The New York Times - 08.10.2019

B4 0 N THE NEW YORK TIMES BUSINESSTUESDAY, OCTOBER 8, 2019

HEALTH | INTERNATIONAL

BRUSSELS — President Trump
said “it really makes Germany a
hostage to Russia.” Senator Ted
Cruz, Republican of Texas, said it
would encourage Russian “mili-
tary adventurism.” Radoslaw Si-
korski, the former Polish defense
minister, compared it to the infa-
mous 1939 Molotov-Ribbentrop
Pact that allied the Nazis with
Stalin’s Soviet Union.
That seems like a lot of heavy
breathing for a pair of natural gas
pipelines known as Nord Stream
2, which follow the route and
would double the capacity of an
existing pair of pipelines, Nord
Stream, which started working in
2011 and are running at full capaci-
ty.
The pipelines run from Russia
directly under the Baltic Sea to
Germany, bypassing Poland and
Ukraine and denying those coun-
tries some transit fees. Gazprom,
which is majority owned by the
Russian government, owns 51 per-
cent of Nord Stream 1 and all of
Nord Stream 2 AG, which is devel-
oping and will operate the new
pipelines.
Critics, including those from the
United States, which would like to
sell Europe more liquefied natural
gas, say they are not simply con-
cerned that Germany will become
too dependent on Russian gas as it
weans itself from nuclear power
and coal. They also fear that Rus-
sia’s larger intention is to starve
Ukraine of an important chunk of
income. Russia is waging a kind of
war in the eastern part of Ukraine
after annexing Crimea in 2014.
So the play of politics and geo-
politics is as much a part of the
Nord Stream story as any argu-
ment made about economics, cli-
mate change or the diversity of
European energy supplies.
“Nord Stream is politically sen-
sitive because it fractures Europe
strategically between the inter-
ests of Germany and the interests

of everyone else,” said Kristine Berzina, a senior fellow at the Ger- man Marshall Fund in Brussels. “That creates a lot of mistrust and tensions with Poland and Ukraine.” While Mr. Trump and Mr. Cruz have threatened to impose economic sanctions on companies involved in building Nord Stream 2, the project is likely to be com- pleted close to schedule early next year. More than 2,000 kilometers (about 1,240 miles) out of a total of about 2,400 kilometers of pipe have already been laid, according to Sebastian Sass, who represents Nord Stream 2 AG, the pipeline company, to the European Union. As it lays pipe in sections, the company is waiting for approval of the final part of the route around Denmark, which has re- fused to let the new pipeline follow the old one through Danish territorial waters. But Copenhagen is expected to approve one of two relatively short detours, one north and one south of a Danish island, Bornholm, that are in Denmark’s exclusive economic zone but out- side its territorial waters, so sub- ject only to environmental, not political approval, Mr. Sass said. “When so much pipe has been laid, it’s not clear what the goal of sanctions would be,” Ms. Berzina said. “The project is so far along that a lot of the conversation about sanctions and halting it seem very late in the game.” More important, she said, is “how do you deal with the political fallout, what does it do to the E.U., and how do you maintain some economic stability in Ukraine and guarantee transit through Ukraine and Poland?” Norbert Röttgen, the chairman of the German Parliament’s for- eign relations committee, has opposed Nord Stream 2. But despite the American threat of sanctions, he said, “it’s a little late” to stop it. Even worse, he said, American sanctions “would mean a pro- found escalation regarding Ger-

many and other European countries, and it would come close to a trade war.” Sanctions “would be a heavy blow to trans-Atlanticists,” who are already defensive about fierce Trump criticism of Chancel- lor Angela Merkel and her poli- cies. “The geopolitical problem of Nord Stream is that it increases the dependence especially of Ukraine on Russia, but even more it has separated Germany from most of its European neighbors, especially its eastern ones, and it has also separated Germany from the United States,” said Mr. Röttgen, a member of Ms. Merkel’s party. “Russia is driving a wedge between Germany and its eastern neighbors, between Germany and the E.U., and between Germany and the United States.” Ms. Merkel has defended the pipeline project. In February, at the Munich Security Conference, she mocked American concerns, saying that “a Russian gas mole- cule remains a Russian gas mole- cule irrespective of whether it comes from Ukraine or from un- derneath the Baltic Sea.” Mr. Röttgen said that her com- ment “has a physical logic but no political logic,” since “so long as Russia needs Ukraine as a transit country, it has leverage.” Gordon Sondland, the Ameri- can ambassador to the European Union, said that “energy inde- pendence for Europe has always been a big concern of the United States.” Nord Stream 2, he said, “puts too much control into Rus- sian hands, and the Russians have had a history of using that control in nefarious ways in the past.” Like Mr. Trump, Mr. Sondland is also promoting exports to Europe of American liquefied natural gas, or L.N.G. Germany’s minister for economic affairs and energy, Peter Altmaier, has not ruled out im- porting L.N.G. from the United

