Thursday, April 30, 2009

Will Arlen Specter Vote for Health Care Reform? Wrong Question.

The last couple of days have been filled with speculation about Arlen Specter’s party switch and the Democrat’s apparent success in getting to 60 seats in the Senate.

Will the Specter switch, and filibuster-proof majorities at hand once Al Franken arrives, mean the Democrats can now ram through a partisan health care reform bill?

The real question is just what will a health care reform bill cost and who is going to pay for it?

Until that question is answered, the Democrats might have 60 seats but they don’t have 60 votes.

Five committees in Congress—two in the Senate and three in the House—are hard at work putting a health care reform proposal together. All have promised to mark-up bills and have them approved in their chamber by the 4th of July.

All of these Democratic committee chairmen point to strong consensus in the Congress that our health care system must be reformed, its long-term costs brought under control, that everyone be covered, and that all the stakeholders have to give up their fair share to make it happen.


The other bit of consensus around town is that an Obama-campaign style health care plan will cost at least $1.2 trillion over ten years. (The mid-point estimate is $1.5 trillion and there are estimates as high as $1.7 trillion.)

But wait, the Congressional budget blueprints that just passed both houses have no money in them to fix the Medicare physician fee problem—starting with the 21% cut the docs are facing on January 1st.

In the CBOs December report on health care options, they said fixing the cuts by freezing physician payments where they are and then increasing them by inflation each subsequent year would cost $556 billion over ten years. It would likely cost about $250 billion to just freeze the Medicare doc fee schedule at current levels for ten years. [The recent House and Senate budget resolution has only $38 billion in it for a two-year doctor patch that would freeze payments at current levels.]

So, a universal access health bill would cost at least $1.2 trillion and unless the Medicare docs are going to get a series of fee cuts—starting with a 21% cut soon—we need to add the cost of a doc fix. That’s another $556 billion to keep them even with inflation—for a total of at least $1.75 trillion.

The other big excitement in town this week is that Senators Baucus and Grassley have reached agreement on how to begin to control these costs and perhaps find some of this money.

Well sort of.

Their 48-page document just repeats a number of proposals already part of the Obama budget like the Medicare HMO cuts ($175 billion in savings over ten years) and the bundling of hospital and post-acute care payments ($18 billion in savings over ten years).

Beyond the things already in President Obama’s budget the Senators are proposing vague programs that lack teeth and therefore won’t likely score any significant savings. For example, they call for efforts to, “foster innovation by allowing broad-scale Medicare pilot programs of patient-centered care.” Now there’s one that ought to raise a trillion or two.

The document also says the Congress might increase Medicare physician payments by 1% then freezes them until 2012. That would cost far less than the $566 billion that would give physicians an inflationary increase each year for ten years. It would also just sweep a whopping health care problem under the rug for two more years. Hardly reform that would blunt those long-term Medicare entitlement costs—unless you think the docs are going to accept a seven-year pay freeze.

Most of the rest of the proposals are the kinds of things the CBO is on record as saying would have only minor impact on reducing costs—more health information technology and comparative effectiveness research, for example.

I see no reason to believe the Baucus/Grassley payment reform document will develop any meaningful savings beyond the provider cuts the President has already proposed in his budget—which he estimated to be worth $316 billion over ten years.

Will Arlen Specter’s party switch give the Democrats the votes they need to easily move their health care reform bill through the Congress?

If the Democrats come up with a health care reform plan and a Medicare physician payment fix that costs $1.75 trillion, they have only $300 billion in offsetting savings and revenue, and Arlen Specter votes for it, his might be the only vote.

I’d ask fewer questions about Arlen Specter and a filibuster-proof majority and instead ask the optimistic health care reform committee chairmen these two questions:
1. How much will it cost—health care reform and a doc fix all in?
2. Whose hide are you going to take the money out of to pay for it?

Then ask Arlen Specter—and everyone else—if they will vote for it.

Recent post: Halfway to Paying for Health Care Reform? A Growing Consensus for Taxing Health Insurance Benefits Produces Lots of Money

Wednesday, April 29, 2009

Health Wonk Review--The Best Health Care Posts on the Web!

This week it's my turn to host Health Wonk Review, a regular review of some of the best health care posts on the web.

Veteran Henry Stern starts things off this time with a timely discussion about just who should have the most say about your health care. If someone else (say, the government) is paying for your health care, how much say should your own doctor have? InsureBlog's Stern explores a recent court case that looks to determine just that in a post called, "Compassionate Gummint Care."

A big issue in Washington these days is Medicare physician compensation. Some might be surprised to know even a small change to Medicare payments has a big impact on the private market--even workers' compensation. Joe Paduda at Managed Care Matters presents, "Medicare's changes to physician compensation; the impact on provider and provider networks" here.

This week Shahid Shah responds to inquiries about why healthcare IT is in the state that it's in. He reminds us why it's not the Doctors' fault and that just money dumped into technology budgets won't help without reworking incentives and the financial side of health care. Shahid N. Shah gives us, "Why Health Care IT is in the state that it is in", at The Health Care Blog.

Indian doctors developed an open heart surgery procedure where the patient is still awake. Health IT use in India is 60% compared to only 20% in the U.S. The Healthcare Economist reviews these and other interesting facts in his post "Health Care in India." Jason Shafrin writes about it in, "Health care in India" posted at Healthcare Economist.

Jerome Groopman and Pamela Hartzband decry the overreaching quality metrics that force physicians into standardized practices that are not always in a patient’s interests. They have a point, but Dave Williams argues they are too dismissive of the patient safety concerns that got us to this point. David Williams presents, "Quality and danger" posted at Health Business Blog.

Glenn Laffell, at Pizaazz, suggests the "ironic possibility that Big Insurance, which helped derail HillaryCare in '93, "is now threatening to do the same thing this time around...and it may just be able to recruit an old ally in its resistance movement...providers" in his post, "They're Baaack."

Over at Supporting Safer Healthcare, Rita Schwab notes, "Healthcare metrics are ubiquitous, but are they always helpful?" Rita Schwab presents, "Quality and Metrics, Finding the Right Mix."

In Colorado, Jay Norris discusses his state's debate over creating a one-state single-payer health plan in, "Colorado Single Payer House Bill Abandoned" over at Colorado Health Insurance Insider.

Health 2.0 is big and getting bigger. Kelly Sonora writes about it in, "25 Excellent Social Media Sites for Your Health, posted at Nursing Assistant Guides.

David Harlow was on the organizing committee of HealthCamp Boston, held last week in conjunction with SocialPharmer Boston, the day before the Health 2.0 conference. HealthCamps are unconferences looking at the use of Social Networks, Open Standards and the latest Internet and Mobile Technologies in the transformation of Health Care. He offers an archive of the live tweets from the event, "HealthCamp Boston/SocialPharmer Boston Twitterstream via Cover It Live."

