Minor Thoughts from me to you

John Goodman finishes his analysis of complex systems. This time, he considers the policy implications of the fact that healthcare is a complex system.

• Complex Systems Cannot Be Managed from the Top, Down
• The Core Components of Complex Systems Cannot Be Copied
• Choosing Public Policies for Complex Systems
• Public Policy Lessons

Most people in health policy do not understand complex systems. They really don’t understand social science models either. As a result, when they advocate or enact public policies, they are almost always oblivious to the inevitability of unintended consequences. The idea that a policy based on good intentions could actually make things worse is beyond their comprehension.

Speaking as someone who works in healthcare: yup. Every time healthcare people get together in large numbers, I see the belief that they can figure out a master plan, using the power of good intentions to make everything better. (Usually, of course, without using any evil profits either.)

∞

If we ignore the fake prices that typify the American health care experience, it's clear that the U.S. uses fewer resources to deliver health care than any other developed nation.

The concept of opportunity cost allows us to see that if we don’t trust spending totals in the international accounts, there is another way to assess the cost of health care. We can count up the real resources being used. Other things equal, a country that has more doctors per capita, more hospital beds, etc., is devoting more of its real income to health care than one that uses fewer resources — regardless of its reported spending.

On this score, the United States looks really good. As the table below (from the latest OECD report) shows, the U.S. has fewer doctors, fewer physician visits, fewer hospital beds, fewer hospital stays and less time in the hospital than the OECD average. We’re not just a little bit lower. We are among the lowest in the developed world. In fact, about the only area where we “spend” more is on technology (MRI and CT scans, for example), as is reflected in the second table.

We might be able to see these lower costs if we could only get some real price competition into the market.

∞

After reading my last post on parenting and responsibility, two people raised the same objection: what about parents who don’t know about proper safety or about the resources that area available to them?

[T]here are many parents out there who are ignorant of the statistics on bike helmets, car seat, proper gun storage etc. AND many parents may not know that there are organizations to help needy families obtain safety items for free / reduced cost. If a doctor isn't allowed to ask questions, how can the information reach the parents who may need it?

It’s a fair question. How should society balance the desire to help people against the tendency to annoy people who don’t need help?

I think we need to start with respect. A pediatrician who questions parents, on their first visit, about their parenting skills risks appearing condescending and disrespectful. A pediatrician who claims that it’s his job to protect my children, implies that he doesn’t think it’s my job and that he doesn’t trust me to keep them safe.

I think the default assumption should be that parents are concerned about their children’s welfare and want to do what’s best. When a pediatrician starts by asking parents “do you do this?”, it communicates disrespect and distrust. From what I’ve read in recent articles, and from what pediatricians are defending, it seems that the normal approach is to grill parents with an invasive and potentially judgmental checklist:

• Do you own a pool? Is it kept covered and locked when not in use?
• Do you own a gun? If so, you shouldn’t. If you insist on doing so, here are the rules that you must follow so that your children don’t suffer from your obstinacy.
• Do your children ride bikes? Do they wear helmets all of the time or do you actually want them to die?

Now, I’m well aware that doctors aren’t quite that confrontational and insulting when they’re talking to parents. On the other hand, that’s often how parents perceive their questions. Especially when they’re asking those questions without first getting to know them and without first learning what their level of parenting competency is.

What should they do instead? Well, riffing off of a comment from a nurse I know, how about a general presentation of what they can do to help?

Hi, I’m Doctor Smith, your daughter’s pediatrician. I hear that your daughter has an ear infection today. We’ll make sure you get some general antibiotics to clear that up as quickly as possible. Since this is the first time we’ve met, I’d like to tell you a little about what we do here at the office. Obviously, we’re here to help you anytime your children get sick or have an injury.

We’ll also help you to keep your children up to date on vaccinations and immunizations—the immunization schedules can be confusing, so don’t hesitate to ask if you have any questions. We’re also available to answer any questions you might have about general parenting topics. If you’d like, we can help you with understanding childhood nutrition, recommended diets, learning styles or disabilities, or other topics related to childhood development.

Surprisingly, the biggest risks your children face today aren’t from sickness or disease but from accidents. Nearly 30% of all childhood fatalities result from either motor vehicle accidents or drownings. We’d love to help you learn about the best way to prevent these accidents. We can talk to you about car safety, pool safety, bike safety, firearm safety, etc.

