The Coming Clash over “Cadillac” Plans

GooznerNow that the Senate has passed its version of health care reform along partisan lines, let’s look ahead to  the single biggest issue that will draw the most heat in conference: The tax on so-called “Cadillac plans,” the largest revenue raiser in the Senate legislation.

As regular readers of this blog know, I consider it ill-considered and unfair, a tax on people stuck in expensive plans because they belong to groups with older and sicker beneficiaries who use more health services; small groups generally; or who live in areas with expensive delivery systems. The idea that taxing those plans will somehow encourage people to reduce their utilization is wishful thinking that ignores who actually makes health care decisions — doctors, hospitals,  drug companies, and other providers.

It also ignores why most people use health care — it’s because they are sick. The latest research shows less than 4% of the higher cost of some plans is due to extra benefits. Most of the rest is due to the higher claims of people in those more expensive plans, or the fact that the plans cover people in areas with expensive medicine.

To the extent taxing the excess costs will work in getting people to reduce utilization, the studies shows beneficiaries are just as likely to eliminate needed care like preventive medicine as they are to reduce wasteful spending, which is, don’t forget, ordered by their physician or the hospitals, who are the primary drivers of the health care train.
The tax will do nothing to make providers more efficient or effective in their use of system resources.

Nor will it force insurers to be more circumspect in what they will pay for. Ever since the patients rights rebellion of the late 1990s, they have become nothing more than pass-through agents in the system, taking their cut off the top. That’s what they’ll do with the tax — pass it along to employers, who in turn will pass it along to their

The economists who argue for this tax ignore all the dysfunctional realities of the health care “marketplace” that I have just described. Those realities make cost control measures that rely on incentive tinkering — and this tax is a prime example — doomed to failure.

In the end, it’s just another tax, one that largely falls on the middle class. Sadly, President Obama rotely repeated the economists’ logic in his interview with NPR yesterday.

In yesterday’s Roll Call, Washington & Lee health law professor Timothy Jost and Case Western Reserve professor Joseph White (a biostatistician and epidemiologist) laid out the case against the tax and offered a logical compromise because they assume, no doubt accurately, that some version needs to be included in the final bill to satisfy both the Senate and the president’s desire that every idea for cost control (even bad ones) be included. They suggest the tax should only be levied on benefits that exceed the premium standard package offered in the exchanges. Then it will truly be a “Cadillac” tax.

Unfortunately, an accurately circumscribed Cadillac tax won’t raise much money. That’s why the House bill is far preferable when it comes to taxation. In the end, this debate is about who is going to pay the higher taxes to provide for the uninsured, not health care cost control. And when it comes to that question, I say — and I dare say hundreds of millions of Americans would agree — that after the past two decades experiment in income maldistribution, the time has come to levy more taxes on higher income households, not on people who are older, sicker and already struggling to pay their bills.

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  3. Yes Allen hospital is receiving checks for $4600 minus co-pay and deductible which in theory they collect from the employee. Welcome to my world, not like I can force the people to drive hours to a bigger facility which is cheaper. Now I can make them liable for a larger portion of the bill if they do refuse to drive further. Well for now I can, this is a perfect example of my liberals attempts to limit out of pocket and lifetime max is so stupid. Allen gets away with charging that becuase the patient isn’t paying the bill. If they where more of them would drive to town to pay 1/10th the price. Once even a few people started doing this Allen would be forced to lower their price, and that is why consumerism would work.
    Blues are week in Cleveland you would be better looking at MMO. That varies by the provider, MMO is Cleveland Centric and directs/pushes people to CC facilities. They ahve huge discounts there, up to 60% but as you can see 60% off 10x Medicare is still higher then 20% off 3 times Medicare.
    this is a firm I almost got a chance to work with, very disappointed it didn’t work out, the carrier that brought it to the table blew the deal.
    “We provide specific cost and quality information for tests, surgeries and other health care services.”
    We are doing this in house and are working on a way to require it in plan designs. I have seen a number of others do it in conjunction with HSA plans.
    Doctors sign PPO contracts that disclose what they will be paid, for a doctor to say they don’t know is really saying I am to lasy to pull out my contract and look. RBRVS, Scheduled, or Medicare based it is all there and they could easily put it in an electronic format and know what carrier pays them what.
    This speaks to how bad of business people medical providers can be. If you have multiple payors that compensate you from X(medicaid) to 10x X(cash or private payor out of network) they should never turn down an appointment from the latter. Yet they do all the time. A well ran pratice would know exacly what they make and treat those higher compensated patients better. If I am earning the doc twice as much as that Medicare individual maybe he should think twice about making we wait 3 hours on a work day.
    Part of them problem with disclousre is legal. Person calls in asking for the price of one code, then the bill comes in with a modifer we pay less and they sue. It was bad enough before we added thousands of codes and another digit to ICD 9

