Brian Klepper joins us again today this time with a post on Atlanta's Grady Health System. Grady is an inner city safety-net hospital now going to extraordinary lengths to remain open.
Brian makes the point that the Grady situation is by no means unique but instead represents a national issue as safety net hospitals struggle to maintain health care for the uninsured while being underpaid by their largest payers--Medicare and Medicaid. Here in the Washington area, in just the last couple of years we have seen the closure of a key inner city hospital and Prince George's Medical Center is currently struggling to remain open.
If Grady Fails
by Brian Klepper
In an extraordinary move last week, the politically appointed Fulton-DeKalb Hospital Authority, the governing body over Atlanta's Grady Health System, unanimously and voluntary stepped aside, to be replaced by a new non-profit corporation. Projecting a $55 million deficit this year, the hospital had just three weeks of cash on hand. It needs $300 million immediately for sorely needed renovations, and must deal with $63 million in accumulated debt to its biggest creditors, Emory University Medical School and Morehouse School of Medicine. New oversight was the predicate for a hoped-for financial bailout from business, philanthropies and financial institutions.
Other Atlanta hospitals are undoubtedly concerned that Grady will fail, and will probably do everything possible to support a bailout. The last thing they want is for Grady's patients to come to their facilities. Now would be a good time to rally business leaders and legislators, who nearly always go to fancier hospitals, which of course has been a big part of the problem.
Grady’s turmoil should be recognized as the first small shock of much larger seismic event, long in the making, a concrete sign of America's relentlessly intensifying health care crisis. The wrath falls on our most vulnerable - those with health problems or with few financial resources - as well as on the institutions and professionals that care for them.
Nearly every large and mid-sized city has a Grady that struggles with similar issues. In addition to being the health care resource to the poor, they are often academic centers - clinicians-in-training need SOMEBODY to learn on. They can be home to a region's highest expertise, particularly related to crisis care. Many house their community’s neonatal intensive care unit and burn unit, as well as the level 1 trauma center, which brings with it disaster preparedness responsibilities. These are precious services that we somehow EXPECT will be there when we need them. So if a safety net hospital closes, the loss to the community and the replacement resources required are immense.
Grady, like other safety nets around the country, isn't failing due to mismanagement, although some of that almost certainly plays a role. Instead, it is the slowly-boiled frog, its financial base eroded over decades as it increasingly became the hospital of the inner city, the center for care for Atlanta's low-income and uninsured residents. As governmental support steadily dwindled, demand for its services rose. Fully 75 percent of Grady's patients are on Medicaid, which pays less than the cost of care. Only 7 percent have commercial insurance.
Strained to the breaking point like other safety nets, Grady provides far greater levels of uncompensated and ambulatory care while generating far lower margins than non-safety net acute care hospitals. A study released earlier this year by the National Association of Public Hospital and Health Systems found that, between 1998-2004 and compared to non-safety net acute care hospitals, the average safety net provided three times the level of uncompensated care as a percentage of total expenses (20% vs. 5%), more than three times the volume of ambulatory care services (meaning emergency and outpatient visits), and saw their margins plummet so low (in 2004, 0.5 percent vs. 5.2 percent for non-safety nets) that investments to maintain infrastructure become difficult to impossible.
Safety net hospitals are famous for struggling through, but presumably there's a calculus here. As small businesses are increasingly priced out of the coverage market, and as state government, facing budget crisis, cut back on publicly funded coverage, the burden on the safety nets will continue to rise and the resources will continue to decline. At some point the demand-resource mismatch will give way, and some will topple. Their patients will seek care at other hospitals, which will simply transfer the burden elsewhere.
We can keep the safety nets afloat. The most logical solution would establish universal coverage for "basic" care services - we have to define what "basic" means - which would associate dollars with each presenting patient. We could also update the EMTALA laws that govern how emergency patients are seen, so those seeking minor care can be managed in less expensive settings.
But these answers don't seem likely at the moment. Despite current rhetoric, universal coverage legislation is doubtful unless we can find ways to significantly drive down cost. Legislation that drives out unnecessary health care spending would reduce health industry revenues, though, an unlikely prospect so long as lobbyists drive Congressional policy.
Still, we should think deeply about what Grady's troubles really mean, and consider this case not in isolation, but as possibly representative of systemic forces. Without significant system change, we could see more safety nets falter in the next few years. Each community where a failure occurs will gradually appreciate the importance of its loss. As the poor turn to the remaining hospitals for care, the cascading impacts on the larger system could severely test America's commitment to care that is independent of an ability to pay.
And that would challenge our core values as a nation.
Thursday, November 29, 2007
Wednesday, November 28, 2007
"Health Wonk Review" Is Up
The latest edition of "Health Wonk Review" is up over at "Health Care Renewal."
I must say it is a very well done and interesting review of some of the best in recent health care posts--this time crafted by Dr. Roy Poses.
I must say it is a very well done and interesting review of some of the best in recent health care posts--this time crafted by Dr. Roy Poses.
The Last One is Gone--CIGNA Buys Great West Life Health Insurance Business
The recent announcement that CIGNA has purchased the U.S. health insurance business of Great West Life for $1.5 billion in cash struck me as more than the minor headline it was back on page C5 of the Wall Street Journal.
The last one is now history.
Metropolitan, Prudential, John Hancock, Mass Mutual, Hartford, Pacific Life, Phoenix Mutual, and so many more, are all out of the medical business.
I remember well the effort Great West led in the mid-1980s to create a nationwide PPO platform for mid-sized carriers that became Private Health Care Systems (PHCS) in order to compete with the emerging threat the new managed care organizations posed. In fact, I was the first group executive to throw a million dollars into the Great West hat to start it. It sounds funny today to say that our original goal was to put a national network together that would rival the size of John Hancock's then medical business.
The twenty-year fundamental shift in the health insurance markets from the large and mid-sized traditional carriers operating on nationwide indemnity platforms to the new and much larger and market focused managed care organizations would now appear to be complete.
You could argue that only Aetna and CIGNA made the turn. But after the U.S. HealthCare merger, one can also argue that it isn’t the old Aetna that survives today.
After all the change, it is not a little bit ironic that the big, often Wall Street dominated, managed care companies have regressed to something not all that different from the volume sensitive indemnity model they displaced.
Must be lots of old group folks selling real estate.
The last one is now history.
Metropolitan, Prudential, John Hancock, Mass Mutual, Hartford, Pacific Life, Phoenix Mutual, and so many more, are all out of the medical business.
I remember well the effort Great West led in the mid-1980s to create a nationwide PPO platform for mid-sized carriers that became Private Health Care Systems (PHCS) in order to compete with the emerging threat the new managed care organizations posed. In fact, I was the first group executive to throw a million dollars into the Great West hat to start it. It sounds funny today to say that our original goal was to put a national network together that would rival the size of John Hancock's then medical business.
The twenty-year fundamental shift in the health insurance markets from the large and mid-sized traditional carriers operating on nationwide indemnity platforms to the new and much larger and market focused managed care organizations would now appear to be complete.
You could argue that only Aetna and CIGNA made the turn. But after the U.S. HealthCare merger, one can also argue that it isn’t the old Aetna that survives today.