More than just medicine, we want to do everything we can to help keep your children safe. Is there anything you’d like help with today? If not, feel free to call or email the office anytime you have a question, day or night.

Beyond that, the doctor’s office could have posters prominently displayed, advertising proper safety or offering to counsel parents about safety. They could have posters and handouts, advertising local organizations that offer free / low cost car seats or safety devices. They could offer instructional DVDs (or link to online videos) that teach parents about proper safety and available resources.

There are many ways that pediatricians could offer help and resources without taking responsibility away from parents or without defaulting to a confrontational style of questioning. My post about parenting and responsibility wasn’t saying that pediatricians can’t offer advice. Far from it. The responsible parent will seek out advice from many sources. But there’s a large difference between solicited and unsolicited advice.

If you wait to be asked, you’ll communicate that you respect your patients and trust them to be responsible. If you freely give unsolicited advice, you risk communicating that you look down on your patients and don’t trust them to be responsible without your help.

All Republicans have to do is hold the House, win the Presidency in 2012 and pick up 3 seats in the Senate — and not have any defections in the Senate while voting. Then it's a lead pipe cinch that ObamaCare will be repealed.

∞

Obamacare represents the biggest expansion of taxpayer-funded abortion in American history.

Thankfully John Boehner, our probable next Speaker of the House, is one of the most pro-life people in Washington. Boehner would like to pass a bill "to codify the Hyde amendment ... which would prohibit all taxpayer funding of abortion across the board." I hope he's successful.

Thanks Z, for the link to this video.

Richard Hannon, an executive for Blue Cross Blue Shield of Arizona, wrote an opinion editorial for the Wall Street Journal yesterday. In How Medicare Killed the Family Doctor he talked about how Medicare's costs exploded between 1965 (when it was created) and 1990. In 1966, the Medicare budget was a mere $3 billion. At that time, the House Ways and Means Committee estimated that the budget would grow to only $12 billion by 1990. Instead, it was $107 billion by 1990.

To fix the cost problem, Medicare in 1992 began using the "resource based relative value system" (RBRVS), a way of evaluating doctors based on factors such as education, effort and specialized training. But the system didn't consider factors such as outcomes, quality of service, severity or demand.

Today most insurance companies use the Medicare RBRVS because it is perceived as objective. As a result of RBRVS, specialists--especially those who perform a lot of procedures--do extremely well. Primary-care doctors do not.

In short, this is one of the major problems of a third-party payment system. Doctors aren't evaluated and paid by patients based on how good they are, how popular they are, or how effective they are. Instead, someone other than the patient judges a doctor's value and pays him according to a strict pay scale. Doctors have little to no ability to raise or lower prices or to set one price for a bundle of services.

This third party payment system sharply limits the way doctors can compete for patients or appeal to patients for business. It also sharply limits the ability of the patient to reward the doctor for good service or punish the doctor for poor service. When that kind of feedback is eliminated, is it any wonder that we spend more time waiting in clinic waiting rooms than we do actually seeing the doctor? Or that the doctor can often seem more interested in hustling us out the door instead of listening to our medical history?

Our doctors do not work for us, they work for the insurance companies. And that's a big problem with third-party payment for medical care.

Obamacare delenda est

Health Care Cost Increase Is Projected for New Law - NYTimes.com

A government analysis of the new health care law says it will not slow the overall growth of health spending because the expansion of insurance and services to 34 million people will offset cost reductions in Medicare and other programs.

The study, by the chief Medicare actuary, Richard S. Foster, provides a detailed, rigorous analysis of the law.

In signing the measure last month, President Obama said it would "bring down health care costs for families and businesses and governments."

But Mr. Foster said, "Overall national health expenditures under the health reform act would increase by a total of $311 billion," or nine-tenths of 1 percent, compared with the amounts that would otherwise be spent from 2010 to 2019.

This analysis isn't really a surprise to me. It seems pretty obvious that adding lots and lots to uninsured people to Medicare will increase costs by quite a bit. And, this picture, is actually a best case scenario. It assumes that politicians won't act like politicians.

Mr. Foster says the law will save Medicare more than $500 billion in the coming decade and will postpone exhaustion of the Medicare trust fund by 12 years, so it would run out of money in 2029, rather than 2017. In addition, he said, the reduction in the growth of Medicare will lead to lower premiums and co-payments for Medicare beneficiaries.