"Swine Flu Meets Workers' Comp!" Jon Coppelman tackles looks at the issue of whether workers comp benefits will cover swine flu over at Workers Comp Insider.

Do as I say not as I do? "Here's a bit of irony for you. Dr. Jacques Chaoulli, the Montreal doctor whose lifelong goal has been to loosen restrictions on private funding for health care in a public system with long wait times, was found to have acted irresponsibly by not treating a man quickly enough at the private clinic where he was working." Sam Solomon presents, "Waiting-room death triggers review of Quebec private clinic rules" posted at Canadian Medicine.

"How Much Can Comparative-Effectiveness Research Do?" Ken Terry has a post about the "disingenuousness of both sides in the comparative effectiveness research debate." He uses the current controversy over virtual colonoscopy to make the point that scientific evidence is not always sufficient to overcome political pressure on the BNET blog.

Democrats win the option to consider health care legislation under "reconciliation" rules, meaning they need 50 votes -- not 60 -- to pass reform. Jonathan Cohn thinks, "This is a game-changer and, paradoxically, could actually increase the likelihood of bipartisan action." Jonathan Cohn presents Reconciliation: This Changes Everything posted at TNR's The Treatment.

"A comprehensive national reform plan should include a definition of basic benefits, but the task of designing the package faces serious policy dilemmas and political obstacles. Historically, the debate has been framed as affordability vs. comprehensiveness. Fortunately, a new strategy has emerged in recent years: value-based benefit design." That's Bill Kramer's message in, "Skinny or Rich? Benefit Design in National Health Reform."

Here's a post that highlights new articles and research about eliminating "junk" insurance, and the need to define what "coverage" means in the context of federal health reform's efforts to expand, mandate, and secure "coverage." Anthony Wright offers, "Coverage that counts..." posted at Health Access WeBlog.

Francois de Brantes and Lawton Burns argue that changes to the payment system, and the process through which clinical integration emerges, must drive changes in the organization of the delivery of care, and not the other way around in a post at Health Affairs Blog, "Payment Reform Should Drive Delivery System Reform.",

The Health Care Blog, nominated David Kibbe and Brian Klepper's article for this edition of HWR, "An Open Letter to the New National Coordinator for Health IT: Part 2 - Opening the Aperture of Innovation." [An article that also appeared on this blog.]

This article, the 2nd in a series concerning the health IT portion of the Obama stimulus, HITECH, looks at the risks associated with tying the electronic health record industry to vendor-specific technology. Using examples from Apple's iphone applications and AT&T, Kibbe and Klepper state, "limiting the kinds of devices and software applications that can handle standardized health care data to a few government (or government agent)-certified products would dramatically stifle innovation and utility while raising (or at least maintaining) costs."

Monday, April 27, 2009

An Open Letter (Part 2) to the New National Coordinator for Health IT: Opening the Aperture of Innovation


One of the important decisions before Dr. Blumenthal and his colleagues at ONC and HHS is whether the national health information network will be one of closed appliances that bundle together proprietary hardware, software, and networking technology, or one of open data exchange and management platforms in which the component parts required to do medical computing can be assembled from different sources. If the former direction is chosen, power and control will be concentrated in the hands of a very few companies. If the latter, we could see an unprecedented burst of disruptive innovation as new products and services are developed to create the next generation of e-health services in this country.

Separating the data from the devices and applications, and maintaining a certain degree of independence of both from the networks used for transmission, is far more than a technical quibble. It can determine the economics of technology in stunning ways.

A familiar example may help here. On April 10, 2009, BusinessWeek reported that Apple was approaching a milestone: one billion iPhone Apps downloaded. This is an amazing number in that it occurred in less than a year, but even more surprising because it might never have happened at all. Prior to July, 2008, the Apple iPhone was a closed appliance that could only offer up applications developed for the iPhone by Apple; for example, the iPhone offers a calendar and contact management app, but these are Apple products. Third-party developers and programmers had no way to make their apps run on the iPhone, and Apple might have kept it this way.

Then, in the summer of 2008, Apple released an upgrade of the software that runs the iPhone and iTouch which included an SDK (software development kit) that allows third-party developers to create software that can be downloaded and run on the iPhone and iTouch; some of these apps are free and others cost up to a few dollars. Whamo! Suddenly the iPhone became the hottest development platform on the planet. As the New York Times technology blog observed, "Fizzy pints of virtual beer, lightsaber simulators and ancient flutelike instruments [and several health and medically related applications] all have one thing in common: they’re flying off the digital shelves of Apple’s App Store for the iPhone and iPod Touch." Apple has created a website with a counter showing the actual numbers of apps as they download, and a list of the top 20 most popular apps at the iTunes store. No one knows for sure what has been the size of the economic stimulation that resulted from opening up Apple's iPhone platform to third-party development, but it must be many hundreds of millions of dollars and perhaps even billions, and certainly thousands of jobs have been created.


It is not coincidental that the Internet itself was made possible by several legal cases that lost AT&T its monopoly position mandating the use of a specific device - an AT&T telephone - to handle voice data, on AT&T's private network. As Jonathan L. Zittrain writes in his remarkable book "The Future of the Internet and How to Stop It:"
These [legal] decisions [against AT&T] paved the way for advances invented and distributed by third parties, advances that were the exceptions to the comparative innovation desert of the telephone system. Outsiders introduced devices such as the answering machine, the fax machine, and the cordless phone that were rapidly adopted. The most important advance, however, was the dial-up modem, a crucial piece of hardware bridging consumer information processors and the world of computer networks, whether proprietary or the Internet.

With the advent of the modem, people could acquire plain terminals or PCs and connect them to central servers over a telephone line. Users could dial up whichever service they wanted: a call to the bank’s network for banking, followed by a call to a more generic “information service” for interactive weather and news.
The separation of devices that might utilize data, from the data itself, eventually made it possible for millions of computers of all kinds, makes and configurations to connect with one another over the Internet. Today, audio data in many different formats travel freely over the Internet, and these are consumed, interpreted and put to use by many thousands of devices and the applications running on those devices. If we send you an MP3 file of a song or a conference recording, we don't need to specify the device or application you will use to decode and "play" that file. If we call you on the phone today, you might answer on a cellular phone, a land line-connected phone, or a computer running Skype. Each of these needs to "understand" the data in great detail: no one dictates which device the consumer has to use.


