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Do the Dems Have the Money to Pay for Reform?

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Robert Laszweski has been a fixture in Washington
health policy circles for the better part of three decades. He
currently serves as the president of Health Policy and Strategy
Associates of Alexandria, Virginia. You can read more of his thoughtful
analysis of healthcare industry trends at The Health Policy and Marketplace Blog.

If I knew anything about computer graphics I'd post this really neat picture of a meter–sort of like a your car's gas gauge.

The full point would represent the cost of a health care bill–somewhere in the $1.2 trillion to $1.5 trillion range.

Each time someone put up scoreable savings I'd post it toward achieving the ultimate objective.

So, you will have to imagine my meter.

Here's where I think we stand today.

First, the President's original budget proposing to cut $309 billion over ten years from providers–including a lot from Medicare HMOs and elder care providers–looks to me to be on track to end up in any final bill and scoreable.

So, I feel pretty confident about posting $309 billion on my health care reform meter–the tank is about a quarter full.

The President's proposed tax increases, as part of his health care "down payment," that would affect charitable and home deductions for high income folks are dead–can't post that one.

Then there is the $2 trillion in "savings" identified by the stakeholders
this week. Nothing but empty boxes because none of the stakeholders are
willing to take any risk they will happen (put their money where their
mouths are). That one has already been lost in the shuffle here in
Washington–doesn't budge the meter.

The big one everyone is talking about is the proposal to limit the tax exemption for health insurance benefits–either
"Cadillac" plans in excess of a standard plan or just phasing out the
exemption for high-income earners. The most likely method would be
hitting the high earners out of a Democratic fear of taking the unions
on (just ask the Chrysler and GM bond holders about that one). The
latter version would be worth about $550 billion over ten years.

Being able to post this one would push the meter way up to almost three-quarters of a tank.

The President, in a letter
to Democratic committee chairmen this week, was non-committal on the
benefit tax but all the signs are he'd sign a bill with such a tax for
high income earners in it despite his sharp criticism of John McCain
last fall for another version of health benefit tax changes. Just so
long as it looks like the Congress made him do it.

However, I am also told that such a tax is not a slam-dunk among all Democrats. After all, the loss of the health insurance exemption for a family would probably mean $3,500 – $4,000 in new taxes. That will not be popular in many high-income states–New York for example.

It's too early to post this one to the meter but if a health care bill is to be had this is the type of thing it will take.

It is important to note that the White House has been talking about "evenly" paying for health care from both cuts to the system and new taxes. The tax on high-income earners' health benefits gets the job done almost all by itself.

There is also talk about tax increases not directly related to the health care system–a
tax on sugary soda and alcohol for example, that would provide some
modest additional money. These aren't automatic either–their powerful
lobbies are in high gear.

In the President's
letter it is also important to note that he called for $200 billion to
$300 billion in additional Medicare and Medicaid provider cuts.
The President specifically said he would be "open" to Jay Rockefeller's idea of putting MedPAC in charge of Medicare and Medicaid provider reimbursement–the
Congress would have to overrule their decisions under a base
closing-like model. That would definitely provide the scoreable savings
they need but it would also be very contentious–I am not sure Congress
is willing to give up that power and I know the providers would fight
it to the death given the easy touch Congress has been on the doctor
cuts in recent years. It smacks of the "cost board" so many oppose.

The President's interest in it may only be a negotiating tactic–"Give me something scoreable or you get MedPAC."

Well,
$309 billion in already announced cuts, plus $550 billion in taxes from
limiting the health care exemption, and $300 billion more in Medicare
and Medicaid cuts would take us to $1.16 trillion.
That about hits the "full" mark on my meter.

Does that mean we will have health care reform?

Neither
the $550 billion tax increase nor the $200 billion to $300 billion in
additional provider cuts are in the bank yet or on my meter.

There are also a number of non-financial issues that could wreck health care reform.

The big one is the fight over a public plan.

As I have told you before, I do not see a Medicare-like public plan option making it to the finals.
Too many moderate Democrats are worried about the "unintended
consequences" and even the providers have come to understand it
wouldn't be just the insurance companies that would take it on the chin
from a Medicare-like public plan. Proposals to require a public plan to pay 10% more than Medicare won't be enough to placate those concerns.

The fact that less than half of the Senate Democratic caucus signed a letter supporting a public plan last week says it all.

I also thought the President's support, in the letter to the Chairmen, for an individual mandate
so long as it did not create a hardship on consumers was important. As
I have posted before, I do not expect an individual mandate to survive
but a soft mandate–mandating only those who can truly afford coverage
or are eligible for an employer plan–might make it.

I do not see an employer mandate surviving–there is too much opposition from employers worried about losing the benefits of ERISA for that one to make a final bill.

But, all of these issues are what the debate is about.

Getting a health care bill will require navigating one giant minefield–and we haven't even entered it yet.

But soon.

