Saturday, February 28, 2009

What is Needed to Unravel a Gordian Knot is a Bold Stroke—Access and Coordination

Today, Andy Wallace joins us with some concise advice on how to make our health care system work far better.

He comes with a special perspective; a highly regarded physician specialist, a former medical center executive (former CEO of the Duke University Hospital), a former Dean of the medical school responsible for the Dartmouth Atlas and Vice President for Health Affairs at the Dartmouth Medical School.

What is Needed to Unravel a Gordian Knot is a Bold Stroke—Access and Coordination
by Andrew G. Wallace, MD

Your Blog on February 24, 2009 makes the point that “cost containment is the whole ballgame” and I do not disagree with that emphasis. But you and others also have made a point in prior reviews that the consequences of being uninsured are unacceptable, even if they are only a symptom of a larger problem. I would add that availability of high quality coordinated services is sufficiently uneven today, based on geography, per capita density, and per capita income (in addition to insurance status) so that even universal and affordable insurance will be a shallow promise for many. I would like to suggest two elements of the necessary bold stroke to unravel this Gordian knot. Both suggestions actually would have getting better care to more people and partially offsetting cost reductions.

First would be insurance reform. I would propose an insurance connector with teeth. All health insurance, other than that through SCHIP, Medicare, Medicaid and other such programs for which an individual is eligible and enrolled would be through the connector. Everyone would be required to have health insurance with appropriate premium subsidies for lower income individuals or families. With such a mandate pre-existing conditions would not be a basis for any participating plan to either deny coverage or require a different premium for such individuals.

Each connector would offer choice from among a limited number* of private and public plans. However, any plan listed would be identified as either not-for-profit or for-profit, and it would list the percent of its premium paid to providers. Benefits and premiums would be described, but no entity would be on the connector if it didn’t offer at minimum a base of benefits agreed to ahead of time by the connector. Similarly, connectors would be informed annually of results from the new Comparative Effectiveness board, and any recommended procedure or treatment that did not meet their tests of effectiveness should be identified by the connector, and paid for by individuals out of pocket. Finally, to be in the connector all insurance plans must agree to use a common claim form.

* My sense is that to recapture any significant part of the significant “excess administrative cost” related to the plethora of private insurance entities, including excesses in doctor’s offices and hospitals in dealing with so many entities, the aggregate number of participating plans needs to be relatively small. To an extent we can look to competition inside the connectors, with other private and the potential public offerings to achieve that result. But more regulation may be required.

Furthermore, connectors at a state level, or even a large single one at a national level, would be large enough to allow to allow variation analysis of the type Wennberg and Fisher have applied so productively to the Medicare population. Such analyses could provide the opportunity to identify physicians or hospitals who generate expenditures on a DRG and or age basis, which exceed some defined level or the national average ± a percentage; hence qualifying as an outlier and flagging whether requested reimbursement by the connector plan is appropriate. I sense Obama and his advisors want to move in a similar direction with Medicare.

Thus, I see an appropriate connector concept as a powerful way to insure most if not all citizens and to attack many aspects of a cost containment strategy.

Second, would be system reform at the provider level. I am concerned that at some level responsibility must be taken to assure that all people who will have insurance also will have access to primary care and to a provider who can and will arrange access to specialists and hospitals when needed and coordinate subsequent care in the patient’s best interest. I am attracted to the possibility that not-for-profit hospitals within what the Dartmouth Atlas calls Hospital referral regions or (HRRs) are such naturally occurring loci for that responsibility. HRRs are regions defined by ZIP Codes where a plurality of patients is already referred to one or more acute care/tertiary hospitals within the HRR. These hospitals are under sufficient actual or potential leverage from either state or federal influence to accept that responsibility. The challenge at an HRR level is to either attract a sufficient number of primary care providers, or to provide them in the form of Federally Qualified Community Health Centers or Rural Health Clinics, in either case linked to the hospital(s) and specialists in the HRR to assure access and coordination. I think geography is a logical and reasonable way to take responsibility for a population. These hospitals, with some assistance from their state or from HRSA or even from their connector, could be leveraged to create these networks to assure access to care and its coordination. I believe that patients managed under such a coordinated system are a part of what the Commonwealth Fund and the American College of Physicians include in their visions for a “High Performance Health Care System.”

Furthermore, populations insured by a connector of the type proposed and participating in the type of coordinated system described offer a near optimal context for measuring the quality of outcomes and comparing ours to other countries.

According to Myth, what is needed to unravel a Gordian knot is a bold stroke!

Friday, February 27, 2009

Medicare Advantage HMO Stocks Down Big This Week

Matthew Holt, publisher of the Health Care Blog, and I have been in a state of incredulity over Wall Street’s head in the sand view of the Medicare Advantage business for more than a year. See his post today, "I Don't Really Understand Wall Street, Part 98."

Why was it that in the wake of a Democratic take-over of Congress in 2006 and Obama’s victory last November that HMO stocks heavily invested in the Medicare Advantage business had not paid a bigger price for betting the Republicans would still be in power in 2009?

