An Important and Disciplined Review of the Health Care Marketplace--The Latest Site Visit Report From 12 Markets

Good health care market intelligence is hard to come by. Information tends to come in the form of detailed and narrow, often backward looking, surveys that give us little texture for what key players are thinking. Or, at the other extreme, market information is often based on a relatively few almost random anecdotal impressions by "experts" as they do their work in the market.

The highly respected Center for Studying Health System Change (HSC) has been conducting detailed and disciplined surveys of 12 metropolitan health care markets since 1996. HSC's work gives us a perspective into the U.S. health care market unlike anything I know of. For more than ten years, they have used the same techniques to drill down into these markets talking to insurers, employers, providers, and other key players. As a result, they can give us a historical perspective and objective analysis like no one else I know of.

Their latest report is now available and required reading for anyone in this business.

Here is a quick summary of their findings taken from the report's abstract:

• Little has changed in local health care markets since 2005 to break the cycle of rising costs, falling insurance coverage and widening access inequities.
• Intense competition among hospitals and physicians for profitable specialty services continues.
• Employers and health plans are looking to consumers to take more responsibility for medical costs, lifestyle choices and treatment decisions.
• While consumer-directed health plans have not gained widespread adoption, other developments—including a heightened emphasis on prevention and wellness, along with nascent provider cost and quality information—are advancing health care consumerism.
• However, concerns exist about whether these efforts will slow cost growth enough to keep care affordable or whether the growing problem of affordability will derail efforts to decrease the rising number of uninsured Americans and stymie meaningful health care reform.

If you are in this business, you need to read this report. The six page report of initial findings is very efficiently done. You can access it here.

Health Wonk Review is Up

Jane-Hiebert-White has the latest Health Wonk Review up over at the Health Affairs blog.

This sample of some of the best recent posts in the health blog world not surprisingly has lots to say about the SCHIP debate and other timely health reform issues.

I wonder what 1993 would have been like if we'd had the blog world?

SCHIP Supporters Are At Least Ten Votes Short to Override a Bush Veto

The Democrats are now going to take two weeks to try to change some minds before they attempt to override the Bush veto of the SCHIP bill--scheduling a vote for October 18th. If nothing else they will continue to hammer on the President and his Republican supporters over what is turning out to be a very unpopular stand by the President.

The Senate approved the SCHIP compromise by a vote of 67-29. SCHIP supporters would need 67 votes to override the President's veto. The Senate should be able to hold at that level--albeit with no margin for backsliding.

But, the numbers are not on the side of a veto override in the House.

The House originally passed the SCHIP bipartisan compromise 265-159 with 45 Republicans voting for it and eight Democrats voting against it.

To override, the bill's supporters are going to have to find 290 votes for it.

147 Republicans have just signed a pledge to stay with their President on this. That means that even if all Democrats now vote for the bill and 147 Republicans vote against it, supporters would have 288--two short.

Assuming that all of the Republicans who did not sign the pledge can be persuaded to vote for the override, supporters are also going to have to change the mind of every Democrat who voted against it and get at least a couple of Republicans who signed the pledge to change their minds--or find some other combination that yields them at least 10 more votes.

Not impossible but really hard.

If the veto is not overridden, the two sides will find a way to continue SCHIP at least at current levels. Not even President Bush wants any stories about kids who are covered today losing their coverage.

Now That The UAW Is On The Hot Seat to Manage Its Retiree Health Costs Will Their View of Health Care Management Change?

Brian Klepper joins us again today this time with an astute analysis of the UAW/GM deal. Now that the UAW owns their GM retiree plan will they look at health care management differently?

The Hot Seat
by Brian Klepper

I agree with Bob that the GM-UAW deal is a turning point for American health care. In a stroke – OK, it was a 456 page stroke – GM agreed to turn over as much as $35 billion, about 70 cents on the dollar, for a trust that will fund the union’s retiree health care benefits in the future. With the exception of modest additional requirements, the agreement effectively absolves GM of future financial liability for their retiree’s health benefits.

This deal is reverberating throughout a US business community that seeks to avoid continuing unpredictable and open-ended health costs, particularly for large numbers of retirees, which demand an ever-increasing percentage of total resources. Many of the articles covering the agreement have focused on the Voluntary Employees Beneficiary’s Associations (VEBAs), almost as a how-to for unionized employers who want to follow suit and stabilize their liabilities.

Some of my colleagues seem convinced that this agreement is another nail in the coffin of employer-sponsored coverage. I’m not so sure. While employers continue to be very concerned over health care costs, no mass exodus is occurring yet, nor is it likely to. Yes, smaller employers are being priced out of the coverage marketplace, but mid-sized and larger employers are between a rock and hard place when it comes to health benefits. They can pay the exorbitant increases, or they can reduce or drop coverage, watch their workers’ and families’ health decline, and suffer skyrocketing lost productivity costs. Until the nation has a workable universal coverage program capable of supplanting employer benefits, no business that sees the big picture wants to drop coverage and risk having an unhealthy, unproductive workforce.