After all the change, it is not a little bit ironic that the big, often Wall Street dominated, managed care companies have regressed to something not all that different from the volume sensitive indemnity model they displaced.
Must be lots of old group folks selling real estate.
One Heck Of A Budget Mess and Lots of Ugly Consequences--But Watch The Pork
With the Congress set to come back to attempt to break the budget impasse in the few weeks before the holidays, many in this town are ready to see the Congressional Democrats and President Bush agree to disagree and let the budget problems slide for a year under a series of lengthy continuing resolutions (CRs).
The problem with CRs is that they only allow the agencies and programs to continue at past spending levels. Inflation cuts into the value of those past budgets and there aren't any opportunities to modify priorities.
In health care, which is especially hard hit by higher inflation, it would be an especially problematic period:
But here is the biggest reason the Congress just might find a way to come up with the votes to get the budget unstuck: pork.
No spending bills--no pork and Republicans love pork every bit as much as Democrats. Don't forget, the "bridge to nowhere" was purely a Republican item.
The next few weeks will be full of drama, brinksmanship, and deals.
Will we get a budget deal when the day is done?
Watch the pork.
The problem with CRs is that they only allow the agencies and programs to continue at past spending levels. Inflation cuts into the value of those past budgets and there aren't any opportunities to modify priorities.
In health care, which is especially hard hit by higher inflation, it would be an especially problematic period:
- The Medicare physicians are going to get a 10% fee cut on January 1st if the Congress can't pass a budget bill with a fix in it for them. Undoubtedly, a big fee cut would mean lots of cost shifting to the rest of the health care system by the docs as new provider contracts are negotiated. The proposed solution for the docs is to cut private Medicare HMO payments to come up with the money.
- The State Children's Health Insurance Program (SCHIP) has been operating on a CR since September 30th. But freezing the program at current levels causes some big problems.
- California will have to decide what to do with as many as 600,000 kids who could lose SCHIP coverage--56,000 on January 1st.
- Georgia is already making up for federal shortfalls in its SCHIP program. Administrators are reportedly wondering if they should hold off on starting kids on six-week chemo treatment plans if they only have four weeks of coverage left because of the budget shortfall in SCHIP.
- The National Institutes of Health (NIH) budget hasn't been increased since 2003. This year it was supposed to get a $2 billion increase in its $30 billion budget but that is in limbo as Congress and the President fight the big budget battle.
But here is the biggest reason the Congress just might find a way to come up with the votes to get the budget unstuck: pork.
No spending bills--no pork and Republicans love pork every bit as much as Democrats. Don't forget, the "bridge to nowhere" was purely a Republican item.
The next few weeks will be full of drama, brinksmanship, and deals.
Will we get a budget deal when the day is done?
Watch the pork.
Wednesday, November 21, 2007
"Cavalcade of Risk" Is Up
The latest edition of the "Cavalcade of Risk" is up over at "Colorado Health Insurance Insider." This edition includes some of the best posts from the last couple of weeks in insurance, finance, and investing.
Monday, November 19, 2007
California Policy Cancellation Scandal Heats Up As Republican Candidates Propose Health Reform Based On An Individual Health Insurance System
All of the leading Republican candidates for president favor health reform based on the individual health insurance model instead of the more common employer-based system.
Apparently, a number of health insurance companies would like to derail those Republican health reform plans by scaring the heck out of consumers and voters picking the year before the election to hold a policy cancellation scandal.
The latest in this dumber than dumb saga has the California Department of Managed Health Care fining HealthNet for $1 million "for failure to be truthful to state investigators" about paying bonuses for canceling individual health insurance policies.
This issue was the subject of a post last week: Report: "Health Insurer Tied Bonuses to Dropping Sick Policyholders"
No one is arguing that an insurance company doesn't have the right to cancel a health insurance policy when it is obtained because of fraudulent statements made on the original application. The issue here is that these California health insurance companies (almost all of which operate nationally) are accused of canceling the policy even when the misstatements may have been unintentional and/or immaterial.
Consumers don't always remember every doctor visit or prescription they've had over a period of years and that can later come back to haunt them when they later file a claim and their medical records are scoured for "fraud" at the time of application.
California state law prohibits bonuses being paid to insurance company employees for trying to limit claim costs. HealthNet accepted a consent agreement and said it would no longer link bonuses to policy cancellations.
The state is continuing it's original investigation into Health Net's cancellation policies--this fine is just for the lying part. The California Department of Insurance has a separate investigation going on.
The ongoing investigations over policy rescision include Blue Cross of California (WellPoint), Blue Shield of California, Kaiser, and PacifiCare. WellPoint has already paid a $1.2 million fine and Kaiser a $350,000 fine for improperly canceling coverage.
What better way for the Democrats to undermine Republican health policy proposals than to drag this one out next fall.
Message to the executive suite: WAKE UP!
See a detailed analysis of each of the presidential candidate's proposal in the index to the right.
Apparently, a number of health insurance companies would like to derail those Republican health reform plans by scaring the heck out of consumers and voters picking the year before the election to hold a policy cancellation scandal.
The latest in this dumber than dumb saga has the California Department of Managed Health Care fining HealthNet for $1 million "for failure to be truthful to state investigators" about paying bonuses for canceling individual health insurance policies.
This issue was the subject of a post last week: Report: "Health Insurer Tied Bonuses to Dropping Sick Policyholders"
No one is arguing that an insurance company doesn't have the right to cancel a health insurance policy when it is obtained because of fraudulent statements made on the original application. The issue here is that these California health insurance companies (almost all of which operate nationally) are accused of canceling the policy even when the misstatements may have been unintentional and/or immaterial.
Consumers don't always remember every doctor visit or prescription they've had over a period of years and that can later come back to haunt them when they later file a claim and their medical records are scoured for "fraud" at the time of application.
California state law prohibits bonuses being paid to insurance company employees for trying to limit claim costs. HealthNet accepted a consent agreement and said it would no longer link bonuses to policy cancellations.
The state is continuing it's original investigation into Health Net's cancellation policies--this fine is just for the lying part. The California Department of Insurance has a separate investigation going on.
The ongoing investigations over policy rescision include Blue Cross of California (WellPoint), Blue Shield of California, Kaiser, and PacifiCare. WellPoint has already paid a $1.2 million fine and Kaiser a $350,000 fine for improperly canceling coverage.
What better way for the Democrats to undermine Republican health policy proposals than to drag this one out next fall.
Message to the executive suite: WAKE UP!
See a detailed analysis of each of the presidential candidate's proposal in the index to the right.
Friday, November 16, 2007
SCHIP, Medicare Physician Fee Cuts, and Medicare Advantage--We're Getting Down to Crunch Time
Since September of 2006, I have been pointing to this year-end as the time that would require some big budget decisions impacting SCHIP, the scheduled 10% Medicare physician fee cut, and corresponding Medicare Advantage cuts to health plans to pay for the doc fix.
Guess what? New Year's is just over six weeks away.
For now, each of these issues is bogged down in the overall budget stalemate between Congress and the White House.
