Peter Ubel

Here is a link to an Op-Ed I wrote with two colleagues at Duke, in which we provide a novel explanation for why so many Americans hate Obamacare.

Check out my recent webcast interview with Duke University “Office Hours”:

George Loewenstein and I have an Op-Ed in the New York Times today.  Check it out, and feel free to add your comments.

Taxes are inevitable, or so they say. How much we should tax our citizenry, however, is debatable. Tea party members think we tax too much, and many liberals think we don’t tax quite enough.

I’m not going to take a position on the overall tax burden right now. Instead, I’ll point out two things I hope any reasonable citizen would agree upon:

1. Taxes shouldn’t be nonexistent. The government does have some legitimate functions after all, and these functions require money.

2. Smart taxes are better than stupid ones.

So what would ever make a tax “smart”? Answer: If that tax better aligns the price of those goods with the true social costs of those same goods.

Consider how much a can of Coke really costs. To the consumer, Coke is a cheap source of empty calories. (Full disclosure — I love a cold Coke at lunch!) But over the past few decades, the cost per calorie of drinks like Coke have plunged almost 40%, after adjusting for inflation. Coke is not only delicious. It’s cheap!

Cheap for consumers, that is. But not for society as a whole, because the price of Coke doesn’t reflect the cost of medical care associated with our nation’s obesity epidemic, an epidemic fueled by the low cost of sugary beverages. Nor does it reflect the cost of diabetes care, of cardiology interventions, of joint replacements… of the many medical treatments that have grown in frequency in an attempt to counter the health consequences of our expanding waistlines.

Taxing sugary beverages is smart policy.

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Common wisdom ain’t always that wise.

The pundits have concluded that Obama made a big mistake by focusing on health care reform this past year, when he should have focused on the economy. Politically speaking, the pundits are correct. Obama has appeared to be ignoring the economy at the expense of health care reform, and his popularity has consequently plummeted.

But Obama is right to have stuck by his desire to reform health care. Sometimes the good of the country is more important than this year’s approval ratings. And here are 7 reasons why Obama was correct to focus on health care reform this year, and why we can only hope that his efforts will come to fruition soon.

1. The federal government can’t do very much to change the course of recessions.

If stocks are overvalued, the stock market will drop. If houses are overpriced, the housing market will plummet. The government cannot change these realities. The best it can do is to soften the economic blows thrown at us by the recession.

2. The Obama administration did take aggressive steps to attack the recession.

While the government cannot stop recessions from happening, it can go into deficit spending to minimize the depth of the recession. That’s what Obama did. Paul Krugman wished the Obama administration had spent more money. Members of the Tea Party wish he’d spent less. Looks to me like he got about as much spending out of Congress as he could have at the time, given the circumstances.

3. The recession is going to end sometime soon — hopefully — and then we’re going to have to look at how we can minimize the depth of the next recession.

Having pushed a stimulus package through Congress in the opening months of his administration, Obama rightly turned his attention to future threats to our economy.

4. The biggest long-term threat to our economy is our health care system.

If we don’t reform health care, our future will be disastrous.

5. If health care costs continue to rise, the middle class will move toward poverty.

Do the math. If more of our money goes toward health care, our wages will decline, our taxes will rise, and our employers will have a harder time offering us any health care benefits. This will lead to economic disaster, for all those middle-class Americans who are struggling right now to make fiscal ends meet.

6. The health insurance industry can’t solve this problem on its own.

Health insurance companies are making great profits, despite rising health-care costs. Their primary goal is not to reduce how much money people spend on health care. If we want to control health care costs, we need the government to use its clout to negotiate better prices for the healthcare industry.

7. If we don’t reform health care now, we won’t be able to touch this topic for another decade.

And we can’t afford to do that. Ten more years of rising costs, of people losing their insurance, of stagnating wages, of Medicare expenditures squeezing federal budgets, of Medicaid expenditures squeezing state budgets… and the American economy will be headed toward long-term decline.

Obama and his team have made plenty of political mistakes. Their public relations efforts have not fared well against Fox news, et al. But under Obama’s leadership, the administration is staying the course in health care reform — looking for enough votes to pass some kind of bill that will move our country in the right direction.

I desperately hope that the administration succeeds.

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See a nice TV news segment from Grand Rapids Michigan last night (March 8th), that followed up on a symposium on health care rationing, where Norm Daniels (one of my heroes–a philosopher from Harvard) and I address the need to discuss how to set appropriate limits to contain health care costs. Click on my picture to link to the colloquy coverage.

They take our money, and hand it over to hospitals and doctors, while keeping a good portion for themselves. What a waste, huh?