Nor are employers confident that a government-driven cure won’t be worse than the illness. After all, Medicare’s inflation rate has matched the private sector’s for years (CBO: "Health Care Issues and Challenges for Reform, July 2007," chart 4) and there’s little reason to believe that cost growth will slow just because the government is involved. I’ve heard a good deal of concern that the tax burden for any new system could be greater than the current voluntary expenditures for health benefits.

Of course, for decades unionized employers have experienced a very different, and untenable, situation than non-unionized companies. Unionized firms trying to manage care and cost have faced the resistance of unions who, despite a wealth of evidence to the contrary, staunchly embraced the ideology that better quality care equates to unlimited access: first dollar coverage of any service by any provider. So when GM successfully transferred its retirees’ health risk to the UAW, it was a watershed moment.

There is a law of the universe that says that whoever owns the risk will come to have a different perspective about how it can most appropriately be managed. Now that UAW has responsibility for the solvency of the VEBA, the question is whether their view of health care management will change.

That’s certainly what happened when the Culinary Fund Health Plan in Las Vegas hired Jerry Reeves, MD to manage their health plan. The Plan collaborated with local hotels to provide coverage to about 320,000 lives. When Dr. Reeves, a former Humana national Chief Medical Officer (CMO) and former CEO for Worlddoc, an innovative patient decision support toolsuite, took on the assignment, their costs were through the roof.

Dr. Reeves profiled the doctors and hospitals, rewarded the high performers and discarded a few of the poor performers from the network. He instituted a range of management techniques that drove excess cost out of the system, ultimately saving so much money while improving quality that the union gave all its enrollees a 60 cent/hour raise. Dr. Reeves became a minor celebrity, taking on that union’s national Chief Medical officer position and working with groups around the country on cost and quality. Its one of the best health care stories I know.

In the Culinary Fund case, the union owned the risk and managed the health plan, and they had the good sense to ditch the conventional wisdom in favor of serious management approaches. And they’ve become a model for how unions can successfully address the problem.

The UAW may or may not be a different story. They have been entrenched in an entitlement mentality for a long time. The question now is whether they can bring themselves to manage the care process in a way that drives out unnecessary cost, and that averts financial insolvency for their own members down the very short road that lies ahead.

That, of course, will end up being the question for unions everywhere, as the GM-UAW agreement encourages employers around the country to offload their health risks to their union partners. And in this sense, the agreement is a watershed because it will force one of the last, most powerful holdouts for unmanaged, free-for-all health care (as long as somebody else is paying) to confront the realities of cost and quality.

The ONLY way to do this was to force unions to be in the same hot seat their employers have been in for years. Now that the moment has arrived, it can only be good for the whole of health care, because meaningful reform first requires everyone in power to agree that every patient can’t have everything, just because they decide they want it. Instead, we have to agree to pursue value and performance, a proposition that requires the implementation of an entirely new infrastructure: standards, evidence-base guidelines, transparency and performance-based reimbursement.

Not everyone believes the UAW can pull this off. One colleague said “I suspect the union really does not understand the tiger whose tail they just grabbed. Imagine the combination of entitlement mentality + older retirees + longstanding poor health choices + fixed budget + long life expectancy + the “bully pulpit” in the media. I think GM made out like a bandit.”

If I were in the union’s hot seat now, I might be inclined to give Dr. Reeves a call.

Reforming Our Health Care Financing System Won't Mean Anything if Americans Don't Start Taking Better Care of Themselves

Ken Thorpe, along with associates David Howard and Katya Galactionova, of Emory University has expanded on his earlier work on chronic disease in the U.S. and its impact on our health care costs in a web article for the journal Health Affairs. He compares chronic disease in the U.S. and Europe and looks at the difference as a means to help explain our higher health care costs.

As all of the Republican and Democratic presidential candidates, and the rest of us, debate how to get everyone access to health insurance the alarming decline in America's overall health, and its impact on our inability to afford health insurance, seldom gets more than lip service.

It's going to take a lot more than passing references to wellness and prevention. We've been talking about, and implementing soft programs in that space, for almost 30 years and Americans have just gotten more sloppy about their personal health. As I have posted before, we need to hit this problem, particularly America's obesity epidemic, head-on. The notion that younger adults and children may be the first generation in our history to have poorer health than the last should scare all of us--and make us understand health care isn't just an access and price issue.

This from the article's abstract:

"The United States spends more on health care than any European country. Previous studies have sought to explain these differences in terms of system capacity, access to technologies, gross domestic product, and prices. We examine differences in disease prevalence and treatment rates for ten of the most costly conditions between the United States and ten European countries using surveys of the noninstitutionalized population age fifty and older. Disease prevalence and rates of medication treatment are much higher in the United States than in these European countries. Efforts to reduce the U.S. prevalence of chronic illness should remain a key policy goal.

"The United States spends far more on health care than any European country. U.S. per capita spending in 2004 was $6,037, compared with $3,094 in the Netherlands, $3,169 in Germany, and $3,191 in France. Even Switzerland, which has the highest per capita health spending of any European country, spends only two-thirds as much per capita as the United States spend.

