More on the "seen and the unseen" related to Obamacare

Bastiat's "seen and the unseen" and Thomas Sowell's "and then what" express the same basic notion. That notion is part of  what the economist Russ Robert calls the economic way of thinking.

See here for a commentary on one of the many "and then whats" of ACA.Part time workers are excluded from the employer mandate to provide insurance or face a fine.So the definition of Part time worker become important. The latest government edict on that stipulates than the cut point is 30 hours a week whereas previously the definition was less than 35 hours per week. So there is now a substantial financial incentive for employers to limit part time workers to less than 30 hours per week. The result is more part time employees will work less;more of the marvelous social justice that ACA is bringing to the middle class and those lower than that on the income spectrum and beating them over the head with it.

I quote from the above referenced article:

 "So there’s a balancing act: preserving jobs vs. providing insurance. The problem isn’t small. In September, 34 million workers, about a quarter of total workers, were part-time, reports the Bureau of Labor Statistics. But the bureau defines part time as less than 35 hours a week; Obamacare’s 30 hours a week was presumably adopted to expand insurance coverage. There are now 10 million workers averaging between 30 and 34 hours a week. To the bureau, they are part-time; under Obamacare, they’re full-time."

  There are advocates of ACA ,including some  in leadership role at major physician organizations, who seem unconcerned or at least silent about the unprecedented power given to federal bureaucrats (this time the IRS) to put words to paper and influence the lives of millions of people seeing only that we have moved further to universal coverage somehow believing the fairy tale than given millions more people Medicaid cards will translate into those people actually getting care.

Bastiat:

1.1

"In the economic sphere an act, a habit, an institution, a law produces not only one effect, but a series of effects. Of these effects, the first alone is immediate; it appears simultaneously with its cause; it is seen. The other effects emerge only subsequently; they are not seen; we are fortunate if we foresee them."

The corporate physician - he is not your father's doctor

Dr. Roy Poses has tirelessly written about the loss of professionalism in the medical profession.Here is the link for a recent commentary by Dr. Poses about the rise and likely consequences of the corporate physician.

There was a time when the AMA vigorously opposed the corporate practice of medicine and a number of states outlawed it.But now times have changed and few states have strong statutes limiting it.

Texas still has a residual- but significantly watered down- corporate practice of Medicine statute. See here for a history of the corporate practice of medicine idea with emphasis on the exceptions even in Texas which has one of the strongest prohibitions against the corporate practice.In Texas the most widely used exception is the situation in which a "non-profit health corporation"-so certified according to defined statutory criteria-can hire physicians.See here for a discussion of what is referred to as a 501(a) entity.The rational of the original opposition to corporate practice was simply that the business entity would control the doctor's practice and profit-not the patients best interest would be controlling.There is much to suggest that the same objection is valid today but few voices are heard in that regard.It should be noted that the "non-profit health corporations" included the "not for profit hospitals". As is obvious Non-profit as well as successful for profit hospitals annually have revenue greater than cost;otherwise they would not be able to keep expanding with more and more branch offices and purchasing physician practices let alone keep operating.

Recently,  I attended a seminar sponsored by the local medical society  labelled as eligible for CME credit under the ethics category of required annual CME credit in Texas.The topic was how to promote your medical practice and , of course, advertizing was one way recommended.

There are at least two negative consequences of physician being employed by hospitals or large medical aggregations ( that includes the latest incarnation, the highly touted ACO):

1)Increased costs to the patient

2)decreased quality of care

Poses give illustrative examples of how the same procedure can cost more when ordered by or performed by a physician working for the hospital   versus a free standing doctor not compensated by the hospital. Read Dr. Poses's posting referenced above for details about these negative consequences.

People respond to incentives.Physicians employed by health care corporation inevitably will face the situation in which the incentives generated by corporate goals and targets with which the docs will be tasked  will conflict with  the primary directive ( or what used to be the prime directive ) of a physician namely doing what is right for the individual patient.I am afraid that the physician's role as a patient advocate  in the corporate health care organization may go the way of the AMA's prohibition against physicians advertizing,a quaint historical artifact.Once the physician accepts the new ethics position that they are responsible for the health of the collective ( the ACO may be the collective ),then the greater good for the greatest number will just happen to coincide with the financial health of the organization.

Will ACA turn full time jobs into part time jobs?

See here for comments from economist Garrett Jones.

If Obamacare increases the cost of hiring full time employees versus part time workers it would seem that a as  shift to part timers would make sense for some employers.This may well apply to the hotel and restaurant sectors and at at least one large restaurant company is going that way.See here for what Red Lobster is planning. Who would have thought that people respond to incentives?

