This isn’t new news, and has been disputed in a roundabout way in various other pieces, particularly one by Jeff Lemieux that I commented on last year. However, the Commonwealth Fund has a latest report showing that in terms of pure increase in payments, the enrollees in Medicare HMOs will exceed the cost of their equivalents in the FFS program by 8%. In some urban counties (such as Phoenix, AZ) the difference will be as much as $1,000 per year per member.

So the recent legislation designed to "level" the playing field between the public FFS program and the privately-run HMOs in Medicare+Choice has at the very least thrown the advantage back to the HMOs. Logically, if it believed that HMOs actually were cheaper you’d expect the government to get seniors into HMOs and then keep them there as they cut reimbursement rates later. That presumably would save money in the long run. However, we’ve seen this movie before, we know how it ends, and there are problems with the "bait and switch" scenario in which the senior is trapped in an ever-cheaper HMO. The problems are that neither the members nor the plans can at this stage be forced to stay in the market. In the late 1990s the private plans moved out as reimbursement fell, and their members were forced to move back to FFS.

That means that the short-term costs of pushing people into HMOs cannot be "made-up" later by ratcheting down rates so (as Commonwealth says), the increased Federal spending is merely a short-term subsidy to private HMOs and their members. Not exactly logical government policy. But then again, who said PDIMA was logical. Expect Senator Kerry to point this out in the run-up to November!

The California Healthcare Foundation is out with more great reference work. This one is an overview of the whole health care system. They call it Health Care Costs 101 and it’s a nice summary of some voluminous work done at CMS by Katherine Levit’s team.

There’s an easy to digest one page system overview PDF as well as a much larger version here.

Perhaps one of the most interesting views of what we already know is what share of which payers’ expenditure goes on what.

For consumers, “Out of Pocket” expenditure on prescription drugs is 23% of all spending, dental/other professional 21% and other (such as nursing homes) is 18%. For Private Insurance the numbers are hospitals 30%, physician/clinical 30% and Rx 14%. For Medicare hospital care is 56%, physician/clinical Services 26% and nursing Home/Home Health 9%

So as you’d expect the relatively low amount overall paid out of pocket by consumers is concentrated on drugs (and is concentrated in a relatively few number of consumers by the way) with the political consequences we’ve been seeing in the past few years. Whereas private insurers are concerned mostly with hospitals and doctors, and Medicare of course is still fixated on hospitals 20 years after the introduction of DRGs.

All food for thought when you’re considering who cares about what.

Sydney Smith at Medpundit is a great med-blogger but sometimes she drives me nuts with her inconsistency, such as in this criticism of Hillary Clinton’s rambling piece in the NY Times magazine:

Except that SARS wasn’t a disease of poor people. It disproportionately affected healthcare workers. It was spread globally by affluent travellers. And it did its worse damage in countries with the sort of healthcare systems that Senator Clinton prefers to ours – like Canada and China and Singapore.

Hillary may prefer Canada’s system, but her plan didn’t try to introduce anything like it in 1994. And Singapore’s system is the HSA/individual consumer account nirvana that is favored by those who believe in the “real consumer market solution” to health care, a group which usually includes Sydney. And China of course is a third world country without what most Americans would recognize as a health care “system”, other than in the big cities. SARS came from a rural area, I believe.

Sydney also comes out and joins me in calling for reform of the individual insurance market. She refers to this article in the NY Times magazine which is another example of how screwed up the individual insurance market is. The solution? Sydney calls for mandatory individual insurance, in community-rated large risk pools. That sounds supiciously like the system proposed by the Junior Senator from New York when she lived in the White House. Yup, that same Senator that Sydney takes to task for her rambling article and views on Canada.

OK, so its not really news, but Senate Majority leader Bill Frist has played the gallant heart surgeon for a very long time, and has had clear sailing for many years despite the fact that HCA (or as it was known Columbia/HCA) has both had a disreputable past, and continues to make money off Medicare. Given his role in health care in the Senate the fact that his father founded the company, his brother is Chairman and he owns millions of $$ of its stock, seems to have gone completely unnoticed.

