Erza thinks that Romney will feature health care in his 2008 run, but because he won’t ask the hard questions (about taxes and redistribution) it won’t actually amount to much should he get anywhere. When the Mass deal was passed and he said that they’d "achieved universal health care without a tax increase," I knew that the one half of the sentence was a lie. It’s just a question of figuring out which half–and apparently it’s the first because he’s not going to sign off on more taxes, not even on smokers, drinkers and perverts. So asking people with their current health benefits (or the providers or insurers who receive them) to "redistribute" them is never going to happen. And if there’s no more money even if it’s money that’s already in the health care system, how are we going to insure the uninsured?
Above the Fold
POLICY/HEALTH PLANS/HOSPITALS: More on the punking of Milt Freudenheim
Freudenheim has been the health care reporter at the NY Times for a long time — a quick Googling suggests 1993 was when he started. So letting this piece of propaganda from the health plans slip by him and writing an article about it called Low Payments by U.S. Raise Medical Bills Billions a Year is basically unforgivable. Especially after the article he wrote last week talking about delays in payments from payers, that completely ignored the huge lawsuits about the issue in the 1990s and again left his readers without most of the story.
The argument in today’s article is basically this. Evil Medicare and Medicaid pay hospitals and doctors so little that they are forced, forced I tell you, to bill private insurers more to make up the difference. We know that’s true because Millman & Robertson says so. (Those of you sniggering at the back of the class who thought that M&R’s job was to help insurers reduce their payments and spending obviously don’t understand….)
Except that halfway down the page the argument changes. Now it says, the huge unreimbursed cost of treating the uninsured is so great an extra burden on hospitals and doctors that they are forced, forced I tell you, to bill private insurers more to make up the difference.
The article then wraps with a grab-bag of quotes from random observers, none of whom suggest any solution to this and two of whom represent organizations (Employers and Health Plans) who have done their damnest over the years to scupper any solutions to the uninsurance problem that is now apparently just killing them. But let’s ignore that for now.
The one person who could have given Milt a good explanation was apparently not answering his phone. Uwe Reinhardt gave as good an explanation of this phenomenon as any at a 1994 HSR conference. The story is that sometimes costs go up faster in the public programs and sometimes they go up faster for private sector payers, but the difference between them is pretty minimal. At that conference Uwe put up a chart that I can’t find, but the data is in the table below (look at the bottom section which shows average annual increase in spending by source over time)
Essentially what this shows you is that in the 1970s public expenditure grew a bit faster than private sector spending (14% vs 12.0%), in the 1980s they grew at about the same rate (private grew slightly faster), in the 1990s public expenditure grew a bit faster than private again (5.9% vs 5.1%) and in 2000–20001 public spending grew even faster than private (9.4% versus 8.2%). Over time of course the overall share of public spending as a proportion of all spending has gone up, but not that much. Uwe’s explanation was that his friends in the insurance business told him that when public costs went up faster than private costs it showed how efficient the private sector was, and when it was the other way around, it showed that Medicare and Medicaid were cost shifting to the private sector!
Well, Freudenheim has bought that hook, line and sinker!
The truth is of course that providers will charge whomever they can whatever they can, and the balance of bargaining power providers hold over payers goes up and down (and in the last few years has been going up) with all payors across the board, while their ability to stick rate increases to different payors (public versus private) varies only slightly. But look again at the overall numbers, There’s never a time when the cost increases for private and public payers are radically different. If you read the NY Times article today you could be forgiven for thinking that Medicare is paying 20% less into the system and that the private side is paying 40% more.
It’s terrible to hear that the poor innocent health insurers have been forced, forced I tell you, to pay these huge extra amounts since the Medicare Balanced Budget Act of 1998 reduced Medicare payments. After all their huge profits of the 1990s have collapsed as they’ve been forced to absorb the extra costs, and the 2000s have been nothing but a sorry tale of woe as insurer after insurer has seen its profits and its stock price hurtle into the abyss, as you can clearly see from this chart
But from the Freudenheim article, the answer is obvious. We should just have Medicare and Medicare pay way more each year, and then the providers would charge everyone else much less! I wonder why CMS didn’t think of that? After all, far be it from health insurers to have to actually try to do something about reducing their clients costs when the solution is so obvious that a slap-dash M&R report identifies it for us.
