Health Care's Tougher Problem--Solving the Access Problem Isn't Enough If We Don't Deal With Costs

Today we honored to have Brian Klepper post for the first time. Brian's posts have been appearing on some of the leading health care blogs and I finally pestered him long enough that he agreed to begin doing some here.

Today, he reminds us that solving our health care access problem is far from enough if we don't get costs under control:

Health Care's Tougher Problem

by Brian Klepper

Health care reforms are finally in vogue again, in state legislatures, Congress, among presidential candidates and in the movies. Most proposals focus on universal coverage of basic or comprehensive health benefits. This is practical as well as noble. As the numbers of uninsured and underinsured patients continue to explode, the worry is that doctors and hospitals will be financially overwhelmed by demands for unpaid services. Funding every patient for at least basic services would make care more available. But it would also strengthen the stability of the professionals and institutions that provide care.

Even so, universal coverage alone will add significant cost to an already overburdened system – about $300 billion for comprehensive benefits, according to America's Health Insurance Plans. Health care’s out-of-control cost growth – almost 5 times as fast as the rest of the economy between 2000 and 2006 – is pricing individual, corporate and governmental purchasers out of coverage. So any effort that seeks a stable and sustainable health system must attend to cost as well as access.

It is impossible to know exactly how much waste there is in America’s vast, incredibly complex health system. But many experts agree that as much as half of care and cost – more than a trillion dollars a year at this point – is inappropriate, preventable, or the result of errors or administrative inefficiencies in every part of the system. There are many drivers: inadequate management tools, enormous workloads, greed, defensive medicine and perverse financial incentives.

Two structural flaws promote excess in health care. First is fee-for-service (FFS), the most common approach to reimbursement, which rewards more care rather than the right care. Under FFS, more procedures and products produce more revenue, and the opposite is true as well. Doing less, even while getting the same results, produces less revenue, so health care organizations have little reason to invest in efficiency.

The second flaw is that objective pricing and performance information is generally unavailable. This makes it hard for managers to identify problems and opportunities so they can be addressed, and it results in poor or even dangerous performance generally going unnoticed.

Worse, the industry’s awareness that behaviors are difficult to detect has created an opportunistic culture, with aggressive tactics for revenue generation that add cost without adding value. Because information is mostly unavailable on cost, on who doesn’t do a good job and on what doesn’t work, the market cannot distinguish and favor appropriateness and excellence.

Weaning the health care industry from unnecessary care and cost will be much harder, technically and culturally, than mandating universal coverage, and it must be undertaken carefully, with a long-term time line, national leadership and resolve. The revenues associated with waste have become a significant portion of most health care organizations’ financial baselines. Simply slashing payments could be disastrous to important organizations with thin margins, like hospitals and primary care groups.

We can disrupt the primary drivers of the health care crisis. Knowing the relative performance of all professionals and organizations will help health care work like other markets. And changing the reimbursement incentives to reward the right care would drive waste from the system.

A lot is at stake here. Skyrocketing costs are rapidly eroding enrollment in health coverage. We could reach a tipping point in which, as resources dry up while the demand for care increases, health care – the nation’s largest business sector, one-seventh of the economy and one-ninth of our jobs – is disrupted and the turmoil cascades to other parts of the economy.

The industry has taken its first tentative steps toward two important cost reforms – transparency and performance-based reimbursement – but the intensity and potential scale of the crisis warrants more focused, immediate national attention and resources. In any case, we shouldn’t rely on the industry to drive or even support these changes. Few groups willingly lose financial ground. Health care’s lobbies will likely present a unified front against reforms that threaten financial performance.

So real change, if it comes, must be shepherded by the leaders of non-healthcare business, the one group with more heft and political influence than the health care industry. A small group of Fortune CEOs, willing to meet and provide visible leadership, could orchestrate the initiation of a much broader effort. They could recruit all business to impose performance disciplines on the health care sector, to resolve the threat to our national economic security, and to make better care more available and more affordable to everyone in America.

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

The Nursing Shortage--Important Data On Why

Brian Klepper has another one of his great posts up—this time over at “The Health Care Blog.”

We all know there is a nursing shortage but Brian sheds a new light on just why.

Here is a small sample from his post, “Benign Neglect and the Nursing Shortage:”

"Almost three-quarters of Nursing schools surveyed said the main reason that they can't train enough new nurses is a lack of qualified faculty. When I first heard this, it seemed counter-intuitive. There must be thousands of very seasoned and appropriately trained nurses who would be glad to go into the classroom.

"Not so. A July 2005 survey of Colleges of Nursing around the country found that 2/3 of all respondents said they had nursing faculty vacancies and needed to hire additional faculty. Of course they want nurses with PhDs, if possible, but with a range of specializations and the ability to both teach and do research. Even so, between 1992 and 2000, the percentage of Nursing faculty positions occupied by PhDs dropped 19%, from two-thirds to less than half.

"Data from 2001 showed it took a PhD nurse almost 21 years on average after receiving her undergraduate degree to get her terminal degree. The average age of full time Nursing faculty in 2001 was 51, and its almost certainly older now. As many a 300 PhD Nursing faculty are expected to retire in the next decade, exacerbating the problem.