This week, HMOs disproportionately invested in Medicare Advantage, like Humana and Universal American, were down 30% on top of their already huge plunges from their 52-week highs. Two things drove the loss of confidence this week. First, CMS said that the Obama administration would begin the cutting in 2010 by announcing a much lower 0.5% increase in the National Per Capita Medicare Advantage Growth Percentage. The market was expecting the Obama administration to be as generous as the Bush folks and announce a 3% to 5% increase.

Then the first Obama budget was announced and, guess what, the administration put $177 billion in Medicare Advantage cuts into it. Not like the new President hadn’t told us he would do this, maybe two or three hundred times, during the campaign.

In January 2008, in a post, Medicare Advantage Cuts? I said, “From the looks of Medicare Advantage-heavy HMOs' share prices, there's apparently lots of sand on Wall Street and a great many people have their heads buried in it.”

On the very first day this blog went online in a December 2006 post called, The Democrats Will Change MedicareAdvantage I said, “What many of these financial analysts on Wall Street don’t understand (Humana is trading at the highest price/earnings multiple in the HMO industry) is that, to the Democrats, this is not just about a fair funding level for private Medicare plans and whether they want to risk messing with them. It is about deep-seated ideological objections.”

I also said in that 2006 post, “In fact, Goldman Sachs analyst Mat Borsch came out with a positive report on Humana, a company that has been particularly aggressive in the Medicare market. Borsch said that while it is possible Democrats would change the Part D program, 'the odds of substantial change to the Medicare Advantage plan program (which is what really matters to Humana) are remote.”

But here is what Barron’s is reporting the analysts are saying this week,
In a note today [February 23, 2009] downgrading both HealthSpring and Humana, along with $575 million Universal American Corp. (UAM) to “Underperform” from “Market Perform,” BMO Capital analyst Dave Shove writes today that Medicare’s profitability growth “will all but disappear” as a result.

Medicare programs will see “significant” reductions in enrollment in 2010 and a 1.5 percentage-point drop in profit margins, writes Shove, and the movement of many of the insured to public programs away from private Medicare coverage. The last time HHS “dealt a crushing blow to Medicare Advantage capitation rates,” in 2000, writes Shove, “the program lost roughly 10% of enrollees in the first year, and bottomed out with 22% participation loss over a three year span.” (Bear in mind, the capitation rates statement is preliminary: final rates will be decided on April 6 and could potentially be higher, meaning, more profitable.)

All three companies have the greatest exposure to Medicare among managed care as a percentage of earnings. “We believe that budgetary strain and sentiment shift on Capitol Hill will cause 2010 [Medicare Advantage] plan changes to drain the profitability from the program,” writes Shove.
Wall Street now seems to think the Obama health plan budget is a threat to the Medicare Advantage business.

It is not.

But since Wall Street hasn't listened to me for two years, I am not going to tell them why!

Here's a hint: Medicare Advantage Payments to Insurers--Baucus Zeroing In!

Wednesday, February 25, 2009

Mr. President, Aren’t You Just Kicking the Can Down the Road?

Pieces of the health care portion of the Obama budget are leaking out.

Based upon published reports, the Obama “down payment on health care reform” will include:
  • $634 billion to help pay for health care reform over the next ten years.
  • $318 billion of that—about half—will come from tax increases that include reducing the mortgage and charity deduction for high income Americans.
  • Charging wealthier seniors more for the Medicare Part D drug benefit—as is done for Medicare Part B now.
  • Cutting Medicare HMO payments by $175 billion over ten years.
  • Reducing Medicare hospital payments by $26 billion over ten years by bundling inpatient and outpatient reimbursement to include the 30-days after discharge.
  • Cutting Medicare hospital payments by $12 billion over ten years for readmissions resulting from substandard care.
  • Requiring drug makers to increase the rebates on drugs sold to Medicare patients from 15% to 21% saving $19.5 billion over ten years.
The biggest spending reduction is the cut to Medicare HMO payments. This one is hardly a risky political move as everyone has expected it. Competitive bidding would begin in 2012 under the proposal.

Interestingly, the Obama budget reportedly calls for creating a system where the private Medicare plans will bid market to market to compete with the traditional Medicare plan rather than continuing the current system where the government tries to set the rates for them.

Ironically, that was the original Republican idea for using the competitive value of managed care to reduce long-term Medicare costs and is what should have happened in the first place rather than this temporary system of overpayments the HMO industry has been fighting to keep permanent.

With $318 billion in tax increases and another $175 billion in Medicare HMO cuts, the $634 billion "down payment" only contemplates a total of another $141 billion in federal health care cuts over ten years (which amounts to about 1% of annual federal spending each year). That is hardly a rounding error on a federal health care budget that CMS just announced will already total $1.19 trillion in just 2009.

This week, CMS estimated that at present trends annual national health care spending would reach $4.35 trillion or 20% of GDP by 2018.

If the Obama administration is serious about not “kicking the can further down the road” then any overhaul of our health care system has to do more than fritter around the edges with spending reductions.

More, it needs to be paid for from real savings—not half of the "down payment" coming from tax increases as they are reportedly proposing.

If the plan is to raise taxes to pay for a big part of health reform that just means they better raise enough taxes to pay for the $4 trillion health care system CMS says we are going to have in 2018.

As the budget details come out over the next few days the question we all need to be asking is, Just what is this administration willing to do to make health care affordable over the next ten years?

