Consensus on Health Care Reform Means More Than 70 Senate Votes

The Clintons have been criticized for agreeing to allow their 1993 health care reform plan to be subject to the Senate’s 60-vote rule. With the Democrats controlling what will end up to be 59 or 60 votes in the new Congress, some are arguing that the Democrats should move quickly and get their plan passed under the budget rules that would require only a simple majority.

Trying to get legislation so fundamental as health care reform passed with 52 or 53 votes would be a big mistake.

The American people need to see a real bipartisan consensus before they will feel comfortable that something so far reaching and complex is OK to do. If there is a big bipartisan majority our people will trust the reform plan—particularly when the widespread and media savvy negative attacks start from the stakeholders destined to lose the most.

Without a broad based bipartisan consensus, the critics will rip any meaningful plan to pieces. When the day is done those 52 or 53 votes will melt to 40 and we will have failed again.

And without a real consensus, the Democrats will have nothing guaranteed in the House either where at least 50 “Blue Dog” Democrats aren’t about to jump on just anything.

President-Elect Obama has repeatedly talked about the importance of moving forward in a collaborative and bipartisan manner. I hope he stays on that track as he begins to engage on health care.

Stimulus Spending and Health Care

Last week I was saying we were facing a $1 trillion budget deficit in the current fiscal year and that made health care reform problematic.

This week, the operative number is $2 trillion.

It was $1 trillion before reports that the President-Elect would be looking at a stimulus bill in the $700 billion range as well as reports his planned income tax cuts are on track and his planned income tax increases for those making more than $250k are likely to be delayed.

First, I mean no criticism here. We are clearly on the way into the worst recession since the Great Depression. All efforts to date have not budged consumer or business spending and I don’t have an alternative to a big stimulus package.

In his news conference today, the President-Elect talked about the importance of any stimulus spending being one-time and not recurring in order that the longer-term deficit doesn’t grow even more. He also talked about getting a “twofer”—stimulus and at the same time an investment in something constructive.

The example he used was in health care. Spending some money to expand the use of health information technology would be a stimulus in that money would be spent on computers, software, training, and so on, and at the same time it would be an investment in making our health care system more efficient.

There are many people arguing that we need to spend big money on a comprehensive health care reform plan that will cover many more people—an entitlement expansion—now. My read is that any entitlement expansion is, by definition, off the table as part of any stimulus spending.

I expect the Obama administration will not discourage Congressional efforts for a big health plan bill.

But I see a smaller scale down payment on health care reform more likely than a larger bill—because a consensus on what health care reform should look like and how it would be paid for will continue to prove to be elusive.

When the day is done I expect the administration's efforts will be more focused on making the health care system more affordable and efficient—a “twofer”

"Two Girls Two Countries One Cancer"

David Whelan has an interesting article at Forbes.com following two girls through the same serious cancer diagnosis here and in Britain.

As David put it, "When stories get specific, as in the cases of Zoe and Ellen, two kids from similar backgrounds with the same disease, the generalities [about the differences in our health care systems] start to break down."

Small Business Health Insurance Coverage: A Sobering Report From the Trenches

One of the things I enjoy the most about my travels across the country is meeting benefits brokers and health plan sales reps--they have the best feel for the real market and what their customers and their employees are up against.

This very sobering and, from what I independently hear, accurate report about the small group health insurance market comes courtesy of Brian Klepper. Please note the impact consumer driven plans are having.

Small Business Coverage: A Report From the Trenches
by BRIAN KLEPPER

John Sinibaldi, a well-respected health insurance agent in St. Petersburg, FL , has become prominent in Florida's broker community because he not only counsels and services a large book of small business clients, but because he also studiously tracks the macro trends that impact coverage for this population. And he's active in the state's regulatory and legislative activities.

The other day I dropped him Jane Sarasohn-Kahn's post that reported on International Foundation of Employee Benefit Plans' survey showing that most employers still want to be involved with health care. John responded with a long description of what the small employers he works with are up against. Its an illuminating, damning piece. I asked him whether I could post it, and he graciously agreed.

Often the discussions on sites like this are dominated by people who understand health care's problems deeply but abstractly. For John and his employers, buying health care is a stark, concrete problem that boils down to cutting care arrangements that are affordable for the employers and employees. As he describes it, it's an increasingly impossible task.

John notes that only 36% of Florida's small businesses - defined in the health insurance market as employers with 2-50 employees - now offer coverage. This is significant, since 95% of Florida businesses are small. Nationally, about one-third of all employees work for firms with fewer than 100 employees.

The increasing pressure on small business may explain why, as I pointed out the other day, even the arch-conservative National Federation of Independent Business (NFIB) recently co-sponsored a reprise of the Harry & Louise health care reform ads, this time advocating for, rather than against, universal health care. Last time, they were part of the coalition that killed the Clinton's reform effort.

And finally, Mr. Sinibaldi's message should drive home a key point, echoed by Shannon Brownlee and Zeke Emanuel in the Washington Post over the weekend and Bob Laszewski's post yesterday. To be successful, the expansive health care reform discussions that typically dominate in DC MUST go beyond the Massachusetts and California reform efforts. Approaches that can address waste and cost are just as important as those relating to universal coverage. Otherwise the resulting solutions will continue to be out of reach to a sizable portion of the American people, and the underlying driver of the crisis, out-of-control cost, will remain untouched.

Here's John's letter.

I've got news for the folks doing the IFEBP survey: Smaller businesses, especially those defined as true small businesses (2-50 FT employees), are strapped beyond belief when it comes to paying ever-higher premiums for health care. The survey's results are NOT indicative of what is happening in the small group market (much like the Kaiser Family Foundation's (KFF) annual survey on total premium and the portions shared by employees, which always makes me laugh. The employees at my businesses would kill to have the low percentage of total premium passed on to them that is reported in the KFF survey).

Across the board, the 100+ businesses I represent, all of them 2-50 full time employees, have received increases between 13%-75% this year. The average has been around 20-24%. That's on top of 15+% average increases last year, 15+% increases the year before, and the year before that.

Some of those increases have been mitigated by moving to High Deductible Health Plans (HDHP), but we didn't get premium savings by doing so, we only leveled premiums for a year or so. Now, the underlying increases are causing the HDHPs to rise just as fast (and maybe even faster; more on that in a minute), so employers are moving toward ever bigger deductibles.

Just five years ago, average deductibles for my employers who had deductibles (many were still on straight copay HMOs) were in the $500-$1000 per covered member range.

Now, I have only a handful of employers still on HMOs, and they have huge co-pays, like $1,500 inpatient hospital co-pays or large deductibles just like the more traditional insurance plans. Most deductibles range from $2,000 per covered member to as much as $10,000 for a cumulative family deductible. And many of those are HDHPs, with no benefit for covered sickness or injury or prescription benefits, until the deductible is met. Even with these plans, premiums are simply too high for many low-wage and middle-income folks to pay.

