The Bigger the Lie

I come from a corporate background.

A longtime ago a chief marketing officer introduced me to the term, “The Big Lie.” Apparently, this also applies to politics.

As he put it, in not a complementary way, the bigger the lie that is told the easier it is to believe.

Sarah Palin has been practicing Big Lie politics.

She recently posted on her Facebook account:

“The America I know and love is not one in which my parents or my baby with Down Syndrome will have to stand in front of Obama’s ‘death panel’ so his bureaucrats can decide, based on a subjective judgment of their ‘level of productivity in society,’ whether they are worthy of health care. Such a system is downright evil.”

Now, readers of this blog know I am not enamored by the Democratic health care bills—my view is that they are about a little cost containment “lite,” shave the providers a little bit, and raise taxes by at least $500 billion and call it “health care reform.” I am more than disappointed in where the majority party has taken this.

But what Palin and a number of other right-wingers are doing is appalling.

And, too often Republican and conservative leaders have attempted to rationalize this behavior—if not outright use it for political advantage. Newt Gingrich responding to Palin's comments for example, “Communal standards historically is a very dangerous concept. …You are asking us to trust turning power over to the government, when there are clearly people in American who believe in establishing euthanasia, including selective standards.”

Rather than rationalizing this kind of thing it’s high time that leading Republicans and conservatives disavow any connection to this kind of behavior—they know better.

It looks like lots of mainstream Americans are having trouble with the Democrat’s health care plan. They should.

But these extremists who just plain misrepresent the facts only undermine credible criticism and they risk a backlash that will just bounce this debate from one extreme to another that would have nothing to do with the honest health care debate this country needs.

Just how much lower are they prepared to go?

Patriots indeed.

Health Insurance Reform or Health Care Reform? The President Gets It Right!

Advocates of the health care bills now pending in Congress, led by the President, have been calling for health care reform. They argue that our health care system is unsustainable as it is. Not only do we need to create a system of universal coverage but also we need to do it in a way that is sustainable, affordable, and doesn’t continue to add to our deficits.

They are right.

But, for months I have been saying that the health care bills in the Congress have not been health care reform bills but expansions of the health insurance entitlement with some cost containment “lite,” a little shaving off provider payments (a cut of about 1% from what providers would have received in aggregate over the next ten years anyway), and $500 billion or more in new taxes.

In his radio address on Saturday, the President used the term “health insurance reform” five times in talking about why we need legislation this year and not once did he call for health care reform.

The President said, "We must lay a new foundation for future growth and prosperity, and a key pillar of a new foundation is health insurance reform - reform that we are now closer to achieving than ever before."

I believe we need a lot more than health insurance reform—we desperately need health care reform--for all the reasons the President said we did when he first opened this debate.

But at least he’s now calling it what it is.

The Public Plan Option: Litmus Tests Are Never a Good Sign

Before now, I can think of only one “litmus test” in American politics—abortion.

That is an issue that simply polarizes the nation—and our political system. On a good day, people on one side or the other just agree to disagree and move on.

But I think we are seeing another litmus test issue emerge—the public health plan option.

I have no doubt that there are not the votes to pass a public plan option in the U.S. Senate. After this recess, I very much doubt there will be the votes to pass it in the House.

If you don’t believe me, listen to the Democratic Budget Chairman, Kent Conrad; "The hard reality is . . . that a public option does not have enough support in the Senate to pass.”

I have also never heard the political dialogue on an issue so strident so late in a debate—coming from both sides.

Neither side gives any indication—even between the lines—they are willing to give on this issue.

I recently saw a news conference held by the Democratic Chairs of the Progressive, Black, and Asian Pacific Caucuses in the House all come up to the microphone and say in the most uncompromising terms they will not ever vote for a health care bill that does not have a robust public plan option. The language was way beyond the normal political posturing.

Needless to say, conservatives won’t have anything to do with a public health plan option. More, they see their opposition as gaining traction and they see no reason to let the Democrats off the hook.

The White House has not been helping either. Way past the point that I would have expected them to begin softening their tone on the issue, getting ready to take what they can get on health care, they continue to be adamant in support.

No one is leaving themselves an escape hatch.

A litmus test for any policy issue is a prescription for a political train wreck.

Never Give Up!

At the rate this crazy health care reform debate is going it could well come full circle and back to twelve Senators who still think they have a good idea--if everyone else would stop digging in on what they can't agree on.

This from a Washington Post op-ed they co-authored this week:

As 12 U.S. senators from both sides of the aisle who have widely varying philosophies, we offer a concrete demonstration that it is possible to find common ground and pass real health reform this year. The process has been rocky, and slower than many had hoped. But the reports of the death of bipartisan health reform have been greatly exaggerated. Now is the time to resuscitate it, before the best opportunity in years is wasted.

The Democrats among us accepted an end to the tax-free treatment of employer-sponsored health insurance; instead, everyone -- not just those who currently get insurance through their employer -- would get a generous standard deduction that they would use to buy insurance -- and keep the excess if they buy a less expensive policy.

The Republicans agreed to require all individuals to have coverage and to provide subsidies where necessary to ensure that everyone can afford it. Most have agreed to require employers to contribute to the system and to pay workers wages equal to the amount the employer now contributes for health care. The Congressional Budget Office has reported that this framework is the only one thus far that bends the health-care cost curve down and makes it possible for the new system to pay for itself. It does this by creating a competitive market for health insurance in which individuals are empowered to choose the best values for their money and by cutting administrative costs and spreading risk across large groups of Americans.

Ron Wyden is a Democratic senator from Oregon. Robert F. Bennett is a Republican senator from Utah. The other authors of this op-ed, and co-sponsors of the Healthy Americans Act, are Sens. Debbie Stabenow (D-Mich.), Ted Kaufman (D-Del.), Daniel K. Inouye (D-Hawaii), Mary Landrieu (D-La.), Joseph I. Lieberman (I-Conn.), Bill Nelson (D-Fla.), Judd Gregg (R-N.H.), Michael D. Crapo (R-Idaho), Lindsey O. Graham (R-S.C.) and Lamar Alexander (R-Tenn.).

Are these twelve "tilting at windmills?"

My observation is that we are nowhere close to achieving any kind of health care bill in 2009. This thing is deadlocked. When I drill down past all of the optimistic spin I find Senators and Representatives that can't agree on any one of dozens of key issues. Those House bills that are out of committee? Wait til you see the floor debate on those. After this recess, it won't be pretty and I'm talking about moderate and conservative Democrats here.

The Senate Finance bipartisan "gang of six" are attracting loads of attention as the Senate heads home for the recess. But take a look at what they're coming up with and I doubt you could find another six Senators that would sign on to it.

