The Hsaio-Gruber Health Care Mega-System

by John McClaughry

John McClaughry

On January 19 Prof. William Hsiao of the Harvard School of Public Health unveiled his recommendations for this year’s version of health care reform in Vermont. The 2010 legislature defined and paid for Dr. Hsiao’s work to support the final all-out push to make Vermont the first American state ever to install a taxpayer-financed single payer system.

Before plunging into the Hsaio report itself, it’s worth looking at the track record of the report’s principal authors, to understand how they approach health care reform issues.

Dr. Hsiao rose to fame for devising the Resource-Based Relative Value Scale (RBRVS) to control Medicare payments to physicians, adopted by Congress in 1991.

Writes Pacific Research Institute health policy expert John R. Graham, “[Hsiao] put together a large team that interviewed thousands of physicians from almost two dozen specialties. They analyzed what was involved in everything from 45 minutes of psychotherapy for a patient with panic attacks to a hysterectomy for a woman with cervical cancer. They determined that the hysterectomy takes about twice as much time as the psychotherapy session, 3.8 times as much mental effort, 4.47 times as much technical skill and physical effort, and 4.24 times as much risk. The total calculation: 4.99 times as much work. Eventually, Hsiao and his team arrived at a relative value for every single thing doctors do.”

“Today,” Graham continues, “Medicare’s RBRVS and Sustainable Growth Rate rules for fixing prices are so flawed that the Congress that consistently champions this price-setting process is annually engaged in a routine effort to change, modify, or even stop the progress of its own pricing machinery before it inflicts damage on the public and the medical profession.”

This annual exercise is called “the doc fix”. It played an important part of last year’s debate over ObamaCare (because the Democratic leadership took it out of the ObamaCare legislation, in a desperate attempt to keep that legislation’s ten year price tag under $1 trillion.)

Of the RBRVS, Dr. Michael Bond, a nationally known health economist at Cleveland State University, says RBRVS “was a essentially a point system based on ‘effort’ to determine what various procedures were ‘worth’. These guys at the Harvard School of Public Health have done more damage in medicine than you can shake a stick at. They are smart people who have no clue about economic principles.”

The other high profile author of the Hsaio report is Dr. Jonathan Gruber, a nationally known health economist at MIT. His speakers’ bureau bio touts him as “instrumental in establishing the current health care reform program in Massachusetts, one of the most ambitious and successful in American history.” “Romneycare”, adopted in 2006, was undoubtedly ambitious, but successful is another matter.

Romneycare attacked the problem of “the uninsured” by fining them and their employers for their not being insured. It also subsidized premiums to make it possible for the uninsured to avoid paying the fine. Romneycare costs have ballooned far beyond 2006 projections. The “solution” of its administrators is to raise new taxes, increase fines on employers, and impose price controls on insurance premiums, which would force the insurers to further cut their reimbursements to hospitals and doctors.

According to the Massachusetts Medical Society, the flood of new patients and the government’s deepening underpayment for treating them has produced a “critical shortage of primary care physicians”. Patients who, if they can find doctors, can’t wait weeks to see them, head for the emergency rooms.

Dr. Gruber might want to think again about taking credit for having been a “key architect” in devising this program.

The central concept in the Hsaio report’s preferred Option 3 is the urgent need for a comprehensive, unified, enforceable, inescapable, tax-financed System to control every component of Vermont health care that a state government can realistically control.

Who will do the controlling? The Hsaio report declares that an “Independent Board”, not the government, will define the benefit packages and provider payments, and thus set the budget that will in turn determine the payroll tax rates.

This all-powerful Board will include “all the major payers.” And how do these “stakeholders” gain their seats on the Board that will control the System that will control everyone’s health care? Dr. Hsaio and Dr. Gruber don’t say, but it surely won’t be through a lottery.

Imposing an all-powerful and all-embracing System to regulate the lives and behavior of a free people never produces happy results. Any Hsaio-Gruber-type health care mega-System will inevitably lead to coercive mandates, ballooning costs, increasing taxes, bureaucratic outrages, shabby facilities, disgruntled providers, long waiting lines, lower quality care, special interest nest-feathering, and destructive wage and price controls. Wait and see.

John McClaughry is vice president of the Ethan Allen Institute.