Michael Millenson, moderator—Intro—consumerism is a legacy of the Clinton health plan and the backlash against managed care

Bill McGuire, UnitedHealth Group— Health care system doesn’t work well—doesn’t work in any country, so it doesn’t matter who pays for it. It is time to drive for change, and consumerism can advance it on behalf of everyone.

We’ve got a problems and every constituent has got a problem—wont get better with fundamental change. United thinks that trend is slowing but Wall Street thinks that’s a problem as they wont be able to charge so much. Left to the system that we have, all use will be inappropriate. We need to re-use re-design what we have to make use of new tech, need to help individual anticipate those needs. Need to build (what looks like a damn complex system in his slide) an inter-operable system around the consumer.

He believes that personal coaching will help consumers. And that this series of problems can be solved across the continuum. Where benefits change matter— the important thing is what tools are there to make this consumer care work? The results so far: Discretionary use in outpatient services is down, apparently no evidence of diminished use of necessary services (although that’s not what the RAND experiment said). But we need to add the support to the system, and also get consumer credit into the health system.

Meanwhile I am also at the same time running the questions from the audience which are delivered over wireless devices and laptops by a clever little company called VisionTree. You can guess what they’re about today! But the moderator is keeping the subject on the one at hand, despite the frenzied concern of the United PR flack who appeared over my shoulder.

Overall I have a limited understanding what he means by his explanation of the universal consumer-focused system. His slide is called “A modern vision for the integration of Comprehensive Assets focused on the individual” —  I think he needs a new copywriter. But the key idea is the main hope that consumer directed care will work. 

On the other hand, despite the criticism of United and McGuire in today’s news, at least compared to may corporate CEOs of late who also have huge paydays he at least has led a company that has consistently increased earnings. And frankly it’s not exactly his fault (or that of other insurers) if their customers have let them get away with lowering their medical loss ratios year after year.

John Brennan,Vanguard Chairman & CEO,—  believes that the consumer is smart. The defined contribution market  has grown and they’ve grown with it. There are 4 main needs to serve consumers. 1) Effective candid communication and education…keep it simple. 2) Technology (especially real time information) 3) Providing choices 4) Willingness to adapt and evolve.

Jim Guest, Consumers Union—test products, get it out to consumers in plain English.  They’re pushing for that in health care. what have they learned? Give the public a consistent format so that they can compare one to another to another. Like a nutrition content guide on the back of food products, and the same template on credit cards. they are starting to do that with drugs, at bestbuydrugs.org Insurance institute for highway safety crash test cars and gives that information out—in the mid 1990’s half the side crashed vehicles ended up in marginal category, now it’s barely any 10 years later. Finally lets get Medicare data about physicians out. Business Roundtable, consumer groups and others all want to get that information out.

Michael asks….

Should you move to consumer directed health plan?

John Brennan—We offer consumer plans, but not very popular.Need to do a better job explaining it. Only 10% at Vanguard have chosen it so far. He talked to a lawyer/accountant this morning who couldn’t understand what the option meant.

Jim Guest—Consumer’s union supports consumer informed health care—consumer driven healthcare seems to mean a different thing. The consumer voice hasn’t been strongly heard. more driven by industry than by consumers. They don’t offer a consumer driven option

Why do I need a HDHP to take part in this wonderful consumer information?

McGuire—you don’t need one. We need a system that people can access. But some of these elements have no applicability for some portions of the population. and it’s a disservice to put the wrong people into that situation. But the consumer support is necessary for everyone.

McGuire—Price alone is not a good guide, Need the cost over a population over time….

Are we going to have another panel in 5 years with another buzzword like we did with managed care/capitation?

McGuire—managed care advocates weren’t very insightful! I would never had said that! this time there are fundamental issues that will be long lasting —information is fundamental, technology will be fundamental, so its a different situation.

Guest—whatever direction this goes, consumers will have to be put in the legislation/business forefront. that genii is not going back in the bottle.