So why is it coming up now? Malpractice is the answer. HCA owns a malpractice insurer, which will benefit (as will HCA) if malpractice awards are limited. A pro-lawyer consumer group has accused Frist of not being as disinterested as he claims to be in HCA’s dealings. It’s odd that it’s this little piece of Frist’s HCA dealings which is proving controversial when last December he helped shepherd the Medicare bill through the Senate that will greatly improve the Medicare funding stream for all hospitals, including of course the nation’s largest hospital chain — HCA.

In a recent study originally in JAMA, it was shown that health care companies put $237m into lobbying in the year 2000. 2000 was you may recall the year of a somewhat controversial and close election. Of the money

Drug companies and medical supply companies together spent $96m. Physicians and other health professionals, such as nurses, spent $46m, hospitals and nursing homes $40m, health insurance and managed care companies $31m, and disease advocacy and public health organizations spent $12m. During the study period, 1997-2000, spending on lobbying by health professionals grew by only 10% compared with 26% by other organizations.

Given that the recent Medicare bill returned big increases in Medicare fees (or at least overturned planned reductions) for both physicians and hospitals, increased Medicare payments for health plans, and of course added billions in potential new government revenue to pharma companies, I’d say the money was well spent.

OK, so that’s cynical, but the current state of US campaign and electoral financing is that all politicians need money, mostly for TV advertising. Those who contribute get their issues heard. And the health care industry is merely doing the logical thing.

I tend to believe that the Adminstration wouldn’t have tried quite so hard to pass PDIMA had they known that 55% of seniors would dissaprove and only 35% approve of their handling of Medicare a mere 100 days later.

This matters of course only because Florida and Pennsylvania are the two biggest swing states in the November election, both were very close last time (dead heat in Florida or fraud at the polls–take your pick), and whoever wins them probably wins the Presidency. In the 2000 census, the over-65s make up 12.4% of the population. In Florida they make up 17.6% of the population and in Pennsylvania, 15.6%. Yes, those are the two highest of any states. Seniors vote in greater proportion than any other age group and they vote about health care more than any other issue. Oh, and they hate drug companies, or at least don’t trust them any more. Prepare for 6 more months of some variant of the phrase "drug company written Medicare give-away" from Senator Kerry’s mouth.

I’ve just returned from a hospital meeting at which some take-all-comers, mission-driven hospitals are seeing bad debt ratios of up to 12% of patients, and at the same time the National Association of Community Health Centers reports that 36 million Americans lack access to basic care. These are not just the uninsured, some of whom do get access to care–hence the 12% bad debt ratio at that hospital. And don’t forget that at any one time 1 in 7 Americans is uninsured.

But roughly half the 36 million do have some level of insurance, even if it’s Medicaid (which in a state like Texas is barely what most of us would recognize as health insurance). The problem is not so much insurance as it is access to providers. As Dan Hawkins, Vice President For Policy at NACHC said:

"They live in inner-cities and in isolated rural communities. But no matter where they live, the story is the same: they can’t get health care because there aren’t enough doctors in their communities who are willing or able to care for them."

The dirty little secret of American health care is that although we have an over abundant supply of facilities and doctors on a national level, at a micro-regional level there are areas that are severely under-served. Many rural regions have less than one-third the number of doctors per head that are seen in affluent suburbs, and if you are living in an inner city area, the experience is similar. The dedicated folks doing the worthy work at community health centers and in county hospitals are desperate to get this message across. Dr. Gary Wiltz, MD, Executive and Medical Director of Teche Action Board in Franklin, Louisiana said:

"Where the unserved live, there are higher rates of infant and childhood illnesses, and higher mortality rates. In my state, which is the most medically unserved state in the union, we have a diabetes rate that is out of control–and that is because the diabetics who need help don’t have a doctor, or can’t go to a doctor because they don’t have transportation; or can’t afford a doctor, or even the medicines they prescribe."

This doesn’t stop when patients become eligible for Medicare, even though it’s not supposed to be a "separate but equal" system as Medicaid tends to be. Several reports including this one about knee surgery rates published in the New England Journal of Medicine last year, or this one in JAMA about access rates for Medicare HMO enrollees show that minority populations are less likely to get care than whites. And it’s not racism on the part of plans or providers that’s the cause. The problem is that there are fewer providers where minorities tend to live.

