Friday, February 29, 2008

A Slowing Economy--What Impact Will It Have On The Health Care Sector?

Health care is considered a business that tends to be resistant to economic downturns. Brian Klepper returns with a post asking just what the impact of a slowing economy will have on the health care sector. He specifically points to changes in real wages and home prices.

Health Care and The Gathering Storm

by Brian Klepper

Here are two very interesting and frightening charts that my good friend Warren Brennan, the CEO of SMA Informatics in Richmond, passed along recently, with this question, aimed at the CFOs of hospitals and other health care organizations:

What do these mean for hospital bad debt and for the health care sector's future financial performance?

Here's the text from Warren that accompanied the chart on wages:
This chart, from the NYT, shows annual growth in real wages. What that means is that workers today are earning significantly less, in real terms, than they were a year ago: their January 2008 earnings were down 19 cents per hour or $8.31 per week from January 2007.

The chart doesn't mention the main reason for the fall: unusually high inflation. Since inflation is running at a 4% clip right now, you'd need wages to be rising at the same rate in nominal terms just to stay at zero on this chart. If food and energy prices stop rising at some point, real wages will start looking much healthier.

On the other hand, however, it's clear that for most of the past year weekly wages have been lagging hourly wages. That's not good news at all: it shows that the workweek is shortening for most workers. Slower increases in food and energy prices aren't going to help on that front.

And here's an excerpt of text that came with the second chart on home prices:
The S&P/Case-Shiller Home Price Indices show a 9.8 percent year-over-year decline for the 10-City Composite Index, the steepest decline on record.

Wherever you look things look bleak, with 17 of the 20 metro areas reporting annual declines and the remaining three reporting flat or moderate growth rates. Looking closely at these negative returns, you will see that 14 of the metro areas are also reporting record lows and eight are in double digit decline. The monthly data paint a similar picture, with all metro areas now reporting at least four consecutive negative monthly returns.
Health care has ridden a very long wave of prosperity that appears to now be in jeopardy. Combined with an explosion in information technology, transparency and decision support, the coming turmoil should force health care organizations to become far more interested in efficiency and competitiveness.

One lesson is clear: Companies that economically reduce both financial and health risk will be winners.

Another Government Study Questions the Medicare Advantage Business

You can now add the Government Accountability Office (GAO) to MedPAC and the CBO as highly respected government agencies who have issued reports questioning the cost effectiveness of the private Medicare program.

This time, the GAO said:
  • Insurers will receive $86 billion this year for the private Medicare plan--Medicare Advantage.
  • Last year the government paid the private plans $8.3 billion more than the traditional Medicare program would have spent on the same enrollees.
  • Private insurers will collect $54 billion more over the next four years than the traditional Medicare plan would have spent for the same seniors.
  • A "relatively small" portion of the money will go to extra benefits for seniors.
  • The extra benefits seniors get in these plans are financed partly by higher senior premiums deducted from their Social Security checks.
  • 30% of the seniors enrolled in private Medicare plans are in plans that will spend less than 85% of their premiums on benefits.
  • Overall out-of-pocket costs are less for seniors in the private plans but 16% of beneficiaries pay more for hospital stays and 19% pay more for home health care services.
Acting CMS administrator, Kerry Weems, defended the program noting that "choice" is "at the heart" of the value private Medicare brings to seniors. He also said the private plans add an extra $1,100 per beneficiary in value beyond original Medicare.

However, the GAO report reminded everyone that Medicare Advantage was never intended to be a way to channel more money to just the seniors who signed up for it--it was also created to save money overall for the Medicare program.

Democrats predictably jumped on the findings calling for Medicare Advantage cuts in order to fund other Medicare priorities--such as the Medicare physician fee fix.

At a Congressional hearing, only one Republican spoke on the record calling the report from the non-partisan GAO, "a fake report with fake conclusions."

