On Friday, February 26, 2010, Gerald F. Seib, the Wall Street Journal reporter for the Capital Journal column, wrote an insightful column entitled “Parties’ Differences Are Clear – and That’s a Start.”  In his column, he explained clearly the philosophical differences between Republicans and Democrats on health insurance reform.

He stated that there were three fundamental differences:

• Democrats favor comprehensive reform and transformation; Republicans favor a more incremental approach.
• Democrats believe that access is the priority, rather than cost reduction; Republicans believe that if health care costs are reduced, the access problem will get solved.
• Democrats believe strongly that the government needs to set standards for health insurance and health care; Republicans believe that the market, particularly consumers, need to decide what they want for health insurance and health care.

Where do I stand?

• I am somewhere between the two parties on the comprehensiveness issue, although I tend to believe that comprehensive reform opportunities come along infrequently and we should take advantage of this one.  On this issue, I would agree with the Democratic philosophy.
• On the other hand, I do not believe we can tackle the insurance access issue without understanding why access has been a problem in the past. Runaway health care costs cannot be deferred until later.  Business and global competitiveness depend on addressing cost before access.
• Relative to health care needs, I believe the government should create a safety net for those unable to get coverage from private insurance, although I do not believe that safety net should include either guaranteed issue or elimination of pre-existing condition requirements for private insurance policies.  The burden for the least healthy members of our society, and them alone, should be borne by all citizens, not in a way that burdens every private insurance policy.  Government is totally ill equipped to decide on minimum coverage for everyone else.  Over the years, elected officials have repeatedly added coverage mandates to all insurance policies because of the power of special interest groups, whether or not the mandates represented good medicine.  Think back to the excessive expansion of bone marrow transplants combined with high-dose chemotherapy in the early 1990’s because cancer advocacy groups mistakenly believed it could save lives.  In fact, after a Congressional mandate was also adopted in many states, the treatment was found to be worse, on average, than doing nothing.  It shortened lives.

Some very smart people have said to me: “Why don’t we solve the insurance problem now, since we can, and we’ll get to cost reduction later?”

Aside from the competitiveness issues to which I referred above, there are two other problems with expanding coverage and not dealing with upstream prevention and health care system issues:

• Giving someone access to health insurance is not only not the same as giving them access to health care, it often results in lower quality care for everyone because of increased demand, and, eventually, decisions by doctors to stop treating Medicaid patients because they get reimbursed less than they do through commercial insurance.  Having an insurance card, but no doctor to use it with, is useless. Massachusetts has had universal health insurance since 2006, but both the access to care and the quality of that care have suffered.  More non-elderly adults report difficulty in getting access to physicians in 2009 than they did in 2007.
• To the degree that there is universal insurance, but inadequate access to doctor care, there is even more strain on our emergency departments. Many studies have pointed out that a majority of the people who access the emergency department for non-urgent care, that is, inappropriately, have insurance coverage, but either do not have timely access to care or are too impatient to wait until they can get access.  The system gets stressed at its weakest point, emergency care.

I am most disappointed that the Democratic majority in Congress and the very capable White House staff could not establish a prevention and wellness agenda, and begin to take on the badly broken fee-for-service health care payment system.

People who argue the practical politics of tackling the insurance issue always point out to me that politicians are swayed by hard-luck stories, individuals who died or went bankrupt because they could not afford sufficient health insurance to cover catastrophic health problems like cancer, heart disease, or a serious injury.  Unfortunately, no health insurance system can eliminate these tragic stories.  Moreover, increasing demands on the health care system without increasing the supply of physicians and nurses creates other kinds of tragedies.

Politicians are very moved when an individual tells a story about being unable to afford a “life-saving” cancer treatment because of no or inadequate health insurance. What puzzles me about these stories is whether the patient has attempted to get relief directly from the pharmaceutical manufacturer.  Every pharmaceutical company has programs to provide life-saving drugs for individuals who cannot afford them, and they provide relief for many patients every year.

However, the tragedy of someone who had no primary care physician because doctors in his or her community did not accept Medicaid patients, and, who, as a result, has an undiagnosed heart or diabetic condition, is a harder one to portray on the evening news.  The patient generally does not understand that, but for a stingy government program, he or she might have had access to a doctor who could have diagnosed and treated the condition earlier.  A public health official from India described the explosive growth of undiagnosed chronic disease cases as a “health tragedy in slow motion”

Implementing universal and affordable health insurance without addressing the imbalance between supply and demand in the underlying system will simply swap one kind of tragedy for another, at a much higher cost to the taxpayer and to businesses that can create jobs to bring many more people out of poverty.  The Democratic majority seems hell-bent to do something, even if it is the wrong something, relative to health insurance.  That’s too bad, and we will all pay dearly for the mistake.

