Wednesday, January 30, 2008

California Health Reform Effort Fails--What Does It Mean?

With news that a California State Senate committee rejected Governor Schwarzenegger's plan by a vote of 7-1, efforts to achieve health care reform this year have all but ended in our biggest state.

Governor Schwarzenegger and Assembly Speaker Nunez almost accomplished the impossible with a complexly balanced compromise that would have gone a long way toward solving that state's uninsured problem.

But the bottom line problem was cost. A late to the party cost estimate found that the bill would not have been self-supporting even with all of the new tax and revenue opportunities. Facing a $14 billion budget deficit in California, legislators ran, not walked, to the exits.

The Governor and Speaker say they aren't going to give up but in fact it is over.

If the bill had passed the state legislature, it would have meant a state-wide ballot measure in November and a major referendum on the kind of health care reform plan the Democratic nominee for President would have been pushing. That would have been a critical vote on health care reform for the whole country--and fun to watch.

But in the end, cost killed what was almost entirely an access proposal.

In my mind there are two messages here:
  1. Health care reform that focuses on cost and sidesteps dealing with fundamentally managing cost ultimately shows itself to be a non-starter.
  2. Only the federal government has the tools necessary to accomplish real reform--the tax code and the ability to manage costs.
Many will say that what has happened in Massachusetts will prove my conclusions wrong. I believe that what will happen in Massachusetts will prove those conclusions right.

Tuesday, January 29, 2008

What President Bush Said in His 2008 State Of The Union Address About Health Care

See the prior post reviewing his 2007 speech. You won't be able to tell the difference between this year and last.

President Bush's 2008 health care record will match his 2007 results--nothing was or will be accomplished.

It is not surprising that a President in his last year would not launch any new health care initiatives. He also barely mentioned the need to deal with our giant entitlement programs--including Medicare--in last night's State of the Union Address.

The President already has some big health care accomplishments to point to--albeit controversial ones. He dramatically expanded the old Medical Savings Accounts (MSAs) into today's Health Savings Accounts (HSAs), passed the Medicare Part D drug program that covers millions of seniors, and greatly expanded private Medicare plans.

And there are millions more uninsured than there were in January 2001. Health care costs have doubled since 2000. The President accomplished none of his proposals to deal with either in spite of having a Republican Congress for six of his years in office. Critics point to the Part D program adding $8 trillion to the long-term unfunded Medicare liability.

This year, the Congress still faces having to reauthorize the State Children's Health Insurance Program (SCHIP) before March 2009, when the current temporary extension expires, and again dealing with a broken Medicare physician fee system that will cut doc reimbursement by 10% this July and another 5% in January 2009. It is clear that this President is not going to engage in any serious way in working with the Congress to deal with these issues.

Democrats, and even some Republicans, would just as well put all the big decisions off until early 2009 when they hope a new Congress and a new President--Democrat or Republican--will be more interested in results.

Voters look for the next President and the next Congress to make a major effort to reform America's health care system.

Republicans may look back at those six years when they had the White House and both houses of Congress and wonder why they squandered an opportunity.

What President Bush Said in His 2007 State Of The Union Address About Health Care

Here is what President Bush had to say about health care in his January 2007 State of the Union Address:
A future of hope and opportunity requires that all our citizens have affordable and available health care. When it comes to health care, government has an obligation to care for the elderly, the disabled, and poor children. We will meet those responsibilities. For all other Americans, private health insurance is the best way to meet their needs. But many Americans cannot afford a health insurance policy.

Tonight, I propose two new initiatives to help more Americans afford their own insurance. First, I propose a standard tax deduction for health insurance that will be like the standard tax deduction for dependents. Families with health insurance will pay no income or payroll taxes on $15,000 of their income. Single Americans with health insurance will pay no income or payroll taxes on $7,500 of their income. With this reform, more than 100 million men, women, and children who are now covered by employer-provided insurance will benefit from lower tax bills.

At the same time, this reform will level the playing field for those who do not get health insurance through their job. For Americans who now purchase health insurance on their own, my proposal would mean a substantial tax savings — $4,500 for a family of four making $60,000 a year. And for the millions of other Americans who have no health insurance at all, this deduction would help put a basic private health insurance plan within their reach. Changing the tax code is a vital and necessary step to making health care affordable for more Americans.

My second proposal is to help the states that are coming up with innovative ways to cover the uninsured. States that make basic private health insurance available to all their citizens should receive federal funds to help them provide this coverage to the poor and the sick. I have asked the Secretary of health and Human Services to work with Congress to take existing federal funds and use them to create "Affordable Choices" grants. These grants would give our Nation's governors more money and more flexibility to get private health insurance to those most in need.

There are many other ways that Congress can help. We need to expand Health Savings Accounts — help small businesses through Association Health Plansreduce costs and medical errors with better information technology — encourage price transparency — and protect good doctors from junk lawsuits by passing medical liability reform. And in all we do, we must remember that the best health care decisions are made not by government and insurance companies, but by patients and their doctors.


The President accomplished none of his 2007 proposals in what turned out to be a very bitter and divided Congress.

However, the President's ideas to reform the tax code in order to help Americans pay for health care did find their way into a number of Republican presidential health care plans--albeit not always in exactly the same form.

The Democrats accomplished none of their 2007 health policy objectives as well. Democratic objectives included a $35 billion expansion of the State Children's Health Insurance Program (SCHIP), enabling the federal government to negotiate Medicare Part D drug prices, and cuts to Medicare HMOs in order the fix the 2008 10% Medicare physician fee cuts.

Monday, January 28, 2008

A Detailed Analysis of the Romney Health Care Reform Plan

A Detailed Analysis of the 2007 Romney Health Care Reform Plan

See an analysis of the 2012 Romney Health plan Here: A Detailed Analysis of Mitt Romney’s Health Care Reform Plan


This following is a repost from October 22, 2007.

Mitt Romney
puts his faith in a reinvigorated health care market—not unlike his Republican rivals. But Romney puts a bit of a different spin on that by focusing on giving states the incentives to craft the solution that works best for them.

The governor that signed the Massachusetts health reform law––that forms the basis of most Democratic presidential candidates health care plans including Clinton, Obama, and Edwards—distances himself from those policies. But he also he says he is “proud" of his role in that legislation.