Now we’re getting into some meat. Mark McLellan head of CMS is on the same panel as Uwe Reinhardt. Bob Galvin from GE is the moderator. Two main issues are whether price controls work, and how we determine coverage…

Mclellan—Price controls aren’t working well in Medicare, and its no good just setting prices, as the level of the price doesn’t matter when you see massive differences in utilization

Uwe agrees. He thinks that at the moment we’re not ready for price controls. Pharm might force up prices using its political power, OR the Congress facing up to budget realities might price below marginal cost.

The audience here, not too surprisingly felt that there shouldn’t be price controls on pharma and medical products. (77% to 22%).

But now the harder question. How do we deal with coverage?

Ask the audience….If a new treatment extended life for 6 weeks, should it be covered 8%? Not Covered at all 22% or not covered but available for people to pay if they can afford it 68% 

Uwe says that he offered Manhattan Inst, and the WSJ Editorial Board the same choice.  They haven’t answered him, because they won’t put their name to it so far! Other countries do it the other way; it’s not covered, (I guess you can pay retail).

Mark says, those drugs are covered under part B in Medicare, and we’re going to move to performance….but essentially he can’t really answer the question. Uwe says that at some point there has to be a price for a life. In England a QALY is 50,000 GBP.

Question—How do we continue to encourage innovations in new technologies such as new equipment and devices and yet address the current irrational situation in which sales commissions and physician ‘incentives’ can and often do exceed equipment actual cost and physician payments for installing said devices?

Mark—At the moment we are paying for volume. We need to change the way that we pay like the Medicare demos to pay based on quality, and that changes incentives. Then you’ll see investment in EMR, and avoid the incentives that are a consequence of the payment system we have set up.

Uwe—one idea is to treat based on probability of paying for likelihood to getting sick over a life cycle. It doesn’t pay an insurer to invest money for long term pay-off. We need to think how that sort of health maintenance to be financed. At the moment Duke is trying it but no insurer is prepared to fund it.

Mark—need to learn more about the value of treatments when they’re on the market. As genomics comes down the track we’ll need to know more and more about this. To do that we need better data systems of real life clinical use.  Now we’re seeing some movement from private sector to find out more about that.

Uwe—that information must be publicly funded and supported; But at the moment there’s almost no government funding of that information in health services research. Doesn’t make sense for all private sector to reinvent the wheel. Government has to help fund this. Government has to spend more, especially on IT.

Mark—well we are spending “some” more. And there is some collective private (plans and employers) efforts on looking into this

Uwe—what have the private employers done?

Bob G—Not enough (and that from the head of this at GE!). We need to do more, but for some populations (the elderly) the government must do more….

Uwe—Mark, how can we get more money for IT? Who’s rear end do we have to kick?

Mark— most potential for supporting IT comes from those initiatives that pay for more lower cost of care. Want to identify what constitutes high value health care and paying more for it. That’s the best avenue. Most IT investment he sees is in software to maximize billing in Medicare. He wishes that there was relatively more put into clinical information systems.

Mark’s question to Uwe—What are we not thinking about? What’s new that we should be looking at?

Uwe—we need to make up what’s after this! You know there’s something after consumer care!  Perhaps the answer is figuring out via psychology how people make health care decisions. What do they use to judge those decisions

Mark—Now have some 20 measures in Medicare. But that might be a universe of hundreds of dimensions…how do we turn that into information that consumers can use….

Despite some obvious political differences with McLellan, he is a very, very polished presenter, and very bright. And Uwe is of course great…..at TCHB we ♥ him.

Joe Paduda is falling into the trap of looking for logic from the Canada-bashing crowd. He thinks that Sally Pipes (from the loony fringe Pacific Research Institute based incredibly enough in the people’s republic of San Francisco) is, ahem, not quite making logical statements. But I have to give him props for this one sentence commenting on Pipes’ absurd comparison of Massachusetts to General Motors.

Oh jeez, that’s about eight errors in less than one sentence.

Of course the dreadful GM health plan for its American workers is actually so terrible that GM is trying belatedly to run away from it. How are they doing that? Well they’re sending all their Michigan jobs up to Canada, because Canadian employers like their nation’s single payer health plan. I’m sure Sally Pipes knows why.

