The first decent poll I’ve seen on the Medicare bill is out from Harris, and the seniors hate it. No one under 40 has a clue about the bill (really!) but those over 65:
–are disappointed it passed by 51% to 16%
–disapprove of the discount drug card provision 45% to 44%
–disapprove of allowing private plans to compete with Medicare 54% to 30%
–disapprove of the ban on Canadian imports by a modest 85% to 12%

They only just approve of the drug benefit itself by 48% to 44%! These are horrible numbers by any interpretation and perhaps may have an impact in the wider scheme of things.

The Republicans (62-3%) get the blame over the Democrats (57%).  So my memo to the Democrat strategists (if they can find one) is to blame the Republicans for banning cheap drugs from Canada and selling Medicare to those evil HMOs, and perhaps they should suggest that Bushco has the same thing planned for social security.  The Donkey faithful must see Florida and Pennsylvania veering into the D column any time now……

Following my post last week on the individual and small group insurance market, the Anonymous Academic declared some of his political colors by saying this:

I haven’t followed the situation in California, but I am familiar with the situation in Washington State in the late 1990s, when the individual market there was a mess. The main culprit was a package of "progressive" reforms designed to enable chronically ill people to buy coverage, but which ended up making the individual market completely dysfunctional (for example, basically eliminating the market for generous individual coverage). After the reforms, most of the insurers (and many beneficiaries) fled the individual market, and those few insurers that remained offered truly crappy plans.

Unbelievably, the state’s insurance commissioner, Deborah Senn, and many left-wingers denied that there was a problem–or if they acknowledged the problem they denied that the legislative reforms were in any way responsible. One prominent liberal said that "sometimes things have to get worse before they get better," by which I believe she meant the market for individual coverage had to be destroyed to engender support for a single-payer approach.  Prior to the reforms, the individual market in Washington functioned reasonably well, although admittedly the situation was not very good for someone who got hurt or sick while uninsured. I don’t see how this problem can be avoided in a voluntary insurance market. If (a) people can choose whether to buy insurance and (b) there are few or no adverse consequences for getting sick while uninsured, then (c) few people will bother to buy insurance until they get sick.

A little later in our conversation, while giving the proviso that his comments are directly limited to the insurance reforms in Washington State in the late 1990s (guaranteed issue, community rating, 3-month waiting period for coverage of pre-existing conditions), he adds:

There were few serious consequences to being uninsured. If you got sick, you could get coverage in just 3 months with no underwriting.  I do think there are some problems with the individual market, but I definitely do not think that guaranteed issue, community rating, etc, are the right way to solve those problems.

Now I’m going to have to agree and disagree with the Academic. He is right. Individual health insurance CAN NOT work as a market if the insurer has any idea who they’re insuring OR if the individual has the choice to buy or not buy insurance. Both of them lead to one extreme–sick people being unable to get insurance–or the other–the adverse selection that kills companies that are compelled to offer insurance to the sick, as under those Washington State reforms. Insurers make money by getting rid of the expensive people. One of my buddies in the consulting business has been looking at individual enrollee profitability, and his analysis for his health  plan customer helped that plan increase profitability by identifying and enrolling the psychogrpahic profiles of a consumer who is less likely to be a big user of health services. Conversely if the plans have any clue in advance who those expensive people might be it’s their raison d’etre to make sure they don’t write them insurance. And funnily enough, crude though they may be, insurers have some tools to help them do that (hence my 300% quote increase when they found out I’d had knee surgery 2 years ago).  It’s the same concept as an insurer who covers fire damage knowing which 15% of houses are already on fire and therefore not covering them.  If an insurer gets it mostly right they do OK; if they get it wrong, they get hosed (pardon the pun).

And, by the way, as both the Academic and on a larger stage Mark Pauly gloss over, there are damn serious consequences for getting sick while uninsured. For example, there’s the raft of stories in the WSJ about denying care to the uninsured at UT Galveston. Another recent story well covered in the medblogs was the hospital in Indiana that carted deadbeat payers off to debtor’s prison.  And anecdotally (but I know her well), there’s my friend who has had no steady job in 30 months, is off COBRA, has a chronic blood-clotting illness (DVT) that flares up occasionally and was quoted (legally) $1200 a month she didn’t have for coverage with a $2,000 deductible (with no coverage of her pre-existing condition for the first 6 months) by California Blue Shield.  Her barely existing middle-class life will be torpedoed the next time she’s carted off to hospital when her condition breaks out, and she’ll probably have to declare bankruptcy to avoid paying the $20,000 bill she’ll likely receive.