Romney seems to rationalize being so closely involved in a plan that served as the example for Hillary Clinton’s health plan with his more recent “federalist” (states' rights) approach to health care by saying that the states should be encouraged and assisted in doing what works for them. So, if Massachusetts wants a Hillary Clinton-style plan, fine. If another state wants a more purely conservative approach that looks more like this Romney plan, that is fine too.

Frankly, I find his, “I’m OK if you’re OK,” position a little frustrating and said so in a recent post: Mitt Romney's Health Plan--A Foot in Each Canoe.

But, Romney is consistent with the Republican playbook on health reform by calling for a more robust private health insurance market, making changes to the tax treatment of insurance, and promoting state-based innovation.

Romney sees the federal government’s role as facilitating, not mandating, state reform so the states can be “laboratories of innovation.”

Let’s look at the four key elements of his plan as he has described them in the, “The Romney Vision”—a slide in a health care PowerPoint presentation on his website:

1. Make Health Insurance Affordable
  • State market reform
  • Full Tax deductibility
  • Medical liability reform
  • Technology and free market dynamics
He would make insurance affordable by giving the states incentives to deregulate their individual health insurance systems. He sees their many benefit mandates and regulations as adding too much wasted cost to the system.

He is right that many states have loaded up health insurance policies with benefit mandates. He needs to tell us which benefit mandates he considers frivolous and unnecessary in order to identify the potential savings. Would he have states cut requirements for regular mammograms from policies? Saying there are too many mandates is one thing but we should see the list of mandates he considers unnecessary.

It has been my experience that this is one that sounds good until you ask the politician to give you that list and then it shrinks considerably--as does the savings forecast.

The Kaiser Family Foundation summary of his proposal says that he has identified, "benefit mandates, guarantee issue, community rating, direct access to specialists and other features as over-regulation contributing to high cost insurance."

And what about medical underwriting rules, coverage of pre-existing conditions, and age rating? How would he expect the states to make the individual market more robust and cover everyone no matter their age or medical condition?

I have spent 35 years in the health insurance business and I am struggling to understand just how you throw the sick and the older to the market wolves and magically make the market more able to cover everyone? Given his "federalist" view, perhaps Romney expects the states to come up with innovative ways to cover the people the insurance underwriters don't want. But there is no free lunch--you end up with the old and the sick in a state pool and the young and healthy being insured by the private sector. How is that a better system?

It is ironic that on the one hand he says we need to give the states more flexibility toward making the health care system work but then says the states have gummed up the insurance system with too much regulation and the feds need to give them incentives to make it better.

He calls for “full tax deductibility” of health insurance rightly pointing out that individuals are at a disadvantage here. But just how would he get everyone covered with limited tax assistance? In Massachusetts, a family of three needs to be able to come up with $7,000 to $9,000 for a family health insurance policy—and that has a $2,000 per person deductible. If the family is in a 20% tax bracket, they still have to come up with the other 80%.

Governor Romney needs to be more specific on just how families earning more than the poverty level but less than a comfortable living, say between $25,000 a year and $75,000 a year, can afford the cost of health insurance, and if they are sick or older, how they can get a policy.

How many people earning even $75,000 a year have an extra $5,000, or more, in the budget for health insurance?

Republicans have been calling for medical liability reform (capping damages) since Lincoln was president with no success. As long as there are 60 Democrats in the Senate it won’t happen.

Governor Romney points to technology as a means to bring costs down—as do all of the other candidates, Republican and Democratic. But the market has been concentrating on this for years and only blunted health care costs. Just how will Romney force greater progress?


2. Provide Access to Quality Health Insurance for Every American
  • Affordable policies for middle-income Americans
  • Premium assistance to help low-income uninsured afford private health insurance.
Presumably, by reinvigorating the individual health insurance market he would make health insurance more affordable for middle-income Americans. Just as in the last section, he needs to tell us how he will do that. If he stripped every benefit mandate out of every state’s health insurance policies, he might decrease the cost 10% to 30%--but he would also strip out a lot of benefits. What does he anticipate the states will have to do here, will everyone, no matter their age or health, be covered for an affordable price?

Romney calls for premium assistance for those with a low-income. He expects the states to be more innovative in using block-grants of existing federal money (presumably SCHIP and Medicaid) to cover more people. He argues that there aren't 45 million uninsured but rather 12 to 19 million and that there is no need for more spending or taxes. But in his own state of Massachusetts, that has federal approval to use its federal money in more innovative ways, the system is coming up way short in being able to assist those doing better than the really poor but not well enough to be able to afford the cost of a policy--for example that family of three making $50,000 a year who is expected to pay all of the $7,000 to $9,000 for a policy with a $2,000 deductible.


3. Portability: End Risk of Losing Insurance
  • Develop and grow individual market
  • Premium assistance to help low-income uninsured afford private health insurance
Once again, just what changes is he suggesting for the individual health insurance market? The market is not currently able to cover all of the people that a Romney plan would send its way. Today, you have to pass medical underwriting, not have a serious pre-existing medical condition, and be subject to age-rating which makes policies relatively cheap for the young and expensive for the old.

If he expects states to dramatically cuts benefit mandates and turns the market loose, why won’t it gravitate in the direction that forced the creation of all of these state rules in the first place? On day one, there were no state regulators. They showed up when abuses began.

Presumably he expects the states to rejigger existing funds in innovative ways to come up with the money to be able to help low-income consumers buy health insurance. But, this is where Massachusetts is struggling today and California is bogged down in trying to figure out how to pay for a new health insurance bill. The experience in both of these states tells us that there simply isn’t enough money to create adequate subsidies from existing sources--state and federal.

In Massachusetts, the subsidies stop at 300% of poverty—just under $50,000 for a family of three. That family is expected to buy a policy that costs $7,000 to $9,000—with no support. With a Romney tax deduction, they might offset 20% of that cost. How does Governor Romney expect the states to be innovative in closing that gap? What does Romney expect other states do that he didn't do in Massachusetts?


4. Reduce Growth of U.S. Healthcare Spending
  • Full Tax Deductibility
  • State Insurance market reform
  • Medical liability reform
  • Everyone in the system
We keep seeing the same short list of policy bullets under each Romney heading; medical liability reform, state insurance market reform, and tax deductibility.

