Sarah Palin on Health Care--A Free Market Republican

Republican vice-presidential candidate Sarah Palin has very little on her health care policy resume from her short time in office as Alaska's Governor but what she does have fits right in with Senator McCain's strategy to use the market more effectively in bringing down America's health care costs and improving access to the system.

Her health care efforts have focused on two things in Alaska:

• Eliminating the 1970s era strategy of requiring providers to file Certificate of Need (CON) applications before being able to build more health care facilities.
• Providing consumers with more information.

On the Certificate of Need issue she recently wrote in an op-ed:

Health care: Do we have too much government or too little? Should we have regulated markets or open markets?

Those are the perennial questions.

And that's what makes the state's proposal to repeal the current Certificate of Need (CON) program so contentious. Yes, there are solid arguments on both sides. But after much consideration, we believe that the program has not accomplished what it set out ultimately to do more than 30 years ago -- lower costs for the consumer. It is time to end Alaska's program in its present form. Doing so will not only reduce the cost of health care, it will also improve the access to health care, allow more competition and improve quality of care for patients.

Certificate of Need programs were required in all states in the mid-1970s by federal mandate. The goal was to make sure that health care facilities matched community need and provided access and quality care, which in turn would help reduce health-care costs. The federal mandate was repealed in 1987 -- 20 years ago! -- along with its federal funding.

The basic assumption in those days was that excess capacity, in the form of overbuilding, directly results in health-care price inflation. However, after more than 30 years of such programs, the National Conference of State Legislatures has found that there is no solid proof that the state-sponsored CON programs have actually controlled health-care costs. In fact, in 2004 the Federal Trade Commission and the Department of Justice both asserted that these programs actually contribute to rising prices because they inhibit competitive markets.

Many opponents of CON programs have argued that health-care facility development should be left to the economics of each institution, in light of its own market analysis, rather than being subject to political influence...

As I said recently in my State of the State Address to the Legislature, "Under our present Certificate of Need process, costs and needs don't drive health-care choices -- bureaucracy does. Our system is broken and expensive." Eliminating the CON program, with certain exceptions, will allow free-market competition and reduce onerous government regulation.

Governor Palin has also been calling for more price transparency, openness and competition as a solution for rising health care costs in Alaska.

A task force set up by the Governor on health care issues in Alaska recently concluded that consumers needed more information to be able to compare costs.

As a result, Palin introduced the Alaska Health Care Transparency Act to provide consumers with information on quality and cost which would be provided by a new government-run health care information office.

Both of these relatively minor forays into health care policy could hardly be described as heavyweight attempts at health care reform. But both are consistent with the McCain market-based strategy to remake America's health care system.

I expect Governor Palin will have no trouble fitting right in with Senator McCain on the health care issue.

Related posts on the presidential candidates' health care plans:

Comparing John McCain's Health Care Plan to Barack Obama's Health Care Plan--What's the Big Idea Difference?

A Detailed Analysis of Senator John McCain's Health Care Reform Plan

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

"US Healthcare on the Edge: A Prescription for Cure"

Jonathan Lorch and Victor Pollak, two physicians with plenty of experience and accomplishments in America's health care system, have suggested the steps they think will go a long way toward making our system work.

I am pleased to post a brief description of their plan and a link to the full proposal.

US Healthcare on the Edge:
A Prescription for Cure
by Jonathan Lorch and Victor Pollak

The US Healthcare system has many problems. At its heart are three that prevent better outcomes, waste vast amounts of money and hinder understanding of optimum cost effective treatment: (1) misaligned risk, (2) ineffectual infrastructure, and (3) minimal leverage with the pharmaceutical industry. All three need be changed simultaneously, or in very rapid succession.

Misaligned risk

The Problem:
For long-term outcomes in chronic disease, that account for 75-80% of costs, the objectives of insurers and employers differ from those of physicians and hospitals. Costing relatively little when first diagnosed, diabetes, hypertension, and vascular disease become increasingly expensive as complications mount. Caregivers try to prevent long-term complications, but payers have no motivation to provide the resources to do so. This misaligned risk represents lost savings from preventable complications. If the savings are only 5% a year this represents $125 billion.