But the twelve who have signed on to the Wyden-Bennett Healthy Americans Act aren't giving up.

Don't count them out--they just might outlast every other idea put on the table. Goodness knows they've outlasted dozens that have come and gone already!

Leave the Town Halls Alone!

Apparently, conservative activists are attempting to disrupt town hall meetings being held by Democratic members of Congress to discuss the health care bills.

I can tell you from conversations I have had with members of Congress that these town hall meetings are VERY important to representatives and senators of both parties as a way to gauge the mood of their constituents. If activist groups disrupt them members will not know what they're voters really think and the time back home with constituents will be severely undercut.

These town hall meetings are grass roots democracy at work.

If the activists really believe in what they are saying they should have the confidence to let the people speak.

Finally, A Reasonable Plan for Certification of EHR Technologies

by DAVID C. KIBBE and BRIAN KLEPPER

A caution to readers: This post is about methods for certifying Electronic Health Record (EHR) technologies used by physicians, medical practices, and hospitals who hope to qualify for federal incentive payments under the so-called HITECH portion of the American Recovery and Reinvestment Act (ARRA). It may not be as critical as the larger health care reform effort or as entertaining as Sarah Palin, but it WILL matter to hundreds of thousands of physicians, influencing how difficult or easily those in small and medium size practices acquire health IT. And indirectly for the foreseeable future, it could affect millions of Americans patients, their ability to securely access their medical records, and the safety, quality, and the cost of medical care.

Three weeks ago, on July 14-15, 2009, the ONC's Health IT Policy Committee held hearings in DC to review and consider changes to CCHIT's current certification process. The Policy Committee is one of two panels formed to advise the new National Coordinator for Health IT, David Blumenthal. In a session that was a model of open-mindedness and balance, the Committee heard from all perspectives: vendors, standards organizations, physician groups, and many others.

And then, on July 16, they released their final recommendations on what is now referred to as "HHS Certification." The effects of their recommendations - these are available online and should be read in their entirety to grasp their extent - are potentially monumental, and could very positively change health IT for the foreseeable future.

At the heart of these hearings was the issue of who will define the certification criteria and who will evaluate vendors' products. Among many others, we have voiced concerns that the Certification Commission for Health Information Technology (CCHIT), the body currently contracted by HHS to perform EHR certification, has been partial to traditional health IT vendors in defining the certification criteria, and in the ways certification is carried out, and thereby able to inhibit innovation in this industry sector. Despite its leaders' claims that the certification process has been developed using an open framework, CCHT's obvious ties to the old guard IT vendors have created an overwhelming appearance of conflict of interest. That appearance has not been refuted by CCHIT's resistance to and delays in implementing interoperability standards, or by its focus on features and functions over safety, security, and standards compliance.

In the hearings that led to the recommendations, longtime IT watchers were treated to some extraordinary commentary, much of which dramatically undermined CCHIT's position.

• Dr. William Stead from Vanderbilt recommended a narrow focus for certification on 'data liquidity' and solving the problem of health data exchange (i.e., interoperability) of summary health information. Dr. Stead supported the idea of separating the data from the applications, which we have written about in our blogs on several occasions.

• Two very experienced Technology Standards professionals, Cita Furlani and Gordon Gillerman of the National Institute of Standards and Technology (NIST) laid out the international standards-based framework for Conformity Assessment, one small part of which is certification, testing for which is always performed by Third Parties. They pointed out that under this framework, Third Parties are by definition independent and unbiased, and required to not have financial interests in the outcomes of the certification process.

• In more on-the-ground testimony, Paula Anthony, CIO at East Texas Regional Medical Center, described her organization's decision, after a multi-million dollar investment, to jettison one CCHIT-certified EHR product because it could not reliably and safely exchange data with another CCHIT-certified HIT product. If there was ever a succinct indictment of the failures of CCHIT, this was it, and everyone in the room knew it.

The recommendations released the day after the public sessions reflected these concerns. Among the Policy Committee's major recommendations:

A New Certification Definition
"HHS Certification means that a system is able to achieve government requirements for security, privacy, and interoperability, and that the system would enable the Meaningful Use results that the government expects...HHS Certification is not intended to be viewed as a 'seal of approval' or an indication of the benefits of one system over another."

In other words, as the definition of Meaningful Use is now tied to specific quality and safety improvements and cost savings that result from health IT -- among them e-Prescribing, quality and cost reporting, data exchange for care coordination, and patient access to summary health data -- HHS Certification will closely follow. Rather than pertain to an EHR's long list of features and functions, some of which have nothing to do with Meaningful Use, certification will be focused on each IT system's ability to enable practices and hospitals to collect, store, and exchange health data securely.

Who Determines the Certification Criteria
The Office of the National Coordinator - not CCHIT - would determine certification criteria, which "should be limited to the minimum set of criteria that are necessary to: (a) meet the functional requirements of the statute, and (b) achieve the Meaningful Use Objectives." As regulator, funder for this project, and a major purchaser of health services, the government, not users or vendors, will now determine HHS' Certification criteria.

A New Emphasis on Interoperability
"Criteria on functions/features should be high level; however, criteria on interoperability should be more explicit." That is, functions/features criteria will be broadly defined, but there will be a greater focus in the future on the specifics associated with bringing about straightforward data exchange.

Multiple Certifying Organizations
ONC would develop an accreditation process and select an organization to accredit certifying organizations, then allow multiple organizations to perform certification testing. In other words, the Committee recommended that CCHIT's monopoly end .

Third Party Validation
The "Validation" process would be redefined to prove that an EHR technology properly implemented and used by physician or hospital can perform the requirements of Meaningful Use. Self-attestation, along with reporting and audits performed by a Third Party, could be used to monitor the validation program.

Broader Interpretation of HHS Certification
HHS Certification would be broadly interpreted to include open source, modular, and non-vendor EHR and PHR technologies and their components.

These bold, forward-thinking proposals from the HIT Policy Committee have not been accepted yet. But in our opinion they should be. These measures would encourage new technologies to enter the market for physician medical practices seeking EHR technology, and wrest control away from the legacy health IT vendors that have maintained barriers and delayed adoption, so you can be sure that the old guard players are doing everything possible to have them rejected.

But these are hugely progressive steps in the right direction, toward allowing HIT to enable improvements in care and cost efficiencies that would be in the best interests of users and the public at large. If implemented, the changes recommended by the HIT Policy Committee would create greater choice, more standardization, lower price, less interruption of the practices -- as well as a check from CMS or Medicaid each year to help smooth the implementation, starting in 2011.

David C. Kibbe MD MBA is a Family Physician and Senior Advisor to the American Academy of Family Physicians who consults on health care professional and consumer technologies. Brian Klepper PhD is a health care market analyst. Their collected collaborative columns may be found here.