But, Mr. Foster said, these savings assume that the law will be carried out as written, and that may be an unrealistic assumption. The cuts, he said, "could become unsustainable" because they may drive some hospitals and nursing homes into the red, "possibly jeopardizing access to care for beneficiaries."

If you believe that politicians are actually going to cut payments to Medicare physicians and hospitals, then you obviously haven't been paying attention to the votes that have been taken in Washington over the last two decades. Congress loves to talk about cutting payments to Medicare. Then, every time the cuts come due, there's a bipartisan rush to postpone the cuts. Government spending is going up. Way up.

Obamacare delenda est

The government wants to run your healthcare. At the very least, they want more control over the companies that do run your healthcare. They want more control because they think the existing companies are incompetent, greedy, or both. But how is government doing with the healthcare they already run?

Not well.

FOXNews.com - VA Claims Office Takes SNAFU to a New Level

Last month, a decorated Gulf War hero received a letter from the Veterans Affairs Administration that said: We are working on your claim for menstrual disorder.

There was just one problem: The claim was submitted for fibromyalgia.

Make that two problems: The claim was submitted by Glenn McBride, a 40-year-old man from Roanoke, Va., who most definitely does not get menstrual cramps.

... Jim Strickland, a veterans advocate who writes a regular health care benefits column on VAWatchdog.org and has his own benefits-related Web site, said he wasn't at all surprised to learn of McBride's "menstrual" letter. "There are 57 regional offices and every one is operating in total chaos and in crisis," he said. "Full frontal mass chaos. Every day."

Contacted in the middle of the week, Strickland said he'd already received two e-mails from veterans who were mailed the records of other veterans. And he provided his most ridiculous example of a nonsensical claims letter, one that managed to try to collect debt and to discuss overpaying the same debt -- at the same time.

Strickland says the problem at the root of letters like McBride's is a bonus structure paid out to VA claims employees.

"The more work, the better the bonus is," he said. "It's strictly volume, not quality driven. There is no accountability whatsoever.

"The art of the Teflon Jacket has been perfected at our VA. They are really totally invulnerable to your criticism."

Let's keep the government out of healthcare. Obamacare delenda est.

Why We Need Generic Copies of Biologic Drugs - NYTimes.com

we continue to spend more on drugs -- in part because of the increasing use of so-called biologic medicines, which cost, on average, 22 times as much as ordinary drugs. In 2008, 28 percent of sales from the pharmaceutical industry's top 100 products came from biologics; by 2014, that share is expected to rise to 50 percent.

Biologic drugs can be more expensive to manufacture; they are grown inside living cells rather than put together chemically, as conventional drugs are. But this does not fully account for their high prices. Another important factor is that they very rarely face competition from generic copies.

Congress has an opportunity to change this by including in health care reform incentives for generic drug makers to compete in the biologics marketplace. But unfortunately, both the House and the Senate versions of health care reform contain provisions that would discourage the development and significantly delay the approval of generic biologics.

In general, I'm in favor of swinging the pendulum back towards less intellectual property protection. This sounds like a bad idea to me.

Mississippi governor Haley Barbour signed a bill last month requiring all patients to get a prescription before buying any medicine containing pseudoephedrine.

This is insane. This is seriously insane. This law -- and Federal laws requiring Sudafed to be kept behind the pharmacist's counter -- have done nothing to curtail access to meth. These laws have accomplished one thing and one thing only: meth production has been shifted from small labs to super high tech Mexican labs. Meth is still plentiful in the United States. But it's now fueling the growth of Mexican drug gangs and Mexican smugglers. If anything, the status quo ante was better in that it wasn't creating sophisticated cross-border smuggling operations.

Now, every Mississippi resident suffering from allergies, sinuses, or colds will have to go to a doctor before they're able to get any effective relief. Doctors' offices and emergency rooms will become more crowded and the entire state population will be vastly inconvenienced. All for a law that will have no practical effect whatsoever.

For the record, Governor Barbour will not be getting my vote, should he decide to run in the Republican presidential primaries.

"Let me be clear: if you like your doctor, you can keep him". Who hasn't heard the President make that promise by now? The problem is, it makes a huge assumption. That promise assumes that your doctor isn't going to retire as a result of healthcare reform.