Well, it is a lot more than that. It is yet one more analysis by a highly respected third-party saying that Medicare Advantage is costing taxpayers a lot more rather than saving anything.

Medicare Advantage payments to private health plans would have been cut last year if it were not for President Bush saying he would veto any bill that did so. But now President Bush has only 11 months to go and can be easily bypassed by the Congress waiting for the new President to take over and sign a budget.

It's going to take a lot more than some backbench Republican yelling "fake" to turn this debate around for the private Medicare plans.

Prior posts:
CBO Issues a Major Report on Medicare Advantage Plans--Pours More Fuel on the Private Fee For Service Fire

MedPAC Recommends a Reasonable Road Map For Reducing Private Medicare Advantage Payments--Plan Would Equalize Payments Over a Five-Year Period

Thursday, February 28, 2008

Drug Patents and "Pay-For-Delay"--Drug Industry Payoffs That Need To End

I call your attention to a recent op-ed by a member of the Federal Trade Commission, Jon Leibowitz, in the Washington Post.

Commissioner Leibowitz writes about the growing practice of "colluding with competitors to keep lower-cost generic alternatives to prescription drugs off the market."

The Hatch-Waxman Act made it easier for generic drugs to enter the market once a name brand drug's patent has expired. Because of it, the health care system has saved many billions of dollars. For example, the generic versions of just four drugs, Prozac, Zantac, Taxol, and Platinol, will ultimately save payers $9 billion.

But that has been changing.

More recently, the patent holding drug companies have begun to payoff their potential competitors to delay bringing a generic alternative to market when the patent has expired. A case in point is drug maker Cephalon and its sleep apnea and narcolepsy drug, Provigil.

Cephalon paid its potential competitors $200 million to keep a generic version off the market for another seven years. By Cephalon's own estimate that will make the company another $4 billion--and $4 billion more in costs to health care payers.

The courts have recently supported this practice. As a result, during 2006, 14 of 28 pharmaceutical patent settlements included such arrangements. While this may yet get to the Supreme Court, there is a bill pending in the Congress to make the practice illegal.

Something as egregious as this deserves to be outlawed.

Wednesday, February 27, 2008

Health Insurance Industry "Racing to Defuse a Growing Furor Over Retroactive Policy Cancellations"

That was the lead line in a Wall Street Journal story on the recent health insurance policy rescission controversy. The controversy is over a health insurance company's right to cancel a health insurance policy when the insured made a misstatement on the original application.

Some insurers have held they can cancel a policy even when the misstatement was not material. For example, forgetting a physician visit for the flu and later being diagnosed with cancer as a legitimate reason for cancellation.

Sound like that sort of thing can't happen? Last week an arbitration judge awarded $9.4 million to a Health Net customer whose policy was canceled. The women's policy was canceled while she was being treated for breast cancer because she failed to accurately state her weight and a heart murmur problem. She claims that was all disclosed to her agent.

Earlier Health Net was found to be paying a performance bonus to the manager whose job it was to retroactively cancel policies.

The industry is now pushing a nationwide proposal to give policyholders the right to appeal retroactive policy cancellations to a third-party panel whose ruling would be binding. Some insurers aren't waiting for a deal with regulators and are doing it on their own.

The big question is why did it take so long and why did they take such a dumb position in the first place?

It was clear from day-one that this was one of the more stupid things the health insurance industry could do generally--and do specifically just as its fate is being debated in the presidential campaign.

But saying a third-party review is now needed is not enough.

The industry also needs to make it clear that health insurance policies will not be rescinded for things that were left off an application that were inadvertent and immaterial.

Related posts:

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

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

Tuesday, February 26, 2008

Give Cuomo and the Physicians What They Say They Want--Show the Patient Just What the Doc Is Accepting From Everyone Else

New York Attorney General Andrew Cuomo says that health plans are using the "Prevailing Healthcare Charges System" to "defraud" consumers and "manipulate" the system.

He points to the example of an insurer refusing to pay a physician's $200 bill--the insurer said that $77 was more appropriate.