Back to the Future! Pelosi Calls Insurers “Villains”

Like we didn't know it would get to this.

This from Speaker Nancy Pelosi’s news conference yesterday:

"The public option--that's where the insurance companies are making their attacks-––it's almost immoral what they are doing. Of course they've been immoral all along. They are villains in this, they have been part of the problem in a major way. They are doing everything in their power to stop a public option from happening and the public has to know...They had a good thing going for a long time at the expense of the American people and the health of our country. This is the fight of our lives."

Guess the days of everyone being at the table and getting along are over.

I’m not interested in getting into a conversation here about whether insurance companies are villains or not. I expect most of you are clearly on one side of that issue or another and that is not likely to change.

I would like to talk about the politics of Speaker Pelosi choosing to go after the insurers.

It’s clear that there is a House Democratic leadership strategy brewing to demonize the insurance companies to counter the Republicans' success to date in the demonizing of “Democratic attempts to put government in charge of your health care.”

The August recess will clearly be about one side trying to get and/or keep the high political ground on health care (not to be confused with the high road on health care). Just how this war of words turns out will likely determine whether this attempt to pass a big health care bill (note I did not say health care reform) goes somewhere or crashes and burns like all of the others.

It is disappointing to see that after months of intensive discussion about what we should do with our unsustainable health care system it’s all boiling down to the same old battle between “villainous” insurance companies versus “inept government control” of health care.

I will also suggest that Speaker Pelosi is doing the same thing Mrs. Clinton did in 1993—using her polling data to determine the way to sell health care is to go after the health insurance industry.

I recall Democratic pollster Celinda Lake’s data from a year ago; 82% of the people who voted in the prior election had health insurance for everyone in their family. 92% were themselves covered by health insurance.

The vast majority of people who vote have private health insurance and they are very happy to have it. They are very worried about keeping it and its growing out-of-pocket costs but that is different than being ready to ditch it.

In 1993, much of the undoing of the Clinton health plan occurred when opponents were able to convince voters, the vast majority of which had good insurance they wanted to keep, that their coverage was in jeopardy. In 1993, Mrs. Clinton made the decision to advance her health care plan making the insurance industry the villain. She did not understand the health care version of the haves versus the have-nots in this country and it cost her dearly.

It’s sort of like the difference between voters having little respect for Congress but liking their Congressional representative.

The health care debate is now devolving not evolving.

Maybe that is because neither side really has a real health care reform strategy to sell in positive terms to the American people.

I will suggest that both sides have tried to do a health care bill on the political cheap--arguing that we can fix this busted system and no one will have to lose or sacrifice to do it. Of course that is not true and all it does is give the other side plenty of room for criticism when you put your plan on the table--which is then easily countered with references to "villains" and "inept government control."

Back to the future.

Health Care Reform Coming Out of Senate Finance?

We’ve been getting lots of news these past few days leading to optimism that a bipartisan health care bill will soon emerge from discussions between the “Coalition of the Willing.” That term refers to the three Republicans and three Democrats trying to find common ground in the Senate Finance Committee.

First, let me be clear that I have the greatest respect for Senators Baucus and Grassley and their four colleagues. Theirs is the kind of bipartisan approach that all of Washington, DC should be following on any number of issues.

And, as I have posted here before, I am concerned that in their efforts to find compromise they are headed for a health care bill that is based on a formula of cost containment “lite,” minor paring of Medicare and Medicaid provider payments, and at least $500 billion in new taxes. I don’t see much changing fiscally if that is the final result in a health care system that is already unsustainable and on the way to spending upwards of $35 trillion to $40 trillion over the next ten years as it goes to 22% of GDP by 2018.

From what we have heard, their bill would hardly "bend" any curves.

Yes, we could well cover tens of millions more people and that alone would be a noble accomplishment. But just loading all of these people onto a system that we can’t now afford seems to me to be ultimately a fool’s errand. The number of uninsured we have in this country isn’t the fundamental problem—it is the most aggravating symptom of our real problem, which is unsustainable cost.

Being good guys and bipartisan doesn’t necessarily lead to the best policy!

But I would also caution people watching this process not to be so certain that when the final Senate Finance product is unveiled—if it is ever reached—that we are on the fast track to legislation.

We’ve literally had these Senators holed up in secret for a number of weeks engaged in a very complex group dynamic trading one policy and revenue concept for another that may be leading to a compromise that makes sense to them. But each trade-off they made, or are making, is something really important to someone outside their little group and maybe not something any one, or a group of, the other 529 members of Congress is willing to go along with.

What we do know is that every time a new idea for controlling costs, getting a good CBO score, or raising money has hit the media it has about always come in for lots of criticism from one side or the other—or even both at times.

For more than a year I have been telling readers of this blog that health care reform was going to be very, very difficult to do. That we really didn’t have the consensus in this country over just what the problems are and what we need to do about them, or the political will to make the tough calls we need to make. Many people have disagreed with that assessment. I may still turn out to be wrong about it being different this time—but not so far.

I’d wait to see just what the “Coalition of the Willing” is able to put on the table before we go declaring any victories. If for no other reason, any product is going to have to lay on the table for all of August and that won’t be pretty.

I will remind you that the last group to go off on their own and hatch a health care plan in secret didn’t do so well when it hit the light of day.

Made sense to them at the time.

A Health Insurance Premium Tax Would be a Chicken Tax

The Congress has looked at taxing about everyone and everything to pay for half the cost of a health care bill.

They’ve considered sugary soft drinks, beer, “millionaires,” and “gold plated” health benefits to name a few. Every time they come up with one it gets shot down by the interests it would offend.

First, as I have asked on this blog before, why do we need to use at least $500 billion in new taxes to pay for half the cost of a health care entitlement expansion bill? We will spend somewhere between $35 trillion and $40 trillion on health care in this country over the next ten years. Many experts contend there is as much as 30% waste in what we spend.

Advocates of a health care bill say we need it to reduce the cost of health care in this country that will otherwise bankrupt us if we don’t fix it.

With as much as $10 trillion to $12 trillion in waste, and cost containment as the stated goal, why do we need to raise people’s taxes $500 billion to pay for an expansion of coverage?

But since it is clear that the Congress and the White House have all but given up on real health care reform that would really “bend the curve” they are adamant they are going to raise taxes to pay for at least half the cost.

So, being rejected by all the interests that effectively countered every other idea for a tax increase, advocates now look to be excited about taxing insurance companies. The most talked about tax would be a tax on insurers who issue the “gold plated” policies—apparently a surtax on the value of such policies. But there has also been talk of a broader premium tax on all policies.