The New England Journal of Medicine reports that more than 30% of physicians want to leave medical practice if the current healthcare reform plans are implemented.

In other news, nurses report that they spent 25% of their time doing "indirect patient care".

Nurses reported having to document patient care information in multiple locations, in addition to having to complete logs, checklists and other redundant paperwork that prevented them from having more time with their patients. Beyond these paperwork redundancies, nurses reported significant time being wasted trying to secure needed equipment and supplies.

When asked for solutions to these challenges, nurses recommended a combination of ancillary staff support, hospital-wide communications technology and reductions in redundant regulatory requirements.

Adding more bureaucracy, rules, and paperwork to the medical process is unlikely to make things better. Doctors may quit and nurses may quit. But, by all means, bring on the healthcare reform. If you like your doctor, the President has promised you can keep him. And the President is an honorable man.

Insurer's Gone Wild

"We allow the insurance industry to run wild in this country," President Obama declared on Monday. "We can't have a system that works better for the insurance companies than it does for the American people."

Yet Obama's plan to tame health insurers would boost their business, protect them from competition, and guarantee their profits, all at the expense of consumers and taxpayers. It is therefore not surprising that the insurance companies, while they object to the president's rhetoric and quibble over some of the details, are happy to be domesticated. Here are five ways in which Obama would help insurers while pretending to fight them.

There's nothing progressive about a plan that forces people to buy products from specific companies, under penalty of law. And there's nothing conservative about that plan either. It guarantees profits, eliminates risks, and rips off the American public. Is it any wonder that the American public opposes this plan 2-1?

Question for the President | Cato @ Liberty

The rationale for your proposed tax on high-cost health insurance plans is that it would encourage people to purchase less-comprehensive coverage and thereby reduce health care spending.

If that’s a good idea, then why is it bad when insurers raise premiums?

Obviously, it's because consistency is the hobgoblin of little minds. You small minded libertarian twerp. Duh: it's good when the government raises prices and it's bad when the market does. Any more questions?

"Let me be clear. If you like the health plan you have, you can keep it." President Obama has made this claim multiple times about healthcare reform. But it's simply not true. Let me offer one small example.

My wife and I enjoy our Flex Spending Account. We put in enough money each year to cover the various drugs we'll need to buy (both prescription and non-prescription), a new pair of glasses, and money to cover any other medical expenses we anticipate. Next year, I'm planning on putting in an extra $4000 for corrective laser eye surgery, so that I can finally stop wearing glasses. We like the plan we have.

Well, under the Senate healthcare bill, we'll no longer have that plan.

Both the House and Senate bills include a change in the definition of a “qualified medical expense” that impacts reimbursements and withdrawals under all types of health care accounts (i.e., FSAs, HRAs, HSAs, and Archer MSAs). As of 2011, expenses incurred for over-the-counter (OTC) medications and products will no longer be eligible for payment or reimbursement from any of the health care accounts. The House bill definition appears to apply to all OTC medications. However, the Senate bill would still allow OTC medicines obtained with a prescription and insulin to be reimbursed or paid tax-free from the health care accounts.

The most significant change likely to be enacted is an annual limit on contributions made by employees to flexible spending arrangements (FSAs) for health care. Both the House and Senate versions of health reform legislation would limit contributions to no more than $2,500 annually. The limit would be indexed to inflation for future years. Under the House bill, these changes would not take effect until 2013. In the Senate bill, these changes would take effect in 2011.

If the current "reform" bills, I wouldn't be able to buy OTC drugs -- Sudafed, Mucinex, ibuprofen, Tylenol -- tax free. If the "reform" bills pass, I wouldn't be able to save tax free for corrective eye surgery. I would no longer have the plan I like.

It's just one more broken promise from a president that's building quite a pile of them. Apparently, "yes we can" act just like any other politician.

At the request of BlueCross BlueShield, Oliver Wyman did a study of the Senate health care bill. Unsurprisingly, this study estimates that the bill will cost consumers quite a bit more than the CBO estimated.

John Goodman summarized the findings this way:

Premiums for individuals and families purchasing coverage on their own will go up 54%. Premiums for small businesses will go up 20%. Both numbers are over 5 years and both numbers exclude the impact of medical inflation.

I skimmed through the study and it looks pretty interesting. The study points out that reform won't work unless everyone is forced to purchase insurance.

