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So That’s How The Rates Are Set

The Wall Street Journal published a very important article this week. Written by Anna Wilde Mathews and Tom McGinty, it is entitled, “Secrets of the System: Physician Panel Prescribes the Fees Paid by Medicare.

Here’s the lede:

Three times a year, 29 doctors gather around a table in a hotel meeting room. Their job is an unusual one: divvying up billions of Medicare dollars.

The group, convened by the American Medical Association, has no official government standing. Members are mostly selected by medical-specialty trade groups. Anyone who attends its meetings must sign a confidentiality agreement.

Yet the influence of the secretive panel, known as the Relative Value Scale Update Committee, is enormous. The Centers for Medicare and Medicaid Services, which oversee Medicare, typically follow at least 90% of its recommendations in figuring out how much to pay doctors for their work. Medicare spends over $60 billion a year on doctors and other practitioners. Many private insurers and Medicaid programs also use the federal system in creating their own fee schedules.

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AMA and Congress: Playing “Chicken” Again

Nine times in the past eight years, Congress has, at the last second, delayed the automatic cuts in doctors’ Medicare fees that it decreed some 13 years ago to prevent Medicare spending from outpacing other consumer expenditures.

The AMA threatens that doctors, especially primary care doctors, will stop accepting Medicare patients if the cuts go through. Congress hurtles toward the head-on collision, citing runaway budget problems. Doctors are kept in suspense, their claims held in abeyance while carriers wait for Congress to fix the problem retroactively if it has missed its deadline. The AMA claims credit when the wreck is averted, and urges doctors to continue paying their dues while it feverishly works for a permanent “fix.” Only the AMA, it implies, stands between Congress and certain disaster.

Every time cuts are postponed, the next scheduled cut gets deeper. It’s like a balloon mortgage payment in reverse.

And the controversy gives columnists another occasion to rail against those greedy overpaid doctors, unwilling to assume a bit of shared sacrifice despite the economic downturn.

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Can a Collection of Official Statements Be Called a “Blog”?

American Medical Association president, J. James Rohack has begun sharing his thoughts on the U.S. health care system, health reform and other issues affecting patients and physicians in a new blog, according to the AMA.

There’s one problem: the AMA presidency is an elected position whose occupant has roughly the same freedom of expression as a senior Iranian clergyman or a member of Vladimir Putin’s cabinet. The AMA, so virulent for so many years in opposition to the group practice of medicine, yields to no one in its practice of group consensus medical politics. All communications by AMA officers and board members are strictly scripted to adhere to official positions.

In other words, an AMA blog is simply repackaged blarney. Don’t consult Dr. Rohack expecting even the barest glimpse of a genuine “second opinion.”

Michael Millenson is a writer, consultant and frequent speaker on healthcare topics. His work appears frequently in these pages and on other blogs, including the Huffington Post.

Commentology

THCB reader JB wrote us to say: Commentology

"I guess you guys are probably aware of the huge backlash that is going
on with various medical societies  around the US, due to the AMA and
other physician groups endorsement of HR 3200, and the subsequent
"meltdown" of this bill??

State medical societies and
associations are "seceding" from the AMA, and threatening to further
distance themselves from AMA because their memberships massively
disagree with the purpose and positions of this proposed "healthcare
reform bill." 

State Medical Associations, specialty groups
(American College of Surgeons, American College of Physicians, American
Academcy of Pediatrics, etc.) are all in full back-pedal spin mode to
try and fend of their furious doctor constituent-members, who generally
were ambushed by their professional societies full-fledged endorsement
of HR 3200. 

This has created multiple rifts, and further
undermined support of this measure, even though Obama and Pelosi want
the public to believe this abomination of a bill is fully endorsed by
organized medicine as well as physicians in general.  NOTHING could be
further from the truth."

Is Wal-Mart Leading the Charge on Health Reform?

ParikhLast Wednesday’s  headline in the Wall Street Journal may have surprised you.  It read:  “Wal-Mart Backs Drive to Make Companies Pay for Health Coverage.”  The article discussed Wal-Mart’s open support for an employer mandate requiring all but small businesses to provide care for its workers, a stance that other retailers have opposed for obvious reasons.