"There are many reasons why Nursing faculty are difficult to come by, but one is overwhelmingly dominant. Nurses qualified to be faculty have to take significant pay cuts for the privilege of taking a teaching position. Nursing schools are unable to pay Nursing faculty candidates what they would make working as nurses in clinical positions in the marketplace."

I encourage you to read Brian’s full post, “Benign Neglect and the Nursing Shortage.”

"Undue Advantage"--The Washington Post Calls for Medicare Advantage Cuts

Tuesday's Washington Post had an editorial on the debate over whether HMOs should be paid more than Medicare receives for the same senior's health care.

Originally, the Congress decided to pay private health plans more as a means to "prime the pump" to encourage both private health plan insurers and seniors to give the new Medicare Advantage plans a try. Both had some bad experiences in the late 1990s when government payments to private Medicare plans sustained big cuts and both seniors and health plans fled the private programs.

Now, the health plans are arguing the extra payments ought to be made permanent.

While there is a legitimate debate over just how many years it should take to equalize payments, The Post has it about right.

Undue Advantage

The House was right to scale back the insurance industry's subsidies for seniors.

Tuesday, August 21, 2007; Page A14

KAREN IGNAGNI, chief lobbyist for the health insurance industry, had an important point. Testifying before Congress in 1999, Ms. Ignagni argued that private insurance plans offering coverage for seniors ought to operate on a "level playing field" with regular fee-for-service Medicare, under which doctors are reimbursed directly by Medicare. Back then, the private plans were being paid less than what regular Medicare providers were making. Ms. Ignagni decried what she called the "fairness gap" and argued that the private plans "should not receive disproportionately low government payments."

Times have changed. Instead of being paid less than private providers on the theory that they can operate more efficiently, such plans, now known as Medicare Advantage, are being paid on average 12 percent more. And Ms. Ignagni and her group, now called America's Health Insurance Plans, are lobbying furiously to keep that, well, advantage.

Some of the money is plowed back into extra benefits to attract more seniors into the plans, and the lure is working: Close to one in five are now enrolled in private plans, which range from HMOs to networks of preferred providers to the most outrageous and expensive arrangement of all, private fee-for-service plans, which cost a whopping 19 percent more than regular Medicare.

The extra spending -- more than $50 billion over the next five years -- makes an already financially unstable Medicare program more expensive. It also unfairly raises premium costs for all seniors, who subsidize the extra benefits of those who sign up for managed-care plans.

A bill approved by the House this month would phase out the excess payments to Medicare Advantage plans and devote the savings to the State Children's Health Insurance Program, which provides coverage for children in low-income families that earn too much to qualify for Medicaid. The House would also use some of the savings to help pay for changes in the Medicare program, including extra help for low-income seniors.

Defenders of the existing payment structure argue that while Medicare Advantage plans may cost the government more, the 12 percent differential is inflated, and that flattening the rates would drive the plans out of existence. They argue that the plans, even if there is a higher cost to the government, lower overall health-care spending by providing more preventive care. They also say that the plans provide important and otherwise unaffordable benefits to low-income seniors.

We agree that private plans can play an important and useful role in delivering good medical care to seniors. But if the problem is providing extra help to low-income seniors, there are more efficient means of doing so than overpaying Medicare Advantage plans for every senior, needy or not. And we don't understand why the level playing field the private plans once so avidly sought is now not good enough.

Medicare Will Stop Paying Hospitals for Errors--Will Private Health Plans Follow?

Medicare will stop paying for the costs associated with "hospital errors." These can include the costs for treating infections, falls and other things Medicare deems the hospital should have been able to prevent.

Health plans tend to follow Medicare policy in their payment practices. Many believe the private sector is going to follow suit.

On its face, the new policy makes sense. If you get your car fixed, and the garage breaks your car in the process of repair, they ought to make good the damages.

But it can also be more complicated that that when it comes to caring for people.

The Doc over at the blog, "The Physician Executive," made some interesting comments on the subject that included:

"While I understand the value of increasing medical accountability, there must still be recognition that all outcomes, including hospital-acquired infections, have multifactorial causation. So what about a catheter-related infection in someone whose immune system is suppressed from medication. What if the infection was acquired outside the hospital, but became evident in-hospital? What if the patient didn't follow directions? What about the visitors?"

And also:

"The other appalling aspect of this rule is that it does not respect the single most important principle of quality data: NEVER use your data punitively. Despite every temptation to do so, the risk is that you may provide an incentive for people to fiddle with or otherwise manipulate their data."

Doctor Ammon has just begun publishing his own blog and has a really good blogside manner. He's worth checking out.

You can read his full post on the subject.

Fred Thompson—Too Good to Be True? Thompson Says He Will Shake Things Up In the Health Care Debate

The Washington Post’s David Broder is one of those people I have only the greatest respect for. So his recent column, recounting an interview with soon to be Republican presidential candidate Fred Thompson, caught my eye.

Broder described a Fred Thompson that sounds too good to be true:

“When Fred Thompson makes his long-delayed entrance into the Republican presidential race, he will not tiptoe quietly. Instead, he will try to shake up the establishment candidates of both parties by depicting a nation at peril from fiscal and security threats—and prescribing tough cures that he says others shrink from offering.”

He quotes Thompson as saying he, “will take some risks that others are not willing to take, in terms of forcing a dialogue on our entitlement situation, our military situation and what it’s going to cost” to ensure our nation’s future.