In an earlier post, I pointed out that an examination of my own family's health insurance "explanation of benefits" statements from our insurer found a $190 office visit that was reduced to $84.17 by my insurer--which the doctor accepted as payment in full. Then there were the lab tests for my own annual physical that were reduced from the lab's charge of $478 to $63--which the lab also accepted as payment in full.

So why not give Cuomo and the docs what they say they want--a truthful and straightforward accounting of the system? Why not release to any consumer who asks for it a detailing of what their doctor is charging, and accepting, from everyone else?

What better "transparency" then seeing what your doctor is really willing to take.

The doctor with that $200 charge, to the consumer who found himself out-of-network, can then be the one doing the explaining when it becomes clear that about 90% of the time he takes more like $80 for the same thing.

There is that old saying about being careful that you don't get what you wish for.

Recent Post: The Usual and Customary Controversy--Who's Cheating Whom?

How Profitable is Medicare Advantage? The United/Humana Deal in Las Vegas Says a Lot

UnitedHealth and Humana have announced that Humana will acquire UnitedHealth's Las Vegas Medicare Advantage business for $185 million.

The transaction was important for United in order to get Justice Department approval of UnitedHealth's acquisition of Sierra Health Systems.

That $185 million gets Humana only another 25,000 seniors--at a price of $7,400 a customer.

Monday, February 25, 2008

The Argument for Specialty Hospitals

The growth of specialty hospitals has always concerned me. Too often these niche players looked to be siphoning off the most profitable parts of the business leaving the big hospital to charge payers more for their less profitable services--creating higher prices overall.

David Whelan
recently called my attention to an article he just did at Forbes making a strong argument in favor of specialization.

Here is an excerpt:
"Patients have a choice, but it's not widespread yet. It's called the specialty hospital, a center that focuses on the care of a particular body part such as the heart, spine or joints, or on a specific disease such as cancer. There are 200 specialty hospitals in the U.S. (out of 6,000 hospitals overall), and they often deliver services better, more safely and at lower cost. A recent University of Iowa study of tens of thousands of Medicare patients found that complication rates (bleeding, infections or death) are 40% lower for hip and knee surgeries at specialty hospitals than at big community hospitals. A 2006 study funded by Medicare found that patients of all types are four times as likely to die in a full-service hospital after orthopedic surgery as they would after the same procedure in a specialty hospital."
David goes on to point out that in any other industry it is perfectly appropriate for the least efficient and capable competitor to "get wiped out by the nimble newcomer," or at least forced to do a better job.

David's entire article is worth a read.

Friday, February 22, 2008

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

This is a repost of an original that addresses Hillary Clinton's claim, repeated in this week's Texas debate, that only her health plan accomplishes universal coverage because it has a individual mandate and Barak Obama's does not. Senator Clinton goes so far as to say she would garnish wages to enforce her mandate that everyone buy health insurance.

Hillary Clinton
has gone on the attack in recent days criticizing Barack Obama's health care plan. She charges that his plan would not cover everyone and hers would.

Is she right?

Senator Clinton has an individual mandate in her plan. That means that everyone would be required to purchase coverage or suffer a penalty she hasn't defined. Senator Obama does not have an individual mandate in his plan although he would require all children to be covered. Both candidates would require employers to cover their employees.

She points to studies that show without a mandate there would still be 15 million people uninsured.

In the sense that the Clinton plan requires everyone to be covered, one could argue that she covers more people. But I will suggest it is not that simple.

The new Massachusetts health plan is really the outline upon which both the Obama and Clinton plans are based. Mass has an individual mandate. But the problem is people still can't afford to buy insurance. Mass is doing a great job getting people covered with incomes so low that they have their health insurance fully paid for. But, for those families who make too much for a subsidy that pays less than the full cost--or none of the cost--the Mass program is faltering. Only a few thousand uninsured Mass residents whose incomes are above the lowest levels have signed up for the mandated coverage.

