Would Either Barack Obama's Health Plan or John McCain's Health Plan Contain Costs?

With the health care reform efforts in Massachusetts presenting us with an incomplete result for an unsustainable cost, just how the presidential candidates' health care plans will contain costs is an even more important issue.

The short answer is neither offer any kind of silver bullet solution to controlling America's health care costs. Both Obama and McCain propose similar generally good cost containment ideas but they tend to be incremental and, because they are not very tough, they are also not very controversial.

Both McCain and Obama's cost containment ideas will help but they will not make a dramatic difference.

That's not just my opinion but also the opinion of three leading health policy experts that have had a lot of partisan and bipartisan health policy experience. The question was asked at a forum: "Putting the Brakes on Health Care Costs: Would the Candidates’ Plans Work? Are There Better Solutions?" cosponsored by the Alliance for Health Reform and the Robert Wood Johnson Foundation.

The panelists were Paul Ginsburg of the Center for Studying Health System Change, Uwe Reinhardt of Princeton University, and Mark McClellan of the Brookings Institution (and recent Bush administration CMS administrator). Ed Howard of the Alliance moderated.

Paul Ginsburg:

There are a number of [cost containment proposals] that all the candidates agree on. And we have to be suspicious of how significant they are. Let me focus on health IT...One, is that it is one thing to be in favor of health information technology becoming a more important factor in the delivery of health care. It is another to say what should the federal government do to accelerate this or make it happen. The campaign materials really do not have much on that. The other thing I wanted to say, which is also relevant, is that health information technology is probably a really worthwhile thing to do because of its potential to improve quality care, to open the door for more transparency quality. Will it contain costs? Very uncertain. A number of the other things they are talking about, will they contain costs? Very uncertain. Malpractice reform, here is where the candidates differ. I am not sure that either approach has the potential to be a major factor. So I would criticize all the candidates because a lot of the things they say certainly are not on the list of things that can really make a big dent in our cost trends.

Uwe Reinhardt:

First of all, on the proposals in the candidates' campaign, I think most policy wonks would write them down. And if you sort of looked at them and said would I favor this or not, most of us would favor them. But if you gave us a truth serum, a couple glasses of wine, say, we would probably all come out saying whether it saves dollars per year is not so clear. But it will give us more value for the dollar...So these are not to be laughed off, but I do not think that will get us out of the box.

Mark McClellan:

Because with costs as high as they are. With government spending as high as it already is. And with the budget as tight as it is, it is going to be hard to take steps and make care more affordable and available for all Americans without doing something about these fundamental problems, these fundamental challenges in underlying costs. So if we do not get better answers to the question of how do we close these gaps using health IT or care coordination or other services, it is going to be awfully hard to make progress in 2009.

It was also noted that McCain's proposals to restructure the tax system by eliminating the employer tax deduction and providing incentives for health insurance to be purchased on an individual basis were more radical and could arguably have a bigger impact on cost containment than more traditional cost containment proposals found in each of the candidates' plans.

You can read the full transcript of the forum here.

Comprehensive Health Care Reform and Massachusetts--Are We On Our Way To a Very Different Debate?

The Massachusetts health care reform law appears on its way to:

• Covering two-thirds of those who did not have health insurance on the day it was enacted--about 400,000 people by the end of 2009.
• Covering most of those who were uninsured in households with incomes below 300% of the federal poverty level--below which the plan pays all or most health insurance premiums.
• Offering health insurance plans to middle-income people that are still largely unaffordable for those families making less than $110,000 a year––people for whom the state has generally canceled the individual mandate that they must buy coverage.
• Racking up costs well above what was first estimated. The plan looks to be coming in 38% higher than originally estimated for its first year and the Governor is now estimating second year costs 50% higher than the original estimate––from $725 million to $1.1 billion for the 2008-2009 fiscal year.
• Developing an annual cost trend for the program's insurance programs, Commonwealth Care and Commonwealth Choice, in the 10% to 15% range.

So, lots more people, particularly lower-income residents, are covered but the program's costs are unsustainable.

Massachusetts was a bold and very difficult piece of legislation to accomplish. It has often been described as an experiment. The greatest contribution experiments make is to tell us a lot about what works and what doesn't so we can move on successfully from there.

Massachusetts policymakers will now work to improve the plan. But without a major cost containment effort--way beyond anything they are even talking about now--they won't make much progress.

Whatever happens next in Massachusetts, this plan's results, a plan that closely parallels Barack Obama and Hillary Clinton's national health reform plans, will likely now undermine both state and federal attempts to copy it. Neither the Congress or any state legislature is going to embark on a plan whose costs have quickly become so problematic for such an incomplete result.

Now before all my readers in the Bay State quickly complain I'm deriding the Massachusetts plan again, let me be clear that this is not a bad outcome. If there has been one primary frustration in the health care debate since the 1960s it's that we too often just debate things, never try anything, and never build on our successes and failures.

The Massachusetts health reform law is valuable because it tells us so much.

My primary takeaway from the Massachusetts health reform law is that attempts to incrementally deal with access first, while avoiding a major restructuring of the system to simultaneously deal with costs, will only lead to an incomplete result in improving access and costs that cannot be sustained.

What Massachusetts has accomplished in passing this law is the most any state or Congress could have done--or ever did. As I have said many times on this blog, the political leverage just hasn't been available to do the job in full. That was true in 2006 when this law was passed and it's true even today.

But in the coming months, results from the Massachusetts health care experiment are going to become well known.

While many will say, "Look at that cost mess let's forget major health care reform," I would hope more people would say it is clear we are going to have to take a more fundamental look at real health care reform that cuts across both the access and cost containment lines.

Even bolder plans, that everyone says are politically impossible today, just may take on a new life because it will be clear the Massachusetts outline isn't going to do much more than bust the budget for an incomplete result. Moving the debate to a more viable place would be a very worthwhile contribution for Massachusetts to make.