Not surprisingly, since this is the first anniversary of President Obama’s inauguration, and the special U.S. Senate election in Massachusetts has produced a result that seemed inconceivable six weeks ago, a Republican victory, many people have asked my opinion of President Obama’s performance.

I met the President four different times before he was elected, three of those times at National Urban League events. President Obama struck me as a person with virtually unlimited growth potential and tremendous intelligence and character, and I still believe he has those qualities.

At the same time, I remind myself that he had no executive experience of any significance before he secured his first executive job, being President of the United States.  I expected him to make some rookie mistakes because of his inexperience as a chief executive, and he has.

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I am going to make some end-of-the-year observations about the way I see the political system, the economy, and our society evolving.

Many elected officials do not have the political will to address fundamental structural economic and political issues.  We built an economy after World War II promising middle class wages for all Americans, but without the foundation of skills and educational capabilities to make such promises sustainable.  Public sector labor unions and unions in heavily politicized private sector industries like the automobile industry, successfully negotiated collective bargaining agreements allowing people with very low skills and educational attainment to secure middle class wages and benefits, and protections against downsizings, even as our economy has had to become more globally competitive.

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Although I usually post a blog on a public policy issue, this end-of-the-year blog will be a combination of personal, public policy, and business observations. The one thing I can say with certainty is that 2009 evolved in a very different way from what I expected when I stepped down from the Executive Chairman position at Pitney Bowes a year ago.

The only thing that happened as I anticipated was that I would disengage emotionally from Pitney Bowes very rapidly, because that is who I am.  Once I leave an organization, I leave with fond memories, great friendships, and insights of lifelong value, but I leave the organizational responsibilities completely behind.  I am not a person who is nostalgic about what I once had or did, and this was no exception.  Other than that, everything that happened was either a surprise or a disappointment.

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In the Saturday November 21 New York Post, reporter Michelle Malkin writes a scathing op-ed piece on the Service Employees International Union,  entitled “The Union That Hates the Boy Scouts.“.  The major point of her piece is that the SEIU strongly opposes volunteer work in many communities, because they believe that volunteer work takes paid work away from union members.

Her description of certain union positions rings true to me because I recall that the Stamford Youth Foundation (Stamford, Connecticut) could not staff the variety and volume of after-school activities that it would have liked because union contracts required it to pay every teacher for the extra hours worked after the regular school day.  This deeply bothers me.

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This has been a most interesting week for me, especially the first two days I spent in Los Angeles with my older son in meetings relating to three investments in performing arts projects: a small commercial independent film called Fog Warning, (a trailer is viewable on YouTube), a reality TV production company called LongStoryShort Productions, and a film script on which my son Mike and I are working together.  From these meetings on all three investments, as well as other conversations I have had with many people in the performing arts business, I have learned about the challenges artists have with agents, distributors, or other intermediaries.

In the recording industry, the intermediary is the record label.  In movies, screenwriters have to approach producers through agents, and film producers have to reach the marketplace through sales agents or distributors.  TV producers have to go through agents to reach TV networks and other content buyers.  This is similar to what I experienced and saw in the broader business world: there are always gatekeepers between product and service producers and the end customer.

What is great about the Internet is how it has the potential to give those who want to reach a customer the ability to bypass intermediaries and create a better balance of power with those intermediaries.  I love the fact that Paranormal Activity, a movie produced for $15,000, which used predominantly low-cost direct marketing channels, including social media, has grossed over $100 million since its release. Too many intermediaries would be threatened if that became the norm on how to get a movie to the public.

Related to this, I was so happy when my younger son became a very capable online seller during his senior year of high school, and my daughter learned about to get harp performing engagements directly without needing a booking agent.

I believe strongly that we will see far more prosperity and a more equal distribution of income and wealth if individuals have the skills to sell their products, services, and labor directly to those who need them.  Intermediaries can serve a very valuable role, and many are essential to the people they serve.  However, just like any monopoly situation, when they have sole or primary access to the end customer, they can get complacent and not do the best possible for the seller.  That’s why I like the potential direct marketing opportunities the Internet provides.  It gives any seller, including me, the ability to say to an intermediary: “Either be as passionate and single-minded about what I am selling as I am, or get out of the way.”

In the October 21, Wall Street Journal, there was an article entitled “Japan Post Goes in New Direction.” Reporters Atsuko Fukase and Allison Tudor reported on a change in leadership and the potential reversal of the government’s commitment to privatization.  As they described the unfolding situation, they cite a statement from the chairman of the Japanese Bankers Association, who stated that he believed that private banks would face unfair competition from a government-owned Japan Post that offers banking services.