POLICY: Shock-horror–I mostly agree with Arnold Kling
Like me at Spot-on today, Arnold Kling is also writing about the US-UK health differentials in Minding the Health Gap. I basically agree with him (and at some point I’ll put up a review of his interesting book Crisis of Abundance). It’s good to see that he seems to have stopped the BS about how rationing happens abroad but not here. I have some nits to pick with his assessment of the It’s the Prices, Stupid argument. And his potential solutions which include multi-layered, multi-year high deductible insurance contracts are so complex as to be incomprehensible, let alone workable in a world where people don’t understand Medicare Part D.
But his identification of the lack of a link between health spending and overall outcomes is correct. Of course I think that logically that should lead us to both limiting the amount of premium medicine and the costs for it visited on those who need it. I’m not sure Kling joins me on that part of the journey.
THCB: My talk at PARC is up
Those of you keen to hear from me as well as read THCB (i.e. you gluttons for punishment!) may want click over to download the MP3 of the talk I gave at the PARC Forum last week.
Don’t forget that I can come and give a version of this talk (or a completely different one) at your organization/hospital/trade show. Just email me.
POLICY: Her Majesty’s Healthy Service
I’m up at Spot-on talking about Her Majesty’s Healthy Service. Don’t ask—titles come from editors
POLICY: Low Payments by U.S. Raise Medical Bills Billions a Year
Freudenheim punked twice in 2 weeks? Apparently so. More in the morning
POLITICS: Bill Frist–A wonderful man and a great doctor who has never done anything worthy of criticism in his life!
There was an puff piece last week in the WaPo called Bill Frist: A Doctor at Heart
Contrasted with the gossip-based assassination on fellow 08 candidate Hillary Clinton and her husband in the National Enquirer New York Times, this is just an incredible piece of uncritical fluff.
Perhaps the reporter was unaware of Frist’s less than brilliant piece of telemedicine when he diagnosed Terri Schiavo by videotape (and got it 100% wrong), and the minor, minor matter of the millions of dollars he has in HCA stock and the insider trading “allegations” that surround his recent sales of HCA stock. After all, they’d have had to google their own paper’s web site to find out about that!
But I just thought that this was a classic:
At the zoo hospital, a team of four veterinarians, three technicians, an animal keeper and a veterinary dentist were wheeling a 350-pound gorilla into surgery as Frist arrived. They would perform an ultrasound of the heart, a root canal and a physical. Frist joined the team, as he had on other mornings, tying on a mask. He unbuttoned his business shirt, revealing jungle-pattern surgical scrubs and a pair of hairy, toned biceps.
Now if you are a gorilla you get FOUR vets, THREE techs, a Keeper, a dentist AND the leader of the Senate to care for you. On the other hand if you are a patient at an HCA hospital—which is controlled by the family of the leader of the Senate—you’ll find that the nursing staff is stopped by subpoena from protesting at the shareholders meeting about the inadaquate amount of staff available to look after you! But apparently the available staff number is substandard and doesn’t conform to California law. While I don’t know the details of the case, let’s face it, HCA’s history doesn’t exactly inspire confidence in their ability to follow the law and do the right thing rather than take the quickest, easiest buck possible.
It’s good to know that the Washington Post has time to give us the full picture…
Healthcare Unbound! A Visionary Conference & Exhibition on Remote Monitoring, Home Telehealth and Pervasive Computing. July 17-18, 2006, Cambridge, MA. For full details, please visit: http://www.tcbi.org/hu2006/index.html
PHARMA/POLICY/POLITICS: McKinnell’s friends turn and bitch-slap him, by The Industry Veteran
The Industry Veteran is back. He notes a piece I’d missed in which the oh-so-rational editorial board of the Wall Street Journal declared Part D to be a future political liability for their desire to drown the government in a bath-tub. And it’s all or mostly the fault of poor Hank McKinnell. The Veteran’s not too impressed with their analysis:
In its May 19 editorial, the Wall Street Journal bitch slapped Pfizer’s CEO, Hank McKinnell, for strongly advocating the 2003 Medicare Modernization Act (i.e., Part D) before the legislation passed and since. In the week preceding the May 19 cuffing, McKinnell apparently did a panegyric for Medicare Part D in front of the Journal’s editorial board that the Goebbels Gang considered less than persuasive. Before writing their Night of the Long Knives editorial, the Journal’s editors knew that McKinnell’s partisanship for Part D was more than mere flack work, sycophancy or a simple affirmation of sound, eighteenth century economics. In his role as president of Big Pharma’s trade group, the Pharmaceutical Research and Manufacturers Association (PhRMA), McKinnell was a driving force behind the Medicare