If something costs more ( like having full time employees ) people will do less of the something.Again Milton Friedman's two principles of economics are on target. To review: there is no free lunch and demand curves slope downward. Thomas Sowell said a good economist always asks "and then what" which is a similar thought to Bastiat's "seen and unseen". With Obamacare, the "and then whats" just keep on coming.

The locus of medical decisions will shift evenmore with Obamacare

Thomas Sowell said the following as a good summary of the second half of his book Knowledge and Decisions:

Even within democratic nations,the locus of decision making has drifted away from the individual,the family, and voluntary associations of various sorts and toward government.And within government, it has moved away from elected officials subject to voter feed-back, and toward more insulated governmental institutions, such as bureaucracies and the appointed judiciary.

Think about the role of IPAB, the binding pronouncements of USPSTF, and the astounding power of the Secretary of HHS under ACA.All of these and other aspects of Obamacare point to the observation that there has never been a larger shift in the locus of medical decision making in U.S. history.
 and in the absence of its repeal the likelihood of a shift back approaches zero.

If you give up Medicare Part A you loose your social security benefits-WTF

The headline is correct .See here for background on this agency ruling that makes the headline true.
See here for my earlier posting of what a federal judge considered a "mandatory entitlement".
 
The absurdity of this situation has been challenged in court and lost in the trial court and in the appeal but now efforts are underway to put the issue to the Supreme Court.

I have blogged about this before and thought the issue was settled but thanks to folks at Cato the fight goes on.

Electronic Health Records-follow the money

Promoted as a means of not only improving health care quality but saving money ( the often quoted $ 77.8  Billion that computers would save in medical care costs) the mandate and subsidy to physicians to adopt electronic health records (EHRs) did not randomly appear in the 787 pages of the 2009 stimulus bill also known as American Recovery and Reinvestment Act (ARRA)

 Application  of the  "follow the money rule" is interesting this regard.

See here for an article from the Washington Post that gives some interesting back story to the HITECH Act which had been waiting in the legislative wings for some time without much congressional support until the 2007-2008 recession and then its insertion into ARRA. Nothing like a good crisis to get stuff done. See here for another important commentary by InformaticsMD (aka Dr. Scot M. Silverstein) who writes regularly at the blog "Health Care Renewal " and writes tirelessly about the major problems with medical IT as it is being sold ( and mandated) to the medical profession.The  initial $36.5 billion for computerization of medical records is just the first of a gift that keeps  on giving to the IT industry. There will be a income stream as software will need updating as will hardware and system malfunctions will need continuing maintenance and a headache stream for the docs who bought in to this Trojan Horse.

HITECH provided subsidies and a very firm nudge to physicians to acquire computer systems  to make operational EHRs in their practices.Further a number of hoops have to be jumped through to receive further monetary rewards and as time goes on to avoid penalties.The term "meaningful use" refers to some of the hoops which in part obligate physicians to report on certain metrics that are allegedly measures of the quality of the care they provide to their patients but really are techniques to force savings.

fee for service in primary health care-what you get when you mess with prices

 In regard to consumer goods markets most economists accept the superiority of the market versus central planning.Almost all believe the invisible hand works to channel private interest into broad cooperation with gains from trade and from innovation.. (OK, Joe Stiglitz and Paul Krugman might not) and that the price mechanism can coordinate production and consumption and provide the feedback of profit and loss. In most of the consumer markets there is a fee for service or fee for a product arrangement (FFS). Paying the plumber,furnace repair man,car mechanic or barber on a per encounter fee are all routine transactions the propriety or desirability of which are seldom the subject of serious commentary. I realize that there also service contracts in some instances so that every encounter may not generate a separate charge.

  Yet the fee for service arrangement is the target for criticism in regard to health care ( mainly in regard to primary care) and often depicted as one of the reasons for escalating health care costs and decreasing quality.

Some argue that FFA cannot work in health care  because of the marked information asymmetry between physician and patient. But that cannot be a sufficient reason to wish to do away with FFS in medical care as there are many situations in a modern western economy where large information gaps exist. That became an issue probably as soon as property rights and trade allowed for the division of labor.  Getting advice regarding estate planning and tax avoidance is just one. Your furnace repairman tells you the something or other needs replacement and in doing so she knows a lot more about furnace anatomy and physiology than the home owner.

 It has been argued that since the physician is paid on a episode or encounter  based FFS that he will tend to do more than is necessary for good health outcomes because of his incentive to make more money. Certainly that is the direction that the cost vector points just as in a capitulated system the physician has an incentive to limit care to avoid financial loss. Is one method categorically better than the other?And the incentives for more financial gain argument would seem to apply  equally well to many other instances of market transactions.The incentive argument and the information asymmetry argument do not clearly distinguish medical care from other economic transactions based on FFS about which we hear no hue and cry or concerted campaigns for its abolition.