Affordability will have a lot more to do with the how this administration deals with the $2.5 trillion we already spend every year not whose taxes we can raise.

"Obama Budget Would Creat $634 Billion Health Care Fund"

Here is what Ceci Connolly is reporting at the Washington Post:
President intends to release a budget tomorrow that creates a 10-year, $634 billion "reserve fund" to partially pay for a vast expansion of the U.S. health system, an overhaul that many experts project will cost as much as $1 trillion over the next decade.

Obama would pay for the expansion by trimming tax breaks for the wealthy and tightening payments to insurers, hospitals and physicians, according to a senior administration official.
If this report is accurate, a $634 billion fund would pay for roughly half of what a fully comprehensive overhaul of the U.S. health care system would cost. It is also notable that some of the $634 billion is reported to come from cuts to what hospitals, physicians, and insurers presently get. We have been fully expecting a $157 billion cut to what Medicare HMOs get but it would seem the docs and hospitals would be in for some pretty big cuts as well to get to $634 billion in savings.

Can't wait to see the full budget in the next couple of days.

Looks like another "Orszag" on the way!

Tuesday, February 24, 2009

For the Obama Administration Health Care Reform Will Require Really Tough Cost Containment—Coming and Going

The President has made a powerful argument—America cannot get its economic house under control without comprehensive health care reform. The cost of existing entitlementspublic and private—and any new ones are just too big a ball and chain on our short and long-term economic health.

The President has also argued that there could be no better time to fix this mess than now—when it is so critical to get our economic house in order once and for all.

The President is right on both counts.

As any of us who have studied this issue know, the number of those uninsured in America are not really the problem—they are a symptom of health care costs run amuck as individuals, employers, and government just can’t afford to insure everyone. Adding more people to this unaffordable mess without fixing it first is not an answer—it’s a prescription for even more fiscal irresponsibility.

So if cost is the real problem then cost containment is the whole ballgame.

As the Congressional Budget Office (CBO) pointed out in its December tour de force on costs and options, the cost containment “lite” proposals out there will not get the job done. Things like more health information technology, wellness efforts, comparative research, and pay-for-performance are all fine and important but individually, or all taken together, result in hardly a rounding error on the huge health care bill America faces.

Real cost containment means paying providers (doctors, hospitals, insurers, drug companies, nursing homes, device manufacturers, and all the rest) less than they would have gotten. It also means paying less out for beneficiaries than they would have received. That probably means more premium sharing, copays, adopting effective consumer-driven principles, and it probably has to include means testing as a progressive way to get wealthier people to pay more and ease the burden.

It might even mean redoing our decades old and now obsolete tax system that rewards too much easy money for health care.

Real cost containment will also absolutely mean more mandatory cost/benefit decisions on what will be covered—the kind of “big brother” intrusion into coverage decisions lots of people hate. But what good is comparative research if, as has been the case for years, it is more often ignored than used?

If you want to contain costs do you know what you have to do? You have to contain costs.

If the Obama administration and the Congress cannot produce these real and politically problematic savings then the same CBO that put everyone on notice about where the real money is in our bloated health care system is going to score the health plan effort as not in fact bringing our long-term entitlement costs under control.

That is where the Obama strategy meets itself coming and going.

If you say health care reform is needed now to bring our out of control health care costs under control and make a big difference in rebalancing our economy then you have to produce a bill that actually does that—that actually controls these costs by succeeding with those politically problematic cost containment challenges.

There will now be lots more “irrational exuberance” over the chances for health care reform in the wake of the President’s speech in the coming days just as there was in the days following the election.

I would rather we had a much more sobering discussion on just what it will take to craft a health care bill that does make the difference we so sorely need to bring our deficits, and our overall economy, back to an acceptable place.

That would be a discussion that included the incredibly politically problematic challenges we will need to face in order to get the health care special interests on the right side of this issue.

When I finally see that discussion taking place, I will be optimistic.

Otherwise our new President is just going to meet himself coming and going.

Sunday, February 22, 2009

Raising the Price Before You Put It On Sale—The Obama Budget and His Health Plan

The Obama budget team has made it clear they are going into the next federal budget process playing it straight on many fronts that the prior administration had fudged on.

The cost of the wars, the cost of adjusting the alternative minimum tax each year to keep the middle class from falling into it, the cost of disaster relief, and the cost of avoiding the otherwise automatic cuts to Medicare physician fees because of the Sustainable Growth Rate (SGR) formula were all conveniently left out of the Bush budgets making them look a lot better than they really were.

Facing a $1.5 to $2 trillion deficit this year you might as well throw the lot on the pile, get it over with, and create an even greater imperative for change—a trillion here a trillion there "and pretty soon it gets to look like real money."

In the end an honest accounting is all to the Obama administration’s credit.

But on the health care front anyway, it may also be very shrewd politics.

Suddenly, the cost of Medicare becomes a lot higher over the next ten years. If the budget now reflects that none of the expected SGR cuts will be made to Medicare physician payments that would put the nation’s ten year health care bill about $320 billion higher than current calculations—using the CBO’s December cost option report to gauge the impact. If you assume the docs would have gotten a Medicare Economic Index increase each year the additional cost is closer to $600 billion.