What do these examples have to do with health IT and HITECH? Just about everything. They illustrate the layers of standards that operate on a digital network: physical wires/cables (or wireless) components of the network; devices connected to the network; applications running on the devices; data of various kinds created and used by the applicaitons; and finally and most importantly, the social interaction based upon the content - that is, the purpose and meaning - of the whole by users.

The future of today's health care IT systems seems to be converging on a handful of enterprise-run networks that do not interconnect, and a dozen or so health IT applications from companies that have the power to decide who can connect, what tasks they can accomplish, under what terms, and at what cost. The irony here is that while Microsoft and Google appear eminently capable of finding ways to exchange health data securely over the Internet in partnerships with New York Presbyterian Hospital and CVS Pharmacy, among others (see "Patient Records Inch Into 21st Century," New York Times, April 5, 2009 , and "CVS joins Google Health Rx network: millions can access medication records online," April 6, 2009), the traditional health IT industry seems to be declaring itself unable to free the data from its proprietary applications and devices quite so easily. Instead, they want a certification process to attach to the software applications from a select group of vendors BEFORE we get interoperability, based on the products' features and functions, only one of which is the ability to handle the data layer. In the process, we believe they are acting more like the old AT&T than the new Apple iPhone.

Congress in its wisdom attached incentive payments to the social interaction layer of the network: "meaningful uses" are by definition the outcomes of the deployment of networked technologies and data exchanges, not necessarily referable to specific applications and devices themselves. This is real progress. Having done that, the next layer down, the data layer, is where attention ought to be paid in order for successful and widespread meaningful uses to proceed and economic stimulus to be unleashed in the health IT economy.

The government can and should facilitate the private sector's arrival at agreement about the content of clinical data that it wants to become accessible to providers and patients over the network; it can also decide in what structures those data elements are formatted or packaged; and it can certainly set expectations and specifications for the protection of privacy of the packages and their contents, whether coded data, text, images, audio, or video. With a limited set of available and well tested standards, this could be done quickly and easily, and would immediately be seen as advancing implementation of the "meaningful uses" that Congress and HSS wish to see.

Here is where the Gordian knot of HITECH needs to be untied. There is no need for ONC to regulate the next layers, the applications, device layers or networks, or to link its specifications for the data to specifications for those products and services that will use the data. They need to know when to stop tying the knot, in other words.


Here's the risk: limiting the kinds of devices and software applications that can handle standardized health care data to a few government (or government agent)-certified products would dramatically stifle innovation and utility while raising (or at least maintaining) costs. Imagine if the government told consumers they had to buy a Dell computer to connect to the Internet, or an iPod to listen to digital music recordings, or computers running Microsoft Vista to use email. Worse still, imagine we all had to use a modern-day version of the private network Prodigy in order to exchange health data of any kind. By locking in the use of data to a specific product/device/application or even a specific class of products/devices/applications, consumers suffer by not having the choice that an open market permits. Nor do they benefit from innovation and competition that arise from comparisons of service, features, usability, and price. And society doesn't get the economic stimulus, or, rather, it goes to a few large corporations only.

Physicians are, generally speaking, fearful that they will see their EHR choices limited to the expensive and difficult-to-implement products that CCHIT now certifies. David Blumenthal is quite right to worry that doctors will "rebel" if given only the choice of a small number of products that are notoriously not "user-friendly" and not designed to meet the goals of "meaningful use" set by Congress.

But we don't believe that the deeper problem is CCHIT or the dubious politics of hiring a vendor-run organization to certify the vendors' products. That real or apparent conflict of interest is an issue, but it's not the major one. Rather, it is the potential linkage of incentive payments to a certification process that would require specific applications to manage health data. That is the root of the the dilemma that Dr. Blumenthal et al. now face; this is the Gordian knot that needs to be undone.

David C. Kibbe MD MBA is a Family Physician and Senior Advisor to the American Academy of Family Physicians who consults on healthcare professional and consumer technologies. Brian Klepper PhD is a health care market analyst and a Founding Principal of Health 2.0 Advisors, Inc.

Click here to read Part 1 of the Kibbe & Klepper series: An Open Letter to the New National Coordinator for Health IT - Untying HITECH's Gordian Knot. Their collected collaborative columns may be found at Kibbe and Klepper on Health Care.

Thursday, April 23, 2009

A Public Health Plan That Looks Just Like a Big HMO---Why?

Respected health policy expert Len Nichols has published a paper, “A Modest Proposal for a Competing Public Health Plan.”

There’s this 1970s TV commercial promoting Xerox document copiers. It opens with a sales rep for a competitor saying his machine is, “Just as good as a Xerox!”

The Xerox commercial’s response is, “Then why not just buy a Xerox?”

In the paper Nichols, and co-author John Bertko, argue that a public health plan option can compete on a level playing field with private plans so long as:
  • “The rules of the insurance marketplace (or exchange) apply to all plans, and
  • “The governance structure is designed to isolate the public plans from unfair advantages and perverse incentives.”
Their paper is important because many advocates of a public health plan, including in the Obama administration, have said a private plan does not have to look like Medicare and could look like the structure outlined by Nichols and Bertko and still be quite effective in making the health care markets more efficient.

Nichols and Bertko have also done an excellent job laying out the technical issues that make the market tick.

Their primary argument seems to be that we don’t have to have the controversial version of a public Medicare-like health plan that would bring to bear the unilateral powers of government in order to make a public plan work--we can do it in more "modest" form. You will recall the Lewin Group’s analysis that found such a plan could grab as much as two-thirds of the market.

Specifically, Nichols and Bertko outline a comprehensive list of, “Conditions for Fair Competition.” The list includes:
The administrators of the public plan must be accountable to an entity other than the one identified to govern the marketplace. In other words, the authority overseeing the marketplace (exchange) and enforcing its rules should not have an incentive to favor the public plan over private plans.

The public plan cannot be Medicare. Creating a marketplace where private insurance plans could compete fairly with Medicare for the under-65 population would be difficult and complex for a number of reasons. Therefore, we believe the public plan option cannot be Medicare.

The new public plan must be actuarially sound.
This means it must charge premiums that cover its costs. The public plan may not be subsidized using additional government revenues.

The public plan cannot leverage Medicare (or any other public program) to force providers to participate. For example, the public plan cannot require providers to serve public plan patients as a condition of participating in the Medicare program.

The public plan should not be required to use Medicare payment rates. Instead it must offer rates that elicit voluntary participation, which means providers should have the same freedom to negotiate with the public plan as they do with other private carriers.

The insurance market rules and regulations governing the public plan must be the same as those governing private plans. These rules and regulations include: guaranteed issue, guaranteed renewal, modified community rating, flexibility to charge different rates on geography, risk adjustment, no pre-existing condition exclusions, marketing rules, open enrollment periods, limits or reporting requirements based on premiums to claims ratios, minimum benefit package.