The same comments apply.

His final point is that he would have everyone in the system--but he wouldn’t spend more money believing there is enough already in the SCHIP and Medicaid program that could be more creatively spent.

He argues that by giving the states greater flexibility they will innovate--his "federalist approach to health care reform. But then he says the states have over-regulated the individual health insurance system and the feds need to straighten them out by giving states incentives to turn the carriers loose in a free market system.

Is this “a foot in each canoe” once again?

Additional post: Romney Says There Are Already "Pots of Money" in the States to Pay For Health Care Reform---Where?
Earlier post: Romney Wants to Reform State Health Insurance Regulation--Just What Does He Mean by That?

Saturday, January 26, 2008

The Lifetime Benefits Cap on Health Insurance Policies Often Needs Updating

In today's Washington Post, Chris Lee has a story about lifetime maximums in health insurance policies. Sometimes, these caps are as little as $1 million--particularly for individual health insurance polices.

As health care policy goes, this is not a widespread issue. The number of people who incur medical costs over $1 million or $2 million is quite small and most health insurance coverage is at much higher levels.

But with health care costs doubling since 2000, a few health insurers have increased prices but they have not necessarily increased their standard lifetime caps. That means more and more people with catastrophic costs find themselves under-insured.

Ironically, providing insurance for the big health care claims is often the easiest part of the health insurance business:
  • Catastrophic coverage is pure insurance--not just first dollar reimbursement.
  • Catastrophic reinsurance is readily available to health plans at a reasonable cost.
  • The industry does a very good job of managing the large and complex high cost claims.
It's time to review the lifetime caps with an eye toward keeping those up-to-date with the rising cost of health care.

That goes for employer sponsors and individuals as well as insurers.


I would recommend a cap of no less than $5 million.

Friday, January 25, 2008

"Strategies To Overcome and Prevent Obesity"--Important Policy Proposals

Taking the point in the effort to deal with obesity in America is the, "Strategies to Overcome and Prevent Obesity Alliannce." It is a broad-based coalition doing good works on this front.

They recently sent me the following update on their activities and links to their work:
As you know, America’s struggle with its weight is affecting much more than just the shape of the union…it’s actually affecting the state of the union. Whether it’s healthcare spending for weight-related health problems like diabetes, our economic productivity, or the readiness of our military, obesity is taking a drastic toll on the nation.

With this in mind, the Strategies to Overcome and Prevent (STOP) Obesity Alliance issued policy recommendations today to help bring new urgency to combating adult obesity. Designed through multi-organizational collaboration, the recommendations address four key areas where the public and private sectors can impact the nation’s battle of the bulge:
  • Redefining Success - There is no agreement between the medical, policy and research communities as to what constitutes successful weight loss. The Alliance recommends promoting the use of a sustained loss of five to 10 percent of current weight as a key measure to judge the effectiveness of weight-reduction interventions.
  • Encouraging Innovation and Best Practices in Obesity Treatment -- Some people do not get the same benefit from traditional nutrition and exercise programs as others. The Alliance encourages the creation and distribution of best practice models that combine multiple intervention approaches.
  • Addressing and Reducing Stigma as a Barrier to Obesity Treatment -- The Alliance recommends promoting programs that foster an open-discussion environment to collaborate, rather than isolate.
  • Broadening the Research Agenda -- Any chronic health condition requires a foundation of reliable information to create change. The Alliance recommends a broadened research agenda that examines all important contributors to the obesity epidemic and how they interact with each other.
Their full press release

Their policy recommendations

Friday, January 18, 2008

The 15% Medicare Doc Cut and Medicare Advantage Payments--The Battle Has Begun Again

Key players in the Congress are voicing some optimism that they can fix the 10% reduction in Medicare physician fees that will occur on July 1 and the further 5% reduction that is on track to follow on January 1, 2009.

It is not surprising that Democrats would be sounding optimistic this early in the new session, but what is interesting is that we are hearing some willingness to compromise on the part of Republicans.

Look for Senate Finance, the place any real deal would be done, to take the lead with a package worth $12 to $15 billion over five years that would take care of the docs for 18 months--until January 1, 2010.

Where would the money come from?

The target is still Medicare Advantage payments to HMOs.

But here is where it gets interesting. Key Republicans, while warning that any deep cuts to the private Medicare program are off the table, are saying they could go along with cuts to the hugely profitable Medicare Private Fee For Service (PFFS) portion of the program.

Since only a couple of the HMOs have made a big play in this controversial portion of the private Medicare business, most Medicare insurers would be happy to cut this part loose to save the core of the program.

It is early and members of Congress are always way too optimistic about what they can accomplish before the real work starts. But, these rumblings about Republicans willing to put the PFFS payments on the table is a bit of a surprise after all the acrimony that surrounded the budget last fall.

Wednesday, January 16, 2008

Four Big Trends Toward Better Health Care Cost and Quality

Brian Klepper joins us again today and calls attention to four key trends in the marketplace, all targeted on improving both the cost and quality of care.

Four Big Trends

by Brian Klepper

Several events and trends emerged over the last year that will reverberate throughout the health care marketplace in 2008 and going forward. While none of these dominated the trade press like some other issues--electronic and personal health records, RHIOs, the evolving labor shortage, pay-for-performance reimbursement--these manifestations of change are occurring in the marketplace as well as through policy, and are moving health care forward in fundamentally positive and far-reaching ways.

Health 2.0
The most significant, in terms of its capacity to change how health care works in the long-term, is the Health 2.0 movement, which Matthew Holt and Indu Sabaiya have played a central role in facilitating and explaining. In some ways, Health 2.0 is simply a continuation of what has come before: companies creating new value through information and connecting with customers over the Web. Health 2.0 takes this approach into every area of health care data, often driven by companies outside of or at the margins of health care, who have no financial stake in perpetuating inappropriateness and waste, and who see an opportunity to make money by rationalizing the system.

We've already seen big, established IT companies like Microsoft and Google announce some forays into this space, as well as a slew of startups, most of whom have staked out interesting niches. But there are other players who haven't made themselves known yet: health IT companies who are positioned to aggregate data and feed it back to their clients; companies who already have established health care data streams and have large repositories; analytics firms; organizations from financial services and other areas that see an opportunity to leverage their own data strengths and expand into health care; and established health care organizations that, as the competitive market intensifies in health care, will use their strength to enter the data space and use it to advantage.