I guess that if Pauly and other "free market" economists really believe that an insurance market is "good enough" if it works for the 80% of people who don’t actually need care, then the individual insurance market is fine.  If, on the other hand, you think that sick people should be able to get health care and have their costs spread over a larger group of healthy people (which I believe is the original concept of insurance) then everyone has to:

a) be anonymously community-rated in a big pool and
b) be forced to be in the pool (i.e. have to buy insurance)

But then again, that means that if you take it to its logical extension we should all be in one pool (or have large pools which make genuinely risk-adjusted transfer payments between each other), and then that means that the government is the logical organization to run that process. That then means the premiums we pay are called taxes, and we don’t like that.  So we pay much higher taxes called "premiums" for worse coverage and services (and pay way more out of pocket) and keep a bunch of useless anachronisms called brokers and small insurers in business all for the pleasure of avoiding "socialized medicine"–even though in Japan, Germany, Holland, Germany, etc, etc, they’ve worked out how to do this without nationalizing care delivery.

But instead we conduct minor and meaningless reforms like HIPAA at the edges of the individual insurance market, and try to get coverage to specific underinsured groups such as kids via tack-on programs like SCHIP which, as Cal Healthline and USA Today report, are incredibly vulnerable to the ongoing fiscal crisis at the state level. There is no way to put lipstick on this pig. But there’s no political interest in fixing it.

My personal solution for this whole mess is for Mark Pauly and all members of Congress to be forced to buy their health insurance on the individual market (even the over-65 year olds!).  Then you’d see a Clinton-style pooling plan implemented in about 3 weeks flat.

Wierd historical footnote: It was of course the smaller insurers who along with the AMA destroyed the Clinton plan with theHarry and Louise ads–the big guys fancied their changes in the pool structure. Ironically enough, a decade later the HIAA and the AAHP just merged!).

Every so often I run into someone, usually a doctor or someone else in healthcare who should know better, who just loses control when faced with a proposal they don’t like about health reform, and it’s usually got the words "single payer" and "Canada" involved in close proximity.  The always entertaining Chris RangelMD had such a moment last week, and unleashed a load of bile on Steffi Woolhandler following her interview with the NYTimes. Chris’ piece was filled with so many inaccuracies and crass misunderstandings about health care in the US (including in his native Texas), taxes in Europe, rationing, etc, etc, etc, that it required a response almost equally bilesome. As that type of thing is not the kind of cool analysis I try to provide at TCHB, I sneakily hid my response in Alwin’s entry about Chris’ piece at his code: theWebSocket blog I’m hoping that I’ll stir Chris into action over there too, and maybe get some other lefties like Ross at the Bloviator or single-payer advocate like Graham at Gross Anatomy to get stuck in too.  Then Sydney at Medpundit might get involved and the bar-room brawl really might get going into the silly season.  Graham incidentally found the the link to the article on rationing in Texas that I mention in my comment over at Alwin’s blog.

Meanwhile at THCB I’ll be trying to continue the highbrow discussion I’m having with DB’s Medical Rants about health care quality.  Of course if I mention the word malpractice that highbrow reserve could all fly out the window . . . . .

Finally and OT for this blog but as both Medpundit and RangelMD lead with it I’ll make an exception, ask yourself the following question: If you had access to at least $750,000 in cash, a false passport and a huge price on your head, wouldn’t you have shaved off the mustache, lost the beret, snuck over the border and been on the first plane to the south of France like this guy and this other guy did it?

I commented in response to a post in DB ‘s Medical Rants about a piece written by the libertarians at the Adam Smith Institute about private health care in the UK. (Don’t worry–they’re nice gentle British libertarians with no guns!). I too got an email requesting a look, so here goes. Their piece seems to be pretty accurate and I had the following comments that are already over at DB’s. So quoting myself:

There’s a little cheating going on here. Most of what the author is talking about is what’s called long term care in the US. That is funded by a mix of public (Medicaid) and private (mostly cash) sources here, but provided almost entirely by private sector facilities (including for-profit ones). That’s similar to the UK other than the money comes more from the state. In the UK, private provision of standard health services is used mostly as a safety valve so that middle and upper income people can get around the queue for NHS surgery. That’s been around forever, as allowing specialists to see private patients was part of the deal cut in 1945 by which they agreed to support the introduction of the NHS. NHS surgeons in specialties like orthopedics or gynecology can (quite legally) double or triple their incomes doing private work on the side.

But in the US context this is all misleading. Not even the most radical single-payer advocate believes that the government should provide all health care, they just think that it should pay for it. What this post ignores is that the every country apart from the US provides some kind of universal system of payment for care, usually delivered in a mixed public/private system. In virtually all of those countries you can "trade-up" with your own money to get better amenities or jump the queue in the public system.