A few weeks ago, I said watch the Wyden-Bennett health care plan. It combines many of the things conservatives want--a decoupling from the employer-based system using an individual defined contribution model--with many of the things liberals want--adequate premium support for consumers and open access for everyone. The fact that the CBO rated Wyden-Bennett revenue neutral early in the game also looks pretty good in light of what's happening in Mass.

Other fresh ideas are on the table. Ezekiel Emanuel's health plan, for example, that also decouples health care from the employer, puts private health insurance in the hands of the consumer, and substitutes the many ways we pay for health care today with a single VAT tax that automatically creates a national budget for health care expenditures, has also gained lots of attention.

The National Leadership Coalition on Health has had a comprehensive plan on the table for sometime. Its bipartisan approach and many supporters from a broad cross section of the stakeholders also makes it a serious proposal that could now get more attention.

To me progress is a matter of keeping the debate moving forward toward a successful outcome by building on valuable experiences.

That, I will suggest, is what the Massachusetts experiment can now become. It is not something to be dismissed--nor is it something to defend for the sake of just defending it.

Related posts:

First Year Results in Massachusetts' Health Care Reform Undercut Barack Obama's Health Care Reform Strategy

John McCain's Health Care Plan and the Uninsurable--There Are Better Fixes Than the Ones He's Proposed

"Healthcare Guaranteed"--A Health Care "Solution" Offered Dr. Ezekiel Emanuel

I just received a copy of Dr. Ezekiel Emanuel's new book "Health Care Guaranteed."

I am anxious to get into it as Dr. Emmanuel's health plan has received considerable attention.

In the meantime, Maggie Mahar over at "Health Beat" has put together two posts on the plan, "A Fresh Look at Health Care Reform" you might find useful.

Dr. Emmanuel creates a voucher system enabling everyone to buy a private health insurance policy with the plan funded by a value added tax (VAT). It's a clean sheet approach to health care reform with all of the political advantages and disadvantages starting over would give us.

Maggie summarizes it this way:

If this all sounds too good to be true, you need to read Health Care, Guaranteed by Dr. Ezekiel Emanuel. Published this month, Health Care, Guaranteed offers a bold, refreshing plan for health care in America. The charm of the proposal is four-fold: It faces up to the fact that reform won’t pay for itself, and it offers a funding mechanism that is fair, efficient and could deliver high quality care nationwide. It regulates insurers, forcing them to concentrate on quality. Finally, and perhaps most importantly, this plan insulates our health care system from the lobbyists who, today, have far too much control over our health care system.

You can access both of her posts here and here.

AHP Announces a Health Care Reform Initiative and Tells All of the Other Stakeholders What They Ought to Do

I'd like to propose a new health care reform rule.

You can't announce health care reform proposals unless Part 1 of your plan first tells us just what it is your side is going to sacrifice for the effort.

I don't know about you, but I am getting tired of one vested interest after another in the health care system telling the others what it is they have to do to fix the system. Everyone has to sacrifice to fix the system and each side should start by outlining what it is they are throwing in the pot before they get to play.

Last December, the health insurance industry trade association, AHP announced its plan for ensuring everyone has access to a health insurance plan even if they have a preexisting condition:

Under this plan, states should establish Guarantee Access Plans to provide coverage for uninsured individuals with the highest expected medical costs. If an individual is not eligible for coverage through the Guarantee Access Plan, health plans would then provide coverage to that individual on a guarantee issue basis with premiums capped at one-and-one-half times the standard rate.

AHP's idea for making sure everyone has health insurance is to take the healthy ones and leave the sick to the states.

Today, they announced a cost containment plan. They talked a lot about what others need to do but I didn't see a lot aimed specifically at what insurers are willing to sacrifice to bring costs down.

Here are AHP's five principles from their "Proposal to Reduce Health Care Costs:"

• Principle #1: Patients and their doctors must have the information and tools they need to evaluate treatment options and make health care decisions on the basis of safety, quality and cost.

AHIP Proposal: Access to information that compares the effectiveness and cost of treatments: Give providers, patients and purchasers access to a trusted source where they can find up-to-date and objective information on which health care services are most effective and provide the best value.

• Principle #2: Patients and doctors want an efficient, interconnected health care delivery system that reduces medical errors.

AHIP Proposal: Health information technology: Encourage widespread adoption of tools such as electronic health records (EHRs), personal health records (PHRs), secure e-visits with physicians, and e-prescribing.

• Principle #3: Doctors and nurses need the freedom to practice medicine without worrying about frivolous lawsuits.

AHIP Proposal: Reforming the legal system: Replace the current medical liability system with a dispute resolution process consisting of an objective, independent administrative process to provide quick and fair resolution to disputes while promoting evidence-based medicine.

• Principle #4: Health insurance plans are transitioning to a system that more closely aligns payments with the quality of care patients receive.

AHIP Proposal: Build health care reform around quality improvement by rewarding safety, value and effectiveness: Work for the broader adoption of value-based reimbursement mechanisms and provide consumers with more actionable information about health care value.

• Principle #5: The nation must move towards a system of care that focuses on keeping people healthy, detects disease at the earliest possible stage and rewards chronic care management.

AHIP Proposal: Enhanced disease management, care coordination and prevention programs: Deploy a new generation of strategies that emphasize prevention, improve chronic care and tailor healthcare for patients to help them live longer and stay healthier.

There's nothing wrong with their five principals. They are, perhaps with the exception of legal reform, fairly non-controversial--at least til you get into the details. They are also incremental since much of this is going on in the market anyway.

AHP says that fully implemented our health care expenditures could be $145 billion less than they would have been in 2015 without these things. Since we're already over $2 trillion and likely headed to more than $3 trillion in the next seven years at this rate, that would be a savings of 3% to 5% of overall 2015 costs. Big money at one level but hardly a rounding error in the overall scheme of things.

