Apr
21

Obama, Clinton, McCain and health care reform

The third session of the World Health Care Congress was begun by a talk from Rep Jim Cooper (D TN), one of Barack Obama’s health policy folks. Rep Cooper primarily condemned Sen McCain’s policy, while noting that both Democrats’ platforms were essentially identical – with one notable exception – Obama does not mandate coverage.
(A comparison of the Clinton and Obama plans is here)
According to Cooper, the upfront problem w universal coverage is that it will result in “zero Republican votes” – a completely wrong statement. For example, Ron Wyden’s (D OR) Healthy Americans Act has six (6) GOP cosponsors – and the HAA specifically calls for universal coverage.
McCain’s spokesman, Thomas Miller of the American Enterprise Institute, talked a good bit about the tax implications of McCain’s plan – a program that is remarkably similar to Pres. Bush’s plan (that got absolutely zero traction in Congress). Miller noted that McCain’s plan relies on the market and individual motivation to buy insurance, a motivation that will be enhanced by a tax credit for those how buy coverage (a tax credit that amounts to $2500 for an individual or $5000 for a family, about half of what coverage actually costs).
I’d note that Mr. Miller did not mention that Sen McCain’s plan will also be quite expensive. The cost of the Senator’s tax credits would be $206 billion in FY 2009 and $3.6 trillion over 10 years.
Chris Jennings spoke for Sen Clinton, and he started with the (I would argue sole) difference between the Clinton and Obama plans – she wants mandated universal coverage and he does not. Mr Jennings noted that half the cost comes from rolling back the Bush tax cuts and half from programmatic savings, but he did not add much in the way of new insights into how Sen Clinton’s plan will reduce costs.
There were two commentors – George Halvorson, CEO of Kaiser Permanente, and fomer Sec of State (and other departments) George Shultz. Halvorson began with the good news, that candidates are talking at a level of detail and comprehension re health care that is unprecedented. We’ve moved away from sound bites and deep into the details, a transformation that is quite encouraging to Mr. Halvorson.
George Shultz noted that if people work longer there will be more GDP, and this will help pay for more health care. He also opined that the reason people are living so much longer over the last 60-80 years is due to basic research and development of technology and pharmaceuticals. This, I would note, is in direct conflict with every other expert’s view on the subject – sanitation, nutrition, antibiotics and infectious disease control are overwhelmingly responsible for the improvement in lifespan, not MRI machines and new drugs (with the notable, but not overwhelmingly important, exception of antibiotics).
Finally, someone raised the question of comparative effectiveness evaluation – and all spokesmen agreed that we need to do a lot more of it. The elephant in the room is the AMA, and their likely-nuclear reaction to anything that smacks of ‘telling physicians how to practice medicine’.
But here’s my primary takeaway – everyone on the panel called for universal coverage even if McCain’s spokesman’s support was muted at best.


Apr
21

Shultz and Shoven miss the mark

Health care ‘experts’ are coming out of the woodwork like termites after fumigation. Former Sec of State George Shultz and Stanford professor John Shoven are two of the latest emergent experts; they have written a book on reforming social security and health care – I haven’t read the social security part and after reading the health care section I don’t think I will.
One of the authors’ primary contentions is that involving the consumer in health care is a key to reforming the system. One of the bases for their argument is the history of laser eye surgery – Shultz and Shoven contend that the consumer’s involvement in selecting and negotiating for laser surgery demonstrates that consumerism can reduce costs while improving outcomes.
This because health insurance does not pay for lasix, forcing consumers to, well, be consumers. The huge differences between buying eye surgery (a pretty basic decision, with a tightly defined problem and expected outcome and easily measured result) and figuring out how to buy, or more accurately if you need to buy, health care for your child with an undiagnosed neural disorder are not addressed – at all. I find this to be an unforgivable error, an oversimplification of monumental proportion.
They call for risk adjustment as the way to spread risk and require insurers to take all comers for Medicare and Medicaid members, and seem to advocate universal coverage, but don’t adequately address, or I would argue even minimally address the issue of adverse selection. This issue – adverse selection – is central to the problem of health insurance today – people who need insurance buy it, and the sicker they are the more they are willing to pay, and the more expensive it is, the fewer healthy folks will sign up (because the cost:benefit doesn’t make sense). This is the death spiral – a current example is Humana, currently getting murdered in Part D (they are one of the only payers still offering a rich option, others have dropped the Cadillac plans because, surprise, the people who bought them were the ones who needed the most, and the most expensive, drugs.
What does this mean for you?
Listen to people like Bob Laszewski, Uwe Reinhardt, Alain Enthoven. People who know of what they speak.