First, having run an insurance operation I can tell you exactly what the insurers will do with that tax—pass it directly onto the consumer. Today, most states charge a premium tax—usually about 2% of premium—on all insured (not self-insured) health insurance business. When calculating the premium on those policies, the insurer just adds the 2% tax as an expense factor and passes it on to the customer—like all other costs of doing business. This is not a theoretical exercise—the tax gets directly passed on and is embedded in the premium the consumer pays.

That’s why this would be a chicken tax.

Given all the beating the advocates have taken on all of the other tax ideas they’ve floated in recent weeks and having had to retreat on those, they are now looking at having someone else be the tax collector.

"This is a tax on insurance companies" goes the political argument—not on consumers or sugary soda or millionaires. The tax on insurers is popular this week because they are at the bottom of the political heap in Washington, DC these days—all that "good will" from things like $2 trillion offers hasn’t gotten them a lot.

And, such a tax "would discourage such overly generous health plans" goes the reasoning.

But it’s still a chicken tax—chicken because the politicians aren’t willing to look voters in the eye and tell them that with $10 trillion to $12 trillion in waste they still have to raise their taxes by at least $500 billion to pay for a health care entitlement expansion and chicken because those same politicians can’t face the “millionaires,” or unions, or even soda bottlers, or people with "gold plated” health care directly, or the rest of us for that matter, and tax us all directly.

When you get down to it, this is all devolving into a chicken exercise because no one in the Congress is really willing to face the real issue—the cost of health care in America. What else would you call a bill that will expand the health care entitlement but not face the hard choices necessary to really make America’s health care system affordable and sustainable?

What It Would Take to Really Make America's Health Care Costs Affordable and Sustainable

Most health care experts agree the reason our system is so unaffordable is because of all of the waste and unnecessary care—up to 30% of what we spend.

I will suggest that it will take the genius of individual creativity to separate the 70% of this health care system that is the best in the world from the 30% that is waste.

So far, the Congress has focused more on entitlement expansion then fundamentally reforming the system and tackling the real problem—getting all the excess costs out. The result so far is expensive health care proposals and no real reform.

How can we actually make the health care system affordable as we expand coverage? I will suggest a three-pronged attack:

1. Launching a number of hopeful initiatives already outlined by the President that would improve the delivery system. These include health information technology, comparative effectiveness research, wellness, and prevention. These have promise but there is no guarantee they will work without unambiguous changes in incentives so those who provide care will begin to effectively use them.
2. Changing the incentives for private sector consumers by adopting many of the financing proposals in the Wyden-Bennett Healthy Americans Act— which has already been scored by the CBO to broaden private sector coverage for no additional cost.
3. Adopt what I call the Health Care Affordability Model to do what we should really be doing—making our health care system affordable.

I will suggest that it is not enough to simply pay for the expansion of the American health care system and end up deficit neutral. At 17% of GDP already and with 30% of the system being wasteful we should set a goal to actually reduce costs from what they would have otherwise been.

The Wyden-Bennett proposals take us to a place where we can expand coverage for no additional cost. The Affordability Model gives the Obama cost containment policies teeth so we can actually make our system more affordable.

The Affordability Model creates an unavoidable imperative for health plans, health care providers, and consumers to finally cooperate in ridding the waste and avoidable care from our currently unaffordable health care system.

For seventy years, we have used the federal tax system to encourage the expansion of health insurance benefits. But now it only encourages more spending at a time when health care is becoming even more unaffordable.

We already know a great deal about where the waste is in our system—wasteful treatments and procedures, poor quality, avoidable sickness, and administrative costs.

We have the tools—or can create tools—to effectively manage the system.

But we haven’t done it quickly or effectively enough.

We haven’t done it because we haven’t had to—as out-of-control as the system is most of the stakeholders have continued to profit from the status quo.

There would not be any global budgets. The Affordability Model would use the tax system to fashion unavoidable incentives to control costs and improve its quality—no stakeholder would any longer profit from the status quo.

The Affordability Model would continue to allow employers to self-insure their health plans. It would not place any limits on insurance or provider prices. It would not interfere in the delivery of care.

The Affordability Model reflects a belief that quality health care decisions need to be made on a patient-by-patient basis, that health care professionals should make these decisions in collaboration with their patients, and that payers and providers cooperating toward the same objectives can produce meaningful results.

Under the Affordability Model, health plan networks would have clear-cut incentives to first begin to stabilize and then control their premiums. Failure to do so would mean the loss of their federal tax qualification and that would mean employers and consumers would move their business to health plan networks of insurers and providers that achieved results.

Consumers and employer sponsors would not be penalized. They would simply move away from inefficient and ineffective health plan networks.

If at any time all residents in a state did not have access to a tax qualified plan, the Secretary of HHS would be directed to introduce a public Medicare-like health plan in that state to compete with all private plans—qualified and non-qualified.

The Affordability Model would create an unambiguous reason for each of the stakeholders to finally work together to get America’s health care system under control. No stakeholder would want to see their network lose its tax preferences:

• The health plan would be placed at a substantial competitive disadvantage.
• If doctors, hospitals, and other providers were not in a tax qualified health care network they would lose patients to networks that did control costs.
• Employers and consumers would almost certainly purchase their health benefits only from qualified plans.

The result would be consumers and employers moving to health plans that succeeded in giving Americans better quality care at an affordable cost—and bringing the American health care system with them.

Read a detailed explanation of the how the Affordability Model would work here.

Health Care Reform Should Mean Health Care Reform--A Proposal for Real Change

CMS says that we will spend 17% of GDP on health care this year and we are on our way to having 22% of our GDP being spent for health care by 2018.

The stated goal of the President and all of the Congressional health care reformers is to accomplish health care reform and have it be deficit neutral.

Deficit neutral means we wouldn't reduce our costs one bit. We would have no assurances that we would make things better than the track we are on--to 22% of GDP--and it could be even worse.

Why would the U.S., where our costs are at least 50% more than any other industrialized nation's costs, want to let this thing keep growing to 22% of GDP?

Yes, I would have to admit that having most everyone covered and spending 22% of GDP would be better than having 50 million uninsured and spending 22% of GDP.

But let me also suggest, this is nuts!

If the question is how do we reform our system over the next ten years by tackling unaffordable costs and covering everyone, why is it acceptable for the stated end result of all of these efforts to be spending 22% of GDP on health care in 2018?

Am I crazy to think that health care reform needs to be about actually changing the system and solving the problem?

I have a suggestion for how we can actually change the system.

I call it the Health Care Affordability Model.

Government wouldn't demand anything of insurers, doctors, hospitals, patients, or anyone else. The Affordability Model would not include a public health plan. It would not have a cost board or turbocharged MedPAC. There would be no price controls on insurance or provider prices. There wouldn't be any complex pay-for-performance system requirements. There wouldn't be limits on what treatment protocols or technology a provider could prescribe. There would be no global budgets.