I’ve been following the story of Wal-Mart and health care reform for the past several years.  While some see this move as the company’s way of trying to level the playing field between it and other retailers, it nevertheless has taken several actions over the past decade to make health care more accessible and affordable.

Wal-Mart’s transformation began in 2006, when then CEO Lee Scott shook hands with Andy Stern, the head of the Service Employees International Union. In the past, such a handshake would have been unimaginable.  Wal-Mart had earned a reputation for failing to provide its workers with health care, and the SEIU was one its strongest critics.

That changed with rising health care costs.  Wal-Mart, like labor, recognized the need to provide affordable health care.  The Scott/Stern handshake was a call for affordable care for all Americans by 2012.

This handshake can be seen as a bookend to another handshake decades ago, described by Malcolm Gladwell in a 2006 New Yorker piece.  This first handshake was, like this one, between two powerful men representing labor and industry:

“The president of General Motors at the time was Charles E. Wilson, known as Engine Charlie. Wilson was one of the highest-paid corporate executives in America, earning $586,100 (and paying, incidentally, $430,350 in taxes). He was in contract talks with Walter Reuther, the national president of the U.A.W. The two men had already agreed on a cost-of-living allowance. Now Wilson went one step further, and, for the first time, offered every G.M. employee health-care benefits”

Thus, American health care: –employer based, brokered by private insurers, and provided by doctors on a fee-for-service basis.  The kind of care that has created the fragmented market that most of are a part of today.  The kind that has left 48 million Americans uninsured and millions more underinsured and just one illness away from bankruptcy.   The kind of health care that led Wal-Mart the SEIU and the Center for American Progress to write a letter to the White House today in support of change.

As reported in the Journal, Wal-Mart has taken sincere steps to provide health care to its employees.  Today, as a result of cutting the time of eligibility in half and increasing choices of plans, 52% of Wal-Mart U.S. employees are covered by the company.  That’s compared to 45% of the rest of the retail industry.

Wal-Mart hasn’t just stepped up to increase coverage for its employees–in 2005, it became the first company to offer $5 generic prescriptions–a breakthrough price for people who previously needed to decide between taking their meds or eating dinner.

Wal-Mart has also been in the lead in opening walk-in clinics in its stores. Although the recession seems to have slowed the initial enthusiasm for retail medicine, the idea, in principle, has the potential to offer convenience at a very affordable price for people who have minor ailments like sore throats.

Finally, Wal-Mart has also recently started offering an electronic medical record to doctors.  While it remains to be seen whether it will sell, you have to give credit to the big box retailer for taking the initiative.

Whether you like or loath Wal-Mart (and all of us seem to fall into one or the other category), its efforts to shape up American health care shouldn’t go unnoticed. In fact, I would dare “real” health care groups, like the American Medical Association, to show that they can match Wal-Mart’s initiative and drive to improve health care.  So far, all we’ve seen from the AMA in the past few weeks has been a lot of lip service trying to assure us that they’re on the side of reform while behind closed doors, the Association’s members are still fighting about its future.  And remember, the AMA represents at best 20-30% of doctors in this country, which is one reason why the New York Times’ Nicholas Kristof urged “President Obama, don’t listen to the A.M.A. on this issue. Instead, for starters, call your doctor!”

Careful What You Wish For

On the left are those who would like health reform to include a strong public plan, one that could negotiate large provider discounts, driving down the cost of medical care. On the right are those who think health insurance should be provided only privately. I’m neither left nor right. I consider myself a realist and an empiricist.

A reasonable reading of the political tea leaves suggests that health insurance for the non-elderly will remain largely a private affair. (See the Debating the Public Option in The American Prospect by Paul Starr, Robert Reich, and Robert Kuttner.) Therefore, I’d like the private insurance market to work well. I’m also very familiar with the Medicare experience (and its problems) with both public and private provision of insurance.

So is Kerry Weems, the former acting administrator of the Centers for Medicare and Medicaid Services (CMS), the agency that oversees Medicare and Medicaid. Weems was interviewed recently by John Iglehart, the founding editor of Health Affairs, a respected journal of health policy (Doing More With Less: A Conversation With Kerry Weems, Health Affairs, 18 June 2009). Based on his experience managing Medicare and Medicaid, Weems had some interesting things to say, some of which I summarize below.

