Enoch is featured in an article about Bay Area Medical bloggers. As is Michael Ostrovsky’s Medgaget, Dmitry’s Medical Blog Network and Emergiblog. Of course only I know what Enoch got up to at the Microsoft party at HIMSS, although for some reason I’m having a little trouble remembering!
Above the Fold
POLICY/POLITICS: The McLaughlin Group Library : Transcript
You probably know The McLaughlin Group. It’s that political talk show where a panel of extreme right-wing Republicans (Buchanan & Blankley) argue with a pair of extreme right-wing Democrats (Clift & O’Donell), and they call it representing the spectrum of American politics. God knows, it probably does.
So last weekend while I was in the gym in NYC I noticed that they were having a special on health care. Filling in for the extreme right wingers were HHS Sec Leavitt and Pfizer CEO Hank McKinnell. Filling in for the right-wing Democrats were Susan Denzter, the PBS health reporter, and Jay Crosson from Kaiser Permanente. I guess they pass for liberals these days!
I spoke with Humphrey Taylor at WHCC and he told me that the Harris data shows now that 36% of the nation thinks that the health care system needs to be completely dismantled and rebuilt — and that basically no one thinks it’s going well. That number was at 40% when Clinton was elected, so we’re on our way! But of course that point of view wasn’t going to get represented in our mainstream "liberal" media. Here’s the transcript
As you might expect, there was a fair load of pap talked. What was said on the show is italics, my comments are in between
McLaughlin–This HSA plan puts the individual in charge of health spending, not the insurance company, so the consumer becomes the buyer, and the buyer will pay attention to the price of medical services. Patients will shop. Patients will negotiate. Patients will put the economy of the market to work. Health care will suddenly become transparent.
Grace-Marie Turner sure got to him. Has he never heard of PPO contracting?
Question: How essential is the market dynamic for health cost containment and quality? Jay Crosson.
MR. CROSSON: Savings accounts are a great deal.
Someone from Kaiser said that? Can he do basic math? Isn’t his organization reeling from the problems of competing with the HDHPs? His buddy Robbie Pearl certainly thinks so.
They’re a wonderful deal for people, and they make a lot of sense. We just need to make sure that the deductible part of these plans does not interfere with patients’ access to those very services we need to prevent the complications of heart disease, hypertension and the like.
And why oh why would that be a problem for a pre-paid HMO with lots of chronically ill people? (Don’t answer, it’s rhetorical). And if it is, why are HSAs a "great deal".
Don’t worry, there’s a journalist here to talk some (and I mean only some) sense.
MS. DENTZER: It’ll help at the margin. Most of these plans essentially are high-deductible health insurance plans. But broad coverage is going to kick in for people at $5,000 or $10,000. So if you have a serious chronic illness, you’re going to shoot through that in no time. So it’s not going to influence — if we think about the fact that 80 percent of health spending is related to 20 percent of individuals who are high-cost, very sick individuals, as Hank says, it’s not going to affect those people. It’ll help, but it reminds me of a bumper sticker I saw recently that said, "You should buckle your car seat belt because it will keep aliens from snatching you out of the car." I mean, it’s a good idea to buckle your seat belt, but it’s not going to create these enormous effects that some people claim.
But who needs sense when a pharma CEO who’s presided over his company’s stock going into the tank can rehash some real rubbish, that is coincidentally, bad news for his company!
MR. MCKINNELL: Well, an informed consumer, in a free market with choices, improves quality and reduces costs. We have many, many examples of this; two, actually, in the medical field. One is cosmetic surgery. The other is Lasik surgery, where, in the last four years, the quality has improved and the cost to the consumer has fallen by half. It does require transparency in pricing and quality, and that’s an enormous hurdle that we’re going to have to —
Let’s ignore the fact that Lasik surgery not only doesn’t represent the major problem–dealing with chronic care–but that actually the "proof" of its price decline has been shown to be bullshit by Paul Ginsberg. And that when you get to the many examples, it’s not two out of many; it’s two–Lasik and boob jobs.