The Affordability Model could be attached to virtually every health care reform proposal now on the table.

The Affordability Model by itself would not require anyone to pay more--or less--for good care or bad care.

The Affordability Model would focus unambiguous incentives for the health care players on actually making the system sustainable and it would phase improved performance in over a period of years so those in the system could manage the transition without causing unacceptable dislocations.

And it would not set 22% of GDP as a laudable goal.

Here's a brief outline of the Affordability Model:

The Health Care Affordability Model

1. We can use American ingenuity to manage our health care system to better outcomes—cost and quality.
2. Providers and insurers have the tools to give the system better cost and quality outcomes—health information technology, wellness and prevention strategies, pay-for-performance, comparative research, and the like. And they can develop new ones.
3. But providers and insurers will not use these strategies to their full potential, or develop others, until they have to—now they do too well under the status quo.
4. The Affordability Model gives them no alternative.
5. Any network of insurers and providers who did not collaborate toward making the system affordable would lose their tax qualification—their plans would no longer be tax deductible for employers and consumers.
6. In order to maintain their tax qualification, health plans—through collaboration with health care providers—would be required to first slow their annual rate increases and then over a period of years stabilize their costs to the same rate the economy grows—a rate America could afford.
7. Because employers and consumers would only be interested in buying a qualified health plan, there would be enormous and unambiguous incentives for health plans, physicians, hospitals, drug and device companies, and other health care providers, to participate in and collaborate within networks of qualified health insurance plans.
8. The Affordability Model would fundamentally change the incentives in America’s health care system—without government controls and global budgets—by creating an overwhelming and unavoidable incentive for insurers and providers to finally cooperate toward the shared objective of controlling costs and improving quality.
9. But, if at any time all of the residents of a state did not have access to a qualified health plan the federal government would provide a Medicare-like public plan.
10. The Affordability Model could be attached to virtually every health care proposal now on the table.
    

You can see a much more detailed description of just how the Health Care Affordability Model would work here.

Grandpa Harry and Grandma Louise

Word from all those town hall meetings members of Congress are having back home this week is that lots of seniors are showing up scared that all the talk of health care reform in Washington, DC might just hurt them.

The seniors’ reasoning goes that Congress is getting ready to cut Medicare in order to pay for the uninsured grandkids' newfound access to a health insurance policy of their own.

Watch for the senior effect on efforts to pay for health insurance legislation once the members of Congress return next week from the recess.

Apparently, it’s not just doctors and hospitals complaining about Medicare cuts.

Or, maybe its doctors and hospitals giving their senior patients an ear full.

Will Eliminating Medical Underwriting and Merging the Small Group and Individual Market Into a New Insurance Exchange Work? Lessons From Massachusetts

Creating a universal system of health insurance is everyone’s objective. But even if we pass an expensive health care bill in 2009 we won’t achieve it. We just don’t have enough money to cover everyone. Maybe, in the most expensive proposals, we would make it possible for 90% to be covered. In others, far less.

The problem is that without an absolutely seamless system there will still be people outside the system and able to game it.

So, how do you balance the goal of giving everyone access to the health insurance system without letting others game it?

Massachusetts has merged the small group and individual health insurance markets and eliminated medical underwriting—people can buy insurance when they want to even though a good number, albeit far fewer than before, of the state’s citizens continue to be uninsured.

So what can we learn from their experience—particularly because most insurance exchange proposals here in Washington, DC look a lot like the Mass health care law?

Harvard Pilgrim’s CEO Charlie Baker has a very important post on his blog. When you read it, remember that Harvard Pilgrim, based in Massachusetts, is undoubtedly one of the really good guys in the American health care system. Their plans continue to score at the very top in service and quality among all the leading surveys and they are one of those community-based health plans that make less than 1% profit.

Here is a portion of his post:

Now here’s the costly wrinkle. When the merger occurred, the state told the health plans in Massachusetts that we could no longer apply a pre-ex exclusion or waiting period to individual purchasers unless we applied it to all purchasers in the merged market (including all small businesses). No one was willing to impose such a condition across the entire merged market - primarily because it would be unfair to small businesses to impose such a requirement. In the end, we all hoped that the new state requirement on individuals to have health insurance - or pay a tax penalty - would encourage healthy individuals to purchase insurance every year, and offset this now wide open front door for individual coverage.

Long story short, I don’t think it’s working. A few months ago, brokers started posting comments on this blog site that implied that people - and some brokers and employers - were gaming that wide open front door - purchasing health insurance for a few months at a time, using a lot of services, and then dropping their coverage. The penalty for not having coverage isn’t all that steep - about $900 - and while a few months of coverage might cost $2-3,000 in premiums - that’s peanuts compared to the cost of many medical services, which can run into thousands of dollars in a matter of days.

After about the fifth broker comment, I asked our finance people to check and see if individuals purchasing insurance from us either directly or through the state’s Connector web site were buying for a few months at a time, and using a lot of services. The results were astonishing. Between April of 2008 and March of 2009, about 40% of the people who purchased individual insurance from Harvard Pilgrim stayed covered by us for less than 5 months. Even more amazing, they incurred, on average, about $2,400 per person in monthly medical expenses - roughly 600% higher than what we would have expected. It wouldn’t surprise me if other health plans have the same problem.

This is a problem. It is raising the prices paid by individuals and small businesses who are doing the right thing by purchasing twelve months of health insurance, and it’s turning the whole notion of shared responsibility on its ear. It’s also created a new way for people who don’t want to play by the rules to avoid them. The state needs to reconsider its policy to eliminate waiting periods and/or pre-ex exemptions for individuals purchasing health insurance in the merged market. That would be the simplest and easiest way to protect individuals and small businesses who are playing by the rules - and limit the very costly impact of this wrinkle in health care reform.

You can read the entire post here.

Wyden-Bennett Touted as an Alternative

I have to say I was a bit surprised watching Meet the Press this morning to hear the pundits on both sides of the political spectrum discussing the Wyden-Bennett Healthy Americans Act as an alternative to the more partisan Democratic health care reform bills already on the table in the House and Senate HELP Committee.

The Republican spin seemed to be that, "We've always been for Wyden-Bennett, it's real reform."

The Democratic spin was something like, "Suddenly you're for Wyden-Bennett, where have you been all this time?"

To me the good news is that the debate may finally be getting to the question of what real health care reform is. As I have posted on this blog before, I am concerned that we are really on our way to a massive entitlement expansion without actually changing the health care system in a way that will make it affordable.

Wyden-Bennett is a serious health care reform proposal.

Hopefully, finally bringing Wyden-Bennett into the mainstream of the debate means we are about to have a serious discussion about systemic health care reform.

