Washington’s View of the World

Remember that Saul Steinberg cover for the New Yorker that showed Manhattan’s view of America – just a vague grouping of place names between the Hudson River and the Pacific Ocean?

On Sunday we got a glimpse of how the Washington Post views the sprawling diversity of America. In an article on Cobb Island, a waterfront community about 90 minutes from Washington, the Post commented:

Cobb Island has always attracted a variety of people, from government workers to politicians.

Economists across the Political Spectrum. Not.

Robert Reich joins President Obama and Vice President Biden in claiming that “economic advisers across the political spectrum support Obama’s plan.”

Now, President Obama and Vice President Biden probably aren’t reading whole newspapers these days, and like their predecessors they don’t talk much to people who don’t agree with them. So they may have genuinely believed that “Economists from across the political spectrum agree” on the need for a massive stimulus program.

But Reich doesn’t have that excuse. He’s a professor at Berkeley. He has full access to newspapers, email, the Internet, and the help of grad students – and so he cannot be unaware that lots of leading economists oppose the Obama plan and similar massive spending programs. But then, as I’ve noted before, he’s often been at wide variance with the facts. This time, knowing that his claim might be doubted, he cited the one conservative economist who has famously endorsed a large stimulus – Martin Feldstein of Harvard – but didn’t quite acknowledge that Feldstein has called Obama’s plan “An $800 Billion Mistake.”

Stimulus Divides 2012 GOP Contenders

It is never too early to start talking about the next presidential election, and for many of those expected to contend for the GOP nomination, the proposed economic stimulus package provides an early test of whether they will be Bush-style big-government conservatives or whether they will champion limited government and economic freedom. So far, the record is decidedly mixed.

In the “give me my pork” camp are governors Sarah Palin, Charlie Crist, and Tim Pawlenty. Palin, darling of many “movement” conservatives came all the way to Washington to lobby for the bill. Crist worked the phones, unsuccessfully trying to convince Republican House members from Florida to support the bill. Pawlenty admits some concern over the bill’s impact on the federal deficit, but says, governors “are entitled to ask for our share of the money.”

On the other side, former Massachusetts governor Mitt Romney says that he opposes the bill. Louisiana governor Bobby Jindal also opposes the stimulus bill, though he admits he may accept the money if it passes. Taking the strongest stand against the bill is South Carolina governor Mark Sanford, who not only opposes the bill but says he probably would not accept any funds for his state. “It’s incumbent on me as one of the nation’s governors to speak out against what I believe is ultimately incredibly harmful to the economy, to taxpayers and to the worth of the U.S. dollar,” Sanford said.

It’s a long way to 2012, of course, but it looks like Republican voters will have some clear choices.

Naïveté, Intégrité, Fraternité

HHS secretary-nominee and former U.S. Senate majority leader Tom Daschle owed the IRS more than $140,000 in back taxes and interest.  One contributing factor: a spokeswoman says Daschle “naively” believed that the Cadillac and driver provided gratis by a business partner was “nothing more than a generous offer from a friend.”

A former Daschle aide reassures us, “He’s the gold standard for integrity in government.”  (Precisely the problem, isn’t it?)

The Washington Post reports that none of this is likely to derail Daschle’s confirmation by his former Senate colleagues.  “Senators also cited their personal knowledge of Daschle in justifying their willingness to dismiss the tax issue,” writes the Post. “He and his wife, Linda Hall Daschle, donated over the past two years to at least 14 senators who will be tasked with voting on his confirmation.”

Only the Little People Pay Taxes

Tom Daschle has joined Timothy Geithner in the not-so-exclusive club of Obama Cabinet appointees who evaded tens of thousands of dollars in federal taxes until they were vetted for their Cabinet nominations.

It’s too bad Leona Helmsley can’t be nominated as Commerce Secretary.

I sympathize with anybody trying to hold down his tax bill. Government is too big and too expensive, few of us feel we get our money’s worth from our taxes, and we all have better uses for our money than bridges to nowhere and free condoms.  But honestly, shouldn’t people who want to increase taxes on the rest of us – like Daschle, Geithner, Eleanor Holmes Norton, Chairman Charles Rangel, Al Franken, Governor David Paterson’s top aide, Democratic National Convention staffers, Al Sharpton, and so on – pay their own taxes?

Coordinated Care: An Exchange with Greg Scandlen

Last month, Cato released a paper titled, “Does the Doctor Need a Boss?“ Our friend Greg Scandlen called it “one of the most offensive papers I’ve ever read.” Scandlen is one of the leading lights of the consumer-directed health care movement. He is a senior fellow at the Heartland Institute, founder and director of Consumers for Health Care Choices, a former Cato health policy scholar, and has written for health policy journals such as Health Services Research and Health Affairs. I invited Scandlen to exchange thoughts on the issues raised. Here I set up the issues and offer my first response.

In “Does the Doctor Need a Boss?”, Arnold Kling and I argue that “the traditional model of medical delivery, in which the doctor is trained, respected, and compensated as an independent craftsman, is anachronistic” given the growing complexities of medical care:

Patients with multiple diagnoses require someone who can organize the efforts of multiple medical professionals. It is not unreasonable to imagine that delivering health care effectively, particularly for complex patients, could require a corporate model of organization.