"Previous studies have sought to explain these differences in terms of system capacity (that is, physicians, nurses, and hospital beds per capita), access to advanced technologies such as magnetic resonance imaging (MRI), gross domestic product (GDP) (that is, the "income effect"), and prices. Neither system capacity nor access to technology appears to account for the higher level of spending in the United States compared with these European countries. However, GDP is strongly related to health care spending. A 1 percent increase in GDP per capita is associated with (at least) a 1.2 percent rise in per capita health care spending, and cross-national variation in per capita GDP explains nearly 90 percent of the variation in this spending. However, even when the relationship between GDP and health spending is taken into account, the United States remains a substantial outlier: Per capita spending is 42 percent higher than predicted.

"More recent U.S.-European comparisons have attributed the unexplained residual spending in the United States to higher health care prices--a component of spending per treated case. Because prices cannot be observed directly for most services, the conclusion is based on Organization for Economic Cooperation and Development (OECD) data showing little difference in capacity--physicians, nurses, and hospital beds per capita and hospital days per capita--between the United States and OECD countries. Thus, the residual (and unmeasured) differences in spending are thought to reflect higher payments for services in the United States.

"Higher U.S. spending may also reflect greater disease burden and higher rates of disease treatment. Differences in diagnosed and treated disease prevalence have received less attention in the literature on spending in the United States and Europe, except as measures of system performance. However, within the United States, increases in chronic disease rates have contributed to the growth of health care spending.

"There are several reasons why disease treatment rates might be higher in the United States. First, higher rates of obesity and, up until the 1970s, smoking place Americans at higher risk for a number of chronic conditions. Second, the U.S. medical system might have a greater propensity to screen for disease more aggressively and treat less severe cases of disease.

"Previous studies have shown that disease and treatment rates are higher in the United States than elsewhere. A recent comparison of British and U.S. surveys of the population age fifty and older found that U.S. respondents were more than twice as likely as their British counterparts to report having been diagnosed with diabetes and were also more likely to report having been diagnosed with other conditions. Disease-specific comparisons between the United States and European countries have also found that prevalence and treatment rates are higher in the United States.

"In this paper we examine differences in doctor-diagnosed and medication-treated disease prevalence between the United States and ten of the largest European countries. We find that both diagnosed prevalence and treatment rates are higher in the United States. We cannot directly calculate the link between higher treatment rates and spending, but we show that U.S. health care spending would be lower if treatment rates were reduced to European levels."

Access the entire article: Differences in Disease Prevalence As A Source of the U.S.-European Health Care Spending Gap

Earlier post: The Obesity Epidemic--It's Time to Deal With it the Same Way We Did Smoking

The Country's Political Center is Shifting and With it the Health Care Reform Debate

I always thought it was shortsighted for the Republicans to avoid comprehensive health care reform in the six years they controlled the White House and the Congress (2001-2006). Instead they just added $8 trillion in unfunded liability (Part D) to a Medicare system they've been telling us from the beginning is unsustainable as it is.

Eventually the political pendulum swings to the other side. Whatever big problems you leave on the table when that happens, you leave to the other guys.

Today's Washington Post cites a tracking poll that gives us reason to believe that pendulum is swinging the other way.

It seems that Democratic polling firm Hart Research and Republican firm Public Opinion Strategies have tested two propositions over the last twelve years: "Government should do more to solve problems and help meet the needs of people" and "Government is doing too many things better left to business and individuals."

In December 1995, a year after the Republican takeover of Congress, the poll gave a big lead to "less intrusive government"--62% to 32%.

This month, "a more activist government won out"--52% to 39%.

The Post pointed out that Republican voters still say government is doing too much--62% to 32%.

The data says two things to me:

1. Republican presidential candidates are running to the right for good reason in the Republican primary season. Republican voters are going to respond to the "free market" and "individual responsibility" health care reform messages all of the Republicans are now delivering.
2. "Free market" health care isn't going to get the job done in the general election.

Yelling "Hillary Care" may work for the Republicans with their own in Iowa, New Hampshire, and South Carolina in January but it will backfire come November 2008 if Republicans don't have more on the table by then.

The center has moved. Right now on health care, the Democrats are standing on it.

All of those great Republican health care reform ideas, where were they during those first six years?

They couldn't get them past Democratic "obstructionists?" They got $8 trillion in unfunded liability for Part D and a private Medicare Advantage program past them.

The GM-UAW Deal--If UAW Workers Can No Longer Count on Employer-Provided Health Care Then Neither Can Harry and Louise

I'm not the first one to suggest the GM-UAW deal to set up a VEBA is a watershed event. Most observers are focusing on the trend it will accelerate in the employee benefits market--and it will.

I will suggest another dramatic impact that it will have--on voters.

The polls already tell us that health care is by far the top domestic policy issue and second overall only to Iraq.

This deal is also going to make voters even more concerned about health care. The middle-class gets its terrific health care benefits at work. The UAW led that trend decades ago.

Now, the UAW is admitting that it cannot count on its employers to any longer provide these benefits.

The more important message: If UAW workers can't count on their employer for good health insurance benefits then neither can Harry and Louise.

This is one more important step on the journey of centrist voters in the U.S. toward a consensus that it is time for fundamental health care reform.

The Republican presidential candidates, that are not so far taking the health care issue seriously, had better pay attention.

If the $35 Billion Expansion of SCHIP is About Moving to Government-Run Health Care Why Does the Insurance Industry Support It?