In the process, the health care data will move beyond simple transparency--public availability of pricing and performance information, which is often inscrutable for many groups, especially consumers, and difficult to make sense of. The creation of easy-to-use data-driven decision assistance tools that can help consumers, clinicians, designers and purchasers of all kinds will change everything.

My bet is that business and the health care sector, more than consumers, will first fully take advantage of the offerings that will gradually come online, and use this new information to make better clinical decisions, better purchasing decisions and to understand their own performance relative to the market. Ultimately, as payment is tied to results, this information will constitute incentives for performance and disincentives for waste.

Consumer Checkbook v HHS
Last August 22, the consumer advocacy organization Consumers' Checkbook won a Freedom of Information lawsuit against the US Department of Health and Human Services, which demanded that CMS be required to release Medicare physician data for 4 states and DC. Interestingly, HHS had argued that physicians are entitled to a right of privacy, a particularly curious position, given the generally progressive stance on health care pricing/performance transparency that CMS has taken under this Administration's tenure and keeping in mind the fact that physicians paid by Medicare are vendors taking public dollars. On October 19th, HHS filed an appeal, indicating that they would fight to keep the data secret. The case is still unresolved. Even so, Checkbook has filed suit for the release of Medicare physician data in all other states.

As I noted in writing about this previously, the AMA's fingerprints seemed to be all over this, but I had no direct knowledge that this was so. Then, a December 10th American Medical News article reported, "The Association is pleased that HHS is taking its advice, said AMA Board of Trustees Chair Edward L. Langston, MD." I'll bet they are.

The Checkbook case is a watershed moment in physician transparency. Until now, despite all the calls from supposed "market-advocates" for informed consumerism in health care, the public has had no way to really tell how a doctor compares to his/her peers in terms of resource consumption or results. If the data were released so it could be evaluated, that information could become available and one important part of health care could begin to work like a competitive market. Whatever the outcome of this case, kudos to Consumers' Checkbook for taking the initiative and, in the process, betraying the lie of those who call for consumerism but want to hold back the information that are necessary to make markets work, all so they protect their advantages.

Stopping the Payments for Hospitals' Mistakes
August must have been a big month, because that was also when CMS threw down the gauntlet and announced that, starting October 1, 2008, it would no longer pay for preventable errors. Until this change, hospitals were paid for the mistake and for the care of rectifying it, a no-lose proposition.

As Medicare goes, so goes the commercial payers, so this is momentous. Come October, hospitals will be on the financial hook for making sure they get it right the first time, a significant change from the past and potentially damaging when they fail, especially for organizations that have had average margins nationally of only five percent.

In a sense, this event is less important than the important quality and safety work underway at health systems around the country. (For a wonderful 5 minute articulation of the value of these efforts, see this short interview with Gary Kaplan MD, the CEO of Seattle's Virginia Mason Health System, recorded in April 2007.) But for those who are not yet focused on getting quality under control, CMS' action constitutes a major incentive.

Moving Toward A National Center for Comparative Effectiveness and National EBM Guidelines
American medicine is gradually, grudgingly acknowledging that using evidence to identify best practice, and then applying that best practice, typically results in improved outcomes and reductions in variation. The refinement process is unending, of course, and the number of different clinical approaches that must be evaluated is vast.

In November 2006, economist and former HCFA Administrator Gail Wilensky published a Health Affairs paper that described the background and laid out the arguments for the establishment of a national agency that would sift available data to support better clinical decision-making. Another long-overdue idea that has private sector precedents in efforts like the Blue Cross and Blue Shield Association's Technology Evaluation Center (TEC), the concept of a national Comparative Effectiveness Center is beginning to finally get traction.

In September, when Senator Clinton released her proposed health plan, a Comparative Effectiveness Center was featured prominently as a key element of required change. And more recently, in December, the Congressional Budget Office published a paper called "Research on the Comparative Effectiveness of Medical Treatments," that argues for the value of a governmental role in identifying best practice, the need for tying identified best practice to financial incentives in the marketplace, and the difficulties of creating these changes in a policy environment so highly susceptible to private interest influence.

The Long View
One of the most difficult of life's realities is the time required to effect desperately needed change. Each of the trends I've described above will take years to get traction and actually change the ways that care manifests, but they're moving us in the right direction. Equally important, change is spreading to more areas and accelerating in health care, partially in response to the increasing pressure, but also simply because technology continues to enable approaches that the marketplace can leverage. To those of us consigned to take the long view, this is great news and important perspective while we're also focused on health care's persistent, moment-to-moment problems.

Tuesday, January 15, 2008

An Analysis of Senator Hillary Clinton's Health Plan Proposal

A Detailed Point by Point Analysis of Senator Clinton's Health Reform Plan

This is a repost of my October analysis of Senator Clinton's health care reform plan.

This is nothing like the Clinton Health Plan from 1993.

Senator Clinton has so far been running a smart campaign for President and her health care reform strategy is no exception.

She waited until after all of the leading Democratic, and most Republican, candidates had announced their plans and then stuck her plan right in the ideological middle of where her Democratic opponents put theirs. It also looks a great deal like a bipartisan plan enacted in Massachusetts and a bipartisan compromise in the works in California. So on the day it was released, it was correctly identified as being relatively “centrist.”

Predictably, Republicans tried to wrap 1993 and her failed health care reform effort around her new offering. But their attempts to resurrect memories of her catastrophic policy failure fell flat more often than not.

Former Massachusetts Governor Mitt Romney is a case in point. Before the day was up, Romney was on camera calling her new health plan, “Hillary Care.” But Senator Clinton’s plan is a virtual clone of the new Massachusetts health care law then Governor Romney signed and that he continues to say he is “proud of.”

So, Mrs. Clinton is out with a plan that looks very much like the new reform effort a leading Republican candidate signed into law.

Not something that would have occurred in 1993.

Reaction in the business community was also encouraging for Senator Clinton. The National Federation of Independent Businesses (NFIB) was an organization that had an outsized impact on defeating the 1993 effort because of the small business mandate that plan included.