It's hard to understand why AHP sees that kind of savings as a big deal. One has to believe a whole lot of bad things would already have happened to America's health care system--and maybe the private health insurance business--well before the $3 trillion mark.

And I don't think state run risk pools will help their cause a lot either.

It's going to take a lot more than this to fix the system and a lot more sacrifice.

Childhood Obesity--The Washington Post's Five Part Series on an Important Issue

Last week, the Washington Post gave us a five part series on childhood obesity.

It made the point, which has been made here a number of times, that for the first time in our history American children are on their way to a shorter life span than their parents.

This comes on the heels of a report last month that 20% of American women have already seen a decline in their life expectancy largely because of obesity and smoking.

The Post series made a number of important points:

• Obesity has tripled among children ages 6 to 11.
• The average weight for boys and girls age 10 is 11 pounds more than it was in 1963.
• Locally, almost a quarter of kids through age 17 in PG County MD, and more than third of kids in Loudoun County VA, are considered obese. In DC, 40% of kids are at least overweight.
• Type 2 Diabetes has increased tenfold among children and teens and gallbladder disease has tripled in children ages 6 to 17.

As I have also said many times before on this topic, we need an offensive against obesity of all ages. Being fat is a dumb thing to let yourself become and letting your kids get just as fat as you are is worse than dumb.

A Post editorial put it more diplomatically: "What is needed is a champion to turn these disparate actions against childhood obesity into a unified campaign...Without clear and focused leadership––the kind that turned smoking from chic to undesirable––rising obesity among America's youth and the health problems that go with it will worsen."

First Year Results in Massachusetts' Health Care Reform Undercut Barack Obama's Health Care Reform Strategy

The Massachusetts health care reform plan is coming up on its first anniversary.

Its costs are now officially out of control.

Those of you who regularly read this blog know that I have been particularly critical lately of what I see as a lack of sophistication in McCain's market-based health insurance proposals.

But with this news, Obama will have some big health care policy questions of his own to answer.

The 2006 Massachusetts Health Insurance Law is looking to be little more than an expensive expansion of Medicaid and that does not bode well for Barack Obama who has used the Massachusetts health reform law as the template for much of his own health care reform plan––as did all major Democratic candidates including Hillary Clinton.

The good news is that the plan, which began on July 1, 2007, has covered 340,000 people who were not insured a year ago––out of around 600,000 when the program started.

Almost all of those people have incomes below 300% of the federal poverty level and are eligible for full or substantial government subsidies to pay for their new health insurance.

The state has seen a gain of only 18,000 Massachusetts residents with incomes above 300% of the poverty level in the Commonwealth Choice plan. That's because it costs $7,000 - 12,000 a year for a family of four to buy the baseline health plan that includes a $2,000 single/$4,000 family deductible before most benefits are available. A family of four with an income of at least $61,000 (300% of the federal poverty level) would not qualify for a subsidy.

Commonwealth Care, the program covering uninsured workers under 300% of poverty, and available at little or no cost to residents, had 176,000 new enrollees as of May 1st and is projected to grow to 255,000 by July of next year--many more than the 136,000 that were estimated for the first year when the law was passed.

It is a good thing that there are 340,000 fewer uninsured in Massachusetts than there were a a year ago and Mass appears on its way to covering about 400,000 of the 600,000 that were uninsured when the program began.

But the Massachusetts Health Insurance Law is doing almost nothing for the middleclass because people can't afford the premiums––leading the state to also back-off on the individual mandate for these people. For example, almost all families would need an income of at least $110,000 a year in order for the mandate to apply to them.

So, Obama is right––you can't enforce an individual health insurance mandate if the coverage isn't affordable.

But that is about the only thing Senator Obama can be happy about when it comes to the state health reform plan that looks a lot like his plan for national reform.

With little or no cost containment in the program, the cost of Massachusetts Health Insurance Law really is out of control.

The cost for the program in its first year––July 1, 2007 to July 1, 2008––was first estimated to come in at $472 million when the bill was passed in 2006. However, that assumed there would be 136,000 low-income residents in Commonwealth Care. Instead, the state now projects that there will be 180,000 in the plan by the end of the fiscal year on June 30th driving first year costs up by 38% to $650 million.

When the law was passed in the spring of 2006, it was estimated that the second year’s costs––2008 to 2009––would increase to $725 million as the enrollment ramped up.

This past March, Governor Patrick provided an updated estimate of $869 million for next year––fiscal year 2008 to 2009––saying enrollment was higher than expected.

Just a month later, in April, the Governor revised that estimate upward by an additional $100 million to $969 million.

Now, in May, in a statement to bond rating agencies, the Governor has estimated that the fiscal year 2008-2009 costs will be more like $1.1 billion––a 50% increase over the original estimate from less than two years ago!

These costs may themselves be understated because health insurers are saying they are losing money on the program and are charging insufficient premiums that will ultimately have to rise. The Commonwealth Care insurers (100% to 300% of poverty) originally asked for a 15% increase for next year and settled at 10%.

The Commonwealth Choice insurers (over 300% of poverty and also available to small groups) are seeing a 10% trend rate and are being pressured to limit their increases to 5%--which they will do with more benefit reductions and cost sharing making these plans even more unaffordable for the benefits they provide.

It is clear that the Massachusetts Health Insurance Law is not sustainable for the state--and wouldn't be sustainable for the nation.

Until policymakers are ready to have a serious discussion about cost containment, health care reform is an unrealistic objective.

Prior posts on the Mass Health Care Plan from March 2007:
The Massachusetts Health Plan Will Turn Out to Be Little More Than a Fancy Expansion of Medicaid--Bids Come In At $250 Per Person Per Month

The Massachusets Health Plan's Inability to Offer Affordable Health Insurance Premiums Will Stall-Out Other State's Efforts in Health Reform

The CMS Website Comparing Hospital Performance Is a Good Step Forward

With much fanfare, Medicare (CMS) has stepped up the publicity for its website enabling consumers to compare their local hospitals' quality of care and cost data.