But wait, don't we see primary care docs rushing through a 12 minute patient counter to cram 5 patients into a hour?, Is not FFS in primary patient care rotten or worse and a major reason for deteriorating quality and increasing costs? Is it really FFS or is it a pretense of FFS or a poorly function remnant of a FFS system that once existed and worked pretty well.To be clear,the objection seems to be aimed at primary care FSF.

 Is there something different about FFS  in health care?Yes, FFS in health care and other consumer products or services FFS are as alike as a warm puppy and a hot dog.They sorta sound alike but there are not.

There are at least two reasons why the nominal fee for service (FFS) payment method in health care differs from FFS in most other  retail transactions regarding goods and services

  1) Much of the payment for health care services is with some one else's money2) There are price controls on the fees in the FFS in Medicare and Medicaid.

Much of health care expenditures is paid for by third party payers, either CMS which includes Medicare and Medicaid or health care insurers.In this circumstance patients are buying things with either someone's else's money or the perception that they are paying with someone else's money.

Milton Freedman explains how things are different when one is spending his own money than when he is spending with other people's money. This is such a obvious common sense observation that most of us have verified that nugget of conventional wisdom by observing multiple instances of that circumstance so that a formal econometric study would not be necessary.Just think of eating out on an expense account.See here for Freeman describing how this works.

 But such a formal study was done by MIT economist Amy Finkelstein who demonstrated that health care expenditures increased markedly after senior citizens in the US were enrolled in the Medicare program which in effect made the price the paid for their health care  much lower.When things are cheaper people buy more. Milton Freedman said that one of the two major principles of economics was that demand curves slope downward,an economist's way of saying that people tend to buy more stuff when it is cheaper..See here for my earlier comments on the Finkelstein paper.

This verification of the obvious was incredibly heralded by fellow economists as a major change in thinking about health care spending.Apparently previously no one had noticed that the elderly were spending more on health care now that they had to pay less nor that such a finding would be expected.The American Enterprise Institute economist,Joseph Antos said of the Finkelstein paper that it was path breaking.MIT's Johnathan Gruber,one of the architects of Romney care, said that the report changed the landscape of health care economics.

CMS's price controls came about as the number of medical goods and services that  increased over the last twenty or so  years ( more diagnostic tests,more medications,etc) met up with the increasing demand brought about mainly by the other people's money factor and reaching some tipping point in which the government moved into an effort to control costs.

 Economics 101 texts tell us that price ceilings create shortages,degradation of quality,wasted time and cost of waiting in lines and  mis-allocations of resources.

Advocates of a single payer and central planning in medical care sometimes conflate FFS and the market economy. One cannot deny that the current FFS situation in primary care medicine has much to be desired but it is because the market has been distorted by price controls and the fact that for a large segment of the patient population folks are paying for care with other people's money. Neither of those factors is likely to go away in this country any time soon..Actually both will likely increase.

But there can be a workaround.

Fortunately, at least for now, people can still operate to some degree outside of this system and contract with physicians for primary care with a retainer payment arrangement.Here there is no price control and the patient is not spending other people's money.

The fee for service in primary care medicine is not your father's or grandfather's fee for service.It is not the case that fee for service cannot work with medical care even now. Cases in point are cosmetic surgery and refractive eye surgery and more recently the growing market for retainer medicine.are example of FFSs in regard to medical care working out  reasonably well.

If price controls were placed on retainer medicine retainer fees we would see the same negatives that we see now with primary care with price controls. It's the price controls, stupid.

The economist Russ Roberts of the Hoover Institute said the following in his novel, The Price of Everything.A parable of  Possibility and Prosperity :

"Know that there is no free lunch. Play with prices and you will bring disorder.You will loose the benefits of the flow of knowledge and resources that  prices choreograph without a choreographer."

When you urge coercion by the government,don't be shocked if you get coerced as well

The following quote explains the title.See here for further details

All people have the moral obligation to care for those who are less fortunate. But replacing morality with legality is the first step in replacing church, religion and conscience with government, politics and majority vote. Coercing people to feed the poor simply substitutes moral poverty for material poverty.
The bishops dance with the devil when they invite government to use its coercive power on their behalf, and there’s no clearer example than the Affordable Care Act. They happily joined their moral authority to the government’s legal authority by supporting mandatory health insurance. They should not have been surprised when the government used its reinforced power to require Catholic institutions to pay for insurance plans that cover abortions and birth control.

Dancing with the devil is dangerous business.