The public plan cannot be granted an unfair advantage in enrolling the uninsured or low-income individuals who will presumably be eligible for subsidies in the new marketplace. This means individuals should be able to apply subsidies to the public or private plan of their choice.

Public and private insurers should be required to adhere to the same rules regarding reserve funds. All insurers operating in the exchange should be required to have reserve funds equaling their incurred but not reported (IBNR) claims. In lieu of solvency requirements (because a state or government cannot be insolvent), the public plan must also establish a Premium Stabilization Fund. This model is currently used by the Federal Employees Health Benefit Program (FEHBP).

The public plan would also need to contribute to value-based initiatives that benefit all payers. For example, if an assessment for funding comparative effectiveness research is levied, private plans and the new public plan must be required to contribute proportionately.
In other words, a "modest" public health plan could pretty much look like the current market players, the "Xerox," if you will.

The authors go on to argue that 30 states already have a similar model which often combines medical self-insurance with commercial networks—usually Blue Cross networks—to operate a publicly-run health plan for their state workers.

OK. But I don’t know of any of these state self-insured plans that are generally getting better results than the typical large private employer’s self-insured plan—or any commercial health plan. And why would they—they are just large self-insured employers using the same commercial networks the ERISA market uses. CalPERS, the biggest for example, has a partnership with California Blue Shield and the last time I looked their costs weren't anything to write home about compared to the typical Fortune 100 employer.

Just which state employee plan is a model for reducing health care costs, ridding the system of unnecessary services, and measurably reducing the "premiums" it charges its sponsors and employees?

But, you might argue, these state plans have expense ratios far less than the existing individual and small group market. Sure they do--just like a typical large employer. Now add the cost of servicing individuals and small groups and why would they be any less expensive than a private plan offered in the same "Insurance Exchange." They don't have to make a profit, one might argue. Really? A public plan would have to develop the same stabilization reserves any existing not-for-profit health plan has to build for in the down years.

There actually are plenty of examples of government going into the insurance business on a level playing field basis with the private sector. There have been a number of state workers’ compensation funds over the years as well as state sponsored physician medical malpractice funds—usually built at a time when the private sector was not creating adequate market capacity for even average risks. [I am not pointing to high-risk pools here but state sponsored insurers aimed at the mainstream market.] All of the ones I know about ended up looking exactly like the private players. The fact that none of them ever dominated the market is testament to just how similar, or ineffectual, they turned out to be compared to their private market cousins.

As an example, I would point you to the California State Compensation Insurance Fund. Founded in 1914 by the state legislature, it is a workers' comp insurer. In the mainstream market the Fund looks, acts, and underwrites just like the private players. California has always been a problematic workers' comp market--can't say having the Fund for 95 years has solved any systemic work comp problems there.

What the Fund has been though is a doormat for the private market and political regulators--carriers move into and out of California when workers comp regulation becomes intolerable for them and back in when the regulatory climate is tolerable. But the Fund has to stay no matter what and its revenue and financial stability have varied widely as a result. When the carriers are interested in being in California, they pretty much take market share away from the Fund at will.

When the day is done, it seems to me the authors are arguing they can create something that looks just like the existing private health plan market—that they can create something that looks a lot like and is “just as good as Xerox.”


Looks to me that in an effort to create a level playing field and overcome the objections to a public health plan the authors have succeeded.

But they have also just come full circle and toward what end?

About half the private health insurance market in the U.S. is in not-for-profit health plans and networks (Blues, Kaiser, etc.). Just how would a "modest" public health plan provide something materially different?


If we have anything in America that looks like a "modest" public health plan it is the various state workers' compensation funds. Here is a an article that provides a view for how well these funds are doing.

Wednesday, April 22, 2009

Progress on Key Health Care Reform Issues?

I recently posted on what I see as a growing consensus for finding the money for health care reform—albeit only about half of it.

I also see some consensus on what a health care reform structure could look like--or not look like.

Proposals for a public health plan that would compete in the under-age-65 market look to me to be out--particularly one that would pay Medicare rates. I do expect the House to include it in their version of health care reform and for advocates to be forceful in their advocacy in the coming weeks but it has far less support in the Senate where the real deal would be done. Simply, there are too many implications and risks inherent in the idea for not only Republican Senators, but more importantly, moderate Democrats. The biggest being the potential for a public health plan to dominate the market. Proposals to neuter the idea by even advocates lead one to question, “Then why do it in the first place?” [See: A Public Health Plan That Looks Just Like a Big HMO---Why?]

I don't see a consensus in the Senate emerging that includes a public health plan alternative that would have the potential to grab huge market share.

However, there are still a number of other really big undecided health care reform issues:
  • Mandates—employer or individual? Still strong opposition to both—particularly from the employer community for an employer mandate out of fear the value of ERISA would be lost in the face of what would be growing benefit mandates. It is possible a partial individual mandate that focused on people with incomes high enough to truly afford coverage, as well as those who are eligible for employer-provided care but not taking it, could emerge.
  • Insurance Exchanges and Insurance Underwriting Rules? Even an Obama campaign-like health bill could leave something close to 20 million uninsured (Lewin, October 2008). That means lots of potential for anti-selection as individuals could still avoid coverage. Trust me, the recent health insurance industry's offer to abandon underwriting won’t apply to any post-reform system with millions still uninsured. But I would not count out efforts to waive underwriting rules for a one-time national open enrollment, similar to the original Medicare Part D enrollment, aimed at minimizing the anti-selection risk. It also appears that the original open-enrollment as part of the Massachusetts health law has not produced serious anti-selection issues from those who signed-up.
  • Will There Be Teeth in Cost Containment Programs Like Pay-for-Performance and Comparative Effectiveness Research? – No teeth, no savings, hard to find the rest of the money.
  • Which Providers and Beneficiaries Will Suffer What Cuts and How? – While I have suggested that the first $800 billion to pay for health care reform is in reach that still leaves us about $800 billion short. We won't get over the line without measurable provider and beneficiary sacrifice. This is the big one.
Recent post: Halfway to Paying for Health Care Reform? A Growing Consensus for Taxing Health Insurance Benefits Produces Lots of Money

Friday, April 17, 2009

The Public Plan--Mutual Assured Destruction?

I typically don’t talk about my travels on this blog but something happened this week that bears reporting.

Whether the federal government should or should not offer a public health plan alternative to compete with private insurers in the under-age-65 market is a hot topic in Washington and in the market.

I recently posted on it in detail: The Public Plan Option for the Under-Age-65 Market—The Biggest Health Care Controversy on the Hill

This past week I met separately with two health insurance CEOs—both well-known leaders in the business and both from highly regarded not-for-profit plans.

