Tag: Paul Keckley

Income Taxes and Healthcare: The Disconnect

After leaving Navigant in February, my pondering of ‘what’s next’ was interrupted by the reality of income taxes due weeks later. By midnight tonight, 240 million Americans will have filed, 53% will have paid something to Uncle Sam and all of us will be puzzled by where it goes and how it’s used.

Our federal individual taxes provide 47% of the federal government’s revenues, or $1.48 trillion for FY15.  Payroll taxes paid jointly by workers and employers make up another 34%, or $1.07 trillion and corporate taxes 11%, or $342 billion.

The federal government will spend more than it receives: for FY2015 just ended, federal receipts from all sources were $3.25 trillion and expenditures were $3.68 trillion billion. And 25% of that went to Medicare and the federal its portion of the CHIP and Medicaid programs.

Healthcare makes up the biggest chunk of Treasury spending followed by Social Security (24%), Defense (16%), and a bucket of expenditures called Discretionary Spending (16%) over which Congress exercises its influence most directly. And when Defense spending for healthcare is added ($51 billion annually), the state portions of Medicaid and CHIP payments are added, and health coverage for federal employees are added, more than 30% of the federal spending goes to healthcare. So one might reason that if individual income taxes are 47% of total federal receipts, income taxes paid for more than $500 billion of the healthcare tab. But that’s not widely known or understood by taxpayers nor is it a complete picture.

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The Myth That Refuses to Die: All Health Care is Local

In 1980, industry healthcare planners imagined a system where the centerpiece was a hospital in every community and a complement of physicians. Demand forecasting was fairly straightforward: based on the population’s growth and age, the need was 4 beds per thousand and 140 docs per 100,000, give or take a few.

In 1996, the Dartmouth Center for the Evaluative Clinical Sciences published the Dartmouth Atlas on Health Care quantifying variability in the intensity of services provided Medicare enrollees in each U.S. zip code. They defined 306 hospital referral regions (HRRs) that remain today as the basis for regulation of our healthcare system.

In the same timeframe (1980-2000), the ratio of doctors per 100,000 doubled as the number of medical schools increased from 75 to 126 leading health planners (Graduate Medical Education National Advisory Council) to predict a surplus of 70,000. Meanwhile, demand for hospital beds edged down slightly to 3.5/1000—the result of managed care efforts in certain parts of the country.

Today, we operate 2.4 beds per thousand and have 265 physicians per 100,000. But the bigger story is the widespread variability in the volume, costs and quality of care across our communities.  Across the 306 HRRs, bed supply ranges almost 250%; physician supply even more and costs as much as 400%.

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Myth No. 1: Quality of Care in the U.S. Health System is the Best in the World

According to Gallup surveys, four of five Americans believe the quality of care they receive is good or excellent, and the majority think it is the best available in the worldSurveys by Roper, Harris Interactive, Kaiser Family Foundation, Harvard’s Chan School of Public Health, and others show similar findings. And the public’s view hasn’t changed in two decades despite an avalanche of report cards about its performance, a testy national debate about health reform and persistent media attention to its shortcomings and errors. But is the public’s confidence in the quality of the care we provide based on an informed view or something else? It’s an important distinction.

Two considerations are useful for context:

Measuring quality of care objectively in the U.S. system is a relatively new focus. And we’re learning we’re not as good as they think we are. Historically, the public’s view about “quality of care” has been anchored in two strong beliefs: 1-the U.S. system has the latest technologies and drugs, the world’s best trained clinicians and most modern facilities, so it must be the best and 2-the care “I receive” from my physicians and caregivers is excellent because they’re all well-trained and smart.

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The Health Care System in 2018: Combat Zones to Watch

Entering the home stretch on 2017, the stage is set for some classic duels next year: they’re about money and control and they’re playing out already across the industry. Here’s the five combat zones to watch:

Hospitals vs. insurers: This is the quintessential struggle between two conflicting roles in our system. Hospitals see themselves as the protector for a community’s delivery system, bearing risks for clinical programs, technologies and facilities that require capital to remain competitive. Insurers see themselves as the referee for health costs, calling balls and strikes on the necessity and cost-effectiveness of improvements providers deem essential. Each sees the other as complicit in healthcare waste and guard jealously their leverage: hospitals enjoy community support and physician relationships and insurers controls premiums. Around the country, the combat zones involve stand-offs involving reimbursement negotiations and narrow networks (i.e. Mission Health (Asheville NC) and Blue Cross of NC), coverage determinations by insurers that impair hospitals (i.e. Anthem’s decision to deny coverage for unnecessary emergency room use) and others.Continue reading…

The Four Things Keeping Hospital CEOs Awake at Night This Year (Hint: Donald Trump Isn’t One of Them)

The Center for Medicare and Medicaid Innovation released a Request for Information (RFI) last week– “New Direction for the CMS Innovation Center.” It’s the latest chapter in the unfolding policy framework that will govern the health system for at least the next 3 years.

The RFI, which doubles down on value-based alternative payment models and consumer directed care, coupled with a proposed rule to cancel mandatory bundles by former HHS Secretary Price, the administration’s actions last week to weaken contraceptive coverage requirements in employer-sponsored health plans and Congress’ FY18 federal budget that include cuts in Medicare and Medicaid funding provide a sobering context for hospital and health system strategic planning. But hospital CEOs have adapted to the new normal from DC: uncertainty about the laws governing our health system is standard fare.

Last month, I interviewed 13 hospital CEO’s in preparation for their upcoming Board-Management strategic planning retreats. They lead organizations in 11 states with substantial differences in the scale, scope and strength of their operations and the dynamics in their markets. Two are academic medical centers, six are independent multi-hospital systems and five operate in multiple markets. When I asked “what’s keeping you awake at night” their answers were the same.