States, but only to supplement Russian gas, and only if the price is right. Nord Stream 2 is estimated to cost 9.5 billion euros (about $10.5 billion) and will double Nord Stream 1’s capacity to 110 billion cubic meters, or about 3.9 trillion cubic feet. While Gazprom owns the pipeline, half the financing of the €8 billion capital cost comes from five European companies: Uniper and Wintershall of Ger- many, OMV of Austria, Engie of France and Royal Dutch Shell. Mr. Sass of Nord Stream argues that Ukrainian vulnerability is ex- aggerated, and that Europe’s need for natural gas will increase suffi- ciently to ensure that Russian gas will continue to travel through Ukrainian pipelines, too. A major Dutch natural gas field, Groning- en, is nearing the end of its life, expected now in 2022, as are the North Sea fields, and nuclear energy is in trouble. “So as gas is replacing coal in the E.U., gas production is collaps- ing,” Mr. Sass said. Renewables like wind and solar are important, he added, but natural gas fills the gaps when the sun does not shine or the wind blow. Burning natural gas also produces fewer carbon dioxide emissions than coal, but coal is cheaper. Which is why an abun- dance of natural gas supply is the best way to promote more compe- tition and cheaper gas prices, Mr. Sass argued, defending the cost savings that his pipeline will produce. European exports represent the bulk of Gazprom’s profits, and those are vital for the Russian state. Oil and gas production ac- counts for 40 percent of Russia’s budget. That is part of the unspoken criticism of the project: its importance for a Russia that still largely depends on energy exports to finance its government (and military). By increasing energy exports, critics argue, the pipeline essentially helps stabilize the Russian regime. But supporters of the project argue that Russia has long been a re- liable supplier to Europe, needing the hard currency and the income, and that the dependence is mutu- al. For all the predictions about the growing need for natural gas, they could be overturned by a signifi- cant advance in battery power, en- abling more renewable energy to be stored, Ms. Berzina pointed out. “Energy folks are always very optimistic about natural gas use in Europe,” she said. But “there are a lot of technological innovations, and if there were a sudden break- through in battery technology, we wouldn’t have this same conversation about natural gas.”

BY STEVEN ERLANGER

Pipelines From Russia Cross Political Lines

Preparing a pipe in the Baltic Sea for the Nord Stream 2 pipelines.

STINE JACOBSEN/REUTERS

Even a divided America can agree on
this goal: a health system that is
cheaper but doesn’t sacrifice quality. In
other words, just get rid of the waste.
A new study, published Monday in
JAMA, finds that roughly 20 percent to
25 percent of American health care
spending is wasteful. It’s a startling
number but not a new finding. What is
surprising is how little we know about
how to prevent it.
William Shrank, a physician who is
chief medical officer of the health insur-
er Humana and the lead author of the
study, said, “One contribution of our
study is that we show that we have
good evidence on how to eliminate
some kinds of waste, but not all of it.”
Following the best available evi-
dence, as reviewed in the study, would
eliminate only one-quarter of the waste
— reducing health spending by about 5
percent.
Teresa Rogstad of Humana and
Natasha Parekh, a physician with the
University of Pittsburgh, were co-au-
thors of the study, which combed
through 54 studies and reports pub-
lished since 2012 that estimated the
waste or savings from changes in prac-
tice and policy.
Because American health spending is
so high — almost 18 percent of the
economy and over $10,000 per person
per year — even small percentages in
savings translate into huge dollars.
The estimated waste is at least $760
billion per year. That’s comparable to
government spending on Medicare and
exceeds national military spending, as
well as total primary and secondary
education spending.
If we followed the evidence available,
we would save about $200 billion per
year, about what is spent on the medi-
cal care for veterans, the Department of
Education and the Department of Ener-
gy, combined. That amount could pro-
vide health insurance for at least 20
million Americans, or three-quarters of