Most of my small businesses have been frightened to death by the health care industry's warnings against governmental intervention. The most common remark I receive is "I don't want government involved in my health care!" However, the second most common remark I am receiving now is "I don't know how much longer I can pay for this. Frankly, the government can't do any worse."

I have an unremarkable quote in a November 17 WSJ article - "Now the insurers are catching up." - on the coverage problems facing small business. What I meant to convey to Ms. Fuhrmans, the reporter, was that the premise that Consumer Directed Health Care would give consumers more skin in the game and slow the rise in health care costs was, and remains, a myth.

I represent the two businesses profiled in the article. Their experiences are not anomalies in the small group market. Rather, they are indicative of the dramatic health insurance changes that have affected small businesses. Just five years ago, one of the businesses had a very traditional PPO product, with low copays, low out-of-pocket expenses for major medical claims, and low-cost prescription drugs. The other employer also had relatively affordable costs, both for themselves and their employees. More importantly, both businesses felt that, while expensive, the costs to them and their employees was not egregious.

Fast forward to today. Both businesses feel that they're being hosed on their health care costs. They don't care what is behind the cost increases. It also makes no difference which carriers are involved, as all struggle with rising costs and ultimately pass those costs on to employers and their employees. The employers only know that the current rate of increase (for premiums, for payroll deductions for the employees' portions, and for out-of-pocket expenses at time of claim) is simply unsustainable.

Unsustainable. Think about it. Only some 36% of small businesses in Florida still offer coverage - this is far less than the national average of 52% - and that number continues to plummet.

So an increasing percentage of small businesses now feel that governmental intervention of ANY kind is preferable to the present untenable situation. In the small group marketplace, the pinch has been here for a long time, and has turned into a hard squeeze. Soon, it will squeeze the life out of the markets - at which point the small group market will implode.

At this point, the current system only works for affluent employers, who can still pay the exorbitant premiums but who don't pass the bulk of that cost along to their employees. It also still works for businesses with high-income employees who can absorb the cost. That typically means larger businesses; institutional purchasers like local, state and federal government organizations. It works for purchasers with enough capital and revenue to offset the bulk of the costs, whose employees haven't yet felt the "pinch" of high health care costs.

An interesting and often overlooked sidenote is that, in almost all surveys of employee satisfaction, employees of larger employers and those employers that pick up the bulk of the premium are typically more satisfied with the current system than employees in small businesses, which are often not included in such surveys.

Finally, the most popular plans I now sell to small businesses? A flat $5,000 individual/$10,000 family deductible HDHP (no carrier responsibility for anything other than pure preventive until the deductibles have been met). A similar $1,500/$3,000 HDHP is also popular. I very rarely sell more traditional PPO co-pay plans, since the businesses I represent (mostly light industry and service) can't afford them.

An Adult Conversation About Health Care Reform

Zeke Emanuel and Shannon Brownlee have an op-ed in Sunday’s Washington Post that should be required reading for anyone interested in health care reform.

The title is, “5 Myths About Our Ailing Health Care System.”

They suggest the “5 Myths” are:

1. America has the best health care in the world.
2. Somebody else is paying for your health insurance.
3. We would save a lot if we could cut the administrative waste of private insurance.
4. Health-care reform is going to cost a bundle.
5. Americans aren’t ready for a major overhaul of the health–care system.

At one level I can disagree with many of their points and at another I can agree with all of them—but they are right on all counts.

For example, as I have argued on this blog before, Americans are nowhere near ready enough for health care reform because most in the middleclass who vote have good health insurance paid for by their employer. As a result, voters don’t have a big reason for change in this regard—no matter the real costs of health care. But, as the authors point out, our people are in fact paying for their health care through lower wages and higher taxes.

What Emanuel and Brownlee are doing is having the kind of adult conversation with the public that our national leadership really needs to have in order to be able to build the necessary underlying consensus for health care change.

Without that kind of conversation, continuing with the same example, our people will never understand that the employer support for their health insurance costs they are enjoying is in fact illusionary. Until that, and so many of these other points are broadly understood, we will never have the consensus we will need for successful reform—getting it passed or doing it right.

Our health care access problems are symptoms of the real problems—uncontrolled costs and inadequate quality.

Today in Washington, most of the political discussion is heading toward a big expensive comprehensive Massachusetts-like package that really wouldn’t change anything, would probably make underlying costs worse, and would likely not even pass—falling of its own weight before the year is over. But the current effort does address many of the superficial political problems our health care system presents—particularly on access—while more often only giving cursory attention to the underlying cost and quality issues that are driving the access problem in the first place.

To build the kind of broad public consensus for the health care change we really need, it will be important to build a solid foundation that addresses the more politically problematic cost and quality issues as a priority at least equal to the access challenge.

To build that foundation, our leaders need to start addressing these more problematic challenges. They need to do that with facts, get beyond the simplistic myth-filled discussion we are used to that often drives the debate, and take the time to build the consensus required for any real reform.

We don’t have time? We are about to waste 2009 and have little or nothing to show for it at the rate we are going.

As the authors put it, "Now is not the time to think small, to cover a few million Americans and leave the bigger job of controlling costs and improving quality for another day."

Now if we could just figure out a way to get Zeke an audience with the new administration…

Earlier post: "Healthcare Guaranteed"--A Health Care "Solution" Offered Dr. Ezekiel Emanuel

The Healthy Americans Act--Wyden-Bennett Bill--Still in Play

A recent letter from 15 Senators to President-Elect Obama caught my eye.

The letter was from Senators Ron Wyden (D-OR), Bob Bennett (R-UT), and the other 13 Senators on their health care reform bill--7 Democrats 7 Republicans, and one independent--to President-Elect Obama reminding him of the progress this bipartisan group has already made toward health care reform.

As readers of this blog know, I am not optimistic that we can get any big comprehensive health care reform bill done in the next two years. That doesn't mean I don't want to see it happen as badly as anyone else.

The Democrats, even with 60 votes, will never get health care reform done by themselves. It certainly won't be done bypassing the 60-vote rule in the Senate and thinking 52 or 53 votes could change 16% of our economy.

The kind of real bipartisanship that can send the signal to the American people that we are headed in the right direction on so risky an enterprise as health care reform will need 70-80 Senators and like bipartisan majorities in the House. Without it, the naysayers will pick its bones apart.

Parliamentary maneuvering won't get this huge job done.

In the least, health care reform will take bipartisanship--and it will likely take statesmanship.

Democrats want to get everyone covered sooner rather than later.

Republicans don't want to build a new system on the same base they, and most people, see as contributing to our out-of-control costs.

