Medicare Buy-In For Retirees--Private Options Make It an Even Better Idea

"We should act now to let companies and unions buy their early retirees into Medicare." That's the point of a Washington Post op-ed today by Democratic Congressman Rahm Emanuel and the president of the Democratic Leadership Council, Bruce Reed.

These two former Clinton aides are arguing that:

• "The troubles at GM and Chrysler--and Ford, which reached a tentative labor agreement this weekend -- underscore the enormous competitive burden that health-care costs impose on American companies."
• "In 2005, Americans ages 55 to 64 were the fastest-growing segment of the population to become uninsured.
• The average annual cost of covering a 30-year-old employee is $2,222. The average yearly cost for an employee who retires at 60 is $6,139."
• "A Medicare buy-in for retirees ages 55 to 64 won't cost taxpayers. Companies could pick up most of the cost; instead of GM contributing $30 billion to a VEBA, that money would go to Medicare. Retirees would have to pay higher premiums than traditional Medicare beneficiaries do to receive health care."

Clearly, the 55-64 age group is the most difficult portion of the uninsured to deal with. Age-rating and pre-existing condition provisions all but exclude a big chunk of this market--because they are sicker and older. Creating a Medicare buy-in would likely create an insurable pool constructed at an efficient level.

Emanuel and Reed have a good idea. This does not mean taxpayers would get stuck with the costs. Existing employer/union funding plus affordable contributions by beneficiaries ought to be able to pay the full bill. The UAW which now has taken on enormous health care liability for its retirees from the auto industry, for example, would be far better off with these obligations part of the broader and more efficient Medicare system.

This proposal does not have to be a matter of the government absorbing liabilities to the detriment of the private market. We can have the best of both worlds.

Let's take this good idea one step further and create a set of private Medicare options and bring the forces of the private market to bear as well. And, as those of you who read this blog on a regular basis know, I am not suggesting a private Medicare market paid 12% or 19% more.

Opening this idea up to the private market will make it more palatable to the private market side of the health care debate.

If you believe in the market, you will be optimistic the market will do well.

If you do not believe in the market, you have nothing to fear from private competition--on a level playing field. With the Democrats likely in charge of the Congress in the coming years, I doubt they will cut the market any breaks.

"Medicare Advantage: Wrong Way to Spend $54 Billion"--The AMA Goes After the Medicare HMO's Money

The American Medical Association (AMA) in an editorial in its journal, American Medical News, has pulled no punches in its argument that Medicare HMO plans (Medicare Advantage) need to be cut in order to find the money to fix the upcoming Medicare physician fee cuts--10% in 2008 and another 5% in 2009.

Without a doubt their attack on "excess payments" to insurers is self serving--as about all lobbying is. But it also gives us a look into the pitched battle that is now going on in Congress over who is going to win and who is going to lose when it comes to Medicare provider payments.

Here is an excerpt from their November editorial:

"Meanwhile, many more seniors could well be affected by physician pay that faces a staggering cut, currently estimated at about 10% for 2008, and 15% through 2009. It's no surprise that an AMA online survey of nearly 9,000 physicians, released in June, reports that about 60% of doctors say the cut will force them into the position, at the least, of having to limit the number of new Medicare patients they take.

"It is time for Congress to look at Medicare Advantage with clear eyes. Congress needs to level the playing field between traditional Medicare and private Medicare plans by eliminating excess payments to Medicare Advantage. The $54 billion saved would be more than enough to offset eliminating the two-year cut in physician reimbursement, as well as an update in payments to reflect increasing physician costs -- all while limiting premium increases for seniors.

"Medicare Advantage, which covers managed care and private fee-for-service plans, was created to make Medicare more competitive and efficient, as well as to entice private plans to rural areas or to offer extra benefits. Instead, the program appears to have become more of a Medicare benefit for insurers, which on average received 112% of the amount that traditional Medicare paid for each senior's care in 2006. For private fee-for-service plans alone, that figure was 119%.

"Yet despite Medicare Advantage's good fortune, it has managed to disappoint many patients and physicians. More than 50% of 2,022 physicians responding to an AMA survey on Medicare Advantage, released in May, said they have seen plans deny services typically covered in the traditional Medicare plan. More than half of physicians report receiving payments below the traditional Medicare rate."

Read the full editorial here.

Why Consumers’ Checkbook v CMS is a Sideshow--Bush Administration Refuses to Release Provider Data

Brian Klepper joins us again today with another one of his welcome posts. This time he points out the hypocrisy in CMS, which has been calling for market transparency, refusing to provide provider data to a consumer group.

Why Consumers’ Checkbook v CMS is a Sideshow
by Brian Klepper

There are people who call for market solutions as the answer to every societal problem, but who then work to restrict the information that markets (and societies) must have to function effectively. Often, the truth is that these supposed market advocates need secrecy and opacity to protect their current advantages. If markets were to work as they claim they want, their actual behaviors (or pricing, or performance) would become known, and their positions compromised.

Which brings us to the new, interesting development in the case of Consumers’ Checkbook v CMS. You may remember that Consumers’ Checkbook (CC) is a consumer advocacy organization that sued CMS for the Medicare physician data in 4 states and DC. Seemingly arguing against their previous position, the Bush Administration – which actually has a good record for promoting health care pricing/performance transparency – took the opposite stance in this case, arguing instead that physicians have a right to privacy. (It is tempting to suggest that the AMA’s fingerprints must be all over this, but I don’t know that for sure.)

In any case, much to the surprise of me and, I’m sure, a lot of other people, on August 22nd, the court held with CC and ordered CMS to release the data by September 21st or appeal the decision. CC promptly promised to provide public access to the data, and sued again, this time for the Medicare physician data from the rest of the country.

On October 19ths, CMS appealed the ruling. This means the Administration will fight to keep physician data out of the public’s hands.

As I’ve said before, in the short term the symbolic importance of this battle cannot be overestimated. Currently, there are few, if any, freely available, robust sources of claims data. Health plans and clearinghouses have the largest data sources, but these are typically proprietary.