For example, a family of three making $50,000 gets no subsidy and the cost of a $2,000 deductible plan is in the $7,000 to $9,000 range. Mass has a law that says they must purchase coverage but how, with such high costs, can they really be expected to?

So, there is a mandate and you can say we are covering everyone because they have to be covered but in fact the mandate is a hollow provision if people can't afford it.

So, when the day is done, I don't see much real difference here.

The real issue is how each of the candidates would make premium affordable in the first place.

When I look at Senator Obama's 12 page health care plan, I see a number of proposals to reduce cost including investment in health information technology, improving prevention and management of chronic conditions, providing reinsurance for big costs, making care universal to reduce uncompensated care, simplifying paperwork, making insurance portable, improving quality of care through disease management, integrated care, and better transparency about costs.

When I look at Senator Clinton's 12 page plan, I see virtually the same things not only on cost containment but everything else.

Senator Clinton would limit premium payments to a percentage of income, "This guarantee will be be achieved through a premium affordability tax credit that ensures that health premiums will never rise above a certain percentage of family income."

But Obama says that, "Individuals and families who do not qualify for Medicaid and SCHIP but still need assistance will receive income-related federal subsidies to keep health insurance premiums affordable."

Both candidates seem to be offering the same cost containment strategies.

Both candidates are offering a vague guarantee that everyone will have access to "affordable" health insurance premiums.

I don't see a difference between them here.

When the day is done, as Massachusetts is showing us, a mandate does nothing if people don't have affordable premiums.

They both claim they are going to give us affordable premiums and would go about it in a very similar way.

I worry that both of them have cost containment strategies that would do little more then dent the continued escalation in health care costs and undermine both of their guarantees for affordable coverage. You can learn more about that by reading my posts on their respective health plans that can be found in the index to the right.

See my earlier posts:
When it Comes To Health Care Policy It Really Doesn't Matter Which Democrat Or Which Republican Wins Their Nomination

Massachusetts Expected to Further Backpedal on its Individual Mandate

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

Thursday, February 21, 2008

A "Health Care Fed" and Obama

An idea that has been floating around for some time is that a "Health Care Fed" needs to be created as a means to control health care costs.

I first heard of the concept in a conversation I had with former Surgeon General C. Everett Koop a few years ago. Later, the idea showed up as a centerpiece in the National Coalition's plan to reform the health care system.

And in both cases, I have supported it.

Most recently, it showed up in former Senator Tom Daschle's new book, "Critical: What We Can Do About the Health Care-Crisis."

Maybe more important than the endorsement of a "Health Care Fed" from these folks are Barak Obama's comments regarding Senator Daschle's book and his support of the "Health Care Fed" idea:
“The American health-care system is in crisis, and workable solutions have been blocked for years by deeply entrenched ideological divisions. Sen. Daschle brings fresh thinking to this problem, and his Federal Reserve for Health concept holds great promise for bridging this intellectual chasm and, at long last, giving this nation the health care it deserves.”
Many will dismiss the concept as just government controls. But before they do, I hope they give some thought to just what it is the Federal Reserve, that institution beloved by Wall Street, does and how they can rationalize a government bureaucracy that controls, of all things, the money supply with their opposition to this idea.

If any part of our economy needs its money supply managed, it is our health care economy.

Previous post: There is a Health Care Reform Plan That Doesn't Duck the Big Issues--and More Than 100 Heavyweight Stakeholders Support It!

Wednesday, February 20, 2008

Health Wonk Review Is UP

This week's review of the best health care blog posts is up over at Merrill Goozner's, "" The former foreign correspondent, economics writer, investigative reporter for the Chicago Tribune, as well as teacher and researcher, always has interesting things to say on his blog.

The Usual and Customary Controversy--Who's Cheating Whom?

New York AG Andrew Cuomo recently announced an investigation into how insurers pay for out-of-network services. He charged that consumers were being "defrauded" by insurers who were "manipulating reimbursement rates."