Wyden-Bennett is in no way perfect health care policy. The give and take of a health reform process would make that impossible. Tough cost containment is lacking like it is in most of the health care reform plans I have seen. But Wyden-Bennett does begin to restructure the system in a way that can give us hope the incentives for more appropriate spending will begin to be in place. The Healthy Americans Act is, within the context of the political art of the doable and respect for what both sides are looking for, elegant policy if I have ever seen it.

Wyden-Bennett is elegant health care policy because it draws from many of the best ideas on the right and the left, lays out a practical road map, and pays for itself.

But it also takes on some tough issues. While it has been modified to allow employer plans to continue, it does change the tax system to make health care more of an individual responsibility. This is very much the vision of Republicans, including John McCain's.

Many employers are dubious about risking changes to the employer-based system. As someone whose career has been built on ERISA, I can understand benefit managers whose job security might be threatened, and insurers who would be reluctant to call for something that might threaten their client's job security. But why would CEOs and CFOs concerned about competing in the global economy not be onside with a plan that caps their obligations?

One of the more intriguing opponents are the labor unions. With wages relatively flat, one of their prime reasons for their being are the benefits they have negotiated, and fight an uphill battle to protect, for their members.

But wages have been largely flat because health care costs are burning up the available money employers have for compensation--cash or benefits. Workers are worried they would have less health insurance security. But no plan I know of has come up with the structure and funding to assure far more health insurance security to people than we have today. That would put the focus in labor negotiations back where it should be--on wages.

Wyden-Bennett achieves perhaps the most important goal in health care reform--it is revenue neutral early on. It is so largely, but not entirely, because it rearranges existing tax preferences and premium support.

With the fiscal realities we are facing, I do not see how we have any chance at health care reform without some statesmanlike rearranging of what we spend on health care today.

We have the Baucus plan, (which interestingly left tax changes on the table) the upcoming Kennedy bill, and likely many other health reform plans.

But no other idea really starts to change, rather than build upon, a system we all agree is unacceptable. No other idea has the bipartisan support out of the box that Wyden-Bennett does.

No other plan likely has as big an uphill battle as Wyden-Bennett because it is so different. Incremental change is always the apparent path of least resistance--and in the end the least satisfying.

But why not try to get health care reform right?

This from the Lewin Group's report on the Healthy Americans Act:

We reviewed the cost and coverage impacts of the Act. Our key findings include:

• The program would cover 246.8 million people. Over 99 percent of Americans would have coverage;
• National health spending, projected to be $2.3 trillion in 2007, would actually decline by $4.5 billion despite the expansion in private coverage, due to savings in administration($29.8) and increased price competition for insurance ($54.9);
• The annual rate of growth in national health spending would be reduced by about 0.86 percent. Savings over the 2007-2016 period would be $1.48 trillion, which is 4.5 percent of spending over this ten-year period (Figure ES-1);
• All new federal program costs, $812.9 billion, are fully funded with: $516.9 billion in premium payments net of subsidies; Employer assessment revenues of $89.3 billion; State and federal share of savings to Medicaid of $153.5 billion; Reduced disproportionate share hospital (DSH) payments of $18.8 billion; Increased Social Security tax revenues less offsets of $13.1 billion; and Elimination of selected business tax credits ($22.9 billion).
  
• State and local Government safety-net program savings of $22.4
• Employer health spending falls by $309.8 billion (from $428.8 billion). This amount will be passed-on to workers as wage increases under the cash-out; and
• Overall, increases in family premium payments are offset by the increase in wages and subsidies provided under the plan.

The Healthy Americans Act in Detail as well as the Lewin Study.

Insurance Industry Reform Proposal––Little Ado About Nothing

This week the health insurance industry trade association announced that its board had approved a new policy position. The industry has agreed to guarantee the insurability of everyone if the nation passes a health insurance plan that requires everyone is covered.

That’s a no-brainer for the industry to offer and not much of a deal.

If everyone is in the insurance pool—sick and healthy alike—there is no insurability risk for insurers. Pre-existing condition limitations in today’s health insurance policies are necessary because, in our voluntary system of insurance, without them people could just decide to wait until they get sick to buy coverage.

It’s like the old argument that without such limits people could wait to buy their homeowner’s insurance until after the house burned down.

But if everyone is covered there is no reason to have these limits. All the healthy people would begin paying premiums on the same day the sick would have guaranteed access to coverage. It’s an easy quid pro quo.

The industry’s proposal glosses over the real issue—figuring out how to make health insurance affordable so that a mandate that everyone buy coverage is practical and enforceable.

All we need to do is to look to Massachusetts to see how hard this is.

Under the new Mass health law, there was to be a mandate that everyone have health insurance. But Mass was only able to afford to provide subsidies for families making less than about $60,000 a year. With the cost of a family policy—that included a $2,000 deductible—often between $10,000 and $13,000 a year the state had to back off on the mandate. It was simply unrealistic to force most middle-class families to pay such high costs.

See The Connector's monthly premium and affordability chart here.

To enforce an individual mandate to buy health insurance any successful reform program would likely have to cover the 75% of premiums most employer-programs cover in order to make insurance reasonably affordable for most of the middle-class.

So, the health insurance industry is saying that if we cover everyone—and therefore eliminate their underwriting risk—they’d be happy to take 45 million new customers at retail.

How magnanimous!

Non-partisan estimates of the Obama campaign’s health reform plan have concluded that even his program likely wouldn’t cut the number of those uninsured by more than half—similar to the Massachusetts health plan’s success.

Since Senator Kennedy and his allies are getting ready to introduce a plan similar to the Obama health plan, and Massachusetts plan, falling short of universal coverage at least for many years, I can only conclude the health insurance industry’s offer is non-binding.

Daschle for HHS?

Word around town is that Tom Daschle, the former Democratic Senate Majority Leader, is going to be named HHS Secretary.

That would mean that President-Elect Obama is going with a political and health care policy heavyweight.

With word yesterday that Senator Kennedy has appointed Hillary Clinton (presuming she stays in the Senate) to take the lead on the health insurance reform portion of his health bill, it is clear that the playing field is filling up with Democratic heavyweights.

A Daschle appointment would make clear that President-Elect Obama does not intend to cede this process entirely to the Congress. It would also indicate that it will be HHS that will take the health care policy lead on behalf of the administration--not White House staff. That would be different from prior efforts.

It also tells me that Obama would have a very smart politician on hand to keep the Congress within the bounds of what can get the votes, what will get broad stakeholder support, and at the same time what will fly on main street.

If it pans out, Daschle would be a superb pick for the new President.

February 2008 post regarding Daschle's book on health care reform and Obama's comments on it: A "Health Care Fed" and Obama

Health Care Reform a "Longer Term Goal" For the Obama Administration?

