As we enter summer, the health reform process is moving into its Newtonian phase: irresistible forces meeting immovable objects. In both health cost and access, the trend is not our friend. There is ample evidence not only of intolerable inequities, but also intolerable waste and inappropriate use of expensive clinical tools. President Obama embodies the need for change. He has assembled a very talented and politically savvy crew of helpers. He confronts the sternest test of any Presidency, fixing a poorly tuned and fragmented health system that is, by itself, larger than either the French or British economy.
Sunday reading-Jon Cohn on French & Dutch health care
Jon Cohn has a long article in the Boston Globe about how the French and Dutch get health care about right at half the American cost with none of that unpleasant Canadian or Britishness that FoxNews loves to complain about. Given that (if we get reform even vaguely right) we’ll look more like Holland or Germany that Canada, it's your essential Sunday reading.
Of course Jon is slightly too nice as ever. One minor point about access to specialty care—it may take longer there than here, slightly. But in the same Commonwealth study Cohn quotes, waiting times for elective surgery were shorter in Germany than they are in the US. And of course no one there gets bankrupted by the cost of medical care.
Rantology: Cannon on Freedom or Power?
Ah-ha. Michael Cannon has now replied to me and it basically comes down in his mind to me being a crypto-fascist Stalinist wanting to break the will of the American people mediated through its representatives, the health care industry lobbyists. His piece is The Ultimate Question: Freedom or Power?
He closes by saying that I could only fix the health care system by getting rid of constitutional democracy. And Michael’s right.
A little more on insurers, and reform means more of the same
In the comments on my piece on Michael Cannon, Michael has replied here and I’ll reply back on Monday), everyone’s favorite insurance broker Nate asked me to describe a bit more the process of a small group buying health insurance. I’m not quite ready to do that yet, but instead I will point you towards this piece I wrote about buying individual insurance in 2006. It’s called A Tale of Two Underwriters and it explains how screwed up the process is.
If you want more, here’s some nitty gritty on the actual process of dealing with eHealthInsurance.com the largest online broker which—for those of you interested in small group insurance—told me last year is encouraging employers to give their employees a lump sum and kick them into the individual market. And I guess for those healthy employees that’s good news, and if you’re not…..
Of course that attitude has been taken several steps further by big insurers, notably Aetna which basically dumped all its money losing groups in the early part of this decade by ramping up their prices to the level where they had to drop off. That’s story’s been well told including back in 2004 by me but it got retold this week by ex Cigna & Humana flack Wendell Potter who also explained how rescission works and how smaller groups get kicked off the rolls.
He also explains how damn hard it is to do an apples to apples comparison between plans, and that’s what I was struggling with last week when I wrote this:
Last night I was busy spending two hours of my and my business partner’s time buying health insurance for our massive 4 person company. That means doing a multi-factorial equation between premiums, co-pays, deductibles, out of pocket maximums, & in & out of network costs. It’s no wonder that no one understands their health insurance, especially when eHealthinsurance.com still doesn’t bother putting half of the important variables on its front page.
None of this is new news but Potter’s testimony last week (PDF) is a quick and entertaining read that pulls many of these threads together. Potter also made some remarks in an interview with Trudy Lieberman about travel costs at insurers. I too once had a conversation with a former insurance exec who moved to a job with potentially less travel involved. I commiserated with him possibly having to give up super frequent flyer status on the airline of his choice. Oh, he said, I haven’t had that in years. I just used one of the corporate jets!
The obvious answer (which Potter has got to now) is that if we are going to have a functioning insurance market we need a defined benefit package with identical co-pays deductibles, et al AND no ability to refuse insurance AND mandatory purchase of insurance (as Charlie Baker points out in his post here yesterday, it doesn’t work if people can opt in and out when they’re sick & healthy) AND a defined & equal total amount (not % of cost) provided by the funding entity (government, employer, consumer) to the consumer so that the consumer can make and apples to apples comparison. Something Enthoven laid out in the NY Times last week, although I don’t see why he’s backed off his 1980s position of putting everyone in the pool the way Zeke Emmanuel/Vic Fuchs want to.
Anyone who says anything different is just covering for the right of unscrupulous insurers to manipulate the market. And there’s lots of them on both sides of that sentence.
Of course, at best we’re instead going to get incremental reform which will not stop the kind of thing Potter’s complaining about.