If a startup company wants to identify the best performing physicians in any market – the ones who, in a given specialty, consistently obtain the best outcomes at the lowest costs – there is no easy way to independently do that.

Or let’s say you have a family member with a complicated condition or who needs a particular procedure. There is no direct way for you to objectively determine which community physician has the best track record with that condition or procedure. (You CAN get information on which car has the best repair record, which house repair contractor gets the best reviews, and which pizza restaurant delivers the fastest.)

The good news is that the Administration’s position is weak, at best, and won’t last long, even if they win this round. Hospital data is already publicly available and states are now actively publicly reporting key measurements of hospital quality and safety. Why should physicians have a special status that keeps their track records secret from the patients who depend on them? How can this Administration, which argues incessantly for market-based solutions, suppose that the health care marketplace can resolve the crisis when, as the great economist Adam Smith would have pointed out, there is no information to drive the decision-making that healthy markets require.

It is ironic that we’re even still having this discussion. In the first years of the 20th century, the famous surgeon Ernest Codman MD began to campaign for “the end-result system of hospital standardization.” He said,

Hospitals [and surgeons], if they wish to be sure of improvement...must analyze their results, to find their strong and weak points, [and] must compare their results with those of [their peers]...[They should] make this information publicly known so that the future patients might make informed decisions.

In the end, it won’t matter what this Administration does. There is now widespread acknowledgment that much of the health care crisis can be traced to an inability to see what is going on behind the curtain. A tidal wave of sentiment is building in the marketplace, with calls for making the information available, so that decision-makers of all types can make responsible, informed decisions.

It is difficult to imagine that this stonewalling can last much longer. If transparency doesn’t occur through policy change, it will surely happen in the marketplace through vendors with the heft and resources to see it through. If the recent Health 2.0 conference in San Francisco made any point emphatically, it was that a slew of companies are focused on infusing health care with unprecedented levels of transparency and decision-support.

The transition away from an opaque market to one that makes relative pricing and performance known and that rewards the good providers is the real health care reform we’re all looking for. Yes, we need to find a way to re-enfranchise everyone into the system. But that will be much easier if there is reason to believe that we can get excessive care and cost under control.

And to that end, Consumers’ Checkbook v CMS is a sideshow, not a pivotal decision. On this issue, the Bush Administration and whoever is urging them on are anachronisms that will soon be swept away with the buggy whip and White-Out. The real change agent here is technology and the long-overdue realization by purchasers of all kinds that, when markets are opaque, value becomes secondary and many vendors will act most assertively in their own interests first.

Brian Klepper PhD
www.brianklepper.net

A Good Idea and Bad Leadership--A Way Out of the Entitlement Crisis Meets Partisan Politics

I call your attention to a column this morning by the Washington Post's David Broder.

He tells us that there will be an important Senate hearing tomorrow on the issue of Social Security and Medicare entitlement costs.

It seems that two Senators, one a Republican and one a Democrat, are trying to create a bipartisan task force that would have the power to fast track a solution to this huge emerging problem that is not going to go away.

"It would have 16 members, equally balanced between Republicans and Democrats. Fourteen would be members of Congress, chosen by the leadership and presumably representing the major economic policy committees. Two would be from the administration, with one of them, the secretary of Treasury, serving as chairman.

"It would take 12 of the 16 votes to submit a report -- guaranteeing each party a voice in the outcome. And the report would be translated into bill form and given a fast track to a final vote in both the House and Senate, with a requirement of 60 percent support for it to go to the president -- again, protection for the minority."

Senators Gregg and Conrad have the attention and support of many in Congress and even the White House for their idea in great part because Treasury Secretary Paulson is behind it.

It sure sounds like something that makes a lot of sense.

But guess what? Vice President Chaney and House Speaker Pelosi are against it--Chaney because the bipartisan group just might come up with tax increases if they were allowed to think for themselves and Pelosi because she doesn't trust the White House and wants to save the Social Security issue to beat the Republicans up over in the coming election.

You know, when good ideas out in the light of day can't trump partisan shortsightedness we have a real problem.

Bush Ups the Budget Pressure--Shows No Sign of Compromising on SCHIP

President Bush just made a statement on the SCHIP bill and the upcoming 2008 budget votes. Standing in front of the White House with the Republican leaders behind him, he blasted the Democratic Congress, the recent SCHIP bill passed by the House, and rumored efforts on the part of Democratic leaders to couple defense and Iraq spending bills with domestic budget bills.

The bottom line is that the SCHIP and 2008 budget efforts look to be more contentious then ever.

The Democrats really screwed up the SCHIP vote in the House last week. Rather then reach-out to fence-sitting Republicans before the latest House SCHIP vote, the Dems overplayed their hand and tried to ram a purely Democratic new version of the SCHIP bill down the Republicans' throats. That all backfired and the result was a vote well short of what they will need to override the coming Bush veto.

Dems are now trying a do-over on that mistake as they now reach-out to Republicans in both the House and Senate, as they should have done last week, in an attempt to get an improved SCHIP bill. Most of these discussions are around fine-tuning the 300% of poverty limit on who can be eligible for benefits.

But this morning Bush took as hard a line as he could.

It is possible that the Democrats can get enough votes behind another version of SCHIP.

But it also looks like we are headed for one heck of a budget mess.

House SCHIP Vote Fails to Attract Veto-Proof Majority

Yesterday evening, the House passed a slightly modified version of the SCHIP bill President Bush vetoed last week, this time by a vote of 267-142. That is still likely at least 7 votes short of the two-thirds needed to overturn the expected Bush veto.

The bill now goes to the Senate.

It is possible that both sides will try to work out a compromise--but not likely.

Expect the Senate to pass it, Bush to veto it, and another uphill Dem attempt to override.

SCHIP is currently operating under a continuing resolution at current funding levels and will continue to do so indefinitely.

The SCHIP battle portends much the same sort of contentious battle for almost all of the upcoming twelve 2008 appropriations bills.

