Intellectual origin of Obamacare’s “death panels”

by Eric Shierman

In a follow up to a previous article where I outlined Ron Suskind’s account of the making of Obamacare, there is also a passage in his book Confidence Men with an interesting Oregon connection that just leaps off the page. Suskind is interviewing Dr. James Weinstein of Dartmouth University who was the intellectual father in many ways to what Obamacare was initially supposed to be. Weinstein’s academic research has studied the regional variations in health outcomes relative to medical procedures that were common practice. He found what any economist might expect: a diminished marginal return in health outcomes in regions that commonly employ more frequent and expensive procedures.

The most cited of Weinstein’s studies regards lumbar spine surgery to treat back pain, but when asked by Suskind where the greatest healthcare savings were to be found, he gave this remarkable answer:

But then he smiled, thinking of Oregon. This was something that always gave him a lift, something he discovered a few years ago that surprised him. Oregon was the first state to pass a “Death with Dignity Act,” in 1994, allowing for physician-assisted suicides in certain limited cases. Since then, the law had been repealed and reinstated, challenged and, ultimately, affirmed in a 2006 Supreme Court ruling.

Nearly 30 percent of Medicare costs are spent on end-of-life care, a stunning figure considering that most beneficiaries arrive into Medicare at sixty-five and the average life expectancy is seventy-nine. In the last year of life, covered medical costs average nearly $30,000.

Weinstein then points out to Suskind a very intuitive fact that perhaps few people have taken into consideration:

The result: Medicare costs in Oregon are some of the lowest in the country. And it’s largely because of reduced end-of-life costs. “They learned what the doctors didn’t want to tell them,” Jim Weinstein said with a chuckle. “That in medicine less is often more. And you – patients – are in charge, right until the end.”

There is of course a huge disconnect between what it means today to have patients in charge and what it would have meant if Obamacare ended up looking more the way Weinstein envisioned it. In a world where data driven boards make rational return-on-investment decisions on end-of-life medical options, expensive new treatments that allow a 75 year old to live another four years with little pain could easily get rejected in favor of two other options: cheaper but painfully torturous procedures or the cheapest procedure of all, suicide.

In rebutting what it deemed to be a mere populist myth, that Obamacare was setting up death panels, the Obama administration thought it was enough to show that its law would not MANDATE suicide or even the pulling of tubes, but that is a low bar to set. This is very similar to the Roosevelt administration’s rejection of the charge that the Social Security number would never become a national ID number, because the Social Security Act did not mandate its use outside of administering what was then a mere old age pension.

Obamacare very deliberately set in motion the institutional creation of death panel infrastructure that will become necessary when the expansion of access this law has mandated continues to accelerate the price inflation of health care services in what would otherwise have been a deflationary environment. The Obama administration did so with their most touted independent expert promoting the Oregon way of bending the cost curve.

Let’s remember that death panels and the other applications of these medical review boards that Obamacare set up, are a form of rationing. Somehow rationing has become a bad word. Rationing is what we do every day in the grocery store. Most of our problems in healthcare costs come from government efforts to prevent rationing through direct subsidies and regulatory mandates. If elderly people were rationally allocating their own family’s assets for their own care, they would no doubt display a far greater degree of frugality than a Medicare system that replaces the hips of folks in their late 90s and gives them an electric scooter too.

For anyone with a basic grasp of economics, this is not hard to fathom. Indeed it’s so easy kids could make a rap video about it.

A free-market healthcare sector undistorted by government policy would provide a more efficient means of rationing. Government rationing can limit the consumption of medical services by directing consumers to approved procedures but cannot much affect their prices. The more efficient rationing of free-market agents can do both, meaning that over time less rationing would need to occur.

Probably the best healthcare policy expert who can lucidly explain how to craft reforms that enjoy the benefits of market rationing while retaining some government intervention to promote access to care lives here in Oregon. The most informative book I have ever read on this subject was Dr. Douglas Perednia’s Overhauling America’s Healthcare Machine.

Perednia's book

Besides being a medical doctor himself, probably the best thing Perednia brings to the policy discussion is a serious grasp of economics to compliment that first-hand experience of his as a physician. Few healthcare policy “experts” have either. I am a regular reader of his excellent blog, The Road to Hellth  and highly recommend it to any of you who want to follow the details on this issue. He has also written for the Oregon Catalyst.