I hope it isn't just Republicans, far too many of whom have been sitting on their hands for months, grasping at something to make them look like they have a credible alternative.

But if they are just grasping for something to believe in they at least have found something credible.

All previous posts on Wyden-Bennett "Healthy Americans Act"

Unions May Get a Pass on Health Care Benefits Tax

There is a major bipartisan effort going on in the Senate Finance Committee to reform the health care system.

Reportedly, one of the elements of that effort may be a tax on "gold plated" health insurance benefits above a certain threshold--$17,000 for family coverage is one option being discussed. The new tax could raise close to $300 billion over ten years to help pay for a health care bill.

However, the word also is that a new benefits tax would not apply to current union contracts for at least five years.

This from a Bloomberg story on Friday:

Gerald Shea, an AFL-CIO official lobbying for health-care reform, said grandfathering benefits negotiated in a collective bargaining agreement is a “common thing when there is a big change in federal law.”

‘Expectations Are Set’

“Once a collective bargaining agreement is set, employer’s budgets are set, workers expectations are set. It doesn’t make sense to go back in the middle of the contract and change it,” he said.

Union groups and workers said Congress shouldn’t target contractually negotiated benefits.

Anna Burger, secretary-treasurer of the Service Employees International Union, said in an interview that workers have often traded salary increases for better benefits in agreements.

Taxes “shouldn’t be taken from the backs of workers who have bargained away wages and other things for their benefits over the years,” Burger said.

Sandra Carter, a retired Pacific Bell Telephone Co. technician from Stockton, California, said her health benefits, worth about $12,000 per year, were negotiated by the Communications Workers of America. She is unmarried with no children, meaning her individual coverage exceeds benefits paid to federal workers by about $7,800. If that amount were taxed at the 15 percent marginal rate, she would owe $1,170.

“I can’t afford the taxes I pay now,” said Carter, who said she suffers from diabetes. “Why should I get taxed on a benefit that keeps me a functioning person?”

Carving unions out of any deal to tax health insurance benefits would be outrageous.

First, such a new tax would not alter any collective bargaining agreements--it would only change how those earnings would be taxed.

Second, since when have unions become a special class? Every new tax increase I've ever been subject to was on something--my income, my house, my property--that was either set or owned well before the new tax was passed.

This is tantamount to a smoker telling us the new tobacco tax to pay for the childrens' health plan shouldn't apply to him because he developed his addiction to cigarettes before the tax was passed.

I now think I understand how the Chrysler and GM bondholders felt when they were forced to give up their priority bankruptcy claims in favor of the Unions' retiree health care fund.

The Co-op Version of the Public Plan—It’s a Camel!

I am sure you have heard the story about the committee that was charged with designing a horse but, because of the bureaucratic ways of the committee process, instead ended up creating a camel.

We will not see a Medicare-like public health plan as part of any health care reform bill in 2009. I know proponents don’t want to hear that but it is crystal clear to me there simply are not the Democratic votes in either house of Congress for it.

But proponents are bound and determined to get something with the moniker “public plan” attached to it before they will sign-on to a bill. In an effort to compromise, North Dakota Senator Kent Conrad has suggested a defanged public plan in the form of a not-for-profit health care cooperative. I have been critical of that suggestion on this blog because his proposals look to me to be no different than the dozens of not-for-profit community-based health plans already operating—not the least of which is North Dakota Blue Cross.

When the day is done, what would Senator Conrad’s co-op proposal accomplish that is any different than the not-for-profit community-based health plans, that already have 50% of the market share in the under-age-65 market, have achieved?

But let’s take it a bit further.

At the thirty thousand foot level the notion of a public health plan cooperative doesn’t sound like a bad one.

But when you dig into it and actually explore how such a thing would work, it looks more and more like a camel to me.

First, the stated objective of a public plan cooperative would be to step up market competition to lower costs—to negotiate lower prices and more efficient provider treatment protocols. The argument goes that the existing plans aren’t trying hard enough.

OK, let’s start with the notion that a co-op can do a better job of negotiating prices and protocols. But wait, on day one how many members does the co-op have. Well it has no members on day one. So, the co-op's provider relations guy goes to the doctor and hospital administrator and demands better prices and protocols. My guess is the provider’s response would go something like this, “So you are here because your stated objective is to screw my reimbursement down more than it is, you have no members now, and if I give you the rates to take members away from the existing health plans you are going to make life even more difficult for me than those existing health plans have?" My guess is that when the provider stops laughing…

Next, the co-op has to hire people to staff its management and operations ranks. Who are they going to hire? Out-of-work realtors? Obviously, the co-op will have to hire experienced health plan people. First, for those of you in the business, just think of all the competition for your services if 50 new health plans suddenly get lots of capital to start-up. But secondly, if the co-ops hire the same people as are running today’s health plans—particularly people in not-for-profit plans now—why would the end result be any different?

And, how will the co-op compete for these new hires? Why would the best talent want to go to work for a quasi government agency paying government pay scales whose future is in doubt? Will the co-op pay more than existing health plans to lure talent away? If so, how will their administrative costs be any lower? After all, payroll is at least half of total overhead costs.

Just how will the government decide how to capitalize these new plans? In the 90s we spent $75 million to $100 million to capitalize a health plan in each of the major markets. How much capital will each co-op get? In the market, that question was answered through the creation of a business plan. Any private not-for-profit health plan that did not ultimately meet minimum scale or reserve requirements was scuttled. Just how much, and over how many years, will the government dump capital into these plans and who will make the decision that the limit has been reached? Will co-ops have an unlimited access to government capital without accountability? No matter how ineffective they are will the government just keep subsidizing their losses?

Already, there is talk in the Congress about allocating $10 billion to build these things.

This whole debate gets back to the simple question I have not heard any of the co-op proponents answer: Just how will a co-op turn out to be any different than North Dakota Blue Cross with its profit percentage of less than 1% and its board a cross section of the provider, business, and consumer community?

Or for that matter, any one of the dozens of other similar Blues plans and not-for-profit community-based HMOs in just about every county in America?

But when you are grasping for a compromise—and putting the urgency for compromise ahead of good policy—it sure is easy to come up with a camel.

Related posts:

Here's an Example of a Cooperative Not-For-Profit Health Plan--North Dakota Blue Cross

Health Care Cooperatives--An Old New Idea--So What's a Blue Cross Plan?

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

Time to Take Another Look at the Wyden-Bennett Healthy Americans Act?

