California Insurers Lose a Big Court Case In the Health Insurance Policy Rescission Controversy

Here's one for a Harvard Business School case study: A few months before voters in the state are going to decide the future of your industry get into a losing battle about retroactively canceling sick peoples' health insurance policies.

A unanimous California Appeals Court decision has decided that California health insurers have a responsibility to check the accuracy of applications for health insurance coverage before issuing policies at the time coverage is purchased and cannot cancel a policy unless the applicant "willfully misrepresented" their health status.

For the past year, California has had a simmering health policy rescission controversy as many of the state's insurers have argued that they can cancel a health insurance policy if there is any misstatement of fact--even if it is unintentional or immaterial to a claim that is later filed.

The court ruling is a big win for state regulators that have been trying to change insurance company policy and for consumers and their trial lawyers that have been going after them.

As I have commented before, the insurance companies behavior on this issue makes no sense to me and couldn't have been anything other than a big losing issue at a time when health care reform is at the top of the voter's agenda--especially in California.

Certainly, a policy should be voided by fraud. But that was never the issue--it was whether a policy could be voided even if the misstatement was unintentional or immaterial.

The particular case has to do with a Blue Shield policy that was issued for a family who later had a major health claim. Information about the claimants weight and an emergency room visit was allegedly incorrect.

The court went on, "These facts raise the specter that Blue Shield does not immediately rescind health care contracts upon learning of potential grounds for rescission, but waits until after the claims submitted under that contract exceed the monthly premiums being collected."

A health plan, "may not adopt a 'wait and see' attitude after learning of facts justifying rescission." The court said health insurers cannot continue to "collect premiums while keeping open its rescission option if the subscriber later experiences a serious accident or illness that generates large medical expenses."

The issue will now go to trial over whether the family intended to deceive the insurer and whether the insurer acted in bad faith by "blindly" accepting their application and taking their premiums until the claimants medical bills got too high.

Because of this ruling in California, these disputes can go to court on terms more favorable to the claimants.

Nice going California health insurance industry.

LA Times: "Court curbs insurers' ability to rescind medical policies"

Earlier posts:

Report: "Health Insurer Tied Bonuses to Dropping Sick Policyholders"

California Policy Cancellation Scandal Heats Up As Republican Candidates Propose Health Reform Based On An Individual Health Insurance System

The First Year For This Blog

This month marks the first anniversary for this blog.

As of today, folks have visited 95,558 times. From less than a thousand visitors that first month, 14,000 a month now visit and that number continues to grow briskly.

As long as you keep reading it, I'll keep writing it.

A November Ballot Initiative Over California Health Reform Would Be The Biggest Thing Ever To Happen In The Debate

With news that California Governor Arnold Schwarzenegger (R) and the Democratic controlled General Assembly have agreed on a health reform proposal we may be on the cusp of a huge referendum on the Democratic version of health care reform.

The next step is for the State Senate to approve the plan. The Assembly approved it earlier this month on a party-line vote with Republicans in opposition. The Democratic-controlled Senate is also likely to approve the bill but that vote will be held at about the time as the state's presidential primary in early February.

Technically, the November ballot initiative would be about approving the new taxes necessary to implement the plan.

All of the Republican presidential candidates oppose this generally Democratic brand of health care reform. You can expect the Republican candidates to be railing against the $14 billion plan that mandates that both individuals and businesses buy health insurance and has lots of tax increases to pay for it.

All of the leading Democratic presidential contenders have proposed a health care reform plan very similar to the already enacted Massachusetts health reform law.

Now, California seems poised to take a very similar health reform program to state voters next November.

If this ballot initiative passes in our largest state next November, it would provide enormous energy for any incoming Democratic president to accomplish the same thing at the federal level.

If a Republican wins the presidency, it would give Democrats in the new Congress a great deal of momentum in their health care dealings with a new Republican president.

If the ballot initiative were to fail in so strong a Democratic state, it would likely scare the Congress far from any similar national program. Just like the failed Clinton health plan of 1993 left Democrats too scared to touch major health care reform for almost fifteen years, a California defeat would have a catastrophic impact. Democratic efforts for their preferred Massachusetts-like style of health care reform would be dead in their tracks and Dems would be forced to take another look at the more incremental market-based proposals offered by Republicans.