Work to get enough Republicans to help the Democrats override the Bush veto of the SCHIP bill is stalled and is not going to be accomplished before Thanksgiving. The problem now is that the Democratic leadership has shown a willingness to toughen up the bill over eligibility and citizenship requirements to please the Republicans only to have the "TriCaucus"--that includes the Congressional Black Caucus, Asian Pacific American Caucus, and Hispanic Caucus--say they won't vote for a SCHIP bill that has given up too much.
Just before the Thanksgiving recess, Democratic leaders made a major push to get an agreement with enough Republicans to override the Bush veto but were not able to find common ground. They will try again in December but the fact that with such great effort they were not able to get it done this week does not bode well.
As I have told you before, the doc fee cut problem and corresponding proposed Medicare Advantage insurer payment cuts are going to be worked out in the Senate Finance Committee. Ignore everyone else, that is where any deal will be done.
This week, Democratic Senate Finance Chair Max Baucus said he is getting ready to release a bill that fixes the 10% physician cut for 2008 and the next scheduled cut of 5% in 2009. To do so, he would cut Medicare Advantage payments by about $20 billion. His bill would also spend more on rural seniors and cut home oxygen providers and home health care.
On the Republican side, ranking Republican Senator Grassley said he would rather see a one-year fix to the Medicare physician fee problem and a smaller Medicare Advantage cut----likely thinking it will be easier to get something that either the White House approves or can be overridden if it is vetoed.
No consensus has yet been achieved--and then there is the White House to deal with.
In the meantime, the SCHIP bill is operating under a continuing resolution (CR) until December 14th--which can be easily extended. However, the longer this goes on the more states that will run short of SCHIP money and have to cut kids--all of which will be on the front page of the local newspapers. The CR money isn't enough to sustain current enrollment levels for long.
The Medicare docs get cut 10% on New Year's day unless a deal can be reached.
There will be a deal in the Congress on the doc cuts and Medicare Advantage and it will occur later in December than earlier. It might even slide into the early part of the New Year with a retroactive effective date to January 1.
Yesterday, the House fell just two votes short of overriding the Bush veto of the Labor/HHS spending bill. It is clear that the Dems have not yet found the combination necessary to get those last few Republican votes to get a SCHIP or budget bill.
The Democrats are now talking about combining all of the ten remaining spending bills into one giant bill. They are saying they would "split the difference" in the total budget disagreement with Bush, pass it, and then fight it out. It is likely that any doc fix and Medicare Advantage cuts will be caught up in that.
On timing, the only thing that is certain is that no member of Congress will miss a holiday dinner. Kids might lose their health insurance though.
The nice thing about the 12-year Republican rule of Congress is that they knew how to run a "railroad." Maybe they spent "like drunken sailors" and kept votes open until 4 am while they beat their people up, but they knew how to enforce discipline in their ranks and get bills passed in time to catch the last plane out of town.
I think I miss Tom DeLay!
Guess what? New Year's is just over six weeks away.
For now, each of these issues is bogged down in the overall budget stalemate between Congress and the White House.
Work to get enough Republicans to help the Democrats override the Bush veto of the SCHIP bill is stalled and is not going to be accomplished before Thanksgiving. The problem now is that the Democratic leadership has shown a willingness to toughen up the bill over eligibility and citizenship requirements to please the Republicans only to have the "TriCaucus"--that includes the Congressional Black Caucus, Asian Pacific American Caucus, and Hispanic Caucus--say they won't vote for a SCHIP bill that has given up too much.
Just before the Thanksgiving recess, Democratic leaders made a major push to get an agreement with enough Republicans to override the Bush veto but were not able to find common ground. They will try again in December but the fact that with such great effort they were not able to get it done this week does not bode well.
As I have told you before, the doc fee cut problem and corresponding proposed Medicare Advantage insurer payment cuts are going to be worked out in the Senate Finance Committee. Ignore everyone else, that is where any deal will be done.
This week, Democratic Senate Finance Chair Max Baucus said he is getting ready to release a bill that fixes the 10% physician cut for 2008 and the next scheduled cut of 5% in 2009. To do so, he would cut Medicare Advantage payments by about $20 billion. His bill would also spend more on rural seniors and cut home oxygen providers and home health care.
On the Republican side, ranking Republican Senator Grassley said he would rather see a one-year fix to the Medicare physician fee problem and a smaller Medicare Advantage cut----likely thinking it will be easier to get something that either the White House approves or can be overridden if it is vetoed.
No consensus has yet been achieved--and then there is the White House to deal with.
In the meantime, the SCHIP bill is operating under a continuing resolution (CR) until December 14th--which can be easily extended. However, the longer this goes on the more states that will run short of SCHIP money and have to cut kids--all of which will be on the front page of the local newspapers. The CR money isn't enough to sustain current enrollment levels for long.
The Medicare docs get cut 10% on New Year's day unless a deal can be reached.
There will be a deal in the Congress on the doc cuts and Medicare Advantage and it will occur later in December than earlier. It might even slide into the early part of the New Year with a retroactive effective date to January 1.
Yesterday, the House fell just two votes short of overriding the Bush veto of the Labor/HHS spending bill. It is clear that the Dems have not yet found the combination necessary to get those last few Republican votes to get a SCHIP or budget bill.
The Democrats are now talking about combining all of the ten remaining spending bills into one giant bill. They are saying they would "split the difference" in the total budget disagreement with Bush, pass it, and then fight it out. It is likely that any doc fix and Medicare Advantage cuts will be caught up in that.
On timing, the only thing that is certain is that no member of Congress will miss a holiday dinner. Kids might lose their health insurance though.
The nice thing about the 12-year Republican rule of Congress is that they knew how to run a "railroad." Maybe they spent "like drunken sailors" and kept votes open until 4 am while they beat their people up, but they knew how to enforce discipline in their ranks and get bills passed in time to catch the last plane out of town.
I think I miss Tom DeLay!
Thursday, November 15, 2007
VEBA's--The New Growth Opportunity
With word that Ford workers have followed those at GM and Chrysler in ratifying their new labor contracts we may be at the cusp of the next big growth opportunity in the health plan business.
GM alone will transfer as much as $50 billion in long-term retiree health care liabilities to the Voluntary Employees Beneficiary's Association (VEBA) and Chrysler and Ford will also set up the structure over the next two years.
So, there is a new business opportunity for as much as $100 billion in long-term retiree liabilities that the UAW is going to have to figure out a way to manage. With the auto companies laying off their retiree health care risk for estimates as low as 70 cents on the dollar, the UAW needs to make their limited funds work for their members.
The business opportunity is for the big health plans to go to the union and do what they do best--carve out risk and limit the plan sponsor's liabilities.
With commercial market growth now coming only when you steal business from the other guy and the private Medicare market beginning to slow--and in danger of having its generous Medicare Advantage payments cut back to a par with the traditional Medicare plan--finding new areas of growth is critical to the health plan industry.
But the VEBA business will not be an easy risk to manage. The auto companies were no amateurs when it comes to health benefit management and they have reportedly laid off their risk at a pretty good discount. The union will be looking for guaranteed costs at levels well below where the auto companies were getting the job done. Competition will drive margins down on what will be a very risky business.
But the health plans need growth and they will have no choice but to enter this sector if they want to continue to satisfy Wall Street's expectations for growth.