They read the Lewin Group analysis of the proposal for a public health plan. They both concluded the Lewin analysis made sense. Lewin projects the public plan would gain two-thirds market share in what is now the private health insurance market because it would pay Medicare-like provider reimbursement levels that are 20% to 30% lower than they pay. Simply, if one player has “raw material costs” 20% to 30% lower than everyone else that’s a game changer—that player will win.

They both see having to go up against such long odds and compete with a public plan as a life and death issue for their organizations.

They both believe the provider community does not understand what this would mean—much lower reimbursement in what is now the under-age-65 market and nowhere to shift Medicare and Medicaid costs to.

The both believe the only way for their health plans to survive in this scenario is to just unilaterally whack the providers with the same payment cuts that the government would impose—chop existing reimbursement 20% to 30%. In short, get their “raw material” costs down to the same level so they can compete on a level playing field.

The providers won’t like it. They will threaten to refuse to provide care under those terms. So what? It’s life and death for these health plans. “Them or us.” If someone is going to have to get clobbered it won’t be them. Just what would a health plan have to lose?

And these guys are the not-for-profit fellows.

It would be billion dollar corporations desperate to survive up against doctors and hospitals and all the other providers.

During the past 10 years (post the "patients'/provider rights rebellion") there has been a truce of sorts between providers and payers. There is a tension and neither is ever very happy—but there is equilibrium between them because everyone understands the other has to survive and make a decent living.

A public plan would end it.

I am not going to predict which side would win. But I will tell you it would be one bloody mess way past anything we have ever seen.

Thursday, April 16, 2009

"An Open Letter to the New National Coordinator for Health IT - Untying HITECH's Gordian Knot: Part 1"

An Open Letter to the New National Coordinator for Health IT - Untying HITECH's Gordian Knot: Part 1


Congratulations to David Blumenthal on being named National Coordinator for Health Information Technology (ONCHIT). Dr. Blumenthal will be the person most responsible for the rules and distribution of the American Recovery and Reinvestment Act's (ARRA) nearly $20 billion allocation, referred to as HITECH, designated to support physician and hospital adoption of health information technologies that can improve care.

The job is fraught with difficulties, which Dr. Blumenthal has readily acknowledged. His recent New England Journal of Medicine (NEJM) Perspective, "Stimulating the Adoption of Health Information Technology," is a concise, clear and honest appraisal of two of these challenges, namely how to interpret and act upon the key terms used in the legislation, "meaningful use" and "certified EHR technology." Dr. Blumenthal gets to the heart of the matter by identifying the tasks on which the National Coordinator's success will most depend, and which will foster the greatest controversy.

The country needs Dr. Blumenthal to succeed. The issues are complex and, with huge ideological and financial stakes involved, politically charged.

Even so, we believe there are straightforward ways to help physicians and hospitals take advantage of this opportunity to use health IT to improve care. This article is the first of a series in which we'll try to disentangle the Gordian knot of inter-related issues embedded in HITECH. Below we identify six issues. Then we address the first.


A defining paragraph in Dr. Blumenthal's NEJM article offers his vision of the problem:

....[M]uch will depend on the federal government’s skill in defining two critical terms: “certified EHR” and “meaningful use.” ONCHIT currently contracts with a private organization, the Certification Commission for Health Information Technology [CCHIT], to certify EHRs as having the basic capabilities the federal government believes they need. But many certified EHRs are neither user-friendly nor designed to meet HITECH’s ambitious goal of improving quality and efficiency in the health care system. Tightening the certification process is a critical early challenge for ONCHIT. Similarly, if EHRs are to catalyze quality improvement and cost control, physicians and hospitals will have to use them effectively. That means taking advantage of embedded clinical decision supports that help physicians take better care of their patients. By tying Medicare and Medicaid financial incentives to “meaningful use,” Congress has given the administration an important tool for motivating providers to take full advantage of EHRs, but if the requirements are set too high, many physicians and hospitals may rebel — petitioning Congress to change the law or just resigning themselves to forgoing incentives and accepting penalties. Finally, realizing the full potential of HIT depends in no small measure on changing the health care system’s overall payment incentives so that providers benefit from improving the quality and efficiency of the services they provide. Only then will they be motivated to take full advantage of the power of EHRs.

Here are issues that, to develop rules that can make the most of emerging Health IT trends, deserve clarification:

1. The term "electronic health record" (EHR) is unclear and imprecise, especially given the wide-ranging tools that can be used to manage health information in electronic format. Before developing rules that will guide our use of these tools, a clearer definition is essential.
2. In thinking about health IT, it is useful to separate health data from the applications used to manage health data. Separating them is critical to better understanding the role of standards, certification and the criteria used to validate physicians' and hospitals' claims on HITECH's incentive funds.
3. In a certification process, the appropriate scope of "basic [EHR] capabilities" should be limited to the critical few. Given constraints on time and resources and the "meaningful uses" that Congress wishes to promote, does it make sense to require a large package of features or a more limited set of basic capabilities?
4. How should the certification process be structured to ensure fairness, flexibility and openness to innovation? Does the current certification process meet these criteria?
5. The roles patients and consumers might play in any determination of "meaningful use" are important, but are left on HITECH's sidelines. How can health IT policy enhance the patient's health care experience and participation?
6. Will the incentive payments envisioned by HITECH actually encourage implementation of EHR technologies, and result in improvements in patient care quality? Or are better mechanisms available that can systemically improve care?


1. Definitions
First, let's admit that there is no precise, universally-accepted meaning for "EHR."

The term sometimes refers to medical records themselves, digital files containing a person's health data and information. We believe this is what both Presidents Bush and Obama intended for the meaning when they have stated that all Americans should have their own electronic medical records. Individuals should be able to access their health information in electronic formats (of which there are many), and not just in paper records. Patients with their own EHRs can access them, give viewing permission to others, download them to computers or cell phones, and use software applications to manage and transfer the records in digital formats.

However, EHR may also mean a software application - like Intuit's Quicken for financial management or Microsoft Office for business productivity - used by doctors, nurses, and staff in a medical practice, hospital or other clinical setting. (EMR, for "electronic medical record," was an earlier term for this same class of software, now less used.) EHR software is typically utilized for creating, storing and managing a patient's care-related and billing data. Dr. Blumenthal uses this meaning in the passage above; EHRs are certifiable software programs that have "capabilities." We might also point out that EHR software for ambulatory care is very different from EHR software used in hospitals.