A California referendum on health care reform could well be the whole ballgame for Democrats and an enormous opportunity for Republicans to turn the tide in the health care reform battle.

Today, the polls say 65% of the voters support the plan. But in California, these ballot measures often look lopsided in the beginning before opponents spend millions in counter advertising. Given the importance of this vote, every health care stakeholder with something to lose will be pulling out all of the stops and the outcome of the contest, that would fundamentally change how peoples' health care would be paid for and delivered in California, can in no way be predicted this far out.

Plan supporters believe it would cover more than 70% of the state's almost 7 million uninsured.

Under the California health reform bill:

• Those with under 250% of the federal poverty level would get state subsidies for coverage while those up to 400% of the poverty level would get tax credits aimed at keeping their health insurance premiums below 5.5% of their incomes.
• While there is an individual mandate to buy coverage, residents are exempt if they are required to spend more than 5% of their income to buy a basic policy.
• There would be an employer mandate to "pay or play" by requiring those who do not cover their employees to pay a tax.
  
• Insurers would be prohibited from denying coverage to residents because of pre-existing medical conditions.
• Insurers would be required to spend at least 85% of their premiums on medical care--the leading for-profit health plans currently spend about 82% on medical care.
• To fund the program new taxes would be created thereby requiring voters to approve the plan in a November referendum. These taxes would include an increase of between $1.50 and $2 over the current $.87 per pack cigarette tax, a 4% tax on hospital revenues, and the employer mandate that would require any employer not providing coverage to pay a tax of between 1% and 6.5% based on the size of the business. The program would also count on $4.5 billion in federal matching funds. Proponents say the program is revenue neutral--it will pay for itself.

This outline is very similar to the health care plans offered by the leading Democrats; Clinton, Edwards, and Obama and the already enacted Massachusetts health plan.

The California health reform plan also looks like everything the Republican candidates say they are against--mandated coverage, more taxes, and bigger government.

But if the California Senate approves this and sends it on to voters next November, we are going to have an unavoidable showdown on health care policy right at the time of the national election.

The outcome of the California vote on health care reform would have enormous life and death policy implications.

Why Couldn't CIGNA Make the Right Decision In the First Place?

The Christmas weekend was full of news stories about a 17 year-old girl who was denied a liver transplant by CIGNA.

The insurer ultimately reversed its decision but the girl died a short time later.

I have no idea if the outcome would have been different had CIGNA made the decision to approve the transplant in the first place.

Health insurance contracts--and government plans like Medicare and Medicaid--rightly contain provisions that can be used to deny payment for unnecessary or inappropriate treatment. If they didn't have these limitations every quack in America would be feeding at the reimbursement trough.

But what these provisions should not do is ever deny a legitimate attempt to save someone's life. The insurer has the burden to act responsibly and, if the family disagrees with the call, provide an independent and fast third-party appeals process for what can be life and death decisions.

This case is a controversial one. A leading liver transplant expert was quoted as saying that a liver transplant is not an option for a leukemia patient like this girl. But her doctors weren't a bunch of money grubbing quacks either--they were part of the very highly respected UCLA Medical Center and lobbied the insurer claiming there was a six-month survival rate of 65% for cases like this if the transplant occurred.

Was this a long-shot and almost certainly doomed to fail? Sounds like it. So, what? If it were your kid you would want even the smallest shot.

CIGNA made matters worse for its public relations situation by reversing its decision at the last minute--what was wrong a week ago suddenly made sense to them as a "unique circumstance." But, the girl died soon after and the family hired famed plaintiff's attorney, Mark Geragos, who wasted no time with headline getting press conferences that played across the cable news channels right up through Christmas eve.

Apparently, as soon as it became clear what a hornet's nest was stirred up, senior management at CIGNA recognized what an indefensible decision this was with the "man on the street" and reversed their policy decision.

Critics of for-profit health care will now be quick to point to a corporate focus on earnings and the almost complete dedication to satisfying shareholders and Wall Street analysts and argue that it has so permeated the company that management has lost the forest for the trees.

