Mitt Romney's comment " I like to be able to fire people" has been turned against him by his GOP Presidential candidate opponents, with Gingrich and Rick Perry (remember him?) using it to illustrate Romney's "out of touchiness" with regular Americans.

Of course they're taking it way out of context. All who try to beat Romney will - a time-tested way to win is to use your opponent's words against her/him; if he makes it thru as the GOP Presidential candidate, expect the Dems to feature that prominently in key states.

But there's a deeper message here - yes, Mitt is out of touch - but no, not for the reasons cited by his opponents.

Romney clearly doesn't understand that most of us can't fire our insurance companies. A piece in the Columbia Journalism Review makes this point: Can you really fire your insurance company? The answer is that it's darn difficult even in Massachusetts--the land of Romneycare.

For those covered by large employer or union plans, what you've got is what you've got - and if we don't like it that's too bad. Of course, many large employers offer several choices, so these folks have better options than those of us who don't work for large employers - which happens to be most of us.

If your coverage is thru a small employer, your selection is most likely limited to one plan. While your employer probably shops the plan every few years, the only one who can "fire" his/her insurer is the employer. And that supposes the insurer doesn't fire the employer first by raising rates to the point where the employer has to move to another health plan.

Those of us (that includes your faithful scribe) who get their coverage thru the individual market face even more limited choices (depending on where you live). If your health status changes while insured, it will be very tough for you to get a new insurer to take you on - and if they do, expect to pay a lot more for a plan that doesn't cover your pre-existing conditions for some period of time (how long that period lasts depends on your state).

The net? While we'd all love to be able to fire our insurance company, most of us can't.

And under Mitt's health reform plan (such as it is), your ability to get coverage would be even more limited.

Of course, Mitt may have been paying a compliment to his potential opponent in the fall Presidential race - under PPACA (health reform), individuals can fire their insurance company, small employers may well have more choice (and the cost of that insurance will be less for many employers).

What does this mean for you?

Mitt is definitely out of touch - we can't fire our insurance companies, but they sure can fire us.

There's lots more detail on Federal limits on pre-ex here.

Posted by Joe Paduda at 7:37 AM | Link to this post | Comments (1)

Among the howls of indignation coming from anti-health reform legislators and more strident Presidential aspirants one can often hear the outrage about "faceless government bureaucrats" rationing medical care to our elderly.

(we'll leave aside that many of the howlers are the same ones screaming about out of control Federal entitlement spending...for now).

Turns out those faceless bureaucrats will likely never be seated, as all 15 members of the Independent Payment Advisory Board (IPAB) have to be approved by the Senate. Given the current toxic environment for appointees (see Donald Berwick et al), it's highly likely Senators opposing health reform will do anything in their rather considerable power to block all appointments.

That's unfortunate indeed, as the Board is one of the few real cost saving mechanisms we have. Here's a brief outline of their responsibilities excerpted from an excellent piece in Health Affairs.

- if the Medicare chief actuary finds that the growth rate will exceed [a relatively low] target, the actuary must determine how much Medicare spending growth should be reduced. IPAB will then have to recommend specific steps that will curb the rate of growth in Medicare spending.

- The total amount of the Medicare savings IPAB can propose, and the type of savings, are both limited by law. The total amount of these savings cannot exceed 0.5 percent of total Medicare outlays in 2015; 1 percent of outlays in 2016; 1.25 percent in 2017; and 1.5 percent in 2018 and thereafter.

- IPAB cannot propose any recommendation to "ration" care; raise revenues; increase beneficiary premiums or cost sharing; restrict benefits; or alter rules for Medicare eligibility.

- The law directs the panel to give priority to measures that extend the solvency of the program, improve beneficiaries' access to care, and improve the health delivery system and health outcomes, among others.

- IPAB can propose savings in any part of Medicare, except hospital payments in the short run. [pharmacy is also excluded, much to my dismay]

- Congress has the option of passing alternative legislation, but it must achieve the same results in terms of the magnitude of savings. If Congress does not act, the secretary of HHS is required to implement IPAB's proposals by August 15.

And there you have it - an advisory board that is tasked with doing what Congress can so obviously not do - control Medicare cost growth - without rationing care, reducing benefits, or changing eligibility.

What does this mean for you?

Is there a better way to achieve real cost control in Medicare that has a chance of becoming signed legislation?

Posted by Joe Paduda at 4:04 PM | Link to this post

There's been one consistent finding among all the polls and surveys seeking opinions on health reform: most respondents don't know much about it and there are many misperceptions and misconceptions about reform.

The good folk at Kaiser Family Foundation have put together an interactive tool to help remedy that situation. The YouToon application shows how reform will impact employers - large, small, and mid-sized; individuals and families, the well-off, middle class, and poor.

It's easy to understand and a quick read too.

There's a more "you-specific" tool here that is focused on individuals and families, not employers.

And the Washington Post has an interactive site where you can plug in details on income, family size, source of insurance, and marriage status and get specific info on how reform affects you - specifically - and what, if any, tax impact it has.

Posted by Joe Paduda at 7:39 AM | Link to this post

It looks like Congress may well include a two-year fix for Medicare physician reimbursement in a sort-of catch-all bill focused on extending the payroll tax cut.

At least that's the way it looks this morning.

The Medicare SGR formula/process was first implemented in 2000, intended to establish an annual budget for Medicare's physician expenses and thereby better control what had been steadily increasing costs. Each year, if the total amount spent on physician care by Medicare exceeded a cap, the reimbursement rate per procedure for the following year would be adjusted downward.

And for ten of the last eleven years, reimbursement - according to SGR - should have been cut, but each year (except 2002) it was actually increased, albeit marginally. The result is a deficit that is now about 300 billion dollars, a deficit that we're carrying on our books, and, by the way, is not addressed in the bill currently under consideration in Congress.

The reason the deficit is still there, and still growing, is simple - fixing SGR permanently would require acknowledging the deficit and thereby adding it to the total debt.

But not fixing SGR may well be worse, as it is a fatally flawed cost containment "approach". The SGR attempts to use price to control cost. The complete failure of the SGR approach to control cost is patently obvious, as utilization continues to grow at rapid rates. This was a problem four years ago, and its done nothing but get worse. Not only does the RBRVS/SGR approach contribute to cost growth, it also 'values' procedures - doing stuff to patients - more than listening to them (I realize this is an unfair comparison, for more click here).

There is at least one Senator willing to acknowledge the accumulated deficit - Sen Jon Kyl (R AZ).; Kyl is proposing using the "savings" from ending the engagement in Iraq and Afghanistan to offset the accumulated deficit, thereby allowing Congress to come up with a permanent fix. Kyl's backed repeal of SGR before, notably when he joined with Sen Majority Leader Harry Reid (D NV) to push the Super-Committee to include the fix in their work.

What does this mean for you?

Fixing SGR for two years will remove this political dynamite from the landscape till 2014 - and give some stability to provider prices based on Medicare (which applies to lots of group and workers comp contracts).

Posted by Joe Paduda at 6:45 AM | Link to this post | Comments (1)

Now that Don Berwick has returned home from Washington, what's to become of Medicare?

The former head of the Centers for Medicare and Medicaid, widely acknowledged as one of the brightest and most effective health care executives in the nation, was only there for 17 months, a victim of politics. That's sad, disheartening, and deeply concerning.

Here was a guy whose life's passion is to improve the delivery of health care; one who founded and turned the Institute for Healthcare Improvement into one of the most effective agents for change in the nation; who, by all reports was doing a masterful job at CMS changing the culture to one of continuous improvement in the quality of care delivered while reducing the cost of that care.

Yet Dr Berwick couldn't get approved by the Senate. He was rejected by Republican Senators who vilified him for such blatant transgressions as:

- complimenting one aspect of the British National Health Service (while ignoring Berwick's pointed criticisms of NHS),

- explicitly acknowledging the US health care system rations care, and calling on politicians to acknowledge that fact as well (a quote remarkably similar to one from GOP Rep Paul Ryan)

These attacks were misguided, politically motivated, and in most instances relied on taking highly selective, out-of-context quotes to misrepresent what Berwick was actually saying.

For those unfamiliar with IHI, the basic premise was to take improvement techniques learned in industry and seek ways to apply them to health care. IHI has had a major impact on all areas of health care; their Improvement Map is widely used and demonstrates the Institute's focus on bringing quality improvement - carefully thought out and rigorously evaluated - to health care.

What bothers me - a lot - about this is politicians decided that demagoguing and scoring political points was more important that reforming Medicare.

What Don Berwick was trying to do was exactly what needs doing - reform CMS to improve quality and strip out unnecessary cost. If we are ever to get health care costs under control, we have to do so by rationalizing what services get delivered, in what setting, by which providers, to which patients. CMS can be, and under Berwick has been, an enormous force for positive change.

The good news - to the extent there is any - is Berwick's replacement is an accomplished, effective health care exec with a long history of achievement. Marilyn Tavenner.

Here's a quote that bodes well for her tenure:
"The only way to stabilize costs without cutting benefits or provider fees is to improve care to those with the highest health care costs."

Here's hoping Ms Tavenner is actually allowed to do just that.

Posted by Joe Paduda at 7:16 AM | Link to this post | Comments (2)

If health reform is overturned, 20% of Americans may be without coverage in 2020, yet we'll be spending 20% of our GDP on health care.

That's David Blumethal's prediction in today's New England Journal of Medicine.

Blumenthal walks thru three potential electoral scenarios: status quo with the Democrats retaining the White House and Senate (ranked as unlikely); the GOP winning the Senate, House, and the Presidency; and what may be the most likely outcome of November's elections: President Obama re-elected with a GOP-dominated Congress.

If the GOP wins the trifecta, ACA is dead, and at least at this point, there doesn't look to be any Republican alternative to health reform that would fill the "replace" part of the "repeal and replace" slogan. Blumenthal notes that after blasting health reform for the last several years, a GOP administration and Congress would find it difficult to then legislate a new approach.

Moreover; " the traditional Republican approach to covering uninsured Americans [is] an individual tax credit subsidizing purchases of private health insurance funded by ending the tax exemption for employers' contributions to employees' health insurance. Many employers and employees oppose this idea, and it would be difficult to pass without a major political fight. Historically, Republican presidents have been reluctant to take on the political costs of comprehensive health care reform, and the last thing a new Republican president will want is to fall on the political sword that impaled his predecessor."

So, what does this all mean?

Repealing health reform will undoubtedly lead to more people without health insurance. My best guess is we're somewhere in the 52-53 million range now, an all-time high due to the recession and ever-higher employer premiums coupled with an individual market that is essentially closed to all but the most affluent, healthiest Americans. Without limits on medical underwriting, it will become increasingly difficult for those with pre-ex conditions to get coverage in the individual market - and in many states, the small employer market will be severely restricted as well.

Blumenthal predicts as many as 65 million Americans will be without health insurance in 2020 - eight years out. I think he's optimistic.

As more go without insurance, cost-shifting to those with coverage will increase, driving up their premiums even faster. The vicious cycle will accelerate, and as costs rise, employers and families will drop coverage, dumping more cost onto the ever-smaller population of insureds.

I've been predicting family premiums will top $30,000 this decade. If ACA is repealed, that timetable will accelerate, and perhaps then America will wake up.

Then again, probably not.

Thanks To Merrill Goozner for the tip.

Posted by Joe Paduda at 12:22 PM | Link to this post | Comments (7)

You know them - the friends and colleagues without work, the folks who've been looking for a job for months and months. Perhaps they've sort of dropped out of sight, embarrassed about their inability to find work. Maybe you stay in touch, passing on leads and dropping an email or call occasionally to check in.

Or this might be you; laid off from what looked to be a solid job, terminated as a result of a corporate directive or faceless superior's decision or lack of business or tax revenue.

Whether it's personal or professional, there's something very different about this economic recovery. Just beneath the surface of the Occupy Wall Street and Tea Party movements is a palpable fear, a desperate sense that "I could be next". This isn't about assigning blame or lamenting missed opportunities or decrying failed economic policies, it's about trying to understand what's happening, why, and what we can do.

Because there's something structural going on, something much deeper than we've been able to explain.

We know there are far more people looking for work than jobs available for workers - according to WCRI's Rick Victor the total number of jobs we're going to create over the next decade is about 3.5 million, matched against around 25 million potential workers. Between the newly unemployed (a declining number, thank goodness), the long-term under-employed (those working fewer hours or at part time jobs and/or for lower wages), and long-term unemployed (those out of work for six months or more) and those with some partial disability that prevents them from working at their past position and limits their attractiveness to new employers, the population without work today totals around 15 million.

While I'm far from a labor economist, there are a few trends I've been following that provide some insight into what's happening.

1. State and municipal workforces are declining, disproportionally hitting minorities and removing "middle class" jobs with excellent benefits from the available supply. This trend is well-established, having begun in mid-2008.

2. Construction - especially housing construction - continues to suffer, and will likely not recover. As people move from exurbs into close-in suburbs and back to cities, there's little demand for - and a huge oversupply of - single family tract homes.

3. Increasing automation - in the name of efficiency and higher quality in manufacturing - has sucked huge numbers of jobs out of the economy (Five million over the last decade alone, driven in large part by automation). Factories that used to need hundreds of workers now need a few dozen, and the jobs that are gone are usually at the middle skill levels - above laborer but below highly skilled machine operator.

4. A woefully low level of investment in infrastructure - whether it be new or maintaining existing transportation, energy supply and communications - means there are few jobs for out-of-work construction workers, and low demand for machines and materials needed to build and maintain infrastructure.

A deeper discussion of trends and a utopian vision of a solution comes from a well-regarded sociologist, Herbert Gans, who writes "the current jobless recovery, and the concurrent failure to create enough new jobs, is breeding a new and growing surplus pool. And some in this pool are in danger of becoming superfluous, likely never to work again."

So, what does this mean for health care?

Well, if you don't have a job, you aren't going to have employer-based health insurance. And you probably can't afford COBRA, so you are likely going to either a) go without insurance, or b) enroll in Medicaid. If it's 'a', then if and when you need health care, the providers are going to have to charge others more to pay for your needs.

If it's 'b', then taxpayers are going to have to pay more for your care, while providers are going to charge other payers more to make up for the shortfall between what it costs to provide that care and what Medicaid pays (it's not this simple but close).

If you're an injured worker due to an occupational injury, it is going to be hard to find a new job - which will add cost due to an extended disability duration.

I'm no Luddite, but I am a realist. Unless we get our economy moving - which will require heavy investment in infrastructure - we aren't going to see much improvement in employment over the near to mid term.

Posted by Joe Paduda at 5:49 AM | Link to this post | Comments (2)

The chances that the Congressional Super-Committee will achieve its stated goal of cutting $1.5 trillion from federal expenditures over the next decade are fading fast.

What happens when the six Republicans and six Democrats can't agree on cuts?

Big - really big - increases in costs for health plans and workers comp payers. I'll get to that in a minute, but first let's walk thru what happens if the Supers can't agree.

Theoretically automatic, almost-across-the-board cuts in military, entitlement program, and ongoing operational budgets go into effect 1/1/2013.

Don't bet on it.

The threat of across-the-board cuts was supposed to motivate/force the Supers to hammer out their differences and get to a solution. All reports indicate that isn't going to happen, as the Republicans refuse to contemplate any form of tax increases and Democrats, who believe they've given enough on the entitlement side, refuse to go further unless the GOP budges on taxes.

The looming threat of across the board cuts has become a good deal less likely to happen as politicians on both sides acknowledge that the threat is just that - a threat - and not much more. As with any bill passed by Congress, the threat can be overturned when/if Congress passes another bill overturning the original law.

That's probably what the GOP members are banking on. If they are able to maintain control of the House, take over the majority in the Senate, and win the Presidency in next fall's elections (a distinct possibility), Republicans will be able to do what they wish. I'd expect immediate action to rescind cuts in military spending, extend the Bush tax cuts for top earners, and slash entitlement spending.

From a political perspective, it's hard to see the GOP members of the Super Committee agreeing to ANY agreement that could be construed as increasing taxes. And that's exactly what is required to reach a deal with their Democratic colleagues.

So, what does this mean for health care?

My sense is the biggest short term effect may well be on Medicare physician reimbursement. Remember, there's no solution on the table for the 27.5% cut in Medicare physician reimbursement scheduled to take effect in exactly six weeks. There's little focus on this as all eyes are on the Supers, but that will change in early December as the AMA marshals its forces to attack Congress. I don't see a solution before the end of the year, so get ready for an increasingly nasty and public screaming match as politicians of all stripes seek to blame someone else.

If this gets really vitriolic, we could be looking at massive physician 'dis-enrollment' from Medicare.

Both parties will try to develop short term solutions to kick the can even further down the road, but the SGR issue (the shorthand term for Medicare's physician reimbursement 'methodology'), as big as it is, is nowhere near as significant, nor as important politically, as the budget battle.

What does this mean for you?

If the cuts go into effect, cost-shifting to private payers is going to explode from today's already outrageous level to one that will drive trend rates through the roof.

Posted by Joe Paduda at 7:34 AM | Link to this post | Comments (1)

There's been much discussion of the impact of the health reform bill - the NFIB and GOP Presidential candidates claiming the ACA has already caused insurance premiums to climb, while others are deriding President Obama for his statements that ACA would reduce premiums.

What's true, and what's BS?

One way to separate the fertilizer from the poop is to turn to independent sources, such as FactCheck. Another is to go back and see what the President actually said reform would do.

First, FactCheck. In their view, "The [health reform] law has caused only about a 1 percent to 3 percent increase in premiums, according to several independent experts."

That finding is consistent with reports from other sources, and is based on the changes already in place due to ACA - no upper monetary limits on benefits, covering children to age 26 with no pre-ex exclusions, and no cost preventive care. There's lots of sources in the link above that verify the 1 - 3 percent figure, including former Bush appointee Gail Wilensky.

Now on to President Obama's blown promise that reform would reduce premiums. Let's see what he actually said:

"On Monday I met with representatives of the insurance and the drug companies, doctors and hospitals, and labor unions, groups that included some of the strongest critics of past comprehensive reform proposals. We discussed how they're pledging to do their part to reduce our nation's health care spending by 1.5 percent per year. Coupled with comprehensive reform, this could result in our nation saving over $2 trillion over the next 10 years, and that could save families $2,500 in the coming years -- $2,500 per family."

I'd note that the President was making two points;

1) reform and cost reductions from stakeholders would reduce spending by 1.5 percent. Not reform alone.

2) this statement indicates the cost reduction, when spread across every American family, would equate to a reduction of $2500 per family over ten years.

Obama did NOT say that family premiums would drop by $2500 per year, and in his other statements, the President made it clear reform would reduce the RATE OF INCREASE by 1.5 points, not total spending.

That said, it is still premature for any conclusions re the impact of reform on health care premiums, other than the one noted above - initial, already-implemented measures have increased premiums by 1 - 3 percent.

That still doesn't address why premiums went up nine percent. And I'd argue that the data indicates the differential has much more to do with insurers' desire to generate margin than any real increase in underlying costs.

Posted by Joe Paduda at 8:40 AM | Link to this post | Comments (4)

To hear the current GOP presidential candidates describe it, former Gov. Mitt Romney's support for the 2006 Massachusetts health care reform initiative was the worst thing since the Spanish Flu.

We can chalk a lot of the hyperbole up to campaigning, but the critics raise some good points.

First, costs have gone up. That's not surprising as more people are covered, many of whom didn't have coverage before and therefore likely had medical issues that, once they were insured, they addressed. Moreover, Mass' per-capita health care costs have been higher than the national average for a long time - this is a structural issue as much - if not more - than a result of reform.

Second, the individual mandate turned out to be a rather unsatisfactory 'solution'. I'd argue that the problem with the mandate's design was two-fold - the penalty for failing to obtain health insurance wasn't stiff enough to drive high enrollment and the individual market was hammered by adverse selection. Some may argue that actual participation results may indicate my pessimism re the low penalty was misplaced.

In the individual market, people could enroll in, and then drop coverage at any time, resulting in some pretty serious adverse selection issues. Someone would need care, sign up for insurance, get the treatment, then stop paying premiums. This was a big problem in the individual market (and I'd argue supports my point about the inadequacy of the penalty).

There's no question that the big problem is the cost issue - especially in today's tough economic environment. (I'll leave aside the 'should government be this activist' argument for now)

There are some pretty interesting solutions to the cost problem emerging in Massachusetts, solutions with broader implications for the country.

A couple years back the Mass Blues set up a program basing reimbursement in their HMOs in part on quality; this plan covered over a half-million members and looks to be expanding. Known as an Alternative Quality Contract, the program involves:

"A global, risk-adjusted, fixed payment per patient, with annual increases in line with inflation; and

Performance-based incentives linked to nationally-recognized measures of quality, efficiency and patient experience."

There's a pretty thorough description of the program in the link and it's well worth reading.

With several years' experience on which to build, Massachusetts' politicians, health plans, and providers are gradually adopting new business practices, pricing models, and reimbursement methodologies designed to address long-term system costs. The legislation under consideration would put global payments in place for about a quarter of Massachusetts residents covered by Medicaid and state-subsidized insurance and state employees.

One of the more promising steps is a legislative initiative to enable/encourage global payments to provider organizations instead of the current fee-for-service reimbursement system. The concept, which is associated with Accountable Care Organizations, is based on the idea that incentivizing physicians and other providers to maintain and improve the health of members is more cost effective than paying them for each visit and procedure.

While relations between the dominant health care systems and insurers have been pretty combative, there appears to be a thaw in the air. Partners Healthcare, the largest system in eastern Massachusetts, just signed on to the program in a deal that appears to be a major win for cost cutters.

Lest we forget, the Massachusetts reform plan has achieved remarkable success in expanding coverage - a mere two percent of residents are uninsured along with less than one percent of kids.

What does this mean?

Mass' legislators decided to pass reform first and tackle costs later. There's no question costs have gone up, in part driven by expanded coverage. There's also no question that providers and insurers are working together to "bend the cost curve" and their efforts look promising for both lower trend and better care.

Are there lessons we can take for the country as a whole?

Yes. Unsurprisingly, expanding coverage increases costs. But over time, stakeholders, prodded by intelligent legislation and forced to compete not on the basis of risk selection but quality and cost, can and will figure out how to control costs.

Posted by Joe Paduda at 6:55 AM | Link to this post | Comments (1)

The latest meteor crossing thru the GOP presidential race firmament is Herman Cain, the Godfather of pizza.

Only in America.

As difficult as it may be, I'm actually going to attempt to take Cain seriously. Leaving aside his bizarre tax plan, one that would actually dramatically increase taxes on consumption smack dab in the middle of an economic recovery, (that's been adequately eviscerated by others far more knowledgeable than I in the implications of tax policy) I'll examine Cain's rather thin health care resume and policy plans.

That said, one should note that the 9-9-9 is just an interim step in Cain's three-step process, which concludes with a flat 30% tax on all goods and services - and no other taxes of any kind.

Cain does have a long track record on health care issues - he led the National Restaurant Association back in the early nineties and was a vocal opponent of the Clinton reform efforts. That said, his website and other public statements are long on sound bites and short on substance.

He advocates:

- treating employer and individual contributions for health insurance the same for tax purposes

- repealing the Accountable Care Act and replacing it with expanded tax credits for personal savings accounts for health care

- tort reform

- switch from the current Medicare system to some type of voucher for Medicare - how this works is uncertain as there are precious few details, but when you end payroll taxes, you end Medicare...

So what would happen with Cain as President?

Well, health care services and products and procedures and treatments would be taxed at nine percent. Yep, everything from appendectomies to pills, proctological exams, psychological counseling, and PET scans.

Next, Medicare would disappear to be replaced by some form of voucher, where people would try to by coverage from private insurers on the free market. How this would work is...uncertain. I'm not sure how many private insurers would jump at the chance to provide coverage to senior citizens with Alzheimer's, cancer, heart disease, or osteoporosis...

What did I just write?

I should have said NO private insurers...

That's about all we can conclude at this point. Until - or rather unless - we get more detail from the Godfather of Pizza, there's just not enough substance to his soundbites.

Posted by Joe Paduda at 8:47 AM | Link to this post | Comments (4)

The announcements this week that the United States Preventive Services Task Force has decided healthy men shouldn't get the P.S.A. blood test is long overdue, but nonetheless very welcome news.

The test, which ostensibly screens for prostate cancer, is notoriously inaccurate, delivering a high rate of false positives and false negatives. And, men who get these tests have no greater chance of surviving the test than men who don't.

Seventy percent of positive PSA tests are false positives; the patient does not have prostate cancer. Worse, these false positive tests often result in more tests and treatments that then result in impotence and incontinence and in some cases, premature death. According to the chair of the Task Force, "This test cannot tell the difference between cancers that will and will not affect a man during his natural lifetime. We need to find one that does."

Over a twenty year period, about a million men got prostate surgery, radiation, or a combination as a result of a PSA test. Of those, about 5000 died soon after surgery, and from 10,000 to 70,000 suffered serious complications, and 200,000 to 300,000 were incontinent, impotent, or both. The dimension of the problem was starkly illustrated when the test's developer called its widespread use "a public health disaster."

There are passionate and dedicated folks who will argue vehemently that PSA tests are necessary and save lives. Unfortunately, many have become part of a campaign financed almost entirely by the pharmaceutical industry. I engaged in a dialogue for some time with one of them, and despite my best efforts, his conclusion is that the test saved his life and therefore others should get it as well.

It's one thing to talk population health and an entirely different thing when one is talking about the health of one's family or self. Unfortunately, well-meaning people often confuse the two - and this is what has led them to advocate for a test that is:

- costly (PSA tests range in cost from $70 - $200, plus the office visits, or about $3 billion a year just for the tests in the US);

- results in surgery that kills about five thousand men over a twenty year period and

- causes impotence and/or incontinence in 20% to 30% of patients

Some will argue that more recent developments in surgery have delivered better results - I'd say it's too early to tell, which is why the Task Force used a database that would allow them to see effects over the long term.

What's the net?

PSA testing is a great example of business masquerading as good medicine, funded by businesses who profit from the test, who arguably, are partially responsible for the deaths and suffering of thousands of men.

It's also a great lesson on why we need more science education in our schools, so so many of us would actually understand what a disaster the PSA test has become.

Posted by Joe Paduda at 7:37 AM | Link to this post | Comments (8)

I'm not the only one befuddled by the disconnect between private health insurance premiums and costs - you've probably seen the headlines screaming about health insurance costs going up, but you may have missed the way-back-in-the-business-section blurb about underlying costs moderating last year.

For some reason, most of the main stream media, including the editorial writers at the New York Times, are missing the real story here.

According to today's NYT, the main reasons costs went up, "analysts say, were increased medical care costs and higher profits for insurance companies, which charged a lot more in premiums than they paid out for medical services."

I don't see how an underlying medical trend of one percent, coupled with another point and a half increase due to new requirements from health reform, could possibly be considered a "main factor", especially when together they accounted for less than a third of total overall premium increases of nine percent.

Reform's contribution

Some are yowling about the impact of the Accountable Care Act on health insurance costs - but their noise is driven much more by ideological positions and not careful analysis.

The two parts of ACA that affected premiums in 2011 a) required insurers to maintain coverage on children up to age 26; and b) required most insurance plans cover preventive services like cancer screening and immunizations at no cost to patients. About 2.3 million 'new' young adults were covered by their parents' policies and 28 million workers and dependents got the preventive care coverage.

Why aren't medical costs increasing?

My sense is the explosion in high deductible plans is, indeed, keeping a lid on health care costs. Many of the folks with these plans don't have enough money in their health savings accounts to cover those deductibles, which are often about $5000. Thus, while they 'have insurance', they don't have access to care. They are putting off tests and routine visits, not buying their medications, holding off on elective surgery, and otherwise delaying care. Undoubtedly some of those foregone services will not affect their health status, but it is also highly likely that some people will find their delay and deferral has quite negative consequences.

So why are premiums up so much?

Simply put, because there's nothing (except the ACA's medical loss ratio requirements) preventing insurers from increasing premiums as they see fit. Remember for-profit health plans' primary obligation is to create and protect wealth for their owners. That's not a value statement or objection, but a confirmation of reality. Not for profit health plans have to generate positive cash flow as well, but most of their providers are 'for profit' and therefore looking to maximize their earnings.

As long as employers are going to provide coverage for employees and help pay the premiums, why wouldn't insurers increase premiums? Sure, every year more and more employers drop coverage, but that's going to change in 2014 when they are required to offer insurance (well, sort of).

What looks increasingly likely is more health plans will hit the maximum medical loss ratio threshold, wherein they will have to refund money to policyholders. But that's of little comfort to employers and families facing premiums up yet another nine percent...

What does this mean for you?

Family premiums will be over $30,000 a year in eight years.

Merrill Goozner has another take on the issue, one well worth considering.

Posted by Joe Paduda at 7:07 AM | Link to this post | Comments (3)

Exactly what role should government have in health care? What does Rick Perry think? And more importantly, what has Perry done?

There's a good deal of evidence that Perry used his position and influence to award millions in taxpayer dollars to his financial supporters, even when those awards were not in keeping with conservative ideology or didn't make much business sense.

According to a lengthy and well-researched piece [sub req] in the New Republic, Perry's been a big supporter of health care ventures, especially when those ventures are tied to people who've been big supporters of Perry. That's not unusual: politicians help those who help them.

What may be a bit unusual is the extent of Gov. Perry's use of taxpayer funds to support selected health care entrepreneurs, and the abysmal performance of several of those lucky entrepreneurs. A couple of examples (there are more) are instructive.

Perry awarded $50 million of taxpayer funds to the Texas Institute for Genomic Medicine (TIGM) at his alma mater, Texas A&M. Most of the $50 million went to supplies and software from Lexicon Genetics - a company in which one of his major contributors was an investor. After several years, the TIGM has little, if anything, to show for the investment; it has ten (10) employees who appear to spend much of their time doing not much. (When the President of Texas A&M complained about the ongoing annual $2 million expense, she was summarily dismissed by the Perry-controlled Board of Regents)

Another $50 million went into the National Institute of Therapeutics Manufacturing (again at the direction of Perry and his associates, and also at Texas A&M). The NITM is still in development, and is closely allied with several of Perry's financial supporters.

Then there's the furor over Perry's support for mandatory HPV vaccines for Texas' girls, a furor generated in part because Perry's former chief of staff was lobbying for Merck, the vaccine's manufacturer and direct contributor of some thirty thousand dollars to Perry over the years plus perhaps a few hundred thousand more via other channels. http://www.washingtonpost.com/politics/perry-has-deep-financial-ties-to-maker-of-hpv-vaccine/2011/09/13/gIQAVKKqPK_story.html

Finally, one would do well to remember that Perry, who advocates repeal of the health reform bill and leaving reform to the states, presides over the state with the highest percentage (28%) of people without health insurance. Over a quarter of the state's population has no coverage.

That's eleven points higher than the national average.

So, what?

Perry doesn't seem to be a conservative as much as a politician of the old school; rewarding friends and financial backers and hammering enemies regardless of their political ideology.

Posted by Joe Paduda at 7:03 AM | Link to this post | Comments (4)

Merrill Goozner's piece on the FDA's decision to pull a stent from the market after it was shown "2 1/2 times (14.7%) more people either died or had a repeat stroke after receiving the stent than those who received drugs and counseling (5.8%)." shows how science can - and should - be brought to what is all-too-often the "art" of medicine.

The stent was approved based on a rather limited study by manufacturer Stryker, but fortunately only approved for use if it that use was as part of an evaluative study.

That study was stopped early due to the higher death/repeat stroke rate; unfortunately it appears that use of the stent may have played a role in patients dying and/or having more strokes.

The good news is the stent is, or soon will be, off the market. The bad news - outside of that delivered to the families of those who died possibly as a result of the stent - is that this is actually "news".

The reason this device was pulled from the market is because it was only approved on a limited basis by the FDA, who could pull that approval relatively easily. For devices and drugs and treatments already approved by, or not subject to approval by, the FDA (or any other regulatory authority) it is much more difficult to get them off the market. And it's impossible for Medicare to factor effectiveness into payment.

If we are to gain any measure of control over health care costs, we have to start by paying for performance - not just for docs, but for drugs and devices as well. One wouldn't think that would require the proverbial "Act of Congress', but it does.

Perhaps the Super-Committee can decide that one way to attack the deficit is to stop paying for unproven treatments, or at least stop paying so much if the treatments aren't proven to be effective. Can you imagine what that would do to health care? Actually paying for good stuff rather than paying for anything that gets prescribed for/inserted into/done to a patient?

Posted by Joe Paduda at 12:40 PM | Link to this post | Comments (1)

Everyone seems convinced there's a ton of fraud in Medicare. And they may be right. What there wasn't, for far too long, was much emphasis on finding and prosecuting the criminals stealing from taxpayers by defrauding Medicare.

Well, looks like that's changed. This 'story' was first broken a week ago by Merrill Goozner, one of the more insightful observers of the health care scene. Here's a piece from an OIG release quoted in Merrill's post:

"Since their inception in March 2007, [CMS anti-fraud] Strike Force operations in nine locations have charged more than 1,000 individuals who collectively have falsely billed the Medicare program for more than $2.3 billion."

CMS' anti-fraud efforts are finally getting some press. For instance, prosecutions are up 85% over last year. Compared to five years ago, there's been a 71% increase. It takes quite a bit of time to develop a prosecute a health care fraud case, as laws and regulations are quite complex and often confusingly contradictory; following the paper trail is difficult at best; and company ownership and fiduciary responsibility usually hard to identify and even more difficult to prove; thus it's no surprise it's taken a couple years for the Obama Administration to start to produce major results.