Both the House and Senate have now passed the $35 billion expansion of SCHIP. The House by 265-159 and the Senate by a vote of 67-29. The Senate bill got exactly the two-thirds it needs to override the expected Bush veto and the House fell 25 votes short of the 290 it will need.

Opponents of the bipartisan compromise to renew and expand the State Children's Health Insurance Program primarily argued that this expansion was really about a big step toward government-run health care.

But the whole of the insurance industry supports it--both America's Health Insurance Plans and the Blue Cross Association.

Opponents have said that the program has grown well beyond its original intent to cover only children below 200% of poverty. That is correct. But SCHIP is a block grant program. The feds give the states a chunk of money and then give them a great deal of flexibility in how they use it. In fact, the Bush administration has approved many of these exceptions. While New Jersey has really pushed things by covering kids in homes up to $80,000 (four times the poverty level) that is an aberration. In fact, the bipartisan bill reduces federal funding for states that enroll children above 300% of poverty, prohibits the feds from approving any more states from covering parents, and phases-out state coverage of childless adults--pretty much all of the things opponents are complaining about.

Opponents also argue that we still haven't covered all of those below 200% of poverty and therefore shouldn't be covering anyone above that level. But, the bipartisan bill calls for states not meeting enrollment goals to begin losing money for those covered above 300% of poverty by 2010.

Block grants are a Republican idea. When the Bush administration tried to reform Medicaid a few years ago by employing block grants they thought it was a good idea and a lot of Democrats didn't like it.

Block grants are a way to give states a lump of money and encouragement to find the most imaginative way to use the money.

But here is George Bush now telling all of these states--most of which his administration gave the go-ahead to--that he's from Washington and he knows better!

Yes, it will cost another $35 billion--the President favors $5 billion more. But he had no trouble finding almost $200 billion this week to fund the war.

Critics argue that the 61 cent tax on tobacco can't be trusted to fund the program because it will lead to a reduction in smoking and revenue falling short of projections. Now there's a problem--the tax results in a reduction in smoking. They argue that it is an unfair tax on the poor. Well it's a tax on behavior that costs the rest of us tons of money when they become uncompensated care or fall back on Medicaid. Looks to me like if there ever was a fair tax on the poor this is it.

SCHIP is not perfect and New Jersey is an example of a state that has gone well beyond the original intention--although they might tell us they have made the money go further than anyone else.

But in this frustrating area of health care it is also an example of:

• Something that has worked for 6 million kids.
• Doing what all of those Republican presidential candidates support--giving states more flexibility to find local solutions that are not "one size fits all health care."
• A bipartisan deal when Democrats and Republicans don't otherwise seem to agree on anything.

The White House says this is about drawing a line in the sand over the expansion of government health care and a chance to take a different direction by passing the President's proposals to use the tax code to enable the near poor to buy their own coverage in the private market. But the fact is George Bush made no effort to do that in the six years his party had the White House, the Senate, and the House. To think he can do it now with Dems in control of the Congress is simply foolishness.

Then there is the fact that he says this is government-run health care but the whole of the insurance industry supports the bipartisan bill.

A big reason the insurance industry supports the bill is because the states are using private insurance to deliver the SCHIP benefits to children! The Republicans have started the privatization of government health care--Medicare Advantage, Part D, Medicaid in many states, and SCHIP.

SCHIP is largely a government-run program provided through private insurance companies.

In the end, President Bush is going to compromise. He will likely go along with funding that will at least maintain the program at current levels--albeit nowhere near the $35 billion.

But on the way to doing that he, and the conservative Republicans, are politically shooting themselves in the foot going into an election-year in ways that are just unfathomable.

Who's More Frustrated With Bush Over His SCHIP Veto Threat--Republicans or Democrats?

These days its hard to get Democrats and Republicans to agree on anything. But there is one bipartisan bill that has incredible support in both parties--the $35 billion expansion and renewal of the State Children's Health Insurance Program (SCHIP).

By any measure SCHIP has been an incredibly good success--covering 6 million kids. There have been some legitimate questions about it growing beyond its original intent--covering kids up to 350% of poverty and some adults in a few states. But the fact is that the number of children without health insurance has begun to grow again with 9 million kids not covered under the expiring SCHIP law. And, the bipartisan agreement does tighten up the eligibility standards somewhat.

There is so much bipartisan support that 68 Senators voted for the original Senate agreement--a veto-proof majority. There are another 20-30 House Republicans that look ready to vote for it--still short of the number needed to override a Bush veto.

Leading Republicans appear more frustrated with President Bush than Democrats. Republican Senator Orin Hatch: "We're talking about kids who basically don't have coverage. I think the President's had some pretty bad advice on this." Senate Finance Ranking Republican Chuck Grassley: "I'm disappointed by the President's comments. Drawing lines in the sand at this stage isn't constructive...I wish he would engage Congress in a bill that he could sign instead of threatening a veto." Republican Senator Gordon Smith: "I'm very disappointed. I'm going to be voting for it." (Source: Washington Post 9/21).

What a dumb place to draw a line in the sand. But Bush has done it and he underscored all of this by opening his nationally televised press conference yesterday with a long statement repeating his determination to veto the SCHIP extension because it represents a creeping expansion of government-run health care. No matter that all of the insurance industry is behind the bill!