Cuomo used the example of a charge for an office visit of $200 that the insurer cut back to $77--the insurer claimed the lower amount was reasonable and the maximum that should be paid.

In a recent editorial, the New York Times asked, "Have health insurers been systematically cheating patients and doctors of fair reimbursement for medical services?"

That is a good question.

So, I conducted an in depth investigation of my own. I pulled our family's recent insurance company EOBs.

I found one charge for an office visit where the physician billed our insurer $190--which our Blue Cross PPO cut back to the in-network allowable charge of $84.17. Under the PPO contract, the doc accepted the $84.17 as payment in full.

Then there was the Quest Diagnostics charge for my annual physical lab test of $67.71 that the PPO cut back to $11.55--which the provider accepted as payment in full. There was another lab test, as part of my annual physical, that had a "list price" of $223 that was cut back to $24.50 because of the network discount--which the lab also accepted as payment in full.

In fact, all of my annual physical lab tests were billed for a total of $477.81--which my PPO reduced to $62.70--a savings of $415.11. The lab accepted the $62.70 as payment in full.

So what does Cuomo do, he de facto calls a $200 physician charge as reasonable and the insurer's claim that the physician charge really ought to be $77 as "fraudulent."

I will suggest that the New York AG, and his crack investigative staff, as well as the New York Times editorial board, pull their own insurance company explanation of benefit (EOB) forms and get a dose of reality!

Tuesday, February 19, 2008

Bush Administration Now Willing to Increase SCHIP Spending by $19 Billion Only Weeks After Vetoing a Bipartisan Compromise

At a February 7th Senate Finance Committee hearing, HHS Secretary Leavitt testified about the 2009 Bush budget request.

This time, the Bush Administration is asking for $19.3 billion more for SCHIP over the next five years.

Just a few weeks ago, President Bush vetoed the $35 billion bipartisan SCHIP extension yet again. Bush and Leavitt maintained all of last year that the program should be extended by only $5 billion over five years.

SCHIP is now operating under a temporary deal that funds existing kids until March of 2009.

Summing up the Senators incredulity over the turnaround, Ranking Republican Senator Chuck Grassley (R-IA) said, "The fact that the President said we only needed $5 billion carried a great deal of credibility with about three-fourths of the people on the Republican side of the aisle. We didn't get the bipartisan compromise that the President could sign, and we would have been able to do that if this had been acknowledged a year ago."

Leavitt answered that the Bush administration had recalculated things saying, "We have better estimates now."

Lifetime Health Care Costs For the Obese and Smokers Lower Because They're Dead Sooner

This was the impressive conclusion of a study published by the Public Library of Science Medicine. The study was sponsored by the Dutch Ministry of Health Welfare and Sport.

Obese people had the highest health care costs between the ages of 20 and 56. Obese folks and smokers were found to have a higher rate of heart disease than others.

However, the authors found that the obese and those who smoke had lower lifetime health care costs than the healthy because they died sooner.

Makes me think the Dutch Parliament must also have a pork barrel spending problem.

Monday, February 18, 2008

Mom, Dad, the Kids and Medicare––Would an Obama Presidency Energize Young Adults to Demand Entitlement Reform?

Barack Obama has made this election-year different. Not since the 1960s have young voters been so energized. One college town after another has voted big for him.

On entitlement issues like Social Security and Medicare, the political debate has always been dominated by what senior voters want. They have been the big and effective voter block that have managed to insulate these programs from any serious discussion about reform.

At the same time, younger voters have until now largely stayed home--conceding the entitlement debate to older voters that are getting or are about to get these benefits.

This week, USAToday reported that the 2007 federal government's cost of senior benefits (Social Security, Medicare, and Medicaid) is now at a record $27,289 per recipient! Since 2000, that cost has increased 24% more than the rate of inflation.