the currently uninsured population. The largest source of waste, according to the study, is administrative costs, totaling $266 billion a year. This includes time and resources devoted to billing and reporting to insurers and public programs. Despite this high cost, the authors found no studies that evalu- ate approaches to reducing it. “That doesn’t mean we have no ideas about how to reduce administrative costs,” said Don Berwick, a physician and senior fellow at the Institute for Healthcare Improvement and author of an editorial on the JAMA study. Moving to a single-payer system, he suggested, would largely eliminate the vast administrative complexity re- quired by attending to the payment and reporting requirements of various private payers and public programs. But doing so would run up against powerful stakeholders whose incomes derive from the status quo. “What stands in the way of reducing waste — especially administrative waste and out-of-control prices — is much more a lack of political will than a lack of ideas about how to do it.”

While the lead author works for Humana, he also has experience in government and academia, and this is being seen as a major attempt to refine previous studies of health care waste. Reflecting the study’s importance, JAMA published several accompanying editorials. A co-author of one editorial, Ashish Jha of the Harvard Global Health Institute and the Harvard T.H. Chan School of Public Health, said: “It’s perfectly possible to reduce administrative waste in a system with private insurance. In fact, Switzerland, the Netherlands and other countries with private payers have much lower administrative costs than we do. We should focus our energies on administrative simplification, not whether it’s in a single-payer system or not.” After administrative costs, prices are the next largest area that the JAMA study identified as waste. The authors’ estimate for this is $231 billion to $241 billion per year, on prices that are higher than what would be expected in more competitive health care markets or if we imposed price controls common in many other countries. The study

points to high brand drug prices as the major contributor. Although not explic- itly raised in the study, consolidated hospital markets also contribute to higher prices. A variety of approaches could push prices downward, but something might be lost in doing so. “High drug prices do motivate investment and innovation,” said Rachel Sachs, an associate professor of law at Washington Univer- sity in St. Louis. That doesn’t mean all innovation is good or worth the price. “It means we should be aware of how we reduce prices, taking into consideration which kinds of products and which popula- tions it might affect,” she said. Likewise, studies show that when hospitals are paid less, quality can degrade, even leading to higher mortal- ity rates. Other categories of waste examined by the JAMA study encompass ineffi- cient, low-value and uncoordinated care. Together, these total at least $205 billion. With more than half of medical treat- ments lacking solid evidence of effec- tiveness, it’s not surprising that these areas add up to a large total. They include things like hospital-acquired infections; use of high-cost services when lower-cost ones would suffice; low rates of preventive care; avoidable complications and avoidable hospital admissions and readmissions; and services that provide little to no benefit. In addition to wasting money, these problems can have direct adverse health effects; lead to unwarranted patient anxiety and stress; and lower patient satisfaction and trust in the health system. Here the study’s findings are relatively more optimistic. It found evidence on approaches that could eliminate up to half of waste in these categories. The current movement toward value-based payment, promoted by the Affordable Care Act, is intended to address these issues while removing their associated waste. The idea is to pay hospitals and doctors in ways that

incentivize efficiency and good out- comes, rather than paying for every service regardless of need or results. Putting this theory into practice has proved difficult. “Value-based payment hasn’t been as effective as people had hoped,” said Karen Joynt Maddox, a physician and co-director of the Center for Health Economics and Policy at Washington University in St. Louis and a co-author of another editorial of the JAMA study. So far, only a few value-based payment approaches seem to produce savings, and not a lot. Some of the more promising approaches are those that give hospitals and doctors a single payment “as opposed to paying for individual services,” said Zirui Song, a physician and a health economist with Harvard Medical School. “Savings tend to come from physi- cians referring patients to lower-priced facilities or cutting back on potentially lower-value care in areas such as pro- cedures, tests or post-acute service,” he said. There is evidence of savings from some bundled payment programs. These provide a fixed overall budget for care related to a procedure over a spe- cific period, like 90 days of hip replace- ment care. Accountable care organizations also seem to drive out a little waste. These give health groups the chance to earn bonuses for accepting financial risk and if they reach some targets on quality of care. The final area of waste illuminated by the JAMA study is fraud and abuse, accounting for $59 billion to $84 billion a year. As much as politicians love to say they’ll tackle this, it’s a relatively small fraction of overall health care waste, around 10 percent. More could be spent on reducing it, but there’s an obvious drawback if it costs more than a dollar to save a dollar in fraud. Because health care waste comes from many sources, no single policy will address it. Most important, we have evidence on how to reduce only a small fraction of the waste — we need to do a better job of amassing evidence about what works.