Kling discusses our paper in a recent podcast.

Scandlen disagrees. In the latest issue of his Consumer Power Report newsletter, Scandlen addresses our paper under the title, “Cato Goes Off Track.” Here are Scandlen’s comments in full:

Boy, I hate it when this happens.

Two gentlemen I admire have published one of the most offensive papers I’ve ever read. Arnold Kling and Michael Cannon just released a paper, “Does the Doctor Need a Boss?” in which they conclude that independent physicians may be okay for treating simple things, but when it comes to anything complicated they ought to be working for a corporation. YIKES!

In coming to this conclusion, they cite a host of discredited work such as Alain Enthoven and the Institute of Medicine’s “To Err is Human.” But they seem driven by the personal experience of Mr. Kling, whose 88-year-old father was poorly treated in a hospital. One might think the lesson here would be less corporatization, not more, since a hospital is nothing but a corporate entity.

The paper says, “During his father’s illness, Arnold observed firsthand the lack of continuity and coordination of care, which squandered the sincere efforts of many individual doctors and nurses.” I don’t doubt that is true, and repeated thousands of times a day. But is the answer adding another corporate bureaucrat … or turning to someone like a concierge physician who knows the patient, knows the family, and is able to advocate for the patient at every level of care?

The gentlemen also fall into the old trap of blaming the problem on fee-for-service medicine when it should be well-established by now that the problem is not FFS but third-party payment (speaking of corporate medicine). Obviously this level of expense required insurance coverage, but it did not require third-party payment. Providers will always respond to their paymaster. They get into the habit of tailoring what they do to please whoever is paying the bill. Third-party payers have rules and procedures that must be followed and providers learn to perform in ways that maximize their pay.

What failed here was not the doctors and nurses, but the fact that Mr. Kling was crushed between corporate entities (the hospitals and the health plan) that were more interested in their bottom lines than in the well being of the patient.

I won’t belabor this. It underscores the emotional side of health care and how personal experience can color our thinking. I don’t blame Mr. Kling for being unhappy with the system. But to conclude that competent physicians created this system and are to blame for it boggles my mind. Read the paper and draw your own conclusions.

Though Kling tells a very personal story, the paper was not driven by anecdote or emotion — in fact, quite the opposite. ”Does the Doctor Need a Boss?“ came about because I read an article Kling wrote about his father’s illness, and I noticed that Kling’s anecdote matched the data. The elder Kling’s experience personalized many problems that the health-services literature has addressed ad nauseam, but often facelessly: fragmented care, poor quality, and possibly even medical errors. I asked Kling to elaborate on his article, and that led to our collaboration.

Scandlen suggests that the solution to those problems is “less corporatization, not more, since a hospital is nothing but a corporate entity.” In one sense, that is correct: hospitals are owned by corporations. But in another sense, it is flat wrong: the multiple physicians who treat a complex hospital patient are not part of the corporation. They are typically independent contractors on whom the hospitals rely for revenue. They typically have significant autonomy and their own idiosyncratic practice styles. Our paper contains a lovely quote from Jeff Goldsmith that describes just how not incorporated the two groups are. As we analogize in our paper, it is as if the bricklayers, plumbers, and electricians building your house can largely do as they please, without having to take orders from the general contractor — and no one is responsible for the final product.

We should expect that, nevertheless, those independent, autonomous, idiosyncratic subcontractors would at least try to coordinate their activities. But consider the heavy favoritism that Medicare and other government interventions show toward fee-for-service payment, where providers receive additional revenue for each additional service. When those subcontractors fail to coordinate care, FFS payment systems reward them. Poorly coordinated care leads to patients needing more services (more antibiotics, more doctor visits, more hospital admissions, etc.). Low-quality care thus results in more revenue. It’s not that doctors and hospitals consciously respond to that financial incentive by providing low-quality care. It’s that when docs try to coordinate care, FFS payment systems punish them. Coordinated care means fewer hospital admissions, fewer services, and (you guessed it) less revenue. The problem is not FFS payment itself, but the fact that government tips the scales in favor of FFS. As a result, we lose the benefits of open competition between different payment systems. If FFS providers had to worry about losing patients to health systems that use capitation/prepayment — which encourages coordinated care — then the threat of competition would create financial incentives that overwhelm the perversities of FFS payment.  (And competition from FFS providers would overwhelm the perverse incentives inherent in capitation/prepayment, such as the incentive to skimp on care.)

Despite Scandlen’s claim, Kling and I never laid the blame for this sad state of affairs on “competent physicians.” The physician lobby deserves its share of the blame for supporting corporate-practice-of-medicine and licensing laws that block competition by truly incorporated delivery systems. The physician lobby also deserves criticism for supporting government interventions that flood the health care sector with subsidies and favor fee-for-service payment. Yet we would never suggest that the physician lobby behaves as competent physicians would.

I doubt that Scandlen and we really disagree all that much about these things. I imagine we agree that fee-for-service, capitation/prepayment, and everything in between should have to compete without government favoring any one payment system over the others. Likewise, solo practitioners, HMOs, and everything in between should compete on a level playing field. And I suspect Scandlen would agree with our policy recommendations: that we should deregulate the medical profession, and let consumers control their health care dollars and choose their own health plan. 

And may the best delivery system win.