Of course the health service researcher cynics amongst us might think that minorities are doing better because they get less care, but a Kaiser Family Foundation report shows that being poor, non-white, un or underinsured and having problems with language severely restricts access to care, and results in much poorer health outcomes for those groups. For instance:

One result of limited access to primary and preventive health care is an increase in the extent to which patients are hospitalized for conditions, like asthma, that could be avoided with appropriate primary care. Gaskin and Hoffman found that Latino children and African American adults were more likely to be hospitalized for such preventable disorders than similar white patients. Disparities in access to care are not a new or recently discovered phenomenon; studies done in the mid-1980s found that Latino adults and children had substantially less access to a variety of health care services than their white peers.

Sadly the political impact of this report will barely make a ripple in the sea of the healthcare system it’s dropped into.

The HSA debate is an interesting one. Most of my comments have tended to focus on whether they can in fact be put into practice both on the consumer side, and on the physician side. This comes down to two questions, are there designated accounts that can consumers easily locate accounts from trusted sources to sign up for which will make the HSA accounting transparent? The answer there is "not yet"–I know as I’ve been trying to create one without success as yet, although I do have an application in to a tiny bank in Wisconsin that puports to be ready. But presumably this whole process will take some time but should eventually be doable–but it has now been 4 months already.

The second and more challenging question is, will providers be able to get their act together to create understandable pricing structures that makes sense for consumers? Given the massive challenge I’ve been having trying to get a cash-only surgeon to pre-price a procedure I"m about to have, I suspect not. After all, presumably a cash-only physician should be able to deliver that pricing already. But the end result from my interactions is that the surgeon would not guarantee rates for different procedures, and wouldn’t even be able to give me alternatives based on different likely outcomes. The end result is that I went to a different surgeon who’s group had already had that negotiation with Blue Shield. Of course the new surgeons office has a different pricing schedule for the uninsured, and when I was in their office last week I overheard a conversation between the clerk and an uninsured patient who was totally confused by different bills from 4 separate sources (surgeon, anesthetist, lab and hospital). So I still believe that we’re a long long way to go till we arrive at the point-of-care consumer nirvana. This is the reason that several free-market advocates of the Enthoven and Abramovitz schools believe that HSAs won’t be a big deal.

Paul Ginsburg seems to agree. In a recent HSC commentary, he writes

So what impact will these new accounts have on physicians, hospitals and other providers? The short answer: Not much in the near term because HSAs are unlikely to reach the critical mass needed to spark significant changes in healthcare delivery. Initial interest is likely to be confined to the individual insurance market under the current requirements.

In other words it’ll be people like yours truly who already have high deductible insurance and know that they are going to have high health care expenses who’ll want the HSA in order to reduce their tax bill. Ginsburg goes on to say:

Even if the accounts have great success in getting people to increase health cost-sharing, they are unlikely to be the magic cost-containment bullet. Since a small proportion of insured people with medical expenses higher than HSA deductibles account for a large proportion of healthcare spending, even widespread adoption would address only a portion of the cost challenge."

I’ve been commenting about this for a long time (mostly over at the MedRants postings). In a nutshell, HSAs won’t do anything to contain costs, as the vast majority of the money is spent on people who’ve blown through their deductible and are also not in the position of being prudent shoppers at the point of care, often because they’re price unconscious–literally!

But there is one deeper question about the whole HSA theory. If you allow people to contribute to their own accounts rather than pay into an insurance pool, what happens over time to that pool? The Kennedy-ites will tell you that as the healthier and wealthier "withdraw" their money, and the poorer and sicker make more demands on the pool, it will run out of money and need to go back to the taxpayer for more. In other words it will not succeed in creating a sustainable insurance model.

While this may be theory in the US, it is now demonstrated fact in the place in the world that has the greatest experience with things that look like HSAs, and that place is the pleasant, but draconian in parts, city-state of Singapore. So last week the local Singapore Straits Times reports essentially that the insurance pool system that backs up Singapore’s compulsory MSA system has run out of money. Don Mcanne (in his single-payer advocating daily "Quote of the day" email) describes the situation accurately:

"Singapore has a Medisave program which is composed of individual MSA-type accounts, a MediShield program which covers catastrophic, life threatening disorders, and a Medifund program that serves the poor. What has become evident is that coverage for non-catastrophic illnesses is clearly needed. Their current system leaves many without affordable access to essential but non-catastrophic health care services."