According to the piece in FierceHealthcare;

"The government prosecuted 903 cases of healthcare fraud, up 24 percent from last year, reports USA Today. The increased numbers come from more investigations under the close attention of the Federal Bureau of Investigation (FBI) and the Medicare Fraud Task Force, as well as the participation of whistleblowers. The FBI recently changed their focus to target criminal enterprises, including hospitals. In 2010, the government paid out $300 million to whistleblowers."

Health care geeks may recall that the PPACA was supposed to deliver $4.9 billion in savings over ten years due to better controls over fraud and abuse. Looks like that was a 'gimme', as the GAO reported savings in 2010 alone were $4 billion.

These prosecutions often netted criminals defrauding commercial insurers as well as we taxpayers - one case in Puerto Rico nailed hundreds of crooks who stole $7 million from AFLAC.

Another CMS-led effort earlier this year resulted in indictments of 111 individuals for allegedly defrauding Medicare of $225 million.

That's all to the good - perhaps as much for the 'Sentinel Effect' as for catching these thieves. Others who may be tempted to steal from the Feds or commercial payers may be a bit de-motivated when they hear about prison terms and hefty fines levied against others with the same idea.

There's no question Medicare is a prime target for crooks large and small. After all, it's a program that pays out billions each year, so there's bound to be fraud. Commercial health plans, workers comp insurers, and other payers are certainly vulnerable and often victimized as well. Here's hoping the recent press attention leads to even more attention on fraud, and more convictions as well.

What does this mean for you?

Are your SIU people tied into the CMS Strike Forces, sharing information and collaborating on investigations?

Posted by Joe Paduda at 8:20 AM | Link to this post

In MCM's ongoing effort to keep our loyal readers apprised of things that will affect their businesses, it's time to remind one and all that the Super-Committee's budget cuts are due in less than three months.

Yep, in 83 days or so, six Republicans and six Democrats are supposed to come up with (at least) $1.2 trillion in cuts. If they don't, automatic cuts will be triggered beginning in 2013, including a two percent cut in Medicare (and that's assuming the pending SGR cuts hit on January 1...)

Couple of key points that bear mentioning;

1. the $1.2 trillion is spread over the next decade. Cuts could be back-loaded to minimize political fallout - and probably will be (if the group reaches agreement)

2. the automatic cuts take effect January 2013 - a lifetime away in political terms. Congress could do something else to prevent some of the automatic, or Group of Twelve cuts from occurring, modify the cuts, or pass a "fooled you, we were just kidding" law.

Back to the committee. As we've noted, it's difficult to see how they can hit their target unless health care is addressed.

There's no consensus on whether the twelve will manage to reach consensus or not. With an election year coming up, it's hard to see how the GOP's folks will agree to any kind of revenue increases, while Dems have been quite public about their intent to prevent cuts to entitlements. And if they don't, as Steve Davis noted in an online piece on AISHealth, "Across-the-board reductions in Medicare payment could translate to more cost shifting by providers, which could lead to higher premiums charged by commercial plans and/or increased cost shifting onto employee-based coverage".

That said, there's some hope that statesmen-like traits will somehow take hold in the group and we'll actually see them arrive at a grand bargain. If such a happy event occurs, expect to see:

- means testing premiums for Medicare

You'll note these are all focused on Medicare. Medicaid is unlikely to be cut dramatically - but then again, we just don't know.

This all supposes the SGR cuts to physician reimbursement actually take effect on January 1 2012 - which is about as likely as our house getting power this week (no chance at all). If it doesn't, there's another $300 million or so in cuts that will have to be made.

What does this mean for you?

Watch carefully what happens with the Super Committee...It WILL affect you.

Posted by Joe Paduda at 5:54 AM | Link to this post

With nine of the twelve spots on the Super-Committee taken, it looks like energy, tax policy, and political connections (now there's a surprise!) are well-represented. What isn't is expertise in health care, Medicare, or Medicaid.

With House Democrats scheduled to name their three panelists by Tuesday, it's possible that someone with real knowledge of healthcare policy will be included, but regardless of who Nancy Pelosi names, there won't be someone from the GOP side who's got deep experience in the issue, someone(s) who could engage in a real discussion of the issues, represent the other side's views, and act as the 'in-house expert' and counsel the other members of their party.

With Medicare and Medicaid likely to account for over a quarter of the Federal budget, the absence of deep health care policy expertise is rather stunning.

The implications are well worth considering.

When one doesn't understand the inner workings of a system, sector, industry, or business, there is a tendency to believe in the power of simple solutions to achieve desired results. For example, economists tout the power of 'consumerism' to control health care costs, failing to understand the negative impact of high deductibles on health status due to foregone treatment. That's not to say we don't need a stiff dose of personal responsibility if we're going to control health care utilization, but there's good - and very bad - ways to inject that personal responsibility.

Price controls are another potentially problematic measure. The SGR (mechanism designed to control Medicare physician reimbursement) has had two obvious downfalls; physicians increase utilization to offset declines in procedure-based reimbursement and politicians kowtow to powerful interests when those interests are threatened.

When those simple solutions are rolled out, the long-term effect can be exactly opposite of the desired result.

For example, back in 2004, California implemented a very low fee schedule for drugs dispensed to workers comp patients - a fee schedule that cut reimbursement by around 40%. Yet costs - which are driven by the price of the pill times the number of pills and the type of pills (e.g. OxyContin v ibuprofen) increased 72% over the next few years.

Why? Anecdotal evidence suggests that pharmacy benefit managers could no longer afford to provide clinical management services, as they were barely breaking even on each script.

Back to the Super Committee. While it's highly doubtful Pat Toomey et al would stomach price controls, remember it only takes seven votes on that committee to pass their plan. When the horse trading starts, there isn't anyone who can explain exactly why this or that suggestion would not work in the real, messy health care world. With a very short timetable, their staffs will have a very tough time keeping up with projections and forecasts. As the November 23 deadline nears, the pace will pick up as the pressure builds to deliver something - anything - before the deadline.

Thus we may well end up with Congress voting up or down on a 'plan' based not on sound policy and solid analysis but on political expediency.

Then again, that would be different exactly...how?

What does this mean for you?

Watch the Super Committee very, very carefully. And be prepared for anything.

Posted by Joe Paduda at 7:54 AM | Link to this post | Comments (4)

Now that the debt limit deal is done, the hard stuff starts. While there's been a lot of focus on the Pentagon budget and lack of revenue increases, the real heavy lifting will come when the super-committee convenes to figure out how to save the next $1.2 trillion. And their focus will be on Medicare, Medicaid, and provider reimbursement.

Because that's where the 'super-committee' is going to have to find a big chunk of the additional savings required by the deal.

With Medicare and Medicaid accounting for a large and ever-increasing part of the deficit, by necessity the super-committee is going to have to look at provider reimbursement. As Bob Laszewski points out, they don't have time to fundamentally alter reimbursement methodology, can't change the eligibility parameters under the terms of the deal, and they are starting from a deficit projection that assumes the pending 29.5% cut in physician reimbursement is actually going to happen.

The 29.5% alone accounts for about $300 billion, so the super-committee has to find another $1.2 trillion on top of that $300 billion.

Where's it going to come from?

Physician reimbursement under Medicare and Medicaid is going to get hammered.

Hospitals are going to see substantial cuts in reimbursement as well.

Pharma and PBMs participating in Part D are another big target, and one with less political pull in DC.

Insurers heavy in Medicare Advantage have been reporting nice earnings of late; that's not going to escape the notice of deficit-cutters in Washington.

Expect to see means testing for Medicare as well.

What are the chances we see substantial cuts in reimbursement? I'd say about 100%.

Without higher revenues and given the requirements of the debt limit deal, there's no other place to cut the hundreds of billions needed, and do so by Thanksgiving.

What does this mean for you?

Cost-shifting was a problem before this deal. It is about to become THE problem for private payers and workers comp insurers.

Posted by Joe Paduda at 10:55 AM | Link to this post | Comments (2)

There's good news and bad news in the latest projections on health care costs; last year, US health spending increased a mere 3.9 percent, due largely to the recently ended recession (people lost health insurance, and those who still had it couldn't afford their high deductibles, and others switched to Medicaid from their group coverage after losing their jobs).

The total national health bill for 2010 hit $2.6 trillion. While the health spend did increase 3.9%, nominal GDP went up by the same amount, so health care spend as a percentage of GDP didn't change.

That won't last very long.

In three short years, national health spending growth is expected to reach 8.3 percent due to several factors:

- implementation of the Affordable Care Act of 2010

- expansion of employer coverage

- increased Medicaid enrollment

- associated increases in spending on drugs and physician care, driven in part by newly-insured individuals seeking care for conditions long neglected.

The year after ACA's implementation, inflation is expected to decline to 5.3%, as effect of the one-time demand for services by the newly insured tapers off

For details, see the article in Health Affairs

Posted by Joe Paduda at 9:53 AM | Link to this post

The Medicare drug program - Part D - was the largest expansion of entitlement programs since the Great Society.

And it was - and is - a Republican program. A political masterstroke, Part D undoubtedly helped George W Bush get re-elected along with many GOP legislators, as seniors loved the new program

It was also completely unfunded; short term, long term, any term. The GOP decided to NOT set aside funds, or raise taxes, or cut other programs; they just passed Part D, committed to paying for it out of 'general funds' and to hell with the future.

Well, the future is here, and to listen to Eric Cantor, you'd think he had nothing to do with Part D.

The latest Medicare Actuary report indicates the GOP-passed Part D program has contributed $21.5 trillion to the ultimate Federal deficit. (page 146)

I bring this up not to anger my conservative readers, but rather to educate some who aren't aware that Part D, and the costs of Part D, are the handiwork of Eric Cantor, John Boehner, Mitch McConnell et al.

Yep, the strident voices screaming for cost control were single-handedly responsible for a program that's added $9.4 trillion to the ultimate deficit.

Here's how one Libertarian sees the GOP legislators who voted for Part D.

"In particular, anyone who was in a position to vote on it, and voted for it, can simply never, ever be trusted to guard free enterprise or the Constitution against the ravages of Washington's welfare state...Every single one of these folks, without exception, is in no position to criticize Obamacare or claim to want to beat back the tide of socialism [emphasis added] that supposedly began only two years ago when Obama rose to power. Every single one of them voted to shovel tax dollars to the pharmaceutical industry and the wealthiest age demographic -- the elderly -- in unambiguous defiance of the Constitution, individual liberty, the free market, fiscal sanity and classical American values."

Posted by Joe Paduda at 6:36 AM | Link to this post | Comments (13)

While the news this morning is not good, I still don't think Congress will fail to raise the debt limit; the economic consequences would be catastrophic, and there's too much political risk for either party to allow it to go that far.

And really, this whole argument is pretty dumb. The fight is about whether or not the United States will pay for debts already incurred to fund defense, Medicare, the CDC, NOAA, the Veteran's Administration, National Parks, the Corps of Engineers, the FBI... Congresses already authorized those programs and the costs thereof, Presidents signed them into law, and, like any responsible entity, we have to pay for them.

We can't just tell the world, and our own citizens who hold the nation's debt, "Never mind, we decided we don't want to pay you back the money you loaned us." That's unethical, immoral, and by my read, illegal.

Lost in the nastiness is the simple fact that those refusing to consider raising the debt limit are going against the Constitution, specifically the Fourteenth Amendment, which reads in part "The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned." (The Fourteenth Amendment was passed after the Civil War, and this Section (4) was specifically designed to ensure the US paid its war debts, while repudiating those of the Confederate States.)

But, what if?

Here are a few ways a failure to raise the debt limit may impact providers, payers, and the rest of us.

1. payments to providers for services rendered to Medicare recipients could be delayed.

2. transfer of funds to the states for the Federal government's portion of that state's Medicaid obligation could be delayed.

3. other Medicare-related funding, including direct payments to hospitals, could be delayed.

4. Medicare fiscal intermediaries (the companies that process Medicare payments) may see their compensation delayed.

5. enforcement actions may be put on hold if they are deemed 'non-critical'

6. payment of funds for graduate medical education may be put on hold, just in time for the fall academic term

Here's hoping it doesn't get that far.

Posted by Joe Paduda at 10:24 AM | Link to this post | Comments (2)

There's been much publicity around a McKinsey survey that purported to indicate many employers would drop their employee health insurance plans, a finding markedly different from that predicted by several other studies.

Were the other surveys wrong, and is McKinsey right?

Give me a minute...

First, lets examine the McKinsey study. It was conducted by Ipsos, a firm contracted to McKinsey; the survey was done on line

Here are the key findings, as reported by McKinsey:

- Overall, 30 percent of employers will definitely or probably stop offering ESI [employer-sponsored insurance] in the years after 2014.

- Among employers with a high awareness of reform, this proportion increases to more than 50 percent, and upward of 60 percent will pursue some alternative to traditional ESI.

- At least 30 percent of employers would gain economically from dropping coverage even if they completely compensated employees for the change through other benefit offerings or higher salaries.

Notably, the folks from the highly-regarded consulting firm initially refused to release the details of the survey, the methodology, and information on exactly who was surveyed. That's weird. After significant pressure from Congress and others, they did provide additional information about the process and methodology, but details on who responded (other than broad characterizations) were not revealed. I read the Survey instrument itself; you can download the pdf http://www.mckinsey.com/en/US_employer_healthcare_survey.aspx.

What's weird is why McKinsey delayed publishing the details. The instrument and methodology look to be pretty sound; results were weighted to account for differences in the actual employer population; and the survey firm itself is well-regarded. But, here's the kicker. When asked how much their company paid for health benefits, almost three in five didn't know. If these respondents were truly decision makers or influencers, you'd think they'd know this rather basic information.

WIth that rather major concern, it is clear this was not some cheap-shot Tea Party-funded hack job.

That said, there are two sets of questions that appear to deliver very different takes on the over-arching question - will employers drop coverage after 1/1/2014. In the initial question re would they maintain or drip coverage, 9.2% said they 'definitely would' drop coverage, and another 20.5% said probably. This question was preceded by a detailed description of individual subsidies and employer penalties, however, while the questionnaire (specifically around question 8) did include some details of the employer subsidies/premium support provided under ACA, it appears these were presented in a sidebar on the internet-based survey and may not have been shown to all respondents. Whether folks read this in detail, or understood what they read, is an open question.

The other question (hat tip to Kate Pickert of TIME's Swampland) asks if the respondents knew what their competitors would do in response to reform. Not surprisingly, 31.4% said they didn't know, but 27% said continue as is or with minor changes and 24.3% said continue offering coverage but with significant changes.

The folks at the Urban Institute published a response (based on their Health Insurance Policy Simulation Model (HIPSM)) to the McKinsey work in which they refute McKinsey's central finding. From the report:

• Employers with fewer than 50 employees are expected to experience substantial savings on health care costs due to the benefits of the health insurance exchanges and subsidies for the smallest firms. These employers face no requirements to contribute to the health care costs of their workers under the ACA; • Savings on premium contributions are offset by employer responsibility assessments for those employers with 50 to 100 workers, which is expected to result in a very small increase in total costs for this group; • The smallest firms are expected to experience a significant increase in offer rates under the ACA, while offer rates for those with 25 or more employees are expected to remain stable;

Notably, the methodologies were markedly different, but, the conclusions were supported by the underlying data.

Which leads to this conclusion.

We don't know what employers will do.

That said, here's what I think. More smaller employers will offer coverage after reform than do today.

Some mid-size (50-100) employers will drop coverage and pay the penalty.

Remember, once people start seeing the benefits of an entitlement program, they are loathe to give it up. Just think about Part D, Medicare, and Social Security, and the unwillingness of (most) politicians to do anything material about these programs.

Posted by Joe Paduda at 9:10 AM | Link to this post | Comments (2)

It's pretty simple, really.

Once people gain actual real-life experience with a government program, they abandon their fear of the unknown, see its benefits more clearly, and become invested in its future.

We've seen that with Medicare, which consistently pleases its beneficiaries. Part D has similar traction, and now we've learned that the citizens of Massachusetts are increasingly happy with that state's health reform.

I'm not arguing that Mass - or Part D or even Medicare itself are perfect, or anywhere close to that goal. That's not the point of this post. The point is, the GOP's continued abuse of anyone and anything remotely supportive of the ACA ignores history; once people experience a program, they like it - and more to the point, do NOT like politicians who threaten its existence.

A poll released by the Harvard's School of Public Health and the Boston Globe indicates strong support for the state's reform - 63% of residents polled supported the program, a jump of ten points from 2009; 21% - about one in five - oppose Mass' reform.

The key here is the ten point increase in two years.

While major provisions of ACA will not be implemented for another two-and-a-half years, many have already seen a direct and personal impact. Dependents are covered till age 26. Lifetime maximum limits were eliminated. Kids with pre-existing conditions can now get coverage. Benefits for preventive care and screening have been greatly improved. Part D beneficiaries' costs have been lowered and benefits improved. Some people previously uninsurable due to pre-existing conditions have obtained coverage.

When reform becomes broadly implemented - in thirty months - the premium subsidies for small employers kick in. Same for lower-income individuals and families. And the list goes on.

This is both a blessing and a curse. The more people know about a program, the better equipped they are to understand it and discuss it - and consider it when voting.

But, the more benefits they see, the harder it is for policy makers to convince voters the program needs to change. That's where we are with Medicare, with Part D, with every entitlement program.

What does this mean for you?

Reform is here to stay.

Posted by Joe Paduda at 8:15 AM | Link to this post | Comments (3)

The expansion of Medicare to include coverage for prescription drugs was a political masterstroke. In a single move, the GOP won the hearts and votes of seniors. The result was significant - larger Republican majorities in Congress, and re-election for George Bush. (I know, there were a few other issues and a poor candidate at the top of the ticket for the Dems)

That was less than a decade ago.

Now, the GOP has decided on a policy of self-immolation. Paul Ryan's Medicare plan likely cost the GOP a previously safe seat in upstate New York, has led several Republican Senators to vote against the plan, and resulted in erstwhile Presidential contender Newt Gingrich alternately slamming and praising Ryan and his plan.

While GOP loyalists will argue that Ryan's plan is meant to save Medicare, that assertion is false on its face. In reality, it transfers the risk to seniors, a risk that Medicare assumed when it become law in 1964. One can argue as to whether or how much risk seniors should assume; one cannot argue that the Ryan plan will save Medicare.

But that's beside the point.

What Ryan et al forgot was that seniors guard Medicare like momma bears guard their cubs. I find it bizarre that the same party that single-handedly passed Medicare Part D in an effort to win this crucial voting block has pulled a 180.

Part D worked to keep the GOP in power. Ryan's plan may well have the opposite effect.

In fact, this may be worse. Tea partiers - well, at least some folks who seem to share the same agenda - are mad that the GOP passed Part D, seeing it as an unaffordable expansion of Federal entitlement programs (I agree). So, there's a 'base alienation' issue here as well as a senior vote alienation problem.

Ouch.

For more on this, see Bob Laszewski's excellent piece.

Posted by Joe Paduda at 8:17 AM | Link to this post | Comments (2)

For several years, Newt Gingrich was one of the more interesting voices in the health care policy world. He joined obscure policy entities, developed interesting ideas, promoted the use of technology as a BIG part of the solution, wrote a book, and sat on committees dedicated to improving quality.

That was then, this is now.

Interestingly, many of the ideas Gingrich now assaults he supported less than a decade ago.

Some of the people he decries he sat next to on policy panels and publicly praised.

Here's an excerpt from an excellent piece by Michael Millenson:

"Gingrich-as-health-wonk for years advocated reforms such as "data-driven reimbursement" informed by best practices, a national electronic health network and a focus on prevention and wellness. All those items -- and others Gingrich supported -- are contained in the HITECH Act, part of the budget stimulus package and the Affordable Care Act...

a former colleague of Newt's on [the National Commission on Quality Long-Term Care] is now one of the Obama administration's most prominent health care bureaucrats, Dr. Donald Berwick. Back then, New Newt must have listened and learned, since in his book he praises Berwick's quality improvement work. But today's Old Newt told Fox News' Bill O'Reilly that Berwick's appointment as head of the Medicare program was just another example of Obama's "secular Socialist machine."

And yes, this is the same Newt Gingrich who's now backtracking as fast as he can from his scathing comments about Paul Ryan's Medicare plan.

I know, I know, this is just politics.

I know, I know, the 'news' that a politician is being hypocritical and intellectually dishonest is NOT news.

I wish it was.

Posted by Joe Paduda at 6:32 AM | Link to this post | Comments (6)

There's been a good deal of complaining about the future costs of health care under reform, some of it justified, some not. In particular, the release of the Medicare Trustee's report last week noted that the date when Medicare intake is lower than outflow has gotten nearer due to the poor economy.

There's a misconception here.

Reports indicate "The Medicare hospital insurance fund will be exhausted in 2024, five years earlier than last year's estimate, government accountants now figure." That's NOT what the report says. In reality, the HI fund will not be exhausted, but rather insufficient to pay ALL projected hospital costs. In 2024, it will be able to cover 90%, slowly decreasing to 75% in 2048 than back up near 90% in 2085.

However, even that overstates the problem, as it is highly likely the IPAC's provisions will kick in to reduce costs well before then. I'd also note that the Medicare Actuary predicted reform would add thirteen years to the HI fund's adequacy; the new figures cut that to an eight year addition due to reform.

As Maggie Mahar pointed out:

"Today [last Friday, actually] the Trustees affirmed that "projected Medicare costs over 75 years are about 25 percent lower because of provisions in the Patient Protection and Affordable Care Act." The Trustees highlight one plank in the ACA that will save tens of billions by reducing "the annual payment updates for most Medicare services (other than physicians' services and drugs.)"

Here, the Trustees are referring to the provision in the legislation that shaves Medicare's annual increases in payments to hospitals, skilled nursing facilities, home health agencies, and other institutions by 1 percent a year, for ten years, with the goal of spurring them to become more efficient. This means that if, in a given year, hospitals normally would receive an adjustment from Medicare that raised reimbursements by 3%, under the new law their reimbursements would climb by just 2%. (Note: this provision does not apply to doctors, only Medicare Part A providers.) Over the decade, the Congressional Budget Office estimates that this change will save $196 billion."

This is not to say Medicare's cost problems are nonexistent - far from it. We absolutely have to get costs under control. The ACA is part of the answer; increasing revenues and reducing expenditures are two other parts of the solution. Of course, we can eliminate the need to increase revenues if Medicare starts negotiating drug prices and Congress eliminates some of the dumber provisions of the Medicare Modernization Act.

Posted by Joe Paduda at 7:04 AM | Link to this post

Actuarial consulting firm Milliman reported recently that the average American family's health insurance costs are now over nineteen thousand dollars. Costs have more than doubled in the last ten years.

CORRECTION - Families are paying over $8000 towards the cost of insurance - "$4,728 in employee contributions and $3,280 in employee out-of-pocket cost..."

Think about that.

If medical inflation rates stay the same, we're looking at the cost of family health insurance hitting $30k a year in six and a half years.

And over $40,000 four years after that.

Of course, trend could accelerate...

If there's any good news, it is that under health reform, both insurance premiums and out of pocket costs won't be as much of a killer for those at lower income levels. Out of pocket costs including deductibles will be indexed to income, as will premiums which will be subsidized for those with incomes below 4 times the poverty level (about $88,000 in today's dollars).

thanks to Jane Saransohn-Kohn for the heads up.

Posted by Joe Paduda at 7:40 AM | Link to this post | Comments (5)

Last week we saw two starkly different views of how to control future costs of Medicare. President Obama is seeking to use the negotiating and regulatory power of government, while Rep Ryan wants to abandon any pretense that government can control costs and cede responsibility to individuals and private industry.

The contrast strikes at the heart of the current political divide; what is the role of government in our society.

Rep Ryan's approach is to get government out of the health insurance business entirely, passing responsibility along to private insurers. In 2022, Medicare recipients would get a check/voucher for $8,000, (based on CBO estimates of Medicare's average per-beneficiary funding). They'd then have to buy insurance with the eight grand, probably from private or not-for-profit health plans. There's no way that would cover the entire cost; the CBO estimates that under the GOP privatization plan, the average health insurance policy would be more than $20,000 per year, so the average senior would have to pony up the additional twelve grand.

There are a few other complicating factors not discussed in Rep Ryan's proposal. Here are the most 'complicating' ones.

- What about seniors with pre-existing conditions? What insurance company would want to cover them? Sure, there's a mild risk-share arrangement in Ryan's plan, but I seriously doubt don't know that any insurer would willingly enroll a senior with hypertension, history of melanoma, signs of memory loss, and osteoarthritis.

- Who's going to help seniors understand their options and ensure they are treated fairly by their insurers? If there isn't a government regulatory and watchdog function, are we to rely on private insurers to police themselves? Really?

- When costs go up faster than the overall rate of inflation, what's to be done? Ryan's plan caps annual increases at the overall inflation rate; medical inflation is usually two to several points higher. We've already seen private insurers can't control costs (or at least haven't been able to so far), so if anything costs may go up even faster.

To Ryan et al, these are beside the point. His plan is designed to get government out of the health insurance business, and let the chips fall where they may. His plan doesn't address these issues, and I seriously doubt he or his fellow Republicans have any intention to address them.

President Obama's strategy is markedly different. His vision is of a more energized and focused Federal approach using the government's leverage and regulatory power to control cost and improve outcomes.

As a start, last week the President appeared to call for the Feds to negotiate drug prices with big pharma; strengthen, greatly increase the power, and enlarge the role of the Independent Payment Advisory Board; and speed up adoption of new models to deliver care.

Notably, the President's IPAB would make significant cuts whenever Medicare spending rose more than the increase in gross domestic product plus one percent. And, if Congress failed to act to control costs, the Secretary of HHS could act independently to initiate changes in Medicare. Finally, the IPAB could sequester Medicare funds if neither Congress or the Secretary acted.

What does this mean?

Well, at the most simplistic level, both plans would control costs by limiting future cost increases by capping future spending.

But there are two markedly different ways to do that. Ryan gets government out of the insurance function, while Obama calls for a more activist, engaged, and assertive role for the Feds.

This will be interesting.

Posted by Joe Paduda at 7:34 AM | Link to this post | Comments (2)

The current political and cultural divide over health reform is not new - in fact, a century ago a very similar debate took place, and the result may be instructive.

At the turn of the century courts were stuffed full of tort cases brought against employers by workers injured in industrial accidents. Workers had no other recourse besides the court system, and for the years leading up to 1911, the courts offered little hope. That began to change in 1911, when New York passed legislation requiring employers to pay for industrial accidents. The day after the bill passed, a Earl Ives, a railroad worker, sprained his ankle while signaling to an engineer. His employer took the case to court, saying it was Ives' responsibility to be more careful.

Ultimately, the court found in favor of the railroad. This from Peter Rousmaniere's recent piece in Risk and Insurance:

"...what drove Werner's (judge in the Ives case) reasoning were cultural values. He magnified the responsibility of the self-reliant worker within his or her immediate sphere of influence. He chose, in effect, a narrative that made sense a generation before Ives' accident.

New York voters overrode Ives with a constitutional amendment in 1913. Other states responded by crafting legislative proposals meant to be challenge-proof.

The rapid and broad acceptance of the new system was mainly due to a new angle of vision on the individual at work. The cause of work accidents now was neither the worker nor the employer but industrial employment itself. The new mantra of a work accident "arising out of and in the course of employment" skirted the question of causality."

Workers comp took hold across the country, and within a decade most states had passed some form of comprehensive workers comp legislation.

There are a couple reasons why employers' efforts to battle workers comp legislation stopped. First, on a national scale, the cultural issues noted by Peter overtook the laissez faire theology of early industrial America.

Second, employers were starting to lose more and more court cases, an occurrence that struck fear into management and owners. Work comp was seen as a 'less worse' alternative to the increasing number of increasing verdicts.

Third, the growing influence of organized labor was being felt in corporate boardrooms around the country, and management wanted to eliminate industrial accidents as an issue.

So what does this have to do with health reform?

Health care is reaching a crisis point. Within six years, family premiums will exceed $30,000, plus out of pocket costs In an increasingly global economy, American employers are going to abandon ideology when confronted by the stark reality that they cannot and will not ever be able to compete if they aren't relieved of the burden of health care costs.

Similarly, taxpayers (as we're seeing every day) cannot and will not pay for ever-increasing health care benefit costs for Medicare, Medicaid, and public employees. But those programs, especially Medicare, control a LOT of votes. Thus politicians will be forced to come up with cost-reducing solutions that are dramatically different from the feeble attempts from Washington to date (and I include both parties in that).

Ryan's solution is no solution at all - in actuality it is nothing more than a 'throwing up of the hands and abandoning any pretense of cost control.'. And, it's from one of the guys who voted for the single largest increase in entitlement programs since Medicare - Part D.

The Accountable Care Act isn't a solution either, but it contains the seeds of real change, specifically with the IPAC.

What does this mean for you?

When things no longer can continue, they won't. We saw that with workers comp exactly a century ago, and we will see that with health care within five years.

Posted by Joe Paduda at 7:46 AM | Link to this post | Comments (1)

Rep Paul Ryan's (R WI) Plan to address the deficit relies heavily on private health insurers to solve the seemingly-intractable health care cost inflation problem. Today we'll finish the discussion of his solution for Medicare.

Ryan's Medicare plan does include means-testing and increases in the age of eligibility, both of which will affect costs on a macro scale. Means testing increases revenues for CMS, while increasing the eligibility age reduces the number of recipients - both valuable and needed, but neither does anything meaningful to restrain the increase in health care costs for Medicare recipients.

In fact, Ryan's plan will increase Medicare's cost trend by 'fixing' the physician reimbursement schedule, a fix that will add about $350 billion to the deficit today, and do nothing to reduce physician costs going forward. Beyond that, there's precious little in his plan that does anything material to address the real problem - health care cost inflation.

For that, Ryan is relying on private insurers, who would take over responsibility for Medicare. They would be paid a fixed price, and would be expected to provide all necessary benefits for that price - an approach that's very similar to how the private insurance market works today. How's that going to work?

Pretty well, according to Ryan, who asserted that the Congressional Budget Office had reviewed his numbers. (at least that's what I think he says; read it yourself here.)

Well, the CBO did review his plan, and the results are pretty discouraging.

Here's Forbes' Rick Ungar:

"Accordingly to the CBO estimates, the program would result in seniors paying twice as much for their care - a sum that would total more than $12,510 a year...

The GOP proposal, which would begin in 2022, involves providing a 'voucher' - or as Ryan likes to call it, 'premium support' - to seniors to help pay for their health insurance. The average American would receive a check for $8,000, representing roughly what the CBO estimates Medicare would have to fork out for the average beneficiary in 2022. In addition to the government's costs, the CBO estimates that seniors, in 2022, would lay out about $6,150.00 in out-of-pocket costs in the Medicare system. That totals an average cost of health care for participating seniors, in 2022, to be $14,770.

Under the GOP privatization plan, the cost to purchase the health insurance policy would cost about $20,520 per year - leaving the seniors out of pocket in the amount of $12,510 or more than twice what they would pay in 2022 should the Medicare system we currently have continue."

Ryan says his plan is adjusted to account for medical inflation; in actuality Medicare premium increases in the Ryan plan are based on the overall inflation rate, which is significantly lower than the medical CPI.

Fact is, private insurers have been managing Medicare for millions of beneficiaries for well over a decade, and they've shown no ability whatsoever to control costs. In fact, when the subsidy paid to private insurers was cut, they screamed bloody murder.

What does this mean for you?

While there are parts of Ryan's Medicare plan that deserve serious consideration (increasing eligibility age for one), his reliance on private insurance is naive at best, and the complete lack of real controls over cost is quite disappointing. After all the fanfare over his plan and willingness to take on the tough issues, Ryan's shown himself to be just another number-massaging political operator.

Posted by Joe Paduda at 6:54 AM | Link to this post | Comments (1)

Rep Paul Ryan (R WI) has come up with an economic/philosophical/governance plan that puts our problems squarely on the table - unsustainable government spending, driven in large part by health care costs.

While that's not exactly new news, it is helpful to be reminded of how big the issue is. And some of his ideas, like increasing the eligibility age and means-testing for Medicare, make a lot of sense. And they will help, on the margins.

If you were looking for real solutions to the health cost problem, you're going to be sorely disappointed. Limiting eligibility doesn't address cost drivers, it just limits the number of people in the program. And that's where Ryan's 'plan' falls apart.

The main pillars of Ryan's plan are privatizing Medicare, changing Medicaid to a block grant program, and replacing health reform with a refundable tax credit ($2300 for individuals, $5700 for families).

While each of those ideas are attractive on their face, they are not going to do anything to solve the real problem - cost inflation.

If privatizing Medicare was the solution, Medicare Advantage programs would be less expensive than good old government run Medicare, and the private insurers that manage them wouldn't be screaming about the reduction in their payments from the Feds. MA plans are MORE expensive than plain Medicare. They've also been around for about twenty years, more than enough time for the private market to prove it can do a better job delivering benefits while controlling costs.

The sad fact is that hasn't been the case. While this may be difficult for free market ideologues to grasp, the for-profit system has not delivered better results for the Medicare population, better results defined as lower costs and better outcomes with happier members

Ryan also recommends fixing the Medicare physician fee problem by adding $350 billion to the deficit, an idea that does nothing to control costs, and actually increases the financial burden of the system on taxpayers.

I'll look at Medicaid and private insurance in later posts - where we'll examine Ryan's plan to require insurers to take all comers without forcing people to get coverage before they get sick, and institute tort reform to somehow control costs when credible studies indicate this is a minor cost driver.

Posted by Joe Paduda at 7:02 AM | Link to this post | Comments (3)

The interesting numbers from the monthly Kaiser tracking poll aren't the public's like or dislike for health reform, but the rather impressive level of ignorance about reform that persists even now, a year after passage.