Apr
21

World Health Care Trends – Why income doesn’t matter

The opening session for the World Health Care Congress featured Hans Rosling MD PhD of Sweden’s Karolinska Institute – a wizard in the use of statistics to explain the relationship between income, health status and the evolution thereof in ways that enable regular people to quickly and readily grasp the issues.
According to Rosling, the biggest disconnect between reality and our current perceptions there of is our segmentation of countries into ‘developed’ and ‘developing’, a segmentation that we use (that ‘we’ would include me) that now looks to really miss the mark – and not by a little.
There is no difference between the Western and developing worlds in two key areas – fertility rate and life expectancy at birth – this has been a remarkable change over the last 50 years, due to fewer kids, better sanitation and nutrition. Pretty simple stuff. But big in terms of implications – for example, demographically, Vietnam is precisely where the US was in 1980 – in terms of family size and life expectancy. And these changes happened before significant economic changes in Vietnam, changes that one would normally associate with dramatically improved population health status.
Most economic growth in the world is taking place in developing countries, the countries that make up 60% of world population and earn a quarter of total income. Yes, we still have about a billion poor people, but that number has remained static for over a hundred years – the percentage of the population that is poor has dropped dramatically.
Rosling’s presentation also made a very convincing case, or more accurately proved, his point that there are wide disparities between and among countries in the same areas – making general statements about OECD v Developing countries is not only dead wrong, it is misleading. Misleading in that we draw conclusions based on a split that appears to be deep and persistent, when in fact the ‘developing’ world is growing faster, economically and in terms of health status, and is rapidly catching up to the developed world.
What does this mean for you?
Always question your assumptions.


Apr
21

Today’s adventure in blogging

I’m covering the World Health Care Congress in D.C. today, and will be posting from the front row. I’ll start with the intro keynote, and post on each session separately. Here’s the order
1. Global Health Trends
2. Interview w George Shultz and Dr John Shoven on their incremental approach to reforming health care
3. Presidential Health Care Agenda – spokespersons from the three candidates left standing
4. Innovation in health care – with Clayton Christensen, perhaps the most insightful business author I’ve read in years
5. HealthGrades on Search and Transparency
6. Achieving accountable care – Elliott Fisher (Dartmouth) Mark McClellan, American Enterprise Institute
To those who subscribe, you will be inundated with posts today.


Apr
16

Medicare is to Workers Comp as Yin is to Yang

Why do regulators base WC reimbursement on Medicare? It’s easy, simple, and already familiar to legislators and regulators alike. It is also a big mistake.
Medicare is a program for America’s elderly – over-65, mostly sedentary, and mostly not employed. Workers comp covers ‘working age’ folks; primarily 18-65. ) Many of the surgeries being performed on Medicare vs. workers’ compensation patients are fundamentally different.
The types of outpatient surgeries that can be performed on workers’ compensation patients, who are generally young and in overall good health, are different than the outpatient surgeries Medicare covers (pays) for. Medicare sharply restricts outpatient surgery for good reason as Medicare patients are frail and surgery followed by an inpatient stay is safer given their complicated medical conditions and health risks of prolonged general anesthesia. WC claimants are younger, in better physical condition, and much better suited for outpatient surgeries – yet basing WC reimbursement policies on Medicare would forbid, or at the least financially dis-incent, outpatient surgery in favor of inpatient.
Medicare fee schedules (like the one Florida’s Three-Member Panel is considering adopting) result in more specialist care and more procedures being performed. (opens pdf) National studies show this frequently leads to poorer outcomes and more suffering for patients, in addition to higher costs for payers.
Medicare recipients’ medical conditions are very different from comp claimants’. The top ten Medicare DRGs (Medicare’s coding for inpatient care) are:

  • Heart Failure & Shock
  • Simple Pneumonia & Pleurisy
  • Specific Cerebrovascular Disorders
  • Psychoses
  • Chronic Obstructive Pulmonary Disease
  • Major Joint & Limb Reattachment Procedures, Lower Extremity
  • Angina Pectoris
  • Esophagitis, Gastroent & Misc Digest Disorders
  • G.I. Hemorrhage
  • Nutritional & Misc Metabolic Disorders

