Category: Health Policy

Hiding In Plain Sight: Using Medicare To Solve The ‘Public Option’ Conundrum

Oct 21, 2009• 53

Barack Obama_addresses_joint_session_of_congress_2-24-09 As Senate and House Committee versions of health reform move toward unified legislation and floor votes, the most complex political challenge is how to resolve the “public option” controversy. While one would have thought weightier issues such as the shape of Medicare reform, the taxation required to support coverage subsidies, or the presence or absence of mandates would have been pivotal in this debate, the seemingly peripheral issue of a Medicare-like “public option” might be the hill on which health reform dies.

The reasons are almost completely political. The Democratic base wants to end private health insurance. Single payer advocates view the public option as a down payment on an entirely public health financing system. Public option advocates believe that the plan’s bargaining power will drive private insurers out of business. (I’ve argued in a previous blog posting that, without fully understanding what they are doing, these single payer advocates are probably right.)Continue reading…

Why AHIP needs the public option

Oct 16, 2009• 38

By MATTHEW HOLT

It’s been a fun week. After years of THCB explaining that neither could AHIP do genuine research nor could its venerable President open her mouth without lying, the rest of the world has caught on. I won’t rehash the blow by blow here—Jonathan Cohn is among many who’s done that already—but essentially AHIP commissioned PWC to include the half of the analysis about the Baucus bill that was favorable to them and leave the rest out. And the fall from grace has been particularly fun to watch. Even the whores from PWC who wrote the report criticizing the bill have been backing away from it. And some astute commentators think that the debacle has helped the likelihood of a more liberal bill’s passage.

Now to be fair (or overly fair as they’d never concede this to the other side), the insurers have a point. They loaded Baucus up with lots of cash and put a former Wellpoint exec in as his chief of staff. They romanced the White House and kept quiet when Pelosi and the rabble criticized them. The deal they thought they’d cut was that they would give up the way they currently make money by underwriting and risk skimming in individual-small group and being overpaid for Medicare Advantage, and in return they’d get 45 million more customers, all forced to buy insurance and subsidized by the government to do so.

But somehow along the way the Democrats, despite lots of tough talk about “bending the curve,” lost the cojones to find even a mere $100 billion a year to redistribute from the probably $1 trillion waste in our $2.5 trillion health care system.

Pop the Cost Bubble: Unallot Medicare

Oct 5, 2009• 8

By VICTOR SANDLER

Here’s a dirty little secret: Cutting health care costs is not that difficult, nor will it harm patients. That’s because it only involves giving up unnecessary medical care—tests and treatments patients may want but really don’t need because they don’t benefit their health.

How is this supposed to happen? In Minnesota we call it “unallotment.” When the state had to reconcile a projected multibillion dollar budget deficit this year, and the Republican governor and Democratic lawmakers couldn’t agree on how to do it, the governor simply “unalloted” billions of dollars of planned expenditures.

Medicare should do the same. All Congress has to do is pass the MedPAC Reform Act of 2009 (SF 1110) and give it teeth. We can then unallot the 30 percent of Medicare expenses that most health care experts believe are unnecessary. That’s the 30 percent that goes for tests, drugs, and devices that don’t have any proven benefit but sell like hotcakes anyway.

When Gov. Tim Pawlenty decided to cut medical expenditures during the unallotment process, he took no prisoners. More than 30,000 indigent adults will simply have their medical insurance eliminated starting next March. Medicare would take a higher road, eliminating unnecessary care and costs, not “unnecessary” people.Continue reading…

Will Victory on Health Care Reform Mean Defeat for the Democrats?

Sep 27, 2009• 50

By MATTHEW HOLT

Being a futurist is not really about making predictions, but people ask for them anyway.

So here is one: The way things are trending right now, Obama and the Democrats will succeed in getting a reform bill – and it will cost them the Congress in 2010 and possibly the presidency in 2012. Why? Because it will be ineffective at bringing most voters any tangible benefits soon, and ineffective especially at bringing down the cost of health care.

Obama (along with everyone else) repeatedly talks about “affordable” health care. What the bill is most likely to bring is health insurance reform. This is very important, and will bring tangible benefits especially for those who must go without insurance now because they have “pre-existing conditions.” But there is nothing in the bills that are most likely to pass that will really bring down the costs of health care any time soon. Yet the bills demand that the health plans cover many more people, and the providers treat them, while putting in place no mechanisms that would forcefully and quickly control costs – so costs are likely to go up even faster than before.

The Speech: Could this have been what he planned all along?