The newer version of the bill makes no major changes to the bill Bush vetoed earlier this month:

• The bill clarifies the eligibility cut-off for kids in families above 300% of the federal poverty level -- about $62,000 for a family of four this year -- with the exception of any state that is now operating above that level.
• The bill is explicit in stating that undocumented aliens are not eligible for federal funding.
• Adults without children will be phased out of the program over one year, rather than over two years, which was previously proposed.

What the Democrats have accomplished is to keep this issue in the headlines for a couple of more weeks as the upcoming Senate vote and Bush veto work their way through the process.

They have also undercut some of the major Republican arguments against the bill with the minor changes. The most significant of those were charges that the SCHIP bill covers middle-class families. The new bill has a clear 300% cap. Bush has already said he will agree to a 300% limit--albeit with firm rules on getting almost all kids under 200% covered first. Republicans had been critical of the first bill saying it would cover illegal aliens and adults and those things have been clarified.

The Dems still want to spend $35 billion more on the SCHIP renewal and Bush has upped his offer from the original $5 billion more to $20 billion more.

Even sympathetic Republicans were ripped that the Dems pushed this to a vote so quickly and without a lot of Republican advice on how to improve the bill. Done more carefully, the Democratic leadership might have come up with the votes they needed.

The Democrats may have also pulled a parliamentary maneuver to get them a better margin by holding the vote when a number of California Republicans were back home because of the wild fires. Republican House Minority Whip Roy Blunt (R-MO) said Pelosi should have delayed the vote on SCHIP due to the fires in California. "Unfortunately, the speaker announced plans today to hold an important, and contentious, vote on SCHIP while these members are confronting serious issues at home - disenfranchising, in effect, a large segment of the most populous state in the union, and throwing into doubt the integrity of the vote."

Republicans are feeling the political pressure and the Democratic efforts to make them pay a political price aren't helping the atmosphere up on the Hill just as we are about to head into the most contentious budget season since the Gingrich efforts to shut the government down in a budget fight with Clinton.

You would think the two sides are close enough to find common ground.

We should not forget that Clinton vetoed welfare reform twice before getting, what was for him, a better bill and declaring victory.

Poll Shows Democratic Presidential Candidates Attracting Independents and Moderates With Their Health Reform Plans

I was struck by this conclusion in today's Los Angeles Times regarding their recent voter survey:

"In one of the most politically significant results, the poll finds that independents and moderates were generally lining up with Democrats in the healthcare debate.

"The survey also suggested an explanation for the emerging alignment: Independents were most likely to complain about "job lock" -- the view that they are stuck in jobs they don't like solely because of health benefits.

"In all, 20% of independents said they or someone in their household were forced to stay in a job because it provided healthcare, compared with 13% of Democrats and 5% of Republicans.

"Independents are more insecure in terms of the issue of 'job lock,' which causes them to lean more toward Democrats on the healthcare issue than Republicans, said Robert Blendon, a public opinion expert at the Harvard School of Public Health."

As I have said in earlier posts regarding the Republicans' health reform proposals, their positions may look good in the primaries where they must please only conservative Republican voters, but they risk losing the middle of the country if they don't get a lot more serious about health care reform.

Discussions Regarding Scheduled Physician Fee Cuts and Possible Reductions in Medicare Advantage Payments Getting Serious

As the year winds down, the Congress must deal with the scheduled January 2008 9.9% Medicare physicians fee cut. Both Democrats and Republicans want to fix it.

To fix the physician fee cut, proposed cuts to Medicare Advantage have been on the table.

Senate Finance Chair Max Baucus (D-MT) has been working on a package that would cost $25 to $30 billion and fix the physician fee problem not only for 2008 but for 2009 as well. His plan would also spend more money on rural and low-income seniors.

Baucus would cut the Medicare Advantage payments by $8 to $12 billion to help pay for the package.

Meantime, the ranking Republican member on the committee, Chuck Grassley (R-IA), is working on a smaller bill that would only fix the physician fee problem for one year.

It seems that Republican members of the committee don't want any significant cuts to Medicare Advantage.

With the committee apparently split on party lines over big cuts to Medicare Advantage one could conclude that Baucus is going to have to back-off on his plans in order to workout a compromise.

He will not have to.

This issue will be part of the year-end omnibus budget bill where the committee chairs for the majority party will have enormous say on what is in the final bill. Elements of the final bill don't even have to clear a committee or either the Senate or House floor--they can be dropped in at the last minute. In fact, this is how the Republicans dealt with the Medicare physician fee problem late last year.

Also, a budget bill is not subject to the 60-vote rule in the Senate--a simple majority gets the job done. That final budget bill is very hard for a president to veto because it contains so many different matters that all sides will want approved.

Then there is what the House will want to do with the doc fees and Medicare Advantage. They will likely be even more aggressive than Baucus and it is those Democrats that Baucus will have to compromise with.

New Study Shows Lower Costs in Consumer-Driven Plans--But the Findings Won't Settle the Debate Over Just How Effective C-D Plans Are

HealthPartners, a highly regarded not-for-profit Minnesota health plan, has issued an important report on its consumer-driven care book of business. It includes Health Savings Accounts (HSAs) and Health Reimbursement Accounts (HRAs).

Their findings include:

• After adjusting for "illness burden," HealthPartners found that heath care costs were 4.4% lower for members in a consumer-driven plan compared to its traditional co-pay-style plans.
• "Researchers found the lower costs were driven by CDHP [consumer-driven health plan] members receiving care from lower cost providers and that providers used fewer resources such as diagnostic imaging and other procedures."
• "The rate of preventive care services [at Partners] was nearly the same among members in CDHPs and traditional plans."
  
• "Members with CDHPs were more likely to use Web-based tools that provide information on health care costs and quality."
• "Members in CDHPs appear to be significantly healthier." They "were expected to use 28% fewer health care services compared to members enrolled in traditional plans."
• "CDHP members are slightly younger."
• Consumer-driven plans are more popular among mid-size companies. About 70% of the CDHP market at Partners is in the individual, 1-500, and 500-1000 employee market.