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9 replies »

  1. Margalit, thank you for the comments. The coordinators are medical professionals – nurses in our case but they could be otherwise with a sophisticated IT system to process reporting and medical billing. Think about medically trained Social Security Disability Adjudicators. The payers did pay for the system but had no control over the medical care. We actually operated the system on the float from the medical payments that flowed through us. There was a small percentage of the medical fees collected as payment. With savings averaging better than 40% measured against pre-managed care, paying for the care coordination was not a problem.
    Unlike a HMO, our lean medical care system was designed to be cooperative and not adversarial. Pay providers fairly and promptly, don’t require prior approval for services, and provide assistance to physicians and patients when necessary. The system actually operates more like a well managed PPO than a HMO. Patients can choose any provider in the system but the providers must provide lean medical care with all patients.
    I challenge readers to answer the question of how to reduce medical costs without managed lean medical care. That is the issue at hand. We’re smart enough to figure out how to pay for it without raising medical costs.

  2. Peter, I don’t understand who pays the coordinators. It is definitely not the doctor or the patient. All is left is the payer. In that case, how is this different than an HMO? Are these coordinators medical professionals?
    From what I saw on the website, this was applied to worker’s comp, which is notoriously slow to pay and requires mountains of documentation. That could explain the doctors’ satisfaction.
    I’m just not too terribly sure how this is applied to general health care without turning into a giant HMO.

  3. Whenever I see another discussion about the cost of health care reform, I want to tear my hair out. That’s actually not such a big deal since I don’t have much hair left.
    The private insurers and medicare already tried cutting fees and limiting services. It clearly hasn’t worked. I have been the leading, perhaps only, proponent of lean medical care managed in a non-adversarial system. This system has worked to reduce medical costs by more than 35%, albeit in a much smaller model than anything like a national health care program. Simply put, I propose:
    1. Form a super national network of care providers who voluntarily subscribe to lean medical care principles. They will do this if seduced by proper incentives.
    2. Put together a management team of care coordinators who ensure that the providers stay compliant.
    3. Let the payers, public or private, just pay for the medical services and stay out of medical management. Payment must go to the care management entity which then pays the care providers. We can run the care management entity on the medical payment float.
    The details of this system are more or less detailed at my blog website, http://www.leanmedicalcare.org.
    One cannot manage health care costs without insisting that doctors practice lean medical care. They write the prescriptions and order the services that are the basis for all medical costs. Get doctors to treat patients by focusing on appropriate care, eliminate the excesses, and the patients will benefit, while we save hundreds of billions of dollars in U.S. health care costs.

  4. I’m sorry, but it still sounds like we’re just moving money around without really addressing the cost drivers. The exception would be jd’s point about the savings to be had by standardizing the claims, eligibility, and other administrative transactions between providers and insurers. There’s many billions to be had there because it is extremely wasteful at the present time.
    I’m with Ravi. Throwing all of that money at our expensive system is counterintuitive, at best. It’s all about the order in which we address things. If we do it right, we can use early savings to fund future steps in the process. I’m not saying there won’t be some difficult parts and confrontations to this. I’m just saying I’m really not feeling that I want to be putting more of my money into the system than I already am.

  5. Bob, regarding the industry players’ commitments you write: “Nothing but empty boxes because none of the stakeholders are willing to take any risk they will happen (put their money where their mouths are). That one has already been lost in the shuffle here in Washington–doesn’t budge the meter.”
    I’m not sure what you mean or what you think they could have done differently. A lot of the changes that need to happen must be enabled by legislation. The stakeholders are saying: legislate us in these ways that will save money. In particular, streamlining and standardizing the claims/eligibility/etc. process among insurers now seems like a sure thing. Why don’t you think so? It’s not like AHIP has been hesitant to offer this and other suggestions for reform this time around….it’s not going to pull the ball away like Lucy to Charlie Brown.

  6. The Dems do NOT have any money at all. They are in debt to entitlement programs by approximately $80 trillion. They need the Total Money Makeover. We need to say STOP THE BORROWING.

  7. This is a useful exercise, Robert! The employer mandate is actually a really big deal, because otherwise it will cost MORE in individual subsidies and your $1.2 billion isn’t enough. If you don’t have the employer contribution, then you need more tax dollars/Medicare cuts, no?
    The additional Medicare/Medicaid cuts will come from hospitals and specialist physicians, and how that’s going to happen is that the relevant interest groups will be told: “Here is how we want you to achieve your “voluntary” savings. So shut up and smile while we shove them down your throat. ” That will be fun to watch!
    The real reason the public plan will cause problems is that to “work”, it will require a provider “cram down” of Medicare rates- e.g. you have to accept Medicare rates for the public plan or you’re out of Medicare. Otherwise, it doesn’t save anyone any money (unless you want to build a completely new provider payment model and replace DRG’s and RBRVS).

  8. I am sorry to keep on hearing that we need money to pay for reform. If we have geniuses like these in DC or advising those in DC, I wonder where the health reform will go.
    So we are talking about a system which is overly expensive, overly bureaucratic, overly stale, and overly wasteful. And now we need to put few hundred billion dollars to fix it.
    Give me a break!
    It may be OK to put some seed money and let it refinance. But asking to pour more money seems to be against the common sense.
    And we should not be promoting the idea.
    rgds
    ravi
    http://www.biproinc.com
    blogs.biproinc.com/healthcare

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