Up to 25% of Health Costs Called Wasteful

At least $760 billion a year is not necessary, a study says.

The New Health Care

By AUSTIN FRAKT

Health care spending is almost 18 percent of the economy, more than military spending.

PHOTO ILLUSTRATION BY GETTY IMAGES

WASHINGTON — The Trump administration said Monday that it had added 28 Chinese organizations to a United States blacklist over concerns about their role in human rights violations, effec- tively blocking those entities from buying American products. The organizations have been implicated in China’s campaign targeting Uighurs and other pre- dominantly Muslim minorities in the autonomous region of Xin- jiang, according to a Commerce Department filing. Among the entities being placed on the list are Hikvision and Dahua Technology, two of the world’s largest manufacturers of video surveillance products. It also hits China’s well-funded, newly emerging class of artificial- intelligence start-ups. Together, the companies’ products are cen- tral to China’s ambitions to be the top global exporter of surveillance technology. The list also includes companies that specialize in artificial intelligence, voice recognition and data as well as provincial and local security bureaus that have helped construct what amounts to a po- lice state in Xinjiang. These entities have been involved “in the im- plementation of China’s campaign of repression, mass arbitrary de- tention and high-technology surveillance,” the filing said. The move was announced just days before high-level Chinese and American officials meet in Washington to try to resolve a trade war that has begun inflict- ing pain on both sides of the Pa- cific. The blacklist’s impact on the companies is likely to be mixed. In many cases, they could find ways to replace American compo- nents and have likely already stockpiled key parts, limiting the short-term impact. Over the longer term, the list could hamper their access to United States and European markets, as well as damage recruit- ment efforts. American customers, universities and others will likely look askance at striking up relations with Chinese companies on the blacklist. A Commerce Department spokesman said Monday that the action was not related to the trade talks. But the decision is likely to rankle the Chinese government, which has helped support some of these companies as they have de- veloped into cutting-edge technology firms. “The U.S. government and De- partment of Commerce cannot and will not tolerate the brutal suppression of ethnic minorities

within China,” Commerce Secre- tary Wilbur Ross said in a statement. Hikvision said in a statement that it strongly opposed the decision and had been trying to address the administration’s concerns for the past year. The pun- ishment will “hurt Hikvision’s U.S. business partners and negatively impact the U.S. economy,” the company said. China has faced growing con- demnation from human rights groups in recent months for its de- tention of up to one million ethnic Uighurs and other minority Mus- lims in large internment camps in Xinjiang. Beijing has constructed an ad- vanced surveillance system, in what it describes as an effort to fight Islamist extremism among the Uighurs, the largest ethnic group in Xinjiang. But many Ui- ghurs and others around the world say Chinese officials are trying to suppress their culture and religion. Human Rights Watch has said the violations are of a “scope and scale not seen in China since the 1966-1976 Cultural Revolution,” and Secretary of State Mike Pom- peo has called China’s treatment of the Uighurs the “stain of the century.” Yet administration officials have wavered on how much to keep human rights and economic concerns separate in their negoti- ations with China. Many officials emphasize that the topics are separate, but the administration has shelved several proposals that would have shined light on China’s abuses over concerns that a tough stance could upset trade talks. And President Trump himself has often linked national security and other concerns to trade talks. On Monday, Mr. Trump said “bad” action in Hong Kong, the site of violent protests, would hurt progress on trade and urged China to find a “humane solution.” This year, the administration placed Huawei, the Chinese tele- com equipment giant, on the blacklist, saying it posed national security concerns. It added five Chinese entities to the list in June, also citing national security. The new additions include several artificial intelligence start- ups: Megvii, SenseTime and Yitu Technologies. They also include iFlytek, which makes voice recognition software; Xiamen Meiya Pico Information Company, a data forensics company; and Yixin Sci- ence and Technology Company, which makes nanotechnology. The listed government entities include Xinjiang’s public security bureau and 19 subordinate bureaus and institutes.

Chinese Entities Blacklisted

As U.S. Cites Rights Abuses

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The New York Times - 08.10.2019

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