In general he paints an ugly picture of a public plan. If you’re hoping health reform includes a strong public plan you should be careful what you wish for, and you should read the interview to see what problems a public plan might have. This is not to say a public plan is better or worse than private plans. It is just to say that one should expect that a public plan will likely experience certain types of problems. Now on to the summary of the Weems-Iglehart interview.

On Congress. Congress has not treated CMS well because funding it is not as sexy as funding other agencies overseen by the same appropriation subcommittees: the National Institutes of Health and the Centers for Disease Control and Prevention. A consequence is that CMS has insufficient resources to fight waste, fraud, and abuse. For example, according to Weems,

“CMS’ annual expenditures [are]…more than the economies of all but twelve nations, and CMS carries out its responsibilities with a staff of 4,600 people. Social Security is of comparable budget size and handles its dollars with about 66,000 people…”

On Medicare Advantage. Weems feels that private plans under Medicare advantage can offer “better care at lower or the same costs” as traditional fee-for-service Medicare.

On Payment Errors. Medicaid has a payment error rate of 24 percent, meaning that the payments paid to providers are either incorrect or unverifiable 24 percent of the time.

On Waste, Fraud, and Abuse. Investigations of waste, fraud, and abuse under Medicare and Medicaid have yielded a return of $17 for every $1 spent. However, far too little is spent in the fight. Therefore, a considerable amount of waste, fraud, and abuse exist under Medicare and Medicaid. (See the recent stories on fraud in Miami, Detroit, and Denver.)

On a Public Plan under Health Reform. Weems thinks a public plan is “a bad idea because the government has a difficult time selecting only those providers who deliver high-quality care. There is a risk that a lot of resources will be wasted on poor care.

On Political Pressure. CMS administrators get a lot of pressure from Congress to treat certain providers more favorably than they might deserve. Such political meddling is a handicap in properly administering a public insurance plan.

On Physician Payments. The American Medical Association (AMA) has considerable influence on physician payments through its Resource Based Relative Value Scale (RBRVS) Update Committee (RUC). Weems thinks the resulting payments have “contributed to the poor state of primary care in the United States.” (Weems’ anti-RUC statements sparked a blogosphere debate (hat tip: Kate Steadman of Kaiser Health News). Rebecca Patchin, Chair of the Board of Trustees for the American Medical Association wrote on the Health Affairs blog that CMS is under no obligation to follow the RUC’s recommendations and she cites examples where it has not done so. On the Health Care Renewal blog, physician and Brown University professor Roy Poses asks “why does CMS rely exclusively on the RUC to update the RBRVS system, apparently making the RUC de facto a government agency, yet without any accountability to CMS, or the government at large?”)

On balance, it is clear that Weems is not impressed with the public provision of health insurance under Medicare and Medicaid. Some of the sources of problems could in principle be remedied. However, if Congress were to implement a public plan under health reform there is no assurance it would not suffer from at least some of the problems that plague traditional Medicare and Medicaid. I think the most challenging are political pressures, including rent seeking on the part of providers, and a potential inability for a public entity to selectively contract based on quality.

The Incidental Economist holds a joint appointment at a major research
university and a federal government agency.  In his current position,
he studies economic issues pertaining to U.S. health care policy with a
focus on Medicare. His writings can be found at www.theincidentaleconomist.com

Commentology

Futurist Jeff Goldsmith’s analysis of issues that could cause problems for any health reform effort that eventually emerges from the foodfight in Washington this summer provoked a wide range of reader replies.   (“No Country For Old Men“)  Goldsmith wrote in response:

“The fun part of this blog is how much you learn about an issue when you post something.  Several learning points: 1) How big a deal this is.  $1.6 trillion sounds like a lot of money, but over ten years, it’s less than 1% of the cumulative GDP over those ten years (which I grew to $16.8 trillion from its present $14t in 2019).  In other words, it’s peanuts.   Cumulative health spending over this time looks like over $40 trillion, so  even $600 billion in Medicare cuts looks like peanuts.   These are small numbers made to look big because of the ten years.  Plus ten year numbers are BS anyway because you never get a linear increase over that type of time span.  $1.6 trillion actually sounds like  Dr. Evil’s ransom demands in Austin Powers. . .”