My sense is that this very well presented study doesn't provide any surprises. Consumer-driven care does save some money--only about 4% in this case--and is inhabited by people who think they can beat the system--the very healthy.

The good news is that at Partners the people who use these plans are making good use of preventive care and health information tools--there is no evidence that the quality of care is less.

I have always felt that consumer-driven care offers consumers incentives to use care more efficiently--especially for first dollar kinds of services and drugs. However, I have never seen CDHPs providing those financial incentives in any kind of effective way for those who incur the vast majority of health care costs--the very sick who blow past their deductibles and into the full pay areas. An overall 4% savings is what I would have expected in this context.

I have also repeatedly warned employer benefit managers who self-insure to be careful in how they design these plans because they have the potential to draw the healthiest people out of the employer pool leaving a disproportionately expensive remnant group and a higher overall program cost for the plan sponsor. The data on just how much healthier the consumer-driven group is only re-enforces that concern.

I was disappointed to see that the study, "excluded catastrophic claims above $100,000 to reduce random variation." That may make statistical sense but I would have hoped they could have found a way to investigate the contention that the bigger the claim the smaller the impact CDHPs has on cost management.

Thanks to HealthPartners for this valuable information.

You can download their PDF here.

Democrats Pushing to Vote on New SCHIP Bill This Week--Bush Starting to Give

Democratic attempts to modify the SCHIP bill just enough to pick off the seven more Republicans they need are intensifying.

The House failed to override Bush's veto by 13 votes last week.

Yesterday, Bush's lead person on the SCHIP issue, HHS Secretary Leavitt, said the administration is now willing to consider covering kids up to 300% of poverty--they had said they would not go above 200%. Leavitt also said that would likely mean another $20 billion in spending--Bush had offered only $5 billion at the start.

But the Democrats, smelling blood in the water, are holding at $35 billion in additional spending and the full 61 cent tobacco tax to pay for it.

Leavitt also said that the administration still opposes new taxes and that states need to cover kids below 200% of poverty before moving past that point to 300% of poverty.

Now the pressure is on for Democratic House leaders to find those other seven Republican votes. If they get them, anything Bush and Leavitt are offering is moot.

If Bush had offered this a month ago, he'd probably have had a deal and avoided a very unpopular political decision.

If the Democrats find the votes, it is going to put them on one heck of a roll as we head into budget season. That could be really good news for the doctors worried about that 10% Medicare physician fee cut and bad news for the health plans worried they are going to pay for it out of their Medicare Advantage payments.

The Fight Over SCHIP Tells Us This Budget Season is Going To Be One Big Food Fight--Medicare Payments to HMOs and Physicians Are in the Middle of It

Now that the House has failed to overturn President Bush's veto of the SCHIP bill by just 13 votes, Democrats are looking to tweak the $35 billion expansion of SCHIP just enough to get the extra Republican votes they need to get their bill passed.

The House Democratic leadership is now in discussions with Republican House members who voted with their President last week and who might be persuaded to change sides in the next round. The focus of these discussions is on capping the enrollment for families between 200% and 300% of the federal poverty level and clarifying the bill's language so that there is no doubt that SCHIP is closed to undocumented immigrants.

While House Republicans and the President have said they are interested in a compromise they continue to argue that no one should be covered above 200% of the poverty level. That does not represent any movement from their original position.

Neither side appears to be interested in any good faith movement toward the middle. Democrats are more than happy to just keep sticking this issue to Bush and the Republicans on the eve of an election-year. The President and his allies, encouraged about polls that show support for limiting coverage closer to 200% of poverty, appear happy to continue hammering away with their newfound fiscal discipline.

Beyond SCHIP, this tells us the rest of the budget process is really going to be ugly. President Bush has already said that he intends to veto every one of the 12 domestic appropriations bills the Congress is working on because they exceed his spending limits. The President originally asked for a total of $933 billion in the 12 bills for fiscal year 2008. The Democrats are in the process of giving him $22 billion more than that. Bush says that this level of spending would ultimately balloon to $205 billion more than he asked for over five years.

We could relive the SCHIP veto fight 12 more times this fall!

Caught up in this will be a number of key health care issues including the automatic January 1, 2008 9.9% Medicare physician fee cut, proposed cuts to Medicare Advantage HMO payments to fund the Medicare physician fee fix, and Medicare payments to hospitals, nursing homes, durable medical equipment vendors, and other providers.

As I have said before, the 10% Medicare physician fee cut will not take place and the debate over payments to Medicare Advantage plans will be right in the middle of that solution. The year-end omnibus budget bill will be the vehicle that likely deals with this. That bill is one that is almost completely controlled by the Democratic committee chairs--no real Republican input, no need to get 60-votes in the Senate. The President can also veto this one but the final budget bill is usually loaded up with things the White House will want very badly.

It will be a fascinating fall.

When the day is done, Democrats may have to be happy to just get by in 2008. This could well be the last budget George Bush has anything to do with. The Democrats are looking forward to a new President in the White House in January of 2009 and ready to sign a 2009 budget. They are confident she will see things their way--especially on health care.

A Detailed Analysis of Rudy Giuliani's Health Care Plan

A Detailed Analysis of Rudy Giuliani's Health Care Plan

Rudy Giuliani's health care reform plan generally follows the Republican health care reform template that places the emphasis on making the health care market more effective in controlling health care costs and thereby enabling more people to be covered.

Giuliani would remodel the income tax system to help people buy coverage and encourage states to be more aggressive in finding ways to cover the poor.

Unlike the Democrats, who would all spend at least $100 billion a year on health care reform and thereby make getting everyone covered the first priority, Giuliani, like all of the Republicans, does not call for any new spending.

Let's take a look at the key points of his plan using the Kaiser Family Foundation candidate comparison criteria:


Provide individuals without employer-based coverage a health insurance tax deduction to subsidize their health insurance premiums and provide lower-income families a tax credit to help subsidize their premiums. Tax changes are intended to shift millions from employer-based to individual insurance.