Why is that? Well in Harpers last month (in a fabulous article about why Obama is the next Herbert Hoover not the next FDR) Kevin Baker writes this:
More frustrating has been the torpor among Obama’s fellow Democrats. One might have assumed that the adrenaline rush of regaining power after decades of conservative hegemony, not to mention relief at surviving the depredations of the Bush years, or losing the vestigial tail of the white Southern branch of the party, would have liberated congressional Democrats to loose a burst of pent-up, imaginative liberal initiatives.
Instead, we have seen a parade of aged satraps from vast, windy places stepping forward to tell us what is off the table. Every week, there is another Max Baucus of Montana, another Kent Conrad of North Dakota, another Ben Nelson of Nebraska, huffing and puffing and harrumphing that we had better forget about single-payer health care, a carbon tax, nationalizing the banks, funding for mass transit, closing tax loopholes for the rich. These are men with tiny constituencies who sat for decades in the Senate without doing or saying anything of note, who acquiesced shamelessly to the worst abuses of the Bush Administration and who come forward now to chide the president for not concentrating enough on reducing the budget deficit, or for “trying to do too much,” as if he were as old and as indolent as they are.
Senate Majority Leader Harry Reid—yet another small gray man from a great big space where the tumbleweeds blow—seems unwilling to make even a symbolic effort at party discipline. Within days of President Obama’s announcing his legislative agenda, the perpetually callow Indiana Senator Evan Bayh came forward to announce the formation of a breakaway caucus of fifteen “moderate” Democrats from the Midwest who sought to help the country make “the changes we need” but “make sure that they’re done in a practical way that will actually work”—a statement that was almost Zen-like in its perfect vacuousness. Even most of the Senate’s more enlightened notables, such as Russ Feingold of Wisconsin or Claire McCaskill of Missouri or Sherrod Brown of Ohio, have had little to contribute beyond some hand-wringing whenever the idea of a carbon tax or any other restrictions on burning coal are proposed.
Of course, when the President decides that we need reform in a bi-partisan 70 vote manner and won’t crack the heads of the “aged satraps from vast, windy places,” we’re just not going to get the kind of insurance reform we need. To do that he has to go on an offensive and connect the dots between the stories on his campaign website and who was in the room at his ABC prime time special.
It was notable that when Ron Williams, CEO of Aetna, was introduced, Obama praised Aetna as a well run company (and in terms of the current market and regulations it is). But he never mentioned the impact of Aetna’s corporate turnaround on those who were thrown off its rolls in the early 2000s.
I happen to think that Aetna could probably perform very well in the kind of regulated market I’d propose, but I’m not sure Aetna shareholders or executives would do quite as well. But to me the defining part of his strategy was that every time Obama talked about taxing rich people he mentioned himself (around $4m from his book) and Charlie Gibson who makes $8m a year. But he never mentioned the fact that Ron Williams was by far the richest and best paid person in the room.
If Obama isn’t going to line up some firepower against the insurers to counteract the bribes they’re paying the moderate Democratic senators, then modest incomplete and ineffectual insurance reform is the most we can expect
And as I’ve said many times, in the long run this will be worse for the insurers than comprehensive reform because it will increase the chances that there will be no health insurance business in the long run. When I gave this message to a big meeting of insurers in my Three Inconvenient Truths talk, many of the rank and file came up to me agreeing with what I’d said. The problem is the boardrooms don’t share their view or their long-term outlook. And so if we want to “hope” for “change”, Obama needs to make them. But apparently he won’t.
And in reply to the ABC Obamamercial…
Stephen Colbert’s Republican Health Care Infomercial. Quite wonderful. Can’t get it to embed but here’s the link
McAllen: A Tale of Three Counties
Introduction
The challenge of constraining costs while maintaining or enhancing the quality of medical care is vividly brought to life by Atul Gawande in his recent widely-read New Yorker essay. The anecdotal evidence presented in the article is compelling as a description of how physician practices can relate to excessive costs. The assertion that the observations in McAllen also explain McAllen’s costliness is an inductive exercise that may go too far. Physician ownership of imaging facilities, ownership interest in hospitals and more subtle forms of self-referral are all substantially present in large healthcare market areas across the country. Is McAllen an extreme example of a bad physician culture or is there another explanation? Our analysis of Medicare data from McAllen Texas demonstrates that exceptionally high rates of chronic disease and poverty explain much of the variation in cost.