VEBAs will be the subject of some pretty brisk competition in the coming years. But maintaining benefit levels for the unions at maybe 70% to 80% of what the auto companies were paying out won't be an easy business.
But done successfully, it will not only make the union and Wall Street happy, it can also show us the value that the private markets can deliver in managing health care costs.
GM alone will transfer as much as $50 billion in long-term retiree health care liabilities to the Voluntary Employees Beneficiary's Association (VEBA) and Chrysler and Ford will also set up the structure over the next two years.
So, there is a new business opportunity for as much as $100 billion in long-term retiree liabilities that the UAW is going to have to figure out a way to manage. With the auto companies laying off their retiree health care risk for estimates as low as 70 cents on the dollar, the UAW needs to make their limited funds work for their members.
The business opportunity is for the big health plans to go to the union and do what they do best--carve out risk and limit the plan sponsor's liabilities.
With commercial market growth now coming only when you steal business from the other guy and the private Medicare market beginning to slow--and in danger of having its generous Medicare Advantage payments cut back to a par with the traditional Medicare plan--finding new areas of growth is critical to the health plan industry.
But the VEBA business will not be an easy risk to manage. The auto companies were no amateurs when it comes to health benefit management and they have reportedly laid off their risk at a pretty good discount. The union will be looking for guaranteed costs at levels well below where the auto companies were getting the job done. Competition will drive margins down on what will be a very risky business.
But the health plans need growth and they will have no choice but to enter this sector if they want to continue to satisfy Wall Street's expectations for growth.
VEBAs will be the subject of some pretty brisk competition in the coming years. But maintaining benefit levels for the unions at maybe 70% to 80% of what the auto companies were paying out won't be an easy business.
But done successfully, it will not only make the union and Wall Street happy, it can also show us the value that the private markets can deliver in managing health care costs.
Health Wonk Review Is Up
Maggie Mahar does a particularly good job this time of accumulating some very good posts from the best of the health care blog world.
This is also an opportunity for you to check out her new and excellent health care blog, "Health Beat" which is "a project of the Century Foundation."
This is also an opportunity for you to check out her new and excellent health care blog, "Health Beat" which is "a project of the Century Foundation."
Wednesday, November 14, 2007
Part D Medicare Drug Plans See Major Price Increases--Why?
The Part D Medicare drug program's weighted average monthly premiums will increase 17% in 2008 and 23% since the program's January 2006 inception. The 2008 increase is well above basic pharmacy cost trend meaning the insurers are doing some rate catch-up. The average is weighted by actual enrollment.
Premiums for the top two Part D Plans (PDPs) by enrollment are up dramatically. According to a study by the Kaiser Family Foundation, the top two plans, that account for one-third of 2007 enrollment, are the United AARP "MedicareRx Preferred" plan and the Humana "PDP Standard" plan.
The United/AARP plan will see a 16% increase over 2007 rates and will increase by 23% over its original January 2006 rates.
The Humana "PDP Standard" will see its rates rise by 71% in 2008 and that plan is up 272% since its original launch in 2006.
Even after these increases, these plans are still affordable. The United/AARP plan still has an average monthly cost of $32.33 while the average cost of the Humana "PDP Standard" is $25.82 per month.
Under all of their plans, United and Humana hold 44% of the Part D market. Humana's "PDP Enhanced" rates will rise 63% between 2006 and 2008. The "AARP/Saver" plan offered by United actually had a rate decrease in 2007 but is now facing an increase of 65% from $14.43 to $23.85 in 2008.
There are also some relatively hidden increases as co-pays go up, formularies are tightened, and name-brand gap coverage has all but evaporated.
Part D will continue to be a very competitive market. A few plans are actually seeing a decrease--Universal American's basic plan will get a 12% cut in 2008. Ninety percent of seniors will actually be able find at least one plan in their market that will be cheaper than their current choice.
Why are the rates rising so much?
Premiums for the top two Part D Plans (PDPs) by enrollment are up dramatically. According to a study by the Kaiser Family Foundation, the top two plans, that account for one-third of 2007 enrollment, are the United AARP "MedicareRx Preferred" plan and the Humana "PDP Standard" plan.
The United/AARP plan will see a 16% increase over 2007 rates and will increase by 23% over its original January 2006 rates.
The Humana "PDP Standard" will see its rates rise by 71% in 2008 and that plan is up 272% since its original launch in 2006.
Even after these increases, these plans are still affordable. The United/AARP plan still has an average monthly cost of $32.33 while the average cost of the Humana "PDP Standard" is $25.82 per month.
Under all of their plans, United and Humana hold 44% of the Part D market. Humana's "PDP Enhanced" rates will rise 63% between 2006 and 2008. The "AARP/Saver" plan offered by United actually had a rate decrease in 2007 but is now facing an increase of 65% from $14.43 to $23.85 in 2008.
There are also some relatively hidden increases as co-pays go up, formularies are tightened, and name-brand gap coverage has all but evaporated.
Part D will continue to be a very competitive market. A few plans are actually seeing a decrease--Universal American's basic plan will get a 12% cut in 2008. Ninety percent of seniors will actually be able find at least one plan in their market that will be cheaper than their current choice.
Why are the rates rising so much?
- First, most players priced their programs at "break-even" when the program was launched in 2006. They did so to grab market share correctly believing it's easier to hold on to existing market share then take it away from someone else later in the product cycle.
- Most of these increases are actually in line with pharmacy trend over a two-year period. The first year increases were light and the second year increase often makes up for that.
- Many competitors also believed that Part D provided a valuable entry to the more lucrative Medicare Advantage market later on as plans tried to upgrade customers to the broader private Medicare coverage. Now, Medicare Advantage enrollment growth is likely going to slow down from initial levels and the imperative for insurers to "grease the skids" with more competitive Part D rates is not so appealing a strategy.
- If Medicare Advantage margins are going to come down then Part D margins have got to go up. The insurers understand the extra payments that have made Medicare Advantage so profitable are not going to last much longer (why Wall Street doesn't see that is another issue) and Part D needs to stand on its own. Medicare Advantage is also going to suffer some natural margin slippage as Medicare trend and scheduled payment levels cause challenges anyway.
- The 2008 Part D price increases are not likely to drive many seniors away because seniors don't like to make plan changes and the new premiums are still quite affordable.
Monday, November 12, 2007
Giuliani Puts His Foot In It With the Claim He Would Have Only Gotten Quality Treatment For His Cancer in the U.S.
There is this myth that all of the extra money we spend on health care at least gets us the best care in the world. Study after study debunked that long ago and the fact that someone running for president doesn't understand that claim is a myth is inexcusable.
But Rudy Giuliani actually has a radio ad in New Hampshire that repeats the myth.
All Giuliani's remark did was give opponents of a market based health care system of care lots of legitimate ammunition. Ezra Klein did a particularly good job of "hoisting" Giuliani on his "own petard."
In that ad, Giuliani argued that in the U.S. the cure rate for prostate cancer is 82% while in England, with its "socialized medicine," it is 44%.
That hardly tells the whole story or gives an accurate impression.
The facts also are:
Sometimes people elsewhere have to wait longer to get the very best. Sometimes they don't.
