Matthew Holt

Connecting finance to coverage

Repeating his message that Health Costs Are the Real Deficit Threat OMB Director Peter Orszag goes into the not exactly friendly territory of the WSJ Opinion pages and explains that practice variation is unnecessary and wasteful, comparative effectiveness research is a good idea. and that changing financial incentives for providers is necessary if we are ever to get health care costs under control.

The question is, how much of this gets included in the woffling coming out of Sen Max Baucus’ Senate Finance Committee? Here’s the press release on the options they’re considering. It’s a little like Stalin in 1930 saying, ‘the people are starving, we may collectivize the Kulaks, or we may rent them their farms back, or we may do nothing, or all of the above”. OK you may think I’m kidding but they give four different options for what a public plan may look like, six different approaches to small group and individual market reform (none of which deal with the smallest employers), and nothing about Orzsag’s concept of “changing financial incentives for providers”. Apparently that’s unrelated to insurance reform. (Yes yes I know they’ve floated some trial balloons about that too….)

What worries me is that because of the downturn and Orszag shining the light on the finance issue, we may have the chance to both fix coverage and finance. But I don’t see this all happening together.

So far I haven’t seen anything to change my mind about what’s going to come out of this process. So to bore all of you still reading I’m going to repeat what I said when I reviewed Tom Daschle’s (remember him?) book Critical.

So my guess is that the Federal Health Board, if it gets established, will get defanged by lobbyists immediately. The consequence of that is that the mish-mash of an “expand what we got now” system will cover a few more people at a lot more cost (as has been the Massachusetts experience). That’s OK because suddenly we’re rich (or at least suddenly the government is pretending it is!). But in a few years the stimulus will end and health care costs will have kept going up. Then we’ll realize that due to more cuts in Medicaid & subsidies for the working poor, and continued cream skimming and bad behavior by private-sector health plans, enough people have fallen through the cracks of the incremental expansion that we’ll be back where we are today again.

CODA: Click here to have some fun as to what happened when Baucus lined up 13 Democratic economists to talk about health care to his Committee and somehow couldn’t find even one who was in favor of single payer…

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  3. Carol – Asking each individual to contribute to reform by taking care of themselves is an exercise in futility. We may have screwed up our healthcare system, but we don’t have to contribute to the fix. That’s what we have a government for.
    Seriously though, I agree with a lot of what you say. Unfortunately we’re going to have to sit back and watch politicians struggle to put a band aid on a heart attack. When the smoke clears, more people will start to realize that we wouldn’t need such an expensive healthcare system if we had a healthy public. The argument that prevention doesn’t save money because people live longer and end up costing more is the ultimate smoke screen of our lifetime.

  4. “The insurance industry is prepared to accept community rating and guaranteed issue in exchange for a coverage mandate,”
    Of course they would, this would provide cover for them to increase rates on everyone. They make 6% profit on the premium, anything that would legislativly drive premium through the roof and force people to buy it will be supported by the insurance companies.
    We the people need to stop community rating, just look what it did to CA small group, they underwrite in a 20% band, from .9 to 1.1. What motivation does someone have the take care of themselves, be healthy, or consume care wisely if there is no cost consiquence?

  5. Frankly, I have not heard one iota of discussion about personal responsibility of citizens of our great country. The single most successful solution for our COST CRISIS (actually an over use crisis) is for each able bodied human being to exercise 3-7 times per week. Meaning reaching a 75% THR. Even slightly overweight to obese individuals are 100 percent healthier that the Non-exercising skinny (not a high percent of these humans exist) slightly overweight to obese humans. Exercise elevates mood, reduces depression, decreases high blood pressure, increases energy, and decreases body fat, etc. If humans were more fit they’d get more sex and there would be less ANTI-DEPRESSANTS NEEDED. We have the greatest system in the world. Furthermore, Medicare and Social Security are not entitlements, as they are now treated. Just about any lazy butt, drug addict or manipulating human can rip off the SS system. I am 100% fed up with all of the useless, ignorant, greedy and incompetent persons running this country.