Under the headline in today's Washington Post, "Kennedy Announces Plan to Submit Bill For Universal Care" was this:

"Some Democrats, including members of President-elect Barack Obama's circle, have begun to view expanded [health care] coverage as a longer-term goal."

Is the new administration trying to send a message to its health care eager constituencies that given the economy and all of the challenges we face it would be best to settle expectations down a bit?

If it is, I would suggest, that would be a smart thing for the incoming administration to do.

As I have recently posted, it is not apparent to me that we have either the consensus on what a mega health plan would look like, the solid voter support for real health care change, or the money to do it.

Many longtime health care reform advocates are calling for the Obama administration to move quickly on comprehensive health care reform while their political capital is strong--do it now or lose the opportunity goes the argument.

Actually, I would argue that if Democrats do go for the whole deal they are likely to run into a political buzz saw and possibly squander the ability to do a more modest bipartisan list of health reform accomplishments that could be the first important steps in a longer-term strategy.

Do you know how many pages were in the 1993 Clinton Health Plan?

1,462.

That number will be with me forever!

An Obama campaign-like comprehensive health care reform proposal converted to legislative language would easily exceed 1,000 pages. You think we have a consensus on what health care reform would look like? Put 1,000 pages of health care policy minutia on the table and watch the vultures attack.

Without a strong consensus going in, I've always said that a 1,000 + page health care bill will afford the opportunity for every man, woman, and child in America to find at least 300 pages each they disagree with--and they won't be the same 300 pages!

There is a heck of a lot more work for President-Elect Obama and health care reform advocates to build the kind of consensus necessary to lift something so big as health care reform across the line.

What can be done is to look to the places we do have bipartisan agreement and take some very important steps that begin the ultimate health care reform structure we will need. Maybe we can build the foundation over the next couple of years and we should try.

In these problematic fiscal times, it will be just as important to pick some steps that either cost little or can be funded under PayGo rules that require upfront money.

That foundation of bipartisan steps might include:

1. Expansion of the State Children's Health Insurance Plan from 6 to 10 million kids and paying for it with a cigarette tax.
2. A Medicare bill. We desperately need physician payment reform. Something we are nowhere near getting agreement over. But everyone does agree we need to try. It is also generally agreed that primary care physicians need to be better paid. It is also agreed that there is $62 billion in five-year private Medicare HMO payments that can be used to grease the skids toward a Medicare provider payment system that is more sustainable.
3. Cost and quality initiatives. A cost and quality board to arbitrate and set the standards for a whole host of items to improve cost and quality outcomes that were in both the Obama and McCain health plans--health information technology standards and requirements, transparency in provider pricing, and health outcomes research, and many others.
4. Assistance for small businesses and individuals in getting health insurance. Conservatives and liberals alike think insurance exchanges make a great deal of sense as a means to help individuals and small business be able to access coverage. If there is money to be found, there is also bipartisan support for modest premium assistance, likely in the form of tax credits to help small businesses--the place our employer-based system is in the most distress--to be able to pay for coverage for their workers.
5. Federal budget assistance for state Medicaid programs as part of a stimulus bill. The Congress is likely to do this one anyway and it might as well be part of a package the Democrats and Republicans can take credit for.

When the year is done, the new President, Democrats, and the Republicans could point to bipartisan progress in covering more people (SCHIP), getting Medicare's house in order, and beginning to build the structure (an insurance exchange and cost and quality board) that will be important to the next stage reforms.

No doubt that even these things will be controversial. But I do expect they are the kind of things that could be passed with strong bipartisan support.

Or, Democrats could go for the 1,000-page bill and risk starting a food fight that would set health care reform back once again.

What will they do?

My guess is that no one is going to tell Ted Kennedy he can't try. Presuming Senator Kennedy can't get traction with the big bill, I look for Plan B. In the meantime, look for President Obama to call for comprehensive health reform but be cautious waiting to see how things develop.

"The Changes We Need"

The Changes We Need
by Brian Klepper

These are, as the Chinese curse reputedly called them, interesting times.

If the burst of new Democratic health care reform proposals is any indication, the fresh breeze of the Obama campaign's "Yes We Can" optimism is blowing across the nation. Mr. Obama’s team is expected to make health care one of its priorities. First out, though, was Senate Finance Committee Chair Baucus (D-MT), who introduced an aggressive health care reform package that builds on Mr. Obama’s campaign platform of cost controls and extended coverage. Senator Kennedy (D-MA) and Representatives Dingell (D-MI) and Stark (D-CA) are expected to offer proposals soon, and undoubtedly there will be others.

The rub is that Congress’ old-guard lobbying system remains in place. Congress is awash in special interest contributions - $2.8 billion from 15,500 lobbyists in 2007 - that exchange money for influence over policy. When the Democrats retook Congress two years ago, they did not substantively change the lobbying rules.

So it is reasonable to ask whether a new day of governance in the common interest is possible. Can we make progress on health care or on any significant problem - climate change, education, energy policy, finance, the social safety net - without addressing the underlying problem of Congress’ receptiveness to special interest influence?

As the new health care proposals unfold, it is worth remembering that, early in the Clintons’ health care reform effort, things looked promising. There was general approval in the business and health care sectors. True, when industry practitioner input wasn’t welcomed, the process began to go south. But the real trouble came when the draft product appeared and some health care segments believed it threatened their interests. They acted, while the business sector was indifferent. With no counterbalance, the health care industry’s public relations machine demonized and killed the plan.

There is little reason to think that today’s corporations will be less action-oriented if they believe their interests are threatened. So what strategies are available to minimize resistance to changes America needs?

In an ideal world, the new Congress would emphasize that it is a new day by forcefully rejecting the institution of lobbying. That would effectively dispatch the problem of achieving health care reform and many other solutions as well. But that seems a stretch.

Alternatively, the leaders of America’s non-health care firms - who represent six-sevenths of the US economy - could overwhelm the health care industry's resistance by galvanizing, mobilizing and championing reforms.

This is also a stretch, but it is not impossible. The relationships between health care costs, productivity and competitiveness weigh on every American business executive. There are Fortune CEOs - Lee Scott of Wal-Mart, Craig Barrett of Intel, Jim Sinegal of Costco, Howard Schultz of Starbucks, Steve Burd of Safeway - who have campaigned tirelessly on the issues central to serious reforms. Keynoting last week's National Business Coalition on Health annual conference, Barrett told those assembled that "The only way health care is going to change is if people who pay the bill tell the industry to change."

It is impossible to overstate the profound importance of business leaders acting together in the common interest. This group currently exerts more influence over policy than any other. That said, businesses typically are mostly focused on their own niche issues. Information technology companies focus their lobbying on IT. Hospitality companies, insurance companies, energy companies all focus on what matters most to them.

But they could unite on the common interest. Especially as they gain increasing awareness that re-enforcing America's social and market fabric strengthens the stability that has made it possible to successfully pursue the special interest in this country over the last 60 years.