“There’s no reason for me to run just to be president,” Broder quoted Thompson as saying. “I don’t desire the emoluments of the office. I don’t want to live a lie and clever my way to the nomination or election.”

Thompson said in the interview that he would have opposed the Medicare Part D prescription drug program, “a 17 trillion add-on to a program that’s going bankrupt.”

Referring to the crisis that is looming over America’s out-of-control entitlement costs, “Nobody in Congress on either side in the presidential race wants to deal with it. So we just rock along and try to maintain the status quo. Republicans say keep the tax cuts; Democrats say keep the entitlements. And we become a less unified country in the process, with a tax code that has become an unholy mess, and all we do is tinker around the edges.”

Referring to national security and the fiscal crisis of an aging society with runaway health care costs, Broder quotes Thompson as saying these challenges, “are worth a portion of a man’s life. If I can’t get elected talking that way, I probably don’t deserve to be elected.”

Is Fred Thompson too good to be true?

Speaking of "clevering" your way along, see my recent post: Good Riddance to Karl Rove--How Part D Left an $8 Trillion Debt and Got Them Nothing

Democratic Presidential Candidate Bill Richardson Announces a Health Reform Plan

Democratic presidential candidate Bill Richardson recently announced his health reform plan.

Richardson's health care proposal follows the general outline offered by other Democratic candidates in that it focuses first on getting everyone insured and falls short in getting at the fundamental problem creating so many uninsured--health care costs.

Bill Richardson's health plan also builds on existing public and private health insurance programs.

Richardson would:

• Provide tax credits on a sliding scale to help residents purchase health insurance.
• Require employers to pay a share of their worker's health care costs.
• Allow people ages 55 to 64 to buy into Medicare.
• Expand Medicaid and SCHIP to cover more low-income families and children.
• Allow individuals and businesses to buy their health insurance from an expanded Federal Health Benefit Plan (the same program Congress and the President use).
• Improve health care efficiency through the increased use of health care information technology.
• Mandate that health insurers no longer can deny coverage to people with pre-existing conditions.
• Expand veterans care by giving them a "Heroes Card" enabling them to access the private system.
• Limit interest rates applied to health care bills and credit cards.
• Allow the federal government to negotiate Medicare drug prices directly with pharmaceutical companies.
• Establish incentives for preventive care programs.

Richardson claims his plan would cost an estimated $110 billion per year but that the savings from the plan would cover the cost.

Richardson was quoted as saying, "Despite Republican hand-wringing about the cost of universal care, it is clear that the cost of doing something--in lives and dollars--pales in comparison to the cost of doing nothing." He also said, "My plan does not build a new bureaucracy. The last thing we need between patients and doctors is another sticky web of red tape."

Like all of the leading Democratic candidates, Richardson is ready to move forward with a big and comprehensive reform plan. But he is not interested in a big government-run plan that would "build a new bureaucracy."

His claim that his program will cost nothing is at the outer edge of wishful thinking. Getting everyone covered will save lots of money. But it will take bundles of money up-front to get a program like this going.

Because the structure of his plan is similar to the plans already announced by rivals Barack Obama and John Edwards--and the plan coming from Hillary Clinton--his program costs will not be lower than theirs.

In many respects, this plan is comparable to the Massachusetts health plan that has found that granting access to insurance is only the beginning--being able to afford to get everyone in and then running the plan in a way that does control costs is the real challenge.

The Richardson health plan takes that first step but hardly addresses short-term affordability and long term costs.

But he is right about this, "It is clear that the cost of doing something--in lives and dollars--pales in comparison to the cost of doing nothing."

But that statement will quickly become fatally flawed short-term thinking if he doesn't more realistically deal with the long-term costs and create an affordable strategy.

Series of posts on the Massachusetts health plan

Good Riddance to Karl Rove--How Part D Left an $8 Trillion Debt and Got Them Nothing

It seems to be the Washington summer sport to pile on Karl Rove in the wake of his announcement that he will be leaving the White House.

Let me add my own good riddance.

America’s health care dilemma is one of our greatest problems. Our inability to provide basic health care services at an affordable cost to all of our people is nothing to play around with.

Politicians—Democrats and Republicans both—have had their turn at manipulating this issue for political gain.

But nothing comes close to this administration’s record on that score and Karl Rove was right at the middle of their health care political calculations.

Right at the top of that list is the Medicare Part D drug benefit.

Early on this administration calculated that one important element in creating a “permanent Republican majority” was to steal the two centerpiece Democratic issues—Medicare and Social Security.

Nothing is so central to the Democratic claim on populism as these two programs. If they could be remade in Republican terms, then went the reasoning, they could be taken from the Democrats and could form the base of a “permanent Republican majority.”

After all, seniors vote in disproportionate numbers in an electorate that votes too little and getting senior votes onside would make the difference.

The second part of that grand plan, the Bush administration’s attempts to begin to privatize Social Security, failed.

But the administration’s promise to create a new, and very important, senior drug benefit succeeded.

President Bush spent enormous political capital in his attempt to “modernize” the Social Security system. It is ironic that the 75-year unfunded liability in the Social Security System is $4 trillion. The same unfunded liability in Medicare is now $32 trillion—$8 trillion of it newly created by the Medicare Part D benefit.