  6. For anyone who missed the opinion page in the Saturday WSJ–read Peggy Noonan’s column.
    Money fuels health care. The government’s responsibility is to define through legislation how universal health care will be enacted in our country; and, how it will be paid for–as I indicated in my last blog entry. The rest as outlined by Peter Orszag is as Peggy Noonan defines: ” New class gobblrdygook, which is more prevalent than ever, is also more destructive than ever…” We are a great society–but have somehow lost our sense of social justice and responsibility. Once “health care reform” is in place, the government should task the health care professionals with the role of aligning and collaborating: “to “figure-out” how to create more efficient models for care, implement the VA health care record for all, work with our national groups like the ACP, ASCO or other specialty societies to perform meaningful cost effective analysis and demand a coding system that acknowledges management of preventive services and chronic disease. Let’s get the right people performing the right roles in the health care system before the remaining primary care base quits.” Peggy Noonan’s statement that “Do members of the administration speak obscurely because they can’t help themselves, or do they speak the way they speak because they really aren’t that keen to have people understand them?” resonates. Our country needs a defined blueprint to reform America’s health care system that is aligned, collaborative, retains a voice for primary care physicians (and the sanctity of the patient-physician relationship) and as she says: “It would be nice if America were allowed to know what exactly the plan is, and how it would work, and who would pay, and how.”

  7. A couple of days ago, I listened to a conference call with Jonathan Gruber of MIT sponsored by J.P. Morgan Chase. Gruber is a liberal who was one of the key developers of the Massachusetts health insurance reform plan. He also was one of 13 experts who testified before the Senate Finance Committee a couple of days earlier.
    He suggested that there is a strong prospect that a reform plan can pass this year that significantly expands coverage via an individual mandate, an employer mandate and sliding scale subsidies available to those with incomes as high as 400% of the federal poverty level (FPL) or about $88,000 per year for a family of four. The insurance industry is prepared to accept community rating and guaranteed issue in exchange for a coverage mandate, and there will be tighter regulation of the industry as well. The industry would still prefer to vary rates by age and geography as is done in MA (within a 2 to 1 band based on age).
    As for financing, aside from the tax increases that President Obama proposed previously, including letting the Bush tax cuts expire at the end of 2010, 12 of the 13 experts who testified before Senate Finance all agreed that the most logical place to go after serious money to pay for reform is the tax preference currently afforded to employer provided health insurance which is currently worth about $250 billion per year in forgone federal revenue. This could take the form of either taxing benefits beyond some threshold value or converting the current exclusion from income to a deduction and phasing it out for higher income people. The definition of higher income at which the phaseout would start that I heard is $80K for a single person and $160K for a couple which could raise $500-$600 billion over 10 years. There seems to be growing support for this approach, Charlie Rangel’s recent comments notwithstanding.
    The insurance industry is vehemently opposed to a public plan option because it fears that the competition would not be on a level playing field. Even if it started out as fairly level, they think budget pressures would lead the Congress to move toward Medicare’s dictated rates within a few years. They also fear what’s called linkage to Medicare which means providers who currently accept Medicare patients would have to accept the public plan insurance if they wanted to continue to do business with Medicare. Gruber, a liberal remember, suggested that the public plan would not have to be part of the bill at the end of the day if it looked like an otherwise robust bill that provided everything else that liberals want including universal coverage could pass without it but not with it. In other words, Gruber doesn’t think Democrats are prepared to fall on their sword for a public insurance option, nor do they need to. Besides, if the competitive playing field were truly level, it is highly unlikely that the government could offer a plan with a meaningfully lower premium. If that’s the case, why bother?
    Personally, I’ve said for several years that I would be perfectly willing to give up the employer tax preference entirely even though it would cost my family at least several thousand dollars per year in higher taxes. We could protect the middle class by increasing the standard deduction and reducing the lower bracket income tax rates. Unlike the doctors and hospitals, I’m willing to support something that would actually cost me money. When will the doctors and hospitals do the same? I won’t hold my breath.

  8. “This issue is much too ripe to fail this time.”
    I don’t think you understand why reform is being proposed Dr. Rick. All the desire for reform from Democrats has nothing to do with fixing our healthcare system, it is 100% about the money. Congress needs trillions of dollars to save SS, Medicare, and Medicaid. If they don’t come up with this money from somewhere those programs will be cut or eliminated. It takes a cold day in hell to kill entitlements, the verge of federal bankruptsy would be that day. Once killed it would be 50-100 years before any liberal could dare propose such a plan again.
    If you still think healthcare reform even remotely has anything to do with solving real problems of today then point out the difference between liberal plans today and the nationalized healthcare plans they proposed EVERY single year from the 30s thru the 50s. Reform is not a solution to our problems, our problems are finally closer to justifying the solution they have always wanted to pass.
    A public plan won’t raise nearly enough money to shore up the entitlements. They already cost shift a huge portion of public health plan expense to private insurance. As the rolls of Medicare and Medicaid grow they can’t cost shift enough expense to the remaining private plan enrollees. Not to mention another enefficient public plan would just consume more money that they would need to shift somewhere else. A public plan option is counter to the goals of Democrats. They have a really short window to completly take over the system or lose major entitlement programs. Just like California has almost reached it’s day of reconning, entitlement programs and federal deficits are seeing the light at the end of the tunnel.