  4. Margalit – I can’t speak to the rate for a 73321 in Cleveland but I can speak to the rates for a 72146 and 72148 in Central NJ. These are MRI’s of the lumbar and thoracic spine which my wife had two months ago. Each took about 20 minutes to perform. The list price for the 72146 was $1,437 while the Horizon Blue Cross contract rate was $505.35. The list price for the 72148 was $1,424 while Horizon BC’s rate was $499.55. The thing is that neither of these contract rates was determinable by either us or my wife’s PCP before the fact. In chatting with the front desk staff during my wife’s testing, I asked about the uninsured and was told that they receive an automatic 40% discount from list price which, according to them, lowered the price to about what insurance pays. A 40% discount from their list price for these two procedures would have reduced the price from $2,861 to $1,716.60 which is still 70.8% more than Horizon BC’s combined rate of $1,004.90. I’ve spoken with UnitedHealth Group, Wellpoint, Humana, Aetna and a couple of others about this subject on several occasions, and I keep getting the argument that disclosing the contract rate is more likely to increase costs than reduce them. Perhaps Nate can tell us who these insurers are who disclose actual contract rates before services are rendered, not estimated ranges for a few of the most common procedures, to either members, referring doctors or the general public. As I said before, when I asked my neurologist how much the brain MRI (CPT-4: 70553) would cost before I got it, he couldn’t tell me. All he could offer was a guess. Price and quality transparency for doctor, hospital, imaging and lab services has a long, long way to go before it is of much use to either patients or referring doctors.

  5. Nate, I have no idea what you write on your checks. What providers bill out is totally irrelevant. It all gets adjusted down to earth when the ERAs come in.
    Here is a concrete example for your consideration:
    CPT 73221 Magnetic resonance (eg, proton) imaging, any joint of upper extremity; without contrast material(s)
    Medicare global rate (technical + professional components) in Ohio for participating providers is about $400 (non par is only a few dollars more).
    According to that website you posted, the prices quoted in Cleveland are between 3 times Medicare (most imaging centers) to more than 10 times Medicare. The Cleveland Clinic rate, although high, pales by comparison to Allen Medical Center which is a Critical Access, rural Hospital with 25 beds, a whooping $4600.00.
    Are you saying that you are writing checks to Allen for thousands of dollars for a shoulder MRI w/o dye?
    If not, can you tell me what the Blues are paying for a 73221 in Cleveland? Can anybody tell me?

  6. not sure how to respond to this, on the one hand we have Margalit who proclaims;
    “No insurer pays those amounts for the listed procedures.”
    Then on the other hand there are the checks I write.
    Do we beleive Margalit who has nothing but her liberal arrogance to support her claim or do we beleive the paper checks that I put in the mail that actually pay those bills? No wonder healthcare reform is so tough!
    Margalit I’m not asking you to assume anything, being a liberal I know your not familar with them but there are these things called facts that are supported by overwhleming evidence, not your Gore hockey stick evidence but real evidence, that releive you of any need to assume. Every hospital has a charge master, they are easy to get your hands on. No one said every charge master is the same and if you looked at the site you would see not every facility charges the same amount. But with a little work it is not hard at all to compile a website that provides consumers billed charges for anything done at any facility.
    Who is hiding true cost? Their are insurers who publish their pricing. Until consumers start using it though it is wasted effort and money. Billed charges are always a pre-cursor to the final bill. The reason some facilities “charge” 5 times what other facilities charge is because they offer bogus discounts. CLeveland Clinic will give some people a 60% discount but their billed charges start 30% higher then everyone else. A smart consumer would always start by looking who charges the least.
    I’m working on a bill now where MMO said to pay the hospital 95% ofbilled charges as long as it was done in 30 days, its called a prompt pay discount. So don’t sit there and tell me people don’t pay full list price I see it every week. You have no basis to make any of the claims you are.
    If groups and members wanted to engage in transparency then why don’t they select an insurer that is transparent? Why don’t more groups hire firms like mine? If people thought insurance was to expensive and they wheren’t given the tools they wanted then they would hire someone that offered it to them. Everything your asking for is available, my firms have been doing it for 20+ years, people don’t want it, thus yes Margalit it is the consumers fault. Failure to use available tools and the resulting excessive cost is 100% the fault of the consumer no matter how hard the left spins them as victums.

  7. Nate, those numbers are bogus. No insurer pays those amounts for the listed procedures. You are asking me to assume that all facilities bill out at the same inflated rates, and extrapolate from that a comparative cost scale without knowing exactly what the costs are.
    I have seen enough claims from enough providers to know that this assumption is incorrect. Some providers bill out 4 and even 5 times what the contractuals are and others not even twice. Barry’s post above, regarding the $1800 MRI for which the payer only paid $475, is a readily available example.
    If I am uninsured, then yes, I have to work with those numbers, but if I am insured and I am trying to save the insurer money, than maybe the insurer should allow me to see the real numbers. It would be in their best interest to do so. It would also be in their best interest to reward patients that shop around, which would be an alternative to Barry’s differentiated copays.
    It really blows my mind when people keep blaming “consumers” for not considering the costs of their care and at the same time the same people are doing everything they can to hide the true costs from said consumers.
    Is this some sort of perverse game?