Make no mistake, seniors deserve a drug benefit, but they deserve one that is part of a reformed Medicare system that is sustainable.

When George Bush ran for president in 2000, I thought he made a credible policy argument for the fundamental reform of Medicare. But that quickly fell by the way as the political imperative took over.

This administration’s political calculation to spend twice the Social Security system’s unfunded liability in an attempt to steal the seniors from the Democratic Party with an unsustainable Part D program is the height of political cynicism.

And as the 2006 elections proved, it didn’t work.

There are lots of reasons to wish Karl Rove good riddance. This is mine.

What’s the point of winning in the first place if you only use the platform to win the next one and leave $8 trillion in unfunded liability in the process?

The Latest Health Wonk Review is Up!

Julie Ferguson over at "Workers'Comp Insider" has done her usually astute job of compiling the best from the health policy and market blog world in the latest edition of "Health Wonk Review."

Her digest makes for great summer reading!

Rudy Giuliani Announces a Health Care Proposal That Would Provide Tax Incentives for Consumers to Purchase Individual Insurance

Rudy Giuliani announced that he will be proposing a system of individual tax incentives to enable consumers to purchase individual health insurance in addition to any employer options they might have. His proposals are also designed to shift the U.S. health insurance system away from employer-sponsored coverage.

Under the proposal:

• Giuliani is proposing a $15,000 family/$7,500 individual standard tax deduction for anyone who does not get their health insurance coverage through an employer--they purchase it individually.
• He would also provide additional subsidies to help low-income people buy health insurance.
• He provided no details as to the amount of the subsidies or the plan's overall costs but said he would provide more detail in the coming months.

Giuliani said that he expects the proposal would increase the number of people who buy health insurance in the individual market. He also expects the standard deductions would enable consumers to put extra money into health savings accounts (HSAs).

While the Democratic candidates proposals focus on dealing with access first and cost later, Giuliani's focus is on bringing the cost of health insurance down with these market reforms and as costs come down more people would be insured, "You have to start bringing the price down before you can figure out how many people you can include. It has to be done incrementally. It can't be done with a magic wand all at once."

Read Giuliani's op-ed piece in the Boston Globe: "A Free Market Cure for the U.S. Health Care System"

A more comprehensive analysis of the Giuliani proposal in an earlier post: Giuliani Set to Announce a Health Care Proposal--But He Has to Make it Affordable for Everyone

Why Is President Bush So Willing to Veto Spending Bills All of a Sudden?

This President didn’t veto a single spending bill during the first six years of his presidency when the Republicans were in control. You might recall John McCain’s characterization of the Republican Congress when he said they spent money “like drunken sailors” all with the concurrence of President Bush.

Now, with the Democrats in control, the President seems more than ready to confront Congressional spending—he's threatened to veto about every Democratic domestic spending bill now under consideration in the Congress.

He's even threatened a veto of the bipartisan Senate SCHIP reauthorization bill when lots of Republicans are onside with the Democrats pleading with him to approve the S-CHIP deal and when there is no chance the Congress will seriously consider his alternatives like his health care income tax proposal.

What’s going on here?

A little history might be helpful.

You might remember the first news conference Bill Clinton had in the wake of the 1994 election in which the Republicans took control of the Congress. One statement Clinton made in response to questions about the big Republican victory and their bold plans to change the national agenda has lived on, “I am not irrelevant.”

President Bush now faces many of the same questions in the wake of last fall’s Democratic victory, particularly as Republican support for his Iraq policy is melting on Capitol Hill.

The National Review, a bastion of conservatism founded by William F. Buckley, Jr., and filled with articles written by leading conservatives, represents Bush’s political “base” if anything does.

That’s why a recent article in the opinion section of the Washington Post by Byron York, National Review’s White House correspondent and the author of “The Vast Left Wing Conspiracy,” is all the more notable.

The title of the article tells all, “Base to Bush: It’s Over.”

This from the article:

“So now the president has 18 months left in office, and they won’t be quiet ones. Absent the committed backing of his party, he will be forced to exercise power based not on his political clout but rather on the authority the Constitution gives the office of the president: He is commander in chief. He can veto bills. He can issue pardons. And that’s about it.”

I’d say that about sums it up for why Bush is now so veto happy—even when it’s Republicans he’s publicly arguing with.

The statement he’s making, particularly to Republicans in Congress, like Chuck Grassley and Orin Hatch who did the SCHIP deal with Democrats and all of those House members who voted with the Democrats on the Labor-HHS-Education bill is, “Wait a minute with all of your deals with this Democratic Congress, I’m still relevant!”

This is where it gets interesting.

Is Bush about to do what Clinton did to restore his presidency—willingly face off with a Congress recently taken over by the other party in a winner-take-all budget battle that included a government-shutdown?

With his support in the polls, from Republicans in Congress, and from his base in the country, at such low levels this President is standing almost alone on everything from Iraq to SCHIP and looks more intent than ever on pursuing a course he strongly believes in and has the Constitutional prerogatives to carry out.

Earlier Post: SCHIP Reauthorization and High Stakes Politics

SCHIP Reauthorization and High Stakes Politics

Everyone agrees that the State Children’s Health Insurance Program (SCHIP) needs to be reauthorized.

But Washington couldn’t have made such a simple idea any more complicated or controversial.