At a time when America so sorely needs real change, when many signs point to the rapid erosion of the health system's stability and sustainability, will America’s Congressional and business leaders stand together for changes that can strengthen the nation's foundation? Will they stand against those who, in continuing pursuit of their own interests, undermine our institutions and our ability to advance?

If they will, then real change is upon us. If they will not, then we are destined to remain where we are now.

Brian Klepper is a highly respected analyst, consultant, columnist and speaker who is focused on the policy and market dynamics of US health care’s deepest problems, and the increasing traction of new approaches that offer tremendous promise.

Medicare Advantage Payments to Insurers--Baucus Zeroing In!

Senate Finance Chair Max Baucus (D-MT) released his health plan white paper last week.

Buried in it was this regarding how private Medicare payments to HMOs should be changed:

“Congress must act to level the playing field between traditional Medicare and Medicare Advantage payments and the Baucus plan would do so. Enacted in July 2008, MIPPA [the July physician fee fix that will end PFFS] took modest steps to reduce overpayments to private plans beginning in 2010. There are a number of ways to complete this. One is to set MA payments on par with traditional Medicare in every county in the country. However, Medicare costs can be low in some areas of the country and extraordinarily high in others. Simply setting MA payments equal to traditional Medicare could maintain overpayments in some areas and create severe underpayments in other areas relative to insurers’ costs.

“The Baucus plan would seek to better understand how insurers’ costs differ by region of the country in designing new policies to eliminate the remaining excess spending in the Medicare Advantage program."

I have lost count of the number of different Democratic proposals there are out there to use these extra payments made to private Medicare Advantage plans above the levels paid for the same senior risk in traditional Medicare for new spending.

MedPAC estimates these extra Medicare Advantage payments are worth $62 billion over five years and $169 billion over ten years. That makes them about the only "free money" in an otherwise bleak deficit picture.

Most calls to eliminate these extra payments simply call for "equalization" between insurer payments and traditional Medicare costs for the same senior risk.

But Max Baucus is telling us here that he knows something that isn't commonly discussed in the private Medicare world--that even if you just equalize payments there is, and was before 2003, plenty of opportunity to game the county-by-county private Medicare payment system--"One is to set MA payments on par with traditional Medicare in every county in the country. However, Medicare costs can be low in some areas of the country and extraordinarily high in others."

Where the 98-page Baucus plan goes from here is debatable. That Senator Baucus is the most influential member of the Senate on the issue of Medicare Advantage payment reform is not.

I expect there are plenty of Medicare Advantage players, knowing that payment "equalization" is on the way, who are getting ready to just play the old county-by-county cherry pick game all over again and preserve a substantial block of profitable private Medicare business doing it.

Think again. Baucus literally has your number!

Market Capitalism and Health Care--It Will Never Be the Same

Washington Post business page columnist Steven Pearlstein's Friday column, "Toward a New International Capitalism," caught my eye.

Here's a snippet:

"From the Latin American debt crisis of the 1980s to the Asian financial crisis of the 1990s to the Internet craze at the turn of the century to today's economic conflagration, the past 20 years have provided ample evidence that uncontrolled flows of private capital have created massive booms and busts that have overwhelmed the financial system and destabilized the global economy. The booms have misallocated capital, widened the gulf between rich and poor, and eroded the norms of behavior that had contributed to social and political harmony. The busts have brought financial hardship and ruin to innocent businesses and households and saddled governments with huge debts that will take generations to pay off."

Wherever you stand on the longstanding debate over the free market versus government regulation, I will suggest that the recent confluence of catastrophic financial events have pushed the pendulum hard over from the market side to the pro-government regulation side of the debate.

With a new Democratic White House and big Democratic Congressional majorities, all driven by the most recent burst bubble and the resulting financial meltdown, the notion that the market is the place to fix and manage our dysfunctional health care system is clearly out of vogue.

For the last eight years, the health care debate has been dominated by market ideas to deliver better quality and sustainable costs--private Medicare Advantage plans, Part D drug benefits for seniors, a reinvigorated health savings account (HSA) market, and proposals like those offered by President Bush and Senator McCain to restructure our private health insurance system from the traditional employer chassis to one of individual responsibility.

My sense is that the recent election outcome is more than a change in the political cycle. It was also a public verdict on their level of trust in capitalism. Market arguments as a solution for the health care challenges will not be able to avoid the public's overall loss of confidence in the relatively unfettered market.

Does that mean we are all about to become socialists in the European tradition? Does it mean the American people will have lost confidence in American business generally? No. I expect we will always have confidence in the ability of most business--particularly small business people--to build real value. But it does mean that it will be a long time before we put an almost blind confidence in the notion that the market by itself will always go up--the stock market, the housing market, the Internet driven "New Economy."

Read another part of Pearlstein's column but this time think of publicly traded health care industry managers instead of financial executives when you do:

"But there is also no denying that American-style capitalism has been undermined by its own success. In its present incarnation, it rewards manipulation over innovation and speculation over genuine value creation, resulting in massive misallocations of capital and the accumulation of unheard-of wealth in the hands of money managers and top corporate executives who are more lucky than they are skilled."

When the Clinton Health Plan failed in 1994 the consensus was that the health insurance market would have have a wide open shot at proving itself since no one would dare put a government health care plan back on the table in the wake of that failure--for at least 10 years.

Let me be clear that I have always believed in the market. But I also believe the past 15 years have amounted to an enormous squandered lost opportunity for the market to prove its value to our health care system.

Fifteen years later, the market has not brought health care costs under control because too much of the entrepreneurial energy in the health care market was used to simply manipulate the massive cash flow provided by a sector of our economy that made up 16% of our GDP. There was no reason to manage health care costs and quality to a better outcome if soaring costs just meant more cash flow to manipulate. Faced with longer-term business objectives--like a sustainable business model based on creating real value--or making shorter-term earnings objectives and stock options, the choice was easy.

Fifteen years later, the health care marketplace has little or nothing to point to in its defense in the face of Democratic control of our government and our capitalist system in a shambles.

At the wild west Wall Street alter everyone has been worshiping at, I suppose there was no alternative.

Will for-profit health care become extinct and replaced by a government-run health care system? As bad as things are, I doubt it. We aren't anywhere near the point where Americans are about to trade their general fear of big government for that.

But the days of the private market saving Medicare and Medicaid, or a reinvigorated private health insurance market, as part of our future? Just a few weeks after John McCain was preaching the virtues of the market as a solution for our health care problems all of that sounds pretty passé now.

For-profit health care players--particularly health insurers--will continue to have a big place in our system. We really have no alternative--that's what the system is built upon.

But trusted to save it? Trusted to operate less regulated? Looked upon as the means to improve cost and quality? An attractive growth stock in the face of the regulation that is coming?