  8. Nate – As I think you know, I’m a big fan of price and quality transparency as well as price shopping where practical, especially for expensive surgical procedures that can be scheduled well in advance. The biggest impediment, I think, is that actual contract rates are not generally available to the general public, referring doctors or insured members themselves. At best, sometimes you can get a general range of likely costs for a specific procedure. The biggest argument I hear from insurers as to why confidentiality agreements need to be sustained is that disclosing contract rates could just as easily cause them to increase as fall. This is because providers who are paid less will agitate for a raise while the powerful providers who are paid the most will not be willing to cut their charges.
    I think this can be addressed, at least in part, by differential co-pays just as we use for prescription drugs now. The differential would only need to be sufficiently large to get members’ attention. One little known provision of the current reform bill is to require employers to include on employees’ W-2 forms at the end of the year the amount the employer paid for health insurance on the employees’ behalf. Currently, most employees don’t have a clue what the total cost of their health insurance policy is. They only know their own contribution, if any. Once they have a better understanding of the total cost of insurance, they might start to care more about what services, tests and procedures cost even when insurance is paying the bill. If they start to care, the employer might be able to afford to give them a bigger raise. This whole area is one strategy that not only will not cost taxpayers anything; it is also quite likely to save real money for the system over time.

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  10. Margalit,
    “In short, I’m not really clear on how to comparison shop based on bogus numbers,”
    You start by saying you don’t know how to read the data and then go on about how little you know about the subject matter. Then to wrap it up you call the numbers bogus because your not able to grasp it? If you don’t understand the subject matter just leave it at that, you don’t get it, how can you dismiss the facts as bogus? This is actually very common from your side just usually a little less brazen.
    Apparently like Gary your not capable of research. These numbers come from a couple sources;
    Charges come from the hospital’s charge master and data compiled from actual claims submitted to payors, hardly anything bogus about this.
    Payments again come from actual insurer data and Medicare DRGs which are published.
    As to your assumption, you know the saying about what happnes when you assume? either that or you poorly worded your statement. If you think insurers only pay 25% of this list price your more clueless then Gary and Peter combined. THE BEST contract Cleveland Clinic gives out averages about a 60% discount. Most payors are comming in paying 60-80% of list price. If you want to question that as being bogus go ahead but I write the freaking check so I know.
    FYI if one facility is charging $5900 for a procedure and CC charges $13,000 and they have similar outcomes I would hope you could figure out which was the better option.
    80% of medical care won’t kill you if you don’t receive it. Not getting an antibiotic for the flu wont kill me, 30%+ of the current treatment would actually leave people better off then if they had it.
    A free market in healthcare is not anywhere close to the same as a free market in insurance. Congress has not done anything to limit the free market in healthcare, oddly they have left that alone. What they have done is destroyed any sembelance of free market in insurance. No one dies due to a lack of insurance.
    We have mostly free markets in food and water, no one is dieing due to a lack of those. Lack of either will kill you much faster then lack of insurance or health care.

  11. Gary you rputting your foot in your mouth again. Didn’t we just go through this? If you don’t know what your talking about research it then post. If you post stupid comments I’m going to call you stupid.
    “Just five years after the HMO Act of 1973 was signed into law, the U.S. Senate Committee on Human Resources, Subcommittee on Health and Scientific Research, held a hearing to discuss amending the Act. Following are excerpts from Senator Ted Kennedy’s opening statement at the March 3, 1978 hearing:
    “As the author of the first HMO bill ever to pass the Senate, I find this spreading support for HMOs truly gratifying. Just a few years ago, proponents of health maintenance organizations faced bitter opposition from organized medicine. And just a few years ago, congressional advocates of HMOs faced an administration which was long on HMO rhetoric, but very short on action.”
    See that Gary, admin short on action, as the author of first HMO bill. Ted Kennedy called from the grave and said your an idiot, stop watching Michael Moore and read a history book.

  12. Conservatives haven’t really weighed in on the “Cadillac” tax. Good: Let the unions fight their own battle. It is a tax hike, which any conservative should oppose. However, if it were re-cast in a different bill, it could be used to fund a universal tax credit or voucher, which would reduce Medicaid and SCHIP dependency. Indeed, lest we forget, this is the path Senator McCain took in his presidential campaign, and which I discussed favorably at the time (http://tinyurl.com/53n4x2).