MR. MCLAUGHLIN: Well, as a matter of public policy, would you recommend to the president that he make mandatory health insurance for 45 million Americans who don’t have it, on the basis — MR. CROSSON: Yes. Not now. I think it’s a reasonable plan, but we need to see how it works in Massachusetts. They have some big problems they have to overcome first.
Very brave Mr. Crosson. But don’t worry, if you want to hear some real ignorance ask a pharma CEO.
MR. MCKINNELL: Well, there’s two important characteristics of the Massachusetts plan. One is it was a bipartisan effort. I can’t see that happening in Washington today, unfortunately. Secondly, it is a way to solve what we call the problem of the uninsured.
<Here comes the real rubbish
But the uninsured don’t have a problem. They get access to health care. It’s a problem for all of us who pay taxes and all of us who pay medical bills.
The uninsured get access to health care? In the middle of "Cover the Uninsured Week", and with the IOM saying that 18,000 Americans die a year from being uninsured, McKinnell couldn’t think of a single qualifier to put in that sentence?
The real answer here is to provide an insurance mechanism, which they’ve done, but it also needs to be able to purchase a high-quality plan. That high-quality plan has not been defined yet.
But what he didn’t say is "if you let us write the bill like we did in 2003 we’ll make sure that the ‘high-quality health plan’ covers all our expensive drugs, and that the tax payer gets screwed".
Meanwhile he’s still speaking the mantra of "I want to be a consumer goods company":
MR. MCLAUGHLIN: If you carry your thinking to its logical conclusion,
you’re going to recommend the elimination of employer- sponsored or
underwritten health insurance for employees. Is that correct?
MR. MCKINNELL: I do think that would be a good idea, for the simple
reason that employers aren’t particularly good at providing health
benefits to their employees. We don’t provide life insurance or
automobile insurance. Why would we provide health insurance? Let’s put
that in the hands of the consumers spending their own dollars.
Given the very effective job pharma’s done running up its profits at the hands of third party payers over the years, I’m baffled as to why they think they’re going to do better given that the margins of a typical consumer goods company are way below theirs. Perhaps he thinks a 40% decline in their stock price isn’t enough…or is he just possibly saying something he doesn’t really mean. If so that habit was catching, and Leavitt was getting infected:
MR. MCLAUGHLIN: The president likes bold moves. Will you recommend to
him, Mr. Secretary, that he mandate health insurance for 45 million
Americans and the other Americans who don’t have it? LEAVITT: It’s (the Mass plan) a powerful idea, and it needs to be tried. And
if it works, other states will follow. And who knows? Maybe the United
States will.
On the other hand he forgot to say….."err, no. We don’t believe in that communistic single payer government run health care nonsense".
Then of course they went on to the real issue of health reform–or at least the one everyone can agree to agree on. More IT please. And then McKinnell actually said something sensible:
MR. MCKINNELL: Well, you won’t get any disagreement on this panel of
the need for electronic medical records. But let me caution you that it
will take a lot longer than we think.
And then we’re onto the predictions–
SEC. LEAVITT: In five years, that irritating medical clipboard they
always hand you when you walk into the clinic will be a thing of the
past.
Maybe we should be buying Phreesia stock then.
MR.
MCKINNELL: My prediction: During our lifetime, the pharmaceutical
industry will eliminate the risk of cancer and heart disease for our
children and grandchildren.
And put itself out of business! But don’t worry I’ll be long retired
MR. CROSSON: This time the health-care crisis is real. The country will
solve it. We always get to the right answer.
Gotta love an optimist. After all we’ve cracked the problems of the Middle east, energy, education, the drug war, etc, etc. What’s this little nugget compared to those!
MS. DENTZER: Medical research will lead us to universal coverage,
because people won’t stand for giving up the benefits that it will show
us in the next 15 years.