In Pearlstein's words, here is how I will suggest health care capitalism will be seen for many years to come:

"...it rewards manipulation over innovation and speculation over genuine value creation, resulting in massive misallocations of capital and the accumulation of unheard-of wealth in the hands of money managers and top corporate executives who are more lucky than they are skilled."

And it will be so treated.

To the Congressional Budget Office: Please Keep Playing it Straight!

I guess this is an open letter to CBO Director Peter Orszag and his colleagues at the Congressional Budget Office (CBO).

I have great respect for the CBO and that has been the case under different majorities--Democratic and Republican. Never more than now.

The CBO is intended to be non-partisan and objective. They provide the information and estimates the Congress needs to complete the budget process.

When it comes to health reform legislation their job is to "score" the proposals. That means on proposed legislation--big and small--they are the official estimate on what it would cost or what its provisions are estimated to save.

How much will Barack Obama's health plan cost? Will it really save $2,500 per person?

The CBO calls it and their estimate is the official one the Congress would have to use. That is particularly important if the Democrats keep their word and follow PayGo rules that require either spending or tax offsets for any new programs.

If the Congress decides to "equalize" private Medicare payments with the traditional Medicare plan's costs, will the course taken in fact result in equalization?

Will any changes to the Medicare physician payment schedule in fact save the money its proponents claim? Will any new "pay-for-performance" initiatives actually save physician Medicare money?

Will any assumptions regarding savings from "waste, fraud, and abuse," like those made in the recent Baucus Health Plan, really materialize?

Will new information technology, wellness, disease management, and the like cost containment, initiatives really achieve the savings claimed?

My sense is that most of these health reform savings claims, like President-Elect Obama's claim he can save $2,500 a person with his health reform plan, are way too optimistic.

MedPAC has already said that eliminating past and future Sustainable Growth Rate Formula cuts to the Medicare physician payments would cost $200 billion over 10 years.

It looks to me like the nebulous "pay-for-performance" initiatives often proposed as part of Medicare physician payment reform are too often ways of avoiding the really heavy lifting that has to be done to fix that doc payment system. Since no one seems to agree on what quality is and a way to measure it I don't have a lot of faith there are big fixes here. If all of the docs are enthusiastic about pay-for-performance proposals in exchange for avoiding fee cuts you know it isn't accomplishing a lot!

Wellness programs very similar to the ones we see today were around in the late 1980s and never accomplished a lot.

Health information technology progress and patient medical records are very important--particularly for improving quality--but have a lot of upfront costs and take years to payoff. Ask any doctor now struggling with them.

The disease management and coordinated care programs now being proposed are, like most cost containment "lite" proposals we are seeing today, helpful but only incremental extensions for what is going on in the market anyway. No silver bullets.

I hope the CBO doesn't cave to political pressure and keeps doing its non-partisan down-the-middle job.

If I hear the politicians whining and the special interests squealing about CBO's conclusions about how these cost containment "lite" proposals and policy rationalizations, like nebulous "pay-for-performance" that give policymakers a free pass on the tough decsions, don't save much money I know the CBO pros are doing their job.

The Baucus Health Plan Proposal--Evidence There Is No Consensus on the Key Health Reform Issues

Max Baucus will be a key player in the health care debate the next two years. As chairman of the Senate Finance Committee he has jurisdiction on many of the key issues including Medicare and provider payment reform.

He is also a leader in the true bipartisan spirit--something crucial to actually getting reform done.

Yesterday, he released a 98-page white paper, "Call to Action--Health Reform 2009."

Reading the executive summary, which given the news stories I have read is about all the press has looked at, the Baucus outline is pretty much Barack Obama's health reform plan. Obama's campaign health plan is 18 pages long and Baucus has tried to take it a distance further with 80 more pages.

The Baucus Health Plan includes:

• Basing the system on existing private and public health plans—employer-provided, Medicare, Medicaid, and SCHIP.
• Insurance exchanges - Creating a system of one or more Insurance Exchanges for individuals and small business to buy their coverage from complete with a management board to run it—very similar to the Massachusetts Connector and the Connector Board.
• Premium subsidies - His subsidy proposal is vague. The Insurance Exchange Board would determine a schedule of coverage affordability based on available health plans, their costs, and income levels. A tax credit would be available to subsidize those deemed not to be able to afford part or all of the cost. This is identical to the process the Massachusetts Connector Board follows.
• Medicare buy-in - Before the Insurance Exchange is up and running and its plans available to consumers, Baucus would allow those age 55-64 to buy-into Medicare.
• Insurance regulation - Insurers could offer health plans through the exchange but would have to comply with benefit and plan option requirements and would be subject to guarantee issue requirements. The health plans could rate around restricted age, sex, and lifestyle issues.
  
• A government-run plan for the under-65 market - After the Insurance Exchange is running Baucus would create a government-run option for consumers to choose. It would not look like Medicare but would have benefit options like the private plans offered in the Exchange.
• Traditional insurance distribution - Insurers could also market outside the exchange using the traditional direct and intermediary distribution systems.
• Medicaid expansion - Medicaid would be expanded to cover all of those below 100% of poverty who were uninsured.
• SCHIP expansion - SCHIP would be expanded to cover all of those below 250% of poverty who were uninsured.
• An individual mandate - Baucus’ plan does differ with the Obama Health Plan in that his plan has an individual mandate to buy health insurance - “Once affordable, high quality, and meaningful health insurance options are available to all Americans, through their employers or through the Exchange, would have a responsibility to have health coverage.”
• An employer mandate - All but the smallest employers would be required to offer and pay for coverage or pay into a government pool—“pay or play.”
• Incremental cost containment "lite" - The plan’s cost containment features are vague and embrace many of the same incremental items both Republicans and Democrats have listed—all “cost containment lite” features. Baucus’ list includes the elimination of fraud waste and abuse, increased price and cost transparency, wellness initiatives, and health information technology.
• Medical malpractice reform - He explores a number of medical malpractice reform ideas around the theme of no fault health courts but makes no specific proposal.
• Physician payment reform - He spends a great deal of time on the issue of physician payment reform calling for better payments for primary care, reforming the Sustainable Growth Rate formula, and pay-for-performance and quality. However, he never deals directly with the issue of specialist payments and never draws a specific conclusion on how he would proceed.
• But no cost estimates or plan to pay for it - What is remarkable about he Baucus Health Plan is that he offers no cost estimates or mentions how he would pay for it! The Obama Health Plan would cost at least $100 billion a year and the Baucus plan is very similar—almost identical at the outline level.
  

I read one press report that suggested the similarity to the Obama health plan and the Massachusetts health law must mean that the Congress is coming close to a consensus on how to proceed with health care reform.