  13. I don’t think that free market supporters ignore Adam Smith’s theories. I think they actually count on them to be applicable in health care with the firm belief that the invisible hand will make things right for both suppliers and consumers.
    The fallacy here is that health care is one of those rare items that although they have easily calculated costs, they don’t have easily assignable prices.
    In many ways national defense is very similar. One can calculate the cost of maintaining armies, but what would be the price a nation would be willing to pay if armies were for sale and its existence was threatened? Maybe that is why the early experiments with renting armies and individual soldiers has failed.
    Any line of products or services that contains game ending, singular points of binary decisions regarding immediate survival of the buyer, whether a nation or an individual, will defy the free market theories.
    That’s what governments are for.

  14. “The problem isn’t government per se, but our government and our private enterprise, the intersection of government and private enterprise, and the misinformed public that keeps being led by interest groups to support policies that hurt it.
    Agreed. Private insurance companies manage very well in most other countries with universal care…because they operate in a framework that places patient care as the first priority. In Germany for example, is much more privatized than here in the US, and delivers universal care for much less. Even Switzerland, which implements universal care through 100% individual, private coverage, spends less per capita.
    The difference is that citizens of those countries benefit from an actual health policy that managed by the government for the benefit of the citizenry. In this country, ensuring healthcare (as opposed to insuring) is the least important factor. The well-being of private insurers, the pharmaceutical industry, hospitals, etc., all take precedence over actual patient access to care.
    “If you think government can’t solve the problems, good luck with letting private enterprise do what is in its interest with fewer restrictions.”
    Which of course, is exactly what Adam Smith said. Those who support a free market approach to healthcare uniformly ignore that.

  15. “All of our troubles were created by government!” MD as HELL
    Funny how government seems to solve those very same troubles in other nations, but not here.
    The problem isn’t government per se, but our government and our private enterprise, the intersection of government and private enterprise, and the misinformed public that keeps being led by interest groups to support policies that hurt it. In short, the problem is American attitudes and institutions. If you think government can’t solve the problems, good luck with letting private enterprise do what is in its interest with fewer restrictions.

  16. Nate, I don’t know what the numbers on that website are, but that is not what the insurers pay to the hospital. I have no idea what the contractuals are for the Clinic in Cleveland, but I do know that Medicare pays them exactly the same amount that they pay the other providers in the area. I would suspect that the private insurers are not paying much more than 25% of the “list price”.
    In short, I’m not really clear on how to comparison shop based on bogus numbers, unless of course I am not insured, in which case I would be forced to pay those totally arbitrary and outrageous prices.
    MD as HELL, I think coffee is a bit different than medical care mainly because you don’t die without coffee. I think this is probably one of the major reasons why it is practically impossible to have a free market in health care. The normal dynamics do not apply. In any other market, if the prices are so outrageously high, you see significant drops in demand, which in turn puts pressure on manufacturers to lower prices. You can live without flying on airplanes or a new car or a new house or fancy coffee, but if you are sick, or afraid that your kid may be sick, you will go to the doctor no matter what the prices are, and when he tells you to go get that MRI, you will go get it, just like Barry did.
    Maybe if Barry didn’t have insurance, he wouldn’t have gotten the MRI, maybe he wouldn’t have even gone to see a doctor, maybe it would have turned out to be something really serious……
    Shopping around for cheaper prices may be of limited value, particularly because if you are older and sicker and on Medicare, or poor and on Medicaid, there are no cheaper prices.
    Maybe we should start looking outside the US. If we can import cheap electronics and various plastic junk, maybe we can import cheap medical care, or outsource medicine and send it off shore, just like we are doing with technology.
    For all those wishing to return to the virtuous days of the Founders, you may just get your wish to come true when all we end up producing in this country is corn, cotton, cows and tobacco.

  17. It was President Nixion who gave us Managed Care and it has driven Health Care Down to 38th among 40 industrialized Nations. Talk about creating Entitlement Programs. The Structure its self is A ENTITLEMENT.

  18. “Most people use healthcare because it is free to them at the time of consumption.”
    I disagree with that statement because I have never had anything that is Free! It costs everyone even if your uninsured.Directly and/or indirectly. However people do shy away from HealthCare when it exceeds their budget. Often putting off what latter turns for the worse,with greater costs and threats to life.
    It seems there is a preception that runs in Health Care Circles. It appears that it is perceived that patients do not want to pay for services. I ask you, Have you seen the Bills that are generated from your services? Have any of you looked at and handed a Bill to the patient and Has anyone here ever attempted to justify the Costs to the patient. Of Course Not!
    I’m sure none of you want to be ripped off or feel as if you are and neither does the patient.It could be the unrealisticly inflated prices,substandard service, and/or Hospital Acquired Staph Infections that are largely preventable, that caused over extended stays and excessive Expenses.Mostly,its because of every day living;lost of jobs, divorce, reckless marketing behaviors,poor judgement and excessive Hospitalization to name a few.
    Believe me ;some of us are not impressed with StarBucks and the Status of overpriced bitter Coffee.Higher prices for products and services. Does Not Guarantee quality of a product or service.Even the brightest at one time or another have experienced one or more of these circumstances in their lifetime.
    Today, you could get some of the same services in (some) facilities as one would find in a flea bag motel. Either way the prices are outragious.