As I wrote directly to Alex Singleton at the Adam Smith Institute, the cheating I’m referring to is at the American end–what they from their UK perspective think of as "private" is private sector provision of services that are often paid for by the government. The government here pays for over 50% of care in its role as insurer to seniors, the poor, the military, veterans and its employees.  So what they think is surprising in the UK is exactly what’s happening here in the US in most of the things that they write about in that post (such as government funding for a significant chunk of private long term care via Medicaid). 

Americans tend to be told by the more mendacious among us that universal health insurance (which of necessity requires some kind of government regulation of the insurance system) equals government-based provision of care.  This argument is made with frequent reference to "useless" American government agencies with low social status (like the California DMV) and rather less mention of the pretty effective ones with higher social status (like the US Marines or the NYFD). In fact the UK is pretty unusual even in Europe in having so much government provision of care facilities and services in the acute setting (I think only the Swedish have more), but government provision of care is by no means unknown in the US–once you add up the VA system, county hospitals, and the DOD there’s a big chunk of government provision going on here too. However, overall who owns care facilities or who provides care is mostly irrelevant.  What is important is the financing situation that determines what care is provided to whom.  In most of the UK’s NHS and in Canada there’s a group/community-based decision made on who gets what care in which area (e.g. we’ve got money to do 50 hip replacements this year and we’ll do the 50 neediest).  In the US that decision is almost totally dependent on the type and level of insurance that is attached to the individual patient, so in my hip example you may get 70 done but 30 of them may be medically "unnecessary" and 15 of the neediest may not get done as the patient couldn’t afford them.  (Ignore for the moment that there are other factors at work too such as race and education impacting access to care in every system). So my overall contention with the Adam Smith Institute’s piece is that they should be focusing on how private insurance markets work in health care rather than looking at who owns what beds.

What’s rather more interesting is that Smith himself back in 1776 thought a great deal about what constituted a competitive free market–although current American conservatives have totally forgotten what little they ever knew about that. The great Northwestern professor Edward FX Hughes gives a talk based on Smith’s principles of perfect competition and how they struggle to work in health care. American health care (not to mention defense, agriculture, energy and several other industries) is in fact predominantly full of the mercantilist behavior and government-protected and subsidized oligopolies that Smith was trying to undermine in his modest treatise called The Wealth of Nations.

Back in 1990 when I first got into this health care policy stuff a guy called Walter Maher was going around saying that we needed a government single payer system. Nothing too unusual in that other than Maher was head of public policy at Chrysler. He was saying it because Chrysler and the other autos, with their unionized and older work-force and pensioners, were locked into paying very high health care costs. When they did the math they noticed that a Canadian-style single payer system paid for out of general taxation would be cheaper for them. Of course during the 1992-4 debate on the subject, the rest of Corporate America took Chrysler out to the woodshed and little was heard from Maher after that.  And of course managed care was going to fix it all, and the market was going to work.  By then anyway the 90s boom was on and the Japanese competition was running into trouble and Detroit (aided by some little known tariffs on Japanese light trucks) was making a fortune out of minivans and SUVs (which are trucks not cars, really!), and saving a fortune by sending jobs to Mexico.

However, there’s to be a sequel to the movie, given that the autos are not seeing the boom days continue, but health care premiums are. Like all good sequels, we’re now going to see a rehash of the first movie. This time it’s Ford stepping up to the plate, and putting a senior executive in charge of solving their health care cost crisis. Listen to the complaint from Ford:

That was written last week, whereas in 1990 you would have read this:

I don’t know why Ford is bothering to have its own investigation.  Surely Chrysler can send over the draft of Maher’s old speeches. All they have to do is double the numbers and the job’s done.

Part of the reaction from employers to rising health care costs has been to push more co-payments, higher deductibles and larger out-of-pocket maximums onto employees. This has been viewed as an easier approach than increasing share of premium contribution, even though it has led to severe labor disputes in many cases. Ignore the fact that employment based insurance is a dumb idea–it just happens to be the way it’s done in real life. But what about people going through the process of paying more and getting less from their employer?

A new study from Sally Trude at the Center for Studying Health System Change called Patient Cost Sharing: How Much is Too Much? looks at the hypothetical actuarial impacts of a move towards higher deductibles, OOP maximums and co-pays. As you’d expect, it impacts most on sicker and poorer employees.  In fact for those very rare employees earning below 100% of Federal poverty but actually getting health insurance from their employer (and that must be virtually a null set), 44% of those with a deductible of over $1,000 will be spending more than 10% of their gross income on health care.