Well, yes and no. To see a really illuminating discussion of health insurance companies, and what they really do, see this blog http://michaelbrownmd.blogspot.com/2010/02/health-insurance-does-not-earn-its.html by Michael Brown– the Chief Information Officer at Harvard University Health Services. Brown shows that, in our current health care “system” (my quotes), insurance companies play a crucial role of negotiating prices with health care providers.

Of course, ideally we wouldn’t need a middle man to control prices–but then again, U.S. law forbids Medicare from even considering costs when making decisions about what services to offer to enrollees.

More on this topic later, but I’m back on hospital service now, and I’ll be busy taking care of patients.

It is pothole season in Michigan, with roads crumbling under the pressure of winter cold. Then again, with the condition of our state’s dismal economy, pothole season is becoming a year-round phenomenon here in the Great Lake State. Michigan’s government can no longer afford to fix roads like it used to, and the same goes for bridges, water mains and other infrastructure. And don’t even get me going on budget cuts to our public education system.

While Michigan’s auto-based economy is the main cause of our fiscal distress, physician that I am, I cannot help but see MRIs lurking at the bottom of the sports-car-sized pot holes that litter the roads on my daily commute. An MRI costs a few thousand dollars a pop, you see, and we doctors order such tests almost unthinkingly. Back bothering you? Shoulder pain lasting more than a week? And that blip on your liver enzymes? We need to make sure nothing terrible is going on. Time for an MRI!

Our willy-nilly use of MRIs occurs in part because we doctors don’t pay for these tests. In fact some of us (but not me!) actually make money by ordering these tests.

The same goes for medical procedures. A primary care physician like me makes a token amount of money during a routine (and frequently time consuming) annual checkup. But if we can bring that same patient back for a skin biopsy, that ten-minute visit smells to me like a college tuition payment!

So we physicians order tests and procedures, and other folks pay — sometimes insurance companies, sometimes patients themselves, and increasingly often, the government through Medicare or Medicaid. Eventually, of course, we all pay for these tests and procedures. Our crazy health care system is basically a huge transfer of income from the general public to people in the health care industry.

States like Michigan are facing enormous budget pressures in the face of the recession. But even before this recession hit, many states were starting to buckle under the strain of Medicaid inflation, leaving huge SUV-sized holes in their annual budgets.

We need healthcare reform because we need to control health care costs, or we will end up with an infrastructure that would embarrass a third world dictator.

And the Democratic party needs to tell us more about how its reform efforts, should they succeed in the face of the Massachusetts senate debacle, will control costs.

And the Republicans need to stop whining about healthcare rationing, if they actually care about the future of this country.

We are facing a serious challenge. If politicians don’t meet this challenge, we will all have lots more to worry about than potholes.

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Is a test that costs $800,000 to add one year of life worthwhile? In one survey, most physicians said yes-evidence that controlling costs will require overcoming very powerful, and irrational, psychological forces.

Imagine for a moment that you are in charge of the U.S. health care system, and must decide whether to pay for a new cervical cancer screening test, let’s call it PapFinder. For every $800,000 spent on PapFinder, health care providers will add one year of life to the population of women receiving this test. Given this information, would you choose to add PapFinder to the standard diagnostic arsenal?

About a decade ago, I presented a national sample of U.S. physicians with a question like this, and almost of them stated that PapFinder (a hypothetical test, by the way) was too expensive, bringing benefits so rarely that they would not offer this test to their own patients. The desire to prevent and treat cancer, it seems, had limits.

Or did it? I presented a random sample of these physicians with a different choice. I asked them whether they would offer annual pap smears (well-established tests in routine clinical use) if they learned that the tests cost more than $800,000 to save one year of life – a figure that came directly from the medical literature. Given this information, physicians were nearly unanimous in saying they would offer their patients this test.

Same cost, same infrequent benefit, but very different attitudes. What’s going on here? And what do the results of this decade-old study tell us about the recent hubbub around mammography screening and, indeed, about the ongoing health care reform debates?

For starters, health care economists are nearly unanimous in holding that interventions that cost more than $800,000 per life year are not a wise use of resources. (Most endorse cost-effectiveness thresholds closer to $100,000.) That means that doctors’ attitudes toward PapFinder appeared quite rational: lots of money, little benefit … not a smart idea.

Why, then, did doctors remain enthusiastic about pap smears even after learning about the $800,000 figure? As a physician working in behavioral economics, I am quite familiar with the irrational forces influencing people’s attitudes towards health care interventions. In this case, a lot of such forces were at work. 

For starters, physicians were influenced by loss aversion. People don’t like having things taken away from them. Doctors were used to providing annual pap smears to their patients, and they knew that their patients would be upset if they no longer offered such tests. We see parallels in current mammography debates, with many women in their 40s responding anxiously to the idea of no longer receiving annual mammograms.

Second was the belief that earlier detection of cancers is always better than later detection, a belief that has also influenced the mammography controversy. This idea is not supported in the medical literature.