While the number of US citizens over age 65 have held constant at 12% since 2000, the baby boomers start to turn age 65, and therefore qualify for Medicare, in 2011. They began to qualify for Social Security this year at age 62.

So, just as voters of younger age appear ready to return to the political debate in big numbers and become a factor, in 2007 Mom and Dad's entitlement benefits accounted for 35% of all federal spending--up from 32% in 2004.

USAToday says that the cost of senior benefits for every non-senior household is $10,673 a year. That's what each of these younger households are paying out for seniors.

So, two things are happening:
  • Senior entitlement costs are big and getting bigger--more than $10,000 per non-senior household.
  • Younger people are beginning to engage in the political system in big numbers for the first time in a generation.
What does this mean for the entitlement debate that has so far been dominated by AARP and the big reliable senior voting block?

Is it possible that the baby boomer's children are finally ready to say, "Wait a minute, we're the ones who have to pay for all of this!"

Would an Obama presidency turn the entitlement debate from being a constant defense of these entitlement programs to one where an energized younger generation finally, now ready to vote in big numbers, tells us they want entitlement reform?

If they are smart.

Friday, February 15, 2008

Haley Barbour or Hillary Clinton?

Here's a test.

Who just proposed the following, Hillary Clinton or Haley Barbour:
  • A government authorized health insurance purchasing exchange program for the purpose of marketing health insurance
  • Run as a not-for-profit clearing house from which consumers could purchase health insurance
  • Target the uninsured
  • Available to workers in small businesses
  • Designed to reduce the overhead costs of small group health insurance policies
  • Policies would be portable
Mississippi Governor Haley Barbour, and the former Republican National Chairman, just made this proposal in his state and Mississippi lawmakers are starting work on it.

Senator Clinton, as part of her 2008 health care reform plan, has proposed a "Health Choices Menu" which would provide people an optional FEHBP-like menu of private health plan choices. She would use the purchasing power of the many to improve the options and prices in the plan. Mrs. Clinton's plan would also set a very high minimum benefit requirement. Obama has a similar idea.

Senator McCain, apparently to the more conservative side of all of the above, has no such government insurance exchange idea. McCain would encourage trade association health plans.

It's certainly likely that Barbour's plan would be more market oriented than regulated and mandate-heavy but the broad overview of both approaches is strikingly similar.

One small place for both sides to begin to work together?

Thursday, February 14, 2008

Employers Finally Figuring Out They Can Shift Retiree Costs to Medicare

Employers are finally showing signs that they have figured out they can take advantage of the generous Medicare payments to Medicare Advantage plans.

With Medicare Advantage plans paid 13% more than for the same beneficiary under traditional Medicare, many seniors have figured out the benefits are better in the private plans. Private Fee-For-Service (PFFS) plans even get more than that.

What is notable is how long it seems to be taking employers to figure it out.

Hewitt has said that a traditional Medicare Supplement policy could cost an employer $1,000 to $1,500 per retiree. But a PFFS plan costs more like $300 to $500 a year--and often with better benefits!

Now we are hearing that Kodak, IBM, and Xerox have decided to not leave this money on the table any longer. Even state retirement plans are getting into the act, including Michigan and Kentucky. Michigan is no surprise because one the of the three biggest national PFFS operators is Michigan Blue Cross.

Undoubtedly, many employers didn't jump into the Medicare Advantage game out of fears these extra payments couldn't last. They are likely right. But the earliest we will see Congressional cuts to the program is in 2009--and likely to hit PFFS first. The rest of the Medicare Advantage products will not suffer more than a gradual equalization with the traditional Medicare program over a few years.

I wouldn't make any longterm bets on PFFS, but the core Medicare Advantage program will likely be around for a longtime to come.

Wednesday, February 13, 2008

No One Ever Did Understand "Customary and Reasonable"

New York Attorney General Andrew Cuomo is suing Ingenix over its operation of the longtime "customary and reasonable" database.