And I think she may well be right, but it’ll be coverage that either McKinnell and the industry or the taxpayer is not going to likeMR. MCLAUGHLIN: The Massachusetts experiment will work and it will spread.
So a show just like our health care system. Everyone screaming stuff that they heard they ought to be saying without thinking whether it benefited them. The lone journalist having to play the sensible analyst without a real industry critic being let in the room. And no discussion or thought about those who are really getting the shaft. Then again, a show just like Washington.
POLICY/INDUSRY: Scenarios and planning for them
In this pretty impressive article, The Consequential Divide: Which Direction Healthcare?, Preston Gee points out that too many people face the future in health care by "wishing would make it so". This was something that we had to contend with at IFTF all the time–people saying "you want X, therefore you’re predicting X" about our forecasts. That’s certainly what most people like to do, and then are unprepared when Y arrives instead.
One way around this–which we used extensively at IFTF–is to create scenarios which give alternate views of the future, and provide clues so that the client could recognize which scenario it ended up in. Then you develop a plan for each scenario, and enact it according to the future you find yourself in.
My only problem with Gee’s argument is that he suggests we’re either going to a consumerist-HSA future or to a single payer one. If I was forced to guess I’d say that we’re going through a consumerist-HSA future to a single payer one–and a damn violent upheaval it’ll be too. So that will make the timing of many initiatives very tricky.
But there are plenty of other potential scenarios: consumerism might remain a small deal for most health care providers, or a modest upturn in the employment world might release some of the cost pressure off employees, or a rash of hospital bankruptcies lead us to the "Blade runner" or "Brazil" scenario, or a sensible coming together of providers, plans and employers plus an individual mandate gets us to a quasi-universal insurance with modest price controls. (If you want the full list you’ll have to hire me!)
Bill Walsh probably figured out the best way to use scenarios. In his day the 49ers had a play ready for virtually every eventuality (e.g. for 3rd and 15 on the opponents 30, losing by 6 with 45 seconds on the clock, Montana would fake to rice and dump off to the fullback, or whatever). Scenario-based strategic planning doesn’t have to be that complex. But health care organizations need to realize that there are a range of possible futures out there, and if they want to be live in all of them, they need to prepare.
Email trouble, UPDATE
Email is back. But if you sent me email between 12 midnight PST and 12 noon PST it didn’t get to me. So please re-send. (and let me know if you got a bounce message)
OFF-TOPIC: It’s spring, so paragliding season is back on
Two cool articles about paragliding. This one, Paragliding: It’s the Alone Way to Fly, in the NY Times has a picture of exactly the same wing that I fly. The other one in the Boston Globe is about tandemming in Europe—which is how I first did it.
HEALTH PLANS: Is this the top?
Here’s my FierceHealthcare editorial today. You’ll notice I’m a little more fair and balanced in this one than some of you might expect!
Life has been good–very good–for the stockholders and executives of the nation’s health insurers in the last few years. Many, if not most, health insurers ended the 1990s with red ink all over their income statements after they "bought" market share and fought providers over price. The early 2000s were a period when insurers got back to basics. They assessed risk, mended their fences with providers, and put up prices to their customers. More than that, the industry reduced its medical loss ratio–the share of premium that it passes onto providers–from an average in the 80 percentage points range down to the low 70s. In other words they put up their prices to customers faster than they increased their payments to providers. Then on top of all that they got a large bonus in the 2003 Medicare Modernization Act which increased payments for their Medicare enrollees and gave them a whole group of new customers in Medicare Part D plans.
But of course Wall Street cares little for past glories. This week Aetna reported that medical loss ratios were heading up. Its stock plummeted 20 per cent, dragging the sector as a whole down with it. Meanwhile compensation controversies dog UnitedHealth Group, and WellPoint stands accused of cancelling members contracts illegally. And of course employers are in general very unhappy with what they’re paying for health care. Private health insurers need to concentrate on proving where they add value to the system, or their future environment may be less friendly than that which they’ve been enjoying recently.