The Solution: A single defined insurance policy

• Defined minimum benefits, credible, applicable over a lifetime.
• “Belongs to” the individual and stays irrespective of good times or bad.
• Competition based only on cost of the policy not its quality.
• With a single policy, and all covered, insurers will have a single vast risk pool including healthy individuals.
• Obviates the need for Medicaid and SCHIP .

Infrastructure

The Problem:
A currently balkanized process wastes $60-100 billion on billing, collecting and administration. Briefly, insurers strive to keep from paying claims, so the more complex and difficult the billing process, the more money providers and patients will be unable to collect.

The Solution: A single claims processing and administrative system

• A uniform medical practice code set and a known set of application programming interfaces.
• This system will be the start and finish of every claim processed.
• Payments will be routed directly from payers to the provider’s bank.
• Claims will be settled electronically and instantly, as by American Express.
• Elimination of back-office provider employees who try to pry funds from insurers, and of insurer employees whose job it is to deny payments.
• The cost will be borne through small transaction fees.

The Pharmaceutical Industry

The Problem:
The third core problem is minimal leverage with the Pharmaceutical Industry, which as of 2005 represented 10% or $200 billion a year of the US Healthcare system.

The Solutions: Increase leverage and independently evaluate new medications

• To bring greater market power to bear, payers and providers should be allowed to organize purchasing organizations.
• Development of ongoing studies on the optimum utilization of drugs and on whether or not new drugs are better than existing treatments.
• A modest tax on pharmaceutical industry sales to be used entirely to study the additional value actually provided by new medications and how best new medications can be used. NIH could be charged with this responsibility.
• Change in, and capping of, the marketing costs of pharmaceuticals, allowing for bringing them to market but excluding direct-to-patient advertising, high honorarium to physician speakers, etc.

This is a summary of an in depth prescription for the US Healthcare system. The full text is available here.

The authors:

Jonathan A. Lorch, MD, FACP
Associate Professor of Clinical Medicine
New York Presbyterian Hospital-Weill Medical College of Cornell University
Director, Medical Informatics. Director, Nocturnal Dialysis, Co-Medical Director
Hemodialysis. The Rogosin Institute, New York, NY
lorchj@mail.rockefeller.edu

Victor E. Pollak, MD, FACP
Emeritus Professor of Internal Medicine, University of Cincinnati
Professor of Clinical Medicine, University of Colorado
Senior Vice-President & Medical Director. MIQS, Inc. Boulder CO
vpollak@miqs.com

McCain-Palin

Who?

Well the self-described maverick surprised everyone this morning.

While many kept saying it would be Romney, I never believed it. First, they don't like each other. Second, a Romney pick would have flown in the face of the McCain health care strategy ( If McCain Picks Romney He Will Never Again Be Able to Criticize Obama's Health Plan).

Governor Palin would seem to be a conservative Republican who walks her talk. The lady has grit!

But what is puzzling about the pick is that the 72 year-old candidate has been criticizing Senator Obama for his inexperience. Then what does he do? He puts a 44 year-old newcomer, with 18 months experience as Governor of Alaska, a "heart beat" away from being Commander-In-Chief.

Go figure.

One thing is certain. We will break a barrier this time--either an African American President or a woman as Vice-President.

This campaign just gets interestinger and interestinger.

Health Wonk Review is Up

Julie Ferguson hosts the latest edition of Health Wonk Review over at the "Workers' Comp Insider."

She has a great list of recent posts from the world of health blogs suitable for beach reading. Just turn up the brightness on that screen!

What Happened to the Health Care Issue?

An interesting article in today's Chicago Tribune.

Readers of this blog know we've been having a spirited debate recently on the question of just how likely health reform will be in 2009. Brian Klepper and Maggie Mahar have added to this discussion with some interesting posts and comments.

