Friday, September 28, 2007

The GM-UAW Deal--If UAW Workers Can No Longer Count on Employer-Provided Health Care Then Neither Can Harry and Louise

I'm not the first one to suggest the GM-UAW deal to set up a VEBA is a watershed event. Most observers are focusing on the trend it will accelerate in the employee benefits market--and it will.

I will suggest another dramatic impact that it will have--on voters.

The polls already tell us that health care is by far the top domestic policy issue and second overall only to Iraq.

This deal is also going to make voters even more concerned about health care. The middle-class gets its terrific health care benefits at work. The UAW led that trend decades ago.

Now, the UAW is admitting that it cannot count on its employers to any longer provide these benefits.

The more important message: If UAW workers can't count on their employer for good health insurance benefits then neither can Harry and Louise.

This is one more important step on the journey of centrist voters in the U.S. toward a consensus that it is time for fundamental health care reform.

The Republican presidential candidates, that are not so far taking the health care issue seriously, had better pay attention.

If the $35 Billion Expansion of SCHIP is About Moving to Government-Run Health Care Why Does the Insurance Industry Support It?

Both the House and Senate have now passed the $35 billion expansion of SCHIP. The House by 265-159 and the Senate by a vote of 67-29. The Senate bill got exactly the two-thirds it needs to override the expected Bush veto and the House fell 25 votes short of the 290 it will need.

Opponents of the bipartisan compromise to renew and expand the State Children's Health Insurance Program primarily argued that this expansion was really about a big step toward government-run health care.

But the whole of the insurance industry supports it--both America's Health Insurance Plans and the Blue Cross Association.

Opponents have said that the program has grown well beyond its original intent to cover only children below 200% of poverty. That is correct. But SCHIP is a block grant program. The feds give the states a chunk of money and then give them a great deal of flexibility in how they use it. In fact, the Bush administration has approved many of these exceptions. While New Jersey has really pushed things by covering kids in homes up to $80,000 (four times the poverty level) that is an aberration. In fact, the bipartisan bill reduces federal funding for states that enroll children above 300% of poverty, prohibits the feds from approving any more states from covering parents, and phases-out state coverage of childless adults--pretty much all of the things opponents are complaining about.

Opponents also argue that we still haven't covered all of those below 200% of poverty and therefore shouldn't be covering anyone above that level. But, the bipartisan bill calls for states not meeting enrollment goals to begin losing money for those covered above 300% of poverty by 2010.

Block grants are a Republican idea. When the Bush administration tried to reform Medicaid a few years ago by employing block grants they thought it was a good idea and a lot of Democrats didn't like it.

Block grants are a way to give states a lump of money and encouragement to find the most imaginative way to use the money.

But here is George Bush now telling all of these states--most of which his administration gave the go-ahead to--that he's from Washington and he knows better!

Yes, it will cost another $35 billion--the President favors $5 billion more. But he had no trouble finding almost $200 billion this week to fund the war.

Critics argue that the 61 cent tax on tobacco can't be trusted to fund the program because it will lead to a reduction in smoking and revenue falling short of projections. Now there's a problem--the tax results in a reduction in smoking. They argue that it is an unfair tax on the poor. Well it's a tax on behavior that costs the rest of us tons of money when they become uncompensated care or fall back on Medicaid. Looks to me like if there ever was a fair tax on the poor this is it.

SCHIP is not perfect and New Jersey is an example of a state that has gone well beyond the original intention--although they might tell us they have made the money go further than anyone else.

But in this frustrating area of health care it is also an example of:
  • Something that has worked for 6 million kids.
  • Doing what all of those Republican presidential candidates support--giving states more flexibility to find local solutions that are not "one size fits all health care."
  • A bipartisan deal when Democrats and Republicans don't otherwise seem to agree on anything.
The White House says this is about drawing a line in the sand over the expansion of government health care and a chance to take a different direction by passing the President's proposals to use the tax code to enable the near poor to buy their own coverage in the private market. But the fact is George Bush made no effort to do that in the six years his party had the White House, the Senate, and the House. To think he can do it now with Dems in control of the Congress is simply foolishness.

Then there is the fact that he says this is government-run health care but the whole of the insurance industry supports the bipartisan bill.

A big reason the insurance industry supports the bill is because the states are using private insurance to deliver the SCHIP benefits to children! The Republicans have started the privatization of government health care--Medicare Advantage, Part D, Medicaid in many states, and SCHIP.

SCHIP is largely a government-run program provided through private insurance companies.

In the end, President Bush is going to compromise. He will likely go along with funding that will at least maintain the program at current levels--albeit nowhere near the $35 billion.

But on the way to doing that he, and the conservative Republicans, are politically shooting themselves in the foot going into an election-year in ways that are just unfathomable.

Friday, September 21, 2007

Who's More Frustrated With Bush Over His SCHIP Veto Threat--Republicans or Democrats?

These days its hard to get Democrats and Republicans to agree on anything. But there is one bipartisan bill that has incredible support in both parties--the $35 billion expansion and renewal of the State Children's Health Insurance Program (SCHIP).

By any measure SCHIP has been an incredibly good success--covering 6 million kids. There have been some legitimate questions about it growing beyond its original intent--covering kids up to 350% of poverty and some adults in a few states. But the fact is that the number of children without health insurance has begun to grow again with 9 million kids not covered under the expiring SCHIP law. And, the bipartisan agreement does tighten up the eligibility standards somewhat.

There is so much bipartisan support that 68 Senators voted for the original Senate agreement--a veto-proof majority. There are another 20-30 House Republicans that look ready to vote for it--still short of the number needed to override a Bush veto.