So far:

• The Senate has come to a bipartisan agreement, supported by lots of Republicans, that would increase spending by $35 billion, add another three million kids to the six million already covered, pay for it with a 61 cent tobacco tax, and streamline the program more along its original lines.
• The House is struggling to approve a much larger $60 billion expansion and pay for it with both a tobacco tax and cuts to private Medicare plans that would equalize them with traditional Medicare over a three year phase-in beginning in 2009. The House bill also deals with other health care issues like the upcoming physician fee cuts.
  
• President Bush has said both proposals go too far toward creating government-run health care and he has promised to veto both.
• Republicans are working with Democrats in the Senate in an attempt to have the votes to override a presidential veto. They might have the votes in the Senate and are less likely to have the needed two-thirds in the House.
  

The Congress is set to leave town at the end of this week and not come back until after Labor Day.

Where is this going to come out?

First, SCHIP will be reauthorized. Most likely, Bush and the Congress, led by Republican Senators who include Grassley and Hatch, will work out a deal by the end of September that will likely expand the current SCHIP program in the $15 - $20 billion range and pay for it with a smaller tobacco tax—and not Medicare Advantage cuts.

The House bill is just an exercise that goes way beyond anything that is possible in the Senate.

Failing that, the program will be continued at present levels using a “continuing resolution.” No one will let it die when it sunsets on September 30th. In this scenario, SCHIP would get punted to the year-end omnibus reconciliation that the Democrats will have far more control over.

The Congress is ready to cut private Medicare payments. Congress needs the Medicare Advantage money to forestall the upcoming 10% physician fee cuts.

The House SCHIP bill is valuable in that it shows the health plan industry the worst case scenario for private Medicare cuts—no sooner than 2009 and a three-year phase-out of payments above traditional Medicare.

But we won’t get to the physician fee cuts and private Medicare payments until the year-end omnibus budget bill where the Democratic committee chairmen will have total control of the Congressional budget process.

The most likely outcome is that the Senate will drive a less dramatic cut to Medicare Advantage than the House wants—looks to me like a four to five year phase-out with the possibility that Private Fee For Service rates in urban areas would be frozen—all starting no sooner than 2009.

To make things even more interesting, Bush has also threatened to veto about all the Democratic spending bills.

Just how far President Bush is willing to go in this budget showdown with the Congress will become evident in how the SCHIP negotiations between the White House and Republican Senators turn out. If they can’t get a SCHIP deal done, we will be headed toward a big budget showdown between the President and the Congress. That is something that Republicans are really worried about—they have to face reelection even if Bush doesn’t.

If cooler heads prevail we will have lots of compromises that will include the necessary Medicare Advantage cuts to pay for other provider needs—particularly the docs.

If cooler heads don’t prevail, we will have one hell of a budget mess.

SCHIP will tell us if Bush is in the mood to deal or not.

Earlier Post on the Senate SCHIP compromise: Bush Reaffirms Veto Threat Over SCHIP Despite Strong Republican Support for Bipartisan Compromise—What’s Really Going On Here?

A Comprehensive and Independent Progress Report on the Massachusetts Health Plan

The Center for Studying Health System Change has issued a comprehensive report on the progress of the Massachusetts health reform plan.

Anyone interested in the plan's progress will find this must reading.

From their overview:

As Massachusetts' landmark effort to reach nearly universal health coverage continues, affordability of coverage remains a key concern for individuals and small employers, according to a study released today by the Center for Studying Health System Change (HSC).

"Despite reforms of the individual and small-group health insurance markets, including development of new insurance products, concerns remain about the affordability of coverage and the ability to stem rising health care costs," said Paul B. Ginsburg, Ph.D., president of HSC, a nonpartisan policy research organization funded primarily by the Robert Wood Johnson Foundation (RWJF).

Funded by RWJF, the study's findings are detailed in a new HSC Issue Brief—Massachusetts Health Reform: Employers, Lower-Wage Workers and Universal Coverage—available here. The study was based on interviews with about 25 market observers in January 2007, including representatives of employer groups, state agencies, health plans, providers, advocates and other health care leaders knowledgeable about the reform. HSC's Community Tracking Study site visit to Boston in June 2007 provided additional perspectives on the reform.

Health Wonk Review for July 26, 2007

This time it's my turn to host Health Wonk Review, a compendium of some of the best health care policy and market posts from the health care blog world.

Joe Paduda seemingly gave up his extra summer time researching the arguments against universal coverage. Joe digs into the logical, philosophical, and political issues; there's also a great summary. With all the recent attention to other nation's systems of care his series of posts is a valuable contribution. And no, Joe's not a socialist.

Richard Eskow is causing trouble again over at "The Sentinel Effect" with his post noting that the average U.S. physician income was $199,000 while the comparable OECD median physician income was $70,324 in his post. "Doctors Incomes and Universal Coverage: Another Inconvenient Truth."

Colorado Insurance Insider is a relatively new member of our little health policy wonk club. But I'm not so sure we should have let them in. Instead of waxing on the theory of health care, Jay actually went out and road-tested one of the big theories--consumerism and price transparency. As Jay put it in his post, "Dealing with health care providers without the assistance of an insurance company is like dealing with the mafia." His real life experiences should be mandated reading for the rest of us!