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The Rest of the Story About the Economic Good News

Legendary radio commentator Paul Harvey ended his daily report with a final story introduced by the tease “Now for the rest of the story.”

Last Tuesday, the U.S. Census Bureau announced that median household income increased 5.2% in 2015 to $56,516—the first increase in inflation adjusted income since the start of the downturn in 2007.

The Bureau also noted that the U.S. poverty rate decreased to 13.5% in 2015, down from 14.8% in 2014 and those lacking health insurance coverage shrank to 9.1% from a high of almost 16% in 2007. According to the Center for Budget and Policy Priorities, that’s the first time all three have improved in 20 years which it attributes to a lower unemployment rate (5.3% vs. 6.2% in 2014) representing an increase of 3.3 million in the workforce. That’s the story, but here’s the rest of the story.

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The Domino Effect of House v. Burwell

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Last week, U.S. District Court of Appeals Judge Rosemary Collyer issued a ruling in House v. Burwell that could cripple the law. In her opinion, the President overstepped his Constitutional authority in granting cost sharing subsidies for those lacking insurance coverage since budgetary approval is required from Congress.

The specific constitutional question is this: Did the administration or specifically the Secretaries of Health and Human Services and Treasury violate Article I, §9, cl 7 of the U.S. Constitution when they “spent public monies that were not appropriated by the Congress.” (United States House of Representatives v. Burwell, 130 F. Supp. 3d 53, 81 D.D.C. 2015). The constitution is explicit:

No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law; and a regular Statement and Account of the Receipts and Expenditures of all public Money shall be published from time to time. (U.S. Const. art. I, § 9, cl. 7.) The courts will have to decide if the portion of the cost sharing subsidies (ACA Sections 1401, 1402) disbursed by the federal government without Congressional authorization violates the law.

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Repealed or Repaired?

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Last Wednesday marked the sixth anniversary of the passage of the Patient Protection and Affordable Care Act. As of this week, the five Presidential aspirants have each articulated key changes they’d propose, though polls show interest in the law is largely among Democrats who consider healthcare a major issue along with national security and the economy.

GOP candidates Trump, Cruz and Kasich say they will repeal the law; Democratic frontrunner Clinton says she will repair it, and her challenger, Bernie Sanders, promises to replace it with universal coverage. Some speculate that candidate Clinton’s plan will ultimately mirror her Health Security Act of 1993 that parallels the Affordable Care Act in many respects. But the law gets scant attention on the campaign trails other than their intent about its destiny if elected.

I have read the ACA at least 30 times, each time musing over its complexity, intended results, unintended consequences and hanging chads. At the risk of over-simplification, the law purposed to achieve two aims: to increase access to insurance for those unable to qualify or afford coverage, and to bend the cost curve downward from its 30 year climb. It passed both houses of Congress in the midst of our nation’s second deepest downturn since the Great Depression. Unemployment was above 10%, the GDP was flat, and companies were cutting costs and offshoring to adapt.

The “Patient Protection and Affordable Care Act” soon after became known as the “Affordable Care Act”, and then, in the 2010 Congressional Campaign season that followed its passage, “Obamacare”. It was then and now a divisive law: Kaiser tracking polls show the nation has been evenly divided for and against: those opposed see it as “the government takeover of healthcare” that will dismantle an arguably expensive system that works for most, while those supportive see it as a necessary to securing insurance coverage for those lacking.

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Is Health care Ripe for Disintermediation?

Ashton KutcherWhat do Ashton Kutcher, Donald Trump and Travis Kalanick have in common? They recognized an opportunity and used it to their advantage. That trend: disintermediation—the opportunity to deliver a product or service to a consumer with higher perceived value than an incumbent’s by changing the fundamental way it is delivered.

  • Kutcher made a major investment in Brian Chesky and Joe Gebbia’s start-up. The trio recognized that hoteliers who gouge patrons around peak events like the Super Bowl or conventions are vulnerable. They created Airbnb that provides overnight guests accommodations in private homes at half the price of a hotel’s rate. But Airbnb doesn’t own or operate a hotel room anywhere.1
  • Trump recognized that 70% of American voters say they’re independents or moderates and do not align with either party. Thus, he’s leading the GOP pack by appealing directly to voters while skirting traditional conventional campaigning and the traditional ground game in politics. And his style of straight talk and disdain for political correctness has tapped into a segment of public disdain for traditional politicians.2
  • Kalanick concluded that urbanites wanted convenient transportation service and millions who have cars wanted part-time income. With a $60 billion market cap after five years of operation, Uber is history’s most successful IPO. But Kalanick doesn’t own a fleet of taxis. 

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Headlines We’ll See In 2016

Paul KeckleyAmidst the rhetoric of Campaign 2016, the reality of escalating health costs, and the acceleration of consolidation across the industry, healthcare headlines in 2016 will highlight major changes that will reshape the future for the next decade and beyond. Here’s the top 10 you can expect to read next year:

Insurance Mega-Deals Approved, Blues Align more Tightly to Compete:

The Department of Justice approved the mega-deals allowing Anthem’s acquisition of Cigna and Aetna’s takeover of Humana. With certain provisions, the deals will go forward which means United, Anthem and Aetna will together control 44% of the U.S. insurance market. In response, the Blue Cross Association announced it is moving forward with its plans to create a more cohesive national strategy for its 36 members to compete with the Big 3. Collectively, the four serve 242 million members, or more than 80% of the insurance market in the U.S.

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