  19. Other countries are not accessing healthcare for the same things as we are. We are whining. we are entitled to our scooters. We are entitled to our PEG tubes. We are entitled to dialysis at age 85. We are entitled to CPR despite no chance of survival. We are entitled to a free medical screening exam any time we want one. We are entitled to pain medicine on demand.
    All of our troubles were created by government! Wake up, people. The same morons that brought you the mess we are in are saying they can get it right this time?
    I don’t think so.

  20. There is a human tendency to think that there is only one right answer, one system that will work. For example: the idea that placing more cost burden on the individual is the best way to go and the only way we’ll control costs. But there is more than one way to skin a cat, as France, Germany, Sweden, Taiwan and dozens of other nations with very different systems show. All of them control costs better than us, have better access to care than us overall, and have equivalent or better outcomes for the vast majority of conditions. As Barry Carol noted upthread, this is mostly because providers are paid less abroad than in the US. One of the main mechanisms for achieving this has been to tie provider pay to national or regional budgets for health care expenditures.
    There is no developed nation I’m aware of that controls costs through consumerism. I’m not saying it can’t work, but to think that this is the only way to go and treating it as an economic rather than a moral/political argument, is spitting into a windstorm.

  21. Sorry Nate, you are wrong. Insurance didn’t go to the “reimbursement” model until Johnson included it as a carrot to get doctors to go along with Medicare. It took less than 2 years for insurance companies to jump on the band. The White House realized it had created a monster. Congress has made faint-hearted attempts to put the genie back in the bottle but never managed to rectify the initial mistake.
    Again, health insurance was “invented” by hospitals to ensure a steady revenue stream. Hospitals still think they are entitled to whatever it costs to run them — including VIP suites and lobby fountains — and they expect insuance companies to do what it takes to get them paid.

  22. I want to share a story that illustrates how hard it is likely to be to change aggressive practice patterns. At my own request, I was recently referred to a neurologist to determine whether or not I had an underlying issue regarding balance. I wasn’t falling and I did not experience any dizziness or vertigo. Instead, there were exercises that are part of my fitness routine that I thought were more difficult than they should be.
    The neurologist took a detailed history and did a thorough evaluation, I thought. He thought there was probably no underlying issue but suggested it was probably just normal aging. He also told me that we could do a brain MRI to make sure there is nothing growing in the part of the brain that affects balance. We could also do a study to see if there is anything pressing against the spine. He recommended against the latter study because even if something were found, we wouldn’t do anything about it because my situation was not considered serious enough.
    I asked how much the brain MRI would cost. He said he didn’t know for sure but guessed about $700. The imaging center was independent and he would derive no financial benefit from it aside from a follow-up consult to discuss the results. I told him I’m one of those rare patients who cares about what procedures cost even when insurance is paying. I also told him that if he thought the chance of finding anything wrong was remote, I was perfectly willing to let it go. He said: “Let’s do the MRI.” I left wondering (1) does he suspect a problem, (2) is this defensive medicine, or (3) is this just the standard of care in NYC and probably the entire Boston to Washington corridor as well as numerous other places around the country? I also told his office that if insurance wouldn’t cover it, I was willing to pay for it myself as long as I could pay the contract rate and not the full list price. The study turned out to be perfectly normal.
    This list price for the initial consult was $350 with insurance allowing $195. The follow-up was listed at $200 while insurance paid $109. The list price for the MRI was $1,800 while insurance allowed $475 and paid 80% of that.
    I suspect what we have here is a standard of care that calls for aggressive treatment. The standards themselves were probably developed, at least in part, to reflect the litigation environment that we live in, especially in NYC. While sensible tort reform, including specialized health courts and a robust safe harbor to protect doctors from lawsuits if they follow established evidence based guidelines may or may not reduce healthcare costs in the short run, it is highly likely that we will never reduce them even over the long term in the absence of tort reform. This is one of several important health reform issues that, I think, the liberals are dead wrong on.

  23. not all insurance was that way but a large percent of it was reimbursement and scheduled. Something about 1973 and Ted Kennedy sticks out in my mind as when that started to change, any Liberals rememebr what happened around then????? Refresh my memory on what went so terribly wrong that year….

  24. Margaret I would disagree in that for a number of years insurance did not allow for assignment of benefits and was truly a reimbursement plan. Insureds paid for their care then where reimbursed based on a schedule. They where much simplier and much more efficient times. Allowing providers to get their hands into the payors pocket was a major catastrophy and should be undone.