Sometimes people in the U.S. don't get that great care. Sometimes they get much less care than in other industrialized nations.
A Rand report found that U.S. study participants only received 54.9% of "recommended care" while a separate survey of the uninsured by the Kaiser Family Foundation found 47% of people without health insurance said they had postponed seeking care during the last 12 months because of cost.
Politicians perpetuating our current health care system by repeating the myth that we have care that is always way better than care in the rest of the industrialized world are setting themselves up to be made "out of touch" on health care.
Giuliani better start paying some serious attention to the health care issue or, if he is the nominee, the Democrat is going to eat him alive.
But Rudy Giuliani actually has a radio ad in New Hampshire that repeats the myth.
All Giuliani's remark did was give opponents of a market based health care system of care lots of legitimate ammunition. Ezra Klein did a particularly good job of "hoisting" Giuliani on his "own petard."
In that ad, Giuliani argued that in the U.S. the cure rate for prostate cancer is 82% while in England, with its "socialized medicine," it is 44%.
That hardly tells the whole story or gives an accurate impression.
The facts also are:
- That the prostate cancer mortality rates for the U.S., Britain, Canada, and France are virtually the same.
- In 1997, 28 males of every 100,000 died of prostate cancer in Britain. In the U.S. it was 26--hardly a fundamental difference.
- Looking at a broader measure of "years of life lost per 100,000 of population for all causes," the U.S. finishes well back from the other leading industrialized nations.
- It is also notable that the prostate cancer treatment Giuliani selected, prostate brachytherapy--using radioactive seeds, was developed by a physician in Denmark.
Sometimes people elsewhere have to wait longer to get the very best. Sometimes they don't.
Sometimes people in the U.S. don't get that great care. Sometimes they get much less care than in other industrialized nations.
A Rand report found that U.S. study participants only received 54.9% of "recommended care" while a separate survey of the uninsured by the Kaiser Family Foundation found 47% of people without health insurance said they had postponed seeking care during the last 12 months because of cost.
Politicians perpetuating our current health care system by repeating the myth that we have care that is always way better than care in the rest of the industrialized world are setting themselves up to be made "out of touch" on health care.
Giuliani better start paying some serious attention to the health care issue or, if he is the nominee, the Democrat is going to eat him alive.
Report: "Health Insurer Tied Bonuses to Dropping Sick Policyholders"
It's hard to imagine a worse headline for the health insurance industry just as we are heading into what will be a fundamental debate over who should run our health care system.
It is even harder to imagine a dumber thing for the insurance industry to do than continue to argue and litigate the notion that an insurer can cancel--or rescind--an insurance policy for a misstatement of fact on an application for coverage no matter whether that statement was intentional or material.
Lisa Girion, of the Los Angeles Times had another story about insurance company health policy rescision last week and reported that:
The problem is that some California health insurance companies have been looking for any "misrepresentation" on a policy no matter how unintentional or immaterial and then using it to cancel coverage.
In this case, a women who later contracted breast cancer was canceled because the insurer argued she had misstated her weight on the application and had not disclosed a heart condition. The women argued she provided all details to the agent who took down her medical history on her application.
Why the industry continues to push this issue is unfathomable to me.
Update
November 16 Post: HealthNet fined $1 million for "failure to be truthful" to state investigators. California Policy Cancellation Scandal Heats Up as Republican Candidates Propose Health Reform Based On An Individual Health Insurance System
It is even harder to imagine a dumber thing for the insurance industry to do than continue to argue and litigate the notion that an insurer can cancel--or rescind--an insurance policy for a misstatement of fact on an application for coverage no matter whether that statement was intentional or material.
Lisa Girion, of the Los Angeles Times had another story about insurance company health policy rescision last week and reported that:
- "Woodland Hills-based Health Net Inc. avoided paying $35.5 million in medical expenses by rescinding about 1,600 policies between 2000 and 2006. During that period, it paid its senior analyst in charge of cancellations more than $20,000 in bonuses based in part on her meeting or exceeding annual targets for revoking policies, documents disclosed Thursday showed."
- The Times reported that in 2002, the company's goal for its senior analyst in charge of rescission reviews, was 15 cancellations a month. She did better than that, rescinding 275 policies that year for a monthly average of 22.9.
- Health Net's lawyer told an arbitrator that prohibitions against performance bonuses for rescision didn't apply because the bonuses were based on the overall performance of the analyst and the company. He also said that meeting the cancellation target was only a small part of her bonus payment.
- Health Net is also reportedly arguing that a prohibition against incentive compensation for rescisions does not apply to the insurer in the case because the senior analyst was an underwriter -- not a claims payer.
The problem is that some California health insurance companies have been looking for any "misrepresentation" on a policy no matter how unintentional or immaterial and then using it to cancel coverage.
In this case, a women who later contracted breast cancer was canceled because the insurer argued she had misstated her weight on the application and had not disclosed a heart condition. The women argued she provided all details to the agent who took down her medical history on her application.
Why the industry continues to push this issue is unfathomable to me.
Update
November 16 Post: HealthNet fined $1 million for "failure to be truthful" to state investigators. California Policy Cancellation Scandal Heats Up as Republican Candidates Propose Health Reform Based On An Individual Health Insurance System
Thursday, November 8, 2007
Sometimes It's the Little Things--The NCQA Announces an Agreement Between Providers and Payers to Better Pay for the Quality of Care
Particularly in this election season we tend to focus on the big health care reform plans. It is natural to want to see a big fix to a big problem. But everyday things are going on in the market that can make a difference. Make no mistake, these good works will not replace the need for systemic health care reform but it would be wrong to think just big policy changes are the only answer.
A case in point is the news that the National Committee for Quality Assurance has scored a big breakthrough in yesterday's New York Times.
The new model would help employers and insurers to spot the best docs and then attempt to encourage employers and insurers to use them. The doctors would be better compensated for doing more than is now the case for things like office visits.
The objective is to give doctors incentives to spend more time with patients during office visits and in other contacts such as phone calls and emails.
Doctors would also be paid for being more proactive in helping patients manage chronic conditions. Apparently associations representing more than 300,000 primary care doctors have accepted at least "some of the measures." A number of insurers are also on board including Wellpoint, United, Humana, CIGNA, the Blue Cross Association and a number of pharmacy benefit managers (PBMs) and employers.
This is a small step (relative to major health care reform) that is a huge accomplishment by the NCQA in making the system more efficient and effective and would be important no matter what the outcome of political health care reform.
Good for the NCQA and the providers and payers that have come to the table.
A case in point is the news that the National Committee for Quality Assurance has scored a big breakthrough in yesterday's New York Times.
The new model would help employers and insurers to spot the best docs and then attempt to encourage employers and insurers to use them. The doctors would be better compensated for doing more than is now the case for things like office visits.
The objective is to give doctors incentives to spend more time with patients during office visits and in other contacts such as phone calls and emails.
Doctors would also be paid for being more proactive in helping patients manage chronic conditions. Apparently associations representing more than 300,000 primary care doctors have accepted at least "some of the measures." A number of insurers are also on board including Wellpoint, United, Humana, CIGNA, the Blue Cross Association and a number of pharmacy benefit managers (PBMs) and employers.