David Williams, at "Health Business Blog," calls attention to the fascinating developments in Singapore. He briefly updates us on the "country’s overall strategy to be a biomedical hub" to strengthen "its position as a medical travel destination, especially for complex procedures and treatments" and links to a more comprehensive podcast.

David Harlow, on "Healthblawg," asks, "Should the potential positive secondary uses of individual health information in EHRs [electronic health records] overcome the privacy concerns around collection and use of the data?" in his contribution.

Adam Fein, on his blog, "Drug Channels," makes clear the significance of the new CMS rule on drug prices that he sees leading to big disruptions in the retail pharmacy marketplace. If you have any interest in how the rules are changing in drug pricing you will want to pay close attention to Adam's very detailed post.

Roy Poses, writing at "Health Care Renewal," gives us his take on efforts to naming a school of public health at the University of Iowa after an insurance company and tells us why he sees it as "a new and very in your face version of institutional conflict of interest."

Hank Stern, over at "Insure Blog," has some fun with the recent Rand Study on the effect of insurance prices and the willingness to buy coverage arguing that "a lot of folks who really don't care how much health insurance (or health care) costs, they ain't buyin.'

Although, I had a different take in my post on the significance of the Rand study.

But if you really want a dissertation on what motivates people to buy health insurance when the government is involved you will enjoy Jason Shafrin's review, on his blog "Healthcare Economist," of a paper on the "political feasibility of different health care systems within a democracy." I give this one a pretty high "Wow" factor.

Daniel Goldberg of Medical Humanities Blog also gives us some quality food for thought. He discusses a new study attributing longevity increases in certain states to access to newer drugs. But he contends, there is good evidence suggesting that public health and prevention medicine are likely to have a much greater effect on health in the aggregate.

Julie Ferguson of Workers Comp Insider discusses the Federal Motor Carrier Safety Administration's increasing concern about the health of the nation's big rig truckers. Recent research shows that severe health issues are a contributing factor in about 10% of the fatalities studied. With trucks involved in 12% of all highway fatalities, it seems to be an issue worth exploring.

The current debate on how to reauthorize the State Children's Health Insurance Program (S-CHIP) is topic number one here in Washington. The Health Affairs Blog does its usual service by giving us the background facts. This time Sarah Dine provides a historical context for the current S-CHIP reauthorization debate

Contributions from the Cato@Liberty Blog give us three perspectives on the same theme--"big government conservatism." David Boaz argues that President Bush's willingness to veto the Senate S-CHIP bill "is in no way a reversal from his stance that big spending is okay as long as Republicans can take credit." Michael Cannon goes on to argue that one conservative proposal for compromise on S-CHIP even goes to far in another post on the topic. Michael Tanner posts on the same "big government" theme but this time telling us that the President's nominee for Surgeon General is, "All in all, a perfect national nanny, and another example of President Bush’s big-government conservatism at work."

Matt Holt on the other hand doesn't have the same problems with more government in our health care system in a post that counters arguments that the veterans health care scandal in no way undermines the notion that the government can do more for the rest of us.

Romney Condemns Obama's Health Plan--But Obama's Plan is a Clone of the Massachusetts Plan Romney Signed!

Mitt Romney criticized Barack Obama's health care proposal over the weekend in New Hampshire. According to The Baltimore Sun, Romney said, "Barack Obama said we're going to have the government take over health care. He at least had the integrity to say he wants to raise your taxes." He added, "The right answer is not a government takeover, it's not socialized medicine. It's not Hillarycare." Separately, at a Sunday town hall meeting, Romney said, "I don't want the guys who ran the [Hurricane] Katrina cleanup running my health care system."

I am not here to tell you Obama has the best plan, or he doesn't--or that any other candidate does or doesn't for that matter. I do feel comfortable in telling you that Obama pretty much has the plan Romney signed into law in Massachusetts.

In fact, Obama's plan doesn't go as far as the Mass plan Romney signed--the Obama plan doesn't have an individual mandate!

Which planet is Romney from?

Previous post on Obama plan details: Clinton, Edwards, Obama--Offering Health Care Reform Proposals More Similar Than Different

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Massachusetts Expected to Further Backpedal on its Individual Mandate

The Boston Globe is reporting that the Massachusetts legislature "will probably make changes" to the new health care law that could well include capping what a person has to pay for health insurance at 10% before the individual mandate law can be enforced.

Presumably, this would mean a family with a household income of $50,000 per year would have to pay no more than $5,000. I fear that is still too high a number for a family of three, for example, who would not qualify for a state subsidy.

Let me first say that I continue to applaud Massachusetts for at least trying to deal with this health care issue and that I believe the "Connector" is doing all it can with the cards it has been dealt.

But what the discussion in the Mass legislature does point to is something I have been talking about for months: Massachusetts will not be able to implement their new health care law to anywhere near the point they wanted because they have not adequately dealt with the fundamental underlying problem--the cost of health care.

My earlier post: The Massachusetts Health Plan Will Turn Out to Be Little More Than a Fancy Expansion of Medicaid--Bids Come In At $250 Per Person Per Month

New York AG Objects to Insurer's Method for Ranking Doctors by Cost and Quality--Just What We Need in Health Metrics--Lawyers

At the core of any market-based ability to control costs--pay-for-performance or consumer-driven care--is the notion that patients and payers have information available to them on a health care provider's cost and quality results.

