The Right Prescription

The Kennedy-Orszag $700 Billion Fix

How can Obama & Co. continue to insist that government-run health care will not lead to rationing and exploding health care costs?

By 7.22.09

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How can President Obama and leading Democrats continue to insist that government-run health care will not lead to rationing and exploding health care costs? The explanation to this delusional thinking rests in their belief that each year the American health care system spends $700 billion a year that does not improve outcomes.

It is this article of faith, based on nothing but a back of an envelope calculation by Obama budget director Peter Orszag, that allows leading health care lights such as Senator Ted Kennedy to claim in his recent Newsweek essay that a government run health plan is last best hope "to ensure that someday, when there is a cure for the disease I now have, no American who needs it will be denied it."

Every health care proposal -- including the one with his name on it -- forces up to 100 million Americans to give up the health care plan they have and enter a government run plan, whether it be Medicaid or the new plan in which doctors would be forced into accepting fees that are 30 percent lower.

Will such a system deliver the promise of a cure when you need it? Of course! Kennedy truly believes that only government can "move from a system that rewards doctors for the sheer volume of tests and treatments they prescribe to one that rewards quality and positive outcomes."

His example? "In Medicare today, 18 percent of patients discharged from a hospital are readmitted within 30 days -- at a cost of more than $15 billion in 2005. Most of these readmissions are unnecessary, but we don't reward hospitals and doctors for preventing them. By changing that, we'll save billions of dollars while improving the quality of care for patients."

Senator Kennedy seems sure it's easy to reduce useless admissions and truly believes that wherever people are seen or enrolled they will get the right kind of care. That's because Kennedy believe Orszag's assertion that "$700 billion a year in health care costs do not improve health outcomes. It occurs because we pay for more care rather than better care."

Orszag relies on the Dartmouth Atlas -- a map of Medicare hospital spending in the last two years of life that divides America into five regions ranging from the highest cost per person to the lowest. The Atlas purports to show that Medicare patients in the highest cost areas are no better off than those in lowest cost areas. So if patients in Salt Lake City with cancer cost less than patients in New York City and both die in two years, that means the care in Manhattan was a waste of money. See? From there you assume that more care anywhere wastes money. That's how Orszag came up with $700 billion. The Theory of Relativity it isn't.

The jump from hospital spending on Medicare patients to all health care spending is one leap of faith. The other is assuming patients haven't changed over the 20 years Dartmouth has been collecting data. In fact they have. Fewer people are entering hospitals. People with chronic illnesses are less likely to enter the hospital. Their procedures, if they have them, are done on an outpatient basis. Hence, the smaller percentage of people going into the hospital are increasingly much older, entering for riskier procedures, and sicker than the population as a whole. Yet, this group is Orszag's benchmark for eliminating care and costs across the entire system.

Those that are "sicker" include people like Ted Kennedy who are living longer with brain cancer and other serious illnesses. For instance, according National Cancer Institute estimates, someone Kennedy's age with a brain cancer has less than a 5 percent chance of living five years let alone one. But over a year ago he went through difficult surgery to remove his tumor and received Temodar and Avastin to shrink the remainder of the tumor not surgically removed. He may be a candidate for a new vaccine to beat back his cancer for good.

Yet, Medicare pays for none of those treatments. Soon it will not pay for readmissions related to the kind of surgery Kennedy received. Jack Wennberg, creator of the Dartmouth Atlas that Peter Orszag worships, calls readmissions for cancer patients such as the Senator "'rescue medicine' to people who are in advanced stages of diseases that can't be cured... the costs of such care are very high, both in dollars spent and in providing care that the majority of chronically-ill patients might not want, such as admissions to intensive care and being sent to specialist after specialist."

According to the "reward" system Kennedy proposes and Orszag would implement, neither Medicare nor a government run health system would pay for such care or future advances against cancer, Alzheimer's, and other illnesses. Kennedy's legislation would rob Americans first of choice, then of progress, and ultimately of victory against diseases like cancer, Alzheimer's, and stroke. Health care reform should accelerate innovation and promote choice. Instead, both will be strangled in a failed effort to control costs. In blessing this sordid exercise, Ted Kennedy will be remembered for breaking his promise to the American people.

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About the Author
Robert M. Goldberg is vice president of the Center for Medicine in the Public Interest and founder of Hands Off My H ealth, a grass roots health care empowerment network. His is new book, Tabloid Medicine: How the Internet is Being Used To Hijack Medical Science For Fear and Profit, was published last month by Kaplan.