Matthew Holt

Live from Aspen: the moderates’ view on Obama health reform

6a00d8341c909d53ef0105371fd47b970b-320wi Paul Krugman’s article today excoriates the Blue Dogs and a former dog Billy Tauzin in particular. He also (as I did a week or so back) wonders where the Dogs were when the Bush tax cuts were bumping the deficit more than the proposed health reform bill will and redistributing wealth from future poorer taxpayers to the very rich in the process.

Funnily enough I’ve been at the Aspen Health Forum where the self-same Billy Tauzin used his not inconsiderable Cajun charm and a dollop of PhRMA’s money to buy me (and a bunch of others) a whisky and a s’more on Saturday night, and took part in a couple of panels I watched on Sunday. We had a couple of brief chats, one about his cancer treatment and another about getting big Pharma to behave better. He claims some progress there (voluntary restrictions on DTC, better posting of clinical trial data, reductions in marketing excess to docs). I suggested that there was more progress required both in pricing policy and PR. He said it was hard, I told him that was why they paid him the big bucks.

More importantly, Tauzin was on a panel with Tom Daschle (former Dem Senate leader, but a red state Dem) and John Porter (former liberal Republican, now heading Research America) which essentially gave the dwindling moderate middle of American politics’ view of health reform. (Video may appear here at some point but isn't there yet).

They all essentially agreed that something called health reform would pass this year.

Tauzin said explicitly that several liberal members of Congress demonstrated by a show of hands at a dinner last week that they thought the Public Option was going to be traded away. They also all agreed that the Blue Dogs in the House wanted the weaker Senate bill to be voted on first, so that they weren’t forced to defend a vote on a more liberal House bill that would be converted to a much more moderate bill in Conference. So the expect a Baucus-lite compromise.

While the three (former) Congressmen’s optimism about reform passing isn’t that widely shared, everything that they talked about—matched with some just excellent discussion from Don Berwick in other sessions—indicated to me that the political will to really fix health care is just not here.

All of them agreed that one way to get the uninsured covered was to get the alleged 10–15m of the uninsured who are eligible for Medicaid/S-CHIP into those programs. Of course out in the real world, last week California started throwing people out of those programs because it can’t afford them. So suggesting that we’re going to enroll a significant chunk of the uninsured in Medicaid without a dedicated funding stream for it (which I don’t see coming) is fantasy. Tauzin did call for automated enrollment somehow, but also noted that there was a similar deal to automatically give seniors’ money in the Medicare Part D legislation which was never put into practice because the government didn’t have the money. Same Story with subsidies for the middle class. Here’s a money quote from the NY Times today:

Senator Ron Wyden, Democrat of Oregon, acknowledged that “there are some questions” about whether insurance would be affordable. “People who are making $50,000 or $60,000 a year and are spending $13,000 on health insurance may not get much of a subsidy,” said Mr. Wyden, a member of the Finance Committee.

Which leads back to the discussion about costs. You know, the issue that the Blue Dogs are so worried about. All three were upset that the CBO is refusing to score prevention, wellness and other things that take years to show up on the positive side of the ledger. But none of them had any real good ideas about how we actually could cut costs in the 10 year time period CBO is scoring.

And the answer of course is that it’s going to require huge changes in payment schemes that are only doable if, and it’s a big if, we get the access system sorted out. This is the sort of thing that Massachusetts is now discussing three years after getting sort of universal insurance done. Given that we’re not even talking about putting the (sorta) uninversal insurance mandate into effect until 2013, and that CBO didn’t even score any cost reduction credit for the Daschle/Orszag Health Board idea, it’s impossible to see where real cost reduction is going to come from.

If Jack Wennberg had been in Aspen he’d have laughed the moderates off stage for suggesting that a lack of long-term prevention has been the driver of health care cost increases. The answer of course is that the the cost driver of American medicine has been the supply side. So to reduce costs we need both a serious restructuring of the supply side—that is fewer hospitals, imaging facilities and specialists—and a significant change in which we pay for health care. A payment stream that gives intermediaries bundled, global payments for better health outcomes.

That of course requires reforms that are just not discussed in DC, although there are in THCB-land. They’d need to include.