Too often the health plan rhetoric--or marketing brochures--have got out ahead of anyone's real ability to measure cost and quality both accurately and in a way that is useful.

These efforts have also been plagued by providers too often more interested in undermining these efforts to protect their interests than cooperating in solving the complex challenges that crafting an effective system entails.

And it is not just the private markets that depend on progress here. Medicare has entered the world of pay-for-performance as well and it is likely that any government-run system would have to be use these kinds of metrics.

The latest evidence that we have a long way to go can be found, of all places, in the New York attorney general's office. From a New York Times article: "In a sharply worded letter, the New York State attorney general's office asked a health insurance company yesterday to halt its planned introduction of a method for ranking doctors by quality of care and cost of service, warning of legal action if it did not comply."

The letter was sent to UnitedHealthcare--but it could have been sent to any number of health plans looking to use provider performance information as a means to rank those in their networks.

But here's where this whole episode gets to the core of whether provider performance will ever matter. The AG said in the letter: "To compound the situation, we understand that employers may act on these 'ratings' to offer financial inducements such as lower co-payments or deductibles to promote 'cost-effective' doctors to their employees."

Well what else would they use it for?

Health care providers have complained that the United program just measures cost and not quality. Of course they would.

United has said cost and quality is "exactly what this is about." Of course they would.

When the day is done, it is in both the provider community's and the health plan community's interest to come to an agreement on how to measure both cost and quality.

While no one is riding any "white horses" in this business, I have to tell you that the provider community would have a disproportionate impact on developing a useful system if they could come to the conclusion that health metrics are here to stay and critical to our getting our health care system under control and take a leading role in their development--no matter if it is a private market system or a government-run system.

Good faith cooperation on both sides is crucial to getting a health metrics system that works for patient, payers, and providers.

We sure don't need an attorney general getting into the health care economics business--it's hard enough anyway.

Brian Klepper has also done a post on this issue. Brian makes a point I am not qualified to make arguing that the United tool suffers from a basic component needed for provider/payer relations to exist in good faith--transparency. He also makes a good argument for the importance of objectivity.

I suggest going over to, "The Doctor Weighs In" for a very good post and another perspective.

Bush Reaffirms Veto Threat Over SCHIP Despite Strong Republican Support for Bipartisan Compromise—What’s Really Going On Here?

The most exasperated person in Washington has to be Senator Chuck Grassley (R-IA). The Ranking Republican on the Senate Finance Committee has worked out a bipartisan compromise with his good friend Senator Max Baucus (D-MT) to continue the State Children’s Health Insurance Program (SCHIP) past its September 30 expiration date.

The plan currently covers 6.6 million low income kids and would cover another 3.3 million under the plan that would increase spending by $35 billion over five years and pay for it with a new 61 cent per pack tobacco tax.

But President Bush says he will veto the deal because he worries that it is a dangerous expansion of government-run health care.

Not only is Grassley exasperated over that comment but so is about everyone else in Washington. This is a truly bipartisan deal with the Senate Finance Committee overwhelmingly approving it with plenty of Republican support.

What makes this so puzzling is that Bush’s stance is out of synch with the facts and his own health care track record:

1. The President has called for expansion of health insurance since he took office through assistance for the poor to buy health insurance in the private market. SCHIP is largely provided through private insurance companies—public funding of private coverage albeit without a choice of different plans by the consumer. Private insurance companies support the deal because setting up Part D-like multiple choices for kids is not practical.
2. A centerpiece of the Bush administration is the Medicare Part D drug plan for seniors—government financed and provided through private insurers.
3. The Bush administration has approved one state waiver after another allowing states to expand the program beyond its original intent. The Bush administration just approved such a big expansion in Wisconsin. The Senate deal would go a long way toward eliminating the "over expansion" Bush has been complaining about.
   

The Part D drug benefit was the biggest expansion of a government health care program since Medicare was passed in 1965—and Bush sees it as a big victory. SCHIP is maybe a tenth the size of Part D and largely delivered through private insurers who have to competitively bid the contract and Bush says it’s opening “an avenue for people to switch from private insurance to government.” Never mind that there is no "switch" involved here because they are almost always uninsured to begin with.

The President also says he wants to have a discussion over his proposal to change the way health benefits are taxed with an eye toward giving consumers more individual control over their health care. OK. But that general idea has been around for 15 years and he never made that proposal in the six years he had a Republican Congress who would have been a great deal more supportive of the idea then the current Democratic Congress.

What’s really going on here?

My sense is that this President has decided he needs a whopper of a political fight with the Democrats to recharge his flagging presidency and he’s decided to take them on over his view that Democrats would like to “socialize health care" in the U.S. Apparently, his political advisers are telling him the “socialized health care” line is still a good one with mainstream voters.

Never mind the fact that many Republicans—including Grassley and Orin Hatch (R-UT) who are key authors of the compromise and plenty of other Senate Republicans--are onside.

In an earlier post I said that it looks to me like we have a desperate President with nothing to lose as he tries to get his administration back on track in its last year.

I also made the point that it looks to me like Bush is willing to finally veto lots of spending bills—he didn’t veto any Republican spending bills during his first six years.

Is this just the opening round in a bigger fight from a President willing to have a government shutdown battle with the Congress to reassert his presidency?