Greg Scandlen commented on the Grace-Marie Turner article, and as he’s a big player in the HSA wars, I thought I’d reply back in the main blog rather than in the comments. Greg and his ex-AMA buddies have their nice little "consumer" organization — you did realize that a consumer organization should be founded by ex-insurers and doctors, don’t you? After all they are the people with consumers’ best interests at heart! (Stop singgering in the back there…)

Greg seems to think that I believe that "every dollar currently spent on health benefits was necessary and efficient." Not quite sure that he’s been following this blog closely, such as some of my "criticisms" of physicians, that caused a minor fuss over my use of the term “waste motion” to describe 30% of the healthcare system’s behavior. I of course fervently believe that there’s huge waste in our system, but only a small small fraction of it is in the admin back and forth that happens between insurers and physician offices. That is the part of the “waste” that he thinks HDHPs and HSAs are going to drive out of the system. He is of course wrong, and if he had ever used a HDHP from a major insurer, he’d know.

Unfortunately for the physicians living in their HSA dreamworld, the way that high deductible plans actually work is simply to change who is paying the first few thousand dollars from being the insurer to being the consumer. The fact is that the PPO network and the pricing set up by the insurer is going to continue to be the main vehicle by which assessments against the consumer’s deductible are counted. So the hopes and aspirations of doctors to charge consumers directly without having to submit a claim to the insurer are going to be dashed, unless the consumer is dumb enough to pay up front, and try to get it back from the insurer later. Greg says that “Using an insurance mechanism to pay for routine care is hugely inefficient. It involves massive administrative costs from both the insurer and the provider” and he’s right (Hint: capitation or salaried physician systems don’t have that problem!) But HDHPs are just going to mean that the providers have to come after the consumers instead of the insurers for their money. Unless he really believes that a) consumers are happy to forgo the PPO deals the insurer has cut and pay larger amounts out of pocket, or b) insurers are going to happily count whatever charges providers can get away with against the insured consumer’s deductible, and then be happy to pay any amount above that.  No way that’s going to happen….insurers are not that dumb.  And if you look in Sunday’s Miami Herald, you see a great example of how this works in practice. And the provider in that case, believe it or not, has it somewhat right:

During the conversation, the billing person mentioned that if Stamm was uninsured and paid in cash at the time of her visit, she would have been charged $125. ”So why can’t you just give me the walk-in rate?” Stamm asked. That wasn’t possible, she was told, since they had to go to the trouble of billing her and attempting to collect.

So what are the consumer’s choices? Go out of network, and have the full amount counted against some mythical huge deductible that they’ll never reach. Go out of network and pre-negotiate the cash rate, which won’t be counted against a deductible at all. Or go in-network and take the pre-negotiated PPO rate which they learn from their EOB.  The provider will not know whether or not the deductible has been reached without filing a claim with the insurer, and they’ll go through the same bullshit they do now with the insurer deciding to allow the claim or not, and deciding what the patient should pay. Then eventually the provider will have to come after the consumer for their share. So essentially all this movement does for  providers is give them the added role of collection agents. Come to think of that, collections is probably a good business to get into!

The alternative is that the insurer will sell a high deductible policy, pay every dollar after the deductible, and just take it on faith that providers and consumers/patients will only send them the post-deductible bill, and that they’ll be scrupulously honest about the bill they’ve run up below the deductible at usual, customary and of course totally reasonable rates. Get real, people. The insurer has to count up to the deductible somehow! And that means administrative waste!

Meanwhile the rest of Greg’s comments are, I’m afraid, as equally muddled.

And first dollar coverage encourages needless spending. This needless spending can be curbed by rationing, or by demand-side behaviors. We tried rationing with managed care, and it works pretty well to hold down costs, but it was pretty unpopular. So now we’re trying to affect the demand side — getting people to make their own trade-offs.