Here are a few 'highlights'.

- half the country (52 percent) is aware the health reform law is still the law of the land, just over one in five Americans (22 percent) think health reform has been repealed and is no longer the law and another quarter (26 percent) aren't sure either way.

- 59% think the law creates a new government health plan - which it doesn't

- 40% think it allows the government to make end of life care decisions for Medicare beneficiaries

- 45% believe the law cuts Medicare benefits previously provided to all beneficiaries - which it doesn't

And it isn't just the 'average American' who's confused.

This was brought home to me in a conversation I had with a very well educated business person earlier this week - trained as an economist, this individual is in the health information management sector. He wasn't aware of some of the rather basic provisions of the reform bill, and misconstrued others.

My sense is most of the debate about health reform ignores what's really in - and not in - the Patient Protection and Affordable Care Act. Instead, there are heated arguments about topics, provisions, themes, taxes, limits, intrusions that are based on not much more than "I read this on the internet or heard it on talk radio'.

To test your own knowledge about reform, take this quick quiz. Not to worry, scores won't be posted on the class bulletin board.

Full disclosure - I scored nine out of ten...

Posted by Joe Paduda at 8:53 AM | Link to this post | Comments (12)

The health reform battle may well be decided in the state houses. Two events lead me to that conclusion.

First, as Bob Laszewski observed this morning, President Obama threw his support behind "the Wyden-Brown bill that would give the states the opportunity, in 2014, to take their share of the almost $1 trillion the new health law collects and use it to craft an alternative health care plan to their liking."

The implications of passage of Wyden Bennett are clear - governors and legislators with grave concerns about some/most/all aspects of the Accountable Care Act and implementation thereof are (almost completely free) to come up with their own solutions.

And the GOP is in a very strong position to do just that.

I sat in on a session at the National Association of Mutual Insurance Companies' annual meeting yesterday that focused - in large part - on the dramatic, game-changing outcome of the last election. The speaker, Neil Alldredge of NAMIC, noted that the GOP added 700 seats in state legislatures, the first time since 1966 that a move this momentous had occurred. This effectively puts the GOP in charge of all branches of government in a third of the states - sixteen to be exact.

If the governors and legislators in those sixteen, or, for that matter, any of the fifty states think they've got better answers, passage of the Wyden Brown bill will give them the freedom to put their ideas to work.

It's easy to be in opposition - especially when the issue is health care. There are big and knotty issues with the Accountable Care Act; lets all hope the various states come up with better answers to our crisis of cost and coverage.

It will be very, very interesting to watch the solutions developed by Republicans and Democrats and Independents in the states. So far, two states - Vermont and Oregon - have begun major efforts to develop their own alternatives. If Republicans have a better answer, one that solves the problem of access and cost, they've got a great opportunity to get it out there for public review.

And if their solution is better, they are going to win very, very big in 2012.

We'll see.

Posted by Joe Paduda at 8:05 AM | Link to this post | Comments (2)

A fifth of Americans polled think the health reform bill has been repealed.

There, in rather stark terms, is a synopsis of the American electorate's engagement in - and awareness of - the health care debate.

The news, from the latest Kaiser Health Tracking Poll is the clearest indication to date of the lack of effective reporting by the media on the health reform battle. That, and a blunt assessment of at least half the respondent's knowledge of civics.

It is easy to blame the media - and some blame is well deserved. But much more should be assigned to those ill-informed, and uneducated, respondents. These people, some of whom may actually vote from time to time, are almost certainly basing their political opinions and candidate preferences on opinions that have little basis in reality.

The onus is on us. We have to inform ourselves, understand the process, intent, and implications of public policy. We have to engage with others on the basis of fact and insight, not emotion-based opinion. We need to check our sources, and question our assumptions.

If not, we'll end up electing more Rick Scotts and Rob Blagojoviches.

And that is a very scary proposition.

Posted by Joe Paduda at 7:16 AM | Link to this post | Comments (2)

Several states have implemented prescription drug monitoring programs designed to identify potentially problematic pharmacies, physicians, or patients - those dispensing/prescribing/getting drugs that could cause significant problems.

Florida's new Governor, the health care expert Rick Scott, thinks Florida shouldn't have one, and is trying to repeal the law passed last year that got more sunshine into the Sunshine State.

Evidently Scott's complaints are the cost, privacy, and effectiveness of the program.

These complaints appear to be based on ignorance - at best.

- 34 states already have such programs up and running

- the annual cost runs about a half-million dollars, but all the start up money has already been raised from private donors.

- privacy is guaranteed as the program - already developed - is HIPPA compliant.

So, for a half million dollars, much of it already committed from private funds, the state would be able to help prevent some of the 2500 deaths associated with prescription drugs that occur each year in Florida.

For those inclined to do the math, that's two hundred bucks per death.

Instead, Florida continues to be a destination spot for out of state tourists seeking drugs, drugs they can't get in their own states that have implemented prescription drug monitoring programs. This from an article in the EWall Street Journal: "According to Frank Rapier, director of the Appalachia High Intensity Drug Trafficking Area, highway patrol officers in hot spots like eastern Tennessee routinely stop vanloads of people returning from Florida with fresh stockpiles of prescription drugs.

In West Virginia, state Sen. Evan Jenkins said flights on discount airlines between Huntington, W. Va., and Fort Lauderdale, Fla., have been dubbed the "Oxycontin Express."

But the problem isn't just the pills. The devastation wrought by prescription addicts getting pills from Florida is crushing towns far away from Rick Scott's home state. According to the Sheriff of one small county in Kentucky, "98 percent of the crimes his office works are related to oxycodone and 80 percent of those involve pills from Florida." The county coroner says two-thirds of his deaths are from pills.

For some of those tourists, the trip is only one way. Drug-seeking people from states as far away as Ohio routinely drive to the Sunshine State to get their fix, occasionally dying on the way home from the meds they've scored in Florida.

I stopped doing research on this as the story is so big, the tragedy so wide-spread - and so preventable - that I couldn't continue.

Scott's effort to repeal the law is unconscionable.

What does this mean for you?

Elections have consequences.

Posted by Joe Paduda at 6:13 AM | Link to this post | Comments (3)

Or perhaps more accurately, what are they smoking?

From HealthNews Florida comes the news that a state Senator, one Joe Negron (R Stuart) has come up with the brilliant idea of shoving most of the state's Medicaid beneficiaries into a state-run 'managed care' program - and if the Feds don't like it, well, then, Florida will just do it without the billion-plus dollars the Feds contibute to Florida's Medicaid program each year.

And that's only this year. When reform kicks in in 2014, the dollars really start to flow, with the Feds contributing $24 billion to the state for the five years after 2014.

This isn't speculation; Negron was recently quoted saying "as a state we're prepared to manage our own program with our own resources."

Florida - which is as broke as it could be - is about as likely to forgo a billion bucks of Federal assistance than I am to start at center for the Miami Heat.

This Negron is no dummy - his bio includes an MPA (master's in public administration) from Harvard - but his grandstanding makes zero sense. Sure, you can chalk this up to political noise, but some of his other comments make you wonder if he really has any idea what he's talking about.

For example, Sen Negron wants to require the new Medicaid managed care plans to:

- have a minimum Medical Loss Ratio of 90% - that's a full five points higher than the requirement under ACA;

- increase physician reimbursement; and

- ensure the"benefits under Medicaid will not be worse than what any private citizen has, but not better, either."

And this is somehow going to cost Florida taxpayers LESS than traditional Medicaid program?

Perhaps the Senator just isn't very good at math. Forcing insurance companies - for profit insurance companies - to accept an MLR of 90% - and to pay docs more - and to provide benefits that - in his own words - are equal to those received by private citizens - is going to cost a fortune - waaaay more than a regular old run-of-the-mill Medicaid program.

Let's see. An insurance company has to make about a three percent profit - ideally more, but less than three percent and no one's going to provide the investment funds to get the thing started.

Now, we are also dealing with Medicaid patients, many of whom have chronic conditions that don't lend themselves to doctor-only management and require investment in disease management programs that are heavy on IT and clinical support service requirements. The health plan also has to communicate, provide information and resources and interpreters, credential, contract with, and manage providers, manage pharmacy spend, and market their services to potential members.

Plus they need to have a supply of cash in the bank for claim reserves in case there's a flu epidemic or other event...

Oh, and they have to be on the watch for fraud - you know, the kind that went on at the current Governor's former company, the kind that resulted in a $1 billion plus fine.

And do all this for seven points?

I've worked for major health plans - both as an employee and consultant, and there's no health plan in the world that can do that - except Medicare, which doesn't have to worry about claim reserves, or investors, or distribution, or a lot of other stuff that costs money.

What does this mean for you?

I guess they don't teach finance at Harvard's public administration program...or perhaps Negron missed that class.

Posted by Joe Paduda at 7:13 AM | Link to this post | Comments (3)

The debate is on, and it is going to get even more nasty, heated, and divisive.

If we're serious about cutting Federal health care expenditures over the long term, here are two changes that will do just that.

1. Requiring HHS to negotiate with pharma for Part D drug costs would reduce annual expenditures by over $20 billion.

As I've noted repeatedly(but unfortunately few in the mass media have), Part D's perhaps the biggest deficit problem we have - the ultimate unfunded liability is now over $20 trillion. Of course, we could solve the majority of our budget problems by just canceling Part D, but neither the Democrats nor the Republicans ) will do that.

So, as long as we're stuck with the damn thing, we ought to make it as inexpensive as possible. The best way to do that is to use the buying power of Part D to negotiate with manufacturers to get the best possible price for drugs that you - the taxpayer - are paying for. Believe it or not, the original Part D legislation expressly forbids negotiation with manufacturers for pricing.

In a 2006 House analysis, a report "showed that under the new Medicare plan, prices for 10 commonly prescribed drugs were 80% higher than those negotiated by the Veterans Department [emphasis added], 60% above that paid by Canadian consumers and still 3% higher than volume pharmacies such as Costco and Drugstore.com."

Another study indicated "An annual savings of over $20 billion could be realized if FSS [Federal Supply Schedule] prices could be achieved by the federal government for the majority of drugs used by seniors in 2003-2004..."

Are there problems with this? Absolutely. Reducing prices may impact R&D expenditures and will affect pharma margins - effects that must be balanced against the nation's long-term financial viability.

2. Stop paying for medical 'bridges to nowhere'; Require HHS to base reimbursement for devices and therapies on efficacy and effectiveness.

As noted in a recent piece in Health Affairs, "with only very rare exceptions, Medicare does not use comparative effectiveness information to set payment rates. Instead, it links reimbursement in one way or another to the underlying cost of providing services." CMS is prohibited from considering benefit to the patient when developing reimbursement formulae and levels.

About a third of US health care dollars are spent on treatments that are likely not effective. One has only to look at the history of MRIs, carotid endarterectomy, and angioplasty to identify billions of dollars that have been wasted on treatments that did not help, and may well have harmed, thousands of patients. These treatments, devices, and providers make money for their purveyors and manufacturers, dollars that they are loathe to give up.

It is amazing that we pillory the Feds when they spend taxpayer dollars on services or items that (some opine) don't work at all or don't work as they are supposed to, yet prohibit CMS from doing precisely that.

Cutting costs while improving outcomes is absolutely possible. Whether it is politically feasible is another question entirely.

Posted by Joe Paduda at 7:33 AM | Link to this post | Comments (3)

The ongoing and far-from-resolved debate about whether or not health reform will erduce costs has generated lots of fear-mongering, wildly inflated claims, and far too little intelligent discussion. Jonathan Cohn's attempt to add a bit more intelligence to that discussion is well worth a read.

Care and Cost, a sort of ongoing compendium of thoughtful articles on the subject, republished Cohn's Kaiser Health News piece dissecting the Medicare Actuary's recent comments on the impact of reform on cost.

Richard Foster is the chief actuary for Medicare - the person tasked with calculating how much it will cost, and estimating whether cost will go up or down and by how much due to this or that change. He recently testified before the House Budget Committee on the impact of reform on Federal health expenditures, basing his testimony largely on the basis of his work in April of 2010.

Foster made a couple of key points.

Cohn's piece focuses on a couple key points. First:

"By 2019, the net reduction in Medicare expenditures is estimated to be 0.5 percent of GDP, which represents an 11-percent decrease from the level projected prior to the Affordable Care Act. [emphasis added] This percentage reduction would grow larger over time as a result of the compounding effect of the slower annual updates in Medicare payment rates for most categories of health care providers."

Good news, right?

Well, he then went on to call into question the basis for that estimate:

It is important to note that the estimated savings for one category of Medicare provisions may be unrealistic. The Affordable Care Act requires permanent annual productivity adjustments to price updates for most providers (such as hospitals, skilled nursing facilities, and home health agencies), using a 10-year moving average of economy-wide private, non-farm productivity gains. While such payment update reductions will create a strong incentive for providers to maximize efficiency, it is doubtful that many will be able to improve their own productivity to the degree achieved by the economy at large. [emphasis added]

So, what happens? According to Foster, about 15% of Part A providers (non-hospital/facility, non-pharma) would become unprofitable, and CMS might make changes to increase their reimbursement.

There's another distinct possibility; Congress will tell CMS that it can't increase payments to less-efficient providers, and those providers either a) get more efficient or b) drop out of the program. And there's ample precedence for this scenario; one need look no further than the recent changes to durable medical equipment reimbursement.

I'd add the recent - and long overdue - focus on the national debt and deficit may significantly increase the intestinal fortitude of members of Congress, perhaps enough even to make them stick to their guns and force providers to get better or get out.

What does this mean for you?

Intellectual honesty is all too rare in the debate over reform. Foster's views are well worth discussion, but don't take them at face value.

Posted by Joe Paduda at 6:27 AM | Link to this post

We know that much of the opposition to the Accountable Care Act is feeling pretty good right now, as they should after the Florida judge's rejection of the Act.

What we don't know is what will happen if they are successful in overturning health reform.

What will our country's health system look like in five years if there isn't reform?

Impact on insurers
Without reform of the insurance underwriting and rating laws, insurers will seek to be even more selective about the policies they write - their right, and I'd argue an obligation on the part of the for-profit health plans. As stock companies, their first obligation is to their owners - and that obligation requires them to generate profits and growth. That is not a value judgment - it is a statement of fact.

Health plans just don't want the 'risk' that someone will have a claim. I'd expect healthplans will also continue to 'churn' their books - to try to dump policies that have been in place for more than three years, as that is about when claims start to pile up.

The number of viable healthplans will continue to shrink. As a mature industry, the healthplan business has been steadily consolidating - if anything that will accelerate. And no, the free market will not increase 'choice'; we already have a free market for commercial plans (and Medicare Advantage and Part D) and in most areas there are at most two plans to choose from.

Smaller healthplans will find it increasingly hard to compete, as the big plans get ever-better discounts from providers, who have to make up the lost revenue by cost-shifting to the smaller plans with less clout. As their costs go up, so will their rates, until they either wither away or get bought out by the big plans.

PPO plans will get 'nichier and nichier'. Their higher medical costs will push members towards HMO-type plans, making it harder for employers with widely-spread workers to get affordable coverage unless they buy insurance from one of the big plans that operates in all the areas the employer has bodies. Inevitably, some workers will be left with poor coverage...

Impact on individuals and families
Bureaucrats at insurance companies will still be making decisions about what doctors you can see and how much they'll pay and what they'll cover and what they won't. You'll have to ask permission for services, and hope and pray they get paid. Those same bureaucrats will tell you they're interested in keeping you healthy, but that's only till they can churn you out of their book.

There will continue to be a hodgepodge of state-specific insurance mandates, rules, regulations, and enforcement mechanisms, as well as benefit designs and limitations

But the big problem is this - it will get harder and harder for individuals and employers to get insurance coverage.

Here's one all-too-common scenario. The breadwinner loses her/his job, and with it health insurance coverage. They find a new job, but that company doesn't offer benefits as they are too expensive. So, Ms/Mr Breadwinner, responsible person that s/he is, tries to buy an individual policy. There are several insurers that write those policies, so the applications go in - followed by requests for medical records, documents, and attestations signed by their physicians. Oops, one of the family has a mild case of asthma, and dad takes cholesterol medication, and mom saw a counselor a few years ago after her dad died.

Three insurers decline to offer a proposal, and the one that does will exclude any cardiovascular coverage for dad, any pulmonary issues for junior, and mom won't be covered for any psychiatric or anxiety or related issues. And, oh, the policy is 50% more expensive than the original quote. Leaving Mr/Ms Breadwinner to decide if they want to come up with $22,000 a year for less-than-full coverage and their HSA deductible (in 2009 dollars)...

Unfortunately there isn't any governmental assistance, so the Breadwinners, who make $75k a year, are looking at spending almost a third of their gross income on health insurance - insurance that doesn't cover their most likely health problems.

Think this is hyperbole? You're wrong. This is happening every day in every community, and if health reform is overturned, it is going to happen more and more often.

What does this mean for you?

Here's hoping those seeking to overturn reform have a solution in mind that will actually work. And when you consider their 'solutions', remember that no insurer will cover your pre-existing condition unless they are forced to. Or your parents' or your kids' or your friends'.

Posted by on August 12, 2009 2:53 PM | Link to this post

Posted by Joe Paduda at 9:30 AM | Link to this post | Comments (8)

Wisconsin Rep Paul Ryan gave the 'official' [pre-speech prepared remarks] GOP post-State of the Union rebuttal. I thought he was a fiscally conservative Republican - just the kind of person we desperately need on Capitol Hill.

After all, Ryan's getting a good deal of press because he's perceived to be a budget expert/wonk. Here's a bit of what he had to say.

- Health care spending is driving the explosive growth of our debt.

- the President and his party made matters even worse, by creating a new open-ended health care entitlement. [referring to the health reform bill]

What Mr Ryan conveniently forgets, or more likely avoids, is this:

Seven short years ago he - and his GOP buddies - passed the single largest entitlement program since Medicare - the Medicare Part D drug benefit with no dedicated financing, no offsets and no revenue-generators - the entire cost - which is now around sixteen trillion dollars - simply added to the federal budget deficit.

The health reform bill has many warts - as I've noted time and time again - yet one it does NOT have is adding sixteen trillion dollars to the deficit. According to Bruce Bartlett writing in the Fiscal Times, "By 2030, Part D alone will cost taxpayers 1 percent of GDP."

The complete failure of the mainstream media to note this blindingly obvious hypocrisy is stunning.

I couldn't find a single instance where the MSM commenters noted this hypocrisy; there were a few in the blogosphere, but none from mainstream pundits and talking heads.

Let's suspend reality and accept the GOP's claim that health reform will add $700 billion to the deficit. That's one-twentieth of the deficit from Part D.

That's right - Paul Ryan's Part D added twenty times more to the Federal deficit than even he claims reform will. Yet in his comments he didn't once offer to end, or fix, or reduce Part D. Ryan was long on problem, and non-existent on solutions - perhaps because he's a big part of the problem himself.

Where's the accountability? How can he get away with this? Why isn't the main stream media at least reporting on this? Commenting? Perhaps just noting in passing?

Folks, we have a BIG deficit problem. If we aren't deadly serious about what we need to do, we're screwed. Whether you're a conservative or liberal, Glenn Beck-er or Rachel Maddow fan, red stater or blue stater, there are basic, immutable facts.

Part D's $16,000,000,000,000.00 ultimate cost is one of the more obvious.

I'd hoped for a much better, more mature, more fiscally responsible - hell, more old-style fiscally conservative Republican Paul Ryan - one who would candidly discuss Part D, give specific suggestions about how its cost could be reduced, and take some responsibility for our current fiscal situation.

When the Ryan I - and undoubtedly many others - wanted to hear didn't appear, it would have been nice if the talking heads noted his absence. I don't know who is more disappointing - Ryan or the media.

Posted by Joe Paduda at 8:04 AM | Link to this post | Comments (10)

Well, the GOP says repealing health reform will save $700 billion, while Nancy Pelosi (D CA) says it reform will save $1.3 trillion. Who's right?

Neither.

FactCheck's take is the CBO's projection that repealing reform would add $230 billion to the deficit is the best available. The CBO itself says that's just an estimate. But it's the best we have.

What's the basis for the politico's claims? Pelosi's basing her number on CBO's estimate 20 years out - a looooong time from now, and one so far away as to be beyond nebulous. , something the agency says is an imprecise and uncertain calculation. That, and she's spinning; there's no 'savings' but rather is actually a reduction in the projected federal deficit.

The GOP's claim that "the bill would add over $700 billion in red ink over the next decade,"? FactCheck said we "judge it to be mostly bogus."

Boehner et al contend that about 400 billion dollars in the CBO's Medicare savings are being "double-counted." But,as FactCheck (and many others) have pointed out, CBO is simply not doing that.

Of the other $300+ billion in 'costs', there's $200 billion for a permanent "doctor fix" to prevent a cut in Medicare payments to doctors. As many have pointed out, that's completely separate from the bill - and oh, BTW, many Republicans endorse the "doctor fix" anyway.

The GOP also says reform's administrative costs will be about $115 billion - that's wildly inflated as well. CBO's pegged these at about $15 billion over the next 10 years.

What does this mean for you?

Base your projections on the CBO. They've no axe to grind, unlike the pols.

Posted by Joe Paduda at 5:18 PM | Link to this post

UPDATE - yesterday I reported on GOP House members' commitment to cut a hundred billion from the discretionary spending this fiscal year (which, by the way, started October 1, 2010). After I posted this piece, the GOP reneged on the commitment, with aides to Speaker Boehner saying the $100 billion figure was 'hypothetical'.

No, it wasn't.

In the 'Pledge to America' the signatories said "We will roll back government spending to pre-stimulus, pre-bailout levels, saving us at least $100 billion in the first year alone."

In a speech at the time of the midterm elections, Boehner himself committed to that number, saying "We're ready to cut spending to pre-stimulus, pre-bailout levels, saving roughly $100 billion almost immediately." (note Boehner's website had the link up yesterday, it doesn't work today.)

So why is this in a blog focused on health care?

Simple. The GOP has committed to overturning, or at the least de-funding, health reform. Not some of the Accountable Care Act - all of it.

That includes:

- the prohibition against medical underwriting that effectively prevents those of us with pre-existing conditions from obtaining individual coverage in most states.

- the closing of the doughnut hole in Part D that will save seniors thousands on their drug bills

- the requirement (already in place) that insurers cover kids till age 26

- the requirement (already in place) that prohibits medical underwriting or pre-ex exclusion for kids

- vouchers for less-well off folks to use to help cover the cost of insurance

- prohibition on lifetime maximum coverage limits

I find it...interesting that many of the same folks who passed Part D and its $16 trillion addition to the deficit in an attempt - successful at that - to woo seniors, would now want to upset seniors, and moms, and families by killing provisions that most voters like.

We'll see.

Posted by Joe Paduda at 7:01 AM | Link to this post

That depends on whether the rest of the reform bill survives without that clause. I've heard from a couple of sources that the Accountable Care Act doesn't include a severability clause. If that is true, than the entire bill may be thrown out if the mandate is ruled un-Constitutional.

That's for others steeped in the details of the ACA and law to figure out. As I'm sure they will.

(Lest we get all excited about the Virginia case, note that there have been about twenty suits filed so far re the ACA, 12 have been dismissed and in two other cases both judges ruled the mandate is Constitutional.)

If the rest of the ACA does survive the demise of the mandate, we'll have a very, very interesting situation. Health insurers will be required to take all comers, the rates they can charge will be highly regulated, benefit plans consistent across most insurers and employers, and there will be no upcharging or medical underwriting or discrimination based on age, pre-existing conditions, or sex.

It would be tough to design a better recipe for disaster for insurers.

Nonetheless, that's what we'll be faced with if the mandate is removed; the rest of the Act will become law, and individuals and employers would - at least theoretically - be able to buy insurance when they need health care, and drop it when they don't.

There's already a precedence for this - in the Massachusetts experiment, loss ratios in the individual market for at least one health plan were about 600%.

The White House recognizes the problem - in a response to the latest court challenge to the mandate that is notable for its focus on individual responsibility for the costs of their care:

"However, unless every American is required to have insurance, it would be cost prohibitive to cover people with preexisting conditions. Here's why: If insurance companies can no longer deny coverage to anyone who applies for insurance - especially those who have health problems and are potentially more expensive to cover - then there is nothing stopping someone from waiting until they're sick or injured to apply for coverage since insurance companies can't say no. That would lead to double digit premiums increases - up to 20% - for everyone with insurance, and would significantly increase the cost health care spending nationwide. We don't let people wait until after they've been in a car accident to apply for auto insurance and get reimbursed, and we don't want to do that with healthcare. If we're going to outlaw discrimination based on pre-existing conditions, the only way to keep people from gaming the system and raising costs on everyone else is to ensure that everyone takes responsibility for their own health insurance."

Whether the President and/or Congress would try to overturn the ACA, or remove the underwriting language is to be determined. While the White House's statements to date acknowledge the issue, AHIP et al have few friends left among Democrats, and those friends would be hard pressed to convince the Administration to be nice to an industry that has been anything but to the Democrats.

Posted by Joe Paduda at 9:13 AM | Link to this post

Friday's NYTimes reports Arizona has decided to stop funding certain organ transplants under the state's Medicaid program. According to the article, "lung transplants, liver transplants for hepatitis C patients and some bone marrow and pancreas transplants, which altogether would save the state about $4.5 million a year" were ended in October.

While it's tempting to make political hay out of this, the reality is Arizona's decision, as painful as it may be, reflects decisions we as a society have to make.

The $4.5 million saved could be spent on preventive medicine, diabetes screening, cholesterol medication, pre-natal care, and other high-value services, services that would likely reduce the need for future acute care while improving the health of many more Arizonans. And the decision process used by the state, while not perfect, is one that we as a society must come to terms with.

The reality here is the government - 'faceless bureaucrats' to some, compassionate and caring stewards of taxpayers' funds to others - determined who will live - perhaps if only for a few more months - and who will not.

Before instituting the change, Arizona studied the outcomes of transplants funded by the program. The results were pretty bad - according to the state, 13 of 14 patients under the state's health system who received bone marrow transplants from nonrelatives over a two-year period died within six months.

Other disagreed with the state's assessment; outside specialists said the success rates were considerably higher, particularly for leukemia patients in their first remission.

I'm not qualified to determine which side is 'more right', and anyway, that's beside the point.

Which is starkly simple. We as a nation cannot afford to provide every health care service that may help every patient.

As db said on his blog;

"We can ration health care rationally or irrationally. We can ration health care based upon emotionally appeals or based on data. We must remember that a decision to pay for one treatment or diagnostic test may deprive someone else of a different treatment or diagnostic test. Or even worse, one treatment may cost so much that many other patients will go without a vaccines or preventive visits.

Rationing exists, it will continue to exist, and we have an obligation to ration in a fair way. We should not value some diseases over other disease. We should avoid emotional appeals, but rather look at data to make the difficult decisions that must be made."

I find it intriguing that a state governed by the GOP is in the forefront of this issue (along with Oregon, which has been addressing Medicaid rationing for years). I sincerely hope - but highly doubt - this will result in an honest, open, and non-politicized discussion of what we can and cannot afford, and why, and how we're going to allocate scarce resources.

Because that's exactly what we must do.

Currently, Medicare is legally prohibited from setting payment based on the efficacy of a specific procedure/medication/treatment. This has to change. It is fiscally irresponsible to pay the same amount for treatments that have a one percent and a one hundred percent effective rate.

Unless and until we address this issue head on, our efforts to reduce the deficit are pointless.

Posted by Joe Paduda at 6:14 AM | Link to this post | Comments (3)

So, you want to get serious about reducing the cost of entitlement programs? How does $25 billion a year, or a quarter-trillion over ten years sound?

Does it sound even better if there's no increase in taxes? How about if there's no reduction in services? And what if beneficiaries didn't have to pay any higher fees, or suffer a reduction in benefits?

What's the catch?

It would require one simple change in Federal law - allow the Secretary of HHS to negotiate prices with pharmaceutical manufacturers.

According to an analysis done three years ago, that's exactly what would happen.

When Part D legislation was passed back in 2003, the Feds were expressly forbidden to negotiate drug prices for Part D. Despite a long and successful history of the Feds doing just that, Congress decided that the private market would do a better job of controlling cost than the gubmint. In actuality, "A report by Families USA, which looked at the top 20 drugs prescribed to seniors, found that VA prices were substantially lower than the cheapest Part D plans, with a median price difference of 58%.6"

That 'VA' is the Veteran's Administration, a federal government entity.

The study indicated "An annual savings of over $20 billion could be realized if FSS [Federal Supply Schedule] prices could be achieved by the federal government for the majority of drugs used by seniors in 2003-2004..."

And that's in 2003 dollars. Recall that brand drug prices increased over 9 percent last year alone; In 2010 dollars, we're easily above the $25 billion per year number for savings.

In a 2006 House analysis, a report "released by Democratic staff on the House Government Reform Committee showed that under the new Medicare plan, prices for 10 commonly prescribed drugs were 80% higher than those negotiated by the Veterans Department [emphasis added], 60% above that paid by Canadian consumers and still 3% higher than volume pharmacies such as Costco and Drugstore.com."

I don't know why the Bowles-Simpson deficit commission didn't consider this in their just-released deficit reduction strategy. After all, Part D alone is responsible for $15 trillion in ultimate deficit dollars. You would think this would be enough to get liberals, conservatives, Druids, Neanderthals, John Birchers, hippies, Greens and Flat-earthers all clamoring for action.

You would think...

Posted by Joe Paduda at 6:17 AM | Link to this post | Comments (1)

A couple weeks ago I started what was going to be a discussion of how we should 'fix' health reform that was intended to run on consecutive days - only to have that sidetracked by goings-on in the health, political, and financial worlds that pushed reform to my back burner.

Let's get back to reform.

First, the easy part. There's no question Congress has to address the 1099 issue - the requirement that all businesses have to inform the IRS when they pay anyone more than $600 over a year. As a small business person myself, I have zero time to send out 1099s to my cell phone, internet access, web hosting, legal, accounting, admin support and other suppliers. No brainer.

Here's a much harder one. Medical loss ratios (MLR).

For politically-obvious reasons, the Senate included requirements that health insurers spend a set percentage of their premiums on actual medical costs and quality improvement activities; at least 80% for individual/small group policies and 85% for larger group coverage. If an insurer's admin expense (all costs EXCEPT medical costs are higher than 20%/15%, policyholders get a refund/rebate of the 'extra'.

The rebate requirement kicks in on January 1, 2011; insurers are already scrambling to figure out how to identify, aggregate, and report costs; lobbying HHS and the National Association of Insurance Commissioners to consider medical management and prevention expenses part of the medical cost category; and crunching numbers to figure out what their medical costs will be in 2011, and based on that, what premiums they can charge.

The MLR requirement is going to require health plan execs to spend an inordinate amount of time and energy figuring out what costs go where and how they need to report those costs to HHS. If they screw up and their medical costs and quality improvement expenses are below the threshold, they have to pay a penalty.

While one can make a rather superficial argument that this is all to the good as it improves transparency, I'm hard pressed to understand how this ultimately benefits anyone.

Health plans that do a great job managing chronic conditions may well be 'penalized' for that success. Plans that contract with providers who deliver excellent preventive care, ensure expectant moms take their vitamins and don't smoke, and get their tubby patients to drop a few pounds may find they are cutting checks come MLR audit time. Payers channeling patients to hospitals with low infection rates and few re-admissions will be in the same situation, as would those that carefully monitored potential diabetics' health status and clinical signs.

These programs are costly, many have unproven benefits and/or won't pay off for some years, and therefore the cost of the programs today (if they don't qualify as 'quality improvement') will add to expenses, driving down the MLR.

While I'm not a believer in the infinite wisdom of the free market, I do know that the health plans that deliver lower costs - over time - will have a major competitive advantage over their less-capable competitors. While insurers and providers need very, very close watching when it comes to risk selection, rescission, underwriting, and care authorization, we don't need to waste their time - and ours - worrying about their MLR.

Posted by Joe Paduda at 3:18 PM | Link to this post | Comments (3)

That's the answer to the question posed by Bob Laszewski in a post this morning; to paraphrase:

When will the US get serious about controlling health care costs?

Right after the bond market collapse...

Health care is the single largest contributor to our deficit, as well as being a huge drag on our international industrial competitiveness. For now, foreign countries and investors are seemingly fine with the historically-low rates of return they get from governmental bonds.

For now.

But not forever.

When the Chinese - or the Germans - or the Scandinavians - decide they want a better return, we may well see the collapse of the bond market. Ivestors will demand much higher returns, which will lead to intolerable budgetary pressure as debt service costs skyrocket.

In turn, this will force us to adopt draconian measures to rein in spending.

Which will - inevitably - lead to big cuts in Medicare, Medicaid, Part D, and other entitlement programs.

What does this mean for you?

It's not a question of 'If?' but 'When?'

Posted by Joe Paduda at 10:17 AM | Link to this post | Comments (2)

To understand how hard it is going to be to control health care costs, one merely has to consider the outrage surrounding TSA's recent roll-out of 'enhanced security' measures - measures which include 'enhanced pat downs' and full body scans.

Videos of boys getting patted down personified the problem. But the upset and outrage and anger visible today will be nothing if another airplane gets blown out of the sky; then we'll see - and hear - about the gross negligence that allowed the terrorists access to a plane full of people.

We want to have our cake, eat it too, and not get fat.

Folks, we need to get the deficit under control. We can't afford the future bills for health care entitlements. Yet many of the same deficit hawks outraged by government spending are also the loudest voices protesting cuts to Medicare and angry about reducing physician reimbursement.