Mrs. Clinton learned from that lesson—this time not including a small business mandate to buy insurance for their employees but including a very generous tax credit for those who do. As a result, an NFIB spokesman responded to the new Clinton plan release about as enthusiastically as the Clinton camp could have hoped for, “One of the standout features of this is it specifically looks to help small business owners, and that’s a good thing.” Now that’s a 360-degree turnaround from the group whose grass roots lobbying against the 1993 Clinton Health Plan was nothing less than devastating.

Even the health insurance industry trade association responsible for those famous “Harry and Louise” ads, also seen as key to defeating the 1993 plan, was cautiously supportive. The AHIP CEO said, “The new Clinton plan includes important ideas to make coverage more affordable.” But there was also a reference to all the very anti-insurance company rhetoric we have been hearing from Senator Clinton recently, “unfortunately some of the divisive rhetoric seems reminiscent of 1993.”

Many worry that this is just the old Clinton Health Plan and the old Hillary Clinton in election-year “sheep’s clothing.” There is some reason to worry about that.

In 1992, Bill Clinton’s campaign health plan drew from the pro-market “Managed Competition” proposals that mixed government incentives with free market health care that built on the private insurance markets.

But within days of taking office, President Bill Clinton announced that Hillary Clinton would chair a health care task force that ended up crafting a 1,400 page plan developed in secret that looked nothing like his campaign platform.

This one-and-a-half page Clinton Health Plan is clearly nothing more than a campaign-year outline of principles. By itself, that is generally what campaign-year policy proposals are.

Any piece of legislation reflecting this outline would run into the hundreds of pages—so there are lots of details left to be filled in.

On the one hand, that gives a new Clinton Administration lots of opportunity for mischief.

However, one of the very big lessons an inexperienced Mrs. Clinton came away with from 1993 was that you couldn’t craft a comprehensive piece of legislation at the White House and simply deliver it to the Congress.

Every successful President has learned that the best way to do policy is to stand for a clear set of principles, use the “bully pulpit” of the presidency to create the political imperative for action, and then stand back and let the Congress do the details of crafting the legislation.

Mrs. Clinton is not running for emperor. She won’t be the one doing the details in any successful health care reform effort—it will be the Congress with all of its checks and balances and special interest influence. It will be the “sausage factory,” not the White House that will fill in all the blanks.

But Mrs. Clinton has proposed an outline for reform that has a great deal of centrist support in the country.

While the Republican candidates for president have a different approach—one that builds on a more vibrant health care and health insurance market—that philosophy’s time seems to have passed. President Bush had six years with a Republican Congress. While he scored impressive private market victories with the Medicare Modernization Act of 2003—which created Part D and Medicare Advantage—as well as health savings account legislation (HSAs), that purely private market approach now appears to have given way to the approach that was enacted in Massachusetts and a number of states are now considering—not the least of which is California.

If a Republican is elected president next year, he will likely face a Congress more interested in the approach Senator Clinton favors than expanding HSAs further.

Only if Republicans regain both the White House and the Congress will the market-based approach most Republicans favor have a chance of going any further. It doesn’t look like a Republican sweep is in the offing.

Let’s take a closer look at Senator’s Clinton’s $110 billion health care plan (her estimate) using her campaign’s outline—keeping in mind that the details of any final bill would eventually be filled in more by Congress than the White House:

1. Offer New Coverage Choices for the Insured and Uninsured: The American Health Choices Plan gives Americans the choice to preserve their existing coverage, while offering new choices to those with insurance, to the 47 million people in the United States without insurance, and the tens of millions more at risk of losing coverage.
  • The Same Choice of Health Plan Options that Members of Congress Receive: Americans can keep their existing coverage or access the same menu of quality private insurance options that their Members of Congress receive through a new Health Choices Menu, established without any new bureaucracy as part of the Federal Employee Health Benefit Program (FEHBP). In addition to the broad array of private options that Americans can choose from, they will be offered the choice of a public plan option similar to Medicare.
  • A Guarantee of Quality Coverage: The new array of choices offered in the Menu will provide benefits at least as good as the typical plan offered to Members of Congress, which includes mental health parity and usually dental coverage.
This is the “something for everybody” section.

Her plan would put the federal government in the health plan marketing business by creating a new version of the FEHBP menu of options that would be available in the private market. This would also be very similar to the Massachusetts “Connector” that takes bids from health plans that must qualify with the regulator and offer minimum benefits.

It is also clear that she would set a comprehensive minimum benefit threshold in the FEHBP-like program equal to the level of benefits offered in the existing FEHBP program—that does include an HSA program.

While it appears that the individual market would continue, and people who have individual coverage could keep it, this would put the FEHBP-like program in direct competition with that market segment. It would appear that consumers could continue to purchase limited or high deductible plans on their own in the individual market. However, she is also proposing an individual mandate, which will have to set a minimum benefit level. In Massachusetts that provision disqualified 150,000 existing policies—many because of high deductibles.

This provision vaguely resembles the Health Insurance Purchasing Cooperative (HIPCs) of the 1993 plan where Mrs. Clinton called for far reaching regulation over how health plans were sold, how they were priced, and what they looked like. She has carefully steered clear of so far reaching a proposal this time and it is doubtful that the Congress would make this version anything close to that failed model.

Mrs. Clinton would also put the federal government in direct competition with private health insurance industry by creating a Medicare-like government-run plan.

This provision gives all sides in the debate something. The single-payer advocates get a Medicare-like plan in direct competition with the private market and a chance to push the private plans out of existence. Those that favor a vibrant private market full of choices arguably get that.

Just where the balance is ultimately struck between government-run health insurance and free market health insurance, depends heavily on the details. For example, would the government plan have the power to unilaterally set provider prices—including drugs?

As long as it’s a fair competition, neither side should have anything to complain about—but then gaining an advantage for their clients is what lobbyists do for a living.

If nothing else, there would be a direct competition between a Medicare-like plan and the private market. So long as that turned out to be a fair head-to-head competition it would tell us a lot about which is the best track to follow and one, public or private, might eventually come to dominate the other.