No spine conditions, multiple trauma, burns, TBIs, crushing injuries, joint surgeries…
Inflation in Medicare billing is rampant – if you think it is bad in WC generally (and you would be right) it is an order of magnitude worse in Medicare. In Florida, the current annual inflation rate is north of 14% for Medicare outpatient services.
Medicare reimbursement disproportionately favors hospital-based care. With facilities reimbursed at levels much higher than free-standing doctors’ offices and clinics, basing reimbursement on Medicare encourages providers to affiliate with, provide care in, and bill thru facilities. In Florida, the impact is dramatic; basing reimbursement on hospital outpatient service charges will increase costs by an estimated $1,675 to $2,320 per claim (calculations courtesy of FairPay Solutions, an HSA client).
What provider would want to treat in their own, lower cost clinic or office, if they could more than double their fees by working through a hospital?
Finally, CMS itself has warned against using their payment methodologies for non-Medicare patients. “The cost-based relative weights were developed solely using Medicare data. We do not have non-Medicare data…For this reason we are concerned that non-Medicare payers may be using our payment systems and rates without making refinements to address the needs of their own population.” (page 272)
I could go on, but you get the picture. The populations are starkly different, claimants’ health status is different, their motivations are different, provider types are different, and reimbursement should reflect these differences.
Unfortunately, Medicare is the easy choice. Easy, but dead wrong.


Apr
9

Get your figures right

There has been, and will be, a lot of comparing and contrasting among competing versions of health care reform in this election. The brouhaha surrounding Sen Obama’s not-quite-universal coverage consumed a good bit of the blogosphere earlier this year, and (if the Dems ever agree on a candidate) the election itself will see the two candidates holding forth on the likelihood that their proposals will reduce the number of uninsured, cut costs, make us all healthier, and brighten our teeth as white as they can be.
Before you condemn or condone, dig into their stats, the basis for their arguments. Do their claims make sense? Are they basing their position on shaky ground? How are they validating their assumptions?
A lot is going to come down to statistics. Unless you are a blind ideologue (which this blog seems to have an uncanny ability to attract), in which case you won’t be bothered by facts, data, or logic.
Which makes this article from Wharton particularly relevant. Here’s what to watch out for.

  • Selection bias – do the data selected to assess the plan look to be slanted in a particular direction?
  • Misrepresentation – did the advocate report all relevant results, and not just the ones that supported their position? (this is very common in the policy world)
  • Unintentional errors – are there math mistakes?

Here’s an example. A survey from the NFIB (National Federation of Independent Business) purports to speak for America’s small businesses. The NFIB has long been an advocate of high deductible plans and an opponent of mandated health insurance coverage. Knowing their history, it is not surprising their survey questions appear to reflect selection bias. Here’s an example.
Question – What is the BEST (their caps) general approach to controlling health care costs (Mark ONE only.)
1. Individuals shopping for the best prices in health care and health insurance.
2. Government regulating health insurance and health care prices
3. Employers choosing/purchasing health insurance on employees’ behalf
Surprisingly, only 49% of respondents voted for number 1. Surprising, because the other options are anathema to the typical independent small business owner. Yet the survey report stated “Small business owners responding to the survey indicated they believe the price mechanism could work to reduce healthcare costs.”
The last quote is indeed accurate, but it does reflect a certain amount of ‘selection bias’, both in the way the question was worded, and the way the responses were described (note the quote did not say how many small business owners believed…)
I’m not picking on the NFIB, which is doing some good work on the national health reform front – merely pointing out that agendas tend to drive results.
As the campaigns continue, keep a skeptical eye out for candidates torturing numbers to get them to say what they want.


Mar
31

What are they thinking?

A recent poll finds that 68% of Republicans think the US’ health care system is the world’s best.
Huh?
Are they really so brainwashed by the likes of O’Reilly, Limbaugh, and Coulter that they can’t see the reality staring them in their collective face?
Do they believe John McCain’s ‘straight talk’?
The health care system that costs twice as much as the average developed country and takes all that cash and delivers results on a par with many third-word countries?
A reality marked by access only via the ER for the uninsured (at 47 million and counting)?
A reality marked by billions in dollars for drugs that don’t do what their manufacturers claim?
Or is it just that the self-described Republicans (and I’m only speaking about the survey respondents) are part of the shrinking population of the self-satisfied and self-absorbed who don’t care that their neighbors are losing jobs and therefore health insurance?
Or are they…
ears.jpg
Regardless of the rationale, or lack thereof, it is brutally clear that the respondents are an isolated, unique group with beliefs that are wildly different from their fellow Americans. Because when you compare their views to those of independents, the differences are striking.
A few samples from the survey

  • US has the best health care system in the world – GOP 68%, Dem 32%, Ind 40%
  • Other countries have better systems – GOP 19% Dem 52% Ind 46%
  • Is the US system better or worse than Canada’s – better – GOP 63%, Dem 25%, Ind 34%
  • Worse than Canada’s? – GOP 16%, Dem 37%, Ind 36%

What does this mean?
GOP respondents are on one side of the chasm, with reality, and the independent voters who get that reality, on the other.