This is going to hurt everyone - you, me, my ninety-year old mom, doctors, the poor, the wealthy, hospitals, supply companies, pharma - you name it. We can either whine about how unfair and awful this is, or get serious.

A good place to start is the President's deficit commission's approach.

Here are a few things to consider

- Speed up cuts to Medicare Advantage and charity care payments to hospitals, both provisions in the ACA.

- Beef up and empower the Independent Payment Advisory Board, the newly created commission charged with slowing the growth in Medicare spending.

- Means-test seniors' contributions towards their health care

- Quickly implement a strict cap on the amount of employer-provided health insurance expenses that are tax deductible - a much lower cap than called for under the ACA (that kick in until 2018).

And here are a few ideas from your author:

- Raise Medicare-specific taxes. Much as I dislike paying taxes, I dislike dumping the costs on my - and your - kids even more.

- Allow the federal government to negotiate prices with pharma for Part D; either that or cancel the program altogether. That's $15 trillion right there.

- Require Medicare to alter payment based on the effectiveness and efficacy of various treatments - a rather obvious step that - believe it or not - is illegal today.

- Require individuals with modifiable risk factors to pay more - or get less - if they refuse to work to get healthier.

What does this mean for you?

This is about shared sacrifice. While the 'enemy' isn't as easily personified as a terrorist or nuclear power, it is every bit as dangerous and threatening. Real, verifiable, tough steps are necessary. We've handled this before, and we can do so again, but only if we get serious.

Alas, the cynic in me doesn't think we will get serious. The deficit crisis isn't going to manifest itself in a highly-visible televised explosion or plane falling out of the sky; no pictures of bloody victims staggering away from a dust-filled street, no shattered buildings with blown-out windows and screaming sirens.

Just a deeper and deeper hole sinkhole that will slowly - but surely - swallow our future.

Posted by Joe Paduda at 7:10 AM | Link to this post

A new study by Paul Ginsburg at the Center for Health System Change reveals what we on the inside of the insurance industry have long 'known':

The balance of power in rate negotiations has moved decisively from payers to providers

Payers without market share have higher medical costs and little chance of improving their position.

Let's focus on the second point.

According to Ginsburg, "Average inpatient payment rates in the eight market areas varied widely, ranging from 147 percent of Medicare rates in Miami to 210 percent in San Francisco...San Francisco had the highest average rate across the four insurers, it was the highest-priced market for only two insurers. Presumably, this reflects such factors as health plans' differing market shares..."

The implication is clear - the dominant payers in San Francisco were able to negotiate reimbursement deals that were much more favorable than those payers with little share.

What does this mean?

If competition is to flourish, there has to be some way for new entrants to compete effectively. In the health insurance business, success is largely driven by price; payers with lower cost structures win and grow; payers with higher cost structures shrink and disappear. If a payer doesn't have enough share in a market - defined as membership - then providers will find little need to give them significant discounts, to comply with onerous utilization review processes, to provide quality data and vary their treatment, scheduling, and billing practices to accommodate an insurer that delivers few patients to their office/imaging facility/hospital.

One of the flaws of the ACA (health reform bill) was it did little to address this fundamental problem. The 'free' market hasn't solved the problem, so some form of regulatory intervention is necessary if new competitors are going to have a chance to compete with the big health plans.

Posted by Joe Paduda at 10:14 AM | Link to this post | Comments (9)

There's no question the Accountable Care Act needs work - everyone agrees on that.

So let's talk about the specifics - what needs fixing, why, and how can we get those fixes passed.

First, let's understand how bad our current 'system' is. Some who want to repeal and/or replace the ACA continue to publicly state we have 'the best health care in the world'. (here, and herel)

While that may - or may not - have been true at some point, it is increasingly clear that the US health care system is not anywhere close to 'best in class'. A just-released study done by the Commonwealth Fund compares our system to those in ten other industrialized countries, with sobering results.

Here are key findings:

- Adults in the United States are far more likely than those in 10 other industrialized nations to go without health care because of costs, have trouble paying medical bills, encounter high medical bills even when insured, and have disputes with their insurers or discover insurance wouldn't pay as they expected.

- One third (33%) of U.S. adults went without recommended care, did not see a doctor when sick, or failed to fill prescriptions because of costs, compared to as few as 5 percent to 6 percent in the Netherlands and the U.K.

- One-fifth of U.S. adults had major problems paying medical bills, compared to 9 percent in France, the next highest country, 2 percent in the U.K., 3 percent in Germany, and 4 percent in the Netherlands.  

One finding is particulary scary - "Although the uninsured were at highest risk for skipping needed care, working-age U.S. adults with below-average incomes who were insured all year were significantly more likely than those with above-average incomes to go without needed care because of costs and have serious problems paying medical bills--nearly half (46%) went without needed care and one third had one bill problem, double the rates reported by above-average income insured adults."

You read that right - having insurance does not mean you get health care, and if you do, you still have to pay a substantial portion of the bill out of your own pocket. 

The study examined health care and health insurance in eleven countries, all with much lower costs than the US - a differential that undoubtedly helps them compete in international markets. As globalization continues, American companies will find the disparity in health care costs will be a growing problem, diminishing their ability to compete with companies from Germany, Japan, Korea, and Switzerland.

That said, ACA is anything but perfect. Let's start our discussion with something that isn't in the bill - Medicare physician payment reform.

Fixing Medicare's horrendously broken physician reimbursement 'scheme' known as RBRVS is critical. Congress has to come up with a long term solution that:

a) better recognizes the primary importance of primary care;

b) incentivizes outcomes rather than pays for piece work:

c) is less likely to be abused by Congressional cowardice and ineptitude.

A big part of the solution is already in place - the Independent Payment Advisory Board (IPAB). This from California Healthline:

"Beginning in 2014, IPAB must recommend Medicare spending cuts if the program's growth rate exceeds the average of the consumer price index and the Medical Care CPI. Barring congressional action to make equivalent cuts, IPAB's recommendations would become law. The board would exempt decisions affecting hospitals and other provider groups until 2020, but the Congressional Budget Office estimates that IPAB still could hold down Medicare spending by $15.5 billion between 2015 and 2019, according to a new report from Stephen Zuckerman of the Urban Institute."

A good start to be sure, but just a start. And note that we've still got to wait ten years before IPAB can address hospital costs, ten years that will likely produce significant inflation driven by technology, utilization, and price increases. We're already seeing hospitals successfully thwart the new severity-adusted DRGs through more sophisticated coding...

Instead, we should move up IPAB's effective date by at least a year, and ideally two for physicians and perhaps seven years for facilities.

If we are serious about deficits, then let's get serious. What the new Congress does about IPAB will tell us a lot about whether it will live up to the oft-voiced commitment to reduce government spending.

What does this mean for you?

Watch what Congress does about physician payment reform. If this isn't addressed in a meaningful, comprehensive, and sustainable way than there's little chance Medicare costs will be controlled until IPAB goes into effect.

Posted by Joe Paduda at 6:41 AM | Link to this post | Comments (1)

The recession, coupled with increasingly unaffordable health insurance premiums, pushed the number of those without insurance for some part of 2009 over the fifty-nine million mark.

Here are a few relevant findings from a new CDC report:

- the number of uninsured has increased by over a million for each of the last few years

- 40% of the uninsured had at least one chronic condition such as diabetes, hypertension or asthma

- those with a chronic condition were more likely than insured people to go without necessary care

- 50 million were adults, the rest dependents

- One-third of middle-income adults weren't covered for some part of the year. Fully half of the increase in the uninsured were middle income adults.

- for those fortunate enough to have coverage, 26.6% of those under age 65 years were enrolled in a high deductible health plan (HDHP); past research indicates many of them didn't have enough funds set aside to cover their deductible.

For all of its warts, the Affordable Care Act will dramatically reduce the number of uninsured, covering an additional 32 million Americans.

One can - and some loyal readers certainly will - argue that this somehow 'overstates' the problem of uninsurance as it includes people who went without insurance for only a few days or weeks. In reality, the data show 33.9 million Americans had been without insurance for more than a year at the time of the interview - over eleven percent of the population.

Which raises a very difficult question. If the new Congress is looking to 'repeal and replace' the ACA, what replacement will stem the rising tide of uninsurance?

Anyone??

Posted by Joe Paduda at 6:57 AM | Link to this post | Comments (1)

It looks like the GOP is going to win, and win big today, their success driven in large part by voter outrage about taxes and spending, with concern about the cost of reform a strong supporting actor.

If those voting for the GOP think they're about to see restraint in spending, they are going to be sorely disappointed. We need look no further than Medicare Part D, which, according to a piece in Forbes, the mouthpiece of American Liberals for generations, "U.S. Comptroller General David Walker called "the most fiscally irresponsible piece of legislation since the 1960s."

The Forbes piece went on to say "Recall the situation in 2003. The Bush administration was already projecting the largest deficit in American history--$475 billion in fiscal year 2004, according to the July 2003 mid-session budget review. But a big election was coming up that Bush and his party were desperately fearful of losing. So they decided to win it by buying the votes of America's seniors by giving them an expensive new program to pay for their prescription drugs."

Here's how Walker put it in an interview with CBS:

"...we promise way more than we can afford to keep. Eight trillion dollars added to what was already a 15 to $20 trillion under-funding. We're not being realistic. We can't afford the promises we've already made, much less to be able, piling on top of 'em."

With one stroke of the pen, Walker says, the federal government increased existing Medicare obligations nearly 40 percent over the next 75 years. [emphasis added]

"We'd have to have eight trillion dollars today, invested in treasury rates, to deliver on that promise," Walker explains.

Asked how much we actually have, Walker says, "Zip."

So where's that money going to come from?

"Well it's gonna come from additional taxes, or it's gonna come from restructuring these promises, or it's gonna come from cutting other spending," Walker says.

Forbes again:
Moreover, there is a critical distinction [between Part D and reform]--the drug benefit had no dedicated financing, no offsets and no revenue-raisers; 100% of the cost simply added to the federal budget deficit, whereas the health reform measures now being debated will be paid for with a combination of spending cuts and tax increases, adding nothing to the deficit over the next 10 years, [emphasis added] according to the Congressional Budget Office...the unfunded drug benefit, which added $15.5 trillion (in present value terms) to our nation's indebtedness, according to Medicare's trustees, was worth sacrificing his [Rep Trent Franks (R) of Arizona] integrity to enact into law. But legislation expanding health coverage to the uninsured--which is deficit-neutral--somehow or other adds an unacceptable debt burden to future generations."

Readers may recall Part D passed in the dead of night and only after GOP leader Tom Delay (currently on trial for money laundering) strong-armed three GOP Representatives into switching their 'nays' to 'yeas', thereby ensuring your kids, and my kids, would be saddled by an unfunded debt of $8 trillion.

(BTW, all but 16 Democrats voted AGAINST the Part D bill...)

One of the vote-switchers was Trent Franks, who is now a top contender for Hypocrite of the Year. Here's what Franks said about health reform: "I would remind my Democrat colleagues that their children, and every generation thereafter, will bear the burden caused by this bill. They will be the ones asked to pay off the incredible debt".

As bad as he is, Franks has some tough competition for the HotY award; Among the GOP deficit hawks who voted for Part D, and are now outraged by the cost of health reform are Senators McConnell (KY), Cornyn (TX), Crapo (ID), Hatch (UT), Grassley (IA), Hutchinson (TX), Sessions (AL), Enzi (WY), Roberts (KS), and Inhofe (OK).

If you think these conservative deficit hawks are going to do anything different this time around, you're delusional - at best.

I am continually amazed by the inability of the American voter to separate fact from fiction, lies from truth, pandering from honesty. Some, including me, will argue that the Democrats have done a lousy job of pointing out the 'inconsistency' on the part of these Republicans.

But at some point the people pulling the levers in the voting booth have to take responsibility.

And that time is now. The reason - the only reason - we have huge deficits and no path to paying for them is because the American voter is too damn lazy to engage.

As HL Mencken said: "Democracy is the theory that the common people know what they want, and deserve to get it good and hard."

And this one is gonna hurt.

Posted by Joe Paduda at 7:36 AM | Link to this post | Comments (19)

The Wall Street Journal has an excellent report on the key step in determining Medicare physician reimbursement.

Here's the intro:

"Three times a year, 29 doctors gather around a table in a hotel meeting room. Their job is an unusual one: divvying up billions of Medicare dollars.

The group, convened by the American Medical Association, has no official government standing. Members are mostly selected by medical-specialty trade groups. Anyone who attends its meetings must sign a confidentiality agreement.

Yet the influence of the secretive panel, known as the Relative Value Scale Update Committee, is enormous. The Centers for Medicare and Medicaid Services, which oversee Medicare, typically follow at least 90% of its recommendations[emphasis added] in figuring out how much to pay doctors for their work. Medicare spends over $60 billion a year on doctors and other practitioners. Many private insurers and Medicaid programs also use the federal system in creating their own fee schedules."

The link probably expires tomorrow, so read it now, or print and read it on a plane later.

thanks to Advisen for the tip.

Posted by Joe Paduda at 8:52 AM | Link to this post | Comments (1)

Yesterday the NYTimes reported the Justice Department is suing Blue Cross Blue Shield of Michigan for allegedly violating antitrust laws. BCBSMI is accused of requiring hospitals to give BCBSMI 'most favored nation' pricing, thereby increasing the prices paid by other health plans and stifling competition.

According to the Times, the Blues contracts had "clauses stipulating that no insurance companies could obtain better rates from the providers than Blue Cross. Some of these contract provisions, known as "most favored nation" clauses, require hospitals to charge other insurers a specified percentage more than they charge Blue Cross -- in some cases, 30 to 40 percent more, the lawsuit said."

Christine Varney, the head of the antitrust division in the Justice Department, said "Our lawsuit alleges that the intent and effect of Blue Cross Blue Shield of Michigan's contracts is to raise hospital costs for competing health plans..."

The lawsuit also claims that Blue Cross agreed to pay higher prices to certain hospitals to get them to agree to the "most favored nation" clauses.

There are three issues here that deserve your attention.

First, there is no 'free market' in health insurance. Most markets are dominated by a single, or at most two, health plans. This is clearly an effort by the Feds to make a statement, to force big health plans and their co-operating health systems and hospital groups to back off and 'let' smaller insurers into the market. No one, least of all big insurance companies, likes to be sued by the Federal government, and this very public case has undoubtedly started many health plan legal departments scrambling to prepare briefs for their CEOs detailing their potential liability for the same 'offenses'.

As a corollary, smaller health plans cannot compete with the big boys because they don't have the medical dollars required for bargaining purposes. Why would St Tony's Hospital give a big discount to Mom and Pop's Health Plan? The answer is simple - they wouldn't, because they don't have to - Mom and Pop don't have any patient dollars that they would (potentially) move to another hospital, so there's no reason for St Tony to do a deal.

(This basic fact is lost on those politicians and pundits who think that selling health insurance across state lines is a panacea. Health plans' costs are primarily, and overwhelmingly, determined by the medical costs in the areas they operate - and legalizing cross-border sales of insurance will do nothing to reduce premiums or improve access)

The suit is apparently an effort by the Feds to address this reality, and may well be part of a larger strategy to improve competition ahead of implementing health reform.

Second, many health plans and insurers have most favored nation clauses in their contracts - workers comp payers too. This suit may - and most certainly should - encourage those payers to reconsider the purpose of and risk in those clauses.

I hasten to add that the accusations against BCBSMI go beyond simple MFN clauses; according to the Times, "the Justice Department said that Blue Cross required two hospitals in Saginaw, Mich., to charge most other insurers at least 39 percent more than the hospitals charged Blue Cross. Likewise, it said, in the Detroit area, the contract required three hospitals to "charge Blue Cross's significant competitors at least 25 percent more than they charge Blue Cross."

Finally, this highlights the symbiotic payer - provider relationship that is the fabric of our current health system - dominant health plans and dominant health systems working very closely together. If we as a society decide this isn't the health system we want, than we're going to have to get very litigious for a very long time. It has taken a century for the system to evolve to this point, and will take decades for any material change. In some instances this works very, very well - think Geisinger, Mayo, Marshfield.

In others, it may well 'stifle competition' But lets get serious - how effectively could a newcomer, or even a second tier health plan, really compete without the huge dollars necessary for investments in IT; care management; provider contracting, analysis, and relations; marketing and brand development; and distribution?

It couldn't, and it can't.

Like it or not, competing in health insurance, as in many industries, puts a premium on size and scale.

What does this mean for you?

We can already see this, as smaller health plans are being snapped up by bigger competitors, their management all-too-clearly reading the writing on the wall that survival in the post-reform world will require size, and scale, and money far beyond the grasp of most smaller health plans.

Note - A subsidiary of BCBSMI is a consulting client of HSA. While I have no knowledge that in any way pertains to this action, I do know that as an organization BCBSMI is quite sensitive to and cautious about any actions that might be construed to harm competition or interfere in provider practice.

Posted by Joe Paduda at 6:26 AM | Link to this post | Comments (6)

Today's pending announcement that the GOP will introduce a 'Pledge for America' includes rhetoric about cutting taxes, reducing the size of the government, repealing health reform, and eliminating $100 billion in discretionary spending among other chestnuts.

It's good to hear talk about fiscal restraint. Too bad they didn't hew to those principals when they were in power. Here's a brief reprise of a post from a ways back.

This from the party that added over $9 trillion to the deficit the last time they passed a health care bill.

Let's return, for just a moment, to the early and mid oughts, the halcyon days of the Bush Administration, when the entire government was under the firm control of the fiscally prudent.

Here's what those wise stewards of the nation's wealth did.

Pass Medicare Part D with no funding - short term, long term, any term. Hell, they would've been more fiscally prudent if they'd included a few hundred million to bet on the horses. At least that would have shown some desire to pay for the thing. But no, the GOP decided to NOT set aside funds, or raise taxes, or cut other programs; they just passed Part D, committed to paying for it out of 'general funds' and to hell with the future.

The latest Medicare Actuary report indicates the GOP-passed Part D program has contributed $9.4 trillion to the $38 trillion Federal healthcare deficit. (page 126)

The Bush-era GOP makes President Obama, Pelosi, Reid, and the rest of those spendthrift Dems look like a bunch of cheapskates; even a GOP analysis finds "the new reform law will raise the deficit by more than $500 billion during the first ten years and by nearly $1.5 trillion in the following decade."

It remains to be seen if the voters will be duped by this blatantly political ploy. So far, it looks like it's succeeding.

As HL Mencken said, "People deserve the government they get, and they deserve to get it good and hard."

Posted by Joe Paduda at 6:52 AM | Link to this post | Comments (3)

Medical malpractice is one of the cost drivers about which there is much disagreement, some contend it is a major contributor to overall system costs, while others view med mal as a relatively minor factor.

A new study [abstract only] reported in this morning's Health Affairs makes a compelling case for the latter view, and adds valuable insight into what is a politically-charged issue, one rife with misinformation and sloppy math.

The study found "Overall annual medical liability system costs, including defensive medicine, are estimated to be $55.6 billion in 2008 dollars, or 2.4 percent of total health care spending." [emphasis added]

Recall total system costs are in excess of $2.2 trillion. While $55 billion is a lot of money, compared to total system costs of $2.3 trillion, it, well, isn't much.

In fact, costs would be much higher if the real toll of medical malpractice - lousy care, incompetent providers, poorly managed facilities, was adequately accounted for. Solid research indicates the vast majority of medical malpractice problems are never litigated. One study indicated that the cost of 'adverse events approached 5% of total health care costs; over a hundred billion dollars in today's world.

The med mal reform issue has been raised by opponents of health reform, who contend the failure to include med mal reform in the Accountable Care Act was a missed opportunity to significantly reduce costs Of note, the study estimated the most significant cost associated with medical malpractice was defensive medicine, which accounted for $45.6 billion of the total, most of which was spent on hospital services.

In an email conversation, I asked the study's principal author, Michelle M. Mello, PhD, to clarify the study's findings re the impact of med mal on defensive medicine - the theory that physicians change the way they practice to protect themselves against medical malpractice by prescribing more tests and studies.

Here's Dr Mello's response.

"There are two ways to measure defensive medicine. One is to ask physicians, using surveys, how often they order extra tests, procedures, and referrals primarily because of liability pressure. We didn't use this method because it has two major shortcomings: (1) physicians may consciously or unconsciously overreport defensive practices because they want to help build the case for taking action to solve what they perceive as a problem with the liability environment; and (2) they may not be able to separate out different motivations they have for ordering services. In many cases, they may feel that ordering an extra test is a good idea both because it's in the patient's best interest and because it helps them reduce their liability risk.

The other method -- the one we used -- is to compare rates of health services that we think are indicative of defensive medicine in areas of high and low liability risk. If rates are higher in high-liability areas, and we can rule out other explanations for the differences, we can conclude that there is an association between liability and physician practices. The main challenge associated with this method is adequately controlling for other factors that could explain the differences. Researchers have extensively documented that physicians in different geographic areas have different practice styles, and it is believed that this is due to many factors, of which liability concern may be one.

We based our defensive medicine estimates for hospital services on previous analyses by Dan Kessler & Mark McClellan. Having reviewed the literature extensively as it has evolved over the past decade, our firm belief is that the Kessler & McClellan analyses provide the best available figures. Their statistical design enabled the researchers to control for other sources of variation in physician practices.

The main weakness of the Kessler & McClellan analysis, as we discuss in the paper, is that it was based on a narrow range of health services (cardiac care services) provided to a specific type of patient (Medicare beneficiaries). Is it appropriate to generalize from these data to all services provided to all patients? We have some concern about that, and consequently characterize the quality of the evidence supporting our defensive medicine estimate as low. Other kinds of health services may be less subject to physician discretion over treatment intensity than the cardiac services that Kessler & McClellan studied, so it's possible that extrapolating to all services yields an estimate of defensive medicine costs that is too high. Nevertheless, we believe Kessler & McClellan's analysis of the strongest one available."

The paper provides additional background on the methodology used, and the challenges with that methodology. While it isn't perfect, one has to compare it to the methods used by others who contend the tort system is a major driver of health care costs. Those 'methods' are rather less rigorous.

What does this mean for you?

One has to view the cost of medical malpractice in context - and the fact is there's far too much lousy medicine, and far too little accountability.

Posted by Joe Paduda at 7:11 AM | Link to this post | Comments (4)

Today's Kaiser Health Tracking Poll contains interesting data about support for health reform (steady positives, declining negatives), what's much more telling is the extent of seniors' a) ignorance of basic facts about health reform and b) widespread belief that reform includes death panels and cuts Medicare benefits.

Yikes.

According to Kaiser, "Half of seniors (50%) say the law will cut benefits that were previously provided to all people on Medicare, and more than a third (36%) incorrectly believe the law will "allow a government panel to make decisions about end-of-life care for people on Medicare."

These are both factually incorrect.

Moreover, "Despite the fact that Medicare's actuaries predict the health reform law will extend the life of the Medicare Part A Trust Fund by 12 years (from 2017 to 2029), only 14 percent of seniors know this and nearly half (45%) of seniors think the health reform law will weaken the financial condition of the fund.
"

There are several ways to look at this.

The power of the anti-reform noise machine is truly impressive; death panel myth promoters are clearly effective in getting people to believe their claims, despite widespread debunking of the claim by multiple independent organizations. (One well-respected organization, Politifact.com (run by the St Pete Times, a terrific newspaper, called it "pants on fire false).

Then again, it's hard to underestimate the ignorance of the American public; we're talking about a country where 43% of the population doesn't believe in human evolution...

Seniors tend to vote in higher percentages than the rest of the population, so their concerns about reform, based at least in part on ignorance of the actual reform bill and its provisions, may well have a disproportionate impact on the election this fall.

Closer to home, health plans and insurers have to take note of these poll numbers and consider the impact on their own members.

As health plans increasingly emphasize provider network selection based on quality and outcomes data; rigorously employ evidence-based medical guidelines; and get tougher on experimental and unproven medical procedures and therapies, they are going to be exposed to the same type of fear-mongering from idiots using the public's ignorance and fear to gain notoriety.

What does this mean for you?

Health plans must - and I mean must - develop and implement programs to stay on top of the public's perception and opinions about them. Call it opinion monitoring, social network monitoring, complaint management, whatever, but do it. But this will only work if you proactively educate members and the markets about what you're doing and why. Otherwise it's purely defensive, will appear so, and will be little help when the stuff hits the fan.

Which it always does.

Posted by Joe Paduda at 9:32 AM | Link to this post | Comments (8)

The recess appointment of Dr Donald Berwick as head of CMS has incited a furor among politicians outraged at what they claim are his advocacy for rationing and fondness for Britain's National Health Service.

To support their claims, these politicians are using Berwick's own words, in a way eerily reminiscent of the recent Shirley Sherrod debacle.

It started with Glenn Beck, master of the one-word quote, and then slipped over into more mainstream politicians.

What's really troubling about all this, in addition to the blatant political motivation, is Berwick is pretty closely aligned with core conservative values.

Don Berwick is now, and has always been, a patient-centric, consumer-oriented 'radical' who's concept for the ideal system is one that is almost entirely patient-focused. Here's Berwick's ideal health plan from a piece by Ezra Klein:

"(1) Hospitals would have no restrictions on visiting -- no restrictions of place or time or person, except restrictions chosen by and under the control of each individual patient.

(2) Patients would determine what food they eat and what clothes they wear in hospitals (to the extent that health status allows).

(3) Patients and family members would participate in rounds.

(4) Patients and families would participate in the design of health care processes and services.

(5) Medical records would belong to patients. Clinicians, rather than patients, would need to have permission to gain access to them.

(6) Shared decision-making technologies would be used universally.

(7) Operating room schedules would conform to ideal queuing theory designs aimed at minimizing waiting time, rather than to the convenience of clinicians.

(8) Patients physically capable of self-care would, in all situations, have the option to do it.

"I suggest that we should without equivocation make patient-centeredness a primary quality dimension all its own, even when it does not contribute to the technical safety and effectiveness of care," he says."

Pretty radical, indeed - returning power to the patient, from the practitioner.

If Berwick's opponents just took a minute to read what the guy really stands for, they'd discover he's pretty much aligned with many 'conservative' principles - self responsibility, ownership, consumer-centered policies and practices.

Unfortunately, they just don't care about who Berwick really is - they've decided he's the stick they're going to use to beat this Administration, regardless of whether he's good, bad, or indifferent.

As Maggie Mahar noted in HealthBeat, "Thomas Scully, who led the CMS under President George W. Bush [said of Berwick] : "He's universally regarded and a thoughtful guy who is not partisan. I think it's more about ... the health care bill. You could nominate Gandhi to be head of CMS and that would be controversial right now."

Here's hoping the recent Shirley Sherrod disaster has stiffened the backbone of the Administration and caused the wingnut media to think a little more deeply before throwing bombs.

And yes, I believe in the Easter Bunny too.

Posted by Joe Paduda at 6:21 AM | Link to this post | Comments (8)

Several clients have asked for more detail on how the reform bill will change Medicare reimbursement for physicians and other non-facility providers. Here's the synopsis.

First, note that this pertains only to reimbursement changes contained within the reform bill. There are a host of other initiatives, ideas, pending changes, and reimbursement 'tweaks' outside the bill that will also impact reimbursement.

Reimbursement for primary care services - provided by some internists, family practice docs, pediatricians, PAs, and nurse practitioners - will increase 10% between 2011 and 2015. After 2015, the increase - which is described as a 'bonus' - will theoretically expire.

The key word here is 'some'.

To get the increased compensation, 60% of the provider's charges for services over the last (to be determined) months/years must have been for primary care.

There's also more funds for some general surgeons - a 10% bonus if they provide 'major surgical procedures in health professional shortage areas".

That's it for the easily described changes. Now here's the more complex.

1. Bundled payments - there's a national pilot program authorized under reform that would allow for bundling of payments for an entire episode of care, as opposed to the current fee for service (FFS) methodology. Under this scenario, a group of physicians, ancillary care providers, and facilities would get paid a flat amount for a specific condition/diagnosis.

2. Post 2014 and the Independent Payment Advisory Board - Starting in 2014, the IPAB would be required to recommend specific Medicare spending reductions in any year in which Medicare's per capita cost growth rate exceeded a specific target. IPAB's recommendations are more than just idle talk; they would become law unless Congress passed an alternative proposal that resulted in identical savings. Some provider types are excluded for a limited time (this is too deep in the weeds to go into here).

There's more in the bill, but it is for very specific services, types of providers, and geographic areas yet to be identified - in all, few providers will be affected.

For more detail on the bill's impact on reimbursement, click here.[opens pdf]

What does this mean for you?

Remember this is just the reform bill - it is highly likely other changes driven by other bills, regulatory changes, and miscellaneous factors will have as much - if not more - impact.

Posted by Joe Paduda at 7:51 AM | Link to this post | Comments (2)

I don't understand why those who believe health reform is socialism don't have faith in the free market's ability to control costs and deliver quality.

Here's why I'm confused.

Several large health insurers have decided its time to get serious about managing costs; they're introducing plans with limited provider networks and either no coverage for out of network providers or high deductibles and co-insurance/copays.

The plans, introduced by United Healthcare, Aetna, Wellpoint and others, are currently only available in a few markets as the healthplans test market receptivity.

Kudos to these insurers for finally getting serious about managing cost. While they are concerned about the potential for a repeat of the consumer backlash seen in the nineties, I'm betting the consumer backlash will be minimal.

The political backlash is a whole different story; more on that in a minute.

Most employees are all too aware of the rising cost of benefits; they have seen their premium contributions increase dramatically as the benefits plan has slimmed down. While some aren't going to be happy if they have to pay more to see their favorite doc or go to the nearest hospital, their anger will be tempered by the knowledge that they are better off than many of their neighbors who have no insurance at all.

That wasn't the case in the early nineties. Since 1993, the number of people without insurance has increased almost 20% to 52 million from 43.9 million.

Just as the benefits landscape has changed, so has the political. We're already starting to hear some politicians complain that employers' changes are evidence that 'ObamaCare' isn't working as advertised, that the President's promise that reform would allow you to keep your current plan wasn't true.

These critics probably know their argument is specious at best. The reform legislation was specifically designed to allow employers to maintain control over their plans, the thinking being the free market will develop solutions to the cost and coverage problem.

And that's precisely what is beginning to happen, albeit slowly and in baby steps. Health plans have realized that risk selection isn't the path to success, quality and cost of care and more effective member health management is.

There's a bit of hypocrisy, or perhaps more kindly, ignorance among those who criticized 'Obamacare' for its 'socialist' leanings and now fault reform for benefit plan changes implemented by employers seeking market answers to rising costs.

The cost control steps included in the reform legislation are weak, scarce, and small; stronger cost controls were discarded in order to get the bill past lobbyists and their friends in the Senate (and to a lesser extent, the House). As a result, we're left with a bill that - de facto - relies on private insurers and employers to develop tools and methods to control cost.

Critics can't have it both ways. Either decry the bill for its weak cost controls and governmental 'takeover' of health care, or slam it for forcing employers to change plans to control costs because the bill doesn't do enough.

Trying to both results in one argument refuting the other.

Posted by Joe Paduda at 8:17 AM | Link to this post | Comments (8)

I've just about had it with the GOP's demagoguing about deficits.

The party of fiscal responsibility, of low taxes and small government, of controlled spending and personal responsibility - that party - seems to have rediscovered its roots of late, with strident calls for fiscal restraint, an end to wasteful government spending and strict adherence to pay-as-you-go guidelines.

This from the party that added over $9 trillion to the deficit the last time they passed a health care bill.

Let's return, for just a moment, to the early and mid oughts, the halcyon days of the Bush Administration, when the entire government was under the firm control of the fiscally prudent.

Here's what those wise stewards of the nation's wealth did.

Point One
Pass Medicare Part D with no funding - short term, long term, any term. Hell, they would've been more fiscally prudent if they'd included a few hundred million to bet on the horses. At least that would have shown some desire to pay for the thing. But no, the GOP decided to NOT set aside funds, or raise taxes, or cut other programs; they just passed Part D, committed to paying for it out of 'general funds' and to hell with the future.

The latest Medicare Actuary report indicates the GOP-passed Part D program has contributed $9.4 trillion to the $38 trillion Federal healthcare deficit. (page 126)

The Bush-era GOP makes President Obama, Pelosi, Reid, and the rest of those spendthrift Dems look like a bunch of cheapskates; even a GOP analysis finds "the new reform law will raise the deficit by more than $500 billion during the first ten years and by nearly $1.5 trillion in the following decade."

Point Two
Prevent CMS from basing reimbursement on effectiveness. As I said a couple months ago, "'the Republican Congress and Administration was responsible for preventing Medicare from considering any cost-benefit criteria in determining whether and what Medicare would pay for procedures, drugs, treatments, devices, etc. Yep, these deficit hawks thought it was just fine for we taxpayers to be forced to pay for procedures with very little efficacy. (Medicare Modernization Act)

Hmmm, wise stewards indeed...

How'd the GOP get away with this? Simple. The Republicans suspended Congress' PAYGO rules, the requirement that any bill that spent more money had to be offset by more revenue or cuts elsewhere.

By the way, those PAYGO rules? The Dems reinstated them.

From all the caterwauling from the GOP side of the aisle, you'd think that Mitch McConnell, John Boehner, Newt Gingrich et al were well practiced in the art of controlling spending, of not spending what you don't have.

And you'd be wrong.

According to the Wall Street Journal, speaking about a recent effort to extend unemployment benefits, McConnell said "The principle Democrats are defending is that they will not pass a bill unless it adds to the deficit," McConnell voted for both Part D and MMA.