According to Gawande, McAllen Texas has a physician culture that promotes high cost, low quality care. By comparison El Paso is portrayed as having a similar patient population to McAllen with lower costs of care. Grand Junction, Colorado, however, the antithesis of McAllen according to the article, is credited with having a physician culture that promotes low costs and high quality. Ultimately Gawande warns that by failing to change the physician culture nationally, “McAllen won’t be an outlier. It will be our future.” But is McAllen really an outlier, a harbinger of physician income-enhancing practices run amok?
A fair comparison between McAllen and Grand Junction would include a more precise analytic methodology than could be offered in Dr. Gawande’s article. Such an analysis is important: the correct diagnosis of the health care cost crisis is an essential step in selecting an effective prescription. If McAllen is not an outlier and Grand Junction is not a paragon, then the solution is not to simply tamp down variation by exporting Grand Junction values to McAllen. If the physician practices reported by Dr. Gawande in McAllen lead to explainable patterns of costs according to current norms, then those practices are part of a national phenomenon right now, not in a nightmare future.
An analysis of the Medicare population in the three counties can place Dr. Gawande’s observations in a more complete context. Medicare beneficiaries enjoy a standardized benefit package, and detailed data are available on the services they receive. We can use cost data for Medicare enrollees in the three counties to test Dr. Gawande’s assertions regarding McAllen’s and Grand Junction’s comparative health care costs. Medicare fee-for-service claims provide us with service level payment and patient health status information; Medicare monthly enrollment data details HMO affiliation, Part B premium assistance and beneficiary demographics. The Centers for Medicare and Medicaid Service supplies researchers (including the Dartmouth Health Atlas team) with data of this type for Medicare policy analysis.
Accurate Medicare Cost Comparisons
The city of McAllen lies at the center of Hidalgo County, one of the costliest areas for Medicare. The population is racially diverse, low income and exhibits high levels of chronic disease. El Paso is similar to McAllen but with less poverty. Grand Junction is the county seat of Mesa County, a largely white and relatively wealthy region. In Exhibit 1 annualized Medicare fee-for-service payments for the counties of McAllen, El Paso and Grand Junction show wide divergence in the total Medicare spends per beneficiary.2
Exhibit 1: Annualized Payments per Medicare Beneficiary by County of Residence, 2006
| County | Medicare Enrollees | Medicare Payments |
| McAllen, Texas | 63,770 | $12,384 |
| El Paso, Texas | 85,478 | $6,163 |
| Grand Junction, Colorado | 22,887 | $4,436 |
The payments in McAllen’s county are twice as high as in El Paso’s and nearly three times as high as in Grand Junction’s but adjustments are required to the statistics to make the comparison fair. These adjustments should include normalization for Medicare coverage type and population health. Relatively few McAllen area Medicare beneficiaries are enrolled in HMOs (2%) in comparison to Grand Junction (42%) and El Paso (16%). Medicare publishes costs only for services paid on a fee-for-service basis; some services supplied by cost-based HMOs (more common in Grand Junction than in either McAllen or El Paso) are included and some are not. As a result the cost of care for counties with high numbers of Medicare HMO enrollees is under reported. In addition, while all eligible individuals receive hospital insurance under Part A of Medicare, beneficiaries must pay a monthly premium to receive outpatient coverage under Medicare Part B, or are enrolled by Medicaid if they are poor enough to meet the state’s income requirement. The percent of the population in the different counties without full Part A and Part B benefits varies. In Grand Junction almost twice as many beneficiaries do not have Parts A & B coverage compared to McAllen (4% versus 8%). The outpatient expenses of this population are not included in Medicare expenditure reports. In Exhibit 2 HMO enrollees and Medicare beneficiaries without full Medicare benefits are removed from the comparison.
Exhibit 2: Comparative Annualized Payments per Medicare Beneficiary by County after Managed Care and Medicare Part A&B Adjustments, 2006
| County | Medicare Enrollees | Medicare Payments |
| McAllen, Texas | 59,665 | $13,150 |
| El Paso, Texas | 67,133 | $7,656 |
| Grand Junction, Colorado | 12,355 | $5,579 |
When the analysis is restricted to cost and enrollment data only for Medicare fee-for-service beneficiaries covered by both Part A and Part B, Grand Junction’s beneficiary annual costs rise by almost 25%. The difference between McAllen and Grand Junction beneficiary costs falls, but McAllen Medicare costs, now for populations with the same coverage, are still well over twice those for Grand Junction.