Sep 11, 2009

By BOB WACHTER

A conventional look at The Speech:

Obama over-learned the lessons of Hillary-care; he gave Congress too long a leash; he lost control of the message; the wacko’s attacked with a barrage of Socialist/Nazi/Plug-Pulling-on-Grandma-isms; not only was health reform on the ropes but the entire Obama Presidency was in danger of imploding (taking the Dems down with him in the mid-terms); Obama had his back against the wall, a make-or-break moment. Then last night, the President gave a great speech that staked out a thoughtful middle ground; Joe Wilson went rogue, horrifying nearly everyone; this led to real sympathy for Obama and the Dems and a shift in the political landscape. In the end, a mild version of health reform – with nearly-universal coverage, some regulatory protections against the most heinous insurance practices, fee hikes to pay for it all, and a little movement toward improving quality and efficiency – passes.

Return to McAllen: A Father-Son Interview

Jul 26, 2009• 32

By IAN ROBERTSON KIBBE

By now, Dr. Atul Gawande’s article on McAllen’s high cost of health care has been widely read. The article spawned a number of responses and catalyzed a national discussion on cost controls and the business of medicine. It even made it’s way into the President’s address to the AMA.

Almost overnight, McAllen and the Rio Grande Valley were thrust into the national health care spotlight – the once sleepy border town became, not a beacon on a hill, but a balefire in the valley, representing much of what is wrong with the current medical culture.

But, McAllen wasn’t always like something from an old Western, where doctors run wild and hospital CEO’s compete like town bosses. I remember McAllen quite differently. I remember it, because as it turns out, it was where I was born.Continue reading…

Families USA Health Action 2008: Anthony Fauci on Global Health

Jan 26, 2008• 1

By BRIAN KLEPPER

I first met, heard and came to admire Tony Fauci several months ago at the Aspen Health Forum. Dr. Fauci heads the National Institute of Health’s National Institute of Allergy and Infectious Diseases. In addition to his spectacular medical contributions, he is, equally importantly, a passionate and wonderfully articulate explainer of the importance of infectious disease and global health to common people. Unfortunately, I was called unexpectedly out of the meeting for a call, but here are my notes on his comments. They provide a clear view of the value of his work.

Plagues and epidemics have shaped societies since the beginning of civilization. Gradually, though, and with progress in hygiene and the management of disease, the dangers from infectious diseases to ordinary people have been significantly lessened, though the idea that we’re home free is seductive and illusory. In 1967, Surgeon General William Stewart testified a little prematurely that “the war on infectious disease has been won.”

HEALTH PLANS/POLICY: Too much fawning over Len Schaeffer?

Jan 31, 2006• 5

No one is arguing that Len Schaeffer isn’t a very bright guy, nor that he hasn’t done very well in America’s health care system. He’s also done very well out of America’s health care system. So when McKinsey publishes a fawning interview with the man who saved Blue Cross of California, and turned it into one of the most profitable for-profit health insurance companies, and then merged it with the other for-profit Blues, it’s perhaps appropriate to ask a few more questions.

Full disclosure here; in the distant past I’ve worked for several companies that are now part of the Anthem/Wellpoint collosus; and I currently do work for the California Health Care Foundation, which wouldn’t exist were it not for the fact that, when Wellpoint converted to for-profit status, it (and the California Endowment) were endowed with a huge chunk of stock. So you can take my comments in what ever light you like. In addition I’ve only done limited research here and a couple of things are retelling of tales I’ve heard, so if anyone knows more gossip, please email me.

Schaeffer is coming towards the end of his business career, but he started young and fast. He was head of HCFA (the artist now known as CMS) at age 33 in the Carter Administration. Now I call Mark McClellan the boy wonder, but he was 41 when he got the job! After leaving HCFA (before it got really exciting in the early years of the Reagan administration when DRGs were introduced, but being the first to introduce a type of DRG for kidney dialysis), and going via Group Health for a couple of years, he ended up at Blue Cross of California. He got there in the middle of an incredible screw-up.

Blue Cross had set up an HMO to compete with Kaiser called HealthNet. Incredibly enough somehow or other Blue Cross didn’t manage to enforce their formal corporate control over its board members on the board of HealthNet. So the board of HealthNet looked around the room one day, noticed that they might do alright if they were running a for-profit company, and declared independence. More on that story in this court documents. And apparently despite several years in court there was nothing Blue Cross could do. Retroactively Healthnet had to agree to endow a foundation with the state (the California Wellness Foundation) but the amount put into that foundation was a tiny, tiny proportion of HealthNet’s market value.