Speaking about the health reform bill a couple months ago, Rep. Paul Ryan of Wisconsin, "the top Republican on the Budget Committee, said "Hiding spending does not reduce spending. We all know this bill is a budget Frankenstein. It is a house of cards. It is going to give us a huge deficits now and even larger deficits in the future." Ryan voted for Part D and MMA.

Here's party leader Newt Gingrich: "Republicans, I think, are going to draw a very firm line against any kind of tax increase that would kill jobs, and that's very hard for liberal Democrats to live with because all of their plans require bigger spending, higher deficits and more taxes, and it's a fundamental disagreement about the nature of the world."

I could go on, but you get the point.

What does this man for you?

I've had, and voiced, deep concerns about the health reform bill and its associated costs. What makes me, and should make you, really angry is the demagoguing by elected officials who've done exponentially more to damage our fiscal future than even the most pessimistic assessment of the health reform bill.

Posted by Joe Paduda at 6:46 PM | Link to this post | Comments (8)

Yesterday the House passed legislation increasing Medicare physician reimbursement till November 30, when it is slated to drop by 23%. Then, barely a month later, physicians will see another cut which will cut their pay by another seven points.

The temporary fix will increase payments by just over two percent.

For six months.

Then the whole debacle/fiasco/mess will resurrect it's ugly head and we'll be right back where we are today, except the cost of an ultimate fix will then be close to $300 billion.

But that will happen after the fall elections, and well before the 2012 voting season starts.

On the workers comp side, several states will see their doc fee schedules change in step with Federal reimbursement, while the impact on most jurisdictions' fee schedules will play out over time as regulators and legislators work thru the politically-charged process, alter conversion factors and assess their potential impact on access and cost.

The indirect impact is likely to be much more significant as physicians and other providers billing CPT codes seeking to maximize reimbursement from private payers to offset (inflation adjusted) losses in revenue from the Feds.

For those interested in more detail, click here.

Posted by Joe Paduda at 7:02 AM | Link to this post

Why do we need health reform? Don't we have the best health care system in the world?

No. Not even close.

According to a study released yesterday by the Commonwealth Fund, "Compared with six other nations--Australia, Canada, Germany, the Netherlands, New Zealand, and the United Kingdom--the U.S. health care system ranks last or next-to-last on five dimensions of a high performance health system: quality, access, efficiency, equity, and healthy lives." [emphasis added].

The report goes on to note "Newly enacted health reform legislation in the U.S. will start to address these problems by extending coverage to those without and helping to close gaps in coverage--leading to improved disease management, care coordination, and better outcomes over time."

While there's no question there are some very, very good hospitals, physicians, and other providers in the US, this isn't about individual providers - it measures the entire 'system'.

The report was based on surveys of patients and primary care providers and data on outcomes from previous Commonwealth Fund research.

While the report notes a major failing of our system is a failure to provide coverage for all Americans, even when access issues are not considered, we still rank below the other countries on most measures. This is particularly valid when considering cost, the only area where we rank far above the other six countries.

The top-ranked country overall is the Netherlands, followed by the oft-decried Brits. But the most troubling finding is not a shortcoming on one of the various measures of quality or cost; the US ranks lowest in living long, healthy, productive lives.

"The U.S. ranks last overall with poor scores on all three indicators of long, healthy, and productive lives. The U.S. and U.K. had much higher death rates in 2003 from conditions amenable to medical care than some of the other countries, e.g., rates 25 percent to 50 percent higher than Canada and Australia. "

What does this mean for you?

The newly-enacted reform bill will help improve access, quality, technology usage, and other metrics.

But we're still going to be - far and away - the most cost-inefficient system in the world.

Posted by Joe Paduda at 6:35 AM | Link to this post | Comments (2)

There's been a minor flurry of articles about the Veteran's Administration health care system recently, a flurry that is both welcome and a bit tardy. It would have been helpful indeed if these had come out during the furor over health reform. Better late than never.

Let's tackle cost first. The CBO's most recent report indicates the VA does a much better job controlling cost than the private sector delivery system (used by Medicare). According to the CBO,

"Adjusting for the changing mix of patients (using data on reliance and relative costs by priority group), the Congressional Budget Office (CBO) estimates that VHA's budget authority per enrollee grew by 1.7 percent in real terms from 1999 to 2005 (0.3 percent annually) [emphasis added] .2 Though not the decline in cost per capita that is suggested by the unadjusted figures, that estimate still indicates some degree of cost control when compared with Medicare's real rate of growth of 29.4 percent in cost per capita over that same period (4.4 percent per year)."

In contrast, the private insurance sector [pdf] saw premiums increase over 70% over the same period (I know this isn't exactly apples-to-apples, but no matter how you slice the apple, 70% is still a lot more than 1.7%)

How about patient satisfaction? Again, the VA scores better than the private sector.

"In 2005, VA achieved a satisfaction score of 83 (out of 100) on the ACSI for inpatient care and 80 (out of 100) for outpatient care, compared with averages for private-sector providers of 73 for inpatient care and 75 for outpatient care...For VA, the scores for inpatient and outpatient care were 84 and 83, respectively, while the average scores for the private sector were 79 and 81."

In the press, Maggie Mahar posted on Phillip Longman's new edition of Best Care Anywhere; Why VA Healthcare is Better than Yours; quoting Longman's foreword "Health care quality experts hail it [the VA health care system] for its exceptional safety record, its use of evidence-based medicine, its heath promotion and wellness programs, and its unparalleled adoption of electronic medical records and other information technologies. Finally, and most astoundingly, it is the only health care provider in the United States whose cost per patient has been holding steady in recent years, even as its quality performance is making it the benchmark of the entire health care sector."

Merrill Goozner published an interview with Longman, who noted "In study after study published in peer‐reviewed journals, the VA beats other health care providers on virtually every measure of quality. These include patient safety, adherence to the protocols of evidence medicine, integration of care, cost‐effectiveness, and patient satisfaction. The VA is also on the
leading edge of medical research, due to its close affiliation with the nation's
leading medical schools, where many VA doctors have faculty positions."

Longman's book is a timely update to his 2007 edition, providing new insights into the effectiveness of the VA's VistA IT infrastructure and coverage of adoption by the private sector of VistA.

Another recent article noted the system is responsible for 24 million veterans (treating about 5.5 million last year), has a budget of "$50 billion and operates more than 1,400 care sites, including 950 outpatient clinics, 153 hospitals and 134 nursing homes."

The piece quoted Elizabeth McGlynn, associate director of Rand Health and author of a study of the VA: "You're much better off in the VA than in a lot of the rest of the U.S. health-care system," she said. "You've got a fighting chance there's going to be some organized, thoughtful, evidence-based response to dealing effectively with the health problem that somebody brings to them."

Which brings up this question -

Where would you like to get your health care, and which inflation rate would you prefer?

Posted by Joe Paduda at 7:00 AM | Link to this post | Comments (18)

I've been somewhat reluctant to write this post, as it takes issue with one of the key presenters at a workers comp conference that I believe is consistently the best I've attended. It's here for one reason: it illustrates how a public podium must be treated with respect and the audience given all the relevant information so each can draw their own conclusion.

Scott Harrington PhD, was on the podium at NCCI last Thursday afternoon discussing the future of Federal healthcare reform, reform legislation, and the implementation of reform. He's a very knowledgeable and highly intelligent guy, but his presentation was marred by what I consider rather striking bias.

Harrington led off by noting that he is a rare professor in that he is an avowed conservative. No problem with that; many in the insurance community tend to be more on the conservative side, but there's no shortage of liberal-leaning insurance execs either (although they tend to be relatively quiet about their inclinations).

No, the issue was he allowed his bias to affect what was an important topic, and one of interest to most of the attendees - of health reform and the goings-on in Washington. At the end of Harrington's talk, I was left wondering what was reality, what was his slanted interpretation of reality, and whether anything he said could be taken at face value.

Here's what caused my consternation.

The uninsured population

Harrington contended that of the 46 million uninsured, 10 million are eligible for coverage thru their employers but have not signed up, and an additional 11-12 million have incomes above 300 percent of the Federal poverty level, and therefore could buy insurance if they wanted to. Harrington's point was people are uninsured because they choose to be.

That's just not true. 300% of the federal poverty level is $66,150 for a family. The average health insurance premium is over $15,000, not including deductibles, copays, coinsurance, and the cost of healthcare for conditions not covered by insurance. Health insurance is unaffordable for many people. Is that a 'choice' issue? Perhaps - many 'choose' to pay rent and buy food instead of insurance.

Moreover, individuals with pre-existing conditions can't get any coverage for those conditions in many states and have to pay a big upcharge in others. If you have diabetes and hypertension, what insurance company who doesn't have to cover you will?

The employer-sponsored issue is less clear, but still problematic. Many smaller employers offer insurance but require workers to pay a big chunk of the premiums; this is especially prevalent among smaller employers. Workers in the lower income brackets would have to pay their part of the premium - typically between 20% and 50% of the total cost, plus the additional deductibles, copays, and coinsurance. For a worker making $20 an hour with a family of three, that's a little over $40k per year. If their employer requires them to pay a third, that's $5000 before the deductible, which in many cases is at least a couple thousand bucks.

The Medicaid picture is cloudier still, but Harrington's inference that many who are eligible haven't sign up is quite simplistic. Research indicates many of the eligible-but-unenrolled are those with language barriers, live in states that have done little to promote the program or educate potential enrollees, and/or have significant mental issues that inhibit efforts to enroll them or are kids.

Harrington's attempt to pooh-pooh the uninsurance problem would have been more compelling had he treated it objectively. There is no question some individuals go without health insurance out of choice - Rush Limbaugh comes to mind. But Rush makes just a bit more than $66k a year.

Deficits

Harrington next took on the Medicare deficit, pointing out (accurately) it would rise to $38 trillion by 2008. He then shared a bunch of scary statistics about the size of the debt, amount per person; all in an attempt to point out the unaffordability of the current system.

That wasn't exactly new news. Where Harrington went off the reservation is his inference that this was somehow the fault of the Democratic Congress and President. In his concluding remarks, Harrington claimed that if the GOP takes over Congress and the White House, the mandate and insurance provisions could be repealed, reductions in Medicare would be legislated, and this would lead to lower costs and deficits.

I'm not sure which Republican party Harrington was talking about; it certainly wasn't the one we've seen in power for most of the last decade.

For example.

Medicare Part D was passed and signed by Republicans, with "no dedicated financing, no offsets and no revenue-raisers; 100% of the cost simply added to the federal budget deficit". The same Medicare Actuary quoted by Harrington, in the 2009 report to Congress, (pdf) reported that the GOP-passed Part D program has contributed $9.4 trillion to the $38 trillion Federal healthcare deficit. (page 126)

I'd also point out that the same Republican Congress and Administration was responsible for preventing Medicare from considering any cost-benefit criteria in determining whether and what Medicare would pay for procedures, drugs, treatments, devices, etc. Yep, these deficit hawks thought it was just fine for we taxpayers to be forced to pay for procedures with very little efficacy.

(the pertinent language from the 2003 Medicare Modernization Act reads as follows - CMS will pay for items or services "reasonable and necessary for the diagnosis and treatment of illness or injury or to improve the functioning of a malformed body member" (Fed Reg 65-95, p 31124- 31129, 2003 MMA); there is no mention of cost)

Finally, I think it is important to reflect on a simple fact. If private industry had been able to control health care costs, we wouldn't be having this discussion. The fact is, for whatever reason, the for-profit, and not-for-profit health care insurance and delivery system has been unable to control costs and consistently deliver quality care.

There's no question the current health reform bill has major flaws; a lack of cost control is perhaps the most glaring. I've taken issue with the law, its future cost, the lack of attention to cost, and the failure of both parties to deal with these tough issues. I will continue to do so, and will continue to keep in mind the singular importance of presenting the facts, data, and logic supporting my views, and address opposing opinions that are similarly supported.

And I'm sure you'll keep me honest.

Posted by Joe Paduda at 8:36 AM | Link to this post | Comments (2)

For the Chinese treasure fleets, voyages went progressively further from their home ports, until, some believe, they circumnavigated the globe. Before we explore the 'other side' of the work comp world, we need to consider what lies just out of sight over the horizon.

Once we think about sailing past what we can see from land, we are forced to guess what lies ahead. Fortunately we can look back and recall what others experienced on similar voyages. Unfortunately, unlike the Chinese of 1421, no one has ever sailed on these particular 'seas', thus we'll have to make a rather scary climb up the ratlines leading to the top of the highest mast, over and into the crow's nest.

So what can we see from our 'crow's nest'?

Today we'll confine our discussion to health system bargaining power; about 30% of comp medical dollars go to facilities.

Among health systems and large multi-specialty groups, provider bargaining power is already growing, and is impacting the largest of the group health plans. The increasing leverage enjoyed by large provider groups and health systems is going to be felt from New England to southern California, as systems and provider groups use their dominant market positions to force non-governmental payers to increase reimbursement.

By watching what is happening to group health plans, those in the work comp space are seeing their future. I've already discussed the ability of providers such as Sutter Health in northern California to demand - and get - double-digit increases in reimbursement from Wellpoint and other huge healthplans with seemingly-immense buying power. Recall that facility charges account for about a third of work comp medical expense; if work comp payers in California see similar increases, we're looking at an increase of three points in the loss ratio...

I understand that many states have fee schedules, California included. I also understand that many work comp PPOs, including those operating in the Golden State, have deals that give their clients lower-than-fee-schedule rates at participating hospitals. At some point Sutter et al are going to start asking why they are giving work comp payers this great deal.

I would expect that shortly after that question is posed, discounts will disappear, or at best, become far less attractive.

One could argue that hospitals, health systems, and large provider groups will be loathe to give up what amounts to a very profitable payer line. That's true so far as it goes, however:

- many providers are highly skeptical of payers' ability and actual effort to direct injured workers to their facilities;

- providers are facing what could well be a significant influx of new patients as previously-uninsured gain coverage and seek the care they've not been able to access until now, making the few additional work comp patients less significant; and

- providers in many areas are already able to force work comp networks to pay at or very close to fee schedule, as those networks know they 'have to have' that system or payers will not consider their network. BayCare in the Tampa Bay area is just one system that leveraged their position several years ago, Sutter Health in NoCal and Partners in Boston have similar approaches.

What does this mean for you?

Unfortunately for payers who choose that 'strategy', some of their competitors will figure out solutions that give them a 'sustainable competitive advantage'.

Posted by Joe Paduda at 6:45 AM | Link to this post

Ok. I'm not exactly what one would call a 'fan' of the health reform bill - too much coverage, not near enough cost control. There are plenty of issues with the current bill, more than enough to make serious students/wonks concerned without having to resort to outright lies.

Yet that is precisely what some are doing. Here, collected for your reading pleasure by the good folks at FactCheck.com, are the top nine falsehoods perpetrated by those not smart enough to focus on the real issues.

* Requires patients to be implanted with microchips. (No, it doesn't.)
* Cuts benefits for military families and retirees. (No. The TRICARE program isn't affected.)
* Exempts Muslims from the requirement to obtain coverage. (Not specifically. It does have a religious exemption, but that is intended for Old Order Amish.)
* Allows insurance companies to continue denying coverage to children with preexisting conditions. (Insurance companies have agreed not to exploit a loophole that might have allowed this.)
* Will require 16,500 armed IRS agents to enforce. (No. Criminal penalties are waived.)
* Gives President Obama a Nazi-like "private army." (No. It provides a reserve corps of doctors and other health workers for emergencies.)
* "Exempts" House and Senate members. (No. Their coverage may not be as good as before, in fact.)
* Covers erectile-dysfunction drugs for sex offenders. (Just as it was before the new law, those no longer in jail can buy any insurance plan they choose.)
* Provides federal funding for abortions. (Not directly. But neither side in the abortion debate is happy with the law.)

Here's the detail on a couple of the more ludicrous issues (quoting FactCheck.

Does the law provide for armed IRS agents to enforce penalties?

No. This is a fantasy. GOP lawmakers claim the law might require "as many as 16,500" new jobs in the IRS, a figure inflated by dubious assumptions. But the agency's role will be mainly to hand out tax credits, not to enforce penalties. And the IRS won't be sending armed agents to enforce the health care mandate, as falsely claimed by Texas GOP Rep. Ron Paul. The law specifically waives any criminal penalties for those who both decline to obtain insurance coverage and refuse to pay the tax enacted to penalize lack of coverage.

And here's this whopper, which was 'reported by a number of wingnut sites, including 'last days' crazies. and from this firearms advocacy site.

Will the law require all patients to be implanted with microchips?

No. Nothing like this appears in the new law, or in any of the bills that Congress considered. This claim stems from a wild misinterpretation of a provision in the original House leadership's bill (H.R. 3200) that did not require implantation of anything, and that was, in any case, not part of the final legislation. The part of the original House leadership's bill that's usually referenced to support this rather paranoid claim actually would have set up a registry for class III medical devices and class II devices that are "implantable, life-supporting, or life-sustaining."

jeez, would someone buy these people a clue...

Posted by Joe Paduda at 10:51 PM | Link to this post | Comments (2)

Health Affairs' most recent edition includes a piece [sub req] on the changing health care landscape in California, one that now has hospitals occupying the high ground. The historical background is telling;

too many hospitals to begin led to tough bargaining by insurers,

which dramatically reduced hospital revenues and profits,

followed by consolidation, hospital closings, and reduction in capacity,

leading to a shift in market power as insurers, needing coverage in key areas,

were forced to agree to ever-higher rates,

pushing hospital costs, revenues, and profits back up.

Here are a couple excerpts from the article.

"In current health reform discussions and proposed legislation, providers' growing market power to negotiate higher payment rates from private insurers [emphasis added] is the "elephant in the room" that is rarely mentioned. Here, in our study of the current negotiating environment in California, we explain that growing market power for providers caused a shift that gave providers a stronger bargaining position [emphasis added] over health plans, leading in turn to higher insurance premiums...

A recent study has shown that in California, after a downward trend in hospital prices for private-pay patients in the 1990s, a rapid upward trend began about 1999 that produced average annual increases of 10.6 percent over the period 1999-2005 [emphasis added]. The study's authors concluded that the source of the near-doubling of California hospital prices remains "something of a mystery."5

Analysis of Medicare Cost Report data by the Medicare Payment Advisory Commission (MedPAC), although national, shows that inpatient costs per admission increased only 5.5 percent per year during that period."

The net is this - hospitals' market power enabled them to raise prices by 10.6% while their costs only went up about half that fast.

This is meaningful on many levels.

1. If you operate in California, your facility costs are trending higher quickly.

2. Reimbursement is but one part of the contracting process; hospitals will, and are, using their leverage to squeeze other concessions out of payers, including faster bill payment, reductions in the UR burden, and speedy resolution of disputes.

3. California is leading a trend that will be felt in many other states, and soon.

4. Those payers with the 'loosest' contracts, particularly those based on a percentage off charges, are going to get hammered. And those with contracts that are only slightly better are no better off.

I'd add that the article also addresses the growing power of larger physician groups, whose negotiating leverage is evolving along similar lines. More on that in a future post.

What does this mean for you?

Big health plans are at the mercy of hospitals, so costs are going to go up. For workers comp payers, the picture is even worse. Your best bet is to keep injured workers out of hospitals.

Then again, you can always just raise rates...

Posted by Joe Paduda at 7:30 AM | Link to this post | Comments (3)

Desperate times call for desperate measures, and today's GOP is certainly close to desperation. A recent news article highlights their new strategy; building bridges to allies in the fight to overturn, repeal and replace ObamaCare.

You've got to admire the Republicans' big tent...

Posted by Joe Paduda at 9:37 PM | Link to this post | Comments (3)

On Tuesday night, PBS' Frontline focuses on what really happened to get health reform passed. Here's a blurb from the press trailer:

"The administration's hopes for reform rested with Sen. Max Baucus (D-Mont.), the powerful head of the Senate Finance Committee, who also happened to be one of the Senate's top recipients of special interest money from the health care industry.

The White House encouraged Baucus to quietly negotiate deals with the insurance lobby, drug companies and other special interest groups, despite promises to run a different kind of White House. "The president said that having people at the table is better than having them throw stuff at the table," White House Communications Director Dan Pfeiffer tells FRONTLINE. "

While I haven't seen the actual program, the trailer is pretty tough stuff.

Posted by Joe Paduda at 7:54 AM | Link to this post | Comments (3)

Bill Sota posted a brief piece about the Veterans Administration's adoption and use of Electronic Health Records, citing: "Good news on the cost savings performance of Vista which is the VA's electronic medical record system:"

Bill is referring to the primary source, an article in Health Affairs:

"The VA spent proportionately more on IT than the private health care sector spent, but it achieved higher levels of IT adoption and quality of care. The potential value of the VA's health IT investments is estimated at $3.09 billion in cumulative benefits net of investment costs." [emphasis added]

Two points.

1. The VA is a very, very large health system that has implemented an EHR program and saved taxpayers over $3 billion dollars - so far. Implementing EHR is difficult, time-consuming, and a lot of work. Yet it can, and has, been done.

2. This is a creditable result, and one that should encourage other integrated health systems to find out what the VA has done and, perhaps, do something similar. After all, if the gubmint can do it, it should be child's play for the vaunted free market...

Unfortunately, it appears as if the private sector isn't as competent in this area as the VA. Within the article itself are a couple telling conclusions. First, the VA spends considerably more (as a percentage of total expenditures) on IT than the private sector does. Yet the VA's ratio of IT capital spending to total spending is considerably less than the private sector's.

The VA spends more on IT, with a big chunk of that invested in implementation and maintenance. And the results show the impact:

"The VA has achieved close to 100 percent adoption of several VistA components since 2004. In contrast, the private health care sector has not reached significant adoption of any of these systems. Adoption in the private health sector of inpatient electronic health records stands at 61 percent; use of inpatient bar-code medication administration is at 22 percent; computerized physician order entry adoption stands at 16 percent; and outpatient electronic medical record adoption is at 12 percent"

Finally, the implementation of the VA's VistA system has delivered significant improvements in the quality of care delivered. Here are just a couple examples (quoted from the articleº:

- For preventive care process measures such as cancer screenings, the VA had higher performance during 2004-2007 relative to the private health care sector

- VA patients with diabetes had better glucose testing compliance and control, more controlled cholesterol, and more timely retinal exams when compared to the Medicare health maintenance organization (HMO) private-sector benchmark.

- The VA averaged about fifteen percentage points higher than the private sector on preventive care for patients with diabetes and seventeen percentage points higher for patients with diabetes who have well-controlled cholesterol

What does this mean for you?

EHR can, and has, delivered significant savings and RoI while increasing quality.

The next time someone bemoans the government's incompetence and complete lack of ability to run anything, tell them about the VA. And tell them to stop parroting Fox talking points; they are a poor substitute for actual thinking.

Posted by Joe Paduda at 8:24 AM | Link to this post | Comments (5)

The tradition here at MCM is to honor all the important holidays, with none so important as April 1. In the five and a half years I've been publishing this blog, the April 1 post has become a challenge - how can we top the previous year?

Last year's post about Coventry acquiring UnitedHealthGroup was reportedly the cause of some consternation at the afore-mentioned firm, which was forced to issue a press release denying the deal (I'm kidding).

This year's effort generated much good cheer among many readers, as even a few who take issue with some of my opinions got a good laugh (Allen you weren't alone).

Unfortunately, there's always someone who doesn't think before passing on the post as truth, resulting in a bit of embarrassment. The adults are a bit chagrined, and a bit wiser, and take the heat in good spirit, realizing the spoof is all in good fun.

But there's always someone without a sense of humor. Late on the fateful day, a senior policy person at a conservative-group-that-shall-remain-nameless sent me an email which read in part "Is this really true? If so, it is extremely explosive and could quickly become a national story. Can you cite the specific language in the law just signed by Obama and the relevant NHS language that leads you to your conclusion? Thank you."

I responded back that no, it wasn't true.

Evidently my correspondent is afflicted with a serious case of SOHDS (sense of humor deficit syndrome), as he (yep, it was a male) shot back "That is extremely unfortunate and not at all funny. I had run it past several very senior people who were looking forward to confirmation of its veracity."

I'll bet.

(In retrospect, maybe I should've come up with some wild story about how this was in a Presidential signing statement that had not yet been made public, and quoted actual verbiage...)

Posted by Joe Paduda at 6:50 AM | Link to this post | Comments (3)

The objections to the individual mandate are loud, frequent, and hyperbolic. What they are not is credible.

Much of the criticism of the mandate appears to be coming from people and organizations that previously supported a mandate. That's why it is so difficult to take them seriously.

Here are a couple examples.

- Mitt Romney, who could teach a kite a thing or two about moving with the political winds, signed a bill into law saying it was "a personal responsibility principle"; a bill that was pretty similar to the one he now describes as "an unconscionable abuse of power.". (and yes, Romney did endorse a Federal mandate)

Romney also said "Some of my libertarian friends balk at what looks like an individual mandate. But remember, someone has to pay for the health care that must, by law, be provided: Either the individual pays or the taxpayers pay. A free ride on government is not libertarian."

- Sen Orrin Hatch (R UT) cosponsored a bill that required a universal mandate back in 1993. Today, he says:""If they mandate you have to buy insurance, it'll be the first time in this country that the government can tell you what to buy," said Hatch, warning the measure could portend even more government control in the future."

- Newt Gingrich, who backed a mandate back in 2008, and...doesn't now.

Many of the loudest objectors were strong supporters of the mandate in the past, including the worthies at the Heritage Foundation. Here's what they said then (text spacing issues from original):

The second central element-in the Heritage proposal is a two-way commit ment between government and citizen. Under this social contract, the fed eral government would agree to make it financially possible, through refund able tax benefits or in some cases by providing access to public-sector health programs, for every American family to purchase at least a basic package of medic a l care, including catastrophic insurance. In return, government would require, by law every head of household to acquire at least a basic health plan for his or her family.Thus there would be mandated coverage under the Heritage proposal [emphasis added], but the mandate w ould apply to the family head, who is the appropriate person to shoulder the primary responsibility for the familys health needs, rather than employers, who are not.

And here's what they say now:

This "personal responsibility" provision of the legislation, more accurately known as the "individual mandate" because it commands all individuals to enter into a contractual relationship with a private insurance company, takes congressional power and control to a striking new level. Its defenders have struggled to justify the mandate by analogizing it to existing federal laws and court decisions, but their efforts do not withstand serious scrutiny. An individual mandate to enter into a contract with or buy a particular product from a private party, with tax penalties to enforce it, is unprecedented-- not just in scope but in kind--and unconstitutional as a matter of first principles [emphasis added] and under any reasonable reading of judicial precedents.

Which leads to the question - why have Romney, Gingrich, Hatch, and Heritage (amongn others) changed their view? Could it be due to a re-reading of the Constitution? New evidence that the original authors didn't want universal health care?

Or could it be that no one to the right of center wants to say anything neutral, much less positive, about anything the President and his fellow Democrats advocate?

Why is this? The reform plan, which has more than its share of warts, doesn't include a public option, has a relatively weak mandate mechanism, relies on private insurers to provide coverage, and doesn't do anything to manage price or utilization.

One would think all conservatives wouldn't find that so universally objectionable.

This doesn't make sense at any level; their flipflopping is patently obvious and readily identified, and all the Dems have to do is advance increasingly centrist ideas and watch while the GOP partisans howl in outrage, backing themselves into a really small corner.

If they don't wise up, they'll find themselves a very, very small party.

There's a lot left to do to truly 'reform' health care. Without the contributions of legislators from all parts of the political spectrum we will end up with a system designed by one party. Some will never 'buy in' to that system, no matter how moderate and effective the reforms may be.

Posted by Joe Paduda at 7:57 AM | Link to this post | Comments (18)

There are enough problems with reform - big, obvious, scary problems - that make lying about reform unnecessary. Yet opponents continue to resort to ludicrous, unsupportable, and completely false claims about the bill, with some of the leading detractors choosing to rewrite history in an effort to scare voters and score political points.

It is NOT socialized medicine, socialized healthcare, government-controlled health care, a violation of the US Constitution, or any of the other ridiculous charges leveled by people who should be more responsible. The reform law is:

- pretty centrist - no public option, utilizing private, for-profit insurers to deliver insurance

- without price controls on providers or insurers, and with no utilization controls to speak of

- based on a very weak mandate that is more accurately described as a fine for those who decide to forgo coverage

Among the demagogues who know better is Newt Gingrich the former House Speaker is outraged, outraged I say, at the Democrats' passage of the insurance mandate. He's obviously had a change of heart, as a few short years ago he not only called for an enforceable mandate in a speech, he did it in two of the books he wrote.

Newt's flip-floppery came about just yesterday, when the following dialogue took place on that fair and balanced network:

HANNITY: Do you think any of these constitutional challenges that are out there about the employer mandate, individual mandate, or any of the other challenges -- do you think as they work their way through the courts, that any of that will be effective?

[...]

GINGRICH: Then you have to appeal the president's ruling and they'd probably lose that fight. But what my sense is -- first of all, I'm glad to see that some 13 attorneys general around the country --

HANNITY: Are going to sue.

GINGRICH: Have sued. Based on a 1992 Supreme Court decision which said that the federal government cannot punish you for failure to do something, I think that there's an outside chance the suit will hold up. And that that will stop the individual mandate at the federal level.

Hmmm, seems pretty unequivocal.

here's what Newt said just two years ago: "According to a June 11, 2008 Associated Press article (accessed from the Nexis database), which ran under the headline, "Gingrich suggests insurance mandate for those who can afford," Gingrich reportedly "outlined his strategy to combat rising health care costs a plan of attack that includes insurance mandates for people who earn more than $75,000 a year" at a visit to a Nebraska health system. The article went on to report that "Gingrich called it 'fundamentally immoral' for a person who can afford insurance to save money by going without, then show up at an emergency room and demand free care. He said those who can afford insurance and choose not to buy it should be required to post bonds to pay for care they may someday need... Gingrich said everyone should have insurance, but not provided by the federal government." [emphasis added]

(from MediaMatters)

Is he so ignorant, or so ballsy, that he doesn't think anyone will pay attention to what he said, or wrote, a few short months ago? Or is Gingrich so driven, so insanely desperate for power, that he'll be blown by political winds like a feather in a gale? Gingrich's patently false statements are prima facie evidence of the depths to which right-wing opponents will descend in pursuit of power and popularity.

It's disgusting and abhorrent behavior, and ill serves the nation.

What does this mean for you?

The new law of the land is nowhere close to perfect, or even very good; as I've said repeatedly I'm deeply concerned about the law's all-but-complete failure to address costs. There's so much misinformation circulating about health reform it is impossible to keep track of it all, much less debunk it.

When you hear Romney, or Boehner, or McConnell, or their fellow wingnuts proclaim the end of America as we know it, ignore them, or better, marvel at the lengths they will go in pursuit of the votes of the ignorant.

Posted by Joe Paduda at 8:24 AM | Link to this post | Comments (9)

While it's not a done deal, the passage of health reform legislation is all but inevitable. When President Obama signs the bill on Tuesday, the American health care system will begin a change more drastic and comprehensive than anything we've seen in decades.

Not all of this will be for the better, and when those unintended consequences begin to be felt there will be plenty of recriminations. I'll give my take on what those might be later.

For now, here's the quick summary of how reform will likely impact work comp.

1. Less need for hospitals to cost shift to work comp to make up for revenues lost due to treating the uninsured. Sure, Medicaid reimbursemt is lousy and Medicare not much better but something's a lot better than nothing.

2. Possibly more cost shifting from other providers to work comp to make up for big cuts in Medicare reimbursement. More to come on this late this summer when Congress takes on the SGR debate.

3. Possibly higher claims frequency, although this is based on assumptions and interpretations. The data indicate those workers with health insurance are more likely to file comp claims than those without, but that appears to be a statistical relationship and not neccesarily a causal one. More explanation on the way.

4. For the big managed care companies, a much stronger and tighter focus on managing group health, Medicaid and Medicare will mean less interest in, and resources dedicated to comp. Make no mistake, this is an event for which the big and small health plans are woefully unprepared. If they are to survive they must adapt immediately.

All we have time for today; these big events really should wait till I'm back from holiday.

Posted by Joe Paduda at 7:41 AM | Link to this post | Comments (3)

Yesterday's news that the CBO estimated the reform bill will come in under the Democrats' $950 billion over ten years (after revenue increases) was good news for reform advocates.

But the analysis didn't account for the $250 billion plus deficit that's hanging over Medicare like Damocles' sword. As I've reported previously, Medicare physician reimbursement will change - and when it does that deficit will be added to the nation's debt.

That's not to say the CBO erred in their cost projection. They are required to base their calculations on current law, and current law has physician fees slashed by over 20% this fall.

That is NOT going to happen. And therefore the real cost of the Medicare program is going to be at least a quarter billion dollars higher than CBO projects.

Posted by Joe Paduda at 8:23 AM | Link to this post | Comments (2)

Not even the most intense civics class would have prepared you for the theatrics coming our way in Congress.

I've read several articles about the Democrats' strategy to get reform passed and signed into law and the GOP's efforts to block reform. There's at least a semester's worth of study just in the Congressional manueverings, with a full year required to flow the Senate processes, parliamentary rules, and political manupulation thereof.

Politico has a pretty good synopsis, with the net being this.

1. The House has to pass the current Senate bill as is.

2. There are provisions in the Senate bill that are repugnant to many Dems; they will pass a 'sidecar' bill to address those provisions which will then go to the Senate.

3. The Senate Republicans will seek to delay the vote in the House and Senate thru debate, asking for votes on amendments to peel away Dem votes, and seeking rulings from the Senate parliamentarian on points of order. These last are a key part of the Republican strategy as the rules for what can and cannot be passed thru the reconciliation process are arcane and complicated.