This is a small step (relative to major health care reform) that is a huge accomplishment by the NCQA in making the system more efficient and effective and would be important no matter what the outcome of political health care reform.
Good for the NCQA and the providers and payers that have come to the table.
Wednesday, November 7, 2007
What Will It Take to Get a SCHIP Bill This Year? The Budget Outlook Deteriorates Even More
Democratic and Republican negotiators are hard at work to get an agreement on the State Children's Health Insurance Program (SCHIP) extension.
The current SCHIP bill failed to get a veto-proof majority in the House.
President Bush has said there is no way he will sign a SCHIP bill with a tax increase in it--the current bill would increase the per pack cigarette tax by 61 cents.
The only way the Democratic leadership can pass a veto-proof SCHIP bill is to peel off enough Republicans to have the two-thirds necessary--something they have already accomplished in the Senate and need about 10 votes to do in the House.
First, the conversations between the needed Republicans and the Democrats don't include dropping the cigarette tax. Bush is on his own on that one.
The deal can be done if Democrats assure the Republican fence-sitters of two things:
Even more, the regular 2008 budget process continues to deteriorate. Federal department and agency heads have already been put on alert to the possibility that the federal government will be operating on temporary "continuing resolutions" for as long as February 15th.
The Democrats' recent attempts to couple the Labor/HHS spending bill with the Veterans/Military Construction bill has not only flopped but backfired with the fence-sitting Republicans they needed to attract, making the already contentious budget process even worse.
President Bush has said he will veto at least 10 of the 12 upcoming appropriations bills and it is clear the Democrats have yet to find the formula they will need to overcome those Bush vetoes.
The upcoming January 1, 2008 Medicare physician fee cuts and proposed Medicare Advantage cuts to pay for that fix have yet to be dealt with. I heard someone on the Hill say the other day that it looks like that issue combo will be the last two things to be dealt with in what is turning out to be a more and more problematic budget process.
But don't let all of this budget news convince you they won't be dealt with. If the doc cuts aren't reversed, the fall-out will be significant.
The current SCHIP bill failed to get a veto-proof majority in the House.
President Bush has said there is no way he will sign a SCHIP bill with a tax increase in it--the current bill would increase the per pack cigarette tax by 61 cents.
The only way the Democratic leadership can pass a veto-proof SCHIP bill is to peel off enough Republicans to have the two-thirds necessary--something they have already accomplished in the Senate and need about 10 votes to do in the House.
First, the conversations between the needed Republicans and the Democrats don't include dropping the cigarette tax. Bush is on his own on that one.
The deal can be done if Democrats assure the Republican fence-sitters of two things:
- That only citizens and documented immigrants will be eligible--that these rules have been significantly tightened-up.
- That the first priority is covering kids below 200% of poverty, before 300% of poverty. The Republican House leadership wants 90% of children in families below 200% of poverty covered before going to 300%. However, getting it that tight won't be necessary to get enough Republicans to accomplish two-thirds support in the House.
Even more, the regular 2008 budget process continues to deteriorate. Federal department and agency heads have already been put on alert to the possibility that the federal government will be operating on temporary "continuing resolutions" for as long as February 15th.
The Democrats' recent attempts to couple the Labor/HHS spending bill with the Veterans/Military Construction bill has not only flopped but backfired with the fence-sitting Republicans they needed to attract, making the already contentious budget process even worse.
President Bush has said he will veto at least 10 of the 12 upcoming appropriations bills and it is clear the Democrats have yet to find the formula they will need to overcome those Bush vetoes.
The upcoming January 1, 2008 Medicare physician fee cuts and proposed Medicare Advantage cuts to pay for that fix have yet to be dealt with. I heard someone on the Hill say the other day that it looks like that issue combo will be the last two things to be dealt with in what is turning out to be a more and more problematic budget process.
But don't let all of this budget news convince you they won't be dealt with. If the doc cuts aren't reversed, the fall-out will be significant.
The Best Places To Get the Inside On the Workers' Compensation Market
Workers' Comp has always been a unique niche in the health care business.
If WC is on your mind, I was reminded again today how important it is for you to be a regular visitor on Joe Paduda's "Managed Care Matters." While Joe is also a great source on all things health care, his perspective on WC is a must for those in that business. It's the real insider view that I always enjoy. His recent post providing a "quick take" on the National Work Comp Conference is worth a read.
Just as important to the WC player is Lynch Ryan's "Workers' Comp Insider." Their take is more by the book and their book is as complete as it gets.
If you are in the business, don't miss either.
If WC is on your mind, I was reminded again today how important it is for you to be a regular visitor on Joe Paduda's "Managed Care Matters." While Joe is also a great source on all things health care, his perspective on WC is a must for those in that business. It's the real insider view that I always enjoy. His recent post providing a "quick take" on the National Work Comp Conference is worth a read.
Just as important to the WC player is Lynch Ryan's "Workers' Comp Insider." Their take is more by the book and their book is as complete as it gets.
If you are in the business, don't miss either.
Tuesday, November 6, 2007
Romney Says There Are Already "Pots of Money" in the States to Pay For Health Care Reform---Where?
Mitt Romney says states could implement comprehensive health care reform without having to raise taxes.
However, states trying to replicate the Massachusetts health plan would likely have to raise taxes in order to pay for it. That is the conclusion of a November 3rd Boston Globe article. Here are some points:
Just where does Romney think these "pots of money" are in the states? As he should have learned in Massachusetts, that state's program already draws on the federal programs (SCHIP and Medicaid) to help pay for the plan. On top of that comes the $160 million from the "free care pool." With all of that there still isn't enough money--the regulator has had to back-off on the coverage mandate for the near poor because of a funding shortfall.
The Romney campaign's health plan has as its core the notion that there is enough money in the states already that they can craft their own version of health care reform and cover their people.
In California, the governor and legislature, now in a special session, are grappling with a state health reform plan that at last look had the Democrats proposing to pay for it with an employer payroll tax of 2% to 6.5%, taking the per pack cigarette tax from 87 cents to $2.87, and raising billions in new hospital taxes. And, that is after "creatively" using SCHIP and Medicaid money.
Romney says he wants the states to be "laboratories of innovation." But, Romney needs to tell us where these "pots of money" are in the states for health care reform.
Recent post: A Detailed Analysis of the Romney Health Care Reform Plan
However, states trying to replicate the Massachusetts health plan would likely have to raise taxes in order to pay for it. That is the conclusion of a November 3rd Boston Globe article. Here are some points:
- Massachusetts had something other states don't have--a $610 million uncompensated care pool that Mass was able to use for covering the uninsured.
- The uncompensated care pool comes from assessments on hospitals, insurers, and state tax revenue.
- Mass is using roughly $160 million from the uncompensated care pool, along with other state and federal funds, to fund Massachusetts plan.
Just where does Romney think these "pots of money" are in the states? As he should have learned in Massachusetts, that state's program already draws on the federal programs (SCHIP and Medicaid) to help pay for the plan. On top of that comes the $160 million from the "free care pool." With all of that there still isn't enough money--the regulator has had to back-off on the coverage mandate for the near poor because of a funding shortfall.