Are their critics right that their corporate culture has now evolved to one that has lost track of who the customer is and the ethical imperative that these life and death decisions create for them?

Critics don't have to say CIGNA was wrong here. Senior management at CIGNA said CIGNA was wrong, no matter how they now spin it, when they reversed the company's decision.

The question senior management at CIGNA needs to now be asking is, Why did their organization take on so controversial a potential end of life decision in which they had a financial stake in the first place and then defend it right up until almost the last moment? They apparently used "independent consultants" for advice. But, why didn't they have an on hand, arms length, third-party panel of experts that had no vested interest in making the call on medical appropriateness?

Maybe more importantly, what would you have done?

These are questions everyone in this business might do well to think about. Next time, it could be anyone faced with the same call.

December 25, LA Times: "CIGNA Stands By Decision On Transplant"

"Health Care Quote of the Year"

Brian Klepper joins us again today with his nomination for the "Health Care Quote of the Year."

Health Care Quote of the Year
by Brian Klepper

I was reading through some other peoples’ blog posts yesterday and came across this straightforward statement by Paul Levy, the CEO of Beth Israel Deaconess Medical Center in Boston. Paul made news by establishing a blog called "Running a Hospital."

I think he's probably taken some good-natured ribbing by his more straight-laced colleagues. But I admire that fact that he's broken the bounds of decorum and speaks openly about the many tremendously difficult issues that face hospital executives.

While many many hospitals (and doctors and health plans and...) are still doing everything possible to hold back the transparency tide, here's his take, published recently on Matthew Holt's Health Care Blog:

"The main value of transparency is not necessarily to enable easier consumer choice or to give a hospital a competitive edge. It is to provide creative tension within hospitals so that they hold themselves accountable. This accountability is what will drive doctors, nurses, and administrators to seek constant improvements in the quality and safety of patient care. So, even if we can't compare hospital to hospital on several types of surgical procedures, we can still commend hospitals that publish their results as a sign that they are serious about self-improvement."

Nothing could be truer, or more central to the mission of fixing American health care.

Thank you, Mr. Levy.

Washington Post: McCain "Has Some Good Ideas on Health Care"

The Washington Post is not known for favoring Republican prescriptions for health care reform. That is why their editorial today calling the McCain health care reform proposal, "the most detailed and thoughtful of the Republican proposals," caught my eye.

McCain has gone further in some respects than his Republican opponents on health care. Instead of providing people with a tax deduction, McCain converts the same tax savings into tax credits which will do more good for people in the lowest tax brackets--lower earners who need the most help.

McCain also puts more emphasis on cost containment--albeit with a focus on "coordinated care" that the provider community has tended to resist. "Coordinated care" may have a logic to it but McCain needs to also tell us why the providers will be willing to play ball with him when they have generally rejected the market's attempts to do the same thing.

The Post also rightly points out that the McCain health plan is weak on how he would use a more vibrant market to offer coverage to everyone just as his plan grants more flexibility to a market known for "cherry picking" when the rules aren't there to prohibit it.

McCain has always struck me as a Senator who is willing to work with all sides to find a common sense solution to problems even when that means moving off his party's ideological base and creating political problems for himself.

McCain worked with Ted Kennedy on the failed "patient rights" bill of the late 90s--which largely failed to pass only because the market adopted many of its requirements and undercut the need to do it. McCain's efforts on the tobacco settlement also crossed party lines to get a deal done. And, his efforts on campaign finance reform and the failed immigration reform (in tandem with his President) all point to someone who is going to find a solution even if it means doing business with political opponents--and at great cost to his own political support.

If we get a Republican President, health care reform is only going to be possible if that Republican is able to work with Democrats. If, as we now expect, Democrats control the Congress that will be essential if we are to avoid more gridlock. Even if the Republicans capture one or both of the House or Senate, it will still take plenty of Democrats to get anything as big as health care done.

One can also argue that Governor Romney shares the ability to work across the aisle since he did the deal with his Democratic legislature to do Massachusetts health care reform. However, the fact that Romney seems to deny that role on alternate days when it suits his audience doesn't give me a lot of comfort.