In this one section sits 75% of Giuliani's health care reform plan.

Like many Republicans, Giuliani believes that the employer-based system that covers most people itself contributes to high health care inflation because of the generous benefits people often get that shield them from the true costs of care. If individuals have more control over the money they spend on insurance and on health care, the argument goes, then they will bring the market to bear on the system and make it more efficient and effective.

Giuliani would give families a flat $15,000 tax deduction ($7,500 for a single person) if they bought health insurance on an individual basis. Any value of that exclusion beyond the cost of their insurance could be put into a health savings account (HSA).

This Giuliani provision only applies to those who do not have employer-provided health insurance--unlike Bush's "State of the Union" plan that would apply to those in employer-based plans and with individual coverage. Bush would also have ended the tax exemption on employer provided health insurance and replaced it with a separate individual tax benefit--as would McCain.

Would this generous individual tax deduction end employer-provided health insurance? There would be no prohibition on employer-based care in Giuliani's plan. But it would encourage employers to say to employees, "You can get a bigger tax benefit than you are now getting in the employer plan. Why don't I just give you the money as wages and then you can control how you spend it." At that point the employer's cost would increase not by the higher health insurance trend rate but at the historically much lower wage rate.

That is what Giuliani hopes the employer will do so that you take control of your health care dollars. In your hands, he sees the money being spent more efficiently. This goes to the favorite Republican ideas of "individual responsibility" and "individual choice" in health care and health insurance purchases.

An issue with this is that health care costs have continually increased each year at two to three times the wage rate. So, this could be a good deal for the consumer early on but over time wages would go up with the wage rate (3% in recent years) while health care costs would likely rise much faster--they have risen at two to three times the wage rate in recent years--creating a big potential gap. As health care costs outstrip income, proponents of this system see the consumer getting more aggressive at controlling costs and thereby bringing the system under control. Opponents argue that since the big HMOs, with all of their expertise and bargaining clout, haven't been able to bring costs under control, how will the consumer?

Since there is no such $7,500/$15,000 tax deduction now on health insurance purchased outside the workplace, this element would have a cost that Giuliani does not estimate or tell us how he would pay for.

Giuliani says almost nothing about how he would deal with the individual health insurance market underwriting issues other than to say he would expect the states to figure it out.

A $15,000 tax deduction also impacts families at different income levels differently. High-income people are in high tax brackets where the deduction is worth more and lower income people are in lower brackets, or even pay no taxes, making the deduction worth less. John McCain uses this system but provides a flat tax credit of $2,500/$5,000 instead, thereby giving the poor relatively more and the rich relatively less as a percentage of their income.

Either approach to tax-based assistance to purchase health insurance needs to be evaluated in the context of how much health insurance costs. The Kaiser Family Foundation 2007 survey of employer-based health insurance found that the average cost of family coverage is now over $12,000 a year. Even an HSA-style plan cost is almost $10,000 a year. If you were in a 20% federal tax bracket, a $15,000 deduction would give you a $3,000 benefit toward that cost. Hopefully, you would also have an employer making a contribution on your behalf.

Giuliani would also simplify health savings account (HSA) regulations to encourage more people to use these funds as a better way to get the consumer more involved in their health care spending in order to better control it.

For the low-income, Giuliani points to Medicaid assistance as well as possible employer contributions and undefined tax credits to fund the cost of care.

Giuliani does not have a mandate that either employers or individuals purchase coverage--consistent with all other Republicans and in opposition to the general Democratic approach.


Permit individuals to purchase insurance across state lines.

Like all of the other Republicans, Giuliani believes that a more vibrant individual health insurance market will do a great deal to make health care costs more affordable.

The big issue with this kind of individual system is that the individual health insurance market is not ready to take all of the new business. Today, you can get an individual health insurance policy but only if you are healthy. The individual health insurance market is fraught with pre-existing condition provisions, medical underwriting, and rating by age. If you are young and healthy you can get a comparatively affordable health insurance policy. If you are age-55 it a comprehensive plan cost you and a spouse more than $10,000 a year and if you have hypertension, heart disease, diabetes, and a long list of other things you probably can't get coverage.

If Giuliani wants to create a national individual health insurance system--the ability to "purchase insurance across state lines," then he has a federal, instead of the existing state, system of regulation and he needs to tell us how his federal system will accommodate all comers including those who have pre-existing conditions.

There is some reference to state "high risk pools." But there is no free lunch here. Who is going to subsidize these pools so the sick can afford them and how will they work in connection to a federal health insurance charter for the individual market?


Provide states with block grants to encourage innovation, reduce health costs, enroll the eligible uninsured in public plans, and address adverse selection issues.

Giuliani would seem to leave these individual health insurance market issues to the states, "address adverse selection issues." So, he would give the private insurers a national charter and then leave the fall-out (those they choose not to cover) to the states?

He apparently believes that by reshuffling existing federal Medicaid and SCHIP money and giving the states more flexibility in how to spend it he can cover more people.

The providing of block grants to the states is at the heart of the current SCHIP debate and the Bush veto of that program's extension because the states have gone beyond covering people over 200% of the poverty level--a position Giuliani has also taken in support of President Bush.

Giuliani needs to be clearer on just what he would expect the states to do, how far these block grants would go, and how he expects the states to deal with those who can't get covered by insurers Giuliani would have operating under a new federal charter.


Cost containment:

• Invest in health information technology to lower costs through improved efficiency and quality.
• Create transparency for prices, provider qualifications and risk-adjusted procedure outcomes to expand competition and reduce costs.
• Supports medical liability reform.
• Streamline the FDA drug approval process to reduce regulations that delay new cures.
• Proposes that “health insurance should be redefined to cover wellness as well as sickness.” Promote healthy lifestyles and tie federal Medicaid payments to a state’s success in promoting preventive care and tracking obesity in children.