So, the budget baseline increases just before you put your health care reform plan on the table. Any cost or savings calculations conveniently occur from the higher baseline and the cost of the proposed health plan looks smaller than it would have because you already have much of the doc fix factored in before your new plan takes effect.

Suddenly, the Obama health plan's solution to the Medicare physician fee issue is at least not costing as much as it would have and is maybe even saving some money rather than costing money as it would have under the old budget assumptions!

Either way it's all spin of course. The cost is the cost. And, this is a much more honest cost basis than we have had—just as long as we don’t lose track of the numbers!

But it’s also a lot easier to spin from a number $300 billion higher than it would otherwise have been.

Geeez, this Orszag guy is good.

Saturday, February 21, 2009 Doing Good Work

A comment to a recent post caught my attention.

There is a new group of primary care practitioners doing some good work that deserves some attention.

From their website: is an off-shoot of the Ideal Medical Practices Project that has been running since 2006. This grant funded project supports solo and small practices across the US as they struggled to provide superb care in a very difficult environment.

The volunteer participants in this project discover that even though they are smart, hard working, and caring they still struggle to keep their practices from dying due to the toxic environment. Current health care policies systematically reward the wrong work and punish us when we do the right thing.

While many of us desperately try to remain afloat in this abysmal system, others find that they can only survive by ditching any interaction with the insurance industry. We need solutions that will work for all of our patients and for all of our practices.

We need new policies that truly support excellent care. A lot of the suggestions coming out of state capitols and Washington DC look like more of the same.

We’re a bunch of physicians, nurse practitioners, nurse midwives, physician assistants, nurses, office managers, secretaries and just plain folks who want to see the US develop a high performing health system.

Aside from being an offshoot of our not-for-profit Ideal Medical Practices, we have no ties to any political party or corporation. Our aim is to help the US create a policy environment in which effective primary care can flourish so that we can all benefit from the improved outcomes, improved experience of care, and reduced costs of health care.

Come look at our evolving resources: is the official web site for Ideal Medical Practices – a nonprofit we are setting up to help practices deliver superb care. is the official web site of the Ideal Medical Practices project funded by the Physician’s Foundation.

The Ideal Medical Practices Blog

Friday, February 20, 2009

“Leading Figures in the Nation’s Long-Running Health Care Debate…Appear To Be Inching Toward a Consensus”

Robert Pear, in the New York Times, is reporting that, “leading figures in the nation’s long-running health care debate…appear to be inching toward a consensus that could reshape the debate.”

He goes on to write, “While not all industry groups are in complete agreement, there is enough of a consensus, according to people who have attended the meetings, that they have begun to tackle the next steps: how to enforce the requirement for everyone to have health insurance; how to make insurance affordable to the uninsured; and whether to require employers to help buy coverage for their employees.”

Without a doubt whether or how to mandate everyone buy health insurance is a very big and contentious issue.

The problem is that it is only one of a very long list of big and contentious issues.

Getting the key stakeholders to agree on how to deal with the individual mandate issue will be very important—health reform cannot move forward without agreement on this.

But this is tantamount to agreeing the car should have wheels—critical but hardly the whole product.

Actually, getting agreement on an individual mandate is not the most problematic of the issues. Getting employers, who already pay for coverage and would like a level playing field, and insurers, who would like the law to require everyone buy their product, to agree to a mandate is hardly news.

According to the report there is yet no agreement over whether employers should be required to provide health insurance or whether the longstanding tax treatment for employer-provided benefits should change—a big deal to unions who don’t want their benefit franchise to disappear if an individual model of insurance were to be used.

Given that the Democrats won a big election victory last fall, it should be no surprise that their employer-based model for reform will ultimately carry the day—reports indicate Republicans are not taking part in the talks.

The really tough issues that will determine whether the key stakeholders can come to agreement will be on the cost issues and how we pay for it all.

Today, we also received news that the Obama administration is going to submit a budget that will have a deficit $2.7 trillion higher over the next decade because, among other things, they will provide an honest accounting of just what the current level of Medicare physician payments will have on future spending—Obama won’t make the Bush budget assumption that the future physician fee cuts under the Sustainable Growth Rate formula will happen. Of course, they never were implemented in the Bush years.

I applaud the Obama administration’s honesty in portraying just how bad the health care entitlement mess really is—sounds like an Orszag to me.

To achieve health care reform will require tackling both the real cost of the old and the new entitlements. As the President has said, “We can’t kick this can down the road any longer.”

That—in how much we spend and how we pay for it—is where the real consensus will have to emerge. That will require some big cuts to what beneficiaries and providers would have otherwise received over the years.

Every one of those “stakeholders” in that room hasn’t given up one thing yet!

Agreeing to the mandate—which hasn’t yet been accomplished—is chump change compared to who will pay the big bills in the future and who will suffer the unavoidable cuts.

Tuesday, February 17, 2009

The Big Stakeholders and Health Care Reform--No More Happy Talk?

For a number of months I have been beating the drum that there is nowhere near the consensus for health care reform we need to get the big one done and that the key stakeholders are no more ready to give up valuable real estate to make it happen than they have been in years past.