4. If the Dems are successful, they will seek a vote that only requires 51 yeas, and the reform will pass.

It's anyone's guess if that will happen. If it does I'll be looking closely at the final bills to ferret out the key provisions...

Posted via iPhone so typos are probable.

Posted by Joe Paduda at 9:29 AM | Link to this post | Comments (1)

In what must be one of her more enlightened statements, Tea Party diva Sarah Palin told a crowd of Canadians that in her youth, "We used to hustle over the border for health care we received in Canada. And I think now, isn't that ironic? "

You betcha.

That from the same person who has repeatedly referred to her good fortune in obtaining 'good union jobs with great benefits'...

Big tip of the toque to Maggie Mahar for the info.

Posted by Joe Paduda at 7:28 AM | Link to this post | Comments (2)

I've been avoiding posting on health reform of late, mostly because I'm so dismayed by what's happened, and what's happening.

The Republican Congress passed and then-President Bush signed into law Medicare Part D which added about $8 trillion to our national debt.

Now the Democrats want to one-up the GOP by passing what would be a massive entitlement expansion, with no meaningful cost containment. They want us to believe we can expand coverage now and fix the cost issue later.

No, we can't, and no, we won't. It is far more difficult to get people to give things up they already have than to convince them they can't afford those things in the first place.

The health care reform debate has provided all the evidence we need to see how hard it is to get physicians, or insurance companies, or unions, or voters, or employers, or state regulators, or pharma, or device companies to agree to give back business/rights/revenue/coverage they have today.

Bob Laszewski said it well in his post today -

"adding 30 million more people to an unsustainable system expecting it will create an even bigger crisis and thereby force real reform is tantamount to reboarding the Titanic in the hopes it will sink faster. It is also hard to see how doing such a thing is the politically courageous thing to do.

Just where is the moral imperative in ramming a trillion dollar entitlement expansion through knowing full well it will make our long-term deficit nightmare even worse--for those now uninsured and for everyone else?

The Democratic health care bill makes little if any systemic changes to the health care system--certainly not at the level we need."

Neither party is acting in the best interest of the nation, or of their own constituents for that matter. And anyone who believes we can pass it now and fix it later is living in a fantasy world.

One example proves the point. The bill presently under consideration doesn't address the ongoing issue of Medicare physician compensation, a failure that precisely illustrates the problem of passing it now and fixing it later. Medicare physician compensation legislation was passed a decade ago, with hard and tough limits on physician reimbursement. Yet every year Congress votes to overturn the cuts, with the result that we now have a $300 billion deficit in the program.

What does this mean for you?

Not only is sausage making ugly to watch, it produces inedible results.

Posted by Joe Paduda at 8:37 AM | Link to this post | Comments (7)

Prostate cancer may be one of the most over-diagnosed and over-treated conditions in the nation. It is also one of the most over-publicized, with ex-politicians (Bob Dole) and sports figures (Ed Randall) encouraging all men over 50 to get a test that is no more accurate than a flip of the coin, costs big bucks, and may well lead to costly, unnecessary, and painful surgery.

In an editorial in today's NYTimes, Richard Ablin, who discovered PSA (the enzyme that is the target of the test), publicly disavowed the test, calling it a "hugely expensive public health disaster". He went on to detail the statistics: "American men have a 16 percent lifetime chance of receiving a diagnosis of prostate cancer, but only a 3 percent chance of dying from it. That's because the majority of prostate cancers grow slowly. In other words, men lucky enough to reach old age are much more likely to die with prostate cancer than to die of it." [emphasis added]

The cost of prostate hysteria comes to about $3 billion a year for the tests, plus the pain and discomfort and sexual dysfunction - and cost - of men treated unnecessarily.

One study found "1410 men would need to be screened and 48 additional cases of prostate cancer would need to be treated to prevent one death from prostate cancer."

Another study found "94% of the cancers detected with the routine PSA blood test would not cause death before the age of 85."

What's really disturbing about this is the evidence was there 15 years ago. I wrote a paper for a now-defunct journal describing the results of AHCPR's Prostate Outcome Research Team which documented much of the problems described by Dr Amblin today. Yet the science is hard-pressed to overcome the marketing muscle behind the test, muscle that has been used to develop fake grassroots organizations supporting the testing (aka astroturf). These organizations are funded by companies who benefit not only from the test, but the devices and seeds used to 'treat' positive results.

Here's one example.

Michael Milken, the principle founder of the Prostate Cancer Foundation, is a significant investor in the venture capital industries. Are you aware that Michael Milken founded Proquest Investments, a $1 billion venture capital fund, with a specific investment thesis centered around prostate cancer after founding the Prostate Cancer Foundation? If you review the board members to ProQuest, you will find that six of the seven scientific advisors to ProQuest Investments are executives or member doctors to the Prostate Cancer Foundation. It seems clear that ProQuest Investments operates as a for profit extension of the Prostate Cancer Foundation, a 501(c)(3) designated non-profit

This not for profit encourages testing and screening, resulting in millions of unnecessary tests, thousands of impotent and incontinent men, and billions in revenue for the physicians, device and pharma companies, and facilities providing the testing and treatment.

What does this mean for you?

Payers are wasting money, patients are getting unnecessary treatment, and physicians are violating their oath to do no harm. Which category are you in?

Note - I've contacted Ed Randall, the host of the popular (and very good) Talking Baseball radio program several times in an effort to encourage him to stop promoting PSA testing. He's never responded. I encourage you to contact Mr Randall yourself here - http://www.erbatforthecure.org/ and ask him to reconsider his advocacy that harms patients and increases costs while benefiting for profit companies.

Posted by Joe Paduda at 7:18 AM | Link to this post

As presently conceived, health reform will fail. I'm talking not about the chances of a bill being signed into law but rather what happens when that happy day arrives.

I say this with deep regret, as I am an ardent advocate for health reform and a strong supporter of the President.

But we cannot force people of limited means to buy coverage they can't afford, and we cannot force insurers to take all comers if people can opt out whenever they wish.

Without cost control, insurance costs won't moderate, and without lower health insurance costs, many Americans can't afford coverage. Despite the efforts of many, this seemingly-obvious conclusion hasn't affected legislative efforts. Democrats are desperately trying to ram thru a huge entitlement expansion during a deep recession, while Republicans gleefully distort and demagogue, much more interested in helping the Dems commit political suicide than actually solve the health insurance crisis.

Over the last decade health insurance costs went up 131%; an annual rate of 8.7%.

If we are able to keep inflation to only 8.7% (doubtful in my mind), a family will pay $30,800 for insurance in 2019,

That inflation rate will moderate somewhat if everyone is covered (less need for cost shifting), but we're still stuck with the prospect of forcing nursing aides making $12 an hour to buy coverage that they can't afford.

To date private insurers have shown no ability to control costs; they're too worried about on a reprise of the 'managed care backlash' of the nineteen-nineties when they should be thinking about the prospect of single-payer, a prospect that will look increasingly likely as health insurance costs approach $30,000 per family.

What does this mean for you?

There's a lot of opportunities here for innovative, intelligent, creative approaches to coverage. Insurers and employers will have to leave their comfort zones and try solutions that will make them nervous, but the ones who do stand a much better chance of surviving than their conservative competitors.

Posted by Joe Paduda at 8:08 AM | Link to this post | Comments (4)

Yesterday the Senate passed a bill extending unemployment and other benefits and subsidies for another month; one of the less well known provisions prevented imposition of a 21% cut in Meducare physician reimbursement.

'Prevented' isn't exactly correct; the bill merely delayed implementation of the cuts till the end of March.

For years Congress has avoided implementing Medicare reimbursement decreases, bowing to intense lobbying by physian groups and other parties outraged at the very idea that their income will be reduced. I can't really blame the docs; as I've reported here in the past physician income, especially generalist physician income, has not kept pace with inflation for several years.

What I'm less impressed with is the failure of physician advocacy groups to offer a reasonable alternative to the present fee-for-service system. Anyone with a clue acknowledges that FFS is one of the biggest problems in our health care system, rewarding providers for doing things to patients and not for keeping them healthy.

At some point we have to - must - adopt reimbursement methodologies that reward results not activity.

Don't expect this to happen before the end of March. No, we're much more likely to see the Senate boot this can once again, and with it the chance to fix a fundamental problem with our health care system.

Posted by Joe Paduda at 7:34 AM | Link to this post

The political grandstanding and point scoring on Capitol Hill will have significant repercussions for work comp, with some states directly - and quickly - affected and others feeling the impact later and more subtly.

I'm refering to the inability of the Senate to pass
legislation preventing the 21% cut in Medicare physician reimbursement that went into effect yesterday.

The Senate is trying to pass legislation to (temporarily) prevent the cut but Sen Bunning (R TN) is holding up passage. I'm a bit conflicted over Bunning's move: he's a bit of a wild card and rather erratic, but his stated rationale isn't unreasonable; he wants to know where the money's going to come from.

Regardless, several states base their WC fee schedules directly on Medicare: the cut will theoretically impact physician bills for services rendered beginning yesterday and cotinuing until the impasse is resolved.

I'm actually in DC now, if nothing's changed before I get back to the office I'll dig out my files and report on which states are directly affected.

Posted by Joe Paduda at 8:00 AM | Link to this post | Comments (2)

There's something missing from the debate/argument/shouting surrounding Wellpont's rate increase announcement; nowhere, in any statement I could find, did the company or it's critics address the core issue, Wellpoint's inability to control costs.

Isn't that what healthplans are supposed to do? Isn't that a core part of their reason for existence?

If they can't control costs they aren't much more than transaction processors and provider contract aggregators.

Wellpont did make statements about the need to raise rates to address medical inflation and an aging population; what wasn't presente was their solution to the problem.

Why not? Doesn't one of the largest healthplans in the nation know how to control costs?

There's no evidence that Anthem or United or Coventry or Aetna or Humana have any ability to manage medical care such that quality is high and costs aren't. What is evident is their ability to raise rates to stay above medical inflation.

And therein lies the problem. Health plans, health insurers, both for- and not-for-profit, haven't controlled costs. And outside the relatively minor investments in disease management and nascent provider profiling efforts, there is no evidence they are even working hard to figure it out.

I'm having a hard time understanding how the private sector is going to solve the health insurance crisis. Truth be told, Medicare's blunt and clumsy approaches, for all theirany problems, have been more successful than any private plan.

What does this mean for you?

When costs get unaffordable, health plans will have no one to blame but themselves if they find their role reduced to administering a single payer program.

Posted by Joe Paduda at 7:25 AM | Link to this post | Comments (11)

Anthem Wellpoint's announcement that it was raising premiums up to 39% for members covered by their California individual insurance product hit at a really bad time - for Anthem.

HHS Secretary Kathleen Sibelius reaction was immediate and blunt, as she ordered a federal probe into the rate hike.

"It remains difficult to understand how a company that made $2.7 billion in the last quarter of 2009 alone can justify massive increases that will leave consumers with nothing but bad options: pay more for coverage, cut back on benefits or join the ranks of the uninsured."

She's right, as far as it goes. And things heated up even more last week, with the release of a report on insurance rate increases around the country.

To justify the increase, Wellpoint claimed

_ healthy customers are dropping coverage to save money while sicker ones retain it and run up medical bills

_ healthy customers also are switching to cheaper insurance options, further dinging revenue

_ some customers are moving into a higher age category that carries higher premiums

_ deductibles and co-payments haven't gone up with inflation

_ prices for medical care are rising

_ people are using more health care, again, age is a factor

Here are the facts

1. The individual business accounts for 10% of Wellpoint's California membership, or about 600,000 members. (other reports indicate this figure is higher, but this comes from their state filing)

2. The average rate increase will be about 25%.

3. Data from their filing with the state appears to refute Wellpoint's claim that membership is declining, as it actually increased over the year.

4. The claim that healthier members are dropping coverage while sicker, more expensive members remain in the plan is likely valid. This is what happens when rates go up and healthier people, who have the option of joining a cheaper plan, leave while the members with pre-existing conditions who can't find adequate, affordable coverage have to stay with their current plan.

5. Despite claims fro Sibelius et al, Wellpoint is not that profitable; while it did make $2.7 billion in Q4 2009, most of that was from the sale of their PBM division. In total Anthem (the parent company) made $4.7 billion last year on $65 billion in revenue; a 3.1% profit margin (on ongoing operations, discounting the one-time profit from the PBM sale).

And here's the editorial view.

Health insurers are not that profitable; as an industry, net profits were 2.2% in 2008. I'll stipulate that this is in large part due to a lack of creativity and foresight on the part of insurers, coupled with a demonstrated failure to do what they're supposed to do - deliver good coverage at affordable prices. Most insurers are not much more than transaction processors and provider aggregators.

Another example of the insurance industry's willingness ongoing penchant for shooting itself in the head. Health reform is clearly a highly politicized topic, yet just a couple days before the rate increase was announced, Wellpoint settled a dispute in California by agreeing to take back 2330 members they had terminated after those members had the temerity to actually submit bills for medical care.

Who could possibly have predicted the hue and cry? That a big rate increase after settling a rescission dispute would raise the ire of politicians while the nation's debate on health care reform is still at full volume?

What does this mean for you?

Perhaps this will do the industry some good, as the focus on profits will reveal insurance companies aren't making big bucks, and politicians will start searching for other, more meaningful areas to address.

Doubtful.

Posted by Joe Paduda at 6:55 AM | Link to this post | Comments (9)

I've never had a guest post on MCM but an email from a colleague inspired me to ask if I could publish it not as a comment but as a post.

The writer addresses the issues laid out in my post earlier this week about the inherent conflicts in many Americans' desire to pay lower taxes while getting whatever care they want from whomever they want.

Here's the guest post.

Your most recent posting and photos brings to mind a case I am now reviewing of a woman who is suing a nearby city for a sidewalk fall. She has more than a decade of treatment and I have gone thru over 4000 pages of files for everything from GI problems, multiple orthopedic interventions including several ineffective spine and knee surgeries, obesity, migraine, 'fibromyalgia', history of hysterectomy at young age for pelvic pain, multiple bouts of depression and anxiety, history of domestic abuse, opiate dependence, multiple work comp, auto and disability claims. Her pharmacy records alone are a 59 page printout from 2006 through 2009. Providers include primary care, GI specialists, Gynecology, MSW, Psychiatry, Psychology, ARNP, chiropractors, massage therapy, acupuncture, neurosurgeons, orthopedists, physiatrists, physical therapy, neurology and some I have may be forgetting. And the file even includes over 100 pages of emails to and from the patient and the various providers.

I could go on. My task focuses mainly on causality of the recent injury claim to her back and spine complaints. As a psychiatrist I have been engaged along with other physicians because of the big picture; emotional issues are likely significant or primary drivers for her multiple somatic complaints, surgery, narcotic consumption and life decisions in general. Her demands for this injury are about $600,000 according to the referring attorney, with the inference being that her current problems are the result of a minor slip and fall in 2006.

I found myself wondering how much her care has cost the rest of us and how little of the care had any real value in terms of doing anything meaningful for her health and her life. She currently has chronic multi-system pain complaints, history of multiple surgeries without obvious underlying pathology or positive outcome in most cases, and she is now opiate addicted. My impression is that there may be more than a million dollars in care that she has received over the past decade or more. It is far from clear whether health reform would in any way change this for better or worse but she represents the Pareto principal (ie 80/20 or 90/10 or 95/5 rule in her case) in practice and she is far from alone. I am likely one of the minority of people engaged in the health debate who actually see individuals that reflect the problems we face in society and in health care. This case is an example of how we as a society medicalize emotional and social problems and the extraordinary level of waste represented by many medical interventions, to the degree that the interventions side-step or avoid what is really going on - but spend extraordinary resources in the process. Most practitioners can likely share similar stories from their training or practice, but it seems to be a secret hiding in plain sight. Consider the difference between this scenario and the meager resources available in much of the world for life changing and saving care. The cost of her care could vaccinate large geographic regions in the 3rd world and actually save lives if we could somehow reallocate the resources.

I find it interesting that some folks like us are willing to pay more in taxes for a better society, while we likely use relatively little in terms of government services - while many who rely on government largesse, like those riding power chairs because they are too lazy to walk, who may be collecting their own Social Security and Medicare while perhaps pulling out far more than they ever put in - are holding tea parties. Many of these protesters are one pink slip away from no health care and no income, yet they protest for who and for what?

Posted by Joe Paduda at 12:14 PM | Link to this post | Comments (10)

The recent demise of the health reform effort was killed in large part by Americans' overwhelming demand for more and more, while wanting to take less and less responsibility.

Uwe Reinhardt's recent column describes the problem quite well.

Americans want government to make sure that they have at their beck and call the most sophisticated health system in the world, without even a hint of a queue or rationing or balancing of benefits and costs (cost-effectiveness analysis).

At the same time, they rail at town hall meetings and in the voting booth against government intrusions into that health system, and wring their hands incessantly over the height of health insurance premiums and the taxes they pay to support the system.

Of late, many have turned to threats of violence, that is, if they can maneuver their Medicare-funded power wheel chairs close enough to get a shot.

While it's easy to condemn the manipulators (60 Plus et al), their job wouldn't be so easy if their pawns had even a modest grasp of linear logic - A (stuffing yourself with junk food and drink) leads to B (obesity) leads to C (diabetes, heart disease, and the need for a power wheelchair paid for by someone else).

Example:

These goals are mutually exclusive - the deficit cannot be controlled without drastic reductions in health care costs, which some will interpret as rationing. Yet these same pawns that protest against 'government hands on their Medicare' are also screaming about deficits, taxes, and the future burden on their children.

This terminal myopia will not prevent the inevitable - growing deficits driven in large part by their incessant demand for someone else to pay for their lifestyle choices and freedom to get whatever health care they think they want from whomever they want whenever they want.

There's more than enough blame to go around over the demise of health reform; as I've written numerous times, the Dems passed bills that would have done little to actually control costs. But the Republicans didn't offer any serious alternatives, when they could have made a clear and principled argument that the bills under consideration would add to the deficit, resulting in higher taxes and government borrowing.

Instead the GOP rallied around death panels, rationing, and keeping government out of healthcare, torching any pretense of leadership on the altar of political expediency. They've painted themselves into an unescapable political corner; when they once again gain control over Congress, they will be faced with a deficit that includes $8 trillion from the Medicare Part D program (a Bush 2 legacy) along with Medicaid and Medicare costs that are even more unsustainable due to their refusal to confront their supporters with economic reality.

As HL Mencken said, "People deserve the government they get, and they deserve to get it good and hard."

Posted by Joe Paduda at 7:21 AM | Link to this post | Comments (6)

A TV ad featuring former Surgeon General C Everett Koop is but the latest example of the depths some will slither to in an effort to smear health reform and scare the crap out of senior citizens.

These people are just disgusting.

In the ad, Koop claims:

"I'm here with two artificial joints, two pacemakers to keep my heart in rhythm, as well as a stent to keep my coronaries open." He then says that "seniors in this country can get the same care I received, but in some places, like the United Kingdom, we would be considered too old and the cost to the state too high."

He's flat out wrong. In fact, 47 patients over 100 years old got pacemakers, Koop's a mere 93.

According to FactCheck,

"NICE [the British health system's National Institute for Health and Clinical Excellence] does have a formula used to assess whether or not a new drug or medical device is worth the cost. But it's not a simple spending cap. And once a treatment is found to be cost-effective, it is available to all patients regardless of age."

So who's doing the lying?

The 60 Plus Association, a pharma-funded astroturf (fake grassroots) organization.

Here's more:

"In 2002, 60 Plus received 91% of its total revenue - $11 million dollars - from one undisclosed donor, which the Washington Post reported lined up perfectly with "an unrestricted educational grant" to 60 Plus from PhRMa, the drugmaker lobby group. Jim Martin, the 60 Plus President, has acknowledged in interviews that it received money from pharmaceuticals, saying "I wish it was more."

There are some very good, responsible pharmaceutical organizations, then there is PhRMa. They are neither.

Posted by Joe Paduda at 7:53 AM | Link to this post | Comments (8)

President Obama's recent visit to Baltimore to speak with (as he said, "not to, but with") the House Republican Conference was one of the best things to happen in politics in recent memory.

Not that there's a long list.

During the 90 minute dialogue, health care came up many times, first during the President' opening remarks. There's a lot there and much of it is encouraging, positive, and helpful. I've excerpted what I think are the most meaningful and interesting passages below, but for those disinclined to read this much, here's my take.

This was an honest, open dialogue, with a bit of demagoging on the part of a couple (mostly freshman) GOP Congressmen. It was clear that the President had read most, if not all, of their proposals and ideas on health care, had considered them carefully, and some were included in the final bills. But let's be clear - Congress came up with all the legislation, not the President. There was no "ObamaCare", despite the use of that term by some in the media.

There is indeed opportunity for some common ground on health reform - perhaps around establishing national health insurance standards combined with opening insurance markets across state lines and perhaps tort reform, although anyone who thinks tort reform is a magic bullet hasn't looked objectively at the issue.

But that said, both steps would help get something started, a 'something' that might break the legislative logjam currently preventing anything at all from getting done.

Here's hoping the Baltimore dialogue will be viewed as the first step in meaningful health reform legislation.

The President's opening remarks:

I know how bitter and contentious the issue of health insurance reform has become. And I will eagerly look at the ideas and better solutions on the health care front. If anyone here truly believes our health insurance system is working well for people, I respect your right to say so, but I just don't agree. And neither would millions of Americans with preexisting conditions who can't get coverage today or find out that they lose their insurance just as they're getting seriously ill...I don't think a system is working when small businesses are gouged and 15,000 Americans are losing coverage every single day; when premiums have doubled and out-of-pocket costs have exploded and they're poised to do so again.

I mean, to be fair, the status quo is working for the insurance industry, but it's not working for the American people. It's not working for our federal budget. It needs to change.

This is a big problem, and all of us are called on to solve it. And that's why, from the start, I sought out and supported ideas from Republicans. I even talked about an issue that has been a holy grail for a lot of you, which was tort reform, and said that I'd be willing to work together as part of a comprehensive package to deal with it. I just didn't get a lot of nibbles.

Creating a high-risk pool for uninsured folks with preexisting conditions, that wasn't my idea, it was Senator McCain's. And I supported it, and it got incorporated into our approach. Allowing insurance companies to sell coverage across state lines to add choice and competition and bring down costs for businesses and consumers -- that's an idea that some of you I suspect included in this better solutions; that's an idea that was incorporated into our package. And I support it, provided that we do it hand in hand with broader reforms that protect benefits and protect patients and protect the American people.

A number of you have suggested creating pools where self-employed and small businesses could buy insurance. That was a good idea. I embraced it. Some of you supported efforts to provide insurance to children and let kids remain covered on their parents' insurance until they're 25 or 26. I supported that. That's part of our package. I supported a number of other ideas, from incentivizing wellness to creating an affordable catastrophic insurance option for young people that came from Republicans like Mike Enzi and Olympia Snowe in the Senate, and I'm sure from some of you as well. So when you say I ought to be willing to accept Republican ideas on health care, let's be clear: I have.

Next, in response to a question from Chaffetz, who said "...when you stood up before the American people multiple times and said you would broadcast the health care debates on C-SPAN, you didn't. And I was disappointed, and I think a lot of Americans were disappointed.

Obama
" Look, the truth of the matter is that if you look at the health care process -- just over the course of the year -- overwhelmingly the majority of it actually was on C-SPAN, because it was taking place in congressional hearings in which you guys were participating. I mean, how many committees were there that helped to shape this bill? Countless hearings took place.

Now, I kicked it off, by the way, with a meeting with many of you, including your key leadership. What is true, there's no doubt about it, is that once it got through the committee process and there were now a series of meetings taking place all over the Capitol trying to figure out how to get the thing together -- that was a messy process. And I take responsibility for not having structured it in a way where it was all taking place in one place that could be filmed. How to do that logistically would not have been as easy as it sounds, because you're shuttling back and forth between the House, the Senate, different offices, et cetera, different legislators. But I think it's a legitimate criticism. So on that one, I take responsibility."

Blackburn
"thank you for acknowledging that we have ideas on health care because, indeed, we do have ideas, we have plans, we have over 50 bills, we have lots of amendments that would bring health care ideas to the forefront. We would -- we've got plans to lower cost, to change purchasing models, address medical liability, insurance accountability, chronic and preexisting conditions, and access to affordable care for those with those conditions, insurance portability, expanded access -- but not doing it with creating more government, more bureaucracy, and more cost for the American taxpayer.

And we look forward to sharing those ideas with you. We want to work with you on health reform and making certain that we do it in an affordable, cost-effective way that is going to reduce bureaucracy, reduce government interference, and reduce costs to individuals and to taxpayers."

Obama
"I've gotten many of your ideas. I've taken a look at them, even before I was handed this. Some of the ideas we have embraced in our package. Some of them are embraced with caveats. So let me give you an example.

I think one of the proposals that has been focused on by the Republicans as a way to reduce costs is allowing insurance companies to sell across state lines. We actually include that as part of our approach. But the caveat is, we've got to do so with some minimum standards, because otherwise what happens is that you could have insurance companies circumvent a whole bunch of state regulations about basic benefits or what have you, making sure that a woman is able to get mammograms as part of preventive care, for example. Part of what could happen is insurance companies could go into states and cherry-pick and just get those who are healthiest and leave behind those who are least healthy, which would raise everybody's premiums who weren't healthy, right?

So it's not that many of these ideas aren't workable, but we have to refine them to make sure that they don't just end up worsening the situation for folks rather than making it better.

Now, what I said at the State of the Union is what I still believe: If you can show me -- and if I get confirmation from health care experts, people who know the system and how it works, including doctors and nurses -- ways of reducing people's premiums; covering those who do not have insurance; making it more affordable for small businesses; having insurance reforms that ensure people have insurance even when they've got preexisting conditions, that their coverage is not dropped just because they're sick, that young people right out of college or as they're entering in the workforce can still get health insurance -- if those component parts are things that you care about and want to do, I'm game...

The component parts of this thing are pretty similar to what Howard Baker, Bob Dole, and Tom Daschle proposed at the beginning of this debate last year...

But if you were to listen to the debate and, frankly, how some of you went after this bill, you'd think that this thing was some Bolshevik plot. No, I mean, that's how you guys -- (applause) -- that's how you guys presented it.

And so I'm thinking to myself, well, how is it that a plan that is pretty centrist -- no, look, I mean, I'm just saying, I know you guys disagree, but if you look at the facts of this bill, most independent observers would say this is actually what many Republicans -- is similar to what many Republicans proposed to Bill Clinton when he was doing his debate on health care.

So all I'm saying is, we've got to close the gap a little bit between the rhetoric and the reality. I'm not suggesting that we're going to agree on everything, whether it's on health care or energy or what have you, but if the way these issues are being presented by the Republicans is that this is some wild-eyed plot to impose huge government in every aspect of our lives, what happens is you guys then don't have a lot of room to negotiate with me.

I mean, the fact of the matter is, is that many of you, if you voted with the administration on something, are politically vulnerable in your own base, in your own party. You've given yourselves very little room to work in a bipartisan fashion because what you've been telling your constituents is, this guy is doing all kinds of crazy stuff that's going to destroy America.

And I would just say that we have to think about tone. It's not just on your side, by the way -- it's on our side, as well."

Price
"Mr. President, multiple times, from your administration, there have come statements that Republicans have no ideas and no solutions. In spite of the fact that we've offered, as demonstrated today, positive solutions to all of the challenges we face, including energy and the economy and health care, specifically in the area of health care -- this bill, H.R.3400, that has more co-sponsors than any health care bill in the House, is a bill that would provide health coverage for all Americans; would correct the significant insurance challenges of affordability and preexisting; would solve the lawsuit abuse issue, which isn't addressed significantly in the other proposals that went through the House and the Senate; would write into law that medical decisions are made between patients and families and doctors; and does all of that without raising taxes by a penny."

[editorial comment - this is bald-faced BS. health coverage for all Americans that doesn't raise taxes by a penny? What utter nonsense!]

Obama
" It's not enough if you say, for example, that we've offered a health care plan and I look up -- this is just under the section that you've just provided me, or the book that you just provided me -- summary of GOP health care reform bill: The GOP plan will lower health care premiums for American families and small businesses, addressing America's number-one priority for health reform. I mean, that's an idea that we all embrace. But specifically it's got to work. I mean, there's got to be a mechanism in these plans that I can go to an independent health care expert and say, is this something that will actually work, or is it boilerplate?

If I'm told, for example, that the solution to dealing with health care costs is tort reform, something that I've said I am willing to work with you on, but the CBO or other experts say to me, at best, this could reduce health care costs relative to where they're growing by a couple of percentage points, or save $5 billion a year, that's what we can score it at, and it will not bend the cost curve long term or reduce premiums significantly -- then you can't make the claim that that's the only thing that we have to do."

What does this mean for you?

A glimmer of hope for change.

Posted by Joe Paduda at 1:24 PM | Link to this post | Comments (1)

If you're one of the 'it ain't over till the fat lady sings' crowd, well, she just did.

With apologies to House Speaker Pelosi; (she may be many things but fat she is not) she's just finished her aria on health reform, and it is officially over. Pelosi's recent remarks confirm what I've been saying; health reform is dead.

Specifically, Pelosi said there aren't enough House votes to pass the Senate bill (good on them), leaving two options - passing a slimmed-down bill or a completely different bill with some reform components. Here's how Pelosi characterized those options (according to Talking Points Memo):

"I don't see the votes for it [current Senate bill] at this time," Pelosi said. "The members have been very clear in our caucus about the fact that they didn't like it before it had the Nebraska provision and some of the other provisions that are unpalatable to them."

"In every meeting that we have had, there would be nothing to give me any thought that that bill could pass right now the way that it is," she said. "There isn't a market right now for proceeding with the full bill unless some big changes are made."

There is a third 'option'; no bill at all. And that's what is going to happen.

Any bill will have to get thru the Senate, and Sen Elect Brown (R MA) is not going to vote for anything like the current Senate bill, nor are any of his fellow Republicans. As Merrill Goozner reports: "...In other words, if President Obama and the Democratic Party leadership had an inkling to reengage the leadership of the Republican Party, there wasn't much evidence on display to suggest anyone on the other side would be offering a receptive ear.

New York Times columnist David Brooks attended the session. He prefaced his question by commenting that the common ground between the two parties appeared to be more like "common pebbles."

More like common grains of sand, I'd say."

On the other side of the aisle, there just isn't the energy in Congress to re-do another bill; there's too much on the calendar, it is an election year, and the Dems darn well better focus on issues more central to voters' concerns.

It is possible the Dems will work on Medicare physician compensation, do something about pharma prices for Part D, and perhaps push some mild form of insurance underwriting reform, but not terribly likely. Instead, look for much more populist rhetoric and politicking, starting with the State of the Union address.

Posted by Joe Paduda at 9:14 AM | Link to this post | Comments (2)

Health reform won't happen this year; ignore all the brave happy talk - there will be no bill that reforms the insurance markets, lowers costs, and/or expands coverage.

You can't have insurance market reform - ending medical underwriting and risk selection - without a strong mandate. And you can't force people to buy health insurance they can't afford without big subsidies. The current budget deficit and recession mean subsidies aren't a reality. There's just no way a family making $75,000 can afford a $15,000 health insurance premium (plus out of pocket expenses) without a big subsidy.

As to cost reduction, Congress has shown itself fundamentally unable to enact meaningful cost reductions. The Republicans painted themselves into a corner with their 'death panels' and 'government-controlled health care' memes. They could have staked out a credible and creditable position as the responsible adults in the debate by getting tough on costs as a way to help business, reduce future costs and thereby deficits and tax burdens.

(But then what do you expect from the party that gave us Part D, the biggest entitlement program since Medicare, along with its $8 trillion ultimate unfunded liability.)

Not that the Democrats gave them much choice. Senate Dems thought they didn't need the GOP, believing they could ram thru a bill they drafted on the strength of their supermajority. And perhaps they could have, if the Mass Senate race hadn't interfered. Sadly, the Senate bill showed our political process at its worst, with glutinous Senators selling their votes for heaping helpings of pork larded with political sweets - clauses on abortion, immigration, and taxes.

The cost estimates were misleading at best; none factored in the quarter trillion deficit we are carrying due to the Medicare physician reimbursement fiasco. The quick fix that's in place today has raised physician compensation by a whole percentage point, making it seven years out of eight that Congress has failed to restrain the growth of Medicare's physician spending.

Given the present environment, I don't see a meaningful effort to do anything different. Thus next year we're going to face an even larger deficit, as our feckless elected officials kick the can further down the path.

No, reform won't happen this year, and isn't likely in 2011.

Family insurance premiums of $30,000 in ten years.

Posted by Joe Paduda at 2:56 AM | Link to this post | Comments (8)

Ten months of effort was blown away yesterday by an unprecedented electoral upset, a most unlikely end to health reform.

Yes, I did mean to write 'end to health reform'. This afternoon the Senate Democratic caucus is meeting to figure out what to do next, but the outcome was pre-ordained when Senate Majority Leader Harry Reid announced earlier today that nothing would be done on health reform until Senator-Elect Brown (R MA) is seated.

Which means nothing will be done this year.

That doesn't mean health reform won't happen at all, but the 'health reform hangover' makes it very unlikely anyone will eagerly jump into reform anytime soon.

I'll admit to being conflicted over the demise of reform. Covering another 30 million Americans would have been good progress towards addressing one of our country's greatest shortcomings. But the cost of that expansion, the lack of any meaningful cost controls or an enforceable mandate, and the political thievery committed by key swing Senators selling their votes (I mean you, Nelson of NE, Lieberman of CT, and Landrieu of LA) made for a Senate bill just a whit better than no bill at all.

The House bill was better, except for the unfounded belief in the public option; at least it had a better mandate provision.