The key implication of our analysis is simple: For these types of insurance reforms to be successful and sustainable, it is imperative to get broad participation. Young and healthy people need to be part of the insurance pool, and people cannot defer buying insurance until they are sick or at high risk. This is true no matter who is paying the premiums--individuals, employers, or the government.

The study then goes on to indicate that the current bill likely will allow people to free-ride, with bad results. They're basing their conclusions on several states' experiments with healthcare reform.

• New York and Vermont: Average premiums in the individual market today are about 60% higher than the national average

• New Jersey: Reform caused much higher premiums forcing thousands of individuals to drop coverage. The individual market decreased from 157,000 people in 1993 to 88,000 in 2007

• Maine: Individual market enrollment in Maine dropped from 90,000 to 41,000 between 1993 and 2007 following the state's reforms.

Even in Massachusetts, there is evidence that individuals are selectively jumping in and out of the market when they need healthcare. Data from health insurers in Massachusetts indicate that the number of peopl ein the individual market with coverage of less than 12 months has doubled post reform. These individuals have a significantly higher claims to premium ration when compared to those who had coverage for more than 12 months but let it lapse or those that are active.

Without strong penalties, similar types of behavior are likely to emerge in the reformed individual market--resulting in significantly higher premiums for the insured.

This is one of the reasons why I believe that the "reform" bills will just make American healthcare worse than it already is.

My father is a fan of Rush Limbaugh.

Also Sean Hannity, now that he's come on the scene.

And Hugh Hewitt, actually, and also Michael Medved. Come to think of it, Dennis Prager too, and...

Well.

You understand. Perhaps your heart is even going out to me. You are thinking of what my childhood must have been like.

Actually it wasn't bad at all - I'm certainly not about to form a support group - but it's true that by the tender age of 15 I had taken upon myself a daily reading list that included practically every major Republican name with a national opinion column - and I found them all conveniently collected for my daily perusal at Townhall.com, still so far as I know the preeminent clearinghouse on the internet for conservative messages (not that I am looking). Daily columns, cartoons, podcasts, pictures of Ann Coulter back when she was attractive, FOX stuff... It's all there.

Here's the thing: when I eventually went cold turkey on the extremely addictive website, it wasn't because I'd jumped over to the Libertarian position. I didn't do that until years later. No, I quit reading Townhall.com's columnists out of boredom.

I tried to explain this to my dad a couple months back, said: "Listen, maybe it's just that I have a Bachelor's in the English language, for which you paid by the way and I am grateful, or maybe it's that the similarities between all of those articles become more apparent to you when you read as many of them as I did on a daily basis. But they're all the same, Dad. There's little difference in style, still less in formula, and either one of us could very likely guess the opinion of any one of them on any given issue at any time. Really, it's hack work, stuff they pretty obviously churn out when they're not busy doing the real jobs that made their names. If they're not ghost-written they should be, because I could write them easy."

"I don't think you could do what they do," replied my father. No doubt he simply thought his son's ego was once again getting ahead of his actual abilities, which admittedly has been known to occur.

But y'know what? I can write them easy. And just as a writing exercise today before I get started on what I high-falutin'ly refer to as my "serious work", I churned out the following column in about an hour and a half. I plan to "forward" it to my father this week with a pseudonymous byline (at the moment I'm thinking "Christofer Fuller", being my first and last name in their respective German pronunciations, but that may be too obvious).

If you've read conservative columnists of the sort that fill Townhall.com then you know whether or not I successfully capture the right formula. I think it needs slight polishing but it otherwise feels authentic.

How Democrats Can Fix Our Health System

By Christofer Fuller

There’s a fairly easy way to tell whether someone’s offer to help you is truly altruistic or has ulterior motivations: just reject the offer and see if the wannabe do-gooder accepts your answer. For instance, if you’re a woman carrying groceries to your home and a man resolutely demands that he bring them inside for you, it’s time to shout for help.

The Democrats’ recent refusal to listen to the millions of Americans who have made it abundantly clear they want nothing to do with government-mandated health care clearly fails this test. President Obama, Sen. Harry Reid, and Rep. Nancy Pelosi aren’t just determined to present every American with the choice of purchasing health insurance; all of them want to fine you if you make the wrong decision, to the tune o’ $950 if you’re just you and up to $3,800 if you’ve got the the wife and kids. I ask you: what could be the rationale behind making this threat? If the Democratic Party can successfully lead all the horses of America to water, why force the ones that aren’t thirsty to drink?