So, I went to it and put in the necessary info for my neighborhood. While a number of hospitals came up, I was able to create a side-by-side analysis for three choices. (I suggest you simply ask for all hospitals within a certain distance from your city and then select the three you want.)

When I asked about the hospitals' results for bypass surgery I got some very impressive information about key hospital and surgical health care process criteria as well as a patient satisfaction survey.

When I asked about the same hospitals' performance for diabetes, far less information came up--this is clearly a work in progress. What they did show was the average Medicare payment to the hospital for diabetes and the number of patients Medicare paid for in that hospital over a year. They also showed the results of a patient customer satisfaction survey on items from pain control to how quiet their room was.

Give the site a try--it's a very positive step forward!

While you're at it, don't forget the American Hospital Directory site that provides significant financial information--including profits--by hospital.

Administrative Costs and the Individual Health Insurance Platform for Health Care Reform

A new study by the "Center for American Progress Action Fund" says that Senator McCain's health reform plan based upon individually owned and controlled health insurance would increase administrative expenses by $20 billion.

The Center is an organization headed by former Clinton chief of staff, John Podesta. So, they clearly have an agenda.

But they also have a point.

As I have said many times before, an individual-based health care reform plan can work. But any such plan has to overcome the problems the individual health insurance market has today that include underwriting and expense ratio issues.

You can't just dump millions of Americans on the individual health insurance platform we have today.

It is true that Senator McCain would create a more efficient individual market by enabling insurers to sell across state lines and doing away with many benefit mandates. But the fundamental problem with individual health insurance is that it commonly has a 25% to 30% expense and profit margin--leaving 70% to 75% of premiums for medical costs. McCain's market improvements will make only a small dent on this expense level that is substantially higher than in the employer-based health insurance market that has an expense ratio that averages more like 12%.

But cutting lots of benefit mandates would dramatically reduce costs even further? Which benefit mandates? My experience is that when you take out the egregious benefit mandates what's left are the things most people would want in their policies anyway like regular mammogram screening or letting a new mother spend the night in the hospital. It's one thing to say these things would no longer be required and another to argue that eliminating them would cut insurance costs. You only cut costs if people wouldn't choose to buy them and would avoid the services.

It's interesting that when I am out in the country meeting with insurance execs in their conference rooms--people who do understand the market--it never fails that they all just roll their eyes at the lack of sophistication when we discuss McCain's market-based solution--specifically his individual health insurance product ideas.

McCain needs to address these very legitimate criticisms the likes of John Podesta and Elizabeth Edwards have made before this campaign goes into high gear.

Related posts:

John McCain's Health Care Plan and the Uninsurable--There Are Better Fixes Than the Ones He's Proposed

Elizabeth Edwards Criticizes John McCain's Health Plan--He Needs to Fill in Some Important Gaps

McCain's Lost Opportunity

Joe Paduda has a great post today over at "Managed Care Matters" on the McCain health plan.

Barack Obama is vulnerable over health care because his plan will cost a lot more than the $50 to $65 billion a year he has estimated--maybe twice as much.

McCain rightly points that out regularly on the campaign trail.

But what McCain and his advisers are missing is that his plan scares people in its own right--and it doesn't have to.

McCain wants voters to take this big leap away from employer-based health care and then does little to take the worry out of such a leap for those voters. Until he realizes that and tries a lot harder to make his plan one that works for people he's just scaring them. If he's scaring Joe Paduda, he will be scaring lots more people as the presidential finals heat up.

There are very good ways for McCain to make his market-based plan work a lot better for voters. For the life of me I don't understand why the McCain campaign has to make it so hard.

Related post:
John McCain's Health Care Plan and the Uninsurable--There Are Better Fixes Than the Ones He's Proposed

Senator Kennedy's Illness

News that Ted Kennedy is seriously ill sent shock waves through the capital and the country yesterday.

Many think of him as the "liberal lion"--and that is true.

Less well known outside the beltway are his incredible instincts and skills for "cutting a deal."

I know the notion of liberals and conservatives finding a way to come together drives some people on the far right and left nuts but it is in fact how we make progress in a real world where there will always be liberals and conservatives--neither will ever score that knockout blow some of them believe can happen at the next election.

I was in a Senator's office last week talking to him about a very important piece of new legislation on health care. I asked him where Kennedy was on it--a key to its being able to move forward. The response was that Kennedy was thinking about just where the deal would be.

That's Kennedy.

I have said before that health care reform will be very hard to do. Without Kennedy leading the way for conservatives and liberals finding the delicate balance, that will be so important, it will be even harder.

As David Broder pointed out this morning, it may be a McCain presidency that will need Kennedy the most for his skills at bringing together what would be a Democratic Congress and a Republican administration.

Everyone in this town has their Kennedy stories. My own favorite is a day some years ago when I was testifying before Senate HELP when he was chair. He had this elaborate introduction planned for me tied to how I was a former exec with a Mass company and a constituent. Of course he screwed up the pronunciation of my name--a constant Irish problem--and an extended interchange between he and Barbara Mikulski on correct pronunciation ensued. I will always appreciate that C-SPAN video tape.

Let's hope he continues to preside over that committee for many more years.

"Blendon, Laszewski, And Rovner On Health Care Reform In The Election"

Earlier this week I was part of conference call organized by the new Health Affairs editor-in-chief, Susan Dentzer, on the topic of health reform in the presidential election.

The call, and subsequent posting of the transcript by Chris Fleming on the Health Affairs blog, was in connection with the thematic issue of health reform in the May/June Health Affairs.

First, congratulations to Susan on taking over at Health Affairs. They couldn't be in better hands and this issue concentrating on health reform proves it.

My colleagues made a number of really good points.