Unfortunately, many people have come to believe that a specific class of EHR software is required to consume and utilize the EHRs that are digital health records. But this is completely inaccurate. Many types of technologies can be used to manage digital records. If, for example, your electronic health record is a discharge summary written by a physician in Microsoft Word or PDF - two very common digital file format standards for text documents - you could use any number of word processing software programs to view that EHR, including some that are open source and/or free. Google Health, Microsoft HealthVault and WorldDoc store health records electronically for retrieval or updating by patients and the professionals or institutions that care for them. Even data that are digitally formatted in less publicly familiar standards, such as DICOM for radiological images and XML for structured medication or lab data, do not require an EHR application. Many types of software - personal health record applications (PHRs), image viewing programs, e-Prescribing applications, and even web browsers - can be used to create, consume, store, manage, and then transmit these data successfully. Each of these software programs, alone or in combination, deserves to be considered an EHR technology, by virtue of the fact that its main purpose is to handle electronic health records.

Further, the Certification Commission for Health Information Technology (CCHIT), initiated by the Health Information Management Systems Society (HIMSS), later re-organized as a non-profit and contracted by ONC while David Brailer was the the National Coordinator, insists that EHR software products must: a) include hundreds of features and functions, based on a model of such software that many would term "comprehensive," and; b) be supplied by a single vendor. This EHR definition prohibits CCHIT certification for many simpler, less feature-rich, and less expensive EHR applications. It also prevents end-users from assembling EHR software from components from separate vendors and submitting this for CCHIT certification.

The upshot is that the term "EHR" is no longer very useful. It creates more confusion than it resolves. This is more than a quibble. One can never be certain what EHR refers to: health data in electronic format; a technology that is designed to handle electronic health records in some fashion; an EHR software program that has fewer or different features and functions than those required by CCHIT, or one that has been assembled from compatible modules; or a CCHIT-certified, comprehensive software application from a single vendor whose product has been accepted by CCHIT.

It is not necessary to accept this confusion. Ever-expanding technological options, more than anything else, have made the term EHR obsolete. However, we think clarity is especially important now, as we face the challenge of setting rules to determine who will and will not qualify for ARRA/HITECH funding. If the language we use to define key terms is arbitrary, capricious, biased or simply out-of-date, the guidance we follow will fail to be fair or, more importantly, in our national best interest.

So, in an effort to reach the appropriate level of clarity, we suggest that "EHR technology" replace the terms EMR or EHR in ONCHIT's lexicon. The term would be defined as:

"An information technology tool, such as a software program or application, that is used to create, consume, manage or transport health data in electronic or digital form."

This definition is very broad, allowing many different kinds of technologies to qualify as meaningfully useful -- required by HHS and ONC -- and without requiring features and functions that are not useful. For the market to work and to encourage optimal innovation that can benefit all Americans, it is important to allow recognition and certification of single function applications that can mix-and-match with others, as well as more comprehensive packages, according to the needs, the budget, and customers' capacity to adopt. A first step is to create clarity in the language used to describe these tools.

David C. Kibbe MD MBA is a Family Physician and Senior Advisor to the American Academy of Family Physicians who consults on healthcare professional and consumer technologies. Brian Klepper PhD is a health care market analyst and a Founding Principal of Health 2.0 Advisors, Inc.

Wednesday, April 15, 2009

The Public Plan Option for the Under-Age-65 Market—The Biggest Health Care Controversy on the Hill

Since when was a two-tiered health insurance system a Democratic policy goal?

Among Democrats in the Congress and at the White House there is a great deal of interest in creating a government-run health plan in the under-age-65 market. Such a plan would compete with the existing private health insurance market in a head-to-head showdown between private and public health insurance.

Such a plan was part of the President Obama's campaign health proposal—albeit limited to the small employer and individual market. We are told the President’s greatest interest here is in “keeping the private health insurance market honest.” That is, creating competition in order that private insurers do a better job of controlling costs.

While most observers assume that this would mean paying providers at Medicare—or even Medicaid—rates the administration says not necessarily.

The respected and non-partisan Lewin Group recently issued a report evaluating the idea, “The Cost and Coverage Impacts of a Public Plan: Alternative Design Options.” It looks to me to be a credible job. They made the assumption providers would be paid at Medicare rates—a logical conclusion if the objective is lowering costs.

Among Lewin’s findings:
  • “If the public plan is opened to all employers…at Medicare payment levels we estimate that about 131.2 million people would enroll in the public plan. The number of people with private health insurance would decline by 119.1 million people. This would be a two-thirds reduction in the number of people with private coverage (currently 170 million people).”
  • The study also examined what the proposed plan might do to provider reimbursement rates. Lewin says that if current Medicare payment rates were to be used for a public plan option, physicians would see their net income drop by $33 billion (-7%), and hospitals would see their revenue fall by $36 billion (-5%) in just 2010.
  • “If Medicare payment levels are used in the public plan, premiums would be up to 30 percent less than premiums for comparable private coverage. On average, the monthly premium in the public plan for a typical benefits package would be $761 per family compared with an average of $970 per family in the private market for the same coverage.”
  • “If as the President proposed, eligibility is limited to only small employers, individuals and the self-employed, public plan enrollment would reach 42.9 million people. The number of people with private coverage would fall by 32.0 million people. If private payer reimbursement levels are used by the public plan, enrollment would be lower, with only 10.4 million people switching to the public plan from private insurance.”
  • Medicare premiums would be lower than private premiums because of the exceptional leverage Medicare has with providers. Medicare pays hospitals about 30 percent less than private insurers pay for the same service. Physician payments are about 20 percent less than under private coverage. Also, because Medicare has no allowance for insurer profits or broker/agent commissions, administrative costs for this population are about one-third of administrative costs in private health plans.
As Lewin found, a government-run Medicare-like plan in the commercial market covering those under-age-65 would save an enormous amount of money.

It would do so in two ways:
  1. By eliminating the higher expense factors that private health plans have in order to do business. Right at the top of the list are costs built into insurance plans to pay brokers and agents, health plan profits, as well as state and federal taxes.
  2. By paying providers less. Simply, the government plan would pay providers just as they now pay for Medicare and Medicaid—Lewin presumed providers would be paid at the Medicare level that is typically 20% to 30% less than what providers get from private plans.
All at once, in what would be almost a simple wave of the hand, doctors and hospitals would see their reimbursements cut by 20% to 30%.

Provider cuts would be across the board.

Doctors and hospitals that provided unnecessary and wasteful care would see their reimbursement cut 20% to 30%. However, providers delivering appropriate care would also be cut 20% to 30%. That would be sort of like the difference between carpet-bombing and laser guided bombs—somewhat effective but totally inelegant as a solution.