The Romney campaign's health plan has as its core the notion that there is enough money in the states already that they can craft their own version of health care reform and cover their people.
In California, the governor and legislature, now in a special session, are grappling with a state health reform plan that at last look had the Democrats proposing to pay for it with an employer payroll tax of 2% to 6.5%, taking the per pack cigarette tax from 87 cents to $2.87, and raising billions in new hospital taxes. And, that is after "creatively" using SCHIP and Medicaid money.
Romney says he wants the states to be "laboratories of innovation." But, Romney needs to tell us where these "pots of money" are in the states for health care reform.
Recent post: A Detailed Analysis of the Romney Health Care Reform Plan
Monday, November 5, 2007
Medicare Buy-In For Retirees--Private Options Make It an Even Better Idea
"We should act now to let companies and unions buy their early retirees into Medicare." That's the point of a Washington Post op-ed today by Democratic Congressman Rahm Emanuel and the president of the Democratic Leadership Council, Bruce Reed.
These two former Clinton aides are arguing that:
Emanuel and Reed have a good idea. This does not mean taxpayers would get stuck with the costs. Existing employer/union funding plus affordable contributions by beneficiaries ought to be able to pay the full bill. The UAW which now has taken on enormous health care liability for its retirees from the auto industry, for example, would be far better off with these obligations part of the broader and more efficient Medicare system.
This proposal does not have to be a matter of the government absorbing liabilities to the detriment of the private market. We can have the best of both worlds.
Let's take this good idea one step further and create a set of private Medicare options and bring the forces of the private market to bear as well. And, as those of you who read this blog on a regular basis know, I am not suggesting a private Medicare market paid 12% or 19% more.
Opening this idea up to the private market will make it more palatable to the private market side of the health care debate.
If you believe in the market, you will be optimistic the market will do well.
If you do not believe in the market, you have nothing to fear from private competition--on a level playing field. With the Democrats likely in charge of the Congress in the coming years, I doubt they will cut the market any breaks.
These two former Clinton aides are arguing that:
- "The troubles at GM and Chrysler--and Ford, which reached a tentative labor agreement this weekend -- underscore the enormous competitive burden that health-care costs impose on American companies."
- "In 2005, Americans ages 55 to 64 were the fastest-growing segment of the population to become uninsured.
- The average annual cost of covering a 30-year-old employee is $2,222. The average yearly cost for an employee who retires at 60 is $6,139."
- "A Medicare buy-in for retirees ages 55 to 64 won't cost taxpayers. Companies could pick up most of the cost; instead of GM contributing $30 billion to a VEBA, that money would go to Medicare. Retirees would have to pay higher premiums than traditional Medicare beneficiaries do to receive health care."
Emanuel and Reed have a good idea. This does not mean taxpayers would get stuck with the costs. Existing employer/union funding plus affordable contributions by beneficiaries ought to be able to pay the full bill. The UAW which now has taken on enormous health care liability for its retirees from the auto industry, for example, would be far better off with these obligations part of the broader and more efficient Medicare system.
This proposal does not have to be a matter of the government absorbing liabilities to the detriment of the private market. We can have the best of both worlds.
Let's take this good idea one step further and create a set of private Medicare options and bring the forces of the private market to bear as well. And, as those of you who read this blog on a regular basis know, I am not suggesting a private Medicare market paid 12% or 19% more.
Opening this idea up to the private market will make it more palatable to the private market side of the health care debate.
If you believe in the market, you will be optimistic the market will do well.
If you do not believe in the market, you have nothing to fear from private competition--on a level playing field. With the Democrats likely in charge of the Congress in the coming years, I doubt they will cut the market any breaks.
Thursday, November 1, 2007
"Medicare Advantage: Wrong Way to Spend $54 Billion"--The AMA Goes After the Medicare HMO's Money
The American Medical Association (AMA) in an editorial in its journal, American Medical News, has pulled no punches in its argument that Medicare HMO plans (Medicare Advantage) need to be cut in order to find the money to fix the upcoming Medicare physician fee cuts--10% in 2008 and another 5% in 2009.
Without a doubt their attack on "excess payments" to insurers is self serving--as about all lobbying is. But it also gives us a look into the pitched battle that is now going on in Congress over who is going to win and who is going to lose when it comes to Medicare provider payments.
Here is an excerpt from their November editorial:
Read the full editorial here.
Without a doubt their attack on "excess payments" to insurers is self serving--as about all lobbying is. But it also gives us a look into the pitched battle that is now going on in Congress over who is going to win and who is going to lose when it comes to Medicare provider payments.
Here is an excerpt from their November editorial:
"Meanwhile, many more seniors could well be affected by physician pay that faces a staggering cut, currently estimated at about 10% for 2008, and 15% through 2009. It's no surprise that an AMA online survey of nearly 9,000 physicians, released in June, reports that about 60% of doctors say the cut will force them into the position, at the least, of having to limit the number of new Medicare patients they take."It is time for Congress to look at Medicare Advantage with clear eyes. Congress needs to level the playing field between traditional Medicare and private Medicare plans by eliminating excess payments to Medicare Advantage. The $54 billion saved would be more than enough to offset eliminating the two-year cut in physician reimbursement, as well as an update in payments to reflect increasing physician costs -- all while limiting premium increases for seniors.
"Medicare Advantage, which covers managed care and private fee-for-service plans, was created to make Medicare more competitive and efficient, as well as to entice private plans to rural areas or to offer extra benefits. Instead, the program appears to have become more of a Medicare benefit for insurers, which on average received 112% of the amount that traditional Medicare paid for each senior's care in 2006. For private fee-for-service plans alone, that figure was 119%.
"Yet despite Medicare Advantage's good fortune, it has managed to disappoint many patients and physicians. More than 50% of 2,022 physicians responding to an AMA survey on Medicare Advantage, released in May, said they have seen plans deny services typically covered in the traditional Medicare plan. More than half of physicians report receiving payments below the traditional Medicare rate."
Read the full editorial here.
Why Consumers’ Checkbook v CMS is a Sideshow--Bush Administration Refuses to Release Provider Data
Brian Klepper joins us again today with another one of his welcome posts. This time he points out the hypocrisy in CMS, which has been calling for market transparency, refusing to provide provider data to a consumer group.
Why Consumers’ Checkbook v CMS is a Sideshow
by Brian Klepper
There are people who call for market solutions as the answer to every societal problem, but who then work to restrict the information that markets (and societies) must have to function effectively. Often, the truth is that these supposed market advocates need secrecy and opacity to protect their current advantages. If markets were to work as they claim they want, their actual behaviors (or pricing, or performance) would become known, and their positions compromised.
Which brings us to the new, interesting development in the case of Consumers’ Checkbook v CMS. You may remember that Consumers’ Checkbook (CC) is a consumer advocacy organization that sued CMS for the Medicare physician data in 4 states and DC. Seemingly arguing against their previous position, the Bush Administration – which actually has a good record for promoting health care pricing/performance transparency – took the opposite stance in this case, arguing instead that physicians have a right to privacy. (It is tempting to suggest that the AMA’s fingerprints must be all over this, but I don’t know that for sure.)