Leading Republicans appear more frustrated with President Bush than Democrats. Republican Senator Orin Hatch: "We're talking about kids who basically don't have coverage. I think the President's had some pretty bad advice on this." Senate Finance Ranking Republican Chuck Grassley: "I'm disappointed by the President's comments. Drawing lines in the sand at this stage isn't constructive...I wish he would engage Congress in a bill that he could sign instead of threatening a veto." Republican Senator Gordon Smith: "I'm very disappointed. I'm going to be voting for it." (Source: Washington Post 9/21).

What a dumb place to draw a line in the sand. But Bush has done it and he underscored all of this by opening his nationally televised press conference yesterday with a long statement repeating his determination to veto the SCHIP extension because it represents a creeping expansion of government-run health care. No matter that all of the insurance industry is behind the bill!

House Republican leaders have vowed to follow the President and defeat any attempt to override his veto--which they probably can succeed in doing.

But there might be an out here. House Republican leaders are offering an 18 month extension at existing funding levels.

That may be the best deal SCHIP supporters can hope to get. The bright side: The next vote would come in early 2009 just after the new President and the new Congress take office. Right now, it looks like a pretty good bet the new President would be just a bit more sympathetic.

Taking that deal would also keep the SCHIP disagreement out of what looks more and more like one heck of a year-end budget mess.

Earlier post: Why Is President Bush So Willing to Veto Spending Bills All of a Sudden?

Thursday, September 20, 2007

Health Wonk Review is Up!

Joe Paduda is hosting Health Wonk Review over at "Managed Care Matters."

Not surprisingly he's got lots of blog entries regarding Senator Clinton's new health plan and lots of other samples of some of the best blog posts from the past couple of weeks.

Also making the big time this week was our good friend, Brian Klepper, who had the following letter published in the New York Times regarding Senator Clinton's plan:

To the Editor:

“Unveiling Health Care 2.0, Again” (Week in Review, Sept. 16) is right. Only innocents believe that meaningful health care reform will occur simply because the American people want it and the presidential candidates promote it.

Health care economists agree that as much as half of the industry’s costs is waste, but that excess constitutes a significant portion of the financial baselines of most health care organizations.

The health care industry, the nation’s largest economic sector, spent $350 million lobbying Congress in 2006, more than any other sector. They won’t willingly abide reforms that compromise their profitability.

Reform will occur only if America’s non-health care business leaders recognize that it is a critical concern for them and us. By pooling their influence, they could overwhelm the health care lobby and drive changes that re-establish American health care’s stability and sustainability.

Brian R. Klepper
Director, Center for Practical Health Reform
Atlantic Beach, Fla., Sept. 16, 2007

Medicare Advantage Cuts Still on the Table to Offset the Medicare Physician Fee Fix

The House/Senate deal to renew the State Children's Health Insurance Program (SCHIP) does not include a fix to the January 2008 10% Medicare physician fee cut. It also doesn't include the $51 billion in cuts to the Medicare Advantage (MA) program the House had in their bill to pay for that fix and other Medicare improvements.

As I have said many times before, that only means that the Medicare physician fix is going to get booted to the year-end budget work--the docs aren't going to get a 10% fee cut.

The big question is just how big will the MA cuts be in order to pay for the doc fix.

The key Senator in the middle of all of this is Max Baucus (D-MT)--the Senate Finance Chair. He is much more moderate on the Medicare Advantage issue than his counterparts in the House. I have long believed where Baucus comes out on this is the place where a compromise will be found.

This week, the Wall Street Journal quoted Baucus as saying he is contemplating cuts in payments to Medicare Advantage insurers that are "not as much" as the cuts that were passed by the House. "But some," Baucus said, "It will be significant."

The House wanted to cut $51 billion over five years beginning in 2009.

The Senate will be more concerned about maintaining payments in rural areas and will have a more favorable view of the standard Medicare Advantage plans. The sore point will likely be the insurers who have been gaming the Private Fee For Service payment system in urban markets.

The House still wants huge cuts. Speaker Nancy Pelosi this week said, "Do we want to stop the privatization of Medicare? Yes." That's pretty clear.

This will all be decided at year-end when the Democratic committee chairs have almost total control of the budget process.

So, the Dems in the House want to stop the privatization of Medicare and Baucus wants "significant" cuts.

Talk about a rock and a hard place!

Tuesday, September 18, 2007

Hillary Clinton's Health Plan

Here is an excerpt from the Clinton campaign's press release outlining her $110 billion a year health care reform plan:

September 17, 2007

The American Health Choices Plan:

Ensuring Affordable, Quality Health Care for All Americans

Hillary Clinton unveiled the third part of her plan today to ensure that all Americans have affordable, quality health insurance. Building on her proposals to rein in costs and to insist on value and quality, her American Health Choices Plan will secure, simplify and ensure choice in health coverage for every American.

Specifically, her American Health Choices Plan will:

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.

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.

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.

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.

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 heath 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.
Read my detailed analysis of Senator Clinton's health plan.
You can also see my analysis of each of the major candidate's plans by going to the index to the right.

Monday, September 17, 2007

SCHIP Agreement "Near"

There are a number of published reports indicating that the House and Senate have reached an agreement to extend SCHIP along the lines of the earlier bi-partisan Senate agreement.

That would mean a $35 billion SCHIP expansion paid for entirely be a new 61 cent tobacco tax.

Bush says he would veto such a deal. While the Senate seems veto proof on this one, the House is another matter.

If Bush is successful in vetoing the latest compromise, then we will see a temporary extension of SCHIP and the longer-term solution will be booted to the year-end budget work where it is now certain that the Medicare Advantage payments and the upcoming 10% Medicare physician fee cut will be dealt with.