But of course, just because we have some data from abroad doesn’t mean we’re going to pay much attention. And as this is the US, HSAs aren’t going to be a big enough deal to really affect the whole system….probably.

My friend and health care sage Jane Sarasohn Kahn took offense at this paragraph from my recent post

So absolute proof that the Bush administration’s efforts to defend the Medicare bill is nothing but PR. Silly really, as there are some good things in the bill (like coverage for the very poorest seniors) that they could at least make a half-assed attempt to promote properly.

Jane writes

"I must respectfully disagree with you on your identifying coverage for the very poorest seniors in PDIMA as a "good thing." The poorest seniors have already been covered through Big Pharma cos. discount programs — like GSK’s Orange Card, the TogetherRx program which is a consortium of many pharmas (AZ, GSK, Janssen, Aventis, Abbott, Ortho-McNeil, Novartis, BMS), and others. You rightfully describe other aspects of the bill as being PR, and this "poorest seniors" aspect is, as well.All Congress would have had to do to extend Rx access to a greater number of seniors would have been to extend an already successful program that gets too-little PR in our sound-bitten era of "Big Tobacco, Big Oil, Big Pharma" to more seniors. The pharmas would extend the programs more in today’s environment. I’m no defender of all of Big Pharma’s practices, as you know–but Congress could have prevented the huge bureaucratic mess that will be the 2-year discount card program prior to the 2006 implementation of PDIMA. I am working with a pharma on their approach to the card (Phase I of PDIMA) and have attended two meetings in Baltimore with DHHS on the implementation schedule and requirements — and it really will be a bureaucratic mess that will add administrative costs to our already-costly system. This is even before the actual "modernized Medicare" kicks in in 2006. I cannot fathom the bureaucratic mess, donut hole and all, that will play out then.

Now I agree with Jane that there’s alot bundled in the bill that’s not helpful towards covering the poorest seniors. But while Medicaid does cover the very poorest seniors, there is another tranche of seniors who don’t have coverage and don’t do well. CMS reports that 76% of seniors have drug coverage. But that means that 24% do not. Of those that do not 19% of seniors without drug coverage spend between $1,000 and $1,999 a year on drugs and 4% spend more than $2,000. And of those that do have drug coverage 6% pay between $1,000 and $1,999 and 2% more than $2,000. So if you’re following along at home, 31% of seniors are paying more than $100 out of pocket a month on drugs. I don’t have the exact numbers to correlate drug coverage with income but the Stat Abstract reports that the median income of households over 65 was $23,000 in 2000, and 30% had incomes less than $15,000. So it’s pretty good bet that if your a senior with less than $1,100 a month in income, you’re likely to be paying over $100 of that in drug costs.

I’m sure Janes’s correct to say that the money could have been better spend subsidizing a discount card, even thought these programs don’t cover anything like the 30% of seniors who need help. Dan Burton would agree that the premiums and the donut hole combine mean that these costs won’t go to nothing, but there will be subsidies of premiums for the very poor and the bill is going to make the situation better for those who are spending hundreds a month on drugs. If I was the Administration I’d be pushing this very hard. What else can they do?

Understanding that this issue could lose Florida and Pennsylvania for the Bushies in November, it looks like (as I’ve been saying for a while) the Administration is getting ready to cave on the banning of drug import issue that its pharma paymasters had inserted into the PDIMA Bill. Yesterday HHS Secretary Tommy Thompson created a Task Force on Drug Importation, which in due course will come back and recommend changing that part of the bill. This has big implications as it’s by far the most unpopular part of the PDIMA bill, and if it goes away opposition to the bill could fade. That will make life a little tricky for the Dems.

Meanwhile the fuss about Tom Scully banning the CMS actuary from telling Congress the truth has been turned into a formal investigation, which will presumably proceed with the same "relentnessness" with which the DOJ has gone after whoever in the White House outed Valerie Plame. So we can expect that to be all cleared up around the time the bill takes effect in 2006!