But the cost reported for both was too low by a quarter trillion, as neither included the cost of reforming Medicare physician reimbursement.

What happened?

The Dems could have had a bill last July, but liberal Senators refused to compromise, convincing Reid they could win without any GOP votes. This forced the more intelligent and intelligible Republican Senators to jump on the death panel/rationing bandwagon. Sure, the compromise necessary to get a bill with at least a few Republicans on board would have been a higher Cadillac tax, lower cuts to Medicare Advantage, and no public option, but a bipartisan bill would have been a huge win for both the Dems and the President.

Instead, we're left with a wasted year.

What does this mean for you?

Without health reform, we're looking at family premiums over $30,000 by the end of the teens. Good luck with that.

That's not to say the House or Senate bill would have made much difference.

Posted by Joe Paduda at 4:08 PM | Link to this post | Comments (5)

The growing furor over the tax on high-cost healthplans is welcome indeed, as it is exposing the tax for what it is - an unfair burden on some based on a superficial understanding of cost drivers.

First, lets clear up a common misconception about the tax. It only affects the value of your health plan above a specific level - the benefit value below that level is not taxable income. Here's how it works in dollars.

The tax, which is in the Senate bill but not the one passed by the House, taxes the value of health benefits above $8500 for individuals and $23,000 for families. If you have an individual policy valued at $10,100, the amount subject to tax is the difference between $8500 and $10,100 - $1600. The Senate plan taxes that $1600 at 40%, so you would have to pay $640 in taxes.

I have no problem with instituting a tax on health benefits, but it should either be on all plans, or on those plans that fail to keep costs under control.

The Cadillac tax does neither, instead taxing benefits on two groups:

- bargaining units that have substituted benefits for wages in negotiated agreements with management; and/or

- individuals and families that live in high cost areas.

The 'benefits' themselves have little to do with whether or not you'll hit the tax threshold; much more important is where you live.

For example - the interstate variation in health care costs - not insurance premiums, but per-capita costs - ranged from $3972 in Utah to $8295 in Washington, D.C. in 2004.

So a company in Utah could cover cosmetic surgery, private hospital rooms, laser eye surgery, $10 copays for office visits and $5 copays for all drugs, all without coming anywhere close to the 'Cadillac tax threshold'. But an employer in the District with a high-deductible plan, $50/$100 drug copays, limits on PT and outpatient therapy, and high copays for out of network services would already be over the threshold.

The idea behind the Cadillac tax is a good one - make consumers more cost conscious of the value of their benefits, and hopefully more careful consumers. And there's no question the additional tax revenue will help offset the costs of the reform bill. (I'll not comment on whether that's good or bad).

Instead of this blunt instrument, that forces people in DC to help fund health reform for no other reason than they live in the District, while doing nothing to encourage Utahans to control costs, Congress should institute a tax on health plans that fail to keep costs under a threshold - thereby motivating all health plans, employers, and individuals to work to keep costs down.

Such an idea was proposed last summer but didn't make it into the Senate bill. It makes much more sense than the current proposal, would give President Obama and Democratic legislators political cover, and would not give the opposition any ammunition.

What does this mean for you?

Watch what happens in the reconciliation process; it looks like the C-tax is on shaky ground, and the Dems will have to find an alternative funding source.

Posted by Joe Paduda at 8:12 AM | Link to this post | Comments (5)

The finish line is in sight, but it's uphill and the path is icy.

The Senate and House conference committee will be working overtime to try to get to a health reform bill acceptable to 218 Representatives and 60 Senators by the end of the month. There are three main issues that will generate lots of outrage/posturing/excitement; abortion, funding, and the public option.

The cost of the two bills is also a major difference, with the House version priced at about $150 billion more over ten years (leaving aside the many criticisms, some justified, about the pricing process and methodology, at least it provides comparative differences). The difference is not as significant as it seems at first blush; according to the CBO, both bills would result in a net reduction in future federal deficits.

However, neither addresses the real problem - the coming battle over Medicare physician reimbursement. If this is resolved in favor of docs, we're looking at the addition of a quarter trillion dollars to the deficit. That's big money, even in Washington...

Public option

Deader than dead. There's been so much hype from both sides on this issue, for reasons I still cannot fathom, when we could have been talking about and perhaps even addressing underlying cost drivers. The public option would not have materially hurt private insurers, nor would it have solved the cost/access problem. Downright amazing how much political capital and press has been expended on something so insignificant.

Funding

There are significant differences between the two bills on funding; the House version has a 5.4% income surtax on individuals earning more than $500,000 and couples earning more than $1 million; the Senate version uses two sources, an excise tax on so-called 'Cadillac' insurance policies along with higher Medicare payroll taxes for individuals earning more than $200,000 and couples earning more than $250,000. House Dems (and others) protest that the 'cadillac' tax unfairly charges some for living in high-medical-cost areas, such as Boston and New York, while those with richer benefits that live in cheaper areas get a break. There are other taxes, such as an excise tax on medical devices that will likely be on the table as well.

Expect the 'cadillac' tax to be modified in reconciliation.

Abortion

For the life of me I can't see the logic in the arguments against using taxpayer dollars to pay for a legal procedure. This country is ostensibly a democracy where majority rules, a nation ruled by law and not by men and women. Except when it comes to abortion. I understand some people are vehemently opposed to abortion, some are opposed to abortion in certain instances, and others believe it is none of the government's business. Regardless, abortion is the only issue where politicians have been able to prevent the use of taxpayer dollars to fund something that is entirely legal.

Jehovah's Witnesses' tax dollars pay for medical services, pacifists' taxes fund the military, vegans pay taxes that promote US pork production and export, all expenditures that are anathema to those groups of individuals. Yet somehow abortion is different. If Sen Nelson, Rep Stupak et al are successful in maintaining the bastardized health benefit plan constructed to meet their demands, they will be building a case for every other group to protest the use of their dollars for things they don't like. In addition to increasing the administrative expense load for health plans in the same legislation that establishes legal limits on those expenses.

Alas, it isn't for me to understand. Given the political sensitivity of the issue and the need for every vote, there's little doubt some version of the Stupak/Nelson amendments will become the law of the land.

There are several other key issues that may well determine the effectiveness of the bill in controlling cost and expanding coverage. I'll address those tomorrow.

What does this mean for you?

Another trip to the sausage factory.

Posted by Joe Paduda at 7:17 AM | Link to this post | Comments (3)

A recent dialogue on the LinkedIn WC group got me to dive back into the question of what, if any, influence does the presence of health insurance have on work comp claim frequency? The data aren't conclusive, but the answer appears to be 'There is a trend, but not in the direction you'd think.'

Commonly accepted thinking holds that workers without health insurance will claim off the job injuries under work comp so the medical bills get paid. (That's what I thought too.) Turns out that the opposite appears to be the case; workers who have health insurance are more likely to file WC claims than those who don't.

It isn't quite that straightforward, so don't just read this and take it at face value; there are significant complicating factors.

The seminal study on the health insurance: WC claims relationship was done by RAND and published in 2005 . If anything, it appears to indicate that workers with health insurance are more likely to file WC claims, however the driver is not the presence of health insurance but rather the nature of the employer.

From the study abstract:

...uninsured and more vulnerable workers are less likely to file claims than the insured. We study this relationship and find that it emerges as the result of employer characteristics. Workers at firms who offer health insurance to employees are more likely to file workers' compensation claims: the characteristics of the firm are more important than the insurance status of workers themselves; [emphasis added] moreover, even repeat injury sufferers are more likely to file during episodes in which their employer offers health insurance. This suggests that the workplace environment and employer incentives may have a significant impact on the utilization of the workers' compensation system.

Key highlights from the study itself:

- injured workers without health insurance are about 15% less likely to file a WC claim than workers with health insurance

- workers in firms that offer health insurance are twenty-one points more likely to file a claim than those in firms that don't offer health insurance

RAND's conclusion that the workplace environment is the key factor affecting claim rates and frequency was supported by several recent reports indicating injured low wage workers are particularly unlikely to file work comp claims. One of the more intriguing studies was done under the auspices of the National Employment Law Project which focused on the problems faced by low-wage workers when they are injured on the job. The study looked at a population that accounts for fifteen percent of all workers in just three cities; Chicago, New York, and Los Angeles. Extrapolating the numbers out in just those three cities indicates that 75,446 workers comp injuries were not reported.

Nationally, that works out to about a million claims unreported.

The study reported 92% of low-wage workers don't file work comp claims for injuries that require medical attention.

Fully half of the workers with on the job injuries "experienced an illegal employer reaction", including firing the worker, calling immigration authorities, or telling the worker not to file a comp claim.

What does this mean for you?

With health reform with some form of mandate looking increasingly likely, some, steeped in conventional wisdom, will expect claims frequency to decline. Others will expect it to increase now that more workers will have coverage.

The latter group's view will be more correct than the former's; or more accurately 'less wrong'. Bad employers will remain bad employers regardless of whether or not they offer health insurance, therefore, after the mandate is in place, injury reporting behavior may increase somewhat but probably not by much.

(kudos to Mark Walls for starting and managing the LinkedIn group)

Posted by Joe Paduda at 6:58 AM | Link to this post | Comments (3)

There are few Americans angrier or more frustrated than House and Senate liberals. They've made concession after concession on issues as dear to them as abortion, single payer, the public option, taxes on high income earners, and tougher regulation of insurers. And for what?

A bill widely applauded by Wall Street for it's promise of millions more customers for the private insurers liberals believe are the problem, not the solution to our health care mess.

For now there us precious little the liberals can do about this. For now.

Later may well be a different story. I'd expect we have not seen the last of their efforts to alter the landscape, in fact the liberals will have learned their lessons well. The most important will be to avoid having to placate Nelson and Lieberman and Landrieu; if the Senate only needed 51 votes we'd have a very different health reform bill.

The obvious route is to use the reconciliation process to push thru legislation that wouldn't survive the 60 vote test. I'd look for a requirement that the Feds negotiate drug prices for Medicare and lower payments for Medicare Advantage plans to start. These are both well within the boundaries of the reconciliation process and therefore will not need the support of any of the afore-mentioned Senators.

And it won't stop there. There is a large and growing concern about the cost of entitlemt programs and Part D is particularly problematic. By attacking drug costs and thereby reducing Medicare's future liability, liberal Democrats will make it very tough for their opponents to use the 'big spender' attack angle in November.

Posted by Joe Paduda at 9:35 AM | Link to this post

That's the word from several senators, at least as of last night. The last holdout, Ben Nelson of Nebraska, is reportedly on board after a lengthy negotiating session that ended late Friday.

The bill is currently being read to the entire Senate on request from GOP Senators, after which the vote will be taken - sometime around 5 o'clock this afternoon. The price for Nelson's vote was $45 million; the US Senator forced the Federal government to pay for the entire cost of the Medicaid expansion for his home state of Nebraska.

Who would've thought Nebraska would need even more pork, or that the Senator would feel no shame in forcing taxpayers from other states to pay for his vote. Since 1983, Nebraska has received more from the Federal government than it has paid in taxes; Nelson's extortion will skew the numbers in favor of his voters even more.

Things could break down, there could be defections from the ranks of the theoretically-committed, Lieberman could decide he's not done grandstanding, the House and Senate could run into difficulties in reconciliation, a meteor could hit the earth...suffice it to say there's a lot that could derail passage, but there's the beginning of a whiff of inevitability about reform, enough to make it very difficult for anyone to stand in the way of the bill.

In broad terms, the bill will result in a national health insurance exchange where individuals and some small businesses will shop for insurance, provide subsidies to help low-income people buy insurance and expand Medicaid. There are numerous pilot programs to evaluate different forms of reimbursement, cuts in Medicare reimbursement to specific provider groups, elimination of the use of medical underwriting and other 'risk selection' tools by insurers, and a host of excise taxes, fee cuts, and other funding mechanisms to help pay for the bill.

I'll be taking a deeper dive into the bill tomorrow - but I won't read the entire thing.

Posted by Joe Paduda at 10:41 AM | Link to this post | Comments (1)

As health reform stumbles like an exhausted runner towards the finish line, we are starting to get a clearer picture of the potential changes reform will bring to the health care landscape.

One that bears close watching is the increasing likelihood Medicare will be cutting reimbursement to hospitals. There are two ways this may affect work comp; in those jurisdictions that base reimbursement off Medicare rates, any changes may - or or may not - have a direct impact on comp reimbursement. I'm not expert in the various ways states apply their own formulas to Medicare's, but will be studying up on it and will repor back in more detail later.

The other, and likely more significant impact may be the result of cost shifting by hospitals if/when Medicare cuts come down from CMS coupled with the expansion of Medicaid. this has plusses and minuses; Hospitals may get more paying and fewer indigent patients if the Medicaid expansion goes thru, but if these were formerly privately insured or if there is a substantial increase in their Medicaid census then their revenue mix may worsen. (Recall Medicaid reimbursement is well below most hospitals' cost). It is mo likely the MedicUs expansion is a net plus but this will vary across the country.

Potentially more significant would be any major decrease in Medicare reimbursement as medicare is a major payer at most hospitals. Expect hospitals hit hard by a cut to look for other places to make up the lost income, and the softest target around is usually work comp.

Apologies for typos; this post written on my iPhone.

Posted by Joe Paduda at 12:18 PM | Link to this post | Comments (1)

Today's revelation that Joe Lieberman is once again flexing his political muscle to force the Senate Dems to remove the Medicare for 55-64 provision is just the latest evidence of the evisceration of the Senate Health Reform bill.

Here's a few of the items that were considered for inclusion that have somehow not made it this far (this isn't to imply or deny an endorsement).

- a meaningful mandate penalty instead of the paltry $750/individual $2250/family in the current Senate plan (the income-indexed penalty in the House plan is better but still not enough...)

- a public plan with reimbursement based on Medicare (if this was mandatory it would definitely have reduced costs - a lot)

- some form of tax on high-value/high benefit plans, aka 'cadillac' plans

- a plan that would actually cover the vast majority of Americans (the current plan still leaves 15 million uninsured)

- a clause enabling the Feds to negotiate drug prices for brand medications purchased for Medicare patients

- a non-fungible ban on lifetime caps on medical expenses

- a 'budget neutral' plan; although the current Senate plan is indeed budget neutral, it doesn't include the quarter trillion accumulated deficit in Medicare physician costs. Notably the coming cut to physician reimbursement is addressed in the House bill, where it is eliminated.

What's next? As Lieberman et al get more and more of the power and influence they so obviously crave, their appetites grow ever more insatiable. Liberals and centrists are getting increasingly desperate to pass something, anything, to deliver on the promise of health reform, and the longer Lieberman et al can put this off, the more press they get and the more their swelling egos demand.

(I'm wondering exactly how far the Senate Dems are going to let Lieberman push them before they decide enough is enough and smack the political crap out of him. He's become the schoolyard bully to the Democratic weaklings, taking ever more of their lunch money in hope he'll be nicer next time.)

The current mishmash of giveaways and concessions can only be called 'reform' by those willing to hope we can do much over the next decade to rein in costs before they kill our economy. I'm not among those optimists.

It is time to trash the whole thing and start over - preferably with the Wyden-Bennett Healthy Americans Act. (for a comparison of WB HAA to the current mishmash see the Kaiser Family Foundation's excellent web tool.

But that won't happen; We'll likely get something passed in Congress, and President Obama will sign it, and they'll all declare victory and move on to energy, Afghanistan, and other critical issues. Meanwhile, health care costs will continue to escalate, and in ten years the average family will be paying north of thirty grand for their health insurance and deductibles, and we'll be reading books about how and why we missed this golden opportunity.

And this from the worst kind of government in existence, except for all the others.

Posted by Joe Paduda at 8:07 AM | Link to this post | Comments (2)

I haven't posted on the reform process not out a lack of interest but because every time I pick up the virtual pen I despair. I've been trying to decide if passing this bill is better than a continuation of the status quo, and the more I ponder the less sure I am.

But it's time.

After months of negotiation, compromise, and horse-trading, we're getting close to a health reform bill that will come to a vote - probably in the next couple or three weeks. There's much work to be done to get to the magic sixty Senate votes, but it looks like no compromise, concession, or giveaway is too big to stand in the way of this must-pass (for the Democrats) legislation.

Yet after all this, we're going to end up with a bill that won't work - it will not appreciably reduce health care costs today, tomorrow, ever.

Sure, we'll end up with lots more Americans covered, better/smarter regulation of insurers, and maybe even lower Medicare costs. But ten years from now, the system will be pretty much the same - a fee-for-service based health system with costs increasing well above inflation.

Why, you say? Aren't there cost controls in the bill? Pilot programs that promise to reduce cost inflation by rationalizing the care delivered to patients?

No, there aren't. What we have is a mishmash of ideas that have long been on the table, demonstrated to work, and completely without traction. Not to mention the huge costs not addressed in the current bill - like the current quarter-billion dollar deficit in the Medicare physician reimbursement program, a deficit that will have to be added to the total cost of any reform initiative that changes how docs are compensated under Medicare.

Fortunately for Senator Reid, no one is asking what he plans to do about physician compensation, as the Senate bill assumes the 20.5% cut in physician reimbursement goes into effect on January 1, 2010. Does anyone believe that will actually happen?

But that's just one of the many failings of the current bill.

- We have insurance reform with a mandate so weak it will not force anyone to buy coverage they don't really really want.

- We have tough cost controls and cost reductions that will likely reduce Medicare's costs over time - but no way for private insurers to stop providers from shifting those costs to them.

Other analysts have complimented Reid et al for trying everything, for not leaving any cost control mechanism, trick, or option out of the bill. That's precisely the problem - the bill's 'experiments' and pilots are way too little far too late.

Folks, health care costs are increasing a helluva lot faster than inflation. Our economy is increasingly hobbled by legacy and current health care costs, not to mention future liabilities. Governments are going to have to raise taxes - a lot - to deal with retiree health care costs. By the time these pilots and experiments are even ready for dissection in the pages of Health Affairs, (forget broad-based implementation) we're going to be spending well north of $3 trillion a year on health care.

I'm disgusted by the political grandstanding of people like Joe Lieberman, whose incredibly self-important preening is just the most repulsive example of elected officials using this crisis to show us all how principled and irreplaceable they are. Mitch McConnell's Medicare advocacy is so blatantly hypocritical it would be laughable if it weren't so cynical. How he can scream about not cutting Medicare while protesting its expansion to the 55-64 year old cohort is a testament to his complete lack of self-awareness. Meanwhile the Democrats are so eager to expand coverage to as many as possible, they are completely ignoring the future cost of that expansion. The campaign contributions rolling in to Reid and Dodd and other players couldn't possibly be influencing their legislation...they just don't think it makes sense to put strong cost controls into health reform.

The public plan advocates have yet to make a compelling case for their statements that it will control cost - unless Congress requires all providers to participate at or close to Medicare rates, the public option will have zero impact on health care costs. Yet they're spending untold hours and mountains of political capital trying to include some version of a public option in the reform bill.

Which leads back to the opening question - is the current health reform bill better than the status quo?

Yes, ever so slightly.

Posted by Joe Paduda at 7:35 AM | Link to this post | Comments (2)

Healthplan stock prices climbed yesterday as a Goldman Sachs analyst upgraded his view on the entire sector, concluding "Key to our view is that an end to health reform uncertainty (in a better-than-worst-case outcome) will be a positive catalyst, bringing investors back into the sector..."

Meanwhile, another analyst downgraded the sector, albeit from "overweight" to "market weight".

I didn't get it last month, and I still don't get it. Unless these gentlemen are just looking at the next few quarters or couple of years at most, their recommendations, even the modest downgrade, don't jibe with the future for health plans under reform.

Which is pretty damn bleak.

Health plans will be forced to take all comers in the individual market. The penalties for individuals not enrolled in healthplans are essentially insignificant in the Senate bill (starting at $95 individual, $285 family in 2014, increasing over two years to $750 individual/$2250 family), and somewhat tougher in the House bill (2.5% of income).

Pray tell me, with individual premiums above $5,000 and family above $15,000 today, how exactly is a penalty that is going to be less than 15% of the cost of a health insurance policy going to force anyone to buy coverage? Especially when the underwriting restrictions will allow those non-members to sign up whenever they get the flu, fall down skiing, discover they're pregnant, or contract ebola.

No, what we'll have is what's happened - already - and is continuing to happen in Massachusetts - people enroll when they need care, stop paying premiums when they're better, and health plans are getting murdered.

Perhaps the analysts are not concerned about what happens in 2014, or they are thinking the employer plans will provide enough margin to make up for sure losses in the individual sector. Perhaps they don't think Congress will pass legislation establishing taxes on excessive health plan profits, or require plans to pay a minimum percentage of premiums towards medical care. Perhaps they've bought in to the greater fool theory.

Or perhaps their view is the bad news has been exaggerated, and the problems health plans have had of late are over and better times are coming. Those bad times include big losses in membership, with especially high disenrollment among commercial members.

I don't see commercial membership increasing any time soon, not with the recent announcement by Aetna that it expects to lose up to 650,000 members in 2010. Those people will need coverage, and the current 'reform' bills will allow those people to purchase coverage on an 'as needed' basis.

What does this mean for you?

Something to ponder as you view your portfolio.

Posted by Joe Paduda at 6:37 AM | Link to this post | Comments (2)

Lost in the fight over health reform is a single, huge truth - if the private insurance market worked, there would be no need for reform.

We wouldn't be in this mess if private insurers were able to control cost inflation. And at the end of the day, that's what they are supposed to do. Sure they have lots of experience in underwriting and risk selection, and some have made some progress in some areas of disease management/mitigation, but UHC and Coventry and Wellpoint and HealthNet et al's 'experience' have not been able to consistently deliver lower health care costs.

I know there are lots of reasons/problems/complicating factors, but the stark reality is when it comes to controlling inflation, none of them have been able to.

Why not?

Several reasons, some good, some not so good, but all worth considering as we contemplate a new world built on one of the bills before Congress.

Health plans' best interest
As Maggie Mahar so eloquently and persistently reminds us, we live in a culture of 'Money-driven Medicine'. Health plans, providers, brokers, and suppliers are in this business to make money. For health plans, controlling costs means lower revenues, and this is one of those wonderful industries where top lines grow every year by ten percent plus - regardless of any increase in the number of customers (members). Wall Street loves top line growth and rewards companies that consistently grow their revenues.

Quite simply, it is not in a health plan's best interest to control cost, as most of their policyholders are going to stick with them regardless of the increase in premiums, and the business they lose they'll make up by stealing customers from other health plans.

Churn
Employers change plans every three or four years, so any 'investment' in reducing long term costs is an expense incurred by the current healthplan for the benefit of a competitor. This is particularly true for smaller groups, and is further exacerbated by the increased mobility of the workforce, which tends to change jobs more now than a couple decades ago.

Mindset
After the great explosion triggered by providers' negative reactions to capitation and employees' negative reaction to small provider networks, healthplans, led by UHC, adopted an 'open access' model, wherein members could go 'out of network' to receive care, albeit at a higher copay rate. Employers are certainly to blame for a failure to explain the logic behind and lack of will to stick with the tighter managed care models, but they've certainly paid a high price for their lack of foresight and will. The result of the 'dimming down' of managed care is the current employer-based health cost inflation.

Regardless, since the adoption of the open access model in the mid-nineties, consumers have gotten used to, and highly attached to, that model. Undoing that mindset is going to be painful, and health plans don't succeed by causing pain amongst their members.

Cost control by price control
Listen to health plan execs on their quarterly earnings calls, read their transcripts, review their press releases, look at their product offerings - see much in the way of real cost control? Strong disease management, medical homes, useful data on provider outcomes and costs presented in a way that Joe Sixpack or Maria Martinez can readily use?

Didn't think so. Sure, a few health plans (Aetna probably being the best among the for-profits) are making an honest effort, but most are not. Instead, health plans rely on price control - squeezing providers down as hard as they can on reimbursement rates for specific procedures - a practice that solves one part of the cost equation but does nothing to control utilization, and may well exacerbate it.

For-profit health plans operate in the best interests of their stockholders - not those of their members, providers, or society. That's how capitalism works. And not-for-profit health plans have to compete with the for-profits, a reality that has forced the Kaiser Permanentes and Group Healths to adopt many of the business practices of their competitors.

The net

The reason we need reform is the current 'free market' is not fixing society's problem. The reform we need is real, meaningful reform, with true cost control, not a few pilots here and a bit of disease management there and a couple of billion of comparative effectiveness research sprinkled on top of a layer of slightly-modified fee-for-service reimbursement.

Posted by Joe Paduda at 7:37 AM | Link to this post

There are some things I just don't get. Bungee jumping, the Ruta de los Conquistadores, body piercing are near the top of the list, just under equity investors' reactions to health reform.

And it doesn't look like my health investor puzzlement is going to end any time soon.

Several news items collided in my inbox this week; passage of the House reform bill and multiple analyses thereof; a report that health plans' medical costs and profitability are worsening, yet many health plan stocks are selling close to their 52-week highs. Huh?

Let's start with the health plan medical cost report. The good folks at Mark Farrah and Associates published an analysis that, among other things, noted:

- the top eight health plans (covering 59% of the nation's total insureds) lost 836,000 members in the first half of 2009

- commercial membership was down 1.45 million while MA and Medicare Supplement was up 405,000

- Medical costs are trending higher, and medical loss ratios are as well

The net - profitability has declined, costs are increasing, and membership is dropping. Yikes.

Now, investors don't seem too worried about these trends. In fact, as of this morning, they seemed to be enamored with the health plan sector as stock prices are up over nine percent over the last month, compared to an S&P that's just over flat.

Next, health reform and the recent House and Senate bills. What I see that's scary is the lack of a strong mandate coupled with an end to most underwriting of medical coverage means people can sign up for health insurance when they need it, stop paying premiums when their care is completed, and then re-up if and when they need care again.

Let's call this the Massachusetts Problem, after what's been happening to health plans there.

This isn't conjecture or theory. It's reality, and it is taking place in a market with a much stronger mandate than the one in the Senate Finance bill.

Finally, a few selected statements from stock analyst types:

- "There were two recent developments of particular concern to WellPoint investors, since the company is a relatively big player in the small-employer and individual markets. First, the Senate Finance Bill included strict insurance market reforms but a weak individual mandate, which could lead to adverse selection, higher premiums, and a smaller market for individual and small-group policies." (Morningstar) Yet Morningstar rates WellPoint a five-star stock

- They also may not be hurt as badly by a federal health care overhaul as many analysts first worried. Congress is debating ways to cover the uninsured and reduce costs, and health insurance stocks have been sensitive to this debate for months. Shares sank at the start of the year when the reform debate picked up steam, but they have recovered for the most part as the threat of a strong public option that would compete with insurers faded. A possible tax on insurers based on their market share remains a concern. But overall, analysts say the sector remains on sound footing heading into the next few quarters. [notice no discussion of the impact of the end of underwriting coupled with a weak or nonexistent mandate...perhaps it was edited out] istockanalyst

- "I think they're getting a really bad shake in the current environment," FTN Equity Capital Markets analyst Peter Costa said. "But the core businesses are there." istockanalyst

United Healthcare is also a top rated stock, and is trading near its 52-week high.

Analysts may say health plans are somewhat insulated from the individual market, where the underwriting issue is really problematic. True, but as more companies drop their group plans (a multi-year trend that has accelerated this year), the size of the individual market will grow - and health plans will have to get into or expand their offerings in that market if they are going to increase revenues (a mandatory requirement for publicly traded companies).

So here's where this all leads. Without a strong individual mandate, health plans are going to lose buckets of money insuring people after they get sick. How that translates into a 52-week high is beyond me.

Disclosure - I've sold all my health plan stock holdings and don't have any financial interest whatsoever in the sector. Not because I don't think there are some good companies out there in the healthplan business (Aetna's probably at the top of the list), but because provisions in the two health reform bills will kill off the entire industry.

Posted by Joe Paduda at 8:42 AM | Link to this post | Comments (5)

Friends and colleagues Jay and Louise at Colorado Health Insurance Insider host this week's edition, featuring the Simpsons explaining all things health policy - as only the Simpsons can.

Great stuff, all in one place for your edification!

Posted by Joe Paduda at 8:30 AM | Link to this post

Because that's what it is going to 'cost' to replace the current Medicare physician reimbursement scheme with something else. And make no mistake, as Trudy Lieberman of the Columbia Journalism Review points out, most of the nation's physicians are adamant about 'fixing' Medicare reimbursement.

The issue is the Medicare Sustainable Growth Rate (details here). The net is simple - if the SGR formula/process is eliminated, a quarter trillion dollars gets added to the deficit, because that's the amount the formula/process says has been paid to docs over and above SGR 'limits'.

Current Congressional protocol requires CBO to 'score' any and all health reform proposals; unsurprisingly the SGR 'fix' has not been included in any reform measure, because it will push the cost way, way over a trillion dollars.

Thus, thru legislative legerdemain, Congress is avoiding talking about and being held responsible for the real cost of reform.

As long as we have to 'fix' the SGR - and I'm not arguing that Part B (physician reimbursement) doesn't badly need fixing, hows' about we 'trade' SGR elimination for some real reform, like, say, bundled pricing for specific procedures/conditions? Like, maybe, a flat cost for treating an asthmatic patient over a year including facility and physician and lab and other costs?

Or, for those chronic patients with more than one condition, a formula that pays for all their care based on a multiplier indexed to the number, cost, and severity of their conditions?

Or a requirement that all physician bills from practices that don't have all patients on a share-able electronic medical/health record are paid under a non-fixed SGR, while bills from practices using 'certified' EMR are paid under a new schema?

Pretty draconian, you say? Not as draconian as anteing up another quarter trillion bucks, I respond. Sure it will be hard and take some time and isn't easy and all that other blather. It's a huge knotty ugly problem, requiring some ugly solutions, and none of them are going to be perfect. But they will be a damn sight more perfect than what we have if we don't get reform-with-cost-control done this time around - family health care costs above $30,000 within ten years.

It's time we got more from stakeholders than just their agreement to not block reform. We need a good more arm-twisting and a lot less gentle cajoling.

What's the net?

Watch to see how Congress and the President handle the SGR redo issue. Do they use SGR as a lever, or do the docs use it as a club?

Posted by Joe Paduda at 7:01 AM | Link to this post | Comments (5)

Paraphrasing Sen Ron Wyden (D OR) produces the most accurate soundbite description of the House' health reform bill.

Is this the best we can do?

If the answer is yes, we're in deeper trouble than even I thought. I'm really disappointed with the Republicans. They are supposed to be the budget hawks, but instead they've spent their time railing against abortion funding, illegal immigrants, and death panels, along with scientific research and taxes on device manufacturers. Instead of attempting to govern responsibly, they've abandoned all morality in their quest to re-energize the lunatic fringe of their once-dominant party. Now comes news that Maine's Susan Collins is convening news conferences to rail against the cost of the bill.

With all due respect, Senator, this isn't exactly new news. Now you're getting concerned about cost? After nine months of debate, discussion, and appearances on Meet the Press? Not to single out Collins; at least she's finally saying something rational about cost.

While there's plenty of blame to pile at the door of the Republicans, it is the Democrats who are to blame for coming up with a huge entitlement program set up to do nothing but grow.

Cost containment as proposed in the bill is in the form of cuts to Medicare totaling about $420 billion, including:

- $155 billion (about) from price cuts to hospitals,

- reductions in Medicare Advantage subsidies,

- increasing drug rebates payable to CMS, and

- requiring CMS to negotiate with pharma for Part D drugs.

Then there's a potpourri of funding for Accountable Care Organizations, better primary care coordination, research on quality and effectiveness, and other should-have-been-doing-all-along initiatives.

As for real cost containment, methods/techniques/tools that can actually reduce cost over the near term in the public and private sectors? Bupkus. Nada. Zippo.

Sure, at some point in the future this research will result in data we can use to recommend more changes. But by that time we'll be broke, and China will own everything of substance.

Oh, and when insurance underwriting reform kicks in health plans will have to take all comers, yet at 2.5% of adjusted gross income, the mandate penalty is not tough enough to force compliance. What we'll get is individuals and families buying coverage when they need it, only to drop it when the condition is fixed/surgery completed/rehab over. And under the terms of the House bill, you could fall off your motorcycle, buy insurance, get treated, and then stop paying premiums when your rehab is over.

I'm no fan of the insurance industry, but that just isn't fair. And lest you think this isn't going to happen, talk to Charlie Baker, former CEO of Harvard Pilgrim Health in Mass. It's happening in Massachusetts today.

Drastic times call for drastic measures. If we aren't going to seriously consider Wyden-Bennett - and more's the tragedy if we don't, then we need cost containment with teeth.

How about starting with normalizing treatment costs for specific conditions? The huge and wildly inappropriate variation in practice patterns and costs associated with conditions such as COPD and back pain and prostate cancer and diabetes and dozens of other conditions have to stop. Medicare should, and could, gradually ratchet down reimbursements across the country till they are match global reimbursement for care delivered by delivery systems that are demonstrably efficient and deliver quality outcomes - Mayo, Lahey, Geisinger, et al.

Or develop an all-payer fee schedule (similar to the one in Japan) allowing all payers access to the Feds negotiating power.

Crazy? Sure. But the current bills will not reduce cost inflation. And therefore, sure as the sun comes up tomorrow, within ten years you will be paying $30,000 for family coverage. And pretty poor coverage at that.

What does this mean for you?

Despair? Disgust?

Posted by Joe Paduda at 6:20 AM | Link to this post | Comments (5)

Thanks to the good folks at Workers Comp Insider, I learned of an intriguing study conducted by Conning and Company that concludes (in part) that private work comp insurers don't perform as well as public ones.