In any case, much to the surprise of me and, I’m sure, a lot of other people, on August 22nd, the court held with CC and ordered CMS to release the data by September 21st or appeal the decision. CC promptly promised to provide public access to the data, and sued again, this time for the Medicare physician data from the rest of the country.
On October 19ths, CMS appealed the ruling. This means the Administration will fight to keep physician data out of the public’s hands.
As I’ve said before, in the short term the symbolic importance of this battle cannot be overestimated. Currently, there are few, if any, freely available, robust sources of claims data. Health plans and clearinghouses have the largest data sources, but these are typically proprietary.
If a startup company wants to identify the best performing physicians in any market – the ones who, in a given specialty, consistently obtain the best outcomes at the lowest costs – there is no easy way to independently do that.
Or let’s say you have a family member with a complicated condition or who needs a particular procedure. There is no direct way for you to objectively determine which community physician has the best track record with that condition or procedure. (You CAN get information on which car has the best repair record, which house repair contractor gets the best reviews, and which pizza restaurant delivers the fastest.)
The good news is that the Administration’s position is weak, at best, and won’t last long, even if they win this round. Hospital data is already publicly available and states are now actively publicly reporting key measurements of hospital quality and safety. Why should physicians have a special status that keeps their track records secret from the patients who depend on them? How can this Administration, which argues incessantly for market-based solutions, suppose that the health care marketplace can resolve the crisis when, as the great economist Adam Smith would have pointed out, there is no information to drive the decision-making that healthy markets require.
It is ironic that we’re even still having this discussion. In the first years of the 20th century, the famous surgeon Ernest Codman MD began to campaign for “the end-result system of hospital standardization.” He said,
Hospitals [and surgeons], if they wish to be sure of improvement...must analyze their results, to find their strong and weak points, [and] must compare their results with those of [their peers]...[They should] make this information publicly known so that the future patients might make informed decisions.
In the end, it won’t matter what this Administration does. There is now widespread acknowledgment that much of the health care crisis can be traced to an inability to see what is going on behind the curtain. A tidal wave of sentiment is building in the marketplace, with calls for making the information available, so that decision-makers of all types can make responsible, informed decisions.
It is difficult to imagine that this stonewalling can last much longer. If transparency doesn’t occur through policy change, it will surely happen in the marketplace through vendors with the heft and resources to see it through. If the recent Health 2.0 conference in San Francisco made any point emphatically, it was that a slew of companies are focused on infusing health care with unprecedented levels of transparency and decision-support.
The transition away from an opaque market to one that makes relative pricing and performance known and that rewards the good providers is the real health care reform we’re all looking for. Yes, we need to find a way to re-enfranchise everyone into the system. But that will be much easier if there is reason to believe that we can get excessive care and cost under control.
And to that end, Consumers’ Checkbook v CMS is a sideshow, not a pivotal decision. On this issue, the Bush Administration and whoever is urging them on are anachronisms that will soon be swept away with the buggy whip and White-Out. The real change agent here is technology and the long-overdue realization by purchasers of all kinds that, when markets are opaque, value becomes secondary and many vendors will act most assertively in their own interests first.
Brian Klepper PhD
www.brianklepper.net
Why Consumers’ Checkbook v CMS is a Sideshow
by Brian Klepper
There are people who call for market solutions as the answer to every societal problem, but who then work to restrict the information that markets (and societies) must have to function effectively. Often, the truth is that these supposed market advocates need secrecy and opacity to protect their current advantages. If markets were to work as they claim they want, their actual behaviors (or pricing, or performance) would become known, and their positions compromised.
Which brings us to the new, interesting development in the case of Consumers’ Checkbook v CMS. You may remember that Consumers’ Checkbook (CC) is a consumer advocacy organization that sued CMS for the Medicare physician data in 4 states and DC. Seemingly arguing against their previous position, the Bush Administration – which actually has a good record for promoting health care pricing/performance transparency – took the opposite stance in this case, arguing instead that physicians have a right to privacy. (It is tempting to suggest that the AMA’s fingerprints must be all over this, but I don’t know that for sure.)
In any case, much to the surprise of me and, I’m sure, a lot of other people, on August 22nd, the court held with CC and ordered CMS to release the data by September 21st or appeal the decision. CC promptly promised to provide public access to the data, and sued again, this time for the Medicare physician data from the rest of the country.
On October 19ths, CMS appealed the ruling. This means the Administration will fight to keep physician data out of the public’s hands.
As I’ve said before, in the short term the symbolic importance of this battle cannot be overestimated. Currently, there are few, if any, freely available, robust sources of claims data. Health plans and clearinghouses have the largest data sources, but these are typically proprietary.
If a startup company wants to identify the best performing physicians in any market – the ones who, in a given specialty, consistently obtain the best outcomes at the lowest costs – there is no easy way to independently do that.
Or let’s say you have a family member with a complicated condition or who needs a particular procedure. There is no direct way for you to objectively determine which community physician has the best track record with that condition or procedure. (You CAN get information on which car has the best repair record, which house repair contractor gets the best reviews, and which pizza restaurant delivers the fastest.)
The good news is that the Administration’s position is weak, at best, and won’t last long, even if they win this round. Hospital data is already publicly available and states are now actively publicly reporting key measurements of hospital quality and safety. Why should physicians have a special status that keeps their track records secret from the patients who depend on them? How can this Administration, which argues incessantly for market-based solutions, suppose that the health care marketplace can resolve the crisis when, as the great economist Adam Smith would have pointed out, there is no information to drive the decision-making that healthy markets require.
It is ironic that we’re even still having this discussion. In the first years of the 20th century, the famous surgeon Ernest Codman MD began to campaign for “the end-result system of hospital standardization.” He said,
Hospitals [and surgeons], if they wish to be sure of improvement...must analyze their results, to find their strong and weak points, [and] must compare their results with those of [their peers]...[They should] make this information publicly known so that the future patients might make informed decisions.
In the end, it won’t matter what this Administration does. There is now widespread acknowledgment that much of the health care crisis can be traced to an inability to see what is going on behind the curtain. A tidal wave of sentiment is building in the marketplace, with calls for making the information available, so that decision-makers of all types can make responsible, informed decisions.
It is difficult to imagine that this stonewalling can last much longer. If transparency doesn’t occur through policy change, it will surely happen in the marketplace through vendors with the heft and resources to see it through. If the recent Health 2.0 conference in San Francisco made any point emphatically, it was that a slew of companies are focused on infusing health care with unprecedented levels of transparency and decision-support.
The transition away from an opaque market to one that makes relative pricing and performance known and that rewards the good providers is the real health care reform we’re all looking for. Yes, we need to find a way to re-enfranchise everyone into the system. But that will be much easier if there is reason to believe that we can get excessive care and cost under control.
And to that end, Consumers’ Checkbook v CMS is a sideshow, not a pivotal decision. On this issue, the Bush Administration and whoever is urging them on are anachronisms that will soon be swept away with the buggy whip and White-Out. The real change agent here is technology and the long-overdue realization by purchasers of all kinds that, when markets are opaque, value becomes secondary and many vendors will act most assertively in their own interests first.
Brian Klepper PhD
www.brianklepper.net
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