This from today's Kaiser Health News:

"A bipartisan proposal from Sen. Ron Wyden, D-Ore., to replace the tax exclusion for employer-based health benefits with a standard deduction would do more to contain healthcare spending than Senate Finance Chairman Max Baucus' plan to cap the exclusion, according to a recent assessment by the Joint Committee on Taxation,' Congress Daily reports. 'The revelation is lending a boost to Wyden as he attempts to sell Finance members on the key idea of his signature Healthy Americans Act.' The bill, which the CBO has scored the bill as deficit neutral, "has 13 co-sponsors, including Sens. Debbie Stabenow, D-Mich.; Bill Nelson, D-Fla.; and Mike Crapo, R-Idaho, who all sit on the Finance Committee" (Edney and Cohn, 6/18).

The Congress is stuck in the mud on health care reform.

The Congressional Budget Office (CBO) continues to demand real health care reform and not the cost containment “lite” stuff they’ve largely been asked to score so far.

The recent letter from CBO Director Doug Elmendorf to Senate Budget Chair Kent Conrad is a very important document. Really, Elmendorf has laid out a detailed roadmap all but saying—“Here’s how I can give you what you are looking for.”

The message to the Congress is clear—stop playing around the edges and get serious about real health care reform:

In the absence of significant changes in policy, rising costs for health care will cause federal spending to grow much faster than the economy, putting the federal budget on an unsustainable path. This letter responds to your request for information about the features of reform proposals that would affect federal spending on health care over the long term.

As you noted, many experts believe that a substantial share of spending on health care contributes little if anything to the overall health of the nation. Therefore, changes in government policy have the potential to yield large reductions in both national health expenditures and federal health care spending without harming health. Moreover, many experts agree on some general directions in which the government’s health policies should move—typically involving changes in the information and incentives that doctors and patients have when making decisions about health care.

However, large reductions in spending will not actually be achieved without fundamental changes in the financing and delivery of health care. The government can spur those changes by transforming payment policies in federal health care programs and by significantly limiting the current tax subsidy for health insurance. Those approaches could directly lower federal spending on health care and indirectly lower private spending on it as well. Yet, many of the specific changes that might ultimately prove most important cannot be foreseen today and could be developed only over time through experimentation and learning. Modest versions of such efforts—which would have the desirable effect of allowing policymakers to gauge their impact—would probably yield only modest results in the short term.

Therefore, one broad long-range approach for reform that has drawn interest recently would combine specific policy actions—to generate near-term savings and provide experience that would lay the groundwork for future savings—with a mechanism or framework to impose ongoing pressure for achieving efficiencies in the delivery of health care. The effectiveness of that path would depend ultimately on the willingness of federal policy to maintain significant and systematic pressure over time and would require tough choices to be made. Without meaningful reforms, the substantial costs of many current proposals to expand federal subsidies for health insurance would be much more likely to worsen the long-run budget outlook than to improve it.

On the cost containment side, Elmendorf’s letter is very specific in suggesting some things that will work—many of them taking the power out of the Congressional hands and putting it into that of a third party to keep the pressure up over time. No more SGR back peddling.

Then there are taxes. Readers of this blog know that I have been critical of using old-fashioned tax increases just to raise cash to pay for health care entitlement expansion. Why would we ever want to chase something--health care--that has been growing almost four times faster than the wage rate with taxes?

But that is different from using tax policy to encourage efficiency in the marketplace. From Elmendorf’s letter:

CBO’s Budget Options volume discusses a number of such changes. One option would replace the current tax exclusion with a refundable but more limited tax credit. Another option would limit the amount of health insurance premiums that could be excluded from income and payroll taxes to specific dollar amounts that represented the 75th percentile of premiums paid by or through employers. These approaches would change workers’ incentives about how much insurance to purchase and how much care to demand, and they would increase federal revenues by several hundred billion dollars over 10 years.

The Wyden-Bennett Healthy Americans Act is a health care reform proposal that would creatively used the tax system to change the incentives—in this case replacing the tax exclusion with a tax credit as Elmendorf has suggested.

Some have been critical of Wyden-Bennett because the first version would have ended the employer-based system of health insurance, as we know it. But I was pleased to see Senator Wyden amend the bill to enable employers to continue their benefit plans.

Some have suggested that my enthusiasm for Wyden-Bennett is inconsistent with my being so hawkish on cost containment.

For sure, Wyden-Bennett needs to have its cost containment effort expanded. Don’t be surprised to see some movement on that score.

But right now both of the Senate health care committees are stuck in the mud. They have health plans that are pricing way north of what we can afford—the Finance Committee at $1.6 trillion—and they don’t have much more than $300 billion to $400 billion in scoreable savings to offset that cost.

It’s time to take another look at the bipartisan work Wyden-Bennett has accomplished in order to get the process unstuck. Elmendorf seems to be all but begging Senators to take another look at some of the key elements of the bill.

Since the CBO has already scored the Wyden-Bennett Healthy Americans Act as deficit neutral, let me suggest that should come in handy to Senators who can’t seem to make any progress with the CBO.

Senate Finance Scrambling to Find a Way to Pay for Health Care Reform While CBO Warns That the Congress Needs to Get Serious About Cost Containment

Toldjaso.

As I have been posting, it has been my observation that the Democrats were headed for a health care bill that had a little cost containment window dressing, would take a little off the top in provider payments, and use lots of new taxes to pay for at least half of it. I also argued that would not be health care reform but just entitlement expansion.

Apparently the CBO (God bless’em) agrees with me. This from today’s Washington Post:

"President Obama's plan to expand health coverage to the uninsured is likely to dig the nation deeper into debt unless policymakers adopt politically painful controls on spending, such as sharp reductions in payments to doctors, hospitals and other providers, congressional budget analysts said yesterday.

"While popular measures such as increasing preventive care, expanding the use of electronic medical records and rewarding doctors for choosing more effective treatments have the potential to lower costs, 'little reliable evidence exists about exactly how to implement those types of changes,' Congressional Budget Office Director Douglas W. Elmendorf said in a letter to Senate budget leaders.

"Without meaningful reforms, the substantial costs of many current proposals . . . would be much more likely to worsen the long-run budget outlook than to improve it, he said."

Word is that the latest Senate Finance draft hit $1.6 trillion in projected costs while the CBO is holding firm on demanding scoreable savings.

Well, they can now raise taxes even more or they could take a look at what real health care reform might do to the score.

The Dumbest Thing I have Ever Seen a Health Insurance Company Do––And Three of Them Took Their Turn Doing It in Front of the United States Congress

And, I’ve been in the business for 37 years.

First, let me stipulate we really need a system of universal care where everyone gets to have insurance. But we don’t yet so certain rules are unavoidable until we do.

Here are a few separate clips from today's Los Angeles Times article, "Health Insurers Refuse to Limit Rescission of Coverage:"

"Executives of three of the nation's largest health insurers told federal lawmakers in Washington on Tuesday that they would continue canceling medical coverage for some sick policyholders, despite withering criticism from Republican and Democratic members of Congress who decried the practice as unfair and abusive.