My advice to the reporter is to spend some time reading the document. It is not so much a plan for specific action as a recounting of the many broad possibilities we could take on key issues such as physician payment reform and medical malpractice reform. There is no detail for just what the most expensive and important element--individual subsidies--would be. It is notable that physician payment reform is an unavoidable issue for the Finance Committee given the pending 21% physician fee cut and he clearly has no specific plan there. There is no cost estimate or plan to pay for it.

Baucus is so vague on key elements because there is no consensus, particularly from the key relevant stakeholders to any of these issues, on just how to proceed. There is no cost estimate because the plan is so vague in structure and timetable. There is no source for funding because there isn't a source for the likely $100 billion this would cost in the first year.

If you read just the executive summary you might see proof of consensus on what health reform might look like.

If you read all 98 pages it is clear there is no consensus on many of the key details, what health reform would cost, the timetable for implementation, or the source for paying for it.

There is Now a Real Bipartisan Opportunity in Health Care

President-Elect Obama, and about every candidate for Congress, has said he wants to change the partisan tone in Washington. Obama, the Democratic Congressional leadership, and the Republicans have a terrific opportunity to do just that on health care when they all come to Washington early next year.

As I posted earlier, I do not believe there is any chance we can see the enactment of the comprehensive Obama health plan in the near term.

But there are a number of important steps that can be taken next year and each of them have enjoyed strong bipartisan support during the past year:

1. Reauthorizing the State Children's Health Insurance Plan (SCHIP) and increasing the number of kids covered from six million to ten million. The Congress passed exactly that kind of reauthorization twice by strong bipartisan margins only to come a few votes short of being able to override two Bush vetoes of the bill. Those attempts met pay-as-you-go requirements by boosting the cigarette tax to pay for it.
2. Rearranging Medicare spending by equalizing the payments private Medicare plans get with the payments the traditional Medicare plan receives for the same seniors. The Medicare physicians face a 21% fee cut on January 1, 2010 and there are other serious cost issues for Medicare. In July, the Congress took the first step toward payment equalization with a veto proof margin of 70-26 in the Senate and 383-41 in the House. The really hard part here is crafting a new Medicare physician payment system that is desperately needed but the first step, where to get the money, has strong bipartisan support.
3. John McCain and Barack Obama had a number of similar and relatively non-controversial cost containment ideas in their health plans which would cost the federal government little or nothing. These similar proposals included the expansion of health information technology and a patient medical record; improving transparency about health care quality and costs including prices, errors, staffing ratios, infection rates, and disparities in care and costs; wellness initiatives including an emphasis on healthy lifestyles; development of best practice standards, requirements for disease management programs; requiring effectiveness reviews for procedures, devices, and drugs; and requiring providers to collect and report data to ensure standards for health quality are followed.
4. There is bipartisan support for assisting small business in providing and paying for health insurance. In 1999, 56% of employers with 3-9 workers provided health insurance to their workers. By 2007, that had dropped to 45%. By contrast, employers with more than 200 workers provide health insurance 99% of the time. The one place employer-provided health insurance is melting away is in the small employer area. A modest bill to assist the small employer enjoys support among both Republicans and Democrats.
   

A big $100 billion comprehensive health care reform plan like the Obama health plan is not realistic in these times of financial crisis.

But, there is already bipartisan support for a children's health insurance (SCHIP) extension and the means to pay for it, reform of Medicare provider payments and the means to pay for that, a list of commonly agreed to cost containment initiatives that would cost the government little or nothing, and bipartisan support for help to the small employer to offer health insurance.

To be sure these steps would only make a dent in the number of those uninsured and these bipartisan cost containment items will only help our cost problem around the edges.

But all of these bipartisan steps would be progress, are doable, and are affordable.

President-Elect Obama and the Democratic leadership can do what the last two Presidents did--promise bipartisanship and then quickly employ the same old partisanship out of the mistaken belief they had the majorities in Congress that would enable them to steamroll the opposition. That mistake led to the 1994 Republican takeover of the Congress in the first case and two straight election defeats, in 2006 and 2008, in the second.

President-Elect Obama, the Democratic leadership, and the Republicans have the road map at hand to truly show a bipartisan commitment to health care change and progress. They could actually break the gridlock on health care and make some modest progress.

Will they take the road less traveled or just give us more of the same?

The Morning After: Obama and the Dems Win Big--What It Means For Health Care

258 House and 57 Senate Democrats make it almost certain that major health reform will be passed. Right?

Actually, that was the number of Democrats Bill Clinton started off with in 1993 and we know what happened to health care reform in that Congress.

With similar Democratic majorities, I do not expect a major health care reform bill like the one President-Elect Barack Obama called for during the campaign--in 2009 or 2010.

I do expect a number of important health bills including the renewal of the State Children's Health Insurance Plan (SCHIP) and a major Medicare bill.

Here are the reasons why we could have a big health care reform bill in 2009:

1. Obama and the Democrats called for health reform during the campaign and many voters expect them to follow through.
2. Senator Kennedy has already begun a significant bipartisan effort and many in the Congress want to see the Senator succeed in what could well be his last effort toward a career-long goal.
3. The health care system continues at unsustainable cost levels--the average family cost of employer-provided health insurance reached $12,800 this year.
4. There are 45 million uninsured.

Here are the reasons why, in spite of all of our health care problems, I don't believe we will have a big comprehensive health care reform bill in 2009 or 2010:

1. There is no consensus in the Congress or the country on what a comprehensive health care bill would look like.
2. Our people don't want health reform badly enough to force the Congress to stand up to the powerful stakeholders and make them do it.
3. We don't have the money.

There is no consensus.
Barack Obama did win a big victory. He did promise health care reform. But he won with slightly more than 50% of the vote and John McCain's voters gave him close to 50% of the vote. The country remains split over the degree to which government should be involved in our health care system and that is reflected in the Congress--even after the Democratic victory yesterday.

In the House, the Democrats will enjoy a big majority. However, last session we had 49 "Blue Dog" Democrats and will have at least that many this time. Without "Blue Dog" support, the Democrats will not have a majority on any health care bill. No big health care reform can pass without the support of these fiscally conservative Democrats who are pledged to a pay-as-you-go policy--you can't spend the money unless you either raise taxes or cut spending someplace else.

In the Senate, it appears the Democrats should have 57 or 58 seats in January. But Republicans can stop a big Democratic health care bill with only 41 votes and they will likely have 42 or 43. Forty-three is exactly the number of seats Bob Dole had when he stopped the Clinton Health Plan in 1994.

Any big health care bill will have lots of reasons for any number of powerful special interests to try to stop it. Or, a big bill's authors could do what they did in Massachusetts--pay everyone off. The problem is if you give insurers, doctors, hospitals, drug companies, and all the others what they want to get them onside, you will create an enormously expensive bill and create opposition on that front alone. That's why the California effort crashed earlier this year when that bill's total costs became clear.