But cutting provider payments across the board in a government plan would reduce the cost of providing insurance to the two-thirds of the population that Lewin estimates would ultimately gravitate to the public plan because these provider cuts and overhead savings would make the cost of insurance about 20% less.

But there is also a concern that a public plan would lead to two-tiered health care for those under-age-65. That is the proverbial “push it here and it pops out there” result.

Today, the concern goes, 85% of our under-age-65 citizens arguably get access to first class health care because they have insurance. Granted, it may be a level of health care that produces enormous waste but at least 85% of us get it while 15% of us under the age of 65 struggle because they are uninsured.

If a public health care plan is created the current equation may just get turned upside-down. The two-thirds of the market Lewin estimates may shift to the public plan may no longer be in first class—they may be in coach.

The first tier would be composed of those in the public plan—presumably a public plan that balanced its books as Medicare does now by cutting provider reimbursement as needed to meet the federal budget. Doctors and hospitals would be “negotiating” with the federal government for their reimbursement to serve these people—not a long list of private insurers. And, it’s hard to see how any discussion between the “thousand pound gorilla” that is government and health care providers would be other than a very unilateral discussion.

Medicare has a history of rarely if ever cutting benefits instead continually tinkering with payments to providers—payments very few providers find adequate.

On the positive side, even a 20% to 30% cut in reimbursements by a government plan paying at Medicare rates would be better than getting nothing from those who can't now pay. Lewin does assume this advantage would be somewhat limited with the number of those uninsured only cut to about half under an Obama campaign-style plan.

The second tier of coverage would be for those who could still afford to pay the higher premiums for the better reimbursing private plans. It is likely that the higher reimbursement levels providers of these plans would get, as well as the likely desire for private plans to keep their customers happy by granting them better access to care, would create a “first class cabin” for health care. Just as it is in Great Britain where citizens can opt out of the public system, those wealthy enough to be able to afford, or have their employer pay for, private insurance will have it.

A government-run health plan for those under-age-65 would also do nothing to bring our long-term Medicare entitlement costs under control. This is a plan for the under-65 market—it would do nothing to solve Medicare’s solvency problems.

In fact, a government-run plan for the under-65 market would likely make matters worse for Medicare’s long-term fiscal outlook.

Today, the government making lower provider payments for those covered under Medicare is possible because health care providers have a huge private population of under-age-65 people to shift costs to in order to make up for the lower payments they get from the government. The private pay market has been large and rich enough to absorb these shifts from Medicare providers, which have generally kept the provider community whole.

But with two-thirds of the population in a Medicare-style government-run plan, cost shifting would no longer be a tenable way for the private sector to subsidize the public sector. Medicare providers would pretty much be on their own with a much reduced ability to shift costs.

It’s also ironic that Democrats have been fearful of doing anything that would create a two-tiered Medicare system for seniors. The reasoning goes that if the rich and powerful are in one plan and everyone else is in another there will not be the political will to sustain a solid Medicare program for regular folks. That reasoning has always made political sense to me. And, it has been at the core of their opposition to the privatization of both Medicare and Social Security.

Which makes the notion that Democrats would now support what will almost certainly evolve into a two-tired system of health insurance for those under-age-65 perplexing.

A public health insurance plan of the kind envisioned in Lewin’s analysis is perhaps one way to pay for covering more people by cutting out insurance company overhead and reducing provider reimbursements by 20% to 30%.

It is also a way to change the American health care system—for consumers, providers, and insurers—in a dramatic way. “Push it in here and it pops out there.”

America’s health care system is unsustainable because it is too expensive partly because of the high overhead produced by so many competing health plans. But mostly it is unsustainable because we waste so much money on unnecessary and wasteful care.

Fixing that problem, and therefore crafting a sustainable system will require entirely new incentives and a focus on paying for value.

It is also entirely possible that insurers, who would be desperate to survive in competition with a “Medicare for all model” would create their own “coach product” by doing everything in their power to just whack provider reimbursement levels to Medicare levels irrespective of which providers create value and which ones waste money. What would they have to lose?

Making the politically problematic decisions that would end the waste in our system is proving to be very hard. It’s entirely possible there will be proposals to create a government-run health plan to compete with the private sector and leave for another day dealing with the enormous waste already embedded in the system. Already, the Congressional Budget Office has said that programs that the administration claims will deal with this waste—introducing health information technology, comparative effectiveness reviews, prevention, and wellness—will have only minor impacts on spending.

If we kid ourselves into thinking that a public health plan program will by itself create real savings—instead of artificial savings produced by underpayments—and continue to avoid the real issue of value for what we pay, we will only end up with a two-tiered health care system (coach for most and first class for a few) for those under-age-65, providers just as underpaid in most of the working age market as they now are in Medicare, and nothing done to stem the unsustainable cost of Medicare’s entitlement benefits.

For providers this would be a disaster—at least two-thirds of the under-65 market would now be paid at Medicare rates and the best providers would be hit as hard as those who under perform. At worst, even the private health plans could be desperate to drive the rest of the market down to Medicare payment levels in an attempt to avoid losing two-thirds of their market share. There would also be about no one left to shift costs to!

I’m trying to understand how a government-run health plan alternative in the under-age-65 market that focuses on payment rates to control costs, absent changes that produce a value-based payment system, would be any kind of policy victory for Democrats—or the rest of us.

Since when was a two-tiered health insurance system a Democratic policy goal?

Recent post: Health plans see a public plan turning into a life and death struggle with providers,
The Public Plan--Mutual Assured Destruction?

Monday, April 13, 2009

Will We Finally Have Health Care Reform This Time?

Will we have a big health care reform bill passed by the Congress and signed by the President in the next year?

Readers of this blog know my opinion--show me where the trillion dollars comes from and I will be optimistic.

CQ's Drew Armstrong and Alex Wayne have a thorough and detailed feature article on that question in the April 5th CQ weekly, "A Second Onion."

Here's a bit of the article and a free link to the rest:
It seemed conceivable on the afternoon of March 5 that Congress might have a sweeping overhaul of the nation’s health system on President Obama’s desk within months, if not weeks. A strange-bedfellows audience had greeted Obama as he opened his White House “forum on health reform” — lawmakers from both parties, advocates for consumers and lobbyists for the health care industry, and a few average citizens who had held discussions on health care policy in their communities over the winter.

For the afternoon, politics were set aside. Obama cast an overhaul of health policy as a national imperative, not a Democratic Party agenda item. People in the audience who had helped defeat similar efforts in the past — health insurers and business lobbyists — promised the president that they wanted to help pass one this time around.

But the bipartisan afterglow from that event has faded in the ensuing month. Politics have returned and lawmakers have resumed fighting over fundamentals of overhauling the health care system.
Too often I see reports that just fall into the easy conclusion that this year is different and health care reform is at hand. These guys dug a lot deeper.