THCB Reader Margalit offered this response to Dr. Rick Weinhaus’s open letter to former Harvard professor Dr. David Blumenthal, the man charged with masterminding the Obama administration’s ambitious health IT push (“An Open Letter to Dr. David Blumenthal“), urging the administration to rethink support for the current EMR certification process …

“Maybe Dr. Blumenthal should come up with two separate “certification” suggestions similar to the auto industry.

1) A minimal set of standard security and safety items. Nothing too fancy and complicated. Something like car emissions and inspection that products have to pass every year in order to “stay on the road”.  Once the criteria are set, the inspection and certification body should be distributed, just like the inspection centers for cars, and multiple private bodies should be able to apply for the status of “Certification Center”.

2) This should be in the form of funding a Consumer Reports like entity, that is completely and totally unbiased, for evaluating EMRs and other health care applications. The Healthcare Consumer Reports should have very strict regulations regarding who it can receive funding from. Maybe the folks at the real Consumer Reports would like to take this one on. I would be inclined to trust them more than anything else that comes to my mind right now.”

Reader Candida also chimed in on the thread on usability prompted by Weinhaus’s proposed EMR design (“The EHR TimeBar: A New Visual Interface Design“), but posed a slightly more provocative question.

“The HIT and CPOE devices out there are an ergonomic failures and that alone renders them unsafe and not efficacious. But that is not the only defect harbored in these CCHIT “cerified” devices that causes injury and death to patients. There are many that are worse and they are covered up. The magnitude of patient injury and endagerment is hidden. The fact is that these are medical devices and as such, none have been assessed for safety and efficacy. CCHIT leadership, when asked about what it does if they get a report that a “cerified” device malfunctions in the after market and results in death, stated that they do not consider after market surveillance in their domain. One can take this a step further. How is it that medical devices are being sold without FDA approval?”

Dr. Evan Dossia wrote in to challenge critics who blame rising malpractice rates on physician attitudes and – in some cases – their ties to the insurance industry, in the thread on Dr. Rahul Parikh’s post looking at how the American American Medical Association is viewed one hundred and fifty years after the organization’s founding. (“How Relevant is the American Medical Association?“),

“Physicians began to be abandoned by big name insurance companies in the mid-1970’s so instead of “going bare” we started our own companies. As we continued to have ups and downs in the malpractice insurance market, more physician oriented companies appeared. Doctors now prefer companies started by other doctors and run by other doctors because these companies fight for their share holders rather than settle with plantiffs attorneys in order to avoid court room battles.”

Fellow reader Tcoyote agreed with industry analyst Robert Laszewki’s criticism of the rumored exemption that the Obama administration may give to labor unions, exempting them from any tax on health benefits for a period of five years. (“Unions May Get a Pass on Health Benefits Tax.”)

“Of course, this is politics, and the Democrats must throw the unions, whom they are stiffing on the “Employee Free Choice Act”, some kind of bone to get health reform financed. True enough, unionized workers’ after tax income isn’t protected by collective bargaining, but if unions knew it could fall by 5-7% because of a benefits tax, they would have asked for more in wages to cover the cost. I completely agree with the Chrysler/GM analogy. Those gold plated benefits are a major reason why our manufacturing sector is in trouble …”

Sarah Greene of the Group Health Center for Health Studies had this to say in response to Weinhaus’s take on a new and more usable electronic medical record design …

“It’s curious to me that human-computer interaction does not seem to have much traction in the EHR world, and yet in the consumer-centered Personal Health Record community, it is a guiding principle. While some might wonder if this suggests that doctors are super-human compared with patients (grin), it strikes me that the EHR developers of the world could take their cues from patient-focused efforts such as Project Health Design (www.projecthealthdesign.org)”

Preventing Extortion

Roosevelt signs the Tennessee Valley Authority Act The debate about a public health insurance option mirrors the debate
about public power in the 1920’s and 30’s. The arguments then were very
similar to the arguments we hear today.