County Socio-Demographic Characteristics
The dissimilarities between the McAllen and Grand Junction county populations are extensive. The socio-demographic characteristics of a population affect its access to care, ability to pay out of pocket for uncovered care and rates of disease associated with diet and life history. The costs of Medicare co-pays and deductibles can be substantial barriers to access, and history of health care coverage and access to preventive care vary substantially based on socio-demographic variables. Low-income individuals often reach Medicare enrollment age with a lifetime history of access and cost barriers, a potent mixture. Barriers to access to care can lead to expensive hospital care for conditions normally treated on an outpatient basis.
Grand Junction Medicare enrollees are 98% white and only 11% require assistance in paying for their Medicare Part B premium (a proxy for low income status). In contrast McAllen and El Paso are both 26% Hispanic, and a higher proportion of Medicare beneficiaries rely on Medicaid to pay for Part B — 36% in El Paso and 48% in McAllen. To assess how socio-demographic factors affect Medicare costs, Exhibit 3 compares costs for beneficiaries with and without Part B premium assistance.
Exhibit 3: Comparative Annualized Payments by County and Need for Premium Assistance, 2006
| County | Premium Assistance-No(not low income) | Premium Assistance-Yes(low income) |
| McAllen, Texas | $10,012 | $16,518 |
| El Paso, Texas | $6,709 | $9,374 |
| Grand Junction, Colorado | $4,853 | $11,425 |
Expenditures are consistently higher for low income beneficiaries, but McAllen is still more expensive than Grand Junction for both income groups — more than 45% more expensive for low-income beneficiaries and more than twice as expensive for those not receiving premium assistance. However, the Grand Junction advantage is not as great for the low-income population as for higher income beneficiaries. Could it be that a good part of the McAllen “excess” is simply due to its larger proportion of low-income Medicare beneficiaries compared to Grand Junction?
But socio-economic differences in themselves cannot explain cost differences. What makes the low income population so much more expensive to care for? And why is El Paso, which also has a large low-income Medicare population, so much less costly to Medicare than McAllen?
Population Health
Exhibit 4 uses estimates of population rates of disease derived from Medicare hospital and physician claims to reveal that the prevalence of chronic disease is substantially higher in the McAllen Medicare beneficiary population than in Grand Junction or El Paso; and that the proportion of the McAllen Medicare population with more than two of these conditions is a whopping 52%, in comparison to 23% in the Grand Junction area and 34% in El Paso.
Exhibit 4: Disease Prevalence by County, 2006
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Many of the disease rates for the McAllen population are more than double those for Grand Junction. If the Medicare population in McAllen is truly that much sicker wouldn’t we expect the payments to be greater? A comparison of expenditures for Medicare enrollees without a diagnosis of diabetes or heart disease in the last year shows that costs for these standard populations are statistically very close (Exhibit 5).
Exhibit 5: Medicare Monthly Payments per Patient without a Diagnosis in the Year for Diabetes or Heart Disease, 2006
| Row Labels | Medicare Enrollees | Monthly Per Person Payments |
| McAllen, Texas | 28,680 | $3,147 |
| El Paso, Texas | 47,960 | $2,564 |
| Grand Junction, Colorado | 11,160 | $3,307 |
By eliminating diabetes, ischemic heart disease or heart failure from the population payment measures the Grand Junction advantage is completely removed. Grand Junction is just as costly as McAllen for populations without one of these conditions.
Even though diabetes and heart disease are both costly and highly prevalent in McAllen, beneficiaries experience a wide range of costly illnesses, and patients with multiple conditions are difficult to treat. We used a more sophisticated risk adjustment method to take into account an array of concurrent conditions.3 Beneficiaries in the top risk scores, the sickest patients, make up 27% of the McAllen, 16% of the El Paso and only 12% of the Grand Junction populations. Average Medicare payments were then computed for each risk group in each county (Exhibit 6). The effect on costs of accounting for this measure of illness burden is dramatic.
Exhibit 6: Annual Medicare Payments by Risk Level
Taking into account the disease combinations eliminates the apparent low cost difference across the full range of disease risk scores. If the disease levels in the McAllen population were magically made to match the Grand Junction disease distribution, but experienced McAllen-level costs, annualized Medicare payments would fall from $13,150 to $6,145. The morbidity-adjusted per beneficiary payment rate for McAllen is 10% higher than the $5,579 Medicare per beneficiary annualized payments observed in Grand Junction, substantially less than the observed 300% payment differential seen in the unadjusted data.
