Several sources indicate Pres Bush is going to veto the Medicare bill (that rescinded physician reimbursement cuts and phased out Medicare Advantage subsidies). The veto may happen today.
Oops, he just did.
The Senate and House are likely to vote to override the veto pretty quickly – perhaps within a day or so. If the veto is overridden, it will be the first time a Bush veto went down to defeat.
A post on the Wall Street Journal’s blog is notable not for the content (which appears accurate and timely nonethless) but rather for the tone and anger of the commenters. Remember folks, this is the WSJ, perhaps one of the most conservative publications in the country – yet the WSJ’s readers are beyond angry with Bush and his pending veto. Think livid, furious, outraged, hyperventilating mad. This isn’t exactly good news for McCain, who now will have yet another opportunity to either avoid voting on this (as he has to date) or will have to actually take a position.
If the veto is not overridden, it is going to be a holy mess out there in IT/reimbursement/physician contracting/patient access/state regulatory land.
Here are a few potential problems.
1. States that base their WC fee schedules on Medicaid will have to decide whether they are going to follow suit; and for those that are directly tied to Medicare, expect big noise from the occ med, ortho, and neuro physician communities.
2. CMS is going to start processing bills today with the 10.6% cut – and docs are going to start dropping out of Medicare at a rather rapid rate.
3. Republican legislators are going to be mincemeat during the August recess, which will be even uglier than their ‘holiday’ on July 4.

Last week the National Coalition on Benefits went public with their position on health reform – they don’t want any reduction in the role of employers. The NCB’s position was laid out in a letter to Sens. Ron Wyden (D OR) and Bob Bennett (R UT) opposing the Healthy Americans Act. The big issue for NCB appears to be the HAA’s focus on providing benefits through state organizations, thereby eliminating employers’ ability to offer consistent plans across multiple states.
I don’t get it. Or maybe I do, and it smells like good ol’ special interest self preservation.
According to their website, the NCB represents employers, health plans, and trade associations that provide benefits under ERISA (Federal law that regulates big employer benefit plans, exempting them from state control). Members like the current employer-based system; their position is that “any change must not erode those parts of the health care system that are working…”
The NCB’s letter goes on to claim “The federal ERISA framework also makes it possible for employers to drive value-based strategies that improve the entire health care system by allowing employers to apply leading edge, innovative practices on a consistent, nationwide basis.”
That’s a puzzler. If the current employer-based system is working so well, why

• have premiums gone up 87% since 2000 while the CPI is only up 17%?
• are 10 million of the uninsured working full time at large employers (>1000 workers)?
• did Safeway and Wal-Mart endorse Wyden’s Healthy Americans Act?
• have insurance costs as a percentage of payroll gone from 8.2% to 11% in six years?
• are 30 million uninsured Americans in families where the head of the household is working full time?