  25. It seems to me that there is a woeful amount of ignorance about what health insurance is supposed to do. Most people seem to believe that health insurance is for the patient. In fact though, the purpose of health insurance is to see that providers get paid; that benefits providers. The first group insurance in the country was offered by a hospital in the 1920s in Waco, Texas to provide a reliable revenue stream for the hospital. It expanded to other places and eventually became known as Blue Cross. If we fast foward to this decade, the Massachusetts “model” had the very same objective: to ensure that doctors and hospitals got paid. That’s why cost control was never discussed when it was constructed.
    That is very different from universal models where the purpose of the system is to ensure that everyone has access to care. Insurance is not the centerpiece of those systems, the coverage is. Different countries finance that care in different ways — with varying levels of private insurance integration – but they all start from the perspective of the patient, rather than the provider or payor.

  26. Karen,
    I can talk like that because I am the one paying the claims and processing all the day to day work. I know what the actual benefits are. 2/3 of employers do not have Cadillac plans, 2/3s of those with such plans might reduce benefits but that is a totally different number then 2/3 of all employers that sponsor benefit plans.
    Dental, Vision, and hearing should not be insured anyways. Twice a year exams and cleanings are known events, why pay 120%+ of their cost to have someone else pay the bill?
    If everyone gets a tax deduction why have the deduction at all, I like your basic idea but do away with the deduction all together and just reduce my taxes. Uncle same holding on to a couple K for me each year while I pay 20% credit card interest is not very efficient use of my money. I prefer they not take it at all and I not have to beg for it back.
    http://www.reflectivemedicine.com I think this one is right I might have spelled it wrong…big shock
    As one of those companies that siphon off money and do nothing to control claim cost my latest project is getting members to comparison shop. For example in Cleveland you can go to the clinic and pay $13,000 for a hernia operation. Or you can go to any of 40+ other places and pay $5900. Because of out of pocket maximum and co-pays most American’s don’t have any incentive to go to a $5900 facility over the Cleveland Clinic. These places have just as good or better outcomes and charge less then half the price.
    So while it is liberal dogma that you can’t comparison shop, consumers are to stupid, the data isn’t available, High Deductible health plan are evil, high Matt, there isn’t money to be saved, and most absurdly that we need to eliminate lifetime maximums and lower annual out of pocket, let me be very clear when I say AMERCIAN’S WASTE A TON OF FREAKING MONEY BECAUSE IT AIN’T THERES! If my plans had 20-30% co-insurance all the way to the 1,000,000 lifetime maximum I bet I could get people to comparison shop and there would be minimal adverse effects. I need to figure out how not to get sued for suggesting they do this…hello tort reform, it ain’t all about the malpractice. I would gladly waive the 20% co-insurance if members choose the most cost effective facility, again opening myself up to getting sued. If Cleveland Clinic suddenly lost all their hernia operations what do you think would happen to their cost? Once CC lowered their cost what do you think the smaller facilities would do? This is another example of how ignorant liberal reform is, you manage to not only avoid fixing ANYTHING but you exacerbate the existing problems. By your blind demand for reduction in employee out of pocket cost you open the flood gates to waste, see Medicare.
    To expand on Barry’s comment the cost difference in the US from facility to facility is close to as large as that in other countries. If every American was treated at the most cost effective facilities their would be minimal difference in spending, it is by choice that American’s choose the facilities they do and they do so because they don’t pay the bill.

  27. “However, we do seem to pay quite a bit more for each service and product. Maybe, just maybe, that is the real reason for our enormous health care costs.”
    You’re right, Margalit.
    Over the weekend, I read T. R. Reid’s new book, “The Healing of America.” In it, he describes the healthcare systems in Canada, UK, Germany, France, and Japan as well as the U.S. In describing the results of his research, I think he puts too little emphasis on the differences in prices per procedure among countries, significantly understates the impact of defensive medicine in the U.S., and doesn’t even address the fraud issue. At the same time, he far overstates the cost impact of insurance companies’ administrative costs and profits on the U.S. system.
    According to Reid’s work, the average U.S. patient visits a doctor about 5.5 times per year. The comparable number in France is 8 times and in Japan, it’s 14.5. The Japanese do twice as many imaging studies per person as we do. Drug consumption is roughly comparable between the U.S. and Western Europe, excluding the UK. If we were to assume U.S. prices per procedure and per drug in Europe and Japan but conceded their lower administrative costs and less litigious environment, their spending as a percentage of GDP would be far closer to ours and might even be higher in some cases.
    Some concrete examples of price differences are as follows: In France, a routine visit to a primary care doctor costs 21 Euros or about $29. A specialist visit is 26 Euros or $36. An equivalent visit to a U.S. doctor in a major metropolitan area would be 3 to 4 times as much. An MRI that might cost $1,200 in Denver runs $98 in Tokyo. Average drug spending per person in Germany is about 60% of the U.S. level even though consumption is comparable. A French woman undergoing a routine labor and delivery will spend 8 to 10 days in the hospital vs. 2 in the U.S. The average hospital length of stay in Japan is 36 days vs. 6 in the U.S. According to Reid, the charge for one night in the hospital is $10!
    Doctors practicing in these countries earn far lower compensation than their U.S. counterparts yet seem satisfied with their middle class to upper middle class lifestyle coupled with their relatively high status in their societies. On the plus side, their medical education is largely paid by the government with little or no cost to the individual doctor in training.
    On the issue of the Cadillac tax specifically, I’m quite certain that, over time, it will result in some combination of lower benefits and cost shifting to the employee in the form of higher deductibles and copays. One little known provision of the reform legislation is a requirement that employers include the cost of health insurance paid by the employer on the employee’s W-2 form at the end of the year. That should help to improve awareness of healthcare and health insurance costs at no cost to taxpayers. As I’ve said many times, if it were up to me, I would eliminate the employer tax preference altogether and lower other taxes to ensure that the government does not collect any more net revenue than it does now. We could also raise the standard deduction and enhance the Earned Income Tax Credit (EITC) to protect the working poor. The current tax preference is an accident of history related to World War II era wage controls. If we want to bend the cost curve, we need to get rid of it.