The Giuliani cost containment program is very similar to not only his fellow Republicans but the Democrats as well. While the Dems don't support the traditional Republican approach to medial malpractice reform (capping damages), the emphasis on health information technology and information about prices, provider outcomes, and wellness and prevention is very similar to all of the candidate's positions. Like his Democratic and Republican opponents, these measures are things largely already underway in the market with limited effect so far. And, like the other candidates, Giuliani is apparently reluctant to suggest anything that would raise the ire of the key stakeholders--doctors, hospitals, drug companies, and insurers. Nor would we expect a Republican with a firm belief in the value of a robust market to do more.


Financing

Giuliani says nothing about spending any additional money for the block grants to states to cover more of the poor or his new tax deduction. Apparently he contemplates no more government spending on health care believing that just reshuffling existing money will cover many millions more.

His focus would be on a big new deduction for individually purchases health insurance and expecting a more robust market to create the savings necessary to make care more affordable both for consumers and governments with the money now in the system.

However, if Giuliani is right about the impact a more robust market could have on costs, it would be years before these initiatives would be in place, allowed to run their course, and be effective. He says nothing about this transition. What would all of the uninsured do in the meantime? How would individuals afford today's health insurance costs? Where would the federal government get the money to help the states with the block grants he is calling for?

Rudy Giuliani's health care proposal is a very brief outline and a political proposal--just like all of the other candidates plans. It is a good proposal to be making during the Republican primaries where voters don't want any big government plans or more spending--especially from a candidate that many conservative Republicans worry is too liberal.

But his proposal also has a lot of gaps and unanswered questions.

It will work in the Republican primaries but if he wins the nomination he is going to have to fill in these gaps for the rest of the voters who will be more demanding of comprehensive health care reform.

You can also see my analysis of the other candidate's plans by using the topic index to the right.

Health Wonk Review is Up

Jason Shafrin is hosting this edition of "Health Wonk Review" over at the "Healthcare Economist."

SCHIP Veto Override Fails in the House--Now What?

As expected, the SCHIP veto override effort in the House failed by a vote of 273-156--thirteen short of the two-thirds necessary.

Now what?

First, SCHIP will not expire. A continuing resolution funds the program at current levels until mid-November and that can likely be extended indefinitely. However, at current levels hundreds of thousands of kids will eventually fall off the program.

The Democratic leadership has two choices:

• They can send the President essentially the same bill again. Some Dems want to do that early next year so he can veto it again in an effort to keep the issue alive and festering as we go into the election-year. Their assumption is that Bush's position is very unpopular and will continue to be so.
• The Democrats can go back to their Republican allies on SCHIP and try to get a smaller extension deal Bush will accept. The President has said he is willing to move off of his position of spending only $5 billion more to a one that would at least keep those kids who are on the program funded. While the vetoed bill would have spent $35 billion more, a bill that would maintain the program at current levels would cost closer to $15 to $20 billion in additional funds over five years.

The Democrats should be worried about overplaying their hand.

A recent USAToday poll found that 52% of voters trusted the Democrats more on SCHIP. But when asked if the program should be limited to poor families below 200% of poverty (Bush's position), 52% said they agreed. In addition, 55% said that they are very or somewhat concerned that the higher SCHIP limits in the vetoed bill would create an incentive for families to drop private coverage.

The bottom line is that the Democrats have won the public opinion battle over SCHIP so far. But, it looks like the tide could turn.

The Congress also has 12 appropriations bills they have yet to pass which call for more spending than the President has asked for. Bush has threatened to veto all of them. After his SCHIP veto, no one doubts him. The budget is going to be a tough battle for both sides--a really tough battle.

During the next couple of months, Democrats have as much risk ahead as do Republicans. The President and Republicans may have come off as the "scrooge" in the SCHIP debate so far but those poll numbers showing little support for SCHIP beyond 200% of poverty give Republicans hope the tide can change as they try to paint the Democrats with that old "tax and spend" brush.

The Congress also has the final omnibus budget bill ahead where they will likely to deal with the 10% Medicare physician fee cuts that are going to happen on January 1 if something isn't done. Medicare Advantage payments to HMOs are still very much a part of that issue.

We only have ten weeks left in the year and a lot of tough work--and tough strategy decisions--ahead!

The fact that President Bush has said that he is willing to compromise on SCHIP--and spend more--indicates that he is willing to talk and this does not have to be part of a budget fiasco.

It doesn't have to be, but it might.

Why Bush is So Ready to Use the Veto Now When He Never Did When Republicans Were "Spending Like Drunken Sailors"

This from an article in today's Washington Post stood out for me:

"President Bush declared yesterday that he remains 'relevant' despite his political troubles, and he derided Democrats for running a do-nothing Congress that has failed to address critical domestic, economic and security issues in the nine months since they took control of Capitol Hill."

Back on August 2nd, I did a post, Why Is President Bush So Willing to Veto Spending Bills All of a Sudden?

In that post, I referred to a news conference then President Bill Clinton had in the wake of the 1994 Republican landslide and takeover of Congress. Clinton went out of his way to tell everyone he was still "relevant."

I have believed for months that President Bush's newfound fiscal conservatism and willingness to use a veto--given that for six years he stood by and watched the Republican Congress "spend like a bunch of drunken sailors" and never once used his veto pen--is as much about his wanting to be "relevant" in the wake of the Democratic takeover of Congress as anything.

Yesterday, in his "Clintonesque" news conference he confirmed it.

Kaiser Family Foundation Creates a Great Tool to Compare Presidential Candidate's Health Care Plans

The Kaiser Family Foundation interactive comparison tool for the presidential candidates' health care plans can be found here.

You can find my evaluation of each candidate's plan in the index on the right side of this blog.

The CED Health Reform Plan Gets It Right Until They Have to Make the Tough Decision

The Committee for Economic Development (CED) has released its report, "Quality, Affordable Care for All."

A few days ago I asked a number of questions about just how far the CED would go toward creating a better health care system.