According to a source in Sen Wyden’s office, “what the National Coalition on Benefits is saying isn’t the attitude of all their members, even of some listed in that letter. In fact, the NCB had a conference call [last] week with some of the members listed on the letter who were unhappy because they didn’t agree with it.”
Turns out the letter from NCB only reflects the opinions of the dozen members of the steering committee which is comprised of equal numbers of trade associations and employers (e.g. ATT, GM, UPS, Verizon).
The staffer went on to note that “news reports said Boeing was severely disadvantaged in competing with Airbus because of the costs they have to bear for their employees’ health care costs that Airbus doesn’t have to pay because their employees’ health care is paid for by the government. Employers could be relieved of that competitive burden under the HAA.”
Wyden himself responded rather acerbically to the NCB (a change from his usual low-key, laid-back-Oregonian style), saying “We may be talking about the coalition of the un-willing. We have talked to several alleged coalition members — like NIKE, AHIP, Wal-Mart and Johnson and Johnson — and they all say that the letter does not represent their views on the Healthy Americans Act. As for their message, their defense of the employer-based health system sounds eerily similar to the Titanic’s deck crew hyping the merits of a sinking ship.
Whoever wrote this letter can’t guarantee a single American that their employer-provided benefits won’t be taken away. But of course, that’s not their job. Their job is to protect tax preferences for the status quo.”
The Senator has a point. The tax benefits of the employer-based system are well-documented and extensive, amounting to about $200 billion annually for employers. Health benefits save employers and employees taxes as they are paid for with ‘pre-tax’ dollars – dollars that aren’t counted as income for tax purposes. If employer sponsorship of health benefits went away, the assumption is the cash employers spend on benefits would instead be paid as wages (and therefore subject to taxation) or (under the HAA) paid into the state agencies as the employers’ contribution for their workers’ health benefits. Of note, monies paid to these agencies would still be tax-deductible.
Provisions in HAA allow for a transition from the current system over a two year period. Employers would increase their workers’ wages by the amount they had been spending on health benefits. After that two year period was up, employers wouldn’t have to pay employees the added wages, but instead contribute to the state agencies running the benefits purchasing groups. Here’s what’s puzzling about the NCB’s position; the amount employers would have to contribute is about 10% of the total cost of health benefits for their employees – a much lower percentage than they are now paying.
Seems like a pretty good deal for employers.
According to the Lewin Group’s assessment, “Private employer health spending under the HAA is reduced under the HAA by $309.8 billion, from $428.8 billion under current law to $119.0 billion under the program.”
There’s a much better reason for employers to maintain a role in the health benefits decision process than the ones claimed by the NCB – benefits directly impact worker productivity. If employers are removed from the process of vetting and selecting health insurance vendors, individuals would be responsible for choosing their carrier. Insurance companies would ‘win’ based on how cheaply they could provide insurance to individuals and families, and the less care delivered, the lower the premiums. I don’t see what would prevent those vendors from suggesting each and every injured or ill worker or dependent tried bed rest and over the counter drugs for two weeks, then an x-ray or basic lab test, and only then would they get to see a diagnostician. In fact that’s how group plans treat back pain, while under work comp care is much more aggressive as it is focused on getting that worker back on the job.
Over time, those insurers who best manage chronic conditions (which drive most health care spending) will have lower costs and therefore deliver lower premiums. But the key issue is this – health plan incentives under an individually-driven system are different from an employer-based system. Over the long term, payers would figure out how to best care for medical conditions, and over that long term, the ones who do it right will win. However, that may not be the case over the short term – wherein low price based on denial of care or very conservative care would ‘win’ in the individual market.
Of course, studies show the number of employers who actually understand the linkage between health benefits and productivity is identical to the number of Yankee fans living within two blocks of Fenway. Yes, employers are ignorant of the real reason they should be involved in health benefits. But that doesn’t mean we shouldn’t protect them from themselves.
The net is this. The Healthy Americans Act would save employers a shipload of cash. It would also allow them to focus on running their businesses and get them out of the health plan management business. Those are good things.
Yet the impact of health benefits on productivity is undeniable – and has to be part of the cost:benefit calculus.

I’d been meaning to get to the Center for Studying Health System Change‘s annual Wall Street comes to Washington meeting for several years – finally made it and it has been well worth the trip from Conn.
There were two sessions, one devoted to health plans and the other to providers. I’ll be reading thru my notes today and tomorrow to come up with a couple unified-theme posts. For today, we’ll focus on what health plans are doing to prepare for health reform.
Panelists opined that there are two issues health plans have to address – dealing with the newly-insured and preparing for the possibility that the employer will not be the locus of control for health insurance purchasing. Christine Arnold noted that Cigna, Humana, and Coventry recently entered the individual market, with Aetna expanding its role while also acquiring Schaller Anderson, a veteran of the Medicaid world. UHC has been in the individual business for a while (post purchase of Golden Rule) and also has significant experience in the Medicaid and special needs populations (high cost, high risk Medicaid folks).
The individual market expansion is a hedge against McCain’s plan becoming the law of the land. As I’ve noted, McCain wants to discard the employer-based health system and rely on the market to cover individuals (while doing nothing to prevent medical underwriting or exclusion of pre-existing conditions). As Arnold noted, the individual market won’t cover many more folks unless there is a requirement for guaranteed issue and a significant penalty for those who refuse to enroll (otherwise they’ll just wait till they get sick, then sign up).
For those who question whether an individual program will work, Bob Laszewski noted that the Feds already have experience with a large scale, community-rated guarantee issue voluntary benefit plan – Part D. In terms of enrollment, the plan has been extra-ordinarily successful (despite my prognostications to the contrary). In terms of financial rewards, the numbers are good for those sponsors that excluded many of the most popular drugs, and pretty dismal for the two biggest players – Humana and UHC. These companies cover all of the most popular drugs, so seniors interested in a drug plan found the plans that covered their drugs and then checked prices.
And promptly used their cards and that’s why UHC and Humana are getting killed by Part D.
So what’s the lesson here? Health plans need to understand the individual market, but they also need to remember that benefit design drives adverse selection, which drives higher loss costs. While selling individual policies may seem like good preparation for a possible McCain-type plan, examining the results of Part D may be more instructive.