There is a real chance that there will be a huge budget showdown between the Democratic-led Congress and the President late in the year throwing all of these issues into doubt.

Those of you who read this blog know that this is what we have been predicting.

Earlier post and SCHIP history: SCHIP Negotiations Not Going Well--Medicare Physician Fee Cuts and Medicare Advantage Payments Hang in the Balance

Hillary Clinton's Health Plan--the Republicans Better Take it Seriously

Sometimes I think that all the Republican candidates for president think they need do is go into a crowded room and yell, "Hillary Care," and all of the voters will run for the exits in terror.

This is not 1993 and this is not the inexperienced Hillary Clinton who tried to drop her drafted-in-secret 1,400 page health care proposal on us all in one "take it or leave it" roll out.

She has changed since 1993 and so have American voters.

Today, health care is the number-two issue--behind Iraq--and it is the number-one domestic issue.

Last week, the Kaiser Family Foundation told us that the average cost of employer-provided family health insurance is $12,000 a year. Today, the UAW and Detroit are in negotiations over the auto companies walking away from their retiree health obligations for 60-70 cents on the dollar.

Mrs. Clinton has come to the center with her plan and we've all gotten a lot more worried about health care and are ready to go a lot farther than we would have almost 15 years ago.

Mrs. Clinton recognizes that. Lots of voters know it.

But the Republican candidates seem to think rolling out the "Harry and Louise" ads, talking about tax exemptions, and giving us all HRAs will do the trick.

It might in a conservative Republican primary. But that is not where the center of American politics is these days and it is the center that it will take to win the 2008 presidential election.

And by the way, the next time you hear Mitt Romney yell, "Hillary Care," ask him just how her plan differs from the one he signed into law in Massachusetts. I do health plan analysis for a living and it looks to me like they are kissin' cousins.

The Republicans would do well to get serious about health care before, instead of getting themselves a repeat of 1993 when Mrs. Clinton's first plan went down to a crushing defeat, they get themselves a repeat of 1992 when Bill Clinton won the presidency in part because he was a lot more serous about health care than his Republican opponent!

Sunday, September 16, 2007

SCHIP Negotiations Not Going Well--Medicare Physician Fee Cuts and Medicare Advantage Payments Hang in the Balance

Negotiations between the House and Senate over how to extend the State Children's Health Insurance Program (SCHIP) before its September 30 deadline are not making much progress.

The Senate passed a bipartisan extension of the plan that included $35 billion in new spending and paid for it with a hefty 61 cent per pack tobacco tax.

The House passed a solely Democratic bill that would spend $60 billion on the SCHIP extension as well as fix the upcoming January 2008 10% Medicare physician fee cuts. The House would pay for its bill with a smaller tobacco tax and a phase-out of "extra" private Medicare payments beginning in 2009.

With confidence, I can tell you the following:
  1. The negotiations aren't over. Just like the typical high school student, Congress tends to leave things to the very last minute. It is still possible a deal can be struck before September 30th.
  2. If a deal isn't done, SCHIP will get a temporary funding resolution past the September 30th deadline to keep the program going at current levels--it isn't going to abruptly end.
  3. The docs aren't going to get anything like the upcoming 10% fee cut they are facing on January 1--the doctor lobby is way too powerful to let that happen.
  4. Medicare Advantage cuts will fund at least the resolution to the doctor fee problem.
How much of this happens in September and how much of this gets booted to the year-end final budget clean-up where Democratic committee chairmen are almost entirely in control, remains to be seen.

I have always thought the doc cut and Medicare Advantage funding issues would be decided at year-end.

The only hope the health plans have to avoid a Medicare Advantage payment cut is that there is a budget train wreck with Democrats putting up a budget at year-end which Bush vetoes and nothing gets done. A budget train wreck could well leave SCHIP in limbo and the docs with a 10% Medicare physician fee cut and a political mess across the board. It isn't something either Democrats or Republicans want to see going into an election year.

For those of you who have been reading my regular updates on this issue, nothing is going on that is a surprise.

Stay tuned!

The history: SCHIP Reauthorization and High Stakes Politics

A budget train wreck? Why Is President Bush So Willing to Veto Spending Bills All of a Sudden?

Friday, September 14, 2007

Hillary Clinton to Outline Her Health Plan on Monday--She Will Target Insurers as the Bad Guys

Senator Clinton will unveil her health plan in Des Moines on Monday. The heavy betting is that it will look a lot like the general Democratic health reform template that draws on the recently enacted Massachusetts health reform law.

We do know this, she will do what she did in 1993 and 1994 and demonize the insurance industry. On Wednesday she said, "I intend to dramatically rein in the influence of the insurance companies because frankly I think they have worked to the detriment of our economy and our health care system."

That tack backfired big time in 1994 when the insurance industry, who took her rhetoric seriously and concluded it had nothing to lose, spent huge amounts of money countering her plan with the now famous "Harry and Louise" ads.

Would she be "dumb" enough to make the same mistake twice?

But Hillary Clinton is a smart lady and has one heck of a #1 political adviser. Her campaign so far has been a flawless political tour de force.

Underestimating her would be a mistake.

Frankly, I wish she would at least try to bring everyone under the same health care reform tent. I am sure she sincerely believes the industry deserves her treatment. But then, which of the for-profit stakeholders in this $2 trillion system is in a position to throw the first stone?

We desperately need health care reform. Why increase the already tough odds of getting anything done by going out of your way to make enemies who have incredible amounts of money and who you put in a position of having nothing to lose?

It should be interesting.