In the days before provider networks, insurers relied on this survey of insurance company claim data to determine an appropriate payment level. It was a survey of what all participating insurers paid by service in a particular market thereby ensuring that any one payer wasn't getting gouged. Actually, we used to call it, "average gouge."

Typically, all of the fees are stacked top to bottom and an insurer pays something like 90% of the 80th percentile of all of the fees for a particular procedure in a particular place.

In the heyday of fee-for-service health insurance, the system was managed by the then health insurance trade association, HIAA. When the day was done, everyone, providers and insurers, figured out how to live with it--no one sued. But it was fee-for-service and it did nothing to manage costs.

Now the database is under the management of a private company and is only used as a price benchmark when an insured person goes out-of-network.

Hearing that Cuomo is suing the current operator, a division of UnitedHealth, for allegedly "manipulating reimbursement rates" made me chuckle. No one ever could give a lucid explanation of how that damn thing worked!

But it gives Cuomo an opportunity to get some headlines and make health care stocks nosedive for a part of a day. Wall Street was a lot more worried this was about Medicare Private Fee-For-Service marketing than this little problem.

In a few months, we will hear that Ingenix paid a big fine and agreed to fix something (that no one will understand) and Cuomo will have another notch in his belt.

Over at Managed Care Matters, Joe Paduda also updates us on a recent court case involving Ingenix and its provider database.

Tuesday, February 5, 2008

Bush Budget Dead On Arrival But It Underscores the Trouble With Entitlements and The Choices That Must Be Made

President Bush is calling for $560 billion in cuts from Medicare over the next decade.

He would make these cuts by reducing the payments doctors and hospitals would have received.

What is amazing about the Bush budget numbers is that the administration is only trying to cut Medicare's annual growth rate from 7% to 5%. At one level, that ought to be easy. After all we aren't talking about reductions in existing payments--just limiting the increase to 5% instead of 7%.

What's a couple of points? In Medicare it is life and death to the bottom line.

Just that two point adjustment will create an incredible political fight in Washington, DC among the health care special interests.

Bush has made a choice here--cut the hospitals and the docs and leave the health insurance company payments for private Medicare programs worth $150 billion over ten years intact.

The Congressional Budget Office (CBO) has said that Medicare's payments to the private HMOs are 13% greater than the traditional government-run Medicare plan gets for the same seniors--the difference is 17% of the Private Fee-For-Service (PFFS) version of the program.

The hospitals and the doctors can be expected to argue that the guys getting the over payments (the insurers) are the ones that need to be on the chopping block. After all, they argue, if private Medicare plans are supposed to be the way to use the market to make Medicare more efficient, why do they need more money? Shouldn't they need less money?

Meantime, the Medicare physicians are already facing an automatic 10% fee cut on July 1 and another 5% cut on January 1. Hospitals regularly point to their Medicare payments as loss leaders needing to be offset by higher private insurance payments.

The Bush budget may be dead on arrival in his "lame duck" year but it does point out the challenges and the choices.

This President has said he will veto any cuts to the private Medicare programs and certainly proved he would in last December's budget battle.

But this President has less than a year to go. The Congress can just keep the budget debate going past inauguration day and look forward to a new President--Democrat or Republican--that they hope is more willing to deal.

The problem is we don't so much need another deal as we need a fundamental restructuring of Medicare if we are going to keep the program solvent in the coming years. The way the program pays providers--hospitals, doctors, insurers, and everyone else--it is not sustainable.

It is the sustainability of Medicare that policymakers need to focus on--not who wins the next battle at the trough.

Monday, February 4, 2008

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

With "Super Tuesday" upon us, I am once again bringing back a post that argues there is little difference among the candidates in each of their respective parties.

My suggestion is that you not cast your caucus or primary vote for a candidate based upon their health care reform plan.

From “thirty thousand feet” the leading Republicans are offering much the same health care policy ideas—a more vibrant market serving a more responsible consumer who would control his health care choices in a system that doesn’t need to spend more money.