According to the Center’s survey research "most Americans, especially lower-income people, are willing to limit their choice of hospitals and physicians in return for lower out-of-pocket costs".  But given the shellacking managed care companies got when they tried that last time, don’t expect too many of those restrictive products to be rushing onto the market any time soon (although Blue Cross is trying to pull it off in California). Trude concludes:

The debate on user fees via the Rand experiment, Evans and Barer at UBC et al, basically concluded that point of service user fees have no impact on overall health care costs but do tend to stop the poor and sick going to the doctor (meaning that minor problems become major). So from a health policy perspective employers ought to be transferring their cost cutting to the front-end–and demanding more cost sharing in premiums.  However, that translates to all employees feeling the pain, rather than just those who are sick feeling it when they are sick.

By the way, I’m currently doing some other work looking into a number of these system problems, so if you have any suggestions about things to look into in the world of clinical or care inefficiencies please let me know.

Occasionally you see a really dumb article.  Not wrong, just dumb.  This one in the NY Times last week asks Who Controls Health Care Costs?.  It wonders why Republicans would promote private plans as a solution to controlling Medicare costs when it’s been shown that both Medicare and private costs increase at roughly the same rate over time. Leaving aside the fact that the Republicans are doing this for ideological reasons, it’s worth taking a little walk down memory lane on health care costs.

The reason costs go up so fast in this country is because of what Alain Enthoven calls "cost-unconscious demand" and a general pattern of Fee-For-Service medicine. Do more, get more, and no one really worries about the cost. That’s more or less what we still have, although it’s become much more sophisticated.   Even after 40 years of health care cost inflation, the same basics apply. There are only three real approaches to change this;

1) Make individuals conscious of the entire cost of the system care–don’t disintermediate it via employers and insurance companies–including either having them pay all their insurance premiums or all cash out of pocket.
2) Make consumers directly responsible for health care via a directly proportional tax (this is how it works in Belgium and is what Vic Fuchs proposed recently).
3) Give responsibility for the cost of the whole ball of wax to someone else who has to manage the bottom line (almost always the government, as in the UK and Canada)

We are nowhere near any of those solutions in the US, so costs will keep going up (as will uninsurance and underinsurance, as there is a what economists call a price effect).

Meanwhile, the leading advocate for my third solution, otherwise known as single payer, Steffie Woolhandler, also got her own interview in the Times.

And for those interested in performance-based reimbursement, a group of health policy wonks who favor a market-based solution, including Enthoven, believe that Medicare could and should change the market by rewarding providers with pay for performance. Not a bad idea, but not realistic in the present climate.

Fresh from triumph in the Senate if not in Baghdad, Bush went out next for medical malpractice reform.  This goes along with the Republican ideology of sticking it to those Democrat-lovin’ trial lawyers improving the climate for business. However, the businesses who tend to get their issues on the front burner with these Republicans are a little more influential to the President’s core base (anyone for energy?) than the AMA.  And the physicians just got a Medicare raise out of the recent bill.  While the actual words malpractice suit stick in the throat of any self-respecting doc like an unswallowed fishbone, there are two cautionary thoughts they might have:

One, malpractice isn’t that big a deal. It’s been a while since I looked at this but by my recollection malpractice costs in all its forms add a trivial percentage to overall health care costs. And a study about a decade ago showed that there was more malpractice than malpractice suits (even though half the suits were about care that wasn’t malpractice). With the IOM reporting on quality in health care not being as amazing as the AMA would have you believe, this is not a shut and dried case in the doctors’ favor.

Two, getting this type of reform passed is very hard.  It just died in Pennsylvania despite the governor’s promise, and the level of political capital required for national reform is unlikely to be expended by the Administration before their 2005 inauguration (which in turn depends on their winning the peace, or lack of it, in Iraq). But that’s not too bad for the Republicans. As Jeanne Scott knows, a lawyer joke always covers an embarrassing pause on the hustings. Of course, you may have noted that one of those potential Presidents on the other side may perhaps also have an interest here!

So a plethera of information about the Medicare bill emerges after the long weekend.  The weekend instant pundit talk shows that I saw claimed it was a triumph for the President, with the odd real conservative crying into his egg-nog. Bush though decided that going on a lay-over at Baghdad would be more helpful to his re-election, and I think the Prez got the issue right (if not the policy–but this is a health care blog, Matthew!) Meanwhile, Milt Freudenheim in the NY Times reminded everyone that the competition aspect of the law is mostly irrelevant and elsewhere they found a ton of seniors in Florida who think they got stiffed. Over at Democrat blog DailyKos the previous ignorance of and about the bill has been replaced by a bitter screed showing that the rural care aspect of the bill takes money from big-city hospitals (serving Democrats) to rural ones (serving Republicans). While you should take a pinch of salt with that analysis, you should also consider what happens if the AAMC gets riled. Those big-city academic names have a lot of clout in American health care.