The UAW's Negotiations With the "Big Three" Automakers Over Retiree Health Benefits and Why They are Important to California Health Reform

The health care reform debate in California has come down to whether there should be an individual mandate to purchase health insurance and whether a big chunk of the cost of the program should be put on the employer community in the form of a 7.5% payroll tax for businesses that don't provide their workers with coverage.

Organized labor is firmly behind the Democratic legislature's efforts to deny Governor Schwarzenegger his individual mandate and to lay much of the program's incremental costs on the employer community.

Labor does not want a reversal in the long-term tradition of the employer being responsible for providing and paying for the biggest share of private health care in America.

That is understandable.

It is also shortsighted.

We only need look to the tough negotiations going on today in Detroit between the United Auto Workers (UAW) and "The Big Three" automakers over the unfunded cost of retiree health benefits.

GM, Ford, and Chrysler simply couldn't be in worse financial shape. The market cap for the biggest, General Motors the people who make all of those Chevy's and Cadillacs, is $17 billion. Compare that with the market cap for United Healthcare at $65 billion––one of the smaller health plans, Coventry Health Care, has a market cap of $9 billion.

What does it say when our biggest health care insurer has a market cap almost four times the icon of American industry?

A big reason (and surely not the only reason) our auto companies can't compete in the world is the burden of their health care costs. A big reason their market cap is so low is because of the enormous unfunded liabilities they carry to provide health care benefits to retirees--about $90 billion--that comes right off the top of their net worth.

If the auto companies can't do a deal with the UAW to get rid of a lot of this, the companies may go broke and the retired auto workers might get far less or nothing--just like the steel and airline workers did when those industries restructured through the bankruptcy courts.

Right now, negotiations are going on between the auto industry and the union to create a Voluntary Employee Beneficiary Association (VEBA). The companies would transfer all of these retiree health care liabilities into the VEBA and off their books. The auto companies would have no more long-term liability for these costs and their ability to survive and compete would be greatly enhanced.

In exchange for getting rid of $90 billion in liability, the companies would transfer assets (maybe including company stock) equal to only 60% to 70% of the liability.

So the UAW has a tough choice. Refuse to let the companies off the hook for 60 - 70 cents on the dollar and risk the companies going broke leading to more layoffs for current workers and maybe getting nothing for their retirees--or take the deal.

Not a great spot for anyone.

But finally, the health care rubber is finally hitting the road. It happened first in the steel industry, then airlines, and now auto.

This was inevitable. And, one way or another, the UAW has to get the best deal they can.

So in light of what's going on in Detroit, how can the California labor unions think the best long-term answer to funding California health reform can be found with the employer community?

Thursday, September 13, 2007

Health Insurance Premiums Rose Only 6.1% in 2007--But This May Be The Last Year the Trend Rate Will Fall

According to the annual Kaiser Family Foundation survey of employer health benefit plans, the average employer premium rose 6.1% in 2007--the lowest increase in four years of successively falling trend rates.

The increase was 13.9% in 2003 (the recent peak), 11.2% in 2004, 9.2% in 2005, and 7.7% in 2006.

The average cost of family health insurance also rose to an incredible $12,106 while the average cost for individual coverage in an employer plan was $4,479.

The relatively low employer medical trend rate of 6.1% was still more than twice the rate of inflation--which was 2.4% in July.

Even a 6.1% trend rate is unsustainable because it is so much greater then the general inflation rate, the increase in wages and the overall growth in the economy--all in the 3% range.

Worse, I expect this to be a bottom in the health care trend line.

Health plans, in their recent quarterly earnings releases, are generally reporting medical trend rates and medical cost ratios that are flat to beginning to edge up a bit.

Even looking back to last year, recently completed a study of publicly traded and not-for-profit health insurer results in 2006 and reported the following:
  • A review of 2006 annual financial statements found that the industry made $11.2 billion in underwriting income compared to $11.3 billion in 2005.
  • While that was a very slight decline in health underwriting results for 2006, it came on the heels of a series of double-digit improvements in profitability in the prior years of the decade underscoring the conclusion the easy money in health care has come to an end.
  • Insurers collected $232.56 per member each month in health revenue in 2006 compared to $216.08 in 2005—a 7.6% increase.
  • However, medical costs rose by an even greater 8.5%, from $181.14 per member each month in 2005 to $192.52 in 2006.
  • “Competitive pressure” on premiums resulted in a decrease in overall profit margin from 4.4% to 3.8% in 2006.
  • The commercial health insurance line saw a full 1% decline in margin while the private Medicare business saw its margins rise from 4.9% in 2005 to 5.7% in 2007. summarized its findings saying, “The industry is now facing a decline in margins on the commercial business, while potentially facing cutbacks in Medicare and an uncertain future regarding how the country finances health care.”

That about sums it up--escalating commercial cost trend just as Medicare payments are at serious risk in a Democratic Congress.

Just as the political heat is growing for health care in an election year, costs are likely on the rise again.

That is a very volatile political mix!

Wednesday, September 12, 2007

Jane Sarasohn-Kahn Joins the Blog World

A very smart lady who knows a lot about the intersection of health care and technology has joined the health care blog world.

Jane has a post up today that puts the new figures on personal health care spending in context with what Americans spend on technology.

Her new blog is, "Health Populi."

Could America Reap International Good Will By Ramping Up its Health Diplomacy Efforts?

Brian Klepper joins us again today with one of his welcome posts:

Reasserting Global Health Diplomacy

by Brian Klepper

A couple weeks ago the Washington Times ran a sensible and honorable article by Susan Blumenthal MD and Elise Schlissel at the Center for the Study of the Presidency (CSP) in DC, arguing that America could reap a huge benefit in good will by significantly ramping up its health diplomacy efforts.