I give Obamacare only a 50% chance of being overturned by the Supreme Court. Many of you would no doubt rejoice in that, but the status quo that preceded it is not to be embraced either. To intelligently hold a national debate on how to move forward, opposing the progressives’ reform agenda will not be enough. You have to be willing to delve into the details to offer a positive alternative. A close read of Perednia’s book, (only $12.38 on kindle) is probably the best first step.

Eric Shierman is a partner at Creative Destruction Investment Partners, writes for the Oregonian under the pen name “Portland Aristotle” on the MyOregon blog, and is the author of the forthcoming book: A Brief History of Political Cultural Change. His articles can be read at:http://connect.oregonlive.com/user/PortlandAristotle/posts.html

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Posted by at 06:08 | Posted in Health Care Reform, President Obama | 61 Comments |Email This Post Email This Post |Print This Post Print This Post
  • Rupert in Springfield

    > To intelligently hold a national debate on how to move forward,
    opposing the progressives’ reform agenda will not be enough. You have to
    be willing to delve into the details to offer a positive alternative.

    I am not saying you are making this argument, but this has become something of an urban myth.

    Obamacare was not conceived in a vacuum. There had been plenty of health care reform suggestions prior to it, and plenty made at the time it was put in place.

    This idea that no one has offered health care proposals but progressives is simply nonsense.

    Bush 2 actually implemented a rather significant health care reform that progressives has a tendancy to poo poo because it helped their most hated group of people, the self employed, yet did nothing for their favourite class of people, the uninsured. That reform was called medical savings accounts, and actually represented some constructive outside the box thinking.

    I think its something of a false argument to go into the debate on the issue as if there have been a dearth of alternative proposals. It’s simply not true.

    One thing that I think was interesting in the article was the expense to Medicare on care in the last years of life.

    I wish this point could have been followed up a little further because it has wide ranging implications.

    One of those implications it is the single reason why Medicare appears to run with lower administrative costs per dollar of health care delivered than private health insurance.

    If you admit an 80 year old for back surgery or a pacemaker installation, you have the administratives costs as compared to hundreds of thousands of dollar worth of treatment.

    Not so with private insurance as they treat a wider age group. If you have a kid come in with e coli poisoning, you have the same admittance costs as the 80 year old, but the cost of care is probably one to two thousand dollars.

    In other words, the lower administrative costs of Medicare are simply due to the fact that more expensive procedures are being used on the elderly as opposed to the general population. Not because of any efficiency of Medicare itself.

    • 3H

      Or not….

      “However, the Congressional Budget Office (CBO) has found that administrative costs under the public Medicare plan are less than 2 percent of expenditures, compared with approximately 11 percent of spending by private plans under Medicare Advantage. This is a near perfect “apples to apples” comparison of administrative costs, because the public Medicare plan and Medicare Advantage plans are operating under similar rules and treating the same population.
      http://krugman.blogs.nytimes.com/2009/07/06/administrative-costs/ http://institute.ourfuture.org/files/Jacob_Hacker_Public_Plan_Choice.pdf 

      (This is a link provided in the Krugman article)

      • Rupert in Springfield

        Kind of have to see the actual CBO study. Krugman is now pretty much discredited after his idea of inventing a space alien invasion to solve the recession, and Berkley Law does not exactly appear to be a centrist organization. 

        • 3H

          Well, I would like to see the study you used for the conclusions you drew. 

          So, now that we have decided that Berkeley Law is not a centrist organization, do you have any specific and substantive complaints?  Or is the fact that are not centrist all that needs to be said?

        • valley person

           Krugman didn’t create the data, the CBO created the data.

    • 3H

      And I hope you never end up on a board that decides medical costs.   You’d actually deny a pace-maker or back surgery to someone who is 80 just because they are old?  Really?   Just how devoid are you of any compassion?   What is your cut-off age?  75?  70?   Maybe once someone has retired, they should get any care, except what they can afford out of pocket.  Why am I not surprised?

      • Rupert in Springfield

        >You’d actually deny a pace-maker or back surgery to someone who is 80 just because they are old?  Really?

        Illuminate us with your intelligence where I ever said such a thing.

        > Why am I not surprised?

        Why am I not surprised you would invent an argument somebody never made for God knows what reason.

        Strategies for rebuttal (obviously I have to help you here)

        1 – Try Dean Weasel #1, topic shift. This wont work, but is an option to avoid having to admit you didn’t read what you were responding to.