And for that matter, why insist on American tax dollars funding this expensive program – especially with the national debt as high as it already is – when the Democratic Party itself already has the power to fix our whole system?

All the Democratic Party has to do is enter the health insurance market.

I'm serious. Look: According to our would-be rescuers, the problem is that greedy health insurers are jipping us, right? And also not accepting those of us with preexisting conditions, the jackals! Well then, let the Democratic Party establish its own non-profit insurer – let’s call it the Democratic Health Co., or D.H.C. - devoted to taking on anybody and everybody wanting coverage at rock-bottom rates.

This should be easy. After all, the Party already has a list of 72 million customers (their registered voters) who want the product, right? Most companies would shed blood for a database like that. One e-mail to everybody on the list and D.H.C. could rival BlueCross BlueShield right out of the starting gate.

As for getting the money to start this ball rolling? Are you kidding? This is the same organization that raised nearly a billion dollars for the last election. For a noble undertaking such as this they could probably raise more.

It would be great to see the D.H.C. really show all of our current money-grubbing insurance providers what it really means to care for others – and best of all, its entry into the market would force those sons of guns to compete by making the same offers! So everybody would end up with affordable health insurance, without having a plan pushed on them they don’t want! Wouldn’t that be great?

If the Democrats only cared enough about me to make a no-strings offer like that, shoot – I’d put ‘em into every local, state, and federal office for which I have a vote.

But they don’t, do they? If I say no, they threaten me.

HELP!

UPDATE: Oh, why not? I just submitted it to a couple of different conservative opinion editors. Total shot in the dark, I know (and if one of them wanted it, I'd have to take down this post in a hurry), but why waste ninety whole minutes of work?

UPDATE 2: My wife agreed that "Fuller" was too obvious, so I chose "Paulson" as my nom de guerre (my father's name is Paul). As the saying goes, "Let's see if he can taste the difference!"

UPDATE 3: Nope, he couldn't.

Jon R. Gabel writes in the New York Times today, saying that we shouldn't fear the cost of health care reform because the CBO has a long history of underestimating the savings from reforms.

In the early 1980s, Congress changed the way Medicare paid hospitals so that payments would no longer be based on costs incurred. ... The Congressional Budget Office predicted that, from 1983 to 1986, this change would slow Medicare hospital spending (which had been rising much faster than the rate of inflation) by $10 billion, and that by 1986 total spending would be $60 billion. Actual spending in 1986 was $49 billion. The savings in 1986 alone were as much as three years of estimated savings.

In the 1990s, the biggest change in Medicare came with the Balanced Budget Act of 1997, a compromise between a Republican-controlled Congress and a Democratic administration. ... The actual savings turned out to be 50 percent greater in 1998 and 113 percent greater in 1999 than the budget office forecast.

In the current decade, the major legislative change to the system was the Medicare Modernization Act of 2003, which added a prescription drug benefit. In assessing how much this new program would cost, the Congressional Budget Office assumed that prices would rise as patients demanded more drugs, and estimated that spending on the drug benefit would be $206 billion.

Actual spending was nearly 40 percent less than that.

I find it interesting though that his savings numbers only extend out a few years. For instance, he talks about how much was saved in 1986, from the 1983 bill, but doesn't talk about hospital spending trends since then. How much has the 1983 bill saved over the past 26 years? He talks about how much money was saved in 1998 and 1999 as a result of the Balanced Budget Act of 1997, but he doesn't talk about how much has been saved in the intervening 10 years. Did the trend continue?

Then I saw this graph, of Congressional health care underestimates. (Courtesy of John Goodman, courtesy of the Joint Economic Commitee. You can read the full report.)

It looks like health care costs are underestimated far more than they're overestimated.

Russ Roberts reminds me about the difference between health care and health insurance -- especially as it pertains to the elderly.

It's the wrong question because when you're 65 the problem isn't getting insurance. It's paying for health care. But the public debate has become so obsessed with health care insurance we've forgotten what the real issues are.

When you turn 65, the high cost of insurance isn't the problem. The problem is that you're old. A lot more things are going to go wrong. Yes insurance is going to be costly. But that's because so many things are more likely to break in your body. The high cost of insurance at that point is just a result of the problem. It's not the problem itself.