2. Lower Premiums and Increase Security: Americans who are satisfied with the coverage they have today can keep it, while benefiting from lower premiums and higher quality.
  • Reducing Costs: By removing hidden taxes, stressing prevention and a focus on efficiency and modernization, the plan will improve quality and lower costs.
  • Strengthening Security: The plan ensures that job loss or family illnesses will never lead to a loss of coverage or exorbitant costs.
  • End to Unfair Health Insurance Discrimination: By creating a level-playing field of insurance rules across states and markets, the plan ensures that no American is denied coverage, refused renewal, unfairly priced out of the market, or forced to pay excessive insurance company premiums.
Presumably the “hidden taxes” are the administration costs she would hope to cut by simplifying the sale and underwriting of health insurance as well as moving the system toward a greater use of information technology—including a patient medical record and investing in disease prevention. While it is likely these steps can save money, the market has been moving to improve health information technology for years and has found that process slow going and very expensive in the short term. The market has also invested heavily in wellness and disease management programs over the past 20 years with only modest success toward controlling healthcare costs.

By mandating that all Americans have coverage, Mrs. Clinton hopes to have virtually everyone in the insurance pool. By doing that, she would eliminate the need to have the barriers to coverage that currently exist to protect the insurer against anti-selection and those now uninsured would get the treatments and preventive services that are necessary to keep costs down over the long run.

But this is also the place reality may have to confront hope.

We cannot have everyone in the pool if it is not affordable upfront for people to buy in.

Massachusetts started out with an individual mandate but quickly backed off on it when it was clear the program could not provide affordable coverage for everyone—particularly those who make too much money to qualify for a subsidy (or an adequate subsidy) and too little to afford family health insurance costs that still run in the $7,000 to $9,000 range for a family policy with a $2,000 deductible.

It all comes apart if the subsidies are not adequate to make it affordable for people to buy coverage. How do you mandate a family to do something they just don’t have the money for?

She did not address the status that illegal aliens would have in her system—a highly contentious issue.

3. Promote Shared Responsibility: Relying on consumers or the government alone to fix the system has unintended consequences, like scaled-back coverage or limited choices. This plan ensures that all who benefit from the system share in the responsibility to fix its shortcomings.
  • Insurance and Drug Companies: insurance companies will end discrimination based on pre-existing conditions or expectations of illness and ensure high value for every premium dollar; while drug companies will offer fair prices and accurate information.
  • Individuals: will be responsible for getting and keeping insurance in a system where insurance is affordable and accessible.
  • Providers: will work collaboratively with patients and businesses to deliver high-quality, affordable care.
  • Employers: will help finance the system; large employers will be expected to provide health insurance or contribute to the cost of coverage; small businesses will receive a tax credit to continue or begin to offer coverage.
  • Government: will ensure that health insurance is always affordable and never a crushing burden on any family and will implement reforms to improve quality and lower cost.
This section is probably the lynchpin in her plan’s ability to succeed.

Insurance companies will gladly drop all of the front-end underwriting activity in exchange for a guarantee that everyone will be in the pool. This makes one wonder why Senator Clinton feels the need to continue demonizing the insurance industry. Her plan gives the private health insurers the potential to sign-up 47 million more customers in a market where they can’t be selected against.

Her comments about the pharmaceutical industry need a lot of clarification. Just what does she mean by “fair prices.” She has previously come out in favor of the federal government directly negotiating Medicare Part D drug prices and drug “reimportation.”

Her statement that individuals will have to buy health insurance because her plan will have made it affordable is probably the biggest challenge. How will she be able to mandate affordable health insurance costs when the average cost of employer-sponsored family coverage is already up to $12,000 per year? Aligning adequate subsidies with the mandate to buy coverage is the big one. If the plan fails to do that, we will still have plenty of uninsured, continued cost shifting, and presumably people who can’t get coverage when they get sick because they didn’t buy when it was first available to them.

This one takes the prize for the most na├»ve line in the plan: “Providers: will work collaboratively with patients and businesses to deliver high-quality, affordable care.” Oh really? Just what makes her think the biggest challenge in the health care system, aligning provider and payer interests, is suddenly going to be a snap?

The employer mandate has been much more carefully crafted this time. It is not clear where the small employer versus large employer break comes but comments from her campaign indicate that it is at 25 employees. So, all employers with, presumably, more than 25 employees will have to “play or pay.”

We also don’t yet know what businesses that don’t provide coverage will have to pay. In the California plan just passed by their legislature, those employers who do not provide coverage would be required to pay a 7.5% payroll tax.

While most large employers already offer coverage and will welcome other employers having to pay their share of these costs, setting the cut-off line at 25 employees may still be problematic for many small companies that have more that 25 workers.

But, by exempting small employers, she has effectively neutralized the small business lobby that had such a major role in killing her plan last time. The subsidies she would also offer these small employers have also helped with that special interest group. However, there is no information on just how helpful these subsidies would be. But give Mrs. Clinton credit for recognizing that small employers, a powerful engine in economic growth, can’t be mandated to pay these costs.

Her line, government “will ensure that health insurance is always affordable” may be more hope than anything.

I would label her plan access heavy and light on cost containment. To contain costs, she would focus on prevention, health information technology, care for the chronically ill, ending the cost shift from the uninsured, saving on insurance administrative costs by improving marketing and cutting underwriting expenses, creating a “best practices institute” to reduce wasteful medical spending, and implementing “common sense” (read that trial bar friendly) medical malpractice reform.

These high-level cost containment proposals are all good ideas. But almost all of them have been underway in the health insurance markets for two decades now and they have not more than blunted health insurance costs that have grown at three to four times the country’s economic growth over the last 20 years.

The biggest issue this plan faces is creating affordable health insurance/affordable care. Without that, we will just have the problems that Massachusetts is facing today as it falls far short of universal access.

How do you enforce a mandate if comprehensive family health insurance costs $12,000 a year? If you think that number is too high for a reformed system, just take a look at Massachusetts or current FEHBP coverage. You can’t mandate comprehensive coverage along the lines of the FEHBP plan and expect that the costs are going to be anything less than what the typical FEHBP plan offering costs today--an FEHBP that already have guaranteed insurability and the more efficient distribution model Mrs. Clinton is proposing.

But then maybe Mrs. Clinton already knows that. I have long believed that fundamental American health care reform will come in two parts. Access first, then when everyone is in an unsustainable and unaffordable system, it will create the political imperative for real cost control in a second phase a few years down the line.