McCain has certainly shown that pragmatism and may be the real reason he got somewhat of an endorsement today by The Washington Post.

You can access my review of each of the major candidates' health care reform plans in the column to the right.

The State of Primary Care--How Much Responsibility Do Specialty Physicians Bear?

Our good friend Brian Klepper, posting over at "The Health Care Blog," has some provocative things to say about the state of primary care and the role the specialties, and even the American Medical Association, have had in getting us to where we are.

Among Brian's points:

• "American primary care is a shambles, and it is now clear that it will not be viable in the future unless significant changes occur in our national attitude about its value and in the way we pay for it."
• "In other words – and it is important to be clear about this – the premeditated actions of the specialist-dominated RUC, operating under the auspices of the AMA and in alliance with CMS, appear to have played a direct role in the current primary care crisis by driving policy that financially favored specialty care at the expense of primary care."
• "But our Congressional representatives and the American people almost certainly don’t know these details. Most Americans and, for that matter, most health care professionals, are utterly unaware of the roles of the AMA and CMS in shaping the primary care crisis and our larger health system problems. Most believe the AMA speaks for all physicians."
• "Recognizing the primary care physician’s value by imbuing him/her with the authority to serve as the patient’s advocate throughout the continuum of care, and then paying him/her to do that would accomplish several important objectives."

That little sample should have you ready to read the whole post here.

The Shadegg Bill––A “Health-Insurance Solution” That Is a Waste of Time

Merrill Mathews, writing on yesterday’s Wall Street Journal op-ed page, asks why Representative John Shadegg’s (R-AZ) “Health Care Choice Act” isn’t a “no-brainer” for the Congress to pass.

Shadegg’s proposal would enable consumers to buy a health insurance policy in any state thereby bypassing the states with the most costly benefit mandates. At the top of his costly mandate list are state “guarantee issue” laws that have forced premiums to skyrocket where insurers are required to take all comers.

So why isn’t it a “no-brainer” to pass Shadegg’s proposal and give everyone access to the least mandated state health insurance policies?

It is notable that Shadegg has been pushing this for years—including the six years he had both a Republican Congress and a Republican president and couldn’t get the bill to go anywhere.

The reason the Shadegg bill never went anywhere is that it is a waste of time.

The Shadegg bill is as close to “rearranging the deck chairs on the Titanic” as one can get in health policy.

If the Shadegg bill became law tomorrow individual health insurance might be a lot cheaper in heavily mandated places like New Jersey—a state Mathews points out now has an individual health insurance cost of between $1,726 to $14,062 per month.

But how much cheaper and at what cost to lots of other people?

Mathews points out that the Shadegg bill would effectively come closer to delivering the kind of mandate-free insurance prices that ERISA employer plans deliver.

OK, but the average cost of an employer-provided, ERISA mandate free, health insurance plan is over $12,000 a family.

That $12,000 average employer family cost is just that--an average. A young and healthy twenty-something can probably buy it for much less—maybe as low as $100 a month. But a 60-year-old, if they are healthy, is going to pay a correspondingly larger amount because of age-rating in Shadegg’s market.

If that older person, or even a younger person for that matter, has a medical condition, forget it. They won’t find coverage.

Sure, we could add a big deductible—maybe $5,000—and get costs down another 20%.

But when the day is done what have we achieved?

In the end, the young and healthy would get much more affordable policies and the old and/or sick would be worse off.

So what exactly does the Shadegg bill get us?

Well it would get Mr. Mathews' insurance company trade association, the “Council for Affordable Care” a wild-west market environment to go find all of those young healthy people and sign them up for really cheap coverage.

Young and healthy people would pay a lot less and older and/or sicker people would pay a lot more if coverage were even available to them.

New Jersey is a dysfunctional health insurance market. But fixing that state, and others like it, is a lot more complicated than putting the “cherry pickers” back in charge.

In the presidential debate, some are suggesting individual-based consumer-driven plans while others are offering more traditional group oriented solutions. Both can work. Whichever, many of the candidates are calling for a comprehensive solution to our health care challenges––that includes reforming how health insurance is purchased.

