event that they may be sued for malpractice. Furthermore, malpractice insurance, which has become a necessity for most care providers, sometimes exacerbates the problem because the insurance company will determine that the legal cost of defending the client may actually be more costly than agreeing to settle out of court. Do you suppose this fact has escaped those whose careers are built on this type of litigation? Is that why tort reform was noticeably missing from the new health reform law?

A new perspective

In my opinion, the solution to the problem of the rising cost of health care, coupled with the lack of health insurance protection, requires a new perspective on accountability. If you wish to benefit from some form of health insurance (be it Medicare, Medicaid, or a private insurer), you should enter into a contract with the benefit provider through which you include a set of advanced directives, drawn up with your input and from your family and legal advisors based on what you want as your end-of-life decision. This contract would be binding on you and your heirs and would help the insurance provider calculate the risk and the resultant premium necessary for them to provide the health benefit you required.

In short, you would be ultimately responsible for the amount and quality of care you wanted to have delivered to you and would have made the cessation of life support decisions in advance. Whether the contract was with an insurer or CMS, you would have made a decision and accepted accountability for the health and life decisions from that point forward. Then providers would be obligated to follow your directives. These decisions would also bind your heirs; if they were to file any legal action against the providers and/or the insurer in violation of this contract, all monies paid as health benefits by the insurer would be due and payable by the estate and heirs of the insured. I believe this strategy would preclude the large number of legal cases taken on contingency by those lawyers who anticipate an out-of-court settlement, since the suing party would be at risk for the benefits received to date. This strategy might also provide the proper platform for building a portable health benefits plan, as long as the advance directives do not change because they would be the variables that would alter the original risk pool for the beneficiary.

I’m certain that legal experts will find flaws in this concept, and since I am not qualified in that area, I make no claims for the thoroughness of the legal arguments. However, if each of us is unwilling to accept accountability for our health and end-of life decisions, then we will be doomed to hear the same rhetoric from now until someone else makes the end-of-life decision for us.