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Tag: Policy

POLICY: Medical bankruptcy podcast

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This is a podcast that I’ve done with Michael Millenson who deigns to attack David Himmelstein’s hallowed article on medical bankruptcy.  We had a good time in this interview, even though I think Michael’s picked the wrong target, and he’s ever the purist.  The last couple of minutes had to be excised so that either of us might ever work in this town again….

Here it is: Michael Millenson interview

UPDATE. And here’s the Dranove Millenson article, and the reply from Himmelstein, and the retort to that reply.  And the name calling from Don McCanne.  They should have known that that Ignagni woman would be trouble!

POLICY/HEALTH PLANS: The sensible way out for the non-profit plans

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Ken Melani, who was the medical director at Blue Cross of Pennsylvania when I presented to them back last century but is now the CEO of HighMark (since BC and BA merged), points out the rational logic for private (non-profit) health plans. And that of course is to try to stay alive as a regional power that will be used by the government as a utility after the eventual inevitable government take-over:

Government expenditures for health care have taken a bigger piece of total spending every year since the creation of Medicare and Medicaid in 1965. While Republicans in Congress viewed the new Medicare prescription drug program as a way to expand the role of private companies in the massive health insurance program, Dr. Melani said the end result is a further expansion of government spending. "History has been made," he said. "If you look year after year, decade after decade, the government has been growing in its role as the financier of medical services, both through Medicare and Medicaid. We’re not growing from the private sector standpoint; we’re shrinking as a proportionate share." The key for Highmark, the region’s dominant health insurer, is to maintain and enhance its position as a regional player so that it can work as a key government contractor, Dr. Melani said.

Of course, a government-regulated utility — which Melani sees as being Highmarks’ future — will have to be managed in a slightly more sensible way than the Republicans rolled over Part D.

If the government expansion continues, the ongoing experiment with the new Medicare Part D prescription drug program provides lessons in how it should — and shouldn’t — develop, Dr. Melani said. One is that consumers like choice, but too much choice is confusing. Consumers in Pittsburgh, for example, can buy Part D benefits in more than 60 shapes and sizes, but they can’t make apples-to-apples comparisons between plans, Dr. Melani said. Another lesson is that the transition of beneficiaries from one government program to another can be difficult. For example, many low-income patients whose pharmacy benefits shifted from state Medicaid programs to Medicare on Jan. 1 were unable to access benefits at the pharmacy because of glitches.

But then again, even if the government can’t manage its own programs, insurance companies have no hope of controlling costs:

But the other key driver is technological advances in medical care, whether in the form of advanced imaging equipment, improved medical devices or new pharmaceutical products. Noting the emergence of cancer treatments that cost tens of thousands of dollars per month, Dr. Melani said insurers were nearly powerless to stem the tide."How can we afford that new technology?" he asked. "First of all, is it worth it? We won’t even ask that question, because we don’t do that in the United States. But how many of these $100,000-per-year treatments can we continue to support and survive as a country, as an economy? "You take the unit price of professional services, the unit price of technology, and we’re out of control — totally out of control."

POLICY: Can Consumerism Save Healthcare? by Brian Klepper

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THCB welcomes back old friend Brian Klepper from the Center for Practical Health Reform. He’s been asked to help various newspapers through the maze of consumer-driven health care, and here’s his take on the matter. You’ll note he gives it an easy ride, in that he doesn’t descend into the mire of risk pooling. Here’s Brian’s take:

In January’s State of the Union Address, President Bush called for expanding Health Savings Accounts (HSAs) as one sensible approach to curb rising healthcare costs. An HSA is a tax-favored healthcare-dedicated savings account that a patient controls. Combined with out-of-pocket requirements and a High Deductible (also called “Consumer Directed”) Health Plan (HDHP), these financing devices can provide comprehensive coverage. Federal 2006 HDHP family coverage guidelines call for deductibles of at least $2,100, with maximum out-of-pocket expenses of $10,500. To his credit, the President also proposed tax changes that would give individuals the same advantages employers already enjoy when they buy health insurance.                                                              The main logic and “sell” of these plans is that HSAs and HDHPs give patients more “skin in the game,” more awareness of healthcare costs, and more control over healthcare spending. The increased involvement in healthcare decision-making encourages healthier lifestyles and smarter healthcare purchasing decisions. In turn, the changes in patients’ buying behaviors will drive down healthcare costs.The reality may be somewhat different.First, there’s little question that HSAs and HDHPs will become major forces in the health insurance market the same way that managed care did in the 1990’s. They’re less costly for employers than conventional plans, so there’s every reason to believe that the market will grow quickly. A recent Kaiser Family Foundation study found that 20 percent of employers offering health insurance already make HDHPs available. Nearly every major health plan now offers an HDHP. And the health insurance industry association, AHIP, claims that HDHP enrollment tripled in the last 10 months, to 3 million lives.The deeper question is why. Are HDHPs becoming more popular because they urge patients to be more sensitive to cost? Or are they successful because, as the scale of healthcare cost has grown out-of-reach, skinnier benefits and higher out-of-pocket costs constitute a lower cost insurance alternative?Both. Employers clearly see HDHPs as a less expensive way to continue offering health coverage. It’s also apparent that, when care costs employees more, they’ll ask more questions.But studies also show that half of employers offering HDHPs do not help fund the HSAs. This may not be a problem for high-income or some middle-income workers. But if you’re low-income – one-quarter of workers make less than $18,800 per year and one-third of families make less than $35,000 – the increased out-of-pocket requirement can be onerous, especially if there’s a serious medical problem. Hospitals and many doctors are already experiencing rapidly increasing bad debt associated with these plans, because HDHPs without funded HSAs are, for many people, simply coverage that can’t be accessed. How about information that helps consumers become better purchasers? There are good Web sites that help patients learn more about their conditions and treatments. But so far, even though inexpensive evaluation tools exist, consumers still can’t get much information on the pricing and performance of hospitals, doctors and drugs. It’s hard to be an effective shopper if you don’t know what things cost or how the vendors stack up. Will consumerism significantly impact out-of-control health care costs? In truth, patients’ diagnostic and treatment choices represent a tiny portion of larger healthcare cost. The real money is associated with chronic disease and catastrophes. In those cases, healthcare professionals, not patients, guide the purchasing decisions. That’s exactly as it should be. But for consumerism to work, healthcare professionals must then be publicly accountable for their financial and clinical results.More to the point, unless consumers have access to robust information about pricing and performance, mechanisms like HSAs and HDHPs won’t really impact cost so much as finance it, merely guiding how the money flows. Even Regina Herzlinger, a renowned conservative Harvard-based healthcare economist, challenged Mr. Bush on this. “Health savings accounts are being touted as a way to control costs, and I very much doubt that claim.”The real roots of our healthcare crisis reside in the ways suppliers and clinicians are rewarded to deliver goods and services that are inappropriate, unnecessary and wasteful. Most healthcare experts agree that half or more of healthcare cost is due to these factors. Making healthcare affordable, stable and sustainable once again will require the infusion of skills and tools – compatible information technology platforms, clinical/administrative practice standards, pricing/performance transparency, payment that’s tied to outcomes – that other industries have long taken for granted. No matter how it’s pitched, consumerism just won’t get us there if these other components aren’t available to support the process.When it’s more mature, healthcare consumerism will likely include the mechanisms that help patients become better buyers and impact cost. Until then, HSAs and HDHPs are less expensive, slimmed down, short-term solutions that can work well if you’re healthy or financially secure. But they’ll do little to address our rapidly collapsing healthcare system. And as a national solution, they’re inadequate and oversold.

POLICY: How did this sneak into the WSJ?

The opinion pages of the WSJ are known for being full of neo-cons and conservatives — people who think that they know what’s best for you and aren’t afraid of getting the US Government to use its power to enforce it here and abroad. The only libertarians with a megaphone I know are the love ’em or hate ’em John Tierney in the NYTimes, and the pop-culture joker John Stossel on PrimeTime 20/20 ABC.

But what’s this, on Feb 21 the WSJ had a signed op-ed column from staffer George Melloan called Musings About the War on Drugs. The column suggests what anyone who isn’t blind, deaf, dumb, biased or making a living from prohibition already knows — the war on drugs is a complete failure that is contributing to most of the worse elements of society. It continues only as a full employment act for some very unpleasant agencies of the US government (the heartless DEA prominent among them), even more unpleasant private corporations, and international criminals and terrorists — all of whom apparently have similar personal ethics.

Given that the WSJ is usually a mouthpiece for some of the worst hypocritical pontificators of the fascist social conservative right (Bill Bennet, anyone), is something going on that we should know about?  After all a much more rational media organization of the right, The Economist, has been pushing for an end to drug prohibition for years. I’m hoping that this isn’t just a flash in the pan…

PHARMA/POLICY: One estimate of what Part D is wasting, with UPDATE

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Dean Baker working under the auspices of the liberal Campaign for America’s Future has written a study of what is being wasted on Part D. His number is $80 billion a year!. Given that the whole program was originally supposed to cost less than $50 billion a year that’s quite some number! The number he’s calculated is (I think) the difference between what the government will pay now and what it would have paid if it was negotiating for the drugs at the VA rate, plus the amount the CBO says CMS is spending on private administration of the project above what it would have cost to simply add one sole plan to Medicare.

Whether or not this analysis is fair, the Dems are nuts if they don’t get a great sound bite out of this.

UPDATE: Of course one Dem, Henry Waxman, is watching.

POLICY/INTERNATIONAL: South Africa, the future of the US?

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I know most of you don’t have access to the WSJ, so I’m reprinting liberally from its story about the CDHP in South Africa. You know what I think by now on the subject, but it’s worth noting that the proponents of high deductible plans are viewing this as a success. Read these snippets:

Whatever Discovery’s advantages, they are available only to a small sliver of South Africans. About seven million people in this nation of 47 million have private insurance, entitling them to use a system of private doctors and hospitals that is considered on a par with Western nations in quality. The rest — including most of the estimated five million people infected with the AIDS virus — are stuck with the public system of hospitals and clinics, which are mostly underfunded and overwhelmed.