Discussion and Implications
McAllen is different from many areas of the United States: it is sicker and poorer. The observed differences in the rates of chronic disease are highest for those conditions rampant in low income American populations: diabetes and heart disease. Further, Medicare beneficiaries in McAllen have significantly higher rates of co-occurring chronic conditions. As a result the costs of caring for McAllen Medicare population appears high in comparison to other areas but not abnormally so. McAllen suffers from a tremendous burden, but it not caused by its physicians: the care they provide leads to costs that are substantially comparable to the other counties in the article once adjustments are made for the magnitude of the health problems they face. The disturbing pattern of physician practices uncovered by Dr. Gawande sounds a warning not because it foretells a McAllen-like future but because it portrays the on-going crisis that affects both McAllen and Grand Junction and it is national in scope. Physician culture is only part of the McAllen story.
Patients with chronic disease, especially those with multiple conditions, are extremely costly to treat. Cost savings will not be realized by denouncing and penalizing medical systems because they treat patient populations with high rates of disease. Instead health care reform must develop policies that support streamlining and coordinating care for beneficiaries with multiple chronic conditions, wherever they reside. Policies that support lifetime continuity of coverage, disease prevention and early treatment, could reduce healthcare costs for populations who now reach Medicare eligibility with a history of under-service. Physician culture has a role to play: Accountable Care Entities are intended to reduce barriers to access by facilitating care coordination. The high costs of care in places like McAllen will not be dramatically reduced by transforming physician ethics and organization if the roots of the crisis are in the interaction between class, demographics and chronic disease.
Notes:
1) The payment amounts and beneficiary counts are from CMS claims and enrollment data that includes a 5% sample of the Medicare population. The data is hosted by JEN Associates Incorporated of Cambridge Massachusetts, a CMS MRAD contractor.
2) A risk score ranging from 1 to 13 was computed for each beneficiary using diagnoses found on Medicare physician and hospital claims. Beneficiaries with scores greater than 9 are not observed in the Grand Junction 5% data in numbers sufficient for analysis. The grouping and scoring system was developed by JEN Associates Inc. of Cambridge Massachusetts for Medicare and Medicaid program planning and evaluation applications. Diagnoses are selected based on correlation with future hospitalization, nursing home entry and death and grouped according to a disease’s functional impact.
Daniel Gilden is a health services researcher with 20 years of hard core quant experience.He’s the President of JEN Associates which provides highly specialized analysis of Medicare and Medicaid data. He contacted THCB regarding the fuss about the McAllen, TX “overuse” story. In his calculations the data suggests something very different from the “practice variation” theory–the patients really are sicker. As this goes counter to decades worth of work by Wennberg et al, we invited Daniel to share his data and methodology with THCB. And we invite those of you who like this kind of research but may disagree with Daniel’s analysis to respond. Finally it’s worth noting that if his conclusions are true this has huge implications for overall health care policy…Matthew Holt
In which I play Obama, answering Michael Cannon
Last night I was busy spending two hours of my and my business partner’s time buying health insurance for our massive 4 person company. That means doing a multi-factorial equation between premiums, co-pays, deductibles, out of pocket maximums, & in & out of network costs. It’s no wonder that no one understands their health insurance, especially when eHealthinsurance.com still doesn’t bother putting half of the important variables on its front page. But no matter, it will be my pleasure to make Wellpoint or Aetna better off—they’re not having such great years and they can use the money.
But then I noticed from the tweets that Obama was doing a primetime townhall about health care. So having failed to find it on my TV (cos I’m on the west coast and we’re not alive at the same time as you east coasters), I looked on the ABC web site. There I didn’t find the TV version , but I did find what I thought was a most amusing article….and as I went all the way through I noticed that it was by my buddy Michael Cannon…the thinking man’s health care libertarian from Cato.
Obama’s too busy talking mush with the townhall to answer…but I thought I might.
So here’s Michael’s questions, and in italics are my answers
Health Care Reform: Questions for the President
Will Health Care Reform Improve Our Health?
OPINION by MICHAEL CANNON
June 24, 2009—
“Health care reform is on life support,” says Rep. Jim Cooper of Tennessee. And he’s a Democrat.