And, from that same "thirty thousand feet," the two remaining Democrats are all offering about the same thing--$100 billion+ in new annual spending to guarantee access for virtually all Americans to existing public and private health plan options as well as some new ones created by the government.

Republicans support an open marketno mandates and less insurance regulation—believing that the market must first get costs under control by developing new and more efficient offerings for people in the private market based on consumer-driven principles and new and more efficient and appealing options for people who have public coverage as well.

Democrats call for shared responsibility—often mandating employers and consumers to participate in their near universal system made up of Medicare, Medicaid, SCHIP, private individual coverage offered through government-run marketing structures, a Medicare-like government plan option for those under age-65, and existing employer plans.

I hate to say that it doesn’t really matter which of the Democrats, or Republicans, wins their separate primary battles. But in terms of the nits health care policy it really doesn’t.

Sure there are differences in their health care policy proposals. Among the Democrats, Obama doesn't have an individual mandate to buy coverage while Clinton does. Among the Republicans, McCain uses a tax credit to help people buy coverage while Romney talks about tax deductions.

But remember, these are political proposals--generally just a few pages long. The real health reform process will eventually have to go through the legislative "sausage factory" that is Congress and I will suggest that the starting point from one Democrat compared to another, or one Republican compared to another, is hardly material.

As you prepare to vote in your state's caucus or primary, I would recommend that you focus on the other issues that are important to you, the "electability" of each of the candidates, and perhaps most importantly on the issue of health care, which of these candidates can finally break the health care reform logjam and get something done.

Whoever the eventual nominee is in each of the parties, we will have a Democrat and a Republican offering a dramatically different approach to American health care security.

The general election is where the big decision will be made on health care--and everything else.

You can see my analysis of each of the candidates plans by using the index in the right column.

"Plumpy"––A Reminder That Good Policy Works on Many Fronts

Brian Klepper joins us again today with a post that reminds us that good health care policy doesn't have to be complicated health care policy and can work for us on many fronts at once.


by Brian Klepper

The NY Times recently had an important op-ed by Susan Shepherd, a pediatrician and medical advisor to Doctors Without Borders. The core of her message is that as the farm bill progresses through Congress, we should focus not only on the quantity of food that is produced and that we export for relief to underdeveloped nations, but on its quality as well.

Dr. Shepherd describes the difficulties in treating children who are victims of severe malnutrition, particularly in areas like Africa and South Asia where milk and clean water can be scarce.

The US and other international donors current supply fortified blended flours for moderately malnourished children. Much better and more accessible nutrition is available through a ready-to-use food called Plumpy'nut (or Plumpy). But Plumpy costs a little more, and current UN and US guidelines restrict its use to the 3% of children who have already descended to the most acute malnutrition.

Ten years ago, a French pediatric nutritionist affiliated with the World Health Organization, Andre Briend, developed Plumpy'nut, a high protein and high energy food bar comprised of peanut paste, vegetable oil, milk powder, powdered sugar, vitamins and minerals, that can be prepared locally and that has a two year shelf life in an unopened package. Children can be treated at home rather than in hospital settings, a critical advance. They receive 2 packets a day. Delivered in combination with Unimix, a vitamin-enriched flour for making porridge, a 2-4 week treatment costs $20 and can allow 90 percent of severely malnourished children to recover.

One of the lessons of Jeffrey Sachs' book, The End of Poverty, is that we now have the tools to stabilize the billion people who remain in extreme poverty, so that we can then help them onto the bottom rungs of the economic ladder, where they have a chance to prosper.

Despite its current economic gloom, America remains a center of prosperity in a volatile world. Think of the goodwill we could create if we resolved to couple our aid with the best we we've learned in food science and other disciplines. The creation of Plumpy is a shining example of what's possible, and the work of Doctors Without Borders and other relief organizations an inspiration for how we can cultivate peace in the world.


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