The Trib headline:

Health care no longer primary ailment
Economy, price of gas, war in Iraq have surpassed insurance as top election issue for candidates

The article laments the way health care has once again fallen off the top of the national agenda replaced by the issue d'jour--this time gas prices and the economic slowdown.

Recently I pointed out on this blog that I was not surprised to see health care once again slipping in the polls since the vast majority of people who vote in this country continue to be shielded from the high cost of health care by employers who continue to be willing to pay the ever higher cost.

In my mind, that is what needs to change before we will have the political juice to really tackle this issue.

Recent posts:

The Voters Aren't Upset Enough About Health Care--And Why Should They Be?

"Chastened and More Sober, Harry and Louise Return"

Will the Lobbyists Make Meaningful Health Care Reform Impossible?

"Chastened and More Sober, Harry and Louise Return"

Brian Klepper joins us again today on the subject of just how realistic health care reform will be in the coming year.

Chastened and More Sober, Harry and Louise Return
by Brian Klepper

Yesterday Ron Pollack of Families USA led a call with bloggers - unfortunately, I couldn't be on it - to discuss a new health care reform campaign sponsored by 5 prominent organizations: the American Cancer Society's Cancer Action Network (ASC CAN), the American Hospital Association (AHA), the Catholic Health Association (ACHA), Families USA and the National Federation of Independent Business (NFIB).

The goal of these collaborators is to get the next President and Congress to focus on meaningful health care solutions. Beyond that - and of course all those experienced with the policy-based reform process are aware of this - the motivations and objectives of the participating organizations diverge. To get an idea of the degree of their differences, look at the ASC CAN, Families USA and NFIB sites.

The first three groups are all provider organizations. Naturally, they're concerned that money is evaporating for their services, and they want to make sure they'll get paid for any services they provide.

Families USA is an idealistic consumer advocacy organization that believes the US should provide universal coverage because its the right thing to do. (They tend to pay less attention to the structural problems in health care that have created runaway cost.) While its an admirable perspective, it also willfully ignores the fact that Congress hasn't passed any major social-justice-based laws for more than 40 years, and that as long as special interests continue to be allowed to exchange financial contributions for influence over policy, it is unlikely we will return to policy in the common interest.

It's the fifth organization that's interesting and unexpected. The National Federation of Independent Business is the generally conservative association representating small business. Here they join with past adversaries, though NFIB's mantras - affordable, stable coverage with choice guided by knowledge of price and performance - is at odds with some of their current pals.

The ad itself has a winning earnestness. Go here to see the new one, and here to see the one from the Clinton period. Like the country, now chastened and more sober after its indulgence in patriotic zeal during the early Bush years, Harry and Louise, older and wiser, aren't so cavalier about Congress making decisions without their input. The health care crisis is all around and they need help. The punchline has Louise, with heartfelt concern (against a plaintive musical score), saying, "Whoever the next President is, health care should be at the top of his agenda, bringing everyone to the table, and make it happen!"

It seems so straightforward! When I was working day-to-day on national health care reform people would call to tell me what needs to happen. As it turns out, knowing what needs to be done isn't the hard part. Most everyone inside and outside of health care who's thought about it even a little knows most of those answers.

No the hard part is making it happen within a policy framework that's controlled by money and power. Displacing the status quo isn't easy at all. And as it turns out, its pretty clear that, while each of the organizations at this table dearly want reform, they, like all of us, want it on THEIR terms.

I attended and blogged Family USA's big meeting some months ago in DC. The had a range of terrific speakers, but the politicians among them - Ms. Pelosi included - pretty much told them what they wanted to hear, that health care reform can happen if people like them just stand up for it. Feeling empowered, the audience LOVED that message. It didn't particularly matter that it wasn 't true.

The truth is that unless the nation's most influential power brokers mobilize to make changes in policy, it's not likely to happen. Consumers certainly aren't galvanized around any specific health care reform agenda or project that I'm aware of, so they don't have a significant power base on this issue. The good news is that a range of non-health care Fortune organizations ARE working, quietly but forcefully, on the problem, through the Patient Centered Primary Care Collaborative and other efforts.