The Shadegg bill is not a serious attempt at reinvigorating the individual health insurance market around consumer-driven principles that would give everyone a fair shot at better coverage.

The Shadegg bill is nothing more than a crass special interest play to carve-out the youngest and the healthiest and leave the older and sicker in the ditch—to dysfunctional state regulated systems like New Jersey whose pools of insured would deteriorate even further and cost even more.

Let’s stay with the debate we have—one that has the potential to make some meaningful change in 2009.

Health Wonk Review Is Up!

David Harlow over at the "HealthBlawg" has a particularly entertaining holiday edition of Health Wonk Review up. It covers some of the best posts in recent weeks from the world of health blogs.

Republican Candidates Wouldn't Have Been Able To Get Coverage Under Their Own Health Reform Plans

Republican presidential candidates have called for a greater reliance upon the individual health insurance market. But many of these same candidates have had cancer and wouldn't have been able to get individual coverage under their own health reform plans at the time of their treatment.

Ricardo Alonso-Zaldivar had a great story in the Los Angeles Times recently.

Ricardo points out that Rudy Giuliani has had prostate cancer, John McCain melanoma, and Fred Thompson has had lymphoma.

All have called for a more robust individual health insurance market. But that market today relies upon medical underwriting--people who have had cancer will have great difficulty finding an insurance company to underwrite them. As the Times reports, "Cancer survivors -- even if they have been free of disease for several years -- are routinely denied health insurance when they try to purchase it as individuals."

If coverage is offered, it often comes with restrictions on the disease the person suffered with or high premiums.

Even after being treatment free for five years it's hard to get coverage. Ricardo cited a survey of 22 insurance companies Karen Pollitz did at Georgetown University about a hypothetical breast cancer survivor who was five years out from a successful treatment. "Eleven companies said they would deny coverage, and six said they would issue a policy at standard rates. One company said it would charge double the usual premium. Another said it would issue a policy but exclude future cancer treatment. Three insurers did not respond."

Romney goes even further than the other Republicans by calling for less regulation in the state-based individual health insurance market then we have today.

Employer plans generally cover all new employees--albeit with as much as a one-year pre-existing condition provision if the new employee did not have prior coverage. However, all of the Republicans provide tax incentives that would move coverage away from the employer model and onto the individual model.

No one should be able to wait to approach an insurance company until they are sick and expect to get coverage--they should have bought it in the first place. But when individual coverage costs thousands of dollars a year, many can't afford to get it. Some people lose their jobs and their coverage.

Lots of people are out there without health insurance coverage and it has nothing to do with personal irresponsibility.

Today's COBRA might help--an 18 month extension for a worker who has left their employer so long as they can afford the full cost of their employer's plan--which averaged $12,000 a year for family coverage in 2007.

A reformed health insurance system based upon an individual insurance model can work. However, the Republican candidates have not closed the loop on how they would make it affordable for people to buy coverage in the first place or how they would overcome medical underwriting and age-rating that are now at the core of this business model.

Good thing these guys didn't get laid off, lose their coverage, and have to go find individual coverage under their own health reform plans!

You can access my review of each of the candidates' health plans in the column to the right.

Mike Huckabee's Health Care Plan

Mike Huckabee is now among the front runners for the Republican nomination. So, what is his health care plan?

First, he doesn't have a plan so much as a set of principles that would have to be detailed. On the surface he seems to want a lot of it both ways--no more government but lots of new program ideas. For example, he calls for tax credits to help low-income people purchase health insurance but says universal health care can't be "funded through ever higher taxes." Giving low income people meaningful assistance to buy health insurance is what makes the Democrats' plans so costly.

Much of what he talks about in these principles is similar to the other leading Republican candidates. Like other Republicans, he would begin to shift the health insurance system away from the employer and toward a consumer-driven model putting a more vibrant health care market at the center of his strategy.

Like other Republicans, he does not call for individual or employer mandates and the more than $100 billion of annual spending that Democrats call for, in great part, to implement them.

Like all candidates, Republican and Democratic, he calls for more focus on prevention and health information technology to improve the cost and quality of the system.