MH: Not really! Or at least not in a sane country unless he has the word “Christian” in front of his party label
President Obama has spent months building momentum for health care reform. But when the Congressional Budget Office put the price tag near $2 trillion, it stopped reform dead in its tracks.
What Senate Finance Committee chairman Max Baucus, D-Mont., once called “nearly inevitable” now seems much less so — and that’s before supporters have confronted the really tough questions.
Before this debate is over, Obama should answer a few questions about his plans for reform, including:
Mr. President, in your inaugural address and elsewhere, you said you are not interested in ideology, only what works. Economists Helen Levy of the University of Michigan and David Meltzer of the University of Chicago, where you used to teach, have researched what works. They conclude there is “no evidence” that universal health insurance coverage is the best way to improve public health. Before enacting universal coverage, shouldn’t you spend at least some of the $1 billion you dedicated to comparative-effectiveness research to determine whether universal coverage is comparatively effective? Absent such evidence, isn’t pursuing universal coverage by definition an ideological crusade?
MH: Sadly Michael, universal coverage is not about improving public health. If you want to do that, go teach some kids age 1–5 and build some sewage systems. Universal care is about making sure that the costs of health care are fairly distributed. Under the systems you prefer and the one we now have they’re distributed to the poor and sick from the healthy and wealthy—many of whom we both know work in the health care system. But apparently there was NOT ONE MENTION from a questioner of the uninsured or sick people bankrupted by the system in the whole hour. (Update Fri: and the only time the moderator Charlie Gibson mentioned it was when he wondered how rich people like him would get access to a doctor with all these newly insured people wanting care–he spent the whole evening appearing to be a selfish git)
A draft congressional report said that comparative-effectiveness research would “yield significant payoffs” because some treatments “will no longer be prescribed.” Who will decide which treatments will get the axe? Since government pays for half of all treatments, is it plausible to suggest that government will not insert itself into medical decisions? Or is it reasonable for patients to fear that government will deny them care?
MH: Why should patients fear it? We know that less intensive care is better, and cheaper primary care is better than more extensive specialty care. As the taxpayer pays for training doctors and funds most medical facilities why shouldn’t they demand that the resources are better spent?
You recently said the United States spends “almost 50 percent more per person than the next most costly nation. And yet … the quality of our care is often lower, and we aren’t any healthier.” Achieving universal coverage could require us to spend an additional $2 trillion over the next 10 years. If America already spends too much on health care, why are you asking Americans to spend even more?
MH: Ah we agree. All the money should come from the current system, even if it means reducing the incomes of pundits, bloggers and those who sponsor them, and a few people in the system. Sadly the politics of the US means that apparently Obama can’t say that
You have said, “Making health care affordable for all Americans will cost somewhere on the order of $1 trillion.” Precise dollar figures aside, isn’t that a contradiction in terms?
MH: Well for a start it’s not $1 trillion, it’s $100 billion a year which these days will barely buy you 6 months invasion of a small country. Which we do without debate on a regular basis it seems. And if we take the money from somewhere else we’re spending the money in health care, it shouldn’t cost more. Ah ha, cant be done because well see last answer
Last year, you told a competitiveness summit that rising health care costs are “a major anchor on the ability of American business to compete.” In May, you wrote, “Getting spiraling health care costs under control is essential to … making our businesses more competitive.” The head of your Council of Economic Advisors says such claims are “schlocky.” Who is right: you or your top economist?
MH: Obama is. I just spent 2 hours figuring out a mess of health insurance decisions that not one of my international competitors has to do. Multiply that out by every business in America, and don’t bother adding the fact that what we actually pay for health care is more than double per head what everyone else does. We’re both political scientists so we know that economists don’t know squat.
You recently told an audience, “No matter how we reform health care, we will keep this promise to the American people. … If you like your health care plan, you’ll be able to keep your health care plan, period. No one will take it away, no matter what.” The Associated Press subsequently reported, “White House officials suggest the president’s rhetoric shouldn’t be taken literally.” You then clarified, “What I’m saying is the government is not going to make you change plans under health reform.” Would your reforms encourage employers to drop their health plans?
MH: So? If employers do drop coverage as there are only 3 or 4 health plans in most markets, it would still be the same plan that the citizen would get to buy if they wanted to keep it and the costs would be subsidized for the poor. But don’t worry too much Michael. Americans hate their health plans. For some strange reason though they apparently like their doctors. Of course the AMA tells them they do
You found $600 billion worth of inefficiencies that you want to cut from Medicare and Medicaid. If government health programs generate that much waste, why do you want to create another?