  28. Dr. Lippin,
    Thank you for your remark on death and dying. That indeed is the 1 trillion dollar elephant in the room. We must incrementally reshape the care of our end of life patients. Right now it is absurd.

  29. Margalit,
    I love your coffee story. The real point not to be missed is you decided that all by yourself based on your personal priorities ans budget. Why won’t we let healthcare be the same?

  30. As a recently retired VP Compensation and Benefits for a Fortune 500 company I can assure you that the Cadillac tax will raise far, far less than claimed. In addition, the absurd view by some economists that any cuts in the benefits will be replaced by higher wages is a pipe dream.
    I and virtually all other benefit professionals have been raising deductibles, co-pays etc, for the last twenty years trying to cope with rising health care costs to no avail. There are no high cost plans out there because the employer wants to be generous. In fact, a large number of such plans are with governments who provide generous benefits mainly to appease strong unions at the state level. Other such plans reflect the age, demographics and location of the work force.
    The most generous plans are not even insured, they are self-insured plans for large organizations.
    No employer is going to pay this tax, no employer is going to give higher wages when they cut benefits to avoid the tax, but rather more costs are going to be shifted to the worker which in many respects is just another form of tax to pay for the so-called reform.
    This is the largest Ponzi scheme in the world it is just that simple and the shame is that we are not fixing much of anything and no one will ever know the true cost of what is happening.
    More of my views based on my experience are at:

  31. The Generic drugs are an aid to the population as though maybe some do not have the same effectiveness of the original medicines, have the components necessary to dispel the pain or discomfort that occasionally gives us any disease. Many locations to provide adequate information on findrxonline generic as indicating that the chronic pain medication are the most sought after and preferred in the U.S. for its economy and quality.

  32. Hello
    You have given good information about Cadillac plans.There are good points about health care and goo to know about that latest research.I also agree with some of your points.Thank you very much for such informative post.

  33. I don’t understand how respondents like Nate can talk as if “Cadillac” plans are substantially richer than “normal” plans when 2/3 of large employers have said that they will probably cut back on coverage to meet the limit. In addition to higher deductibles and co-pays, many will discontinue extras such as dental, vision, or hearing. I’m mystified as to how that could possibly be seen as an improvement.
    It seems to me that a more equitable way to limit coverage would be to include all health benefits as taxable compensation then set up a universal, above the line exclusion for health insurance and expenses up to the $8500 limit (Mike Enzi’s proposal for a $2500 tax credit for those who pay their own way would be even better). That way, everyone would be in the same boat. Companies could continue to offer extras but employees who want them would have to pay tax on the extras. And *everyone* would know how much his/her coverage is costing him.

  34. I would really like to see some concrete data substantiating the argument that Americans are gluttons for medical care as compared to citizens of other developed countries. The OECD numbers are certainly not indicative of such trend.
    However, we do seem to pay quite a bit more for each service and product. Maybe, just maybe, that is the real reason for our enormous health care costs.

  35. By gosh and by golly, I find myself agreeing with both MD as HELL and Nate. Mr. Goozner is incorrect in stating that physicians generate most medical costs – remember, the patient has to GO SEE the doctor first! Many, if not most, people I know go to see their doctors for symptoms, like a simple cold, for which I would not even consider seeing a doctor, even if I did not have an M.D. degree. If they had to pay for this up front (and not a few bucks copay), they would think twice.