It's like saying that if you drive your car in a demolition derby, it's hard to get coverage for collision damage. No kidding.

What's needed isn't more insurance for the elderly but more savings. Providing savings through insurance is just a way to disguise what's really going on. It's not insurance, it's a subsidy for the savings that weren't done before or it's a wealth transfer from people with high incomes to people with low savings.

The Safeway grocery store chain created its own health plan for its employees. That's not unique -- many employers do that. Over the past four years, the average U.S. company has seen per-capita health care costs rise by 38%. Over the past four years, Safeway's per-capita health care costs have remained flat. That's a tremendous accomplishment and a great competitive advantage.

They did it by giving their employees responsibility over their own health and their own healthcare costs.

Safeway's plan capitalizes on two key insights gained in 2005. The first is that 70% of all health-care costs are the direct result of behavior. The second insight, which is well understood by the providers of health care, is that 74% of all costs are confined to four chronic conditions (cardiovascular disease, cancer, diabetes and obesity). Furthermore, 80% of cardiovascular disease and diabetes is preventable, 60% of cancers are preventable, and more than 90% of obesity is preventable.

... As with most employers, Safeway's employees pay a portion of their own health care through premiums, co-pays and deductibles. The big difference between Safeway and most employers is that we have pronounced differences in premiums that reflect each covered member's behaviors. Our plan utilizes a provision in the 1996 Health Insurance Portability and Accountability Act that permits employers to differentiate premiums based on behaviors. Currently we are focused on tobacco usage, healthy weight, blood pressure and cholesterol levels.

Safeway's Healthy Measures program is completely voluntary and currently covers 74% of the insured nonunion work force. Employees are tested for the four measures cited above and receive premium discounts off a "base level" premium for each test they pass. Data is collected by outside parties and not shared with company management. If they pass all four tests, annual premiums are reduced $780 for individuals and $1,560 for families. Should they fail any or all tests, they can be tested again in 12 months. If they pass or have made appropriate progress on something like obesity, the company provides a refund equal to the premium differences established at the beginning of the plan year.

Not only have these incentives saved employees a lot of money, they've also dramatically improved employee health.

Our obesity and smoking rates are roughly 70% of the national average and our health-care costs for four years have been held constant. When surveyed, 78% of our employees rated our plan good, very good or excellent.

Safeway would like to make their program even better. But the Federal government won't let them.

Today, we are constrained by current laws from increasing these incentives. We reward plan members $312 per year for not using tobacco, yet the annual cost of insuring a tobacco user is $1,400. Reform legislation needs to raise the federal legal limits so that incentives can better match the true incremental benefit of not engaging in these unhealthy behaviors. If these limits are appropriately increased, I am confident Safeway's per capita health-care costs will decline for at least another five years as our work force becomes healthier.

That's reform that won't cost taxpayers anything. That's reform that will actually "bend the cost curve" and reduce the cost of insurance. That's reform that will improve health not just finances.

Why isn't Washington working on that kind of reform? Why does Washington prevent insurance companies and employers from offering more of those incentives?

Shawn Tully, at Fortune, details 4 reasons why the current healthcare "reform" bill will do more to raise costs than lower them.

First, they will impose rich, standard packages of benefits, with low deductibles, for all Americans. Those policies, typically containing everything from in-vitro fertilization to mental health benefits, are usually far more expensive than anything most people would pay for with their own money.

Second, the plans would impose on a federal level the doctrine of community rating, in which all customers have to be offered the same rates, regardless of their health risks. Community rating forces young people to pay far more than their actual cost, a main reason for today's 46 million uninsured, while it subsidizes older patients.

Third, Obama would ban consumers from buying private insurance across state lines, perpetuating the price differences in today's fragmented market, instead of allowing all Americans to shop anywhere for the best deals.

Fourth, both plans propose what's known as a "public option," or a Medicare-style plan that would compete with the private offerings. The previous three proposals would make the private plans extremely expensive. With the same subsidies, the Medicare-style plan could put them out of business.

This plan will only lower the price of health care if by "price" you mean premiums and payments made directly to insurers or health care organizations. But if you include the necessary taxes and subsidies in your definition of "price", well, the price is going to go straight through the roof.