  9. tcoyote is right that the leadership got ahead of the membership for many of these lobbies. Or to put it another way, there was less unanimity among the membership than might at first appear, and now the leadership is getting an earful. This seems to be especially true with AHA and device manufactures.
    But Matt, I still think this really misses the political reality:
    “What worries me is that because of the downturn and Orszag shining the light on the finance issue, we may have the chance to both fix coverage and finance.”
    When is it going to sink in that we can’t get deep cuts in health costs this year? We certainly can’t get them with a universal health care bill, private plan or no. I’ve been silent for a while because I didn’t have much new to add, but things are coming to pass as I had been saying, and I think will continue to do so:
    1. We will get universal health care, or something close to it, this year. The insurance industry is willing to take on additional regulation in order to get the monkey off its back that has been there since 1996. Health insurance is already a low margin business, so on the whole insurers have less to lose from reform than most people imagine, and more to gain in terms of public acceptance and increased revenue from the formerly uninsured.
    2. However, no other part of the industry is ready to accept deep reforms to how it does business, and certainly not reforms that will result in lower costs. Most are in denial, and in some cases (AHA, AMA) they are in a good position to obstruct reform for the near future. The public believes providers when they cry murder. If Obama tries to take them on right now he risks derailing health reform and even his presidency. He needs to wait for round two of reforms to do that.
    3. Thus, we will get broad reforms to the delivery of care this year….something very similar to what Orzag outlined…but these will be designed to bend the trend only by modestly slowing the growth of costs in future years. Nothing that would reduce total costs from providers is even remotely plausible at this time politically.
    4. We will not increase taxes enough to cover the additional costs of universal coverage right away, which means we will deficit spend to pay for it for anywhere from 2-10 years. Given that we are in a recession right now, deficit spending is actually a good thing (bad time to raise taxes). If we are unable to bend the trend–and, really, we should aim to freeze growth within 5 years so that the rest of the economy can catch up–then this deficit spending is a mistake in the long run. However, unlike many who I respect (including Maggie Mahar and I think Matt), I believe that once we have universal health care the nation’s attention will focus on the true cost drivers of care in a way that it can’t at this time, for all sorts of reasons that I’ve outlined previously.
    If Obama can get phase I of health care reform passed in 2009, then phase II will begin between 2011 and 2013, and that will be the first chance to really dig into the kinds of reforms that tcoyote talks about that actually make big segments of the industry earn less in real and nominal terms. But phase II will not be one bill, it will be multiple bills spread out over years, each with huge battles as oxes get gored.
    America isn’t ready to drop its addiction to health care. But it is ready for universal access to care. Use the latter as a lever to achieve the former over time.

  10. Single payer is not going to happen.But Obama -despite Baucus-is NOT going to back off of a public plan option component to reform.
    The so called extrememely powerfull lobby for the disease care industies are on the ropes and they know it.
    Health care WITH A PUBLIC PLAN OPTION will be a reality by the end of this year.
    This issue is much too ripe to fail this time.
    Dr. Rick Lippin
    Southampton,Pa
    http://medicalcrises.blogspot.com

  11. It is great fun watching all of you try to ban freedom and provide something for nothing to people who only want it at all because they don’t pay for it.
    Get real. And will someone please define “basic healthcare”? That way there might be something for IT to measure.