Progress at improving health status in many developed and developing nations has been hindered by unrelenting epidemics of infectious disease and chronic illness, and by a lack of skills and tools plentiful here in the US. We have developed technologies and processes that can relieve suffering in unprecedented ways, but for decades we have not considered global health assistance nearly the priority that we have accorded other forms of diplomacy, like military intervention.

Dr. Blumenthal, a retired Rear Admiral in the US Public Health Service and Ms. Schlissel, a Princeton junior interning at CSP, call on us to put this wonderful asset to work on the global stage, to once again put our best foot forward in a more modern and humanitarian context, and by doing so, to shine a bright light on America’s best values. This is solid and refreshing advice, especially given the low esteem that has resulted from America's actions.

The Cavalcade of Risk Is Up

Dave Williams hosts the latest "Cavalcade of Risk" over at his "Health Business Blog."

Check out his picks of the best on insurance risk in the blogosphere.

Schwarzenegger is Right––You Can't Achieve Universal Coverage on the Backs of the Employer Community Alone

The California legislature has passed a major health care reform proposal but Republican Governor Schwarzenegger says it isn't good enough and he will veto it and bring the legislature back to do it over again in a special session.

Give the California governor and legislature credit for hitting the problem of health care head-on. If the biggest state can make headway, it could well open up the health care reform logjam for everyone and change the dynamics of this debate.

The proposals by both the California governor and the legislature have serious problems--most notably they are creating a system that is still going to be unaffordable.

But just maybe the only way we are finally going to deal with costs is to shove ourselves into an unsustainable system that later forces everyone's hand on the issue of affordability. Not statesmanship but perhaps the only way we can make progress (see earlier post below).

Governor Schwarzenegger says he is going to veto the Democratic led assembly health care bill because it places a big part of the cost burden on California's employers (with a 7.5% payroll tax for those who don't offer coverage) and because it does not contain an individual mandate.

Good for him.

While I don't necessarily agree that the governor needs an individual mandate for his program to work (see post below), the legislature is taking the easy way out and making doctors and hospitals happy by relieving them of any share of the cost they might have. I can't say that I have been proud of my doc and hospital friends in California over this one. Schwarzenegger made a very reasonable proposal for paying for a health reform plan by spreading the funding burden over the broader health care economy. The docs and hospital execs made an incredibly shortsighted decision to oppose that leading to the Democratic bill.

Apparently, in the past few days the hospitals have said they will agree to a hospital contribution and that will be helpful in future negotiations between the legislature and the governor.

The docs and the hospitals only have to pass their share onto the broader payer community in a rational and more affordable way. Instead, they lobbied to force the cost burden onto the employer. Most employers who don't offer health insurance don't do it because they are bad guys, the don't offer because they can't afford it. Too often these are start-up businesses working on a shoe string. It is just dumb economic policy to shift so many social welfare costs onto the one segment of the economy we count on for new jobs and economic growth.

And, just how was it we came to the conclusion that the employer community has the social responsibility for fixing America's health care problems?

The legislature also appears to have caved in to organized labor. Labor doesn't want health care to ever look like an individual responsibility because that would undermine so many of the benefit gains they have made--they want it to stay in the employer space. That may be understandable but it is shortsighted economic policy.

When corporate America is overburdened by health care costs we get something that looks like the "Big Three" automakers--companies that can't compete in the world economy. That leads to job loss and eventually, as we are seeing in Detroit today, negotiations to push the health care costs back onto the workers. Labor would be far better off seeing America's health care costs spread more broadly than the employer community.

The good news is that the California legislature and the governor have agreed on just about all of the other key elements of a health care bill.

Let's hope that Californian physicians, hospitals, and labor do their share to step-up and work with a California governor intent on doing something of great significance!

Why an individual mandate can't be enforced in California:
California Health Care Reform—An Individual Mandate is Nowhere Near as Important as Affordable Health Insurance

Both California health care plans on the table will only deal with access and not cost: Deja Vu in Massachusetts--We've Been Down this Road Before--The Massachusetts Health Care Plan and Health Care Costs

But dealing with access first and affordability second may be the only practical way to do health care reform: The “Realistic” Way to Do Health Care Reform

Monday, September 10, 2007

The Obesity Epidemic--It's Time to Deal With it the Same Way We Did Smoking

While we debate just how we will change our health care financing system so that more people can be insured at an affordable cost, we are too often overlooking one of the biggest drivers of health care costs--America's obesity epidemic.

The latest report on obesity in America by the Trust for America's Health found that the problem is growing at an ever larger rate despite recent "wellness" initiatives and attention to the problem.

In the past year, obesity rates have gone up in 31 states, and no state saw an improvement.

The report said that two-thirds of U.S. adults are overweight or obese!

In 32 states, 60% of the population (including children) is overweight or obese! Mississippi leads the nation with 30% of its people obese.

Presidential candidates can talk about covering the uninsured or making the health insurance markets more efficient all they want until we look this national epidemic in the eye.

Ken Thorpe of Emory University is a health care economist I have come to greatly respect over the years. This from an overview of his 2005 study on the impact obesity has on America's health care costs:

"The obesity epidemic has caused a tenfold increase in the nation's private health insurance bill for conditions related to being overweight, according to a self-funded study by researchers with the Emory University Rollins School of Public Health published today in the online version of the journal Health Affairs. According to the study the cost of treating conditions linked to obesity increased from $3.6 billion to $36.5 billion between 1987 and 2002. The study concludes that the best way to lower healthcare spending is to target the rise in population risk factors -- especially obesity."