Read the rest here.

Friday, April 10, 2009

"A Self-Fulfilling Prophesy: The Continuity of Care Record Gains Ground As A Standard"

A Self-Fulfilling Prophesy: The Continuity of Care Record Gains Ground As A Standard
by Brian Klepper

We live in a time of such great progress in so many arenas that, too often and without a second thought, we take significant advances for granted. But, now and then, we should catalog the steps forward, and then look backward to appreciate how these steps were made possible. They sprung from grand conceptions of possibilities and, then, the persistent focused toil that is required to bring ideas to useful fruition.

We could see this in a relatively quiet announcement Monday at HIMSS 09. Microsoft unveiled its "Amalga Unified Intelligence System (UIS) 2009, the next generation release of the enterprise data aggregation platform that enables hospitals to unlock patient data stored in a wide range of systems and make it easily accessible to every authorized member of the team inside and beyond the hospital - including the patient - to help them drive real-time improvements in the quality, safety and efficiency of care delivery."

The announcement was amplified by a New York Times article, also Monday, by Steve Lohr about New York Presbyterian's collaboration with Microsoft, now beyond the pilot stage, to transfer patient data into consumer-controlled personal health records (PHRs). The article acknowledges that Google, as well as Microsoft, are now actively engaged as well with major health care institutions - Mayo Clinic, Cleveland Clinic, Kaiser Permanente - to automatically move patient data into PHRs.

The facilitating technology in all these efforts is the Continuity of Care Record (CCR) Standard. Here is the Wikipedia entry, cited in the Microsoft announcement, describing the CCR. It is "a patient health summary standard. It is a way to create flexible documents that contain the most relevant and timely core health information about a patient, and to send these electronically from one care giver to another.

Because it is expressed in the standard data interchange language known as XML, a CCR can potentially be created, read and interpreted by any EHR or EMR software application. A CCR can also be exported in other formats, such as PDF and Office Open XML (Microsoft Word 2007 format)."

The creation of a new industry standard is an immense undertaking of breathtaking audacity, vision, skill and hope. It starts from scratch to craft a highly useful, flexible tool that can be easily adopted by developers, who are focused on wide-ranging aspects of common problems.

The CCR Standard was developed by a collaborative - the Massachusetts Medical Society (MMS), the HIMSS (HIMSS), the American Academy of Family Physicians (AAFP), the American Academy of Pediatrics (AAP), and other health informatics vendors - under the auspices of ASTM International, a not-for-profit organization that develops standards for many industries, including avionics, petroleum, and air and water quality. David Kibbe MD, my friend, colleague and frequent co-author on this blog, was a co-developer of the CCR, and serves as the 2008-2010 chair of the E31 Technical Committee on Healthcare Informatics, the leadership group within ASTM that works with individuals and organizations on the implementation and use of the CCR standard in the US and abroad,

The CCR's increasing adoption by major players is testament to the soundness of its vision and its utility. It's advance will allow patient health data to be easily transported from one platform to another, intact and with integrity, so that better decisions can positively impact care, health, and the costs of achieving them.

This is something we can all acknowledge and admire, because it fulfills the common mission - better, more affordable care for better health - that brings us together on this site.

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

Thursday, April 2, 2009

Congress Taking a Second Look At Changing the Way Health Benefits Are Taxed--Good--But We Can't Tax Our Way to Health Care Reform

As you have heard me say many times, paying for health care reform is the real challenge. An Obama campaign-style health plan will likely cost at least $1.5 trillion over the next ten years.

Until I see some constructive progress on how we pay for health care reform I cannot be optimistic the latest health care reform debate is going anywhere.

Where we stand today is that the Congress and the President have yet to come up with more than a small percentage of that $1.5 trillion. [See my recent post: Anybody Know Where We Can Find a Quick Trillion Dollars?]

However, my sense is that legislators are more open to changing the taxation of employee benefits than in the past—particularly in the Senate. That is not to say we are anywhere near the point where there is any kind of consensus on this idea—particularly among leading House Democrats. And, we can't forget that President Obama trashed the idea when Senator McCain proposed it in the campaign. But I do see some movement.

Changing the way we tax health care benefits would yield big money and, if tailored properly, it could encourage more efficient benefit plans. For example, in the CBO’s December report on health care reform options, they found that phasing out the deduction for employer provided health benefits for families with incomes greater than $160,000 a year [not a way that would generally encourage more efficient plans] raised $552 billion in new revenue over ten years—about a third of what would be needed for comprehensive health care reform.

The Wyden-Bennett “Healthy Americans Act” made the first constructive proposal to modernize our health benefits tax structure, which was created in the 1940s. You will recall that the CBO scored Wyden-Bennett as deficit neutral within two years of passage. That is primarily because the proposal exchanges the traditional tax exemption on employer-provided benefits for a fresh set of personal deductions on health benefits limited to a more efficient standard package. In addition, Wyden-Bennett replaces the traditional employer contribution with a new tax on all employers that ranges from 2% to 17% of payroll, based upon the size of the employer. In a recent change, Wyden-Bennett would also allow employers to continue their self-insured plans.

This combination of tax changes in Wyden-Bennett essentially reshuffles what employers pay for health benefits, as well as the tax benefits workers get for those benefits, to create the revenue needed to make this universal health care plan deficit neutral.

The realization that we are going to have to get creative in finding something like $1.5 trillion to achieve health care reform and universal coverage makes proposals like the Wyden-Bennett bill more relevant to the debate than ever.

But I want to be clear that we cannot only tax our way to health care reform.

CMS says that our current $2.5 trillion health care system will grow to $4.4 trillion in ten years. If we are going to tax our way to universal health care we are going to quickly run out of people to tax. In short, tying a tax system to health care costs that consistently inflate at unsustainable rates is a prescription for taxes tied to the fast lane.

Sustainable health care reform has to be built upon a system of health care costs we can afford. That means making some tough decisions about the level of payments to providers and beneficiaries as well as the incentives we build for more effective care. One health policy wonk's waste is a doctor's, or hospital's, or drug company's income. Take away excess costs and we take away at least a part of someone's livelihood.

Ideally, there is already enough money in the $2.5 trillion health care system to cover everyone without raising taxes. But, as a practical matter, I have to believe health care reform will almost certainly mean some new taxes. But if reform just means more taxes and doesn’t at the same time predominantly involve systemic reform to what we now pay, and how we pay, we will just be creating a tax-eating monster.


Avoid having to check back. Subscribe to Health Care Policy and Marketplace Review and receive an email each time we post.

Blog Archive