I got a call from Maggie Mahar earlier today to discuss an article in yesterday's Chicago Tribune, written by Julie Davis of AP, in which I was quoted, that pretty much reports that the big vested interests', "I'm happy, you're happy, we're all happy to see health care reform," happy talk is predictably beginning to break down.

A few snippets from Maggie's excellent summary over at "Health Beat:"
A story in yesterday’s Chicago Tribune confirms that coalitions between “Labor unions and business groups that have teamed up in a multimillion-dollar national lobbying campaign to pressure President Barack Obama and Congress for big changes in the nation's health care system” are now “quietly at odds.”

(Hat-tip to reader Brad F. for calling my attention to this story. As Brad put it in an e-mail: “Ah, contestants on Survivor are cannibalizing: Shocker”)

Specifically, the Tribune explains that “after spending two years and more than $20 million to promote the idea, collaborators in the Divided We Fail Coalition — a project of the seniors’ lobby AARP, the service workers' union, and groups representing small business and the Fortune 500 — are divided over key elements of how to fix health care. There’s consensus on a vague set of general principles that include making coverage more accessible, affordable and efficient. But they differ over important details, including what roles the government and private businesses should play.”

Today, in a separate phone interview, Bob Laszewski talked about the limits of bi-partisan coalitions in 2009: “Divided We Fail” is a Bush-era thing. Back then, everyone knew that we were not going to get real reform. So Karen Ignagni ( president and chief executive of America’s Health Insurance Plans) and Ron Pollack (director of Families USA) could sit down in a room and agree on some things around the edges,” he explains. “But now, Democrats are saying ‘why should we compromise with these people?’” (As Ron Pollack acknowledged in a recent HealthBeat post "The goal [of making strange bedfellows] is not to establish a consensus, but to see how far the participants can go in trying to find common ground.” It seems they may have gotten as far as they can. Pollack he made it clear: “there are sharp dividing lines.”)

If Democrats seem intransigent it is because, as President Obama puts it, “I won.” And over the past eight years, conservatives rarely held out an olive branch. Indeed, sometimes they literally locked the door, closing liberals out of the deal-making.

Now, liberals want meaningful health care reform, and as I wrote in an earlier post, they are unwilling to compromise on what they see as basic values: “Inevitably, healthcare reform will be partisan because it is all about our beliefs about what is fair. . . . Conservatives believe that “the market ‘can solve our healthcare problems. Progressives believe that you cannot count on ‘the market’ to decide in favor of the public good. In a second post on the topic, I quoted Yale law professor Frank Pasquale: ““we should remember commitment's place in the world of health care reform. For me, that means universality--a strong commitment to a robust baseline of care for all--should be at the top of reformers' agenda.” Meanwhile, as we saw in the battle over the fiscal stimulus package, conservatives remain committed to their agenda...

Laszewski believes that by expanding SCHIP, boosting Medicaid and helping the unemployed continue their employer-based coverage under COBRA (by paying 65% of the cost) Obama already has done “more for healthcare” than most recent presidents. But Laszewski doesn’t think that it will be possible to pass major health reform legislation without bi-partisan agreement. “This issue is too controversial. When it comes to fiscal stimulus—you can get a couple of Republicans, get the 60 votes, and shove a bill through. With healthcare if you don’t have a big consensus that takes you to 65 or 70 votes—if it becomes partisan-- it is too easy to drive a Mack truck through anyone’s plan and scare the daylights out of the American public. In that situation you need more Republicans who will be willing to stand up and say “the scary things those other Republicans are saying are lies. This bill is okay.”

The problem is that those more centrist Republicans who might stand up to Karl Rove’s “framing” of an issue were drummed out of the Republican party long ago.
You can access all of Maggie's analysis here.

Saturday, February 14, 2009

Drug Industry Wins Comparative Research Fight in Stimulus Bill

If you are looking for something to do over the weekend I suggest reading the one thousand page final stimulus bill.

You can access it here.

This past Wednesday, I posted the following regarding the differing health care comparative effectiveness research provisions in the House and Senate versions of the stimulus bill:
Comparative research--which drugs or medical devices work the best--makes a lot of sense. That is especially true in the wake of decades of research that continues to point to wide overuse of technology as the primary cost driver in our health care system.

So you would think this one was a no-brainer. But wait. From a Wall Street Journal story, "The drug industry is mobilizing to gut a provision in the stimulus bill that would spend $1 billion on research comparing medical treatments, portraying it as the first step to government rationing." And you know, these guys never lose.

The rub for the drug and device industry is that this kind of research could actually be able to call balls and strikes--which treatments don't work well and therefore should have their use subordinated to those that work better. Already, in the Senate version the industry has been successful in getting language that added the word "clinical" which has the effect of having any studies avoid "bang for the buck" kinds of conclusions.

One billion dollars for comparative research but we aren't allowed to know which drug or device gives us the best return for our money?
So, how was this resolved in the final bill?

From the "American Recovery and Reinvestment -- Conference Report," page 157 of Division A:
"That the funding appropriated in this paragraph shall be used to accelerate the development and dissemination of research assessing the comparative effectiveness of health care treatments and strategies through efforts that: (1) conduct, support, or synthesize research that compares clinical [emphasis added] outcomes effectiveness, appropriateness of items, services, and procedures that are used to prevent, diagnose, or treat diseases, and other health conditions..."
Referring to the drug industry in my Wednesday post, I said, "And you know, these guys never lose."