More on that soon.

This is What a Real Cost/Quality Decision Looks Like

The UK's National Institute for Health and Clinical Excellence (NICE) has decided in a preliminary ruling that four drugs used for the treatment of advanced kidney cancer are not effective enough and they won't be paid for by the National Health Service.

Now before someone just claims this is what single-payer health care plans do all the time, let me be clear that NICE is an organization that has largely gained the respect of the world health community. Andrew Dillon, NICE's director, participated in a conference on technology evaluation I chaired a few years ago and the domestic audience from business and policy was more than impressed with their work.

These guys are trying to do the right thing and using extraordinary means to do it. They don't make arbitrary and bureaucratic decisions--they follow the science.

But here's the crux of their decision.

NICE concluded that the drugs extended some patients lives but not enough to justify their high price.

Using clinical trial results that were imputed into complex financial models, NICE concluded the drugs cost between about $150,000 and $350,000 for each year of life they gave patients. Britain's standard says that the Health Service shouldn't pay more than about $60,000 for a year of healthy life gained. They call that their "quality adjusted life year" (QALY).

The chief doc at Cancer Research UK, a non-profit, responded that, "These drugs have shown a small but definitive improvement in an illness where there are few alternative treatments."

Two things:

1. If this was someone in my family, I would expect my U.S. health insurance to pay (today) or I would find the money to get them the drugs.
   
2. This is what real cost/quality decisionmaking looks like.

The next time any of us suggest that making better cost/quality decisions is an obvious next step to take we should remember this example of a real cost/quality decision.

The Voters Aren't Upset Enough About Health Care--And Why Should They Be?

The health care issue has a history of being named by voters as one of the biggest problems we face--until the problem de jour comes along and pushes it off the list. In 2008, that seems to be happening again with the economic downturn, the mortgage mess, and $4 gas surpassing health care as the big issues.

When asked to name the most important financial problem facing families today by the Gallup organization:

• 29% said energy and gas prices
• 18% said the high cost of living and inflation
• 14% said a lack of money and low wages
• 9% said health care costs

Policy experts can point to the high cost of health care but Joe and Mary Middle-America are still clearly sheltered from the real impact of these costs largely by the employers who still provide so many of us with affordable health care.

True the ranks of the uninsured are growing with the unemployment rate and the number of people getting health insurance from small employers has been on a long decline. But the fact is the vast majority of Americans still get very good health insurance from mid-size and large employers. And, what cost shifting has occurred has been relatively modest.

Last year's Kaiser Family survey of employer-provided health insurance found:

• Health insurance coverage at larger employers is stable - In 1999, 99% of employers with more than 200 employees offered health insurance--that number was also 99% in 2007.
• Cost shifting has been only modest - In 2001, workers at larger firms (over 200 employees) contributed 4.4% of the cost of their coverage as a percent of their income--in 2007 they contributed an average of 6.9% of the cost of their coverage as a percent of their income.
• Consumer-driven plans remain a very small part of the market. More than ten years after MSAs became available, and five years after HSAs were expanded by the MMA, between 3% and 5% of workers are in various forms of these and high-deductible plans.
  

Most workers are still sheltered from the reality of health care costs and equate health care quality with access to whatever they want.

Conservatives, including John McCain, argue that we need to move away from third-party pay to a health care system that stresses individual responsibility so consumers can better understand the problems of high cost and respond with more efficient choices. Makes sense.

But to get that kind of far-reaching change it will take a groundswell of major support from voters.

Ironically, voters aren't going to be interested in supporting that kind of change if they remain sheltered from the problem.

It's a "catch-22"--conservatives believe we need voters to realize they need to be more sensitive to health care costs but to sensitize them voters have to be willing to let policymakers take their rich benefits away.

Voters sure don't have a lot of incentive right now to give up those still rich employer plans.