There are few issues that do more to crystalize the balance between personal freedom and personal responsibility than motorcycle helmet laws.
Twenty states require motorcyclists to wear helmets, which means thirty do not. Opponents of helmet laws see it is a personal choice and often claim wearing a helmet increases visibility and situational awareness. Could be.
Proponents of mandatory helmet laws note that fatality rates appear to be higher in states without helmet laws; common sense indicates that falling off a bike onto one’s head without a helmet is likely to cause a more serious head injury than if one was wearing a helmet.
And there is an ongoing back and forth debate on the merits of statistical analyses and the results thereof, a debate that leads nowhere and gets folks all wrapped up in numbers, thereby obscuring the real issue – ultimately wearing a helmet is a personal decision, until you get a traumatic brain injury, whereupon it becomes a societal issue.
Here’s an idea.
Those who want to ride without a helmet have to buy insurance that reflects that decision. That insurance must provide comprehensive coverage for medical care for associated with the covered individual, including long term custodial care, with a really high limit – say $10 million, that is indexed to the medical CPI to account for inflation. Upon showing proof of coverage, they get a special license plate. Insurance companies take the risk, society does not get harmed due to the adverse consequence of a personal decision, and those who want to ride with their hair blowing in the wind are free to do so.
Oh, and they should be required to be organ donors as well.

GOP Senators better wear their cheap suits while marching in Independence Day parades this weekend, as it is tough to get tomato stains out of nice wool.
As Bob Laszewski pointed out, Republicans were boxed into a very tight corner by their Democratic colleagues after GOP Senators blocked a bill that would have prevented a drastic cut in physician fees. The maneuvering was ugly, as the Dems apparently backing out of an earlier deal that would have restored the cuts. Once the bill was overwhelmingly passed by the House, Senate Democrats were presented with a very big cudgel they could use to smack their Republican colleagues around. And with Congress heading out for the 4th of July recess, they have done so – publicly, loudly, and repeatedly.
Republican Senators now find themselves defending their vote to reduce physician fees by 10% (that’s not exactly what happened, but close enough for politics) while refusing to reduce payments to big insurers. Payments that most view as far too generous.
Politically, the picture could not be better for Democrats. Republicans will be vilified for their vote to cut payments to Dr. Welby, everyone’s kindly neighborhood physician while continuing to pay huge sums to big, faceless, bureaucratic insurers located far away staffed by nasty clerks who delight in forcing new moms to leave the hospital mere moments after giving birth.
And in an election year too.
There is a good bit of substance to the argument against continuing the massive subsidies for Medicare Advantage (MA) and Private Fee for Service plans (PFFS). These payments were supposed to be temporary, used to motivate health plans to set up alternative Medicare programs, to make it worth their while to get started. Now that many of these plans have been up and running for several years, they should be able to survive on their own.
And as far back as 2005, health plans in these programs were doing just fine. In an example of exquisite timing a GAO audit revealed health plans in the program made over a billion dollars more than they expected; $1.14 billion in extra profit.
Yet healthplans are fiercely lobbying to hold onto the subsidies, and their GOP allies are marching in lockstep – right off a cliff.
Health plans, and their Republican allies, now look like they won’t pull their heads out of the public feedbag, even when it is obvious they are getting fat on taxpayer-funded subsidies.
Politically, both the GOP and health plans are being stupid. There’s no other word for it. Not only is this politically suicidal, the longer term implications are obvious. Health reform is coming, and private health plans will want to play a major role. They will claim that the market is the solution (a point I have also been making).
Yet these free-market companies continue to argue they can’t compete with the government-run Medicare program without massive subsidies.