Schaeffer turned up to steady the ship at Blue Cross in the wake of the Healthnet screwup. In part he did this by turning Blue Cross from a warm and fuzzy non-profit into a pretty avaricious underwriter and a health plan that played very hardball with its providers (and members). More on that in the first section of this document, but it’s a reminder of a tack taken years later by Jack Rowe at Aetna.

But he clearly learned something from the experience. The first thing he did was to set up a for-profit subsidiary called Wellpoint which started buying health plans and offering services (primarily outside California). Then he tried to put all of Blue Cross’ assets into Wellpoint. It looked like he’d away with this for a while, but then started negotiations to take the whole thing for-profit. Apparently when the state first asked him the amount with which he would fund the foundation, his first offer was “nothing”. This eventually got anted-up to $100m. Eventually the state (pressured by consumers’ groups) pointed out that it had quite a bit of control over the Blue Cross plans, and in the end the two Foundations were set up with lots of money and the majority of the stock, which gets spent doing good works in California (and funding some great research!) — not that everyone’s happy with it!

However, what amuses and dismays me is that Schaeffer is lauded for a couple of things, specifically the creation of new insurance plans and the shift to consumer care, and a commitment to IT. I really don’t understand what is so amazing about the new consumer plans, other than the Tonik brand has a lame web sites which look exactly like what a 50 year old thinks a 23yr old thinks is cool. THCB readers already know that, while selling high deductible plans to youngsters may help a 23 yr old who needs catastrophic insurance, you’re not going to fix the problem of uninsurance by replacing it with under-insurance. But underwritten properly, these plans are very profitable for Wellpoint. And Wellpoint is damn good at underwriting.

So much so that you’d be surprised at what Schaeffer says is the main problem with American health care. Practice variation and lack of information:

The level of variation in our health care system is unbelievable. You could be hospitalized for nine days in New York and for three days in California with the same diagnosis—and those differences would have no impact on outcomes. There is no other industry in the world that uses so many different approaches to the same thing and in which these differences don’t relate to better results

So can’t health plans fix that? Apparently not:

As a health insurer, if you start by telling doctors, "We know what’s best; we’ll pay you for it," you violate the fundamental principle that doctors want to exercise their own discretion. That’s what killed HMOs—telling the doctors what to do. Doctors don’t like to follow cookbooks, but, clearly, evidence-based medicine would work better for patients.

So because health plans failed at getting doctors to practice better medicine, instead they’re going to give them the information systems that show the doctors all about this variation, and it’ll magically self-correct. Except there’s the odd problem there too, including more cluelessness by health plans.

The Quarterly: WellPoint invested $40 million to encourage its in-network physicians to start using IT and to begin "e-prescribing." What results have you seen?

Leonard Schaeffer: If you believe in an IT-enabled, evidence-based health care system—which I do—you’ve got to get IT into doctors’ offices. So we offered our in-network doctors, for free, either a desktop or a state-of-the-art "e-prescribing" unit for connecting to the Internet. Our theory was that if we could get a certain number of docs online, we could revisit them later and get rid of paper, which would benefit the physicians and us. That was the theory. But to get doctors to trust us, we had to say "no strings attached." We had to contact 26,000 doctors to get 19,500 to accept the free gift. Of these 19,500 doctors, 2,700 accepted the e-prescribing package. Unfortunately, only about 150 physicians are using this technology consistently. I was very disappointed that we only moved the needle that much.

Harvey Fineberg, the president of the Institute of Medicine, explained why the doctors were so recalcitrant: "When you’re in private practice, ‘free’ is not cheap enough." In other words, the doctor thinks,"You’re giving me what looks like a free gift, but you’re really requiring a change in how I work, which costs more and gives me little benefit. So I’m not changing my work process."

It was a real lesson in life. We were trying to change fundamental behavior, and the doctors don’t want to change unless they see a significant benefit for their patients or themselves.

While Schaeffer is dismayed that the $40m giveaway intended to promote ePrescribing was such a failure, you’d think that the program could have had a little but of brains put behind it first. Basically docs were given the choice of a) either take this subsidized ePrescribing system that we’re going to drop on your practice with little support, or b) have this free Dell computer which you can use to trade stocks and surf porn at home, and later sell on Craigslist. Doctors, not being dumb, took the choice with some value. This was for Wellpoint the equivalent of throwing mud at a wall to see if it sticks, except the technique used involved blasting the wall with a water cannon at the same time. The dummy was whomever at Wellpoint gave the docs the choice. And these are the geniuses who failed at HMO network medical management, as earlier noted

So why were the dummies in charge of this one? Well because the smart guys are stuck over in a different part of the company.