<snip>

Discovery has a 26% share of the private-insurance market in South Africa, at least twice that of its nearest competitor. The majority of insured South Africans have high-deductible plans and have put aside some of their income in a savings account with tax advantages to spend on medical care. That is the combination President Bush is promoting in the U.S.

Most of Discovery’s rivals in South Africa have tried to copy its points program, and the idea is making some headway in the U.S., too.

<Snip>

Discovery says preliminary studies of its South African members suggest its incentives are having an impact. The most striking result: People age 50 to 54 who were actively chasing wellness points saw their health spending decrease even as they aged. However, the data cover only a few years and haven’t been published in a medical journal.

<Snip>

Skeptics in South Africa, including officials at the nation’s health-insurance regulator, say Discovery’s rewards program isn’t the win-win situation the company claims. They believe the real goal of the program is to attract a vigorous, health-conscious clientele and discourage older and sicker people from signing up for Discovery’s insurance plans.

"You discount things that younger and healthier people tend to like," says Alex van den Heever, a senior technical adviser at the regulator, which is called the Council for Medical Schemes.

<Snip>

And now it gets interesting, because like the Singaporeans the South Africans are going to do something about the destruction which underwriting and self-selection wreaks on the risk pool.

The problem of cream-skimming by insurers is a familiar one to health economists, and recently South Africa has taken steps to prevent it. Starting in about a year, companies whose insured populations are disproportionately filled with the young and healthy will have to pay a penalty. Discovery says its customer base is close to average now, and it doesn’t believe its success is the result of cherry-picking healthy people.

Discovery Holdings, the parent of Discovery Health, saw net profit jump 40% in the year ended June 30, 2005, to $97.4 million. The company is majority-owned by FirstRand Ltd., a South African financial-services company, but trades separately on South Africa’s main stock exchange. Its stock price has more than doubled since the beginning of 2004.

<Snip>

Another measure of the Vitality program’s value is how members’ health-care costs change over time. The insurer measures this using the "loss ratio," which is the cost of paying a member’s annual health claims divided by the annual premium. If the insurer receives $5,000 in premiums and pays out $2,500 to cover claims, the loss ratio is 50%.

Discovery examined 1,467 insured people age 50 to 54. From 2000 through 2003, those with elite status in Vitality saw their loss ratio fall to 70% from 73%, while the loss ratio for nonelite members rose to 80% from 72%. In the 30-34 age bracket, members in both the elite and nonelite categories saw loss ratios rise but the ratio rose faster for nonelite members.

Discovery says the study excluded those with family coverage and focused on individual members so that it could be sure the person racking up the points was the same one filing the health claims.

The bottom line seems to suggest some health benefit for eager point-getters, but Discovery’s own actuary, Mark Litow of Milliman Inc., acknowledges "we’d have to follow it much longer" to prove anything. Also, separating cause and effect is difficult: It is possible that the elite Vitality members would have pursued a healthy lifestyle even if they didn’t get rewards for it.

Alex van den Heever, the senior adviser at the government regulator, says: "I do not trust any commercial entity that has a big financial incentive to produce research." Discovery’s Mr. Gore says the government is welcome to examine the raw data. So far the company hasn’t submitted the data to a peer-reviewed medical journal. It says it might at some point.

Meanwhile, Discovery has brought its Vitality rewards program to the U.S., where it has a subsidiary called Destiny Health. Destiny’s South Africa-style plans, which combine a high deductible, a medical-savings account and reward points, are available in Illinois, Maryland, Massachusetts, Texas, Virginia, Washington, D.C., and Wisconsin.

And they don’t have to contend with any of that messy risk adjustment here. On the other hand, if there was a level playing field we might find out if any of this CDHP stuff worked (backing out for health and income). It’s just that the way the US is regulated we won’t because any insurer is by definition better off avoiding sick people. The rest is just window-dressing.

Pity, because there are certainly some interesting approaches in the CDHP morass.

POLICY: Inside Intel’s Health Care System

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I’m up over at Spot-on about the health benefits system, and how it’s heading for long-term collapse, focusing on this time a wealthy company that’s not from Arkansas: Inside Intel’s Health Care System.

Meanwhile, I wrote a little about HIMSS, technology and why we’re falling behind over at TPMCafe’s excellent ongoing blog on Medicare Part D (which is fast becoming an excellent group health policy blog).

So go there and come back here for extensive HIMSS dump downloads next week….

POLICY: Well, this is obvious

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A new study states the obvious about health policy and the HSA

The analysis, conducted by Jonathan Gruber of M.I.T., projects that while 3.8 million previously uninsured people would gain health coverage through HSAs as a result of the President’s proposals, 4.4 million people would become uninsured because their employers would respond to the new tax breaks by dropping coverage and they would not secure coverage on their own. The net effect would be to increase the number of uninsured Americans by 600,000.

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