Here are a couple of excerpts from the article in Insurance Journal:

- 25 public and quasi-public workers' compensation insurance plans perform better financially than the private market in a number of performance categories and at least as well when it comes to the bottom line.

- public workers' compensation providers tend to have higher losses than the workers' compensation insurance industry as a whole, they more than offset those losses with lower expenses, higher investment returns, bigger dividends to employers and better injury prevention efforts.

- through more stable reserves and superior investment income, state funds have managed to achieve operating income on a par with that of the workers' compensation industry as a whole.

- Spurred by their mission that includes improving safety and their state's economy, state funds blunt the impact of bigger losses through concerted loss prevention efforts. As Jablonowski put it, "They are able to convert the marginal and poor risk into something better."

The public providers offer employers significantly higher dividends, which provide an incentive for businesses to adopt safety measures. These dividends can also create a competitive advantage and build customer loyalty, according to the study.

Congratulations to the good, hard-working, effective folks at SCIF in California, Texas Mutual, NYSIF in NY, the North Dakota state fund, Beacon Mutual in Rhode Island, and the rest of the state funds. While all is not perfect, and as Peter Rousmaniere has pointed out, often quite a distance from perfect, some of the findings of the Conning study are illuminating.

I'm also thinking the study should be carefully reviewed by Federal legislators, as the conclusions may help inform the discussion about the public option in health reform. I'd point to them to this quote:

"When you look at the entire insurance world, there are obviously insurance companies in the private world that do a great job of loss prevention control,"[the study's author said] "But the unique thing about funds is that they all do it. Twenty-five of them and they all do it. So it's not a random sample; it's a sample that suggests that this group puts an emphasis on loss prevention control."

That's exactly, precisely what we need to do with health care - prevent preventable claims that lead to high costs and lousy outcomes.

What does this mean for you?

Once again, the health insurance world can certainly learn something from workers' comp.

Posted by Joe Paduda at 7:13 AM | Link to this post | Comments (3)

Depends on who you ask. If you ask group practice administrators about how Medicare compares to the private insurance industry, it is pretty darn good - in several categories, Medicare Part B is rated higher than any other large payer.

That's partly due to the lousy performance of some of the private insurers, but administrators actually rate Medicare's responsiveness, transparency, prompt payment, and overall administrative functions highly.

Yes, you read that correctly.

On a five-point scale, with 5 the highest rating, the much-maligned and oft-decried public plan for the aged has an overall satisfaction rating of 3.6, with Aetna at 3.1 and UnitedHealthcare bringing up the rear at 2.5.

Medicare was considered the most timely responder to inquiries, with Aetna second and UHC at the back of the pack; the same standings hold for accuracy and consistency of the payer's responses to questions, speed of payment (Medicare 4.1, Aetna 3.5, UHC 3.1), disclosure of payment policies, and claims appeal process (Aetna was excluded from the report).

Medicare doesn't appear on the list of questions regarding satisfaction with the contracting process, except in the 'willingness to disclose the fee schedule' category, where it is again rated at the top. This isn't surprising, as CMS is not engaged in '2-way good-faith negotiations' nor do practices have 'leverage during the negotiation process'. I don't know if responders didn't ask about Medicare or if Medicare was ranked at all; I'll let you know when I hear back from the Medical Group Management Association (MGMA), the organization that conducted the study.

As with any study or survey, you can find data to support any perspective.

That said, the ratings of the health plans are generally consistent with those reported by the Verden Group, an independent firm focused on helping providers deal with managed care organizations.

Aetna received top marks for clarity of communications, and was rated the most 'provider friendly network' by respondents to the Verden Survey in 2008.

As the public option becomes possible once more, and opponents lament the inefficiency, lousy service, and incompetence of the faceless bureaucrats that run Medicare, it is helpful to know what the people on the other end of the transaction think.

If you listen to them, on a number of fronts, Medicare's a darn sight better than most of the private insurers they have to deal with

Posted by Joe Paduda at 7:13 AM | Link to this post | Comments (6)

The Senate rejected the Medicare Physician Fairness Act rather resoundingly today, preventing a 'fix' that would have added a quarter trillion dollars to the deficit.

Senate Dems were trying to pass the bill separately from any overall reform bill, as combining the two would have pushed the total cost well over a trillion dollars over ten years - a figure that would, in all likelihood, doom the bill.

But an interesting coalition of all 40 Senate Republicans, Evan Bayh of Indiana, Russ Feingold of Wisconsin, Claire McCaskill of Missouri and Ron Wyden of Oregon - a pretty broad spectrum - voted no, killing the bill in a procedural vote.

This is good news. Not because we're still stuck with the dysfunctional Medicare Sustainable Growth Rate mechanism, but rather because fully a dozen Dems stepped up to the plate and rejected a huge increase in government spending on an entitlement program. Lest my Republican readers get too excited, their party has yet to participate in any meaningful, helpful way in the discussion, and Minority Leader McConnell's snarky comments today were yet another example of his inability to set aside petty, stupid, childish politics for the good of the country.

Here's hoping that the rejection means we will actually, finally, seriously start talking about cost. This is where the GOP should show some leadership, which will require McConnell et al get a sudden injection of statesmanship. None of the bills currently before Congress - with the exception of Wyden-Bennett - reduce costs.

We should throw them all out, pass Wyden-Bennett, and get on with other matters.

Yeah, right, that's really going to happen...

Posted by Joe Paduda at 5:59 PM | Link to this post | Comments (2)

AHIP - did they jump or were they pushed?

I'm not pointing any fingers, but if I were, all ten would be pointed right at Bob Laszewski.

Yesterday Bob pointed out that AHIP could not possibly have screwed up any more than it did when it released the PwC 'analysis' of the Senate Finance Committee reform bill. Here's how Bob put it.

When you are going to issue a report of the kind AHIP and PwC did--in terms of its intended consequences on a national political debate--you better be sure you can back-up everything you say in simple and unambiguous terms.

The ineptitude on the part of AHIP and PwC is startling. That either organization was not able to clearly and decisively defend their conclusion in the midst of the health care reform finals is one thing. That they couldn't defend a conclusion that is generally right and consistent with common sense [emphasis added] is even more startling if not aggravating.

But then AHIP starts from way behind anytime it has tried to do anything in this town... there was the Congressional hearing this summer where three of their members told a House committee that they planned to continue retroactively canceling individual health insurance contracts even when they found only inadvertent and immaterial errors on the original applications.

Then, of course, there was the silly $2 trillion cost savings offer they spearheaded at the White House this spring, which Republican Chuck Grassley dismissed as nothing more than "fairy dust."

When you have that kind of track record and lack of credibility and you want to issue a game-changing report you better have every duck in line. I swear, if AHIP issued a press release on a crystal clear day telling DC the sun was shining no one would believe them [emphasis added].

But you can't blame Karen Ignani alone - her board, which includes CEOs of pretty much all the big and most of the medium-sized health plans, obviously played a big role in developing AHIP's 'strategy', such as it is. There are some really bright and capable folks on that board, many of whom are likely stunned at the blindingly inept way AHIP tried to make their point - a point that I absolutely agree is entirely valid, and for which there is ample historical support.

Alas, the correctness of their opinion has been overwhelmed by the way it was 'presented' - a bucket of cold slops dumped over the heads of the Democrats who were (at the time) warming to the idea of sending forty million more paying customers their way.

Unless...unless Karen Ignani is a secret single payer zealot, the only explanation is they just woefully miscalculated - or the accelerator got stuck...

(much as I'd like to take credit for the Harry and Louise to Thelma and Louise, I stole it from someone on the toob)

Posted by Joe Paduda at 5:09 PM | Link to this post

That's what it is going to cost to 'fix' Medicare's physician reimbursement problem. A bill introduced into the Senate, and now scheduled for a vote within days would eliminate the Medicare Sustainable Growth Rate (SGR) program (which determines, or is supposed to determine, what docs get paid by the Feds for procedures) while adding another quarter trillion dollars to the program's deficit.

Really.

The Medicare SGR formula/process was set up six years ago to establish an annual budget for Medicare's physician expenses. Each year, if the total amount spent on physician care by Medicare exceeded a cap, the reimbursement rate per procedure for hte following year would be adjusted downward.

And for the last six years, reimbursement - according to SGR - should have been cut, but each year it was actually raised, albeit marginally. The result is a deficit that is now almost 250 billion dollars, a deficit that we'\re carrying on our books, and, by the way, is not addressed in the Senate Finance Committee's reform bill. In order to pass, the bill, S 1776, will have to get at least 60 Senators to agree to waive a budget point of order because the measure is not offset in the budget - that is, there isn't a cut of a quarter trillion in spending elsewhere in the budget, so the bill, which goes by the feel-good title of Medicare Physician Fairness Act of 2009 (MPFA) will add a quarter-trillion bucks to the deficit.

Physicians are, not surprisingly, all in favor of the bill - even if there are no details on what the 'new reimbursement' methodology or levels will be. Certainly not in the bill itself, which takes less than a minute to read. If you're looking for what replaces SGR, and how Medicare will control costs, don't look in the bill - it isn't there. It looks like the docs think anything is better than the SGR; at least that's what their thinking appears to be today.

But what about the cost? Where are we going to come up with a quarter trillion dollars, while adding another eight hundred billion or so for the big health reform bill? Does the MPFA have some magic bullet, a money tree, a golden goose provision?

Sources on Capitol Hill tell me this isn't just a Democratic measure, but one that will likely garner perhaps a half-dozen Republicans voting 'aye'. Both Harry Reid (D NV) and Minority leader McConnell have agreed the Senate will proceed to vote on S. 1776 next week.

Well, what can you expect from a body that voted in favor of Medicare Part D, and as a result added $8 trillion to the Medicare unfunded liability? This is a measly quarter-trillion, less than 3% of the Part D boondoggle.

Jeezus H Flippin Christmas. This is nuts.

Posted by Joe Paduda at 5:47 AM | Link to this post | Comments (4)

Last week the Senate Judiciary Committee held an initial hearing aimed at removing some of the health insurance industry's anti-trust exemptions. The hearing, entitled "Prohibiting Price Fixing and Other Anticompetitive Conduct in the Health Insurance Industry", may be a reaction - at least in part - to the health insurance industry's public (and private) assault on health reform legislation.

And over the weekend, President Obama added his considerable weight to the call for a review of the industry's anti-trust exemptions.

To be sure, AHIP's public slam of the Senate Finance Committee did nothing to strengthen relations with Democrats, and the hearing, (although put on the Committee's schedule on October 2, well before the AHIP report was released), was a fine opportunity for Senators outraged by AHIP's action to up the ante.

Like pretty much everything having to do with health insurance and reform and Washington, this isn't simple, and I certainly don't pretend to understand the details. But as near as I can make it out, here's what is causing heartburn among some.

Here's Julie Barnes' synopsis: "There are three sets of laws involved here; 1) the federal antitrust laws; 2) the state laws that regulate the insurance industry; and 3) the federal law passed in 1945 called the McCarran-Ferguson Act. The antitrust laws promote competition, and states have a long tradition of regulating insurance practices for their citizenry. The McCarran-Ferguson Act doesn't regulate insurance or prohibit certain anticompetitive behavior, but it does allow federal and state governments to regulate insurance and makes clear when antitrust laws do and do not apply to the insurance industry."

The issue is the industry's exemption from the McCarran-Ferguson antitrust laws (which is under the Judiciary Committee's purview). Providers have long contended that it is unfair for the payers to be exempt from these laws when providers are not; this, providers contend, is unfair. I'm not sure I buy that argument, as provider consolidation has been continuing regardless of the regulatory environment, and the negative effects of that consolidation were clearly illustrated in the Boston Mass market.

McCarran-Ferguson exempts insurance industry activities that: (a) constitute the business of insurance; (b) are regulated by State law; and (c) don't constitute an act of boycott, coercion, or intimidation. According to Barnes, the crux is the 'business of insurance' standard - and the Supreme Court has set up a test to determine if an activity is the business of insurance - (1) whether the activity has the effect of transferring or spreading a policyholder's risk; (2) whether the activity is an integral part of the policy relationship between insurer and insured; and (3) whether the activity is limited to entities within the insurance industry.

Over the years, the exemption has been tightened considerably - in particular mergers and acquisitions and provider contracting activities are generally not exempt, so anti-trust laws and regulation apply.

So what happens if Congress repeals the exemption? Way too early to tell, but undoubtedly even the whisper of this possibility is most unwelcome in health plan executive suites.

If you look at market concentration, there's no question the health insurance industry is not exactly competitive; 94% of insurance markets are 'highly concentrated'. Here are a few factoids using 2005 data; if anything there has been more market consolidation, so these percentages are even higher today...

- in 96% of markets, at least one insurer has share higher than 30%

- in almost two-thirds of the markets, one insurer has share greater than 50%

- in a quarter of the markets, one insurer has share at or above 70%

But repealing the industry's exemption is not likely to significantly increase market competition.

Which leads us back to the original question - Why?

My sense is this is a 'OK, you want to mess with us?' statement by the Senate Democrats. It is a very loud, and very close, shot across the bow of the industry intended to let them know in no uncertain terms that intransigence will be very, very costly.

What does this mean for you?

Watch to see how AHIP et al react. If they appear somewhat chastened, don't be surprised.

Posted by Joe Paduda at 6:29 AM | Link to this post | Comments (2)

Over the last few weeks, all the media focus (as well as here at MCM) has been on the Senate Finance Committee's health reform legislation, aka the Baucus bill. Now that the eponymous bill has been voted out of committee, it is no longer the only game in town, but rather one of six.

As the most 'conservative' of the six bills, it is highly likely the final version's details will reflect a less 'conservative' approach, perhaps with some version of the public option, which the other Senate and all House versions contain.

First, the Senate is going to compare, contrast, and possibly combine it with the bill voted out of the Senate Health Education Labor and Pensions (HELP) committee - the one formerly chaired by the late Senator Kennedy. Among the major differences between the two; the HELP bill includes a public option; phases in the mandate penalty of $750 immediately (Finance doesn't get to $750 till 2017); has a tougher employer mandate with higher penalties; expands Medicaid to individuals earning up to 150% of the Federal Poverty Level (Finance is 133% and is delayed till 2014); and the HELP bill does not contain the excise taxes that are included in Finance's effort.

The differences with the House Tri-Committee bill (HB 3200) are even more stark (no pun intended).

HB 3200 has a much stiffer individual (2.5% of adjusted gross income up to the cost fo the average plan premium thru the Exchange) and employer mandate (almost all employers would have to contribute at least 75% of the cost of individual/65% family coverage or pay 8% of payroll into the Exchange; and offers up to 50% premium credit for smaller employers to help pay for insurance; increases Medicaid reimbursement to 100% of Medicare (Medicaid is usually significantly lower). HB 3200 also sets up an Insurance Exchange, is funded thru a higher tax on families making over $350,000 annually, increases rebates from drug companies, and significantly reduces Medicare Advantage subsidies. (there are several version of this bill, see the Kaiser site for additional detail).

CBO estimates HB 3200 will cost slightly over a trillion dollars over ten years, significantly more than Finance's $850 billion.

These are by no means the only differences; they do serve to illustrate the yawning gap between the Finance bill and the other major bills before Congress.

So, what's going to happen?

Can it get thru the Senate is the standard by which all revisions and edits will be judged. Just a week ago, that made it highly likely the final bill would look much like the Finance version, but the release of the PwC report by AHIP may have given potentially-wavering Senate Democrats the push they need to adopt some of the provisions from HELP and HB 3200. Democrats are outraged by what they (I think somewhat unfairly) view as a last-minute stab in the back by the health insurance industry, which heretofore had been publicly in favor of reform.

Democrats are also keenly aware that a failure to pass health reform will be a political disaster.

I've long doubted the votes are there to pass reform, but of late the odds are moving - slightly - in favor of reform.

The Kaiser Foundation has an excellent tool that enables side-by-side comparison of all of the bills, proposals, and suggestions; the NYTimes has a comparison of the several bills before Congress here.

Posted by Joe Paduda at 5:48 AM | Link to this post

For at least a couple weeks, many of the 1642 people who subscribe to MCM didn't receive notices when new posts went up. It looks like we've figured out the problem (electronic fingers crossed), so here's what's been on the blog while we were in a technical hiatus.

Yesterday I opined that the recent AHIP/PwC report is more right than wrong; the report misses a lot - and much of what it misses is less than favorable to the report's funders - health insurance companies. But the central point is indeed accurate; without a tough, enforceable universal mandate, you can't force insurers to take all comers without charging more for higher risks or excluding them altogether.

Last week was devoted to the recent report by the state of Texas' Research and Evaluation Group's report on workers comp networks. The initial post generated a good bit of dialogue with the report's authors wherein they clarified a confusing (at least to me and several large payer clients) statement; the follow up post detailed the issue, adn explored another concern; "the report didn't note that three of the networks are provided by one company - Coventry, which also administers a network that is likely underpinning much of the 'non-network' category."

The 'Texas Week' concluded with a post on the larger issue with the report - the fallout in workers comp "C" suites, and the potential damage to managed care.

Two posts the week before covered the AmComp meeting in NYC, with one lamenting the lack of concern about medical costs among work comp execs and another summarizing a talk by industry veteran John Burton.

Before I got all wrapped up in workers comp, i handicapped the health reform odds, saying "If the Baucus bill comes out of committee with unified Democratic support, that tells a lot. And if Snowe signs on, that's even more telling...The Democrats are almost all-in on health reform; at the end it will come down to some Dems deciding if they're better off holding their nose and voting in favor or handing the victory to the GOP."

So far, looks like those Dems are indeed holding their collective nose.

This was preceded by a confession - I'm one of those nerds that actually reads Health Affairs - the latest issue has a great piece on the primacy of price in health care inflation. I don't necessarily agree, but the authors make a compelling case.

It appears that the problem started just before the end of September; readers can always check the main page, sort by category, or type in key words to find specific posts.

Thanks for the forbearance, and here's hoping the gremlins are back in wherever gremlins live..

Posted by Joe Paduda at 7:08 AM | Link to this post

The odds that comprehensive health reform will pass are up - a bit. Word from Washington is the Democrats in the Senate Finance Committee are 'coalescing' around Baucus' original bill's provisions. While there's been much discussion, few of the 564 amendments have passed.

While the public option will be offered up as an amendment, odds are it won't become part of the Finance Committee's bill - but may be added when that bill is combined with the Senate HELP Committee's version later on.

The Democratic strategy appears to be focused on maintaining unity, while peeling away the one Republican Senator (Snowe, ME) that has voiced some support for Baucus' bill. The White House is working every angle, including schmoozing Snowe's fellow Maine Republican Senator, Susan Collins. Whether they can keep the Dems together is anyone's guess, but with White House Chief of Staff Rahm Emanuel focused on this issue, it would be difficult indeed for the Democrat who wavers.

Meanwhile, the for-the-moment-still-unified GOP is facing dissension among the ranks of traditional supporters. Big business, and small business as well, appear to be rallying behind the Baucus bill, due in large part to the lack of an employer mandate. What's pushing the usually-reliable GOP base to back reform is a recognition that health care costs are out of control - one statistic released by the Business Roundtable has focused attention on the issue: "the cost to insure a single employee, including the person's own out-of-pocket expenses, would jump to more than $28,000 a year by 2019, from around $11,000 a year now."

Even the US Chamber of Commerce said nice things about Baucus' effort, notably that the bill: "will actually...get health-care costs under control."

"The reality with the business community is that we want reform, while some Republicans want to stop this train and start over," said Bruce Josten, the chamber's chief lobbyist. "That is just not going to happen." [emphasis added] (WSJ)

THIS IS BIG NEWS.

The traditionally fractious Dems are banding together, while a critical GOP constituency is breaking with the Party.

What to watch for

If the Baucus bill comes out of committee with unifed Democratic support, that tells a lot. And if Snowe signs on, that's even more telling.

But remember, nothing gets passed without sixty Senators voting 'aye'. And right now there are exactly 60 Democrats in the Senate. The two Senators from Maine are possible supporters, but there may be defections among the Dems.

What's going to be the most important single factor? Likely the political calculation on the part of the Democrats, many who clearly remember the disastrous fallout after the failure of the Clinton plan, when the GOP won control of both Houses for the first time in forty years. The Democrats are almost all-in on health reform; at the end it will come down to some Dems deciding if they're better off holding their nose and voting in favor or handing the victory to the GOP.

Posted by Joe Paduda at 6:52 AM | Link to this post | Comments (1)

I've been accused of being one of the few that actually reads the bimonthly journal Health Affairs. Well, guilty as charged, although the pub has a lot more than a 'few' devotees. What it does particularly well is challenge core beliefs.

The latest edition focuses on bending the cost curve - a phrase likely to inspire William Safire to dissect it in detail in one of his discourses on language. The idea is to find ways to reduce the rate of growth in health care costs, and this edition has plenty of ideas.

One of the most thought provoking articles contends that price controls are "central to curbing cost growth". I'm going to comment on the article next week in detail, but here are a couple of points made by the authors.

• "out of pocket spending in the United States is roughly twice the OECD median. If some Americans have "Cadillac coverage," than most workers in Germany or France must have "Mercedes coverage" - and they would likely view many American insurance policies as "Yugo coverage."
• patients in OECD countries average more hospitaldays, more physician visits, and greater consumption of prescription drugs than American patients do. Higher US spending is not primarily explained by greater volume of services.
• analyzing data from Massachusetts, David Cutler and colleagues found<, for example, that virtually all of the savings that managed care plans achieved for heart disease treatment, relative to indemnity insurance, came from price reductions./li>
  

I've long believed, and still do, that utilization is a more significant cost driver than price. I've seen this time and time again - in data on physician in-office utilization from CMS (up 11% in 2006), in NCCI's analysis of workers comp prescription drug costs, in analyzing client physical medicine experience, in the correlation between workers comp medical expenses and state fee schedules - or rather lack thereof, and a host of other examples.

What doe this mean for you?
The authors make a compelling case - not just for price as a cost driver, but to always question your assumptions.

Posted by Joe Paduda at 9:50 AM | Link to this post | Comments (6)

President Obama's speech Wednesday night clarified what he will, and won't, accept from Congress. It also was politically artful, mollifying the liberal Democrats while borrowing from Republican positions in an effort to give just enough to each to keep the process moving.

My main takeaway was this - for the first time, substantial attention was paid to cost, with a good chunk of the speech focused on reducing spending due to unnecessary care, excessive Medicare Advantage subsidies, and squeezing out administrative cost.

This is the speech that should have started the health reform campaign.

Instead we're far into the legislative process, and many, if not most, Americans are uneducated about and unaware of the key issues reform should address. Example - I had dinner Friday night with several well-educated people in Chicago, one of whom is a nurse anesthetist married to an anesthesiologist. She railed against the reform bills' negative impact on physicians, but could not point to any specific issues or clauses or reimbursement changes in any of the bills currently before Congress. She complained vociferously about the cost of medical malpractice insurance, stating that this is not a problem in any country but ours. The others listened, as to them, she is deeply involved in the industry and therefore an 'expert'.

This is why the chances for health reform are dim and fading. The Democrats ceded the field of public debate to opponents of reform who successfully focused the public's attention on secondary issues such as tort reform while avoiding any discussion of cost (which would mean lower revenues for reform opponents). Now the President is paying catch-up, trying to educate the American people about the problems, cost drivers, and inefficiencies in health care. This education will not happen overnight. Wednesday night he set the stage, raised a number of good points, and was generally accurate in describing the health care system's cost drivers.

It would have been the perfect speech except it wasn't in May.

I'll temper my comments with the observation that then-Senator Obama was counted out last August, appearing to stumble while his opponents soared, only to soundly trounce Senator McCain three months later, winning several states that had historically been solidly Republican. He also defeated the Clintons to win the Democratic candidacy, an accomplishment that cannot be overstated.

Can the President get reform done? Possibly. But not probably.

Posted by Joe Paduda at 9:44 AM | Link to this post | Comments (3)

This is it - President Obama's speech tonight will be the single most important health reform event this year. Here are the key things to watch for.

The reactions of Sens Grassley, Enzi, and Snowe are more important than the content. More important, even, than any Presidential pronouncements about public options and tort reform. Without bipartisan support, however thin, nothing gets done, and these are the three keys to that elusive bipartisan stamp.

Cost control - to date the Dems in the House have passed several bills out of Committee greatly expanding coverage at huge cost. Health reform without cost control is not possible nor should it be. The President must address cost, and do so directly.

Lines in the sand - I don't expect there will be any, especially any referring to a public plan option from day one. But there will be 'requirements' for coverage, perhaps timeframes, and possibly a trigger for implementing a public option if specific criteria aren't met by the private insurance market. How tight these are will go a long way to revealing how far the President will go to get reform passed.

Tort reform - the President's treatment of this topic will be highly instructive. If he signals a willingness to include tort reform in a health reform bill, that will show a) he's open to make big concessions to get reform done; and b) opponents that the stakes are raised. Getting tort reform done is a high priority for many in the industry, and they will likely be willing to compromise on other points if they get what they perceive to be meaningful reform.

What to ignore

The slamming by opponents and hyperbowling (a term used to describe advocates hurling positive adjectives at any microphone) immediately after the speech. Turn off the coverage and get back to your fantasy football picks - it will be more productive and less stressful.

Posted by Joe Paduda at 2:28 PM | Link to this post | Comments (3)

President Obama's speech to a joint session of Congress tomorrow night looks like the last best hope for health reform in 2009. Despite all the protestations about 'ObamaCare', the reality is the President has been remarkably silent on health reform specifics, preferring to let Congress work out the details, as long as they meet his goals of coverage and 'budget neutrality'.

This looks to be the result of a careful analysis of 'what went wrong' with the Clinton health care reform effort, an effort blown apart by too many details that elicited devastating criticism. While some may accuse the President of fighting the last war, others note that Obama, as a relative newcomer to the Capital, understands that many in Congress, and particularly the Senate, have long experience with health care and much pride in that experience, and would resent what they might see as a heavy handed attempt by the new guy to dominate an issue that they view as their own.

Regardless, we're now at the point where the speech, and moderate Democrats' and Republicans' reactions to that speech, may be the turning point in the reform effort.

Obama has largely kept his powder dry, avoiding 'deal-breakers', lines in the sand, and 'non-negotiables', and the same can be said for the Republican Senators key to a true 'bipartisan' deal - notably Enzi and Grassley. (Snowe is a different story; she's the one hope for Democrats seeking to shove something thru with some form of a public option.) Despite the escalating rhetoric on the part of the two Senators, they have - so far - pretty much avoided had line positions.

This modicum of restraint on the part of the President, Enzi and Grassley, is the key to coming up with something that a) can be passed; b) is more than just a tweaking around the margins; and c) promises to control costs while expanding coverage.

A solid set of principles that would form the basis for agreement has been developed by Bob Laszewski, and are the subject of a measured piece by Brian Klepper and David Kibbe. Klepper and Kibbe suggest the following:

* Bulletproof Health Care Security. This is the idea that everyone would have significantly improved access to care, that the employer-sponsored system would remain available for those who like it, and that Congress would be required to use the same system that they pass for the rest of us.

* Medical Malpractice Reform. The Republicans have the Democrats where they want them on this one. There is no good reason why our current Med Mal system, as capricious and ineffectual as it has been, has not been revised with expert systems, except that the trial lawyers, in exchange for hefty financial support, have received protection from the Democrats. It's time to fix this problem that pervades our health care provider community.

* Paying for It. This is acknowledging that subsidies will be required for those who can't afford health care at its current cost level, and that there are ways to structure the new cost that are more sensible. As Bob points out, the nearly forgotten Wyden-Bennett bill would be cost neutral in its second year.

* Tough Cost Containment. As we said above, this has been the Congressional Democrats' proposals' most glaring and conflicted flaw. It is an area that, with a focus on primary care, paying for results instead of piecework, and cost/quality transparency, could dramatically drive down cost while improving quality, rightsizing our health system and going a long way toward ameliorating the most pernicious drag on our larger economy. Bob tackles cost control most effectively in his Health Care Affordability Model, a plan that would use tax incentives to encourage the industry to focus on driving out waste.

There are a couple huge political plusses for the Republicans in the 'Four Points'.

First, to date the Dem's proposals have been woefully short on cost containment, and woefully long on unfunded entitlements. By getting tough on costs, the GOP may be able to find one issue where it has a fresh, new perspective - something the party desperately needs. Sure, they'd infuriate a big donor base, but that would be an acceptable price to pay for a party that needs something to build on for next year's mid-term elections.

Second, Enzi, Grassley et al would earn big points from the medical provider and manufacturing industry by attacking Med Mal. A successful 'solution' to what is perceived to be a big cost driver (although the data don't support that perception) would play very well with their base, and take some of the sting out of the cost containment provisions.

This is not to make light of the significance of the issue for the Dems as well - passing health reform is a must-do. There's a lot of political capital at stake so passing it will boost the party's credentials while failing to do so will cut deeply into the public's view of the Democrats.

What does this mean for you?

By September 30 we'll know if reform is still alive. If Grassley and Enzi aren't sounding strident and protesting 'heavyhanded Democrats', we may still get there.

Posted by Joe Paduda at 10:41 AM | Link to this post | Comments (1)

Last week's post about what will happen if we don't have health reform got me (and a couple others) thinking about the downstream impact - on employers, manufacturers, taxpayers.

Before we delve into the impacts, a bit of clarification.

My statement that a family policy would cost $30,000 in 2016 was based on the latest info from two large consulting firms about commercial health insurance premiums - rates are going up more than ten percent next year. And it is highly likely they will continue to accelerate at or near the ten percent number. Two commenters noted that just because something happened in the past does not mean it will continue into the future - I'd respectfully note that while that is true in the abstract, in the concrete world of health insurance, there's a very high likelihood that costs will indeed go up ten percent - or more - per year for the foreseeable future absent meaningful cost reform.

The AON survey reports trend rates ranged from 16.0% and 18.2% for HMo, PPO, Indemnity plans in 2002, 15.7% - 17.2% in 2003, 14.1% - 15.3% in 04, 12.7% (CDHP) to 14.6% in 05, 11.9% - 14.4% in 2006, 10.7% - 12.7% in 2007, and 10.5 - 12.4% in 2008.

The past is a pretty good predictor of the future; over the last eight years cost have consistently increased more than ten percent each year, with most increases well above that level. Whether we are at the bottom of the cycle or cost inflation rates will continue to decrease is unclear, but what is clear is that the inflation rate will head back up at some point in the next few years.

Back to the real world impact.

• If nothing changes, the share of the nation's budget paid by the government will be greater than that paid thru private insurers.
• 178,000 small business jobs will be lost by 2018 as a result of health care costs
• If employee contributions stay at their current level (about 30% of premiums), workers will be paying $9000 per year, or $750 per month, towards their health coverage - not including deductible, copays, coinsurance, and services not covered
• General Motors' health insurance will add about $3000 to the cost of each vehicle - if it is still in business>li>In my hometown of Madison, Conn., Town employee health insurance costs are paid for with property taxes; without reform the amount of tax revenue needed to pay those bills will double by 2016, forcing tax increases and/or significant service cuts
• More Americans will have to rely on the kindness of others for their health care
• Because 65 million of us will be without health insurance

Unlike the distortions, misrepresentations, and outright lies being spread by McCaughey, Limbaugh, Palin et al, this is the real deal. So fight against reform if you wish, but don't complain later when you can't afford insurance, your employer can't afford insurance, your taxes are going up to pay for teachers' benefits, and our economy is sinking under the weight of health care costs.

(Note - as I said Friday, health 'reform' must include cost control, something neither party has bothered to meaningfully address)

Posted by Joe Paduda at 10:37 AM | Link to this post | Comments (4)

It's quite clear the public plan option is not going to be part of any health reform bill, if any health reform bill is passed.

This despite the announcement yesterday that sixty progressive/Democrat members of Congress signed a document that they would not support a reform bill that does not include a public plan option. While I admire their willingness to take a stand, I don't believe that they will follow through.

THe good folks at the Campaign for America's Future invited me to participate in a call yesterday with Dr. Jacob Hacker, the brains behind the public plan option, as well as two Congressmen, Rep. Raul Grijalva and Keith Ellison. The gentlemen waxed eloquent about the progressive caucus' commitment to the public plan option, and all the reporters who got to ask questions focused on the political issues surrounding their position.

I didn't get to ask the 'other' question, which was in three parts; "How will this save money, and how will you convince providers to sign up, and how will it prevent cost shifting to private plans?"

Dr. Hacker addressed these questions in a monograph published by CAF; providers would be automatically signed up but could opt out; reimbursement would be set at 5% above Medicare; and cost-shifting is overblown.

I don't agree with Dr Hacker that most providers would join (why would they join a plan with no members at reimbursement much less than they are currently getting to serve their current patients?) or that cost-shifting is overblown - I see too much of this every day. I also don't see how a public plan would control the single biggest driver of health cost - utilization.

But it doesn't really matter if he's right or I'm right or we're both wrong - what matters is the political reality is there aren't the votes in the Senate to pass a plan with a public option.

The continued political brawl over the public option is pointless on at least two levels - it is clear there is not enough support for the option to include it in a bill that will pass the House and Senate, and if health reform legislation is written intelligently, the public option is unnecessary. Moreover, I seriously doubt the progressives will fall on their collective swords and vote 'No' on a comprehensive health reform bill if it doesn't include a public plan option.

My sense all along has been the public option is a stalking horse, one that the President and a few Democrats let out of the stable to create a little excitement, rile up the opposition, and distract attention from other provisions that are more important and meaningful, like insurance reform, mandated universal coverage, and comparative effectiveness research.

Boy were they successful. Once out of the stable, the horse took off bucking and snorting, and kicked up enough of a ruckus to perhaps kill the whole reform process.

Posted by Joe Paduda at 10:13 AM |