Bob Blendon, the guy with his "finger on the pulse of the American public" from his perch as director of the Harvard Program on Public Opinion and Health and Social Policy:

• In the eyes of voters the health policy struggle between Clinton and Obama is not about the details but about who can follow through and get it done.
• The health care issue is going to be "bigger than people think."
• Comparing McCain to the Democrat over health care will be about "very big differences in values and beliefs."
• McCain has framed this in a way that people can make choices--Employer or individual?--Do you want something done about the uninsured or not?
• "The differences are so wide that it's going to be easier for people to be interested in the [health care] debate."

Julie Rovner, health policy correspondent from NPR:

• Health care is not wavering as an election-year issue but it is more integrated in the overall concern about the economy--don't write if off as a major issue.
• The idea that the Democrats can pay for their big health care plans by "simply letting the Bush tax cuts expire does not hold up."
• The Wyden-Bennett bill is "the stealth bill." The recent CBO scoring that found it likely to be revenue-neutral very early in its proposed implementation was very significant and the bill bears watching.

There is lots more good stuff in their comments and you can read the whole conversation here: Blendon, Laszewski, And Rovner On Health Reform In The 2008 Election

Against Obama, McCain Has a Lot of Ground To Make Up on Health Care

The latest Washington Post-ABC News poll on health care should give John McCain reason to be concerned.

The early May poll asked voters, "Regardless of whom you may support, whom do you trust more to handle health care?"

The answer was Obama by 55% and McCain by 31%.

And this poll was done a few days after his much-publicized week long health care tour.

McCain also did poorly on the other economic issues--although not as badly. On gas prices, it was Obama 48% and McCain 28%. On the economy generally it was 48% to 38%.

McCain did better on the war on terror––55% to 34%. The two were tied over who would do the best in Iraq.

It is still early and polls are notoriously unreliable this far out.

But my sense is that McCain has some big work to do on health care. He has the most far-reaching health care proposal because he proposes the most fundamental change in calling for an end on the reliance upon the employer-based health insurance system in favor of a plan that builds upon the individual. That is in many ways to his credit. But the best health insurance people now have comes through the employer-based system. This can only be a hard sell for him.

But he also has a health care plan with some very troubling gaps in it. The biggest having to do with how those with a low-income, those with pre-existing medical conditions, and older people will be able to access a health insurance plan.

So long as he has these glaring health care gaps McCain can expect to run far behind Obama in health care voter polls.

Recent McCain posts

An Analysis of Senator John McCain's Health Care Reform Plan

Watch the Wyden-Bennett "Healthy Americans Act"--It Could Be the Place Health Care Reform Compromise Takes Place in 2009

Health care reform will be hard to do after the November election. I've even called it a long-shot.

Polls clearly show the voters split evenly between the Democratic and Republican approach to health care reform. I can't tell you who will win the presidency but I am willing to make the bold statement that it will be a close election and neither very different approach to health care reform will enjoy any kind of mandate.

That will mean finding common ground between these very different approaches will be more than tricky.

But we may already have an outline.

Senator Ron Wyden (D-OR) and Senator Robert Bennett (R-UT) have crafted a health care reform plan that gives both sides the most important things each are looking for:

• For the Republicans, it gives them a plan that moves away from the third-party employer-based payment system to one of individual responsibility and the promise of a more vibrant market.
• For the Democrats, it provides a plan that assures everyone will have access to coverage and provides the financing to get about everyone covered in the short-term.

But here's the big one: Last week the Congressional Budget Office and the Joint Committee on Taxation said the Wyden-Bennett plan could be operational by 2012 and would be budget neutral by 2014! In health care terms, parting the Red Sea would be an easier accomplishment.

The key to the individual-based program's financing is an employer contribution. Employers would be required to pay a tax based upon a sliding scale of 3% to 26% of the cost of basic health insurance--tied to their size and revenue per employee. That would convert to a per worker tax of something like $250 to $2,000 for an employer. Employers who now contribute would be required to convert their contributions to higher wages during the first two years and pay the sliding scale tax later.

Under the Wyden-Bennett plan, people with an income of less than 400% of poverty would be eligible for subsidies, everyone would have access to guaranteed and community rated coverage, and the feds would oversee a system of private individual-based insurance and would collect the base-line premiums through the tax system.

In exchange for all of this consumer support, the Wyden-Bennett plan would also require individuals to have health insurance (an individual mandate) and that it must be purchased from a state-run purchasing pool that would require health policies have substantial benefits (rich benefit mandates) and offer a choice of private policies. There would be a flat personal tax deduction ($12,000 for a couple) for consumer insurance payments and low-income subsidies would be tied to the lowest cost policy available.

While employers could offer plans created especially for them by the state purchasing pools it is hard to see why they they would other than to comply with existing labor contracts that required benefits that did not fit the standard state pool offerings.

Those in SCHIP and Medicaid would be converted to this private system. The private insurance sector would clearly have lots more business as they picked up the uninsured and those in these public programs.

Just as there is something for everyone to like there is also something for everyone to dislike.

Conservatives still see too many benefit mandates, too little financial incentive for people to be better health care consumers, and too much federal regulatory control over how the private insurance market would work: See a critical view of the Wyden-Bennett "Healthy American's Act" from the Heritage Foundation.

Liberals, particularly the unions, will be concerned about moving away from the employer-based system. Liberals will also be concerned about continuing to base the system on private insurance--particularly the higher cost individual form and ceding SCHIP and Medicaid to private insurance companies.

Employers will be hard hit to pay for it. Those who provide health benefits today will have to convert their existing health support to wages and pay another tax on top of that.

I would also label the proposal "cost containment lite." It clearly emphasizes access over cost cost control.

It will also be easier to pass this bill since it doesn't directly take on any of the powerful health care special interests--insurers, drug companies, doctors, hospitals, or lawyers. However, the biggest losers would include insurance agents (out of business for health care), Medicaid and SCHIP program bureaucracies, and insurance company employees who do billing and eligibility work.