MH: You’re saying all government programs are the same? That means the US Marine Corps and the Iraqi volunteer EDF (or whatever it’s called) are the same. I could start a government program that saved $600b very easily in Medicare & Medicaid. I might make a few enemies 
You and your advisors argue that Medicare creates misaligned financial incentives that discourage preventive care, comparative-effectiveness research, electronic medical records, and efforts to reduce medical errors. Medicare’s payment system is the product of the political process. What gives you faith that the political process can devise less-perverse financial incentives this time?
MH: See my above answer, oh and abolish the Senate
You claim a new government program would create “a better range of choices, make the health care market more competitive, and keep insurance companies honest.” Since when is having the government enter a market the remedy for insufficient competition? Should the government have launched its own software company to compete with Microsoft? Are there better ways to create more choices and more competition?
MH: Hmm…the government did launch its own software “company”, which was way better & cheaper than the private sector competition, and made the government agency that used it provide the “best care anywhere”—demonstrably superior to privately provided care. And it was so good that the monopolists at Microsoft stole its name and never paid compensation! Or did you miss Vista in your health care system and software market analysis?
When government entered the markets for workers compensation insurance, crop and flood insurance, and disaster insurance, it often completely crowded out private options. Do you expect a new government health insurance program would do the same?
MH: I hope so because the current private options are lousy at keeping down health care costs, or satisfying their customers. Oops, Obama can’t say that, can he.
You have said there are “legitimate concerns” that the government might give its new health plan an unfair advantage through taxpayer subsidies or by “printing money.” How do you propose to prevent this Congress and future Congresses from creating any unfair advantages?
MH: I don’t know but I’ll make a deal. I’ll promise my health plan wont have use an unfair advantage if you promise that AHIP’s members will stop lobbying Congress to rip-off the taxpayer. This wonderful chart shows that the likelihood of being against the public plan is directly proportional to the bribes paid to Senators by insurance companies.
President Obama needs to address questions these directly. The health of millions depends on his answers.
MH: No it doesn’t. The health of Americans depends on a bunch of stuff. The wealth of a few millions who get royally screwed by the current system does depend on reform. The current system is aided and abetted by its defenders like Cato and others who advocate “solutions” that are not only unworkable but also politically un-feasible. Their only role is to be spoilers to keep the status quo in place.
Michael F. Cannon is director of health policy studies at the libertarian Cato Institute and coauthor of Healthy Competition: What’s Holding Back Health Care and How to Free It.
Matthew Holt is a vicious blogger who wouldn’t mind being President for a day or two but not without the ability to break Congress to his will in the first ten minutes.
More bad press for Insurers. Will anyone care?
Jon Cohn notes that Wendell Potter, a former PR executive with Cigna and Humana. will be appearing before a Senate Commerce Committee today. Note the word “former”.
Trudy Lieberman has an interview with Potter where he repeats what we already know:
Lieberman: How do companies manipulate the medical loss ratio?Potter: They look at expensive claims of workers in small businesses who are insured by the company, and the claims of people in the individual market. If an employer-customer has an employee or two who has a chronic illness or needs expensive care, the claims for the employee will likely trigger a review. Common industry practice is to increase premiums so high that when such accounts come up for renewal, the employer has no choice but to reduce benefits, shop for another carrier, or stop offering benefits entirely. More and more have opted for the last alternative.
The bleedingly obvious
It makes no sense for small businesses to provide health insurance to employees. This testimony from a small business owner to the House Tri-committee yesterday shows it. (Same is true for all employers but none save Ron Wyden dare say that).
Health insurance should be paid for by some form of taxation (VAT, income tax or payroll tax) that is in proportion to businesses and individuals profitability/income, and small businesses (and big ones) should be left to do whatever it is they do. I cannot fathom how NFIB manages to convince its members otherwise, but it does appear that there’s a crack in that dike with various small business groups coming out in support for real health reform.
Having said that, I don’t think there’s too much likelihood that a typical low wage business will get much help anytime soon.
Your AHIP Quiz Question of the Day
By
This is something that’s been puzzling me for a few weeks. We all know that insurers are very good at making sure that they insure healthier risks than average. In the individual market they do this openly, by underwriting against poorer risks. Those “risks” (who are most of the people with the really tragic stories) end up uninsured or in massively over-stretched state major risk pools.