House Republican leaders have vowed to follow the President and defeat any attempt to override his veto--which they probably can succeed in doing.

But there might be an out here. House Republican leaders are offering an 18 month extension at existing funding levels.

That may be the best deal SCHIP supporters can hope to get. The bright side: The next vote would come in early 2009 just after the new President and the new Congress take office. Right now, it looks like a pretty good bet the new President would be just a bit more sympathetic.

Taking that deal would also keep the SCHIP disagreement out of what looks more and more like one heck of a year-end budget mess.

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

Health Wonk Review is Up!

Joe Paduda is hosting Health Wonk Review over at "Managed Care Matters."

Not surprisingly he's got lots of blog entries regarding Senator Clinton's new health plan and lots of other samples of some of the best blog posts from the past couple of weeks.

Also making the big time this week was our good friend, Brian Klepper, who had the following letter published in the New York Times regarding Senator Clinton's plan:

To the Editor:

“Unveiling Health Care 2.0, Again” (Week in Review, Sept. 16) is right. Only innocents believe that meaningful health care reform will occur simply because the American people want it and the presidential candidates promote it.

Health care economists agree that as much as half of the industry’s costs is waste, but that excess constitutes a significant portion of the financial baselines of most health care organizations.

The health care industry, the nation’s largest economic sector, spent $350 million lobbying Congress in 2006, more than any other sector. They won’t willingly abide reforms that compromise their profitability.

Reform will occur only if America’s non-health care business leaders recognize that it is a critical concern for them and us. By pooling their influence, they could overwhelm the health care lobby and drive changes that re-establish American health care’s stability and sustainability.

Brian R. Klepper
Director, Center for Practical Health Reform
Atlantic Beach, Fla., Sept. 16, 2007

Medicare Advantage Cuts Still on the Table to Offset the Medicare Physician Fee Fix

The House/Senate deal to renew the State Children's Health Insurance Program (SCHIP) does not include a fix to the January 2008 10% Medicare physician fee cut. It also doesn't include the $51 billion in cuts to the Medicare Advantage (MA) program the House had in their bill to pay for that fix and other Medicare improvements.

As I have said many times before, that only means that the Medicare physician fix is going to get booted to the year-end budget work--the docs aren't going to get a 10% fee cut.

The big question is just how big will the MA cuts be in order to pay for the doc fix.

The key Senator in the middle of all of this is Max Baucus (D-MT)--the Senate Finance Chair. He is much more moderate on the Medicare Advantage issue than his counterparts in the House. I have long believed where Baucus comes out on this is the place where a compromise will be found.

This week, the Wall Street Journal quoted Baucus as saying he is contemplating cuts in payments to Medicare Advantage insurers that are "not as much" as the cuts that were passed by the House. "But some," Baucus said, "It will be significant."

The House wanted to cut $51 billion over five years beginning in 2009.

The Senate will be more concerned about maintaining payments in rural areas and will have a more favorable view of the standard Medicare Advantage plans. The sore point will likely be the insurers who have been gaming the Private Fee For Service payment system in urban markets.

The House still wants huge cuts. Speaker Nancy Pelosi this week said, "Do we want to stop the privatization of Medicare? Yes." That's pretty clear.

This will all be decided at year-end when the Democratic committee chairs have almost total control of the budget process.

So, the Dems in the House want to stop the privatization of Medicare and Baucus wants "significant" cuts.

Talk about a rock and a hard place!

Hillary Clinton's Health Plan

Here is an excerpt from the Clinton campaign's press release outlining her $110 billion a year health care reform plan:


FOR IMMEDIATE RELEASE
September 17, 2007

The American Health Choices Plan:

Ensuring Affordable, Quality Health Care for All Americans

Hillary Clinton unveiled the third part of her plan today to ensure that all Americans have affordable, quality health insurance. Building on her proposals to rein in costs and to insist on value and quality, her American Health Choices Plan will secure, simplify and ensure choice in health coverage for every American.

Specifically, her American Health Choices Plan will:

Offer New Coverage Choices for the Insured and Uninsured: The American Health Choices Plan gives Americans the choice to preserve their existing coverage, while offering new choices to those with insurance, to the 47 million people in the United States without insurance, and the tens of millions more at risk of losing coverage.

• The Same Choice of Health Plan Options that Members of Congress Receive: Americans can keep their existing coverage or access the same menu of quality private insurance options that their Members of Congress receive through a new Health Choices Menu, established without any new bureaucracy as part of the Federal Employee Health Benefit Program (FEHBP). In addition to the broad array of private options that Americans can choose from, they will be offered the choice of a public plan option similar to Medicare.
• A Guarantee of Quality Coverage: The new array of choices offered in the Menu will provide benefits at least as good as the typical plan offered to Members of Congress, which includes mental health parity and usually dental coverage.

Lower Premiums and Increase Security: Americans who are satisfied with the coverage they have today can keep it, while benefiting from lower premiums and higher quality.