While I think the group has made a number of very valuable suggestions, when it comes to cost containment they don't offer more than the long list of incremental and market-based elements already at work in the market with limited effect--and which they effectively decry in telling us the employer-based system has failed.

For example, why do they think that providers would embrace government-set health care quality protocols on a voluntary basis any more than they have when the market tried to get the docs to accept them?

At the core of the CED proposal is the notion that if we can just set the market up to work the way a market ought to, all will be well. I believe in the market. I also believe, after watching what is now a $2.2 trillion health care market at work for 35 years, that the market has its limitations. The notion that this policy proposal will somehow make all the "dummies" in the market a lot smarter and more effective once the CED outline is in place is a simplistic leap of grand proportions.

The CED proposal is a business proposal made by primarily business leaders. Give them credit for going way past the slim health care reform proposals the Republican presidential candidates have released. The CED makes good suggestions for crafting an individual health insurance system that can actually deliver a health insurance policy to everyone--no matter their age or health status. They also would give everyone the assistance they need to buy a health insurance plan (albeit a basic plan)--something the Republican candidates seem afraid to talk about. They also aren't afraid to tell us that would mean more taxes.

The CED goes well past what the Democratic candidates are willing to do by pointing out just how ineffective the employer-based systems, the Democrats have built their plans on, are in controlling costs.

The CED's analysis of what's wrong and why more limited strategies like consumer-driven care and health technology are by themselves inadequate, are right-on.

In short, the CED looks to me to get the understanding of the problems and challenges right and follows that up with a creative way to get everyone covered.

But then, the CED stops at the water's edge of cost containment.

They did steal the "health care fed" term. But then they don't give it the power it really needs to manage the nation's health care money supply. Until that happens, there will be no incentive for the market to do more than fiddle around at the edges.

I guess this group of mostly business people (many of them in the health care business) just can't get themselves across that last line--granting a "heath care fed" the kind of powers to rein in the health care system that the Federal Reserve has over the nation's money supply.

That's too bad particularly since I will bet that every one of those business leaders thinks the powers the real Fed has over controlling our nation's money supply are a good thing.

You can see the full report and summary here.

Here's a plan with a real "health care fed."

Earlier post: Committee for Economic Development (CED) to Release Its Health Plan This Week--The Questions to Ask Them

Upcoming "Common Good" Forum: Health Courts, Administrative Compensation & Patient Safety: Research, Policy & Practice

For years we have debated reforming the medical malpractice system. But, most of that debate has focused on capping a system most people believe just doesn't work when it comes to improving the quality of our medical care. To me, that has always begged the question, Why cap a system that is fundamentally flawed?

Common Good has been doing good work on that more fundamental question and will have another in a series of forums:

UPCOMING COMMON GOOD FORUM: Health Courts, Administrative Compensation & Patient Safety: Research, Policy & Practice

November 5, 2007

Location: Washington, DC

This event, the fourth in our series of national forums sponsored by the Robert Wood Johnson Foundation, will provide information about: (1) the negligence standard and medical error causation; (2) the potential patient safety benefits to be gained from shifting to an “avoidability” standard for compensating medical injuries; (3) a variety of state reform initiatives; and (4) non-legislative approaches to crafting an administrative compensation system. The event is designed to discuss patient-safety focused alternatives to the current medical liability system, and to receive feedback from key stakeholders. In particular, this forum will focus on recent research conducted by a team at the Harvard School of Public Health (many of whom are notable for their previous work on medical liability, such as on The Project on Medical Liability in Pennsylvania funded by The Pew Charitable Trusts). The research paper, "Policy Experimentation with Administrative Compensation for Medical Injury: Issues under State Constitutional Law" is being published this winter in the Harvard Journal on Legislation. Speakers and respondents will include academics and representatives from consumer groups and health care quality and provider organizations.

More information and agenda

Committee for Economic Development (CED) to Release Its Health Plan This Week--The Questions to Ask Them

David Broder gave us a preview of the Committee for Economic Development's (CED) upcoming health care reform plan. With the likes of Alain Enthoven and "a high powered business group" involved, we all need to pay attention.

Key points the report will make according to David's column:

• Business can no longer afford afford to pay for health care.
• Five years ago the group laid out a strategy for business to curb health care costs and it hasn't worked.
• "The U.S. employer-based health insurance system is failing."
• "Band Aid" approaches from Gingrich's emphasis on high-tech computers to medical practices, to the emphasis on consumer-driven care, to "Medicare for All," won't work. [Amen to all of that.]
  

The report will call for a reinvigoration of the market based on a structure of individual health insurance purchasing that would include:

• A regional purchasing exchange through which individuals would buy a policy from a number of competitors.
• Each year there would be an open season free of pre-existing condition provisions and medical underwriting--and presumably a late-enrollment penalty.
• The exchange would manage a risk adjustment system for the insurers so each would get a fair slice of the market--thereby eliminating the need for underwriting.
• Every family would receive a fixed-dollar credit sufficient to pay for a basic, low cost health plan. They could pay for more benefits with after-tax dollars.
• To pay for it, the current employer-based tax exemption would end (along with a requirement for employer-based insurance) and those savings, plus some form of other broad-based tax, would pay for the program.

These are all good ideas.

Republican presidential candidates have all pointed toward the reinvigoration of the individual health insurance market as a better alternative to the employer-based system. The problem with all of those proposals (see the candidate reviews in the topic column at right) is that they don't modernize the individual market so that age rating, pre-existing conditions, and medical underwriting are dealt with. It would appear this group has a way to get that done efficiently and the Republicans should pay attention to it.

When the proposal comes out, I suggest we pay attention to a number of things:

• 1. The details of the regional exchanges. To work, the exchanges need to result in something that really gives everyone access--no matter their age or health status.
• 2. Giving everyone the same low-cost policy concerns me a bit. Would the poor have the same health insurance policy as the rich and, while the rich could buy up, would a poor family be able to afford the same care?
• 3. The funding. As I have posted many times, an individual mandate is not necessary if the cost of a program is affordable for consumers. Do they really accomplish affordability at first--and ten years later is the program still affordable.
• 4. The big one I will be looking for is cost containment. To make the program affordable in future years, the group will need to "gore some political oxen." The only way I know of to stabilize costs is to pay the key players less than they would have gotten in future years. The Democratic and Republican presidential candidates all give lip service to this issue by just giving us a list of the same things that are mostly underway in the system now with insufficient effect.