  36. As someone that actually works with these plans and understand the economics of insurance I have to disagree with just about everything Merril says as it’s completly inaccurate.
    Taxing cadillac plans has no effect on the care individuals receive, should receive, or desire to receive. It is purely a tax issue. A zero or low deductible plan with minimal co-pays is not insurance, it is financing and should not be included as tax free income. Corportations and these individuals are dodging billions in taxes by purchasing phony insurance.
    Reduce these plans’ benefits to normal levels, give the employees the difference in pay, and they can purchase the exact same care they did before. Uncle Sam will get his payroll, medicare, and SS taxes, and the mostly Union and public employees will be back to par with private employees.
    It is the current system that funnels this unfair benefit to mostly liberals that needs stopped, not the tax, how this came out of liberal congress is beyond me but it is well past due.
    Next the tax will do a termendous amount to make providers more efficient, now that it is their money employees will be more likely to ask if the test is needed and make sure it is efficient care.
    The only studies showing patients eliminate preventive care are biased hack studies pushing a political agenda. You can’t produce a single study the shows what you claim that also shows the individual’s other discreationary spending. All these people “supposedly” forgoing preventive care havn’t had to forgo cable, cell phones and eating out so the reduction in care was discreationary not needed, disproving your argument right off the bat.
    your comment on insurers being pass through agents is just ignorance. While some companies put little effort into controling cost just as many more do. Those companies that are concerned about cost hire companies like mine that aren’t doorsteps. Those that hire companies with poor cost control are spending money they feel is excess and they choose to waste in that manner.
    This tax isn’t going to solve everything nor will it raise 10% of the money they think it will as benefits will be cut but it will focus the attention of a small group of big spenders on the issue. The members of these plans need brought back to earth. If you have ever spent one day with a UAW plan you would know how detached these people are from reality. Or look at most public plans.
    What is your experience with cadillac plans merril to be making these statements? From your comments I would guess you have never seen one besides in reference in a news article.
    To prove my point further why is generic utilization in caillac plans much lower then that in normal plans? With there is no or minimal co-pay difference members will take the brand name drug, in almost all cases this is wasteful care. I could give more examplea that all contadict your non experienced opinion.

  37. On Meet the Press earlier today,spokesman Robert Gibbs took a shot at Cadillac plans, suggesting that these are used by Goldman Sachs gazillionaires. I wonder why he didn’t mention the unions who are the most vocal antagonists of taxing these plans? Gibbs also stated that it was the insurance companies that would be taxed, as if these costs wouldn’t be passed onto the consumer. The House Dems can’t cave on this. Lots of sausage making to come. http://www.MDWhistleblower.blogspot.com

  38. There are two ways to reduce expenditures.
    A few months ago I realized that I am spending way too much money on coffee. I had two choices: Ration the number of Starbucks I get every day, or pay less for a cheaper, and equally good, brand.
    The point is that I am not at all convinced that rationing obscenely overpriced services is the only answer.

  39. Agree that neither of the bills does much to control costs which is the ultimate issue that we all must confront.
    Politicians though will be the last to use the inevitable “R” (rationing) word. Because right now it is poltical suicide to even imply that ANY treatments would/should be reduced or denied.(even though some actually do direct harm)
    The big elephant in the room which we are beginning to dance around remains the death and dying issue.
    We need a serious sober national dialogue on this issue to begin to grow up and to fix US health care.
    Dr. Rick Lippin

  40. If you give 2 people 70% of the pie, and you give 3 people 20% of the pie, and 10 people 10% of the pie, but then you tell the people with 20% to give up a slice to the lower percentage, then what happens?
    These are basics. Address the real issues – the overall cost of medicine.

  41. The downstream economic and practical issues associated with the current legislation have largely been ignored or falsely interpreted throughout the lawmaking process. In the rush to patch together passable legislation, cumulative ‘fixes’ have been added to appease those critical of earlier and current CBO reports.
    Looking at the details of these issues, as described here by Goozner, shows the tenuous house of cards that current reform is built upon.
    The ‘Cadillac’ plan taxation is not alone in its shortsightedness. The provider workforce issues, tort reform, SGR effects etc. have immense implications for the actual successful delivery of care which will only become apparent upon implementation. The bottom line is the failure to focus on reducing the cost burden and provide step-wise fixes to our broken system.
    Once again, as have been suggested many times on THCB, the formula for successful reform of our health care system requires small incremental steps, not a forced legislative process pushed through on bribery and favoritism.
    Too bad we have been unable to apply the simple lessons from mid sixth century B.C. as Aesop reminds us “slow and steady wins the race.” Unfortunately we may all be losers in this contest.

  42. Most people use healthcare because it is free to them at the time of consumption.

  43. The real effect that taxing the Cadillac plans will have is to cause such plans to disappear over time with the longer term overall effect being that many plans will have a similar level of coverage. This could hurt those who make more claims, but it is not entirely clear if this will be the effect.

  44. I tend to agree with these comments and believe taxing Cadillac plans will not lower costs.Also the cost will not just be passed on to the employer but also to the Consumer.These Health Plans are only afforded to large corporations. As small business’s of 20 or less employees has a standard plan without the bells and whistles.Although, I believe that small business is getting a raw deal. I would think it to be wise to spread the benefits to small business’s that account for the largest share of the work force.