Recent post on why health care reform will be very difficult in 2009: Health Care Reform, the Federal Deficit, and the Bush Tax Cuts--A Very Counter Productive Combination

Health Wonk Review

It's my turn to host Health Wonk Review--a synopsis of some of the best recent posts from the world of health blogs.

HWR founder Joe Paduda starts things off with a post critical of investment analysts handling of a recent Coventry Health earnings conference call with his assertion that "the analysts blew it." First the analysts helped HMO stocks hit historic lows this year and now seem to be supporting their resurgence. But are they asking the right questions in the first place? In a related post, I pointed out the Coventry stock rallied after the same conference call where Coventry management used the term "sort of" 63 times to explain the company's performance while the analysts gave them almost a free pass.

And you thought you had challenges in your business. Julie Ferguson at Workers Comp Insider reports that in Florida, Georgia, and Louisiana, an employer's right to establish and enforce health and safety policies on private company property has been abridged by recent laws that give employees the right to keep loaded guns in their parked cars on work property. She discusses this issue and the legal challenges put forth by several large employers such as Disney and Georgia-Pacific.

Merrill Goozner weighs in on the headline anthrax story telling us, "The FBI doesn't have a slam dunk case against Bruce Ivins, the bioterror weapons researcher at Ft. Detrick, Maryland who committed suicide last week after becoming the prime suspect in the 2001 anthrax letter-bomb attack that killed five. But once again it appears that all roads lead back to home in this seven-year investigation, including the fact that Ivins co-owned patents on an anthrax vaccine. Merrill uses the latest wrinkle in this ongoing saga as a springboard to a discussion on the impact that the War on Bioterror has had on infectious disease research.

Jason Shafrin always asks great questions and provides even better answers at "Healthcare Economist." Do people value additional income more when they are healthy and can use it things such as travel, dining out with friends, and athletics; or do they value additional income more when they are sick and can use the money for things such as additional health care, home nursing care? He reviews some arguments from a paper by Finkelstein, Luttmer and Notowidigdo in his post, "The Marginal Utility of Consumption and Health."

Roy Poses suggests that, "The current COO of a Florida hospital resigned after questions were raised about financial management of the hospital he previously ran, including allegations of diversion of more than $1 million into his personal accounts. It also turned out that he spent time in the brig for theft in and then received a bad-conduct discharge from the US Navy. This is another case suggesting, given the rising power of managers and executives of health care organizations, there should be some licensing process to ensure they have some relevant knowledge and background, and follow some ethical standards." See the details in his post, "Another "Rising Star" Health Care Executive Implodes."

Maggie Mahar, over at "Health Beat" takes Roy's post another step asking, "Should More Hospital CEOs Be Physicians?"

But over at "Amateur Economists" they're posting on, "Why Doctors Are Not Good Businessmen." This post discusses "the poor business model of a private practice and compares it to the business model of other types of businesses."

David Hamilton, at "BNET Healthcare,"warns us that, "The increasingly widespread dissemination of individual health data is a double-edged sword, offering patients the benefits of more integrated healthcare (the Health 2.0 view) and potentially disadvantaging them as insurers use the information to risk-adjust premiums or to deny coverage altogether" in his post, “Health 2.0″ vs. Health Insurers: The Looming Clash."

But, Brian Klepper gives us reason for optimism as he sees us on the cusp of a "breathtaking" breakthrough in usable health care information for both the patient and the clinician in his post, "From Description To Action: The Future of Health 2.0 Tools" at "The Health Care Blog."

While Jaan Sidorov, at the "Disease Management Care" blog, discusses the limits of HEDIS-based wellness and prevention measures. He suggests the successful HEDIS approach needs to be integrated with activities in employer settings, communities and even the PHR in, "Physician-Focused HEDIS Is Not Enough."

Matthew Holt gives us a comprehensive review of the UK's technology assessment program, NICE, in his post, "NICE job. Cost-effectiveness in the UK." Under Andrew Dillon's leadership, NICE has created an example for all of us to learn from.