The big question: How will this plan will be affordable ten years after it is launched?

I look forward to hearing more about this.

Health 2.0 and the Promise of Market-Based Health Care Reform

"The ONLY policy-based reform approach that makes real sense is for the leaders of non-health care business to come together around a change agenda. They could use their collective strength to overwhelm the health industry’s objections, and drive disciplines and tools – standards, information technologyinfrastructure, evidence-based best practices, transparency and decision-support, and performance-based payment – through policy."

Those are the words of the always welcome Brian Klepper who joins us again today this time focused on the effort the market is going to have to make if it is to reach its potential in getting America's health care costs under control.

Brian, and another one of the smartest people in this business, Jane Sarasohn-Kahn, have been challenging the rest of us all around the blogosphere on what it will really take to get the cost and quality job done.

Health 2.0 and the Promise of Market-Based Health Care Reform
by Brian Klepper

I’ve been skeptical on this site and elsewhere about the potential for meaningful policy-based health care reform. The health care industry fields the largest, best-funded and most powerful lobby that, as Bob Laszewski knows as well as anyone, has held huge sway over health policy for decades. If the reforms necessary to re-establish stability and sustainability in health care also threaten to reduce the excesses that now constitute as much as half of cost and have become the bread and butter of the industry, they’ll face a steep uphill policy battle.

Given this reality, the ONLY policy-based reform approach that makes real sense is for the leaders of non-health care business to come together around a change agenda. They could use their collective strength to overwhelm the health industry’s objections, and drive disciplines and tools – standards, information technology infrastructure, evidence-based best practices, transparency and decision-support, and performance-based payment – through policy.

But while it makes sense to try to bring together the nation’s business leaders, it also makes sense for the policy community to pay attention to market-based activities that hold real transformational promise. Perhaps the most compelling of these efforts is Health 2.0.

A few weeks ago I attended a fascinating conference in San Francisco on Health 2.0, an emerging industry that promises to change the ways patients manage their own health, and the ways that clinicians and purchasers of all types make clinical and management decisions. The term Health 2.0 refers to Web 2.0, the idea that, in social networking, people will use Web-based platforms to reformulate data for their own purposes.

Jane Sarasohn-Kahn is a respected health economist and commentator working at the intersection points of health care and technology. Jane and I worked together to describe the elements and functions we believe will be integrated to constitute Health 2.0's real value. We've posted this narrative and an accompanying image - its an animated PowerPoint slide that lets you watch the elements build - on several sites, including Jane's site, Matthew Holt's The Health Care Blog and the Health 2.0 wiki.

We have invited readers to download the image and read through the narrative, and provide then feedback on this model. Please join us. Understanding how information can be leveraged to promote better, less costly care is a critical step toward getting us there.

Aggregate, Analyze and Advise

Scott Shreve MD, an Emergency Physician who has been a prominent theorist in this exciting new area, summarizes Health 2.0's primary data management functions as Aggregate, Analyze and Advise. It's a good way to think about it, and is very consistent with the description that Jane and I came up with. A short version of our explanation is described below.

Keep in mind that the companies chasing the big, comprehensive vision that is at the end of the Health 2.0 rainbow – Microsoft, Google, Yahoo, WebMD, Revolution Health and many smaller firms – hope to make money. They'll directly get fees for the services they provide or capture the traffic and profit from the ad revenues, as Google does. (It's worth mentioning that Health 2.0 represents an incredibly powerful development in health care technology, which has a very accessible (relatively low cost to each end-user) value proposition in terms of its ability to impact the health of large populations. This stands in stark contrast to some of other health care technologies, like bio-technology, that often have very inaccessible (i.e., expensive) value propositions.)

Aggregate

To get the ball rolling and deliver on the promise of Health 2.0, though, the companies in this game first have to develop ways to aggregate patient data of all types: claims, clinic, drug, lab and image, and then map these data elements - they're from different sources and often in different formats - to a common format, like the increasingly well-recognized and accepted Continuity of Care Record.

Once aggregated and stored in centralized data repositories, they'll route that individualized information into Patient Health Records (PHRs), which help patients monitor and manage their health, to Electronic Health Records (EHRs), which help clinicians monitor and manage patients' health, and Health Management tools, which help health care professionals in non-clinical settings (like wellness specialists, case managers and disease managers) monitor and manage patients' health.

Analyze

In addition to routing the identified patient data to its proper destinations, the stored information in the CDR will be analyzed to identify patients with health risks (like people with chronic health conditions, or people who are likely to have an acute event in the future), and to identify best practice guidelines (i.e., the treatment approaches that consistently produce the best outcomes at the lowest cost). The evaluations will also allow comparison of the relative pricing/performance of providers (e.g., doctors by specialty and hospitals by service) health plans, products (drug, device, equipment and supplies by class), and interventions/treatments.

Advise

The results of these analyses can be used to create public transparency reports on health care products and services - like a Consumer Reports for health care - and can also be used to create decision support tools that advise patients, clinicians, and purchasers of all types about how they might better manage health care quality and cost.

The patient advice tools will also include expert information like medical encyclopedias, and user-generated information like patient or caregiver advice to other patients.

This flow and reformulation of information in Health 2.0 efforts will give every health care decision-maker far better information. The transparency and decision-support should facilitate vast improvements in health care quality and efficiencies. (I should also note that, operating at a higher level, they could also make the mostly-floundering local Health Information Exchange efforts (i.e., the RHIOs, or Regional Health Information Organizations) obsolete in their infancy.)

Please go over to one of the sites listed above, and give our graphic and the narrative a look. Then let us know how we can make it better.

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