        2 – Insist that somehow because I compaired administrative costs by giving an example of elderly patient, that would imply to any reasonable person I was suggesting denying treatment.

        Personally I think strategy one is better as no one reasonable would buy strategy two.

        The best strategy would be strategy three

        3 – Do what I do when I have made a clear mistake – admit it and move on.

        Projections – Hard to say, but you wont choose strategy three. You are like Dean in this regard, you can never admit when you are wrong.

        Although I should correct myself there. Dean once admitted he was wrong when he made the wild claim that illegals have no standing in the Supreme Court.

        • 3H

          ” Illuminate us with your intelligence where I ever said such a thing.
          I wasn’t aware that you actually had to say it.  I thought we got to pretend that people say things when they don’t.  Unless you have a special dispensation from Oregon Catalyst that allows you to do exactly that?  Is that how it works?  

          “Why am I not surprised you would invent an argument somebody never made for God knows what reason.”

          But you must know the reason — you’ve done it several times in the past week.  Do you have black outs?  Do you wake up and find that you’ve said things that you later no longer have any recollection about? I’d see doctor of that Rupert.

          “Do what I do when I have made a clear mistake – admit it and move on. 

          If you mean by that, ignore it and move on then I guess I could try that.

          Oh, you’re right, you never did say that.   It was a test Rupert.  Congratulations, you failed and proved yourself to be both an intellectual fraud and a hypocrite.   

          • JoelinPDX

            Now this is funny! 3H criticizing someone for saying, “I never said that.” Yet 3H uses that argument himself all the time. 

            Want to talk hypocrisy 3H?

          • 3H

            Perhaps you should have read what I wrote more closely, because I actually acknowledged that Rupert hadn’t said that (and why I deliberately put words in his mouth).  Did you skip that part, or are you failing to understand the point I was making? 

          • Rupert in Springfield

            I would suggest last call at the local dive would be the correct environment to find the occluded mental faculty that would be crucial to sympathizing with whatever you were on about there.

          • 3H

            I’m not the one that is suffering from blackouts  😉

          • Rupert in Springfield

            I’m not entirely sure what you are on about here, but I think you have succeeded in making yourself look totally nuts.

          • 3H

            LOL. no idea?  You frequently put words in my that I didn’t say, and then accuse me of being intellectually dishonest for saying something that… well… I didn’t say.When I ask you to show me where I said that, you simply run away.

            But – you sure do seem to take offense when it’s done to you. 

            Funny how that works, huh?

        • valley person

           Admit your mistakes? Yes, I think you did that once. 

          • Rupert in Springfield

            Since I have admitted two mistakes to you directly, where you were right and I was wrong, and have reiterated those mistakes on several occasions to reinforce the fact that I do own up, your comment is especially vapid.

            I think the thing is you are threatened by people who can admit when they are wrong and move on since you have a phenomenal inability to do the same.

          • valley person

            Yes that’s it Rupert. Your admitting to 2 mistakes over how many years and dozens if not hundreds of actual mistakes threatens me. Terrifies actually.

      • 3H, countries with socialized medicine ration as a business or budget move. Elderly or very young are of limited societal (income tax) value.

        • 3H

          But, they are covered aren’t they?  And, private plans also limit treatments and procedures.

        • valley person

          Craig, it may be true the young and elderly are of “limited value” to modern, technological societies. But together they manage to get about 90% of all social spending in these societies, including the US. Most of our tax money pays for schools (kids), Medicaid (kids and old folks, Medicare (old folks) and social security (old folks). How do you explain this?

          • “valley person” don’t understand your question. All have equal value as a human life, including the unborn human.

          • valley person

            You stated: “Elderly or very young are of limited societal (income tax) value”

            I asked, if this is the case, then why does the US and other modern societies spend so much taking care of the young and elderly?

            What is there not to understand?

    • valley person

       If your theory were true then Medicare Advantage (private) would have the same overhead costs as Medicare (public). I’m pretty sure this is not the case.

      • Rupert in Springfield

        I think the big hurdle you have to overcome with your argument for government efficiency boils down to three major hurdles. 

        1- In most peoples experience government is not any well oiled watch of administrative efficiency. A $1T deficit doesnt inspire confidence nor is blaming Bush paying the bills.

        2 – Medicare is going broke.

        3 – Cost projections for Medicare were off by a factor of ten, and not in the direction that helps your argument btw.