The principal issue then was whether the federal government should
enter the public power business by investing taxpayers’ money to build
the Tennessee Valley Authority and to harness the Columbia and other
rivers for electrical energy, or whether the sites should be transferred to the
private sector. A second issue was who should build transmission lines
and set wholesale prices when the Federal government built dams.

The answer to the second question was first enunciated on the Senate
floor in the fight over the Wilson Dam in 1920 by Senator John Sharp
Williams of Tennessee. He said, “The government should have somewhere a
producer of these things that should furnish a productive element to
stop and check private profiteering.” Thus was born the yardstick
federal policy which later found its way into TVA legislation through
the efforts of Nebraska’s Senator George Norris. In a 1932 campaign
speech in Portland, Oregon, Franklin Roosevelt referred to his TVA and
other regional proposals as “yardsticks to prevent extortion against
the public.”

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How Relevant is the American Medical Association?

Like most doctors, I was busy seeing a full schedule of patients when President Obama addressed members of the American Medical Association at their annual meeting in Chicago.  The speech was billed as a crucial confrontation over health reform, and anticipation had been building for quite some time.   So I was too busy to learn anything about his remarks and the response until I got home.

Then again, I’m not a member of the AMA.  I never have been.  Neither are very many of my  physician friends and colleagues.  In fact, the odds are that your doctor isn’t a member of the AMA, because at best, only between 25-30% of the approximately 800,000 doctors in country belong to it.  And a good percentage (up to half of members according to one report) of those include residents and medical students, who get big discounts on membership and a free subscription to a journal when they join.Continue reading…

Obama vs Hillary at the AMA

Sixteen years and two days after then-First Lady and Health Care Czar Hillary Clinton went before the American Medical Association’s House of Delegates to sell her vision of national reform, President Barack Obama is treading the same path. I’m not sure how much greater eventual success Obama will have with the AMA, but having covered the Clinton speech as a reporter for the Chicago Tribune, I have three lingering memories.

The first was the invocation given before Clinton arrived. Its gist was, “Oh, Lord, you have taught us it is impolite to boo our guests, particularly in front of hordes of reporters.” The second memory was that Clinton finished her speech to a standing ovation. And the third is that she spoke fluently and passionately for 50 minutes without a prepared text, much to the chagrin of a national press corps accustomed to being spoon-fed a follow-along text before filing their stories. Fortunately, being a mere “regional reporter” (as the White House called us), I had taken notes.

Obama’s visit promises at least a few contrasts. He runs virtually no risk of being booed. He’s not only the President of the United States, and a very popular one, he’s also a president who has eschewed the perceived doctor-bashing engaged in at times by President and Mrs. Clinton. Obama most assuredly will not be speaking from notes, being as attached to the teleprompter as Ronald Reagan was to his 3×5 cards, but in the Internet Age anyone who cares to will be able to hear him live, anyway. A standing ovation? We’ll have to see.

To the amazement of her audience in 1993, Hillary went out of her way to hit all their hot buttons. For example, she praised the doctor-patient relationship and lashed out at the “excessive oversight” of insurance company reviewers and government bureaucrats who second-guess medical decisions. She talked sympathetically of the need for reforming malpractice laws and amending antitrust laws to allow medical professional societies to discipline poor-quality doctors on their own. (Here, I’m relying on a copy of my story I grabbed from an electronic archive.)

Obama, by contrast, prides himself on seasoning the obligatory political pandering with a soupcon or two of hard, cold reality. While reducing red tape and the need for defensive medicine are sure to be high on his list of promises, I don’t think he’ll hesitate to invoke the harsh global economic challenges that make health care reform so urgent. Look for Obama to remind the doctors how many more uninsured patients they’re seeing today and how much more involved Medicare has become in setting doctor pay scales.

One more contrast: in 1993, the AMA shoved forward Nancy Dickey, the one woman on their nine-person executive committee, to be its public face during the Hillary visit. Today, the organization’s elected president is Nancy Nielsen, the second woman to head the group (Dickey went on to the top job) and, though not publicized, the first who came to the post after holding a senior position in one of those dread health plans.

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