• Reducing Costs: By removing hidden taxes, stressing prevention and a focus on efficiency and modernization, the plan will improve quality and lower costs.
• Strengthening Security: The plan ensures that job loss or family illnesses will never lead to a loss of coverage or exorbitant costs.
• End to Unfair Health Insurance Discrimination: By creating a level-playing field of insurance rules across states and markets, the plan ensures that no American is denied coverage, refused renewal, unfairly priced out of the market, or forced to pay excessive insurance company premiums.

Promote Shared Responsibility: Relying on consumers or the government alone to fix the system has unintended consequences, like scaled-back coverage or limited choices. This plan ensures that all who benefit from the system share in the responsibility to fix its shortcomings.

• Insurance and Drug Companies: insurance companies will end discrimination based on pre-existing conditions or expectations of illness and ensure high value for every premium dollar; while drug companies will offer fair prices and accurate information.
• Individuals: will be responsible for getting and keeping insurance in a system where insurance is affordable and accessible.
• Providers: will work collaboratively with patients and businesses to deliver high-quality, affordable care.
• Employers: will help finance the system; large employers will be expected to provide health insurance or contribute to the cost of coverage; small businesses will receive a tax credit to continue or begin to offer coverage.
• Government: will ensure that health insurance is always affordable and never a crushing burden on any family and will implement reforms to improve quality and lower cost.

Ensure Affordable Health Coverage for All: Senator Clinton’s plan will:

• Provide Tax Relief to Ensure Affordability: Working families will receive a refundable tax credit to help them afford high-quality health coverage.
• Limit Premium Payments to a Percentage of Income: The refundable tax credit will be designed to prevent premiums from exceeding a percentage of family income, while maintaining consumer price consciousness in choosing health plans.
• Create a New Small Business Tax Credit: To make it easier—not harder—for small businesses to create new jobs with health coverage, a new health care tax credit for small businesses will provide an incentive for job-based coverage.
• Strengthen Medicaid and SCHIP: The Plan will fix the holes in the safety net to ensure that the most vulnerable populations receive affordable, quality care.
• Launch a Retiree Health Legacy Initiative: A new tax credit for qualifying private and public retiree health plans will offset a significant portion of catastrophic expenditures, so long as savings are dedicated to workers and competitiveness.

A Fiscally Responsible Plan that Honors our Priorities:

• Most Savings Come Through Lowering Spending Due to Quality and Modernization: Over half the savings come from the public savings generated from Hillary Clinton’s broader agenda to modernize the heath systems and reduce wasteful health spending.
• A Net Tax Cut for American Taxpayers: The plan offers tens of millions of Americans a new tax credit to make premiums affordable—which more than offsets the increased revenues from the Plan’s provisions to limit the employer tax exclusion for healthcare and discontinue portions of the Bush tax cuts for those making over $250,000. Thus, the plan provides a net tax cut for American taxpayers.
• Making the Employer Tax Exclusion for Healthcare Fairer: The plan protects the current exclusion from taxes of employer-provided health premiums, but limits the exclusion for the high-end portion of very generous plans for those making over $250,000.

Read my detailed analysis of Senator Clinton's health plan.
You can also see my analysis of each of the major candidate's plans by going to the index to the right.

SCHIP Agreement "Near"

There are a number of published reports indicating that the House and Senate have reached an agreement to extend SCHIP along the lines of the earlier bi-partisan Senate agreement.

That would mean a $35 billion SCHIP expansion paid for entirely be a new 61 cent tobacco tax.

Bush says he would veto such a deal. While the Senate seems veto proof on this one, the House is another matter.

If Bush is successful in vetoing the latest compromise, then we will see a temporary extension of SCHIP and the longer-term solution will be booted to the year-end budget work where it is now certain that the Medicare Advantage payments and the upcoming 10% Medicare physician fee cut will be dealt with.

There is a real chance that there will be a huge budget showdown between the Democratic-led Congress and the President late in the year throwing all of these issues into doubt.

Those of you who read this blog know that this is what we have been predicting.

Earlier post and SCHIP history: SCHIP Negotiations Not Going Well--Medicare Physician Fee Cuts and Medicare Advantage Payments Hang in the Balance

Hillary Clinton's Health Plan--the Republicans Better Take it Seriously

Sometimes I think that all the Republican candidates for president think they need do is go into a crowded room and yell, "Hillary Care," and all of the voters will run for the exits in terror.

This is not 1993 and this is not the inexperienced Hillary Clinton who tried to drop her drafted-in-secret 1,400 page health care proposal on us all in one "take it or leave it" roll out.

She has changed since 1993 and so have American voters.

Today, health care is the number-two issue--behind Iraq--and it is the number-one domestic issue.

Last week, the Kaiser Family Foundation told us that the average cost of employer-provided family health insurance is $12,000 a year. Today, the UAW and Detroit are in negotiations over the auto companies walking away from their retiree health obligations for 60-70 cents on the dollar.

Mrs. Clinton has come to the center with her plan and we've all gotten a lot more worried about health care and are ready to go a lot farther than we would have almost 15 years ago.

Mrs. Clinton recognizes that. Lots of voters know it.

But the Republican candidates seem to think rolling out the "Harry and Louise" ads, talking about tax exemptions, and giving us all HRAs will do the trick.