Mar
26

Should health plan stocks be dropping?

In a word, No.
The industry-specific event that triggered the recent selloff in health plan stocks was teh announcement by Wellpoint that they underpriced their premiums for certain products. This was followed by Humana’s problem – their Medicare Part D program is under pressure due to higher utilization, and Coventry’s statements to the effect that the flu bug was depressing their results.
The credit market debacle hasn’t helped either.
I have no idea why markets move, or why a seemingly minor announcement about increased medical costs due to a flu problem (the very definition of a non-recurring event) would depress the earnings of an entire sector. If I bought and sold stocks (which I don’t, my broker does with no input from me) I’d be buying these stocks for several reasons.
First, national health care reform is coming, and these health plans are going to have a huge growth opportunity.
Second, Coventry is one of the better-managed health plans, and their valuation does not reflect their demonstrated ability to consistently excel operationally.
Third, in an increasingly concentrated market, I’d expect the big guys to snap up the smaller ones – which will drive up their stock rices. The recent drop-off in prices should, if anything, make this more likely. That said, the volatility and tightness in the credit markets may make deals tougher to pull off.
Fitch (the ratings agency) opines that the industry’s current EBITDA margins should remain around the 9% mark – consistent with past results


Mar
25

McCain’s expensive health plan

Now that McCain is the presumptive GOP Presidential nominee, I’ll be spending a bit more time analyzing his health care plan. I’ve examined his plan before, but the Senator has made some progress, refining concepts and defining specifics.
First, lets find out how much this trip on the ‘straight talk express’ will cost.
According to McCain’s website, the plan will “eliminate the bias toward employer-sponsored health insurance, and provide all individuals with a $2,500 tax credit ($5,000 for families) to increase incentives for insurance coverage.”
“All” evidently means just that – no income indexing, cap based on total taxpayer income, or any other means test. Folks making a gazillion bucks get the same credit as those earning income below the poverty level.
McCain would likely take the revenue created by repealing the employer tax breaks for health insurance (noted in his proposals) to fund his plan’s new health tax credits. The result? The cost of the tax credits would be $206 billion in FY 2009 and $3.6 trillion over 10 years.
Notably, nowhere on McCain’s website or in his policy papers does he say what the plan will cost. But his statements leave little doubt as to what he wants to do, and the Joint Committee on Taxation’s report on the McCain health plan clearly demonstrates the financial impact of his plan.
Equally notable, Douglas Holtz-Eakin, one of McCain’s key advisers agreed that his plan would increase the budget deficit, saying “It will make deficits expand up front, no question…” (Holtz goes on to say that helping corporations helps workers…)
McCain’s plan will cost more than either the Clinton or Obama plans. To figure out whether it will be worth it, we’ll have to consider whether the $2500/5000 credit will be enough to help folks actually buy insurance and reduce the number of uninsured.


Mar
6

McCain’s beltway blinders

I watched Sen. John Mccain’s victory speech Tuesday night, listening as he trudged thru assaults on his opposition’s likely positions on issues ranging from Iraq to taxes. He then made one of the least intelligent ad I’ll-founded claims I’ve heard in presidential politics; Mccain claimed the US has the best health system in the world.
You could chalk this amazingly wrong characterization as just another pander, more raw meat for the adoring audience in the hall.
Or you could see it as a verbal faux pas of dramatic prorportion. Most Americans’ view of our benighted health care ‘system’ is it OSS anything but the best in the world – when you spend twice as much as the average developed nation which ranks well below average in most indicators of quality, its hard to justify any level of approval.
Which is how the real audience- the one outside the hall- likely saw the Senator’s comment. If you are lying in bed trying to figure out how your company will be able to afford healthcare, or you are locked in a job due to a pre-existing condition or have to choose between heat or drugs or have a kid without insurance and a bad ear infection you’d just be incredulous.
How can anyone think McCain can fix a problem if he doesn’t even acknowledge its existence?