1) Getting everyone in one population vehicle/pool which can be managed longer term. Any system—even one with an individual mandate—that relies on people receiving a subsidy and switching between Medicaid and loosely regulated plans has no hope of establishing such a population. We need everyone in one pool and at the least Dutch-style managed competition between the plans. It simply cannot be done with Medicaid expansion, a fall back small public plan, Medicare all remaining separate and then having the worst buyers in health care, employers, being responsible for most care. No one will have a vested interest in longer term health outcomes or costs, just as it is now.

(BTW having made clear that he was speaking for himself and not his company, in a separate panel, Regence Blues’ CEO Mark Ganz stated his strong preference for ending employer health care and going to a Wyden type individual mandate).

2) The intermediaries (whether private plans, Medicaid, CMS or whomever) need to be mandated to figure out a formula to pay providers (and incent consumers) that moves away from FFS to some type of performance/outcome-based measures. Again, nothing in the current bill comes close (although Berwick suggested some things in the HELP bill might slowly push us there).

3) We need to rationalize the supply side. I called this the “What’s good for General Motors” idea a while back. But clearly Obama’s need to get the AMA, AHA, PhRMA et al to agree to be in the health reform camp for the modest proposals on offer now means that doing this much tougher part is just not on the table.

Krugman’s version of how to restrain costs remains similar to the Jacob Hacker model in which the public option needs to become a big ugly buyer and essentially use its (and Medicare’s) heft to restructure the health care system—and pay it much less. Given that even the Stark bill is now claiming the public option will only have 11 million people in it by 2019, it’s impossible to see how that will work.

Because the Blue Dogs are opposing the public option and the employer mandate (which is about the only route we’ve got to getting to universal coverage) Krugman accuses them of being corporate tools. And it’s true that their moderate approach, as exemplified by Tauzin, Roberts & Daschle in the pleasant surrounds of Aspen, means more money for the health care industry in the short and medium term.

There’s nothing in the current proposals that really guarantees uninversal coverage or puts in a mechanism for cost control. So whatever happens, we are going to have the ugly discussion on costs done in something approaching the General Motors way at some point in the medium term future. Maybe it’ll be prompted by the Chinese asking for their money back but the evidence is that no one, particularly not the moderates, is ready for that discussion yet.

Coda: Also at Aspen, Goldie Hawn has done something really remarkable for kids in schools. Watch the video on her page for an explanation (although you have to put up with Chris Matthews interrupting all the time) or read this

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14 replies »

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  2. Matt,
    Capping awards doen not change the practice of medicine. Decreasing lawsuits will change the practice of medicine. Ther is a difference.
    you know this. When are you going to wake up?

  3. Steve,
    The idea of “litigation lite”, besides being profoundly cruel, is also likely not going to work.
    In California, we passed a law limiting malpractice awards, basically making the entire population “litigation lite”. It has had exactly zero effect on HC costs. It seems like big awards or insurance are causing the pain, but the real data does not support this conclusion.

  4. Matt, unsurprisingly I agree with your main points again.
    I’ll put aside my well-beaten dead horse about a two stage process (universal care with token system reforms now, deep system/payment reforms in 2-5 years) to bring out a conceptual point that I think is worth making explicit:
    You referred to provider-driven costs and Deron responded that chronic disease should be considered as a cost driver “near the top.” There are many ways to legitimately explain the excessive cost in the system, and when you sum all those factors they add up to way more than 100% of the cost.
    As Deron says, it’s true that about 75% of costs are for chronic diseases. It’s also true that most of those costs (70%?) are “preventable” through lifestyle changes and better medication compliance. So let’s say that’s around 50% of costs that could be removed from the system.
    It’s also true, however, that our unit costs for care are generally 50-100% higher than those in Europe. I don’t know that anyone has calculated an average fee difference for the US, but let’s say it is 75% higher for the sake of argument. So, if we paid European rates and didn’t change anything else, we could also cut our costs down about 43%. Since the fact that Europe exists means those systems are possible to achieve (not easily, of course), we can say that around 43% of cost could be removed from the system through prices in line with the rest of the world.
    You could do a similar estimate for utilization as a cause of higher costs. We often see a 30% figure thrown around based on Wennberg data. We could save 30% through lower utilization of unnecessary treatments or the unnecessary selection of a more expensive treatment when a less expensive option would do.
    Note that we are at 123% of potential savings.
    You could also generate an estimate of how much malpractice and preventive medicine make an impact, how much self-dealing makes an impact, how much oligopolistic markets make an impact, how much fee for service makes an impact, how much lack of cost sharing makes an impact, how much price and quality opacity makes an impact, etc.
    What all of these exercises do is take one variable and estimate how much of an impact you could make if you tweaked that variable as much as you reasonably could while making as few changes as possible elsewhere in the system. And the maximum size of a “reasonable” or achievable variation here is a judgment call.
    So my first pedantic point is that when you add up all these percents, you get a potential reduction in costs way more than 100%, which is absurd. The reason is that each estimate assumed other things would pretty much stay the same, but now we are assuming that all the factors change together, which invalidates the original estimates. If you reduce unit costs by 50% of the original, then all other reductions are cut in half in relation to the original amount. In general, savings in one area reduces the possible savings in other areas.
    My second pedantic point is there is probably no such thing as a “largest” reason for why our costs are higher. It depends on what variables you want to look at and how much variation in those variables you are willing to consider as realistic.