According to some, there's a new "problem" looming: the "underinsured." But is there, really? InsureBlog's Henry Stern is skeptical, but takes a look in his post, "Moving the Goal Posts."

Louise at "Colorado Insurance Insider" suggests that the problem of the uninsured could get even worse. "If McCain's plan results in any decrease in employer group plans, we're going to see an increase in the number of people without health insurance, simply because of the underwriting rules that individual health insurance carriers use" in her post, "McCain Health Care And Individual Health Insurance."

What to do about Medicare and its many challenges? Joanne Kenen gives us a summary of the Medicare Conference recently ran in Washington in her post, "REFORM: Medicare versus Cassandra" at the "New Health Dialogue" blog.

At the blog, "Home of the Brave," Annie suggests that emergency departments which experience inpatient boarding may find using the Joint Commission's Leadership Standard and the regulation which demands that the appropriate inpatient standards of care and practice be enforced from the time of admission was ordered to be the key which unlocks effective strategies to address staffing, care and mechanisms of care provision to patients who are boarding "off-service." You can get the details at, Emergency Department Overcrowding Revisited: It’s The Care And Not The Geography.

Lisa Emrich continues to keep a sharp eye on drug pricing. This time she reports on a Senate Joint Economic Committee meeting she attended which examined extraordinary price increases for drugs used in rare-disease small populations in, "Price Gouging in Extremely Vulnerable and Captive Market" as well as "Small Patient Population - Big Drug Prices."

Health Care Reform, the Federal Deficit, and the Bush Tax Cuts--A Very Counter Productive Combination

Readers of this blog have been very fortunate this week to hear from Brian Klepper and Maggie Mahar on the subject of just how realistic is it to expect any kind of meaningful heath care reform in the next year or two.

They have both made excellent points--and both hope real health care reform will happen.

But there is a big bucket of cold water we all have to factor into such a discussion.

While everyone at least hopes health care reform will save the nation lots of money over the long-run it would be unrealistic to believe it won't cost a lot in the short-term.

Obama's health plan will cost at least $100 billion a year from the start--far more than he has estimated.

McCain says his health plan will be not have an upfront cost but it will because passing any kind of reform through a Democratic Congress will require expensive help for those who can't afford the thousands of dollars a year a health plan costs.

But here's the big hurdle:

• The White House estimates that the 2009 federal budget deficit will hit $482 billion--and that does not include the cost of the Iraq war, any further economic deterioration, and the indirect tax high oil prices are giving us.
• Federal spending in 2009 will already be the equivalent of 21% of the economy--the largest share since 1993--before any big health plan is passed.
  
• The Bush tax cuts expire in 2010 and the cost to extend them is at least $200 billion a year more.
• Every year the Congress eliminates the hit middle-class families would take from the alternative minimum tax and it will cost about $200 billion a year to eliminate all of it.
  
• The Fannie and Freddie bail-out could cost nothing or it could cost $100 billion--no one knows.
• Total federal debt has skyrocketed during the Bush administration to 40% of GDP (in 2001 Bush said it would shrink to 8% of GDP)--and the interest payments to maintain it have increased with it.
  

While the projected 2009 deficit is lower than the red ink we saw in the early 80's as a percentage of GDP, it would be the biggest nominal deficit we have ever faced.

McCain wants to extend the Bush tax cuts and cut even more taxes. Obama wants to let the Bush tax cuts expire for only high income folks, leave them in place for everyone else and in addition would cut taxes for seniors, the middle class, and the working poor.

Frankly, I don't see how either of the candidates can keep their tax cut pledges.

So, where does the up-front money for health care reform come from?

The new President and Congress will face an expectation that America's health care problems must be dealt with.

And, we're broke.

Earlier post:
Health Care Reform Will Be a Long Shot in 2009

A revenue neutral health care reform plan:
Watch the Wyden-Bennett "Healthy Americans Act"--It Could Be the Place Health Care Reform Compromise Takes Place in 2009