"Current approaches to controlling healthcare costs are not working because they ignore the true drivers of those costs,' Dr. Thorpe says. 'Increases in the number of people getting treatment for serious health problems like diabetes, heart disease, high cholesterol, and mental disorders are directly linked to population increases in obesity. If insurers and employers are serious about reining in health care spending, then obesity prevention should be at the top of their agenda."

Today, being fat has almost become a protected class. It is not OK to be fat.

Twenty years ago, we began a crusade against smoking that has made a difference and generally made nicotine socially unacceptable and I don't remember any anti-smoking campaign ever making it personal.

We need to do the same thing with obesity--it's killing more Americans and creating chronic disease beyond anything cigarettes ever did!

The youngest generation now looks like it is going to be the first to be less healthy than the one that came before them.

It's also making America's health care bill unaffordable for all of us.

Related Post: United Health Launches a New Health Plan That Rewards Healthy Workers--Immediately Criticized for "Turning Health Care Into a Police State."

Friday, September 7, 2007

People Who Say Insurance Regulation Creates More Uninsured Are Missing the Forest for the Trees

The health insurance trade association, AHIP, just released a new study on the impact of state health insurance reforms on the market and argues that the "unintended consequences" of these reforms hasn't been good.

Here is an excerpt from their release:

“This report offers important lessons. It demonstrates that insurance reforms without universal access drives up health care costs for consumers and encourages individuals who have health insurance to drop insurance and take the financial risk of being uninsured,' said Karen Ignagni, President and CEO of AHIP.

"Guarantee issue requires insurers to sell an individual health insurance policy without regard to a person’s health and community rating requires that all consumers pay the same or similar premiums without regard to age or gender. According to the report, these initiatives have the potential to cause individuals to wait until they have health problems to buy insurance. This could cause premiums to increase for all policyholders, increasing the likelihood that lower-risk individuals leave the market, which could lead to further rate increases. If this continues, the pool or market could essentially collapse or shrink to include only the high risk population.

“While these reform goals were laudable, they frequently had unintended consequences that disrupted the individual marketplace,' said Leigh Wachenheim, FSA, MAAA, Principal and Consulting Actuary at Milliman, Inc.

"Overall, the report found that states that implemented guarantee issue and community rating saw a rise in insurance premiums, a reduction of individual insurance enrollment, and an exodus of health insurers from the individual insurance market. In addition, the report found no significant decrease in the uninsured population in states that implemented these initiatives, often a stated goal of legislators."

The report is very thorough and worth a read.

But I have to say I think it misses the forest for the trees.

As far as it goes the authors are right. Before health insurance reform in the mid-1990s, it was the carriers that were "selecting against" consumers. That is, "cherry picking" the best risks and discouraging everyone else through underwriting limitations or pricing.

After the reforms, the insurers had to basically take all comers under terms that vary by state but are generally good for the consumer.

So, with underwriting reforms, the balance of power in the market shifted--from the insurer to the consumer. As a result, consumers often wait to buy health insurance until they need it--now it was the insurer that's on the bad side of the deal. The authors are right to point out that has been problematic for the individual insurance market.

So, what should we do? Go back to the old days of carriers "cherry-picking"?

More often, health policy reformers are suggesting that we now need to mandate that everyone be in the pool. That way neither the insurer or the consumer has a chance to "select against" the other or "cherry pick."

That has a logic to it and it has become the big issue in California where the governor and the legislature are trying to find common ground on a major state reform. It also led to the individual mandate in the new Massachusetts health insurance law.

However, I will suggest that in our focus on the individual health insurance market we are missing the obvious in the parallel employer market. The employer market is an insurance system that is voluntary, community rated, and has little or no adverse selection.

Every worker is an individual that has the option of joining the pool or not. Every employer group is a mini health insurance market impacted by the same variables that impact the individual health insurance market.

No employer I know of mandates that everyone participate--employer systems are voluntary. Everyone pays the same price (very few plans have any age rating), and "adverse selection" and "cherry picking" are terms we never hear.



Employers typically pay 75% of the cost of health insurance. When a consumer is presented with a good health plan that costs them a relatively small contribution, more then enough of them buy it giving the plan a good "spread of risk" and that makes each employer pool work very well.

Here is the employer lesson: Make the cost affordable and adverse selection isn't an issue.

If the employee doesn't take the low cost employer insurance when it is offered, they have to pass "evidence of insurability" if they want coverage later.

This focus on the "unintended consequences" of state insurance regulation, and whether we need an individual mandate (which is not working in Massachusetts because the coverage is still unaffordable), misses the real problem--people don't buy if they can't afford it.

No health reform proposal will work--in Massachusetts or California or advanced by the libertarian notion that insurance market deregulation is the way to go--unless the insurance package has a price working families can reasonably afford!

The forest--cost. Not the trees--underwriting rules!

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

Thursday, September 6, 2007

How Will SCHIP Be Extended and What Will Happen to Medicare Advantage and the Upcoming Medicare Physician Fee Cuts

Health Market Survey publisher Bill Boyles joins us again today. After getting his perspective on the State Children's Health Insurance Program (SCHIP) debate yesterday, I prevailed upon him to put a post together for our readers.

Bill has some very important news on just how this debate, which involves three greatly important health care issues--the SCHIP extension, proposed Medicare Advantage cuts, and the scheduled Medicare physician fee cuts, is coming together:

Dems Seeking SCHIP-Only Deal,

But Not Without A Good Road Map
by Bill Boyles

Key Democratic Chairmen in the House and Senate have instructed their staff to work out a possible road map for how to split off Medicare Advantage (MA) reform from the SCHIP bill, I found out earlier this week. They’ve been working with MA lobbyists to avoid a train wreck when the House-Senate conference meets in two weeks.