If this sounds like the concern expressed about the “public option” U.S. health insurance reform proposal, there is a good reason: the issues are remarkably similar.  In the U.S., the U.S. Postal Service has largely avoided competition with the private sector, except in the area of package delivery, in which it competes with UPS and FedEx, express mail, in which it also competes with these same companies, and international mail, in which it competes with DHL, and, more recently, Pitney Bowes.

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Because September is the one-year anniversary of the worldwide financial meltdown, there were many good articles in the various newspapers and magazines over the last few weeks.

One particularly insightful article appeared in the September 14, 2009, issue of  The New Yorker, entitled “Eight Days” by James Stewart. It highlighted three root causes that ended up building destructively on one another:

• Excessively high debt leverage among many players in the financial services system;
• Rapid asset sales driven either by panic or sophisticated profit-driven short selling; and
• Provisions in credit agreements that triggered defaults based on accounting-driven asset valuations.

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Many people sought my reaction to President Obama’s health care speech.  I had a mixed reaction.  It was reassuring to see him take a decisive position in staking out the case for reform, his priorities, and the common-sense proposals on which there appears already to be agreement.  I also think that he was more eloquent than I have ever seen him on any issue, and I felt inspired by his leadership skills, and his obviously sincere and deep moral values that drive his passion on health care.

While I believe that we should attack the health crisis first, then the health care delivery crisis, and then attack health insurance, rather than his obvious prioritization of health insurance, his decisiveness and strong leadership has value independent of how he prioritized the issues.

There are two fundamental problems with his plan:

• The proposed public option is a flawed solution to the problems he outlines; and
• The proposed methods for paying for expanding care to tens of millions of additional Americans are highly unlikely to yield the revenues he has projected for them.

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In past blogs, I have observed that one of the fatal drawbacks to government-run health plans is their inability to respond flexibly to advances in medical science, even when medical evidence is relatively clear and the human and financial costs of not responding are very high. 

Rita Rubin of USA Today,  in the Monday, August 24, 2009, issue of the news daily, in an article entitled “Dialysis Treatment in USA: High Costs, High Death Rates” describes a clear example supporting my argument.  In that article, Ms. Rubin points out that when Medicare began paying for dialysis in the early 1970’s, the prevailing view was that between 3 and 6 hours of dialysis a day three days a week was sufficient.  Medical opinion has now come to the conclusion that 3-day-a-week treatments are extremely inadequate.  As Ms. Rubin summarizes a set of comments by Dallas nephrologist Thomas Parker III, co-organizer of a conference at Harvard’s Beth Israel Deaconess Medical Center:

“Normal kidneys work 24/7, not a few shifts a week, so the standard treatment replaces only 10% to 13% of their function, Parker says.  How much dialysis is enough isn’t clear, he says, because few studies have randomly assigned patients to different amounts to test which approach is more effective.”

Later in the article, she notes that many physicians and patients believe that longer and/or more frequent dialysis can not only improve the quality of life, but also reduce hospitalizations.  Given the fact that Medicare paid $8.6 billion in 2007 for dialysis treatment and that 20.1% of the patients on dialysis died in 2006 from heart disease and infections, one would think that correcting this problem and getting to the right answer would have been an urgent priority for the federal government.

Unfortunately, being a highly-politicized program with annual budget targets and many competing politically-driven demands and limited staff, Medicare has not taken up this issue and addressed it.  Moreover, it is unlikely that any government program would operate differently because the consequences of a mistake in a highly-centralized program are huge.

In a more decentralized health system, driven by cost-saving and quality improvement objectives, this problem would have been tackled and probably addressed by now.

I do not consider government officials to be incompetent or insensitive to issues like this.  However, the reality is that, in a single payer system in which every major decision is highly visible, has political consequences, and affects potentially millions of lives and billions of dollars per year, the likelihood is extremely high that either the decision will take a very long time, or it will never get made. 

Think about it for a moment: is any Medicare official or any lawmaker being held accountable for this bad outcome?  The answer is very clear: no one has been held accountable or will be held accountable for inaction.

On the other hand, if Medicare radically alters its approach and starts to pay for longer and more frequent dialysis, the short-term cost increases will be highly visible and heavily criticized.  The downstream savings in reduced hospitalizations and deaths, and in improved quality of health and life will not be visible, and therefore, the decision will be perceived as a bad one, perhaps shortening the career of whoever makes that decision.

This is not a good way to run a health care system, but a public plan option which ultimately wipes out a more decentralized and innovative set of health care systems would make this mediocre-to-poor decision process the norm across the entire system.