Also, from Wednesday's post:
And, these were supposed to be the easy parts of health care reform. I am again reminded of all the reports in recent months about how different the 2009 version of health care reform will be with the special interests really ready to cooperate.
And some people think I'm cynical about health care reform.

Wednesday, February 11, 2009

Health Care Reform--The Stimulus PreGame

"Drug Makers Fight Stimulus Provision"
"Lobbying War Ensues Over Digital Data"

The first was a recent Wall Street Journal headline and the second headline comes from the Washington Post. Both refer to what were supposed to be two already agreed on health care reform ideas--comparative research about which treatments work best and the creation of a nationwide system of medical records.

The lesson here is that in health care nothing is easy, simple, or widely agreed to.

The stimulus bill will include about $20 billion for computerized medical records. The problem is privacy. Business interests want more ability to use health care data to market their products and identify people who can be treated more effectively--data mining for example. Privacy interests want tighter control of that data. Can a doctor or a hospital make money selling people's medical data? Could data ultimately be used to discriminate against people? Can drug companies pay doctors to send a letter to certain patients touting medications? Where does a system of information that could be used to alert patients to new treatments and used to track trends in health care effectiveness become at cross purposes with privacy?

This is not a new debate--a health information technology bill has been bottled up in the Congress for years over these kinds of issues.

Comparative research--which drugs or medical devices work the best--makes a lot of sense. That is especially true in the wake of decades of research that continues to point to wide overuse of technology as the primary cost driver in our health care system.

So you would think this one was a no-brainer. But wait. In the WSJ story, "The drug industry is mobilizing to gut a provision in the stimulus bill that would spend $1 billion on research comparing medical treatments, portraying it as the first step to government rationing." And you know, these guys never lose.

The rub for the drug and device industry is that this kind of research could actually be able to call balls and strikes--which treatments don't work well and therefore should have their use subordinated to those that work better. Already, in the Senate version the industry has been successful in getting language that added the word "clinical" which has the effect of having any studies avoid "bang for the buck" kinds of conclusions.

One billion dollars for comparative research but we aren't allowed to know which drug or device gives us the best return for our money?

And, these were supposed to be the easy parts of health care reform. I am again reminded of all the reports in recent months about how different the 2009 version of health care reform will be with the special interests really ready to cooperate.

Let me say it again, there is no consensus about just what any meaningful, or probably meaningless, health care reform bill will look like.

Can't wait for the main feature.

The "Cleanest and Strongest Lever" to Make Health Care Reform Work

I like the Congressional Budget Office (CBO). In a town where self-serving BS generally pollutes the health care reform discussion these guys regularly play it down the middle. Are they always right? I suppose not. But they play the game on the up and up and that makes them noteworthy.

Their latest contribution came from Director Doug Elmendorf. In Congressional testimony he said that, "The cleanest and strongest lever that [the Congress has for] private health care [reform] is the tax exclusion. Many analysts would agree that adjusting that exclusion can be very beneficial for health insurance coverage and for ensuring a more efficient health care system." He went on, "In the public sector...the comparably clean and strong lever would be increasing cost-sharing by Medicare beneficiaries."

His comments came during testimony where he told Congress that the number of those uninsured would reach 54 million in ten years if we do not fix the system.

Now this suggestion certainly wasn't music to the ears of Democrats that have generally avoided things like health care tax reform and cost sharing but it was an honest appraisal of just what it is that will do a lot of the heavy lifting that real health care reform will require.

Last December, the CBO published a list of 115 health care reform options and their impact on long-term federal spending--another stellar job by them. In a post summarizing their findings, I said that it was clear from their work that making the health care system affordable would mean having to deal with what and how we pay providers and beneficiaries--the politically problematic part of meaningful reform. This latest testimony just underscores that conclusion.

Is there any support in the Congress to actually deal with the long-standing tax exclusion for health benefits or entitlement cost sharing? Just a few days ago a bipartisan coalition of 13 Senators from Lindsey Graham to Joe Lieberman to Ron Wyden announced they were reintroducing the "Healthy Americans Act."

Will the Congress and the administration be so bold to actually tackle these kinds of far-reaching goals?

At least the CBO and 13 Senators appear ready.

Monday, February 9, 2009

The AMA Wins A Round Against Patient Information

The AMA Wins A Round Against Patient Information

On January 30th, a 3-judge DC appeals court overturned a lower court decision that would have forced public release of Medicare physician data. Writing for the majority in a split 2-1 judgment, Circuit Judge Karen LeCraft Henderson declared that, “The requested data does not serve any (freedom-of-information-related) public interest in disclosure. Accordingly, we need not balance the nonexistent public interest against every physician's substantial privacy interest in the Medicare payments he receives.”

But in a strongly worded dissent, Judge Judith Rogers, the third member of the ruling panel, found that the request by the consumer group, Consumer Checkbook, represented “a commanding and important public interest in disclosure of the data.”