  12. Orszag wrote in the WSJ:
    “There are four key steps: 1) health information technology, because we can’t improve what we don’t measure; 2) more research into what works and what doesn’t, so doctors don’t recommend treatments that don’t improve health; 3) prevention and wellness, so that people do the things that keep them healthy and avoid costs associated with health risks such as smoking and obesity; and 4) changes in financial incentives for providers so that they are incentivized rather than penalized for delivering high-quality care.”
    Let’s get real. Money is what fuels health care. John Oberlander wrote a wonderful perspective in the NEJM “Picking the Right Poison–Options for Funding Health Care Reform.” This is where Peter Orszag needs to focus. Replacing income-tax exclusion for employer-sponsored health insurance with a deduction; BANNING tobacco, significantly taxing sugar-sweetened beverages, establishing competitive bidding in Medicare advantage will allow us to have health care reform. Physicians need to work collaboratively to “figure-out” how to create more efficient models for care, implement the VA health care record for all, work with our national groups like the ACP, ASCO or other specialty societies to perform meaningful cost effective analysis and demand a coding system that acknowledges management of preventive services and chronic disease. Let’s get the right people performing the right roles in the health care system before the remaining primary care base quits.

  13. Orszag wrote in the WSJ:
    “There are four key steps: 1) health information technology, because we can’t improve what we don’t measure; 2) more research into what works and what doesn’t, so doctors don’t recommend treatments that don’t improve health; 3) prevention and wellness, so that people do the things that keep them healthy and avoid costs associated with health risks such as smoking and obesity; and 4) changes in financial incentives for providers so that they are incentivized rather than penalized for delivering high-quality care.”
    ad 1), I really would like to seriously discuss how EMR can help (I am using EMR already, in a mid-size to large private HC system). To be sure, controlling some useful parameters (like HBA1C, BP) is helpful for sure, but it will not curb e.g. unnecessary hospitalizations, MRIs and back surgery because the judgement needed to say wheter sthg is appropriate is too complex to be evaluated by EMR data mining. But I am happy to be taught how that would work …
    ad 2) I would honestly want to know what big ticket items we need to know so much more about. We do know that ABx do not work for cold and the usual viral sinusitis, and that back sx for axial back pain isn’t really beneficial. The real challenge is to make doctors order value oriented AND TO HAVE PATIENTS ACCEPT THAT (and to reduce the litigational threat).
    ad 3) Agree, but what exactly should we do? I think the recipee for prevention is, for most of us, quite simple and more dependent on motivation (than on detailed knowledge or professional support): stop smoking, eat less (esp. fat, sugar red meat), eat more veggies and fish, do as much exercise as you can, at least 3×20 min. per week (or sthg similar). IMHO, it would work only with a concerted effort by government, schools and physicians, and maybe health care rebates for health conscious people and people moving in the right direction (i.e. give rebates not only to the person with ideal weight, but also to the person getting his/her BMI from 40 to 35 (which is still obese).
    ad 4) Yes, but how? I’d say, decrease reimbursement for lucrative and massively overused treatments like back surgery … if reimbursement is still fair, patients will get the procedures they really need. Of course, this suggestion would create a lobbying storm. But this seems more realistic than a half assed and bureaucratic-complex “pay for performance” or “pay for outcome” scheme that would create an even greater storm.

  14. Really respect Orzsag but of the 4 big items that he mentions in this op-ed 3 of them were rated as having a minimal impact on long-terms costs by the CBO last year and the 4th one is conceptually easy but incredibly problematic to implement an actual payment that accomplishes it.

  15. “It’s a little like Stalin in 1930 saying, ‘the people are starving, we may collectivize the Kulaks, or we may rent them their farms back, or we may do nothing, or all of the above”.”
    Or, Stalin could have simply stopped starving them. He was the direct cause of the starvation.

  16. tc, it seems clear orzag’s focus is on trend-bending (long-term flattening of cost increases; slices shift relative dimensions over time while the whole pie grows more slowly) rather than cost shifting (political poison)

  17. No surprise on the backtracking by the lobbyists. They were WAY out in front of their membership, recalling the AARP’s role in negotiating Medicare catastrophic coverage in 1988. It’s not like there aren’t a lot of options for saving money, but they all reduce someone’s income. Whose???
    Orzsag’s OpEd was depressing. He’s dead on right about the need to control costs, but if he’s really counting on healthcare IT, comparative effectiveness, wellness and prevention and pay for performance to save him money, it’s going to be a lonely and futile dialog w/ his former colleagues at CBO about scoring any of them. Lots more juice in aggressive fraud and abuse prevention (e.g. no more self-referral), bundling and squeezing the high earning specialists and hospitals.

  18. And – quel suprise! – now comes our “health care leaders” spluttering that Obama misunderstood them the other day:
    NY Times 5/15/09 Robert Pear
    Health Care Leaders Say Obama Overstated Their Promise to Control Costs
    (admins: no html controls around here?)

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