  5. Matthew – You continue to underestimate the demand side as a contributor to increasing costs. If 75% of our costs come from chronic conditions and most of those were preventable, how can that not be a cost driver worth listing somewhere near the top? I can probably answer my own question by saying that it is not poltically popular to tell voters they are part of them problem.
    By the way, I’m jealous because Aspen is amazing!

  6. You could cut health care costs while retaining existing health care coverage by offering consumers a “litigation lite” option. Consumers selecting this option would retain their full existing medical coverage at a fraction of the cost. In exchange, consumers selecting this option would agree to waive medical malpractice claims except in cases where gross negligence or willful misconduct could be proven beyond a reasonable doubt. Cadilac coverage, including full “medical malpractice” coverage would continue to be available but many middle and lower income families would probably prefer the lower cost “litigation lite” option

  7. Do I hear the resurrection of the Wyden-Bennett here? This is really hard work.
    I’ve suggested to my friends, that they send their Congressperson/Senator a copy of a provider bill or insurance premium with a post-it note stating they can’t take this anymore — fix it.
    Of course Pres. Obama could just leverage Medicare (Medicaid) to bundle payments for at least 40% of us. Healthcare its just too big to fail, declare an emergency and go for it. It will either crash the “system” or begin the rebuild.
    I guess its a good thing drugs cost so much so Billy can afford to buy a round of drinks for the wonks.

  8. Almost all health plans have spent much time and effort over the last many years disaggregating physicians (divide and conquer) to a substantial extent. This payor-driven disaggregation is also supplemented by recent federal antitrust policies with appear to many to be out of touch with many of the realities of 2009. We should all pitty the poor little multi-billion dollar insurance companies that have to be protected by the FTC from a few physicians who want to work together to improve care and fight back against oligopsonistic pricing and take-it-or-leave-it contracts.
    Now it appears that there might be some beneficial aspects to physicians aggregating their efforts better to manage care and share information and, maybe, some type of risk. So, all you docs who we’ve tried to keep from working together…now we might need you to do just that.

  9. Bundling can work under a non-Federal government model if the government will at least use the comparative effectiveness/IOM tools to provide a medic al malpractice liability “safe harbor” for not ordering every test under the sun.

  10. Since bundling is an incentive to minimize care, and any care denied can be used to demonize and sue the decision-maker, no one but the Federal government can possibly create and survive bundling.
    No form of capitation is going to arise from the private sector after the HMO PR disaster of the 90’s. No provider is safe in America saying “you could have this test, but only one in a thousand show anything useful, so I’m not going to order it.”

  11. Thanks for ruining my day with discouraging words. (:
    I am with you; bundling is the only way to go. God knows I don’t like insurance companies, but maybe it will take one of them to institute bundling (if that would be legal – ???) since Congress is too gutless.

  12. The question is not whether a healthcare reform will pass or not, the question is who will be the beneficiary. With mandating all to have healthcare, we are increasing the insurance and hospital business without thinking that many who do not buy do not have money to buy.
    I see some stat that many of these make decent amount of money..I think people forget that even those making decent money have necessary expenses. And I am not talking top notch restaurant bill..

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