She added, “The crux of the court’s determination today that physicians’ privacy interests outweigh the public interest in disclosure is its conclusion that the requested data cannot assist the public in assessing either the quality of Medicare services or HHS’s efforts to combat fraud and waste...In reaching this conclusion the court overstates the inviolability of the privacy interest and overlooks the near undeniable fact that the requested data can be of some assistance to the public’s evaluation of how HHS is carrying out its initiatives aimed at measuring and improving health care quality and its efforts to combat Medicare fraud and waste.”

In 2007, Checkbook sued HHS under the Freedom for Information Act (FOIA) to release the Medicare physician data from four states and DC, and promised to make the data publicly available so consumers could understand physicians’ relative pricing and performance. The Bush Administration’s Department of Health and Human Services (HHS), in league with the AMA throughout this case, argued that doctors have a right to privacy that precludes the public’s right to know how government works. When the lower court found with Checkbook, the consumer group promptly sued for the data in the remaining states and territories, and HHS filed an appeal that was joined by the AMA. Amicus briefs supporting Checkbook’s position were filed by several prominent health care groups: AARP, the Center for Medicare Advocacy, Consumers Union (publisher of Consumer Reports), the National Business Group on Health, the Pacific Business Group on Health, and Judicial Watch.

This court’s decision creates an interesting set of dynamics. On the AMA’s site, a brief press release triumphantly states that, “The American Medical Association successfully fought to preserve protections against public disclosure of Medicare payments to physicians.”

The statement continued, “The court found that physicians have a significant right to privacy, and there is no public interest in the disclosure sought by Consumers’ Checkbook. The court clearly found that the release of personal physician payment data does not meet the standard of the Freedom of Information Act, which is to provide the public with information on how the government operates.”

But the statement is attributed to a specific AMA Board member, Jeremy Lazarus MD. It must be awkward for the AMA’s new President, Nancy Nielsen, who has worked as a practicing internist for 23 years, served as Chief Medical Officer for Buffalo, NY health plan Independent Health, and represented the AMA at the National Quality Forum. Dr. Nielsen told the Wall Street Journal that she “endorses insurers’ use of report cards but wants doctors involved in what is rated.”

I am not a lawyer, so may not appreciate the full power of the ruling, but several observations come to mind.
First, the decision appears to be a very narrowly drawn response to the question of whether the release of physician-specific Medicare payment data meets the standard of the Freedom of Information Act. If that is the case, then it does not seem to be a very definitive or strong barrier to future efforts to make Medicare physician data publicly available.

And while the AMA undoubtedly will use the ruling to fight future efforts, the Obama Administration’s ascent presumably is accompanied by the belief that greater pricing and performance transparency are critical to the public interest, including efforts to identify and reduce health care waste and inappropriateness. It is difficult to imagine that this decision could withstand the overwhelming pressure to make transparency a core value of national health reform.

So the remarkable thing is that the judgment appears to have been made outside the context of the data's potential impact on health care cost and quality. Checkbook’s President Robert Krughoff highlighted this point in his response, “The inexplicable thing about the majority’s opinion is that the two judges in the majority didn’t understand, or acknowledge, any counter-balancing public benefit that would result from allowing the public access to the requested data."

A question now is whether HHS or CMS can simply make the Medicare physician available. After all, physicians delivering services through Medicare and Medicaid are vendors taking public dollars. Hospitals providing services through those programs do not enjoy the same special protection, and their data are released to the public.

More to the point, while few credible physician data sets are publicly available at this time – the commercial health plans typically hold their data close, treating them as proprietary – a great deal of evidence has been developed over the years to show dramatic differences in the cost and performance of physicians by specialty and market. Jerry Reeves MD, the Chief Medical Officer of the UNITE HERE health plans, presents a slide showing a 6x-8x difference in resource consumption – that is, cost - between the least and most expensive physicians in a specialty and market to obtain the identical outcome.

At this point, patients have virtually no objective data available to guide their physician choices. Organizations like HealthGrades and Emily’s List aggregate peripheral information about physician education and training, patient experiences and brushes with medical malpractice incidents, but there is no substitute for credible data that would point to, say, rates/ranking on post-surgical infections, re-admissions or adherence to guidelines.

One irony here is that the Bush health team constantly trumpeted the idea of transparency, while blocking its fruition at every turn. This ruling is a last gasp of the old paradigm, an attempt to protect the entrenched interests that have brought American health care to its current sorry state.

My guess is that the Appeals Court’s decision for physician privacy at the expense of patient knowledge will be extremely short-lived, and end up being nothing but a minor negative footnote in the steady march toward better health care in America. Certainly, there is good evidence that some progressive health plans increasingly understand the value of using their data to drive better patient decisions, and to make physicians aware of their own performance.

Dr. Nielsen at the AMA has the experience, background and opportunity to own up to this reality as well. It will be interesting to see whether she possesses the strength of leadership to seize that opportunity.
But one thing is clear. This ruling is hardly the last word on physician transparency.

Brian Klepper is a health care analyst and consultant based in Atlantic Beach, FL.

Tuesday, February 3, 2009

Ron Wyden for HHS Secretary

Let me be the first to suggest that the President name Senator Ron Wyden (D-OR) to be the next Secretary of HHS.