In exchange for all of the new business, insurers would be subject to a lot more regulation including minimum loss ratios and a complex bid process that could only narrow premium margins. This would likely be a business model not as kind to Wall Street.

But as a place for a country split right down the middle to come together and begin a health care reform process?

Watch this one.

The Wyden-Bennett "Healthy Americans Act"

There Won't Be Any Health Care Reform Without Physician Payment Reform and There Won't Be Any Physician Payment Reform Unless the Docs Lead The Way

Physicians are facing a 10% Medicare fee cut on July 1st, a total of 15% in cuts on January 1, 2009, a cumulative total of 20% on January 1, 2010, and more each year thereafter.

This spring the Senate Finance Committee is trying to solve the problem. In the short term, the idea is to reach out to future years, when they are betting the Congress would finally fundamentally reform the Medicare physician payment system, and pull those savings back to today in order to stave off the near term cuts. That idea has been referred to as "balloon financing."

In the wake of the subprime fiasco, how any U.S. Senators can come up with so thoroughly dumb an idea is beyond me. At the heart of my disbelief is their notion that the Congress is going to reform the Medicare physician fee schedule a year or two down the line. This problem has been accumulating for years and they have avoided facing it year after year--but don't worry they'll do it next year and be able to make this "balloon payment." And the Congress has refered to the "moral hazard" in subprime lending!

I am coming to the conclusion that it will have to be the docs that break the logjam in health care reform. Please don't misunderstand me, I do not mean to say it is the docs whose fault it is we can't agree on a way to fix the U.S health care system. But fixing physician fees problem may be necessary before any other reform can move forward.

The Medicare physician fee schedule problem has been festering for years. And, what Medicare pays is the basis for what physicians are paid in the private sector--what health plans pay physicians is commonly tied to a percentage of the Medicare fee schedule.

When the Congress created the Medicare Sustainable Growth Rate Formula it was their intention that physician Medicare costs would be controlled. The idea was simple: If doctor costs rise faster than an affordable level, we'll just cut their fees next year to compensate. The hope was that would create an incentive for docs to contain their costs and we wouldn't reward unaffordable Medicare cost trends. Any chance that idea would work, which wasn't much, went by the way when the Congress, year after year, said "never mind" and gave the powerful doctor lobby an increase anyway.

The problem now is that we're out of money. With the Democrats now requiring offsets to any new spending and Medicare about to welcome millions of baby boomers, something has to give in order to keep the docs happy.

About everyone agrees that the Medicare physician payment system is long overdue for an overhaul. So, Senate Finance Committee Chair Max Baucus (D-MT) is now saying we need to just fix the mess and stop dodging the issue--a couple of years from now.

One of the biggest problems in physician payment--first in Medicare and therefore de facto in the rest of the market-- is that the balance between primary and family care on the one end, and specialty care on the other, is out of balance. The primary care guys are hurting and we are on our way to a serious shortage there while the specialties are doing much better and all the new docs are heading for the better money.

The Congress is not going to impose a "solution" to the Medicare physician fee problem without the various medical specialties buying into it. The only thing all the docs can agree on right now is that none of them should get any kind of cut. Congress is afraid of the docs. The doctors have a great lobby--better than hospitals and insurers--and have a knack for manipulating the patient/voter lobby to their benefit.

The fix has to be bottom up--not top down. This physician fee problem is not going to be fixed until the docs--that is the various specialty groups--get together and figure it out. There isn't a lot of chance that will happen anytime soon either.

But until that happens, there will be no Congressional fix. The docs also know this. That is why it will be the docs that block the "balloon" idea. They know that is a slippery slide to an even bigger payment hole.

That is also why there will be big Medicare Advantage payment cuts in 2009. The docs truly need the money, they have the best lobby, the Congress is not going to fix the physician fee problem anytime soon and the "balloon" idea is full of hot air.

And, just as no Medicare physician fee fix is possible without physician payment reform, no big health reform plan can take place either. It isn't that it's the docs fault health care reform can't take place as much as it is they have to be the first of the tough hurdles we have to cross before it can happen. How can any budget scoring of a health reform plan take place without a sustainable physician fee structure?

So far the work between the medical specialties that has to occur hasn't even begun. The AMA itself is hamstrung by what amounts to a low intensity civil war within the ranks between the physician specialties over how to divide the loot.

It will take some key players from the various powerful physician specialties to see an imperative to settle this, and do it, before any real progress can be made.

The sooner the better.

John McCain's Health Care Plan and the Uninsurable--There Are Better Fixes Than the Ones He's Proposed

John McCain spoke about health care in Tampa on Tuesday and tried to answer many of the questions that have been raised about his health care reform plan.

The most pressing question is how would people with preexisting conditions get health care coverage in his plan? The worry is that his plan emphasizes tax incentives for consumers to purchase coverage in the individual health insurance market that relies so heavily on upfront medical underwriting.

Here is how his website explained his answer to that question:

John McCain Will Work With States To Establish A Guaranteed Access Plan. As President, John McCain will work with governors to develop a best practice model that states can follow - a Guaranteed Access Plan or GAP - that would reflect the best experience of the states to ensure these patients have access to health coverage. One approach would establish a nonprofit corporation that would contract with insurers to cover patients who have been denied insurance and could join with other state plans to enlarge pools and lower overhead costs. There would be reasonable limits on premiums, and assistance would be available for Americans below a certain income level.

I am frankly amazed he offered this as a "solution."

First, he is simply shunting the problem off to the states.

Second, he implies that one or more states have figured out what to do with people who can't get health insurance because of preexisting conditions. Just which state is that? I don't know of a single state that has been able to provide widely available access to health insurance for people who cannot get it.

Third, just who would finance this pool? States have tried so called high risk pools before. Time and again they are swamped by people trying to get in and there is never enough money. Since they have never worked before, how would they work this time? There were vague references to coming up with $7 billion in federal money here. Is that their proposal?