4. Ensure Affordable Health Coverage for All: Senator Clinton’s plan will:
  • Provide Tax Relief to Ensure Affordability: Working families will receive a refundable tax credit to help them afford high-quality health coverage.
  • Limit Premium Payments to a Percentage of Income: The refundable tax credit will be designed to prevent premiums from exceeding a percentage of family income, while maintaining consumer price consciousness in choosing health plans.
  • Create a New Small Business Tax Credit: To make it easier—not harder—for small businesses to create new jobs with health coverage, a new health care tax credit for small businesses will provide an incentive for job-based coverage.
  • Strengthen Medicaid and SCHIP: The Plan will fix the holes in the safety net to ensure that the most vulnerable populations receive affordable, quality care.
  • Launch a Retiree Health Legacy Initiative: A new tax credit for qualifying private and public retiree health plans will offset a significant portion of catastrophic expenditures, so long as savings are dedicated to workers and competitiveness.
Senator Clinton defines affordability in political terms—the upfront cost of the insurance plan to the voter. Real affordability is the underlying cost of any insurance plan, of health care generally, and her cost containment strategy falls well short on what it will take to accomplish that.

In her plan with something for everyone, she picks up on the idea of creating a refundable tax credit, popular among Republicans, to make it possible for families to be able to afford health insurance. Here again, the "devil is in the details." As we are seeing in Massachusetts, the subsides are nowhere near good enough for those between 200% of the poverty level and those rich enough to pay the prices.

She also makes Republicans happy with her line, “while maintaining consumer price consciousness” when a health plan is chosen. While vague, this is a concession to those favoring a defined contribution approach to personal responsibility.

With health care costs growing at two to three times the growth in our economy, and likely to continue to grow at close to those levels given her light approach to cost containment, how long will it be before health insurance costs outstrip any subsidy program?

Her scheme to subsidize health insurance costs (limiting premiums as a percentage of income) is a great way to assure consumers that they will have affordability. The bigger question is just how much money will she need on day one to do that and how will she be able to sustain that strategy with such a light cost containment program?

Her “Retiree Health Legacy” proposal will come as welcome news to America’s legacy industries, and state and local governments, that cannot afford to keep their retiree health promises. Labor unions will love the requirement that any benefit from government help has to find its way to workers. This proposal recognizes the enormous cost to bail out the unfunded retiree health care liability that is crippling American industry in global markets. But again, there is no “free lunch” here. To make any bailout affordable, even the federal government can’t continue to subsidize these incredibly rich benefits at current levels. That Mrs. Clinton does not deal with.

5. A Fiscally Responsible Plan that Honors our Priorities:
  • Most Savings Come Through Lowering Spending Due to Quality and Modernization: Over half the savings come from the public savings generated from Hillary Clinton’s broader agenda to modernize the health systems and reduce wasteful health spending.
  • A Net Tax Cut for American Taxpayers: The plan offers tens of millions of Americans a new tax credit to make premiums affordable—which more than offsets the increased revenues from the Plan’s provisions to limit the employer tax exclusion for healthcare and discontinue portions of the Bush tax cuts for those making over $250,000. Thus, the plan provides a net tax cut for American taxpayers.
  • Making the Employer Tax Exclusion for Healthcare Fairer: The plan protects the current exclusion from taxes of employer-provided health premiums, but limits the exclusion for the high-end portion of very generous plans for those making over $250,000.
“Most savings come through lowering spending due to quality and modernization.” That is her most dangerous assumption.

This is a political proposal after all. And like any good political proposal, it is careful not to “gore” any political “oxen.” Her cost containment program is cost containment light because she fears alienating any key stakeholders—like the providers. You can’t lower, or even stabilize costs, without key players getting less than they would have had.

But real cost control might doom her plan. That’s why I continue to believe any successful health reform plan will come in those two parts: Access first, and when the new access skyrockets costs even further, cost containment next.

Her promise for fundamental reform without pain continues in her assertion that only the rich are going to have to pay for this. Dream on.

Finally, she picks up on another Republican idea (choice, consumerism, tax credits being others) to limit the employer tax exclusion on health insurance costs but she only applies it to those who make more than $250,000 a year. By doing so, she is giving a nod to conservatives who argue that the present system of tax exclusions on health insurance have encouraged health plans to provide rich benefits that have contributed to high health care inflation.

But by changing the exclusion only for the those making more than $250,000 a year, she has bowed to labor pressure not to break the employer/employee compact on health care benefits for everyone else.

Good Politics and Centrist Health Care Policy
The other day I referred to Mrs. Clinton’s new health plan as centrist. A long-time Hillary Clinton critic was indignant that I would label Mrs. Clinton a centrist.

I pointed out that I wasn’t referring to Mrs. Clinton generally—I was referring to her health plan. I’ll leave the rest of that to your judgment.

The center in American health care politics has moved since 1993. With average costs up to $12,000 a year for an employer family plan, people are really worried not just about access but also about health care costs. They see the system as close to crashing and they’re worried.

Centrist voters will generally find this proposal as reasonable.

Those on the right of center will continue to see it as just more government intervention in health care—“Hillary Care.”

Those on the left will say she caved-in to special interests giving stakeholders like the health insurance industry too much--which may explain her anti-insurance rhetoric, that is so much worse than her policy proposal, as a way of deflecting that criticism.

American elections are won in the middle. She wasn’t ever going to get those on the right to vote for her. Who else will those on the left have to vote for?

The polls universally tell us that health care is the top domestic issue.

Politically, if she wanted to come out solidly where the middle is today on a critical issue, tackling what is possible, it looks like she got it about right.

But, this is a political proposal. As policy, it is a page-and-a-half that creates more questions then it answers.

For the Republicans to take the high ground here, they are going to need to do more then walk into a room and yell, “Hillary Care”––expecting that everyone is going to run from the room in terror.

Whatever she may be thinking deep down in her psyche, she is clearly not acting like the Hillary Clinton of 1993.

Must be driving her enemies nuts.

Related posts:

Hillary Clinton Criticizes Barack Obama's Health Care Plan Saying It Would Not Cover Everyone--Is She Right?

A Detailed Analysis of Barack Obama's Health Care Reform Plan

An Analysis of Senator John McCain's Health Care Reform Plan

Thursday, January 10, 2008

"Health Wonk Review" Here At Health Policy and Marketplace Review

This week it's my turn to host Health Wonk Review. HWR is designed to highlight some of the best posts in the health blog world.