The withdrawal by Tom Daschle has underscored just how important it will be for the President to name someone who can bring a number of key strengths to the job. The right candidate will have:
  1. A high degree of respect from members of Congress--both Democrats and Republicans.
  2. An understanding for how the process works both in the House and the Senate and a track record of success.
  3. A reputation for bipartisanship.
  4. A detailed understanding of the health care political and policy challenge.
  5. A passion for health care reform.
  6. The ability to communicate the complexities of health care reform to the American people.
  7. Someone the President can trust to enact his agenda.
All day reporters have been asking me whom the best person was for the President to now turn to and get his health care agenda back on track.

Seems to me Ron Wyden fits the bill.

He is:
  • Respected: Senator Wyden is highly respected and well liked by his colleagues—and everyone else in the business of health care policy.
  • Understands the Congressional Process: He has served in the House and the Senate and has a significant track record of accomplishment.
  • Bipartisan: He is the principal author of the Wyden-Bennett health care reform bill—a unique bipartisan health care effort that has as many Republican Senators as Democratic Senators onside--conservatives and liberals alike.
  • Understands Health Care: His Wyden-Bennett efforts resulted in a bill the CBO has scored as revenue neutral in its first few years of implementation—a notable achievement demonstrating Senator Wyden’s understanding of the moving parts in health care.
  • Passion for Health Care Reform: I’ve heard one Senator after another remark about Senator Wyden’s passion and enthusiasm for health care reform—the Wyden-Bennett bill has gone as far as it has in great part because of his passion and personal commitment to it.
  • The Ability to Talk to the American People About Health Care: He has made Wyden-Bennett an important part of the health care discussion.
  • Someone the President Can Trust: Since the election, Senator Wyden has not tried to trump the new administration’s health care efforts by trying to keep the Wyden-Bennett bill at the top of the agenda.
Would Wyden subordinate his own bill to the President’s priorities? I have no doubt that he would. But I also have no doubt that Senator Wyden would make cost containment and long-term affordability, something the President has also been talking about lately, the issue it deserves to be.

Who has the stature, policy expertise, legislative track record, bipartisanship, and passion to get the health care reform job done?

After thinking about it all day, the name that comes to mind—Ron Wyden.

Daschel Withdrawal Sets Back Health Care Reform

In many ways picking Tom Daschle to be HHS Secretary was the perfect choice. The former Senate majority leader knew Congress like the back of his hand, he wrote a book outlining not only what would be the Obama health plan but laid out the process to get there. He is an effective communicator on behalf of the administration on an issue that can easily become buried in controversial policy minutia. In short, a health care wonk that speaks English and was as good a legislator as they come.

Now what?

First, the administration has lost crucial health care reform momentum. In effect, Daschle has derailed one of his first priorities—moving quickly on health care reform before the opposition can get organized and while the administration still has big political capital.

There was no second choice for HHS Secretary in Obama’s mind—Daschle had this nailed well before the election. There is no obvious second choice period.

It is also possible that Obama's biggest health care reform challenge may not come from Republicans but from those on the far left of his own party. Their pushing on things like a public health plan to compete with the private sector could be a big hurdle. While Daschle supported some of these things, like the public plan and a cost board, in his book he was also a skilled and pragmatic legislator and could well have done a good job managing the President's left flank.

This will set the health care debate back months not weeks. It appears the economic crisis is deepening and there is talk of President Obama planning to come up with another giant bailout bill. That would take a lot of time and political capital.

Add the two together and we could be looking at the fall before this administration gets its health care effort back on track.

Yesterday's Post: The Daschle Appointment and "Limousine Liberals"

Monday, February 2, 2009

The Daschle Appointment and "Limousine Liberals"

Republicans are fond of referring to liberals who lead a comfortable life while claiming they understand the plight of the poor as "limousine liberals."

I have a friend who says that when you first come to Washington you see it as this ugly political swamp but after you are here awhile it begins to seem like this wonderful hot tub. He says that's when it's time to get out of town and go back home.

President Obama's nominee for Health and Human Services Secretary is having to answer some uncomfortable questions about paying $128,000 in back taxes mainly for the use of a limo and driver over three years. First, please understand that Senators understand the rules on gifts--many do a pretty good job of taking advantage of things right up to the line. Daschle may have been out of the Senate a few years but his story that he thought he was getting a limo and driver as "a generous gift from a friend" doesn't pass the laugh test.

More troubling for me is what appears to be this sense of entitlement in that Daschle thought he needed a limo. Cabs are everywhere in this town and the Metro is great.

Is this the view of the world that he brings to wanting to reshape our health care system? It just plays into that Republican label, "limousine liberal."

President Obama came to office telling us he wanted to change things in Washington. First we had Geitner telling us he forgot to pay his Social Security and Medicare taxes for a number of years in a row. Now, we find Daschle couldn't do without a Caddy and driver and on top of that he just thought it was a "generous gift" he didn't have to report.

I have been supportive of President Obama's pick of Daschle for Secretary of HHS. He will probably be approved if for no other reason then he has some close friends in the Senate.

But I think he needs to seriously consider spending some quality time with some real people back home in South Dakota. This place just looks too much like a hot tub to him!

Update: Daschel Withdrawal Sets Back Health Care Reform


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