But today the most important thing for us is our actuarial data, which helps us price our premiums. As you might guess, pricing is critical. Our analysis showed that the so-called cycle in health insurance—three good years, three bad years—is simply a function of pricing discipline and pricing mistakes. There isn’t any doubt that the companies with the best pricing are less cyclical. In our case, we have no cycles at all.

We found that the most critical information for good pricing wasn’t how many contracts we had but how many people we had—who they were, their age, their gender, and where they lived. Together with regional and local differences in illness types and doctors’ behavior, these characteristics determined what the costs would be. So we gathered more information than anybody else about those things, and this was a huge competitive advantage. Now almost everybody does things that way.

We also make a point of processing claims quickly because we found that faster processing gives you a better idea of your costs and early knowledge about how trends are changing. By monitoring the landscape, we were able to raise or lower our prices before anyone else, which is really important in this business. You never want to sell an underpriced policy.

So there you have it. Being really smart about pricing and risk is how you run a successful insurance company. If you look at Wellpoint’s stock in the last 4 years, it’s evident that in the mission critical part of their business, they’re very very good about this. Stock is up four-fold and profits nearly double in the last 3 years.

Wlp

Of course that’s not the only thing that’s gone up in the last five years. So have premiums and health care costs. And the two things may per chance be related!

Gabel_1

But this just goes to show that what Schaeffer is good at — running a lean mean ultra-competitive pricing business — has little if anything to do with solving the wider problems of the health care system that he’s so eloquent about. He of course is walking off from the whole deal with some $300m smackers under his belt. All in stock from “converted” non-profit companies, and all such high stock because Wellpoint has (like the rest of the business) been able to stick price increases to its clients, year after year after year.

So why is McKinsey, which is after all supposed to be in the business of helping the Fortune 500 reduce their overall costs, so fawning to Schaeffer? Perhaps it’s just a mutual recognition that when it comes to corporate America, perhaps you can fool all the people all the time — so long as they hang out in the executive suite.

POLICY: Why health care costs so much

Jun 22, 2005• 11

This one is the cross-post from Ezra’s blog yesterday. I was going to do something different last night, but the wind was right and so I went paragliding instead! And it was great! I will have more on the FDA later today or tomorrow

Health Affairs (the essential peer reviewed health policy journal) has an article from the very well respected Center for Studying Health System Change (HSC) which announces that the decrease in the increase of health spending has stalled (here’s the slightly more digestible press release). No kidding, the press release starts off with this line. See if you can get the gobbledygook here:

“The reprieve from faster-growing health care costs stalled in 2004 as costs per privately insured American grew 8.2 percent”

The good news is that nominal GDP growth (real growth plus inflation) was 5.2% in 2004, so health care costs (the 8.2%) were less than double that. So in the bizzaro world of American health care, it’s still something of a success when health care is expanding only are only a little under double the rate of the rest of the economy or less than three times the inflation rate. That’s why health care takes up 15% of the economy now when it was around 5% in 1970.

But the two key questions are a) do we have to spend so much more? and b) what are we getting for the money?

The short answer to a) is no, we don’t have to spend so much. Most other countries spend between 6% and 10% of their GDPs on health care, and some, such as Canada and Japan in the 1990s, actually reduced the share of GDP they spent on health care. The more complex answer to a) depends on what you think we ought to be spending our money on. Back in the time of Vietnam and the Cold War the US spent nearly 10% of GDP on “defense”. Now we spend money on frappuchinos and viewing pictures of Paris Hilton on-line. These are all political choices, and it’s clear that Americans view medical care as to some extent a luxury good that they are happy to spend money on. In her book Medicine and Culture the late Lynn Payer described the difference between the British stiff-upper lip, the French consternation about balance in the liver, and the American desire to operate on any patient who’d lie still for a moment, and she ascribed most of the difference in medical practice, and thus costs, to culture. More recently Uwe Reinhardt has shown that it’s not just culture but also prices — we pay our health care workers and supplier more than foreigners do and that’s a big factor in our overall larger costs.