Even his fellow travelers at Cato admit that most of the “needless spending” happens well past the deductible, (not that they have a solution for it). But apparently we’re only going to get at that with by impacting the demand on the first few thousand dollars of an individual’s spending, even though the literature and common sense show that there’s no market mechanism for that, that the reduction in services received is equally for necessary as well as unnecessary services, and that of course this disproportionately impacts those with lower incomes. But hey let’s do that anyway. It won’t make much difference overall. And while Greg thinks that we may have tried rationing via managed care, we didn’t try it properly (perhaps he missed Enthoven’s rants on the subject), and the insurance industry has shown in the last 5 years that it’s much better at risk-selection and raising prices than doing care management. (I’m in favor of rational versus irrational rationing, but that’s a different discussion).

Meanwhile, I’m still fascinated to discover what the HSA promoters really do believe, beyond those in their number who like making money off heavily underwritten, high-margin HDHPs. In her interview with me Grace Marie was going on about all kinds of non-HDHP related activities. Greg says:

HSAs are not the be-all-and-end-all of health care reform. But they are an enormous step in the right direction, and they will help bring about other changes like a demand for reliable information from consumers, greater accountability on the part of providers, and new more efficient ways of delivering care.

And he wants to promote HSAs in Medicare too! The first part of his plan, which is to convert Part B premiums and the deductible for Part A to one larger deductible, may not be too bad an idea, so long as there is continued help for those for whom the increase in deductible would be a real hardship (those with lower incomes but not dual eligible). After all that concerns private spending on Medicare recipients.

It’s the public spending on Medicare recipients that I’m concerned about. As far as I understand the plan, if a Medicare recipient who chooses to moves to a HDHP gets the difference between what they spend and the average, put as cash into their private account. “Any savings to the Medicare program would be converted into a cash deposit to the beneficiaries’ HSA account.” It’s bad enough HDHPs destroying what’s left of the community-rated risk pool in the individual market, and giving employers an excuse to get out of providing health benefits. But that process was well underway anyway, so honestly it’s not that big a deal — not that I’m going to stop calling its advocates on it.

But now Greg wants to remove money from the Medicare risk pool to give it to healthier than average Medicare beneficiaries. 

The per capita premium and deposit would need to be risk-adjusted at least for age and geography, much as CMS currently does for Medicare Advantage plans.

Well here as a tax payer I must object. Every time Medicare has split its risk pool so far, it’s basically handed over more money than “sickness” to the private sector plans. And don’t take my word for it (although common sense and the retreat of private plans from the Medicare program when payments were cut in the late 1990s should be proof enough) because the GAO has said so twice. (Read down here for the details). And now Greg wants us to allow the healthy people to pull out actual cash, leaving proportionately more sick people, more demand, and less money in the traditional program for the taxpayer (or as the current Administration’s accounting would have it, the taxpayer’s children and grandchildren) to pay for. Thanks.

Funnily enough Greg’s being hanging out with Grover Norquist lately (Apr 4 entry here).  That whole notion about drowning the Federal Government in a bath tub must be catching. This goes to the whole notion of deliberately destroying a risk pool, except that unlike in the case of the private insurance market where the poor uninsurable sucker gets stuck with the problem of having to deal with the extra costs, this is one that the taxpayer will pick up. I thought these “conservatives” were in favor of lower taxpayer spending! (OK, I know in real life they just are in favor of lower taxes for the very, very wealthy…but that is their rhetoric).

I would still love Greg, Grace-Marie or anyone to take the challenge of explaining how I’ve got my math wrong (read down in this example) when I say that handing out cash into private accounts from a common insurance pool means that someone else has to pay in to the pool to provide care. It’s an explanation we commies have been waiting for, and we’re still waiting. Just because the private market doesn’t really have large community rated pools any more doesn’t make the theory wrong, and when they want to do this to Medicare, they are talking about a large community rated pool.

And if they don’t really believe that HSAs/HDHPs are the “the be-all-and-end-all of health care reform” what the hell do they believe? They don’t seem to talk about much else. Don’t they have an overall policy solution for the market. Their rivals in the single payer and the managed competition crowd do. At least those two groups are having a rational disagreement about how to cure the same problem, and have been saying the same thing since the 1980s. Of course, in our bizzarro world they never get any attention, and the pro-HSA crowd is ruling our political rhetoric.