Here are his key points in his own words:

• "The health care system in this country is irrevocably broken, in part because it is only a "health care" system, not a "health" system.
• "We don't need universal health care mandated by federal edict or funded through ever-higher taxes. We do need to get serious about preventive health care instead of chasing more and more dollars to treat chronic disease, which currently gobbles up 80% of our health care costs, and yet is often avoidable.
• "I advocate policies that will encourage the private sector to seek innovative ways to bring down costs and improve the free market for health care services.
• "We can make health care more affordable by reforming medical liability; adopting electronic record keeping; making health insurance more portable from one job to another; expanding health savings accounts to everyone, not just those with high deductibles; and making health insurance tax deductible for individuals and families as it now is for businesses. Low income families would get tax credits instead of deductions. We don't need all the government controls that would inevitably come with universal health care.
• "I also value the states' role as laboratories for new market-based approaches, and I will encourage those efforts. As President I will work with the private sector, Congress, health care providers, and other concerned parties to lead a complete overhaul of our health care system, not more of the same, paid for by Uncle Sam at the expense of hard-working families.
• "Our employer-based system has outlived its usefulness, but the answer is a consumer-based system, not socialized medicine."

You can access Huckabee's health care policy web page here.

Earlier post: When it Comes To Health Care Policy It Really Doesn't Matter Which Democrat Or Which Republican Wins Their Nomination

You can access my review of all of the candidates' plans in the column to right.

More People Think Health Care Is An Urgent Issue Than Think The Iraq War Is

A recent Wall Street Journal poll caught my eye.

The poll found that 52% said the economy and health care are most important to them in choosing a new president compared to 34% that said terrorism and social and moral issues were most important.

That is the opposite of what people thought at the time of the 2004 election.

Here's the surprise for me. The poll also showed, "health care eclipsing the Iraq war for the first time as the issue most urgently requiring a new approach."

I said to someone yesterday, who has also been through the health car wars for many years, we health policy folks ought to be ecstatic about all the attention health care is getting. But I also said all of the scars from health care efforts started and stalled don't make me overly confident.

It is important voters demand the health care problem be solved by the next president and Congress. If the new guys just come to Washington with more of all of the partisan bickering we are seeing on the budget and SCHIP today, we will go nowhere.

There continue to be more reasons health care reform can fail than succeed. Voters need to send an unambiguous message.

Pete Stark Regrets the Stark "Self-Referral" Laws!

David Whelan was kind to point out a great story he just did at Forbes.com on the Stark anti-kickback laws and the bans on provider "self-referral."

David writes, "Yet in an interview today the Congressman lamented that he ever made this legislative intrusion into medical practices."

Congressman Pete Stark (D-CA) went on to say the laws, "gave every shyster and promoter a loophole" and that he would now simplify things by relying on just the anti-kickback laws.

This article is a must read!

Great scoop, David!

If Grady Fails--The Crisis At Atlanta's Grady Health System Is A Symptom Of Bigger Problems In The U.S. Health Care System

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.

"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.

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.

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:

• 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.

You will now see a number of new Congressional attempts to move these budget items including the possibility that a modest SCHIP extension, the doc fix, and Medicare HMO cuts will all get lumped into one very hard to vote against or veto bill to save the kids' health insurance coverage.

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.

"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.

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.

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!

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.

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."

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?

• 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.

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:

• 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.

If you live in the U.S. you can have access to the best health care treatments in the world. But, other nations also have access to the best.

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:

• "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.
  

Fraud is wrong and an insurer has every right to go looking for it.

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

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.

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:

1. That only citizens and documented immigrants will be eligible--that these rules have been significantly tightened-up.
2. 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.

More than anything, Congressional Republicans want to get this off the table--they are not winning in the polls.

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.

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:

• 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.

But the Romney people say states wouldn't have to raise taxes: "We firmly believe you can do this in a revenue-neutral way,"said a spokesperson. "There are these pots of money around that states do receive or their hospitals receive that you can say, 'Let's use that in the best fashion, let's use that more wisely, let's use that to get people into health insurance plans, so they're not using that in a hospital room."

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