The thinking is that the House bill is simply too massive a change to ever work out a deal among Democrats, let alone a bi-partisan agreement within a House-Senate conference committee. That leaves only one option: limiting the conference to the Senate bill and considering the MA stuff separately.

That’s bad news for Medicare Advantage backers. Their main hope has been that neither party will be able to work out all the kinks of a road map compromise, and the whole thing will stall out and fail until 2009.

There’s no way the House Dems will ever agree to just dropping MA, not after sweating blood to get it out of the House (including a final vote margin of one vote that caused Republicans to walk out). But there is a way the House leadership could think about dropping the proposed Medicare Advantage cuts: if there is a pre-nuptial agreement. And the dowry has to include a real list of specifics with what , when, where and how a House-Senate deal takes shape. This is what is being negotiated at the staff level while members of Congress work on their tans. If they succeed it’s lights out for MA plans before the SCHIP vote even happens.

In retrospect, there was a sly hidden logic to House Dems pushing through their MA reforms attached to the House SCHIP bill, something that was criticized by pundits as a hopeless exercise at the time. Now neither party wants the popular SCHIP bill to go down in flames, and the only way of saving it now is to reach some kind of a deal on all those “hopeless” provisions. Otherwise, it’s going to be stalemate city.

For months there have been two hidden priorities for September. First, getting the SCHIP bill to the White House so it can be vetoed and over-ridden in a vote that includes lots of Republicans. And second making sure that the [pending 10%] physician fee cuts are restored this year instead of being extended like they were last fall due to the election. Nobody wants the AMA attacking Congress just weeks before the first Democratic primaries in February. This year it has to be done by mid-December at the latest.

The road map for dropping the House MA provisions in SCHIP has to deal with this now, not after the SCHIP compromise is voted on and sent to Bush. The only financing method that can raise enough to satisfy the docs is MA reform. Basically, the passage of the House bill gave House Democrats the leverage they needed to insist on a private behind-the-scenes deal before SCHIP can pass.

What’s going to be in the deal? That depends on how much the Senate Finance Committee thinks it has to give the House Dems to make them jump. Almost all of the non-SCHIP stuff in the House came from the House Commerce Committee, not Ways & Means and not necessarily the majority. With the huge attraction of child health removed, the Senate can probably pick and choose what it wants from the House bill, just enough to reach the magic number of bi-partisan votes in the Senate. First to cut will be MA private fee-for-service, but there are dozens of smaller changes that affect various provider groups, not just insurers.

What’s in this for the GOP? Nothing good. If they try to block SCHIP, Republicans get hammered by voters just before an election in which they are already expected to lose seats and perhaps lost their majority for decades. The best idea may be to let Bush fight his own veto battle on SCHIP without even involving Republicans. That means letting the House MA reforms go through, and a large faction of the GOP will say it’s better to protect MA than pass SCHIP.

Medicare Advantage lobbyists this week said with bravado they think they can win the battle with the AMA over whether to use MA reform to pay for restoring Medicare physician fee cuts. I doubt it. First, most of the private insurers in the U.S. are not even that interested in Medicare Advantage – it’s heavily concentrated in United, a couple Blues plans, and the large regional HMOs like Kaiser. Intense lobbying at the state level by medical societies could really hit home this year and easily trump anything AHIP can muster in an underfunded campaign that is not winning much public credibility – or votes. The health insurance industry is also split. Carriers are really much less worried about MA reform than Michael Moore’s popularity with mainstream voters, and finding ways to work with Democrats.

Health Wonk Review is UP

This time Brian Klepper over at "The Doctor Weighs In" has an assortment of provocative posts on a wide range of health care policy and marketplace issues.

Check it out.

Romney Wants to Reform State Health Insurance Regulation--Just What Does He Mean by That?

Republican presidential candidate Mitt Romney is calling for the cutting of state health insurance regulations to make policies more affordable. He blames the over-regulation of health insurance at the state level as one of the primary reasons health insurance costs so much.

Of course the reason that health insurance costs so much is that health care costs so much, but we’ve discussed that one plenty of times before.

Romney’s proposal comes straight from the conservative Republican playbook on health care. The thinking goes that state regulation has made health insurance expensive—just let the market set its own standards and costs will come down as people buy the policies they need.

To a point, these advocates are on to something. There are too many rules making costs higher from one state to another. Kentucky virtually blew its market up in the mid-1990s with excessive regulation, as one example. The new Massachusetts health insurance law (that Romney signed) refuses to recognize tens of thousands of existing health insurance policies because they don't meet minimum benefit requirements--particularly when the policy has a high deductible.

In fact, you can argue that the minimum health policy standards Massachusetts now has, because of the new law Romney signed, makes it the most regulated health insurance market in the union.

It would also be helpful if we had one regulator in the health insurance space rather than more than 50 and policies that could be sold on a national scale.

But those who advocate a “free market” for health insurance also need to heed recent history.

In the 1980s and early 1990s we had a virtual free market. Health insurers could cover whomever they wanted, drop people when they became sick or give them a whopping rate increase to drive them off. The vaunted “association health plans” many conservatives would like to bring back were in their glory—and largely made money “cherry picking” the best risks.

Most of the state health insurance regulation we live with today came out of the “cherry picking” controversy of the late 1980s and early 1990s.

There is plenty of regulation that is counterproductive and adds unnecessary waste.

But, most of it—the rules that add the biggest costs—were the direct result of some pretty bad free market experiences.

Is Romney looking to trim bureaucratic waste from the health insurance market?

Or, is he calling for turning the calendar back to 1990?