It might in a conservative Republican primary. But that is not where the center of American politics is these days and it is the center that it will take to win the 2008 presidential election.

And by the way, the next time you hear Mitt Romney yell, "Hillary Care," ask him just how her plan differs from the one he signed into law in Massachusetts. I do health plan analysis for a living and it looks to me like they are kissin' cousins.

The Republicans would do well to get serious about health care before, instead of getting themselves a repeat of 1993 when Mrs. Clinton's first plan went down to a crushing defeat, they get themselves a repeat of 1992 when Bill Clinton won the presidency in part because he was a lot more serous about health care than his Republican opponent!

SCHIP Negotiations Not Going Well--Medicare Physician Fee Cuts and Medicare Advantage Payments Hang in the Balance

Negotiations between the House and Senate over how to extend the State Children's Health Insurance Program (SCHIP) before its September 30 deadline are not making much progress.

The Senate passed a bipartisan extension of the plan that included $35 billion in new spending and paid for it with a hefty 61 cent per pack tobacco tax.

The House passed a solely Democratic bill that would spend $60 billion on the SCHIP extension as well as fix the upcoming January 2008 10% Medicare physician fee cuts. The House would pay for its bill with a smaller tobacco tax and a phase-out of "extra" private Medicare payments beginning in 2009.

With confidence, I can tell you the following:

1. The negotiations aren't over. Just like the typical high school student, Congress tends to leave things to the very last minute. It is still possible a deal can be struck before September 30th.
2. If a deal isn't done, SCHIP will get a temporary funding resolution past the September 30th deadline to keep the program going at current levels--it isn't going to abruptly end.
3. The docs aren't going to get anything like the upcoming 10% fee cut they are facing on January 1--the doctor lobby is way too powerful to let that happen.
4. Medicare Advantage cuts will fund at least the resolution to the doctor fee problem.

How much of this happens in September and how much of this gets booted to the year-end final budget clean-up where Democratic committee chairmen are almost entirely in control, remains to be seen.

I have always thought the doc cut and Medicare Advantage funding issues would be decided at year-end.

The only hope the health plans have to avoid a Medicare Advantage payment cut is that there is a budget train wreck with Democrats putting up a budget at year-end which Bush vetoes and nothing gets done. A budget train wreck could well leave SCHIP in limbo and the docs with a 10% Medicare physician fee cut and a political mess across the board. It isn't something either Democrats or Republicans want to see going into an election year.

For those of you who have been reading my regular updates on this issue, nothing is going on that is a surprise.

Stay tuned!

The history: SCHIP Reauthorization and High Stakes Politics

A budget train wreck? Why Is President Bush So Willing to Veto Spending Bills All of a Sudden?

Hillary Clinton to Outline Her Health Plan on Monday--She Will Target Insurers as the Bad Guys

Senator Clinton will unveil her health plan in Des Moines on Monday. The heavy betting is that it will look a lot like the general Democratic health reform template that draws on the recently enacted Massachusetts health reform law.

We do know this, she will do what she did in 1993 and 1994 and demonize the insurance industry. On Wednesday she said, "I intend to dramatically rein in the influence of the insurance companies because frankly I think they have worked to the detriment of our economy and our health care system."

That tack backfired big time in 1994 when the insurance industry, who took her rhetoric seriously and concluded it had nothing to lose, spent huge amounts of money countering her plan with the now famous "Harry and Louise" ads.

Would she be "dumb" enough to make the same mistake twice?

But Hillary Clinton is a smart lady and has one heck of a #1 political adviser. Her campaign so far has been a flawless political tour de force.

Underestimating her would be a mistake.

Frankly, I wish she would at least try to bring everyone under the same health care reform tent. I am sure she sincerely believes the industry deserves her treatment. But then, which of the for-profit stakeholders in this $2 trillion system is in a position to throw the first stone?

We desperately need health care reform. Why increase the already tough odds of getting anything done by going out of your way to make enemies who have incredible amounts of money and who you put in a position of having nothing to lose?

It should be interesting.

The UAW's Negotiations With the "Big Three" Automakers Over Retiree Health Benefits and Why They are Important to California Health Reform

The health care reform debate in California has come down to whether there should be an individual mandate to purchase health insurance and whether a big chunk of the cost of the program should be put on the employer community in the form of a 7.5% payroll tax for businesses that don't provide their workers with coverage.

Organized labor is firmly behind the Democratic legislature's efforts to deny Governor Schwarzenegger his individual mandate and to lay much of the program's incremental costs on the employer community.

Labor does not want a reversal in the long-term tradition of the employer being responsible for providing and paying for the biggest share of private health care in America.

That is understandable.

It is also shortsighted.

We only need look to the tough negotiations going on today in Detroit between the United Auto Workers (UAW) and "The Big Three" automakers over the unfunded cost of retiree health benefits.

GM, Ford, and Chrysler simply couldn't be in worse financial shape. The market cap for the biggest, General Motors the people who make all of those Chevy's and Cadillacs, is $17 billion. Compare that with the market cap for United Healthcare at $65 billion––one of the smaller health plans, Coventry Health Care, has a market cap of $9 billion.

What does it say when our biggest health care insurer has a market cap almost four times the icon of American industry?