What I found remarkable this time was the sheer number of thoughtful submissions. The number and quality of health care blogs continues to grow.

It's a long, but terrific, list so I'll try to make it easy reading:

Brian Kleppper, posting over at "Health Commentary" gives us his take on the importance of California health reform and his worry that it will end up being more about taking care of the special interests than the strong medicine our system really needs. You know, I think Brian is just another one of those independently wealthy health care consultants who likes to cause trouble.

Speaking of independently wealthy health care consultants who cause lots of trouble, Joe Paduda, over at Managed Care Matters, gives us his take on John McCain's health plan now that the Senator is back in the game. You can also access my detailed analysis of McCain's plan on this site.

Jason Shafrin probably isn't the wealthiest health care blogger, but this kid may be the smartest. This time Jason gives us his take on the Democratic candidates' health care plans in an easy reading detailed analysis on, "Healthcare Economist." Wonder where Jason will be in thirty years?

Anthony Wright, with "Health Access California," points to a recent New York Times chart comparing the various presidential candidate's positions on health care but also gives us his sense about where the differences are. By the way, if you are following California reform, you need to keep an eye on this site.

I don't know how wealthy he is, but I do know Chris Fleming posts on a heck of a content rich site--"Health Affairs." This time Chris comments on the latest federal data from CMS on health care spending. Merrill Goozner also gives us his take on the report over at, "GoozNews."

Roy Poses on, "Health Care Renewal," a must on your health blog bookmark list, this time tells us about the CFO that put greed in front of good judgment in health care and the predicable result.

I found Bob Vineyard's piece, on the recent death of the young girl who was denied a liver transplant, on the always worthwhile, "InsureBlog," to be a particularly compelling one this time.

Maggie Mahar also gives us a most thoughtful perspective on this recent controversy over cost and end-of-life care in her post, "Bad Cases Make Bad Law," on her blog, "Health Beat."

Lisa Emrich, my favorite health care musician, has a a post this time on a recent study and the controversy over the value of free drug samples and compares and contrasts the pharmaceutical industry's statement with her take on it.

But David Williams sees it an a very different way with his post, "Drug Samples Not Going To The Poor. So What?," on "Health Business Blog."

From one of the best business insurance sites, Julie Ferguson recaps the top insurance news from 2007 at "Workers' Comp Insider." Julie also recommends a post by John Coppelman about a neurosurgeon awaiting sentencing in a kickback scheme over surgical implants.

Louise from, "Colorado Insurance Shopper," gives us her take on the recent California health insurance policy rescission controversy. Louse just reminds us that the people who work in the market every day often have a lot more common sense than those in the corporate suite who think the way to deal with their customers is through the legal department.

Over at "Wealth Builder," "Super Saver" gives us some outside the box thinking about how to require that people buy health insurance in quite an unconventional way.

David Harlow does his usually great job of keeping us up-to-date on health law at "HealthBlawg," this time with his post, "ERISA Pre-Emption Ruling Bites San Fran Health Care Coverage Mandate."

Daniel Goldberg, at "Medical Humanities Blog," discusses a recent study that demonstrates a link between having insurance and good treatment but still leaves him thinking there may be a more powerful argument in favor of universal care on ethical, compared to, policy grounds.

Adam Fein at, "Drug Channels" looks at December's unexpected injunction against CMS in, "No AMP for You!" The injunction stems from a lawsuit brought against CMS by two retail pharmacy trade associations to stop the use of Average Manufacturer Price (AMP) data to set reimbursement limits for Medicaid prescription drugs. Adam highlights the effect on payers, manufacturers, and pharmacies in one of the only blog posts on this important but little-understood topic. I just cut and pasted Adam's description because this issue is so complicated I can't even describe it. Adam is one heck of a resource for the rest of us on the nits of drug pricing.

Neil Versel posts about two separate federal health IT initiatives and offers some commentary about the chance of meaningful Medicare reform in 2008 on his blog, "Health Care IT Blog."

Monday, January 7, 2008

Can You Really Mandate People To Buy Health Insurance?

That's not so much a policy question as a practical question and it is what Hillary Clinton seems to be saying is the big difference between her health care reform plan and the health reform plan of Barack Obama.

That's why a news story this week out of Massachusetts caught my eye.

It seems that the Mass Department of Revenue is in the process of drafting new regulations to up the penalty for people who do not buy health insurance. If they are approved, the maximum penalty for those who do not buy health insurance would jump from $219 per year to a maximum of $912 in 2008. The penalty is estimated to be half the per person cost of the lowest priced health plan available.

Penalties would vary by age and the time a person was without health insurance. A 26 year-old would have a penalty of $672 per year and those over 26 would pay $912. So, a family of two adults over 26 would pay about $1,800 in penalties if they didn't buy health insurance (a reader has correctly pointed out children are not covered by the mandate).

The state health plan administrator--The Connector--has said that about 290,000 of the states 400,000, that were believed to be uninsured when the program was launched, have purchased coverage. But most of these people are those that get either all or most of their premiums paid by the state. Among those who get no subsidy, relatively few have chosen to buy insurance likely because they cannot afford the thousands of dollars in premiums for the minimum policy with a $2,000 deductible.

At a practical level, we are talking about middle class families being required to buy a health insurance policy costing $6,000 to $9,000 a year (with a $2,000 deductible) or having to pay a $1,800+ penalty.

The Connector has already exempted thousands of residents from the mandate because there was no way they could buy the coverage.

It is notable that the senior Medicare Part D drug benefit is voluntary but the vast majority of seniors have purchased it. Why? Because the government pays 75% of the costs and it is affordable. The Part D experience shows that if insurance coverage is affordable people will buy it.

The Massachusetts experience tells us if it is not affordable, people will not--or maybe more appropriately cannot--buy health insurance.

It's one thing to mandate health insurance coverage, but as we are learning in Massachusetts, the real challenge is making it affordable.

On the issue of health insurance mandates, Barack Obama, and the Republican candidates, are right.

Earlier posts: Hillary Clinton Criticizes Barack Obama's Health Care Plan Saying It Would Not Cover Everyone--Is She Right?

California Health Care Reform—An Individual Mandate is Nowhere Near as Important as Affordable Health Insurance
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