Elsewhere Forrester research (log-in as a guest allowed) believes that the bill will have  immediate consequence in three other areas

1. More drug discounting via new discount cards. Why? Medicare PBMs wanting to get going in 2006 will give deep discounts now to learn seniors’ online behavior, demographics, and drug history. Allow me some doubt on this one, as the PBMs have shown only moderate interest in cash pay cards so far and seniors have little interest in letting them know about those issues! And even if they knew, where in the bill does it say "restrictive formulary" or "co-marketing arrangement".
2. Redefine the market for hospital services as Medicare requires more quality data. Forrester says this will change hospital behavior and help healthcare IT firms. Maybe. But quality measures have been around and been meaningless before and its the IOM rather than politically maleable CMS that tends to drive this, albeit slowly
3. Not slow the development of specialty hospitals despite the 18 month moratorium. Agreed.
4. See a boom in health savings account (HSAs) and CDH. I’m still very unconvinced that employers are biting at this. And remember that MSAs (same as HSAs) cannot logically contain enough health care spending to be effective in restraining health care costs, whatever optimistic conservative theorists believe.  It’s called "insurance" for a reason even if you are a self-insured employer.

Still, while I often find Forrester over-optimistic on the pace of change, they are doing the right thing, which is looking for wrinkles in the Bill that will start changing behavior of market players. So keep looking into the folds of the bill’s flesh both politically and business-wise.

UPDATE: Harvard Professor Bob Blendon (health care’s leading political analyst) gives his take on NPR.  Overall, young people like what they’ve heard; seniors hate it, but it won’t matter politically until 2005.

My take on the Bill remains the same. The details will see it losing support among seniors, but probably not enough to matter politically. Paul Ginsburg sees it differently and thinks that there might be another 1989 style repeal on the way. Some first comments on senior support that I’ve heard in the media seem to match this article which has feelings among seniors very mixed. Don’t forget that the most politically influential seniors already have drug coverage–they’ll only get really mad if they see their employers dropping coverage and forcing them into the Medicare plan (which is after all voluntary). That’s why there’s so much money in the plan to bribe what Don Johnson is calling "Old America" (employers who offer pensions) into keeping their pharmaceutical benefits alive for now. The rest of the NYT article that quotes Ginsburg suggests that employers will tread gently in moving retirees over to the Medicare drug program, and of course they can’t before January 2006.  Some of you following at home might notice that there’s an election some 13 months before that. Curious, eh, that the program doesn’t start immediately after the election or even just before it? The original Medicare program went into operation in less than 9 months! (You’ll notice that I’m in flippant holiday mode today!)

Frankly I don’t think anyone else in America cares too much about this bill.  Hence this huge change in the second biggest government social program has relatively little impact on the news, and even less around the non-health care blogsphere. (One article in the last three days on Andrewsullivan.com and that one shorter than his post on England’s win in the Rugby World Cup . Not one that I can find on the DailyKos. These are, I believe, the two most visited "right" and "left" blogs in the US).

Talking of Don, he has an interesting piece at The Business Word about how the bill is a response to demands from the "market".  His assessment is bang on, although he shares Karl Marx’s rather than Adam Smith’s definition of a "market" (Betcha no one’s called you a commie before, eh Don?!).  Don also links to non-HC blogger Daniel M Drazner (who claims to be a libertarian Republican–and you thought there were none left!), who has a post with multo-comments from his mainly right wing crowd on the issue.

Elsewhere DB’s Medrants has both a cut down but useful explanation of the details and his own comments which are largely centrist in the "we were never going to get the perfect bill, but this is a workable start" vein. He promises to add more over the weekend (and all you’ll be doing is eating left-over turkey sandwiches!).

Russ at the Bloviator doesn’t hide his true feelings.  He believes that this Bill is  a) responsible for the death of Medicare as we know it and b) that this is a very bad thing. I would slightly agree with him on the death issue other than it is only at the very start of a long slope towards the TDOMAWKI (pron. Tee-Dom-Or-Key), and that the Medicare program will inevitably get some huge dose of reform anyway some time between now and 20010-2 as the baby-boomers move towards it.

Otherwise that seems to be about it for the Medicare postings. I’ll inevitably get stuck into some of the nuances of the business and political implications next week.

Have a great Thanksgiving holiday.