In 1995, the roles were reversed. Democrat Clinton was looking to reassert his flagging presidency just as just as Republican Gingrich was looking to make a new Congressional majority dominant. Is Bush taking a page from Bill Clinton's game book?

Is Bush trying to make himself "relevant" again?

"Cavalcade of Risk" is Up Over At "Sentinel Effect"

Richard Eskow has more than two dozen carefully selected posts from the world of insurance blogs up over at his "Sentinel Effect."

Richard has put a lot of time into giving us a wide array of good work.

"Government Subsidies That halve Premiums Would Cut Number of Uninsured by 3%"--No Surprise There But it Was the Wrong Question

That's the headline on a story regarding a Rand study that says giving people subsidies won't do much to decrease the number of those uninsured.

But here's the problem with that study: Paying for half the cost of health insurance that averages more than $11,000 for a family in the U.S. still makes health insurance prohibitively expensive for all but the well off.

As I posted yesterday, voluntary health plans that are successful, like employer plans, Medicare Part D, and Medicare Part B pay 75% of the cost of coverage bringing the cost into line with what people can afford and get great participation.

Asking people if they can afford half of something like $11,000 was a dumb premise for a study in the first place.

All the folks at Rand needed to do was to go look at their own company health plan. My bet is that Rand pays about 75% of the costs for its employees and has more than 75% of its workers enrolled--and probably 95% of its workers that don't have coverage through a spouse.

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

California is entering the final weeks of a major effort to reform the state’s health insurance system.

Good for them and in particular good for Governor Schwarzenegger who is willing to tackle this most prickly of domestic policy issues!

The Governor and the legislature will need to get a deal done by the end of September if it is going to happen in this session—or maybe for a long time to come.

As we have learned in Massachusetts, health care reform is hard and inevitably has uneven results. But the alternative, doing nothing, gets us nowhere.

In health care reform, no pain—no gain.

The big issue in California is whether to have an individual mandate or not.

Governor Schwarzenegger believes an individual mandate is necessary to get everyone covered and spread the risk across the largest pool—therefore providing the most efficient cost.

Democratic leaders, who control the legislature, oppose a mandate in part because of opposition from labor groups trying to avoid the direct cost of expensive health insurance on workers. They would rather concentrate the burden on the employer community proposing a 7.5% minimum payroll contribution.

Hospitals and doctors are also objecting to a provider tax.

It seems that worker groups, health plans, hospitals, and doctors all have in common the notion that California should have universal coverage but only the employer should have to pay for it.

That’s the subject of another post.

While most of the California debate’s focus is today on whether there should be an individual mandate, or an employer mandate, or both, let me suggest that is not the big question for California policymakers.

As we have learned in Massachusetts, a mandate is a moot point if individuals, or employers, can’t afford the cost of insurance.

In Massachusetts, a health insurance plan with a $2,000 individual/$5,000 family deductible costs around $200 per month per person at an average age of 37. For a 55-year-old the cost is around $500 per person per month.

The good news is that Massachusetts looks like it has already covered about 150,000 people that didn’t have health insurance before the new law. But there are somewhere between 200,000 and 400,000 more who still do not have coverage.

When all the Massachusetts data is in, my bet is that we are going to see the very low income (under 200% of poverty), who get almost 100% subsidies, fairly well covered and those with little or no subsidy help still unable, or unwilling, to buy the coverage.

Those between 200% of the poverty level and 400% of the poverty level are going to be particularly pained to buy coverage because they make too much for assistance and too little to pay for it on their own.

In an earlier post, I argued that you don’t need an individual or employer mandate to make a health insurance reform plan workable.

My training as a health insurance underwriter many years ago taught me that to have an efficient “spread of risk” you only need to get 70% to 80% of those offered coverage to sign up.

Employer plans do not require their workers to sign up and they almost always get an efficient spread of risk. The Part D Medicare drug plan is voluntary and has achieved a very efficient pool, as has the Part B portion of Medicare, which is also voluntary.

Employer plans, Medicare Part D, and Medicare Part B all have in common the fact that they are affordable because either the employer, or Medicare, pays most of the cost so the remainder is affordable for employees and seniors. Medicare pays 75% of these costs and employers also typically pay 75% of the cost of health insurance.

California, just like Massachusetts before it, is focusing on the wrong thing—making people buy insurance and whether to do it through an individual or employer mandate.

Don’t get me wrong. The most equitable form of health reform is one everyone is a part of. Freeloaders don’t help health reform efforts. But I would not let health care reform fail over the issue of whether there should or shouldn't be a mandate.

This whole debate over whether to mandate or not misses the critical point: Have we made the cost of health insurance affordable for individuals and employers?

It’s also hard for me to see how health care reform can have any chance of being affordable unless the burden is spread across the greatest number of stakeholders—individuals, employers, health plans, doctors, hospitals, and taxpayers.

Give credit where credit is due in Massachusetts. But I hope California doesn’t make the same mistake Massachusetts made in focusing too much on mandates and too little on how to offer a health insurance policy people can afford.

Related post: The Mandate Myth--Health Reform Plans Don't Have to Mandate Coverage to Work But They Do Have Be Affordable

But maybe we won't have a practical choice other than just getting everyone covered and let the resulting out-of-control costs drive the rest of the solution: The “Realistic” Way to Do Health Care Reform