At the risk of taking sides here, what I find most frustrating is that I think this problem is solvable for McCain.

As consumers left an existing employer or individual plan for any reason they could be guaranteed access into their new individual plan within a certain time limit--just as we have "creditable coverage" provisions today under HIPAA when people move between employer plans.

For those who are not insured today and want to purchase an individual policy in the new McCain health plan, I think he can guarantee access by telling people that his plan would be "guarantee issue" at a first open enrollment. The high cost people could then be carved out by the insurers and put into a risk pool that was reinsured across all market players. This would be a structure that consumers would never see--it would only be a behind the scenes risk transfer system between insurers.

There are a number of different mechanisms for the insurers to identify and pool these "high risks" and spread their cost across the entire individual market. The program would also be self-financing because the high risk costs would be spread across the entire pool. To the extent McCain wanted to fund his GAP program with federal money he could instead be subsidizing the private insurance pool in order to get people into mainstream insurance as opposed to state pools I doubt anyone would be looking forward to.

With this structure, Senator McCain could simply look everyone in the eye and say his plan will guarantee access to everyone--even those with a pre-existing condition.

But he didn't propose anything like this. McCain simply took one of the biggest problems his plan has--and one of the most legitimate criticisms Democrats can levy against his plan--and said there really isn't a problem. From his own website:

MYTH: Some Claim That Under John McCain's Plan, Those With Pre-Existing Conditions Would Be Denied Insurance.

• FACT: John McCain Supported The Health Insurance Portability And Accountability Act In 1996 That Took The Important Step Of Providing Some Protection Against Exclusion Of Pre-Existing Conditions.


• FACT: Nothing In John McCain's Plan Changes The Fact That If You Are Employed And Insured You Will Build Protection Against The Cost Of Any Pre-Existing Condition.


• FACT: As President, John McCain Would Work With Governors To Find The Solutions Necessary To Ensure Those With Pre-Existing Conditions Are Able To Easily Access Care.

So people would not be denied insurance just as soon as he and the governors find a solution?

Senator, health care plans are supposed to be about your telling us how you are going to do it before you are elected.

McCain also vaguely talked about premium assistance for those who cannot afford coverage even after his $2,500 individual/$5,000 family tax credit but he also gave no details on how much would be available and who would pay for it. I would suggest he means test his tax credit just has he recently proposed doing for seniors in the Medicare Part D program and use that money to help subsidize low income folks. In his own terms, why is he giving a tax credit to Bill Gates and Warren Buffet when there are people who legitimately can't afford health insurance coverage?

Senator McCain, you had better get your health care act together before the Dems make their choice. At this rate, they're going to cut you to ribbons on this issue.

Earlier posts:
An Analysis of Senator John McCain's Health Care Reform Plan

Elizabeth Edwards Criticizes John McCain's Health Plan--He Needs to Fill in Some Important Gaps

McCain Would Increase Medicare Part D Premiums for High Income Seniors--A Small Step in the Right Direction

HMO Executive Earnings Are the Subject of Criticism--37 Execs Paid $277 Million in 2007

I have had two different emails today on the subject of health plan executive compensation.

The first cited a link to an article in the Baltimore Sun that reports the $17.65 million severance settlement with the former CEO of CareFirst (Maryland Blue Cross) is under scrutiny by the State of Maryland.

The second was a reference to an Industry Radar post that compares HMO executive compensation from the six biggest publicly traded health plans to what the federal government pays our leaders. They have also juxtaposed a long list of disputes these health plans are currently engaged in with customers, investors, and other providers in the column to the right of their salary chart.

Taken together, these six health plans paid 37 executives three times what the top 562 leaders in the federal government (executive, judicial, and legislative) received.

I am not sure whether I should be angry or jealous.

The Genetic Discrimination Bill Shows Us Just How Hard Health Care Reform Can Be

About 1990, I was a member of something called the Task Force on Genetic Testing at the then Health Insurance Association of America (HIAA). The health insurance industry realized that, with the Human Genome Project in its early stages, we weren't far away from genetics being a part of everyday health care and the Orwellian implications on us as insurance underwriters were not lost.

The task was to think about all of this and develop an industry policy for dealing with it.

Here's the headline: In 1990, there was agreement among the many insurance executives on the panel that it should never be the insurance industry's policy to use genetic information to underwrite or otherwise use the information in a way that disadvantaged the people we either insured or could insure.

So, 18 years later, the news that the Senate has passed a genetic non-discrimination bill by a unanimous vote and we are a week or two from the House approving, and the President signing, a bill to outlaw the use of genetic information for the purpose of underwriting was notable. The bill would also prohibit an insurer from forcing someone to take a genetic test and using that information to limit their coverage and it would prohibit an employer from using the information in the workplace.

In fact, to my knowledge, in these 18 years there has not been an example of a health insurance plan using genetic information for any of these things.

The good news is that we are about to have a bill prohibiting the use of genetic testing for insurance or employment discrimination so no one can ever use it for these purposes.

The bad news is it took 18 years to do something that was obvious and the insurance industry never objected to in principal. There were tangential disagreements about how such a law could create a new protected class and therefore increase the number of lawsuits in the workplace.

The implication for health care reform is that if it takes 18 years to do the easy things you can understand why it is taking so long to do the hard ones.

What Good Has Private Medicare Done for Shareholders?

Wall Street seems to have lost faith in publicly traded HMOs.

When the Medicare Modernization Act was passed in late 2003, it was seen as a major boon to the health plan business. Without a doubt the revenue and profits that have accrued from the privatization of Medicare have been more than substantial.

But what good has Medicare privatization done for shareholders?

The first week of January 2005, just as Medicare Advantage enrollment first went into high gear, United Health, the biggest player in private Medicare, saw its stock price close at $43.62. The first week of January 2006, as the first seniors were signed up for the new Part D drug program, United's stock price was at $62.90. Yesterday, United's stock price closed at $33.59.