A big reason (and surely not the only reason) our auto companies can't compete in the world is the burden of their health care costs. A big reason their market cap is so low is because of the enormous unfunded liabilities they carry to provide health care benefits to retirees--about $90 billion--that comes right off the top of their net worth.

If the auto companies can't do a deal with the UAW to get rid of a lot of this, the companies may go broke and the retired auto workers might get far less or nothing--just like the steel and airline workers did when those industries restructured through the bankruptcy courts.

Right now, negotiations are going on between the auto industry and the union to create a Voluntary Employee Beneficiary Association (VEBA). The companies would transfer all of these retiree health care liabilities into the VEBA and off their books. The auto companies would have no more long-term liability for these costs and their ability to survive and compete would be greatly enhanced.

In exchange for getting rid of $90 billion in liability, the companies would transfer assets (maybe including company stock) equal to only 60% to 70% of the liability.

So the UAW has a tough choice. Refuse to let the companies off the hook for 60 - 70 cents on the dollar and risk the companies going broke leading to more layoffs for current workers and maybe getting nothing for their retirees--or take the deal.

Not a great spot for anyone.

But finally, the health care rubber is finally hitting the road. It happened first in the steel industry, then airlines, and now auto.

This was inevitable. And, one way or another, the UAW has to get the best deal they can.

So in light of what's going on in Detroit, how can the California labor unions think the best long-term answer to funding California health reform can be found with the employer community?

Health Insurance Premiums Rose Only 6.1% in 2007--But This May Be The Last Year the Trend Rate Will Fall

According to the annual Kaiser Family Foundation survey of employer health benefit plans, the average employer premium rose 6.1% in 2007--the lowest increase in four years of successively falling trend rates.

The increase was 13.9% in 2003 (the recent peak), 11.2% in 2004, 9.2% in 2005, and 7.7% in 2006.

The average cost of family health insurance also rose to an incredible $12,106 while the average cost for individual coverage in an employer plan was $4,479.

The relatively low employer medical trend rate of 6.1% was still more than twice the rate of inflation--which was 2.4% in July.

Even a 6.1% trend rate is unsustainable because it is so much greater then the general inflation rate, the increase in wages and the overall growth in the economy--all in the 3% range.

Worse, I expect this to be a bottom in the health care trend line.

Health plans, in their recent quarterly earnings releases, are generally reporting medical trend rates and medical cost ratios that are flat to beginning to edge up a bit.

Even looking back to last year, TheStreet.com recently completed a study of publicly traded and not-for-profit health insurer results in 2006 and reported the following:

• A review of 2006 annual financial statements found that the industry made $11.2 billion in underwriting income compared to $11.3 billion in 2005.
• While that was a very slight decline in health underwriting results for 2006, it came on the heels of a series of double-digit improvements in profitability in the prior years of the decade underscoring the conclusion the easy money in health care has come to an end.
• Insurers collected $232.56 per member each month in health revenue in 2006 compared to $216.08 in 2005—a 7.6% increase.
• However, medical costs rose by an even greater 8.5%, from $181.14 per member each month in 2005 to $192.52 in 2006.
• “Competitive pressure” on premiums resulted in a decrease in overall profit margin from 4.4% to 3.8% in 2006.
• The commercial health insurance line saw a full 1% decline in margin while the private Medicare business saw its margins rise from 4.9% in 2005 to 5.7% in 2007.

TheStreet.com summarized its findings saying, “The industry is now facing a decline in margins on the commercial business, while potentially facing cutbacks in Medicare and an uncertain future regarding how the country finances health care.”

That about sums it up--escalating commercial cost trend just as Medicare payments are at serious risk in a Democratic Congress.

Just as the political heat is growing for health care in an election year, costs are likely on the rise again.

That is a very volatile political mix!

Jane Sarasohn-Kahn Joins the Blog World

A very smart lady who knows a lot about the intersection of health care and technology has joined the health care blog world.

Jane has a post up today that puts the new figures on personal health care spending in context with what Americans spend on technology.

Her new blog is, "Health Populi."

Could America Reap International Good Will By Ramping Up its Health Diplomacy Efforts?

Brian Klepper joins us again today with one of his welcome posts:

Reasserting Global Health Diplomacy

by Brian Klepper

A couple weeks ago the Washington Times ran a sensible and honorable article by Susan Blumenthal MD and Elise Schlissel at the Center for the Study of the Presidency (CSP) in DC, arguing that America could reap a huge benefit in good will by significantly ramping up its health diplomacy efforts.

Progress at improving health status in many developed and developing nations has been hindered by unrelenting epidemics of infectious disease and chronic illness, and by a lack of skills and tools plentiful here in the US. We have developed technologies and processes that can relieve suffering in unprecedented ways, but for decades we have not considered global health assistance nearly the priority that we have accorded other forms of diplomacy, like military intervention.

Dr. Blumenthal, a retired Rear Admiral in the US Public Health Service and Ms. Schlissel, a Princeton junior interning at CSP, call on us to put this wonderful asset to work on the global stage, to once again put our best foot forward in a more modern and humanitarian context, and by doing so, to shine a bright light on America’s best values. This is solid and refreshing advice, especially given the low esteem that has resulted from America's actions.