We are simply not at a place where any of us can outline a health care bill that clearly has consensus support and you don't do something this big unless you have a clear consensus.

Our people don't want it badly enough.
We really do have a democracy. For all the things you hear about the "special interests controlling Washington," the fact is that if there is a huge outcry from voters the Congress will respond. But there is no huge outcry from voters over health care.

The big issue in this election leading to Obama's big victory was the financial meltdown and the economy--not health care.

Support for health care reform among voters is soft. Health care had consistently been the number three issue (behind Iraq and the economy) in the Kaiser Family Foundation tracking poll until gas prices spiked this summer. It then fell to fourth behind the price at the pump. In August, 22% of those polled thought paying for health care was a serious problem for them--but 36% said paying for gas was a serious problem. After the financial meltdown, in October only 12% thought paying for health care was a serious problem.

Health care costs $12,800 a year for a good family plan and when gas went to $4, the cost of gas was more important!

Health care is a chronic issue for the voter but support for big change is not deep-seated. It is not deep-seated because most people have very good health insurance that is largely paid for by someone else. Lake Research reports that 92% of those who voted last year had health insurance--82% had everyone covered in their household. For the vast majority, health insurance comes from the workplace where someone else pays for it.

For all the issues of the uninsured and health insurance costs, the vast majority of voters have really good health insurance and their employer still pays for the largest share of it. So, it's no surprise when $4 gas is a bigger issue than $12,800 health insurance. It should also be no surprise when next year voter pressure for the Congress to do anything big and controversial will be tepid.

As long as the employer community is willing to subsidize our incredibly high health care costs for those who vote don't look for anyone to be marching on Washington to fix our health care system.

We don't have the money.
Passing an Obama-like health care reform plan will easily cost $100 billion a year to implement.

Two years ago the budget deficit was $162 billion. Last year it was $455 billion. In this fiscal year, it will be at least $1 trillion! The deficit was going to be $550 billion before it became necessary to book $250 billion of the bailout this year. It is expected the economic deterioration will create an additional $100 billion in deficit, and the Congress is getting ready to pass another stimulus bill costing at least $100 billion. That totals $1 trillion. Add to that the cost of the Iraq war, a bigger stimulus bill, any more deterioration, and $1 trillion is going to look good.

Add to that Obama's preeminent campaign promise--he will cut taxes for all families making less than $200,000 a year. He can't avoid this one. He intends to raise taxes for those making over $250,000 but just keeping the Bush tax cuts (which expire in 2010) for those making less than $250,000 a year and then cutting taxes further for those under $200,000 will have a big cost. Keeping that promise at a time there are already huge deficits will trump other spending--like health care.

With 43 Senate Republicans and at least 49 "Blue Dog" fiscally conservative House Democrats and pay-as-you-go health care reform looks pretty unrealistic.

And watch Massachusetts. That health reform plan was passed by giving all the players what they wanted--hospitals, docs, insurers. It was passed with virtually no cost containment. Coming up on its third year this summer, just as any federal health care legislation would be on the table, those chickens are going to come home to roost.

What will happen in 2009?
I expect the new President and Congress to keep their health care promise by starting incrementally to insure more Americans. They can't afford, or would be able, to do it all so they will make a down payment.

There are a number of unavoidable health care issues for the next Congress:

• The reauthorization of SCHIP, which must be done by April. Last year the Congress approved a $35 billion expansion that would have increased the number of kids covered from 6 million to 10 million. President Bush vetoed the bipartisan expansion twice. Obama will sign it and it could well involve a big cigarette tax to meet pay-as-you-go demands.
• Physicians are scheduled to get an automatic 21% Medicare fee cut on January 1, 2010. The Congress has fixed this Sustainable Growth Rate problem seven times before. The last time was in July when they fixed it for just 18 months. While we desperately need physician payment reform, we won't likely have the votes to do more than another temporary fix because the doctors don't agree among themselves how to reform the payment system.
  
• With pay-as-you-go so important an issue there is one place, other than a cigarette tax, where the Congress can find the money for health care--private Medicare. Pit the kids health program and the big Medicare fee cut against the cigarette companies and Medicare HMOs and, in the new Congress and White House, there is no competition--tobacco gets taxed more and the HMOs get cut.
  
• But even the extra HMO payments and a cigarette tax aren't large enough to both expand SCHIP to 10 million kids, fix the doctor payment problem, and pay for Medicare as it is. There will have to be more Medicare cuts--hospitals, nursing homes, durable medical equipment...Look for a big provider food fight over who gets what.

There are also a number of things the Congress can do that won't cost the government much or any money--health information technology standards and requirements, transparency in provider pricing, health outcomes research, and others.

If there is any money left, there have been bipartisan efforts to help small business owners provide health insurance. This is the one area where we are seeing significant coverage erosion.

Expanding SCHIP, dealing with Medicare payments, adding on things like health information technology, and maybe doing something for small business would give the new President and the Democratic Congress bragging rights on health care if not comprehensive reform.

In the end, Obama and the Democrats can accomplish a fairly substantial health package without doing a big comprehensive Obama health plan and that is what I expect.

High Costs for the Massachusetts Health Law--Sustainability is Now the Question

The Center for Studying Health System Change has just released a study examining the state of the important health reform law in Massachusetts.

As one of the co-author's put it, "Improving access to heath care coverage has been a clear emphasis of the reform, but little has been done to address rapidly rising health care costs, raising questions about the longer-term viability of the reform."

I can tell you that from my experiences in Mass, employer health care trend is running in the 10% range--well above the national average and clearly something unsustainable in this or any other economic climate.

From the study's summary:

"Passage of health reform legislation in Massachusetts required significant bipartisan compromise and buy in among key stakeholders, including employers. However, findings from a recent follow-up study by the Center for Studying Health System Change (HSC) suggest two important developments may threaten employer support as the reform plays out. First, improved access to the nongroup—or individual—insurance market, the availability of state-subsidized coverage, and the costs of increased employee take up of employer-sponsored coverage and rising premiums potentially weaken employers’ motivation and ability to provide coverage. Second, employer frustration appears to be growing as the state increases employer responsibilities. While the number of uninsured people has declined significantly, the high cost of the reform has prompted the state to seek additional financial support from stakeholders, including employers. Improving access to health care coverage has been a clear emphasis of the reform, but little has been done to address escalating health care costs. Yet, both must be addressed, otherwise long-term viability of Massachusetts’ coverage initiative is questionable."

You can access the entire document here.

With the Massachusetts health care law looking so similar to the Obama health plan, just how Massachusetts is doing will be critical to the national health care debate.

My own conclusion has always been that the Massachusetts health care law will turn out to be an incomplete result for an unsustainable cost. Earlier post.