Just where is the health insurance regulatory waste he wants to eliminate? The voters deserve the details on this one.

Wednesday, September 5, 2007

Mitt Romney's Health Plan--A Foot in Each Canoe

Up in Wisconsin's Northwoods, camp counselors play a game with the kids in which they put two canoes together in the lake and have the kids try to stand up with one foot in each canoe. As you can imagine it's an almost impossible balancing act.

I was reminded of that last week sitting by our lake reading reports of Mitt Romney’s health plan proposals.

Romney has two canoes to deal with:
  • He signed, and participated in the development of, the Massachusetts health plan law that has become the basis for the health plans proposed by Democrats John Edwards and Barack Obama—and likely the plan Hillary Clinton will offer.
  • He is running as a conservative where there is a virtual requirement to offer market-based health reform ideas and to stay away from big government plans—which about all conservatives consider the Massachusetts plan to be.
Romney clearly has a foot in each canoe:
  • He has referred to the Mass health plan as an “example of how he used conservative principles to provide affordable health insurance to all state residents."
  • Recently in New Hampshire, Romney charged, "Barack Obama [whose health plan looks like the Mass plan Romney signed] said we're going to have the government take over health care. He at least had the integrity to say he wants to raise your taxes." He added, "The right answer is not a government takeover, it's not socialized medicine. It's not Hillarycare." Later, Romney said, "I don't want the guys who ran the [Hurricane] Katrina cleanup running my health care system."
Romney is trying to position himself as the darling of the conservative wing of the Republican Party—a smart thing to do if you want the nomination.

So, it comes as no surprise that his health plan principles come right out of the conservative Republican playbook on health care:
  • Changing the tax code so more people are able to buy health insurance in the individual market.
  • Promoting health savings accounts (HSAs) and high deductible health plans.
  • Giving states more flexibility in how they use federal health care funds.
  • Encouraging states to reform their state health insurance regulatory oversight to reduce the cost of insurance.
Romney seems to be trying to rationalize the two canoes by saying what worked in my state isn’t what I would do in yours, “A one-size-fits-all national health care system is bound to fail. It ignores the sharp difference between states, and it relies on Washington bureaucracy to manage. I don’t want the people who ran the Katrina cleanup to manage our health care system.”

But the same day he announced his health care plan, Romney spokesmen Eric Fehrnstrom, had this to say, “What’s important about the Massachusetts health care law is that it’s working, and Mitt Romney got it done by reaching across the political isle. We have fewer uninsured, the cost of policies is coming down, and more and more people are taking personal responsibility for their own care.”

So, if Romney is elected and has a Democratic Congress unwilling to enact a conservative Republican health program, will Romney again do the same deal he did with Massachusetts Democrats? I am sure that Senators Obama and Clinton would vote for it.

Watching someone with a foot in each canoe try to maintain his balance is always a hoot!

You can also see the complete Romney health care PowerPoint.

Tuesday, September 4, 2007

"Don't Pit Children Against Seniors"--The AHIP Takes the Medicare Advantage Debate to Another Low

When the health insurance industry trade association, AHIP, tried to employ the NAACP in their battle to protect Medicare Advantage (MA) payments last May by arguing higher payments to the industry are good for poor people, I asked, could they have sunk any lower?

From the looks of a letter to the editor in Sunday’s Washington Post, the answer is yes.

The title of AHIP CEO Karen Ignagni’s letter is, “Don’t Pit Children Against Seniors.”

In her letter she makes a number of points:
  • Proponents would strip “funds from the Medicare Advantage program, on the theory that health plans providing comprehensive protection from seniors are overpaid.” What “theory?” They are overpaid. The CBO has clearly documented that only a portion of the amount MA plans are paid in excess of standard Medicare goes for extra benefits for seniors. Does she have evidence to the contrary?
  • That Congress “corrected” the “inequity” in payment rates when it increased payments that had barred senior participation particularly in “mid-size cities, small towns and rural areas from access to Medicare Advantage.” Yes they did--ultimately through the creation of the Private Fee For Service program which now pays the plans an average of 19% more than standard Medicare. But the Congress never intended that to be more than a transitional strategy—not permanent corporate welfare.
  • “The push to cut reimbursement ignores the value not only of the added benefits but also of bringing coverage choices to more areas, as Congress mandated in 2000.” All of the data points to MA plans having higher benefits but only because they are paid more. And, the data shows that not all of the extra payments go to more benefits—these payments also go to profits particularly for the Private Fee For Service plans. Is she suggesting that the private Medicare market deserves payments--and senior benefits--that are permanently higher than the traditional Medicare plan receives for each senior it covers?
  • “The Congressional Budget Office predicts that 3 million seniors—mostly rural Americans—will lose their Medicare Advantage coverage altogether if the House bill becomes law.” I am sure that is right. But the CBO is right more because the plans that have been gaming the Private Fee For Service payment system won’t any longer be able to do it and will leave those markets.
  • And then the big one: “There’s no justification for pitting children against seniors.” Damn right. So, why are you making this into a kids versus seniors issue?
Private Medicare is an experiment that we have got to see through to determine if the market is in fact an answer to making Medicare sustainable.

But, that experiment should be about an honest competition between the private sector and government. Head-to-head. No unfair advantages--either way.

Priming the pump with extra dollars to get the private sector into the business and encouraging seniors to try it is a fair policy.

But it becomes nothing but corporate welfare when industry leaders try to defend it in a way that ignores the original intent.

It becomes just disgusting when they bring the likes of the NAACP and kids into it.

Does Karen not have confidence that her industry, in a fair and even competition, can beat the government?

Original Washington Post editorial


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