Modernization Act. Never more than six months behind the news, the Journal is finally reflecting some of the sotto voce criticism that McKinnell is receiving from within Pfizer itself.The Journal’s criticism of Medicare Part D and its advocates combines boilerplate, right wing economics with Monday morning political quarterbacking and crypto-fascist scare threats about single-payer health systems. The patellar reflex economics faults Part D for contributing to the federal deficit. In this respect the Journal aligns with Reaganite and other conservatives who label Bush a fraud for posing as a conservative when he is actually a big deficit spender who obtains Congressional acquiescence for his military Keynesianism by declining to veto porkbarrel legislation. The Wall Street Journal’s reproval of Bush’s spending, however, is less credible than Claude Rains’s declaration of shock at learning that there is gambling at Rick’s Cafe. Bush is only opposed to federal spending if it benefits the middle class and the poor. He doesn’t have the slightest problem with a fiscal deficit policy as long as the spending benefits his cronies and benefactors who run multi-billion dollar corporations. It is for this reason, rather than some fixation on 1960’s vocabulary, that I call George Bush a fascist. In siding with the stopped-clock conservatives who favor a balanced budget, the Wall Street Journal’s editors merely seek a cloak of principle for their Hjalmar Schacht economics.The Journal’s Monday morning quarterbacking faults Republicans for thinking that the Medicare Modernization Act would turn Medicare from a Democratic into a Republican issue. Instead the MMA gives Democrats a reason to call for constant improvements to the program that will require more federal spending. In the Journal’s horror scenario, the out of control spending will lead to calls for Medicare to act as a single purchaser that can constrain costs. The Journal holds some smelly socks and underwear between its thumb and forefinger to admonish thoughts of price constraint by claiming that the pharmaceutical industry will fail to discover new remedies if it can no longer gouge a cancer patient $300,000 a year for his medication. (I mean, is this a great country or what?) If a rejoinder to the Journal’s herring-stained fright-wig is necessary, it is the fact that the development of new molecular entities constitutes the sole reason for the existence and capital investment of branded pharma companies and biotechs. The aging demographics of the developed world, and our commitment to health and longevity, virtually guarantee a fair return on this investment for a biopharmaceutical industry. Not content with a fair rate of return, the Wall Street Journal, Hank McKinnell and George Bush take a unconscionable rate as their entitlement and that is where I want to see them bent, broken and humiliated. Is Medicare Part D turning out badly? If so, that’s good. When it comes to George Bush and all his constituencies, worse is better.
QUALITY/INDUSTRY: Healthways buys Lifemasters
Over in the disease management world, a little piece of consolidation late yesterday. Healthways is buying Lifemasters for some $307m. Healthways is running at a $400m annual revenue rate and has a $1.75 billion market cap, so that suggests that Lifemasters is less than one fifth of its size, even though it’s apparently been growing fast the last couple of years. (It’s private so there are no official numbers). It’s also been around a long long time (I met the first founder in 1995!) waiting for DM as a market to take off. You can tell that in part from its funders:
LifeMasters Supported SelfCare, Inc. is privately held. Financial backing is provided in part by Intel Corporation, Lightspeed Venture Partners, Pacific Venture Group, Knotty & Co., VantagePoint Venture Partners, SightLine Partners, National Healthcare Services, The Northwestern Mutual Life Insurance Co., J. and W. Seligman & Co., Landmark Partners, ORIX Venture Partners, Siemens, Pacific Life Insurance Company, Cove Investments, Comerica Bank and Lion Investments Limited.
Sixteen different venture investors suggests that a lot of money has gone in over the years, and most of those investors must be tired enough that they are taking the rather thin bird in the hand than the fatter one which apparently was not hiding behind the IPO bush. Still with Medicare getting interested in DM, and the whole market belatedly taking off (Lifemasters is advertising over 60 vacancies on its website), it’s a little curious that they decided to take the offer rather than soldier on alone. Still Healthways stock is down some 5% on the news, so its investors aren’t exactly thrilled.
Anyone know more or have any thoughts?
TECH: PACS in 450 words or less!
I have an article up at Health-IT World which is about the evolution of PACS — largely based on a long interview I did recently with Oran Muduroglu, a founder of Stentor which Philips bought last year. I found it pretty tough to squeeze this one into the few words allotted, as it’s largely about a market and tech evolution that’s pretty messy! Again feel free to come back here and comment.