Wellpoint was at $57.90 in January 2005, $78.93 in January 2006, and closed at $49.00 yesterday.

Universal American, a senior specialist who has made a disproportionate play in this space, was at $14.80 in January 2005, $15.39 in January 2006, and closed at $10.01 yesterday.

Humana, arguably the company most leveraged in private Medicare, was at $29.42 in January 2005, $57.08 in January 2006, and closed at $43.06 yesterday. Humana and Universal have been particularly hard hit by Part D pricing problems involving anti-selection issues but have pointed out their Part D blocks are overall operating as planned.

Aetna was at $30.99 in January 2005, $46.90 in January 2006, and closed at $42.26 yesterday.

Historically, these managed care companies are at all time high profit levels--it's not like their results have suddenly bombed and the business is coming off its rails.

The problems these companies have had, such as they are, are not limited to the senior business. There are also concerns about growth and profitability in the commercial market every bit as big. But the Wall Street analysts all said the private Medicare business was supposed to be a growth and profit diversification to the normally cyclical employer health insurance market.

Listening to the research reports the privatization of Medicare was the second coming.

The bottom line is the bottom line.

Where are the great valuations the private Medicare business was supposed to create?

Recent related posts:

Wall Street Continues to Be Disappointed in Managed Care--Just Where Did They Think It Was Headed in the First Place?

Health Plan Stock Prices Hard Hit Recently--Then There is John McCain

Today's HMO Carnage on Wall Street

Health Care Reform Will Be a Long Shot in 2009

Many people, me included, have compared the recent resurgence in calls for health care reform with the big debate we had in 1993 and 1994 and the expectation back then that we would see major health care reform. Of course, all of that focus on the issue ended with the failed Clinton Health Care Plan derailing health reform for at least 15 years--and counting.

Each of the remaining candidates for president--Clinton, Obama, and McCain--have major health reform proposals. Health care continues to register as one of the major issues voters want addressed and expectations are rising again.

But the chance for major health care reform in 2009--or 2010--is a long shot.

The problem is that the country is divided right down the middle on which very different direction to go on the issue. As high as health insurance costs are and as dissatisfied as consumers are with the system there is no consensus on what should change and no real willingness for any of the major stakeholders to compromise.

I don't know who will be elected president in November. But I am confident that whoever it is the vote will be another very close election with about half of the people on one side and half on the other. While the Congress will probably continue to be Democrat controlled, there will be no big majority wanting to take the country in one health care reform direction over another.

Something as big as health care reform requires a clear consensus--among voters and therefore in the Congress. We have nothing close to that today irrespective of the apparently strong commitment to health care change among the candidates for even incremental health care reform.

Jay Rockefeller is a Senate Democrat that has been working on health care reform for 20 years and he's an Obama supporter. About the $100 billion both Democratic candidates want to spend on health reform he says, "We all know there is not enough money to do all this stuff. What they are doing is...laying out their ambitions."

No one is a bigger supporter of Hillary Clinton than fellow New York Senator Chuck Schumer. He doesn't see any consensus on how to get health reform done either saying he's "not sure we have the big plan on health care." He goes on, "Health care I feel strongly about, but I'm not sure we're ready for a major national health care plan."

The next Congress, and likely the new President, will be ready to deal with a permanent extension and expansion of the State Children's Health Insurance Program (SCHIP) and they will be forced to make some necessary decisions about how Medicare pays physicians and potential cuts to private Medicare plans to pay for them. But the $100 billion expansion of health care Obama and Clinton want, or the abandonment of the longtime employer tax exemption and new emphasis on the individual market that McCain wants, are way beyond any kind of consensus we have among voters and in the Congress.

As bad as things are, they aren't bad enough.

Detailed analysis each of the candidates health care reform plans:

An Analysis of Senator Hillary Clinton's Health Plan Proposal

An Analysis of Senator John McCain's Health Care Reform Plan

A Detailed Analysis of Barack Obama's Health Care Reform Plan

Wall Street Continues to Be Disappointed in Managed Care--Just Where Did They Think It Was Headed in the First Place?

United Health's earnings and revenue grew by 7% this quarter year over year and the stock fell by almost 10% yesterday.

I'd hate to see them really screw up.

United is the first to admit that they have some service and persistency issues but the fundamentals of their business continue on track.

Wellpoint followed with another disappointing report today.

Wall Street finally seems to be figuring out that the health insurance business is, and has been for years, on a long walk off a short pier. What's sustainable about a business whose costs have continually exploded at 2-3 times the growth rate of the rest of the economy or the wage rate? Just where did Wall Street think this business was headed all those years the sector has been the darling of Wall Street?

Perhaps most telling was the recent comment by one analyst in the Wall Street Journal, "What we're seeing is a market that's gotten so mature and beyond its customer that people can literally no longer afford to buy the product," said Sheryl Skolnick, an analyst with CRT Capital Group. "The number of uninsured is growing faster than any player in the game, and it's getting bigger at the expense of the Uniteds, the WellPoints."

Ya, and it was five years ago.

Allow me to let you in on another gem Ms. Skolnick--and the other health care analysts out there: Pet Stark is getting ready to slash those fat private Medicare payments and either a Democratic president or one of the only Republican Senators to vote against the whole thing in the first place isn't going to veto it the next time around (that would be any nano second past noon on January 20, 2009). And, that's after the growth in these private Medicare products has already started to level off.

We are way past the time the really smart people on Wall Street (that would be all of you) needed to start asking just what the future of this business is. If the answer you get is that the future of managed care is just to ride an unsustainable health care cost trend rate many more years into the future you might just want to dig a little deeper this time.

Related posts:
Health Plan Stock Prices Hard Hit Recently--Then There is John McCain

Today's HMO Carnage on Wall Street