In fact, medical science has discovered that some early cancers pose little threat to people’s lives, with the cancers growing so slowly that any intervention to thwart them would cause more harm than benefit. We’ve even learned that some cancers can regress over time. But these cold hard medical facts stand little chance against the hot passions of cancer psychology: doctors and lay people, understandably frightened by the thought of cancer, cannot believe that early detection could be anything but good.

Third was the limited human attention span. When we contemplate important decisions, it is difficult to consider all of the relevant factors, and thus we focus our attention on the most obvious ones. Deciding whether to live in Michigan or California, for instance, we think about the weather while ignoring other important differences between these two states – differences in daily commuting, for example, a factor that has been shown to have far more impact on people’s lives than climate. 

Similarly, when people make decisions about cancer screening, they focus most of their attention on cancer – if the test detects cancer, they conclude it must therefore be worthwhile. People don’t pay as much attention to other aspects of the test. If it mistakenly characterizes a benign lesion as cancer, for example, it will cause undue anxiety or even lead to unnecessarily and potentially harmful treatments. But we don’t give such factors much weight when contemplating whether to utilize the tests.

Everyone who cares about this country should care about finding ways to reduce health care costs. The recent debates over mammograms reveal just how difficult it will be to achieve this goal, for controlling costs will require us to overcome very powerful psychological forces. The biggest impediment to successful reform of our health care system, thus, is not blue dog democrats or obstinate republicans. It is human nature.

To read the original post in the Hastings Center’s Health Care Cost Monitor, click HERE.

In an effort to be the first president since Lyndon Johnson to succeed in reforming our nation’s health care system, President Obama is exhibiting honorable flexibility. Taxing health care benefits for employees? He was against it when running for office, but he is considering it now that the federal budget deficit is growing so rapidly. A new public insurance plan? He promised this spring that it would be a central part of his health care reform efforts, but now he is willing to put it aside in pursuit of more important goals.

And what are those more important goals? First and foremost, the President wants to expand people’s access to health insurance, so that their medical care will no longer be threatened by job loss or by what an insurance company determines to be a “pre-existing condition;” and second, he is committed to controlling health care costs, aware that our future fiscal solvency depends on slowing the growth of Medicare and Medicaid.

The time may come for Obama to shed one of these two laudable goals. Indeed, if blue dog democrats begin turning away from health care reform because of budget concerns, Obama will need to give up his immediate plans to expand access to health insurance, and focus his efforts, instead, on showing the American people that he knows how to control health care costs.

I recognize the moral horror that my proposal will create among those people who, like me, are outraged that a wealthy country like ours allows 50 million people to go without health care insurance. Obama is correct, in fact, to be exhorting Americans to recognize our moral duty to offer basic health care coverage to all our citizens.

But with ballooning budget deficits and an economy still on the brink of disaster, it may not be politically palatable to expand health insurance coverage right now. Most conservatives, and even many moderates, are understandably worried that the government will do the easy job of spending money it doesn’t have, while ignoring the more difficult job of making our health care system more efficient. After all, Obama has not really laid out a clear plan for how he will control health care costs. Instead, he is simply asking people to trust him: somehow, with a teaspoon of electronic medical records and a few milligrams of “comparative effectiveness research,” he will cure the health system’s inefficiencies and make our financial problems go away.

I suspect that Obama already realizes that he cannot achieve both of his goals — expanding access and controlling costs — in the initial stages of his reform efforts. Instead, his administration appears to be taking a Massachusetts-style approach to health care reform: expand coverage first and then, after costs spiral further out of control, take on the difficult job of ratcheting down health care costs. In this approach, expanded coverage is the horse that pulls health care reform along what will no doubt be a long and winding road.

This access first approach is morally laudable and may even be politically wise. But politics moves quickly — who, after all, would have predicted three months ago that “death panels” would play such a large role in public discourse about health care reform?

If fiscal concerns threaten to impede Obama’s health plan, he will need to change direction. At that point, the best way to expand health care coverage to all Americans will be for Obama to focus, over the next few years, on proving to Americans that he can control health care costs — indeed, that he has a legitimate plan for controlling government expenditures more broadly. With this proof established, Obama will then be able to propose reforms that will expand health insurance coverage, and the American public will have confidence that these reforms would not break the bank.

With so many Americans worried about rising taxes and runaway budget deficits, Obama should consider putting the cart of cost control in front of the proverbial horse. If Obama can prove to us that he can rein in Medicare costs, the American public will gladly follow him further down the path of health care reform.

Peter A. Ubel M.D. is author of Free Market Madness: Why Human Nature Is at Odds with Economics — and Why It Matters (Harvard Business Press, 2009), and George Dock Collegiate Professor of Medicine at the University of Michigan.

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