"The hearing on the controversial action known as rescission, which has left thousands of Americans burdened with costly medical bills despite paying insurance premiums, began a day after President Obama outlined his proposals for revamping the nation's healthcare system."

"But they would not commit to limiting rescissions to only policyholders who intentionally lie or commit fraud to obtain coverage, a refusal that met with dismay from legislators on both sides of the political aisle."

"The executives -- Richard A. Collins, chief executive of UnitedHealth's Golden Rule Insurance Co.; Don Hamm, chief executive of Assurant Health and Brian Sassi, president of consumer business for WellPoint Inc., parent of Blue Cross of California -- were courteous and matter-of-fact in their testimony."

"The industry has tried very hard in this current effort not to be the bad guy, not to wear the black hat,' Begala said. 'The trouble is all that hard work and goodwill is at risk if in fact they are pursuing' such practices."

"But rescission victims testified that their policies were canceled for inadvertent omissions or honest mistakes about medical history on their applications. Rescission, they said, was about improving corporate profits rather than rooting out fraud."

"Late in the hearing, Stupak, the committee chairman, put the executives on the spot. Stupak asked each of them whether he would at least commit his company to immediately stop rescissions except where they could show 'intentional fraud."

"The answer from all three executives: 'No."

For those of you not versed in the details of medical underwriting, let me explain a few things.

Lying on your health insurance application is fraud and you can lose your insurance when you intentionally do it to gain coverage. That is good policy and basic to contract law. An example would be someone who went to the doctor because of severe headaches, didn’t disclose it when applying for insurance, and a short time after getting coverage was diagnosed with a brain tumor. Common sense would tell you not to withhold such information—particularly when the application makes you attest that you have revealed all.

But sometimes people forget to put things down. Let’s say you went to the doctor for a back problem onetime five years ago, didn’t put it down, and were diagnosed with diabetes a few months after your health insurance became effective.

It would be an inadvertent and non-material misstatement to sign your health insurance application having promised you told all but left something, that in the end did not matter, off of it. It is always important to be thorough and honest in filling out a health insurance application but sometimes we forget things.

In all the years I worked for an insurer—from underwriter to COO—we never penalized anyone for an inadvertent and immaterial misstatement. I never knew of a competitor who did either.

Why would you? How could you sleep at night knowing you retroactively canceled (or rescinded) a sick person’s health insurance because of something that really didn’t matter?

Fast forward to the California rescission controversy. A number of health insurers have been doing just that. More, they continue to defend it even in the face of California Insurance Department fines and plenty of lawsuits.

Then, they do it right in the middle of a national health care debate the day after the President of the United States flew to Chicago and told the American Medical Association private health insurers should have to compete with a public health plan that could well run them out of the business if it ever passed.

So here they sat in front of a Congressional Committee and were asked if they would stop retroactively canceling sick people’s health insurance—not for real fraud but—for inadvertent non-material reasons.

Representatives of the three companies each took their turn and said, “No.”

Two things.

I’ve brought a lot of good folks into this industry over the years. People who still need this to work so they can pay for their kids’ college education and fund their retirement plans.

This is the kind of corporate leadership they have to rely upon so that this industry can continue?

The current health care debate turns on who can best make our system work. My sense is that it will take the genius of individual creativity to separate the 70% of this health care system that is the best in the world from the 30% that is waste. Who can do the best job on that? Government? The private sector?

I believe the private sector.

And, this is the leadership I have to defend?

July 2008 post:State of California "Fearful" of Enforcing $1 Million Fine Against Wellpoint/Anthem Blue Cross for "Illegal" Health Insurance Policy Rescissions

February 2008 post: Health Insurance Industry "Racing to Defuse a Growing Furor Over Retroactive Policy Cancellations"

December 2007 post: California Insurers Lose a Big Court Case In the Health Insurance Policy Rescission Controversy

November 2007 post: Report: "Health Insurer Tied Bonuses to Dropping Sick Policyholders"

March 2007 post: California Fines Wellpoint $1 Million for "Unfairly" Rescinding Health Insurance Polices--Was Wellpoint Fair or Not?

Just Which $2 Trillion Were They Talking About?

Just two weeks after putting $2 trillion in health care cost reductions on the table, the response to President Obama's plan to cut the health care providers by a total of $618 billion over the next ten years ($305 billion in his original budget and another $313 billion this week) is startling--if not in the final analysis predictable.

Given that, at present trends, we are on our way to spending $35 trillion on health care services during the next ten years you wouldn't think $618 billion (two percent of $35 trillion) would be so hard for the health care providers to contribute to the effort--especially after they told us cutting $2 trillion was something they knew how to do.

First, the American Medical Association (AMA) made it clear to the President he'd better not cut their payments by imposing a Medicare-like public plan, complete with much lower reimbursement rates, on them.

And at today's speech by the President to the AMA, did you also notice how quiet the audience was when he also suggested that an independent body of experts, MedPAC, rest control of Medicare reimbursement from the Congress as a means to further control costs?

But it isn't just the AMA that suddenly can't find any savings to put into the health care pot. It's all of the other $2 trillion health care providers as well--hospitals, drug companies, and medical device companies.

This from Monday's Wall Street Journal:

"The sharp response from the hospital industry, which under the proposal faces reductions in subsidies exceeding $100 billion over 10 years, illustrates the administration's challenge in winning the deep concessions from industry needed to pay for the overhaul. After agreeing in May to contribute to a $2 trillion reduction in health spending over 10 years, the hospital industry is now bristling at the prospect of more givebacks -- this time, cuts that would be set in law.

'We're certainly disappointed,' said Rich Umbdenstock, chief executive of the American Hospital Association, an industry group. 'It will be very, very difficult for hospitals to live with cuts of that magnitude.' He said what concerns the group is that the cuts were being laid out before lawmakers have agreed on concrete proposals for reducing the number of uninsured...

"The pharmaceutical industry recently has been negotiating with the White House and Congress over how much it would contribute to the cuts, said several people familiar with the negotiations. Drug companies were initially asked to contribute $100 billion over the next decade, but pressed for their contribution to be closer to $60 billion, they said. The industry argued that giving up too much in payments would cut into spending to develop new drugs.

"Otherwise we might all just become generic drug companies,' said one industry official familiar with the talks. The White House on Saturday said it would save $75 billion over 10 years by paying better prices for drugs under the Medicare Part D prescription drug plan.

"The Access to Medical Imaging Coalition, which represents makers of medical-imaging equipment, said the administration's proposed cuts 'will impair access to diagnostic imaging services and result in patients' delaying or forgoing life-and-cost savings imaging procedures."