        Solve those three and you might have a convincing argument. Without it, not much. Sorry.

        • valley person

          But I didn’t argue for “government efficiency.” Medicare overhead is less than Medicare Advantage. That is a fact. If you want to generalize the argument to all of government, that is your concern, not mine.

          Maybe your health insurance company is a well oiled watch that gives you great value. But I doubt it. 

          • 3H

            Rupert loves the straw-man tactic.  He likes to invent statements, or beliefs, attribute them to you, and then tell you how wrong you are.   It’s a nice gig if you can get it.  But, be warned, don’t do that to him.  He just won’t stand for it.

          • valley person

            Do you think he will admit he is just wrong on this issue? Ha. Just kidding.

          • 3H

            That’s a good one  🙂

  • Bob Clark

    I think most people should fend for themselves with respect to healthcare, as most of us are big boys and girls and raised to make life’s key decisions.  For those not able to fend for themselves maybe they could have a certain amount of barebones coverage provided by healthcare stamps.

    I say lets party if ObamaCare gets struck down in large measure by the Supreme Court.  It will help knock the wind out of Obama’s sails this election year.  Just think:  his crowning “achievement” (in the land of smoke and mirrors) will be routed; and instead of having something to crow about, he’ll probably display his inherit bitterness.  And we’ll be freed from the over lording inherit in ObamaCare from some faceless bureaucrat in Oregon’s Department of Health and Human Services.  Geez, there’s a really winner agency.  Not.

    • “healthcare stamps” is that a combo of healthcare and foodstamps via the bank failure president? 90% chance SCOTUS throws Obamacare out.

  • valley person

    Geez Eric, I thought better of you than to be perpetuating this nonsense. You should be ashamed. 

  • Tim Lyman

    The idea that there will not be rationed care aka “death panels” under Obamacare is ridiculous.  It exists in every state run healthcare system in the world.  It is also true that it exists in private healthcare, but the difference is, in private healthcare, it is the consumer who chooses what the level of care will be based on what he is willing to pay for.  

    • valley person

       So you think the “consumer” of a private insurance plan, which they probably got through their employer and had only a single choice, willingly has signed onto a “death panel?” I doubt it. The “death panel” term is nothing more than negative marketing. No one lives forever, and no one is entitled to eternal life support. Few would even desire it.

      The fact is that the issue that raised a big stink in Obamacare was paying doctors to have a conversation with elders about their desires should they become incapacitated. That is all it ever was. The rest is utter nonsense. 

      • HBguy

        And, I think the actual issue was PAYING the doctors to have that conversation. Many/most/all Doc’s have that difficult talk, and health care reform plan included reimbursement for that.

      • Obamacare death panels was not just over “the talk.”  The Medicare rationing board is a huge issue. Also the cost of paying for a medicaid tsunami will not be acceptable.  So rationing will be done on unprecedented levels.  http://www.cobrahealth.com/Obamacare-rationing.html

  • 3H


     In a world where data driven boards make rational return-on-investment decisions on end-of-life medical options, expensive new treatments that allow a 75 year old to live another four years with little pain could easily get rejected in favor of two other options: cheaper but painfully torturous procedures or the cheapest procedure of all, suicide.”

    Only two options Eric?  You left out palliative care.  Which is not all the expensive, compared to many medical procedures, I’m willing to bet.

    • valley person

      Eric writes: “If elderly people were rationally allocating their own family’s assets
      for their own care, they would no doubt display a far greater degree of
      frugality than a Medicare system that replaces the hips of folks in
      their late 90s and gives them an electric scooter too.”

      Think about this statement. Eric seems to be saying that if we only had a free market in health care, old people would just decide to forgo treatment and live in pain or die rather than bankrupt their families. Like the good old days before Medicare. Is this really what we want so we can save ourselves some tax money? Is this what it comes down to? Personally, I don’t mind chipping in for the electric scooter for Erics granddad.

      • 3H

        Or.. their relatives would refuse to pay: sorry Nana, but we did a cost/benefit analysis and the figures just don’t pencil out.  

  • Ted

    Get government OUT of healthcare. That is the answer and everone know it already.

    • Rupert in Springfield

      You got that right. Letting people choose their own insurance plans rather than government mandated ones would be an easy first step.

      • valley person

        Yes, all those 85 year olds and poor kids should fend for themselves.

        • 3H

          Take away their scooters and their tricycles!

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