The other factor that allows us to spend so much more is that there is neither a competent market mechanism that stops us spending too much, nor a central budget authority doing so. Market mechanisms work in one of two ways, either on average we just can’t consume more (i.e. pictures of Paris Hilton) or we can’t afford to all consume as much as we might possibly want (i.e. we can’t all afford Prada dog-caddying purses or whatever Paris carries her dog around in). In health care our ability to consume is essentially limitless, especially if we’re sick, and usually some other sucker is paying the tab. So we are dependent either on the producers of care to say “that’s enough” (which is the British stiff upper lip approach which results in what Americans call rationing and Brits call compassionate care for the sick and elderly), or on the sucker that’s paying the tab to cry “Uncle!”. Briefly (and this is a much more complex subject), because of our diffuse system of third party payment, none of the said suckers have either had the ability or the will to really reduce payment. And the producers here have always known that putting up their costs will result in someone ponying up. Even though as the prices go up more people get excluded out of the system on the margins, those who can stay in it will more than make up the financial difference. So costs go up, as we do more things with more technology at a higher price. And because not everyone is in the system, and there’s not one universal pot of money or line-item budget, or no effective consumer pricing mechanism (and there can’t be for reasons that I wont go into here), no one is there to cry “Uncle!”. Of course in other countries that’s usually the job of the other cabinet ministers who say things like, hey if you put all the taxes towards health care there’s nothing left for education, roads, invading Iraq or whatever. When Congress votes on a new healthcare bill no-one seems to care too much about that bottom line, as the Medicare Modernization Act cost fiasco proves. Note that this is not how Walmart governs relations with its suppliers.

The second question is harder to answer. In some ways it’s easy to say that we don’t do as well as other countries on several outcomes measures and that we’re not getting our money’s worth. On the other hand several of the things that used to kill people are now relatively easily surmountable — at a cost. And then there’s the paying for comfort issue. It used to be that if you had real heart trouble, you needed to have your chest cracked and have a full CABG. No fun. Now getting a stent put in is a relatively painless procedure that they don’t even put you to sleep for. Does that lower the bar on the decision to do invasive cardiology? Indeed. Does it cost more for the payer per individual? Probably, as in the end many of those stent patients need a by-pass anyway. Does it cost the payers and society more overall? You betcha. And the parking lots outside the cardiologist suites are filled with physicians’ Porsches as are those outside the executive offices at J&J and BSC.

Is that a good or a bad thing? Complex. In aggregate the cheapest thing is to let the heart (and therefore patient) go when it’s time, but we’re never going to do that. So should we restrict procedures to only those in real trouble, and only give them a CABG? Fine if you say so, but let me ask you two questions. What do you define as real trouble? And would you rather have a stent put in while you lie there listening to Lite jazz, or have your chest cracked?

And that uncertainty is what drives our system and drives that cost barometer up.

HEALTH PLANS: Kaiser will combine “systemness” with high-deductible plans, maybe.

Jan 27, 2005

There’s a pretty interesting interview with Kaiser Permanente CEO George Halvorson in the San Francisco Business Times. The tag line is that “Moving Kaiser beyond one-size-fits-all health coverage and ‘Dark Ages’ record-keeping, CEO George Halvorson reshapes a health-care giant for the 21st century”. Well, maybe.

Kaiser appears–at the third time of trying–to be making a real go with its HealthConnect electronic medical records system. My spies in S. Cal tell me that the implementation is going really well. However, given that the original system I was shown (based on the old Oceania system) was pretty spiffy back in 1997, I’m not certain that the whole organization needed to wait until 2005-6 to get it right. But no matter, they are clearly ahead of the rest of American mainstream health care in EMR adoption. And they are making the folks at Epic much richer. Plus, it goes without saying that Kaiser has got the integration of incentives and purpose that the rest of the system lacks in dealing with the long term chronically ill. If I was chronically ill, I’d like to be a Kaiser member.

However, Halvorson’s other concern is one that doesn’t really have an answer. He worries that younger healthier people in his catchment area will be attracted to high-deductible plans and HSAs–not an area that Kaiser as a full service HMO has much experience with.

Kaiser is scrambling to move into this new realm by creating benefits packages with added cost-sharing elements, such as high-deductible plans and HSAs, he said. Hiring experts in insurance systems and billing has been a big priority recently. It is also hiring large numbers of new managers and workers with experience in areas such as actuarial work, insurance underwriting and the like.

Kaiser is trying to roll out these types of plans, but of course they don’t fit easily with its historic pre-paid group practice mentality. It also doesn’t fit in with the mathematics of insurance. High-deductible plans work well for an organization that doesn’t have to deal with the consequences of splitting the risk pool. Kaiser is a risk pool. It’s been the pioneer of community rating forever.

The article suggests that the high-deductible plans are so far a minor irrelevant part of Kaiser’s business. If they stay that way, it’s probably OK. If they become a big deal, well all the actuaries in the world won’t make their chronically ill population healthier, and that could lead to real problems.