POLICY: Email from Baghdad
By JOHN IRVINE
“Iraqi troops injured in the fighting must pay their own way at civilian hospitals as the Iraqi military has no military hospitals of its own …” Marketplace reports this morning.
I’ve seen plenty of TV footage of Iraqi troops being treated by U.S.forces, but this certainly raises a question about what the official policy is. If it’s true, it’s outrageous.
The audio is here.
I emailed Iraqi blogger Zeyad about this story earlier this morning. Zeyads runs the excellent Healing Iraq blog. (As it happens, Zeyad is the author of an good piece on official corruption in the Iraqi healthcare system which ran on the Guardian’s web site recently.)
Here was his response to my email:
Indeed, Iraq’s only military hospital (the Rasheed hospital south of Baghdad) was destroyed in the war and was never rebuilt. As far as I know, there is a temporary facility set up to treat Iraqi soldiers at the Taji military base north of Baghdad. Most of the time, though, Iraqi soldiers are treated for emergencies at civilian hospitals all over the country, except during joint operations with Americans. This is what I know and I may be wrong.
You should read Zeyad’s take on working at an Iraqi clinic. It’s really good.
POLITICS/POLICY: Social mobilty, and its impact on health care politics
This is taken direct from Ezra Klein’s piece on “Brave New Economy, With Such Immobility In It” and it goes to the heart of why insecurity over health benefits will be the political issue of the next ten years.
The Center for American Progress just released a comprehensive study of economic mobility and income volatility. And, according to its data, Andy’s right about the American lack of fatalism, the belief in opportunity and mobility. When asked if people get rewarded for their effort, 61 percent of Americans agreed, versus 49 percent of Canadians, 33 percent of the British, and 23 percent of the French (weirdly, the Philippines win this one, with 63 percent agreeing). But of all these societies (save the Philippines), America is one of the least mobile, which is to say the least dependent on hard work rather than social station. In Denmark, the relationship between your parent’s income and yours is 15% percent or so. In Canada, it’s 19% percent. In France, it’s 41 percent. And in America, it’s 47 percent. The only country more hidebound and hierarchal is Andy’s native England (50 percent), also the country most closely approximating the American economic model.As it is, if you’re born in the lowest income quintile, you have a 1 percent chance of reaching the top 5 percent. If you’re born rich, you’ve a 22 percent shot at remaining there. For the middle class, hard work and productivity have begun to count far less. In 2003 and 2004, years when the GDP saw strong growth, the median household was no more upwardly mobile than in 1990-91, during a deep recession. Think about that for a second: inequality has reached such a height that the average household is actually worse off during today’s expansion than yesterday’s recession.There’s been a serious increase in downward mobility, too, with only 13 percent of families seeing $20,000 (in real terms) loss during the 1990-91 recession, while nearly 17 percent experienced such a drop during the 2003-04 expansion. Households in the top 10 percent have, by contrast, seen a reduction in downward mobility during the same period. And while it used to be the case that you could combat stagnation through hard work, even that’s dying out. Households where the adults worked more than 40 hours a week were able, during 1990-91 and 1997-98 able to translate their labor into upward mobility. Now, the correlation has disappeared.
Now overlay over that the findings from Commonwealth (which I wrote about over at Spot-on yesterday) that health insurance from employers is declining fastest amongst those in the third and fourth lowest income quintiles, and that those earning between $20K and $40K—who are probably pretty much the same people—have seen their likelihood of being uninsured at some point in the last year go from 28% to 41%. Add to that picture the fact that the top 10% of Americans have seen their share of national income increase in the past twenty years, while everyone else has suffered a relative (and in many cases a real) decline in income.
So adding it all up, despite a rise in the number of high income households, if you don’t start off that way you’re much less likely to trade up in class or income. You’re going to be making relatively less money than your parents were. And the rising cost of health care is going to manifest itself in your greater likelihood to lose insurance coverage.
This has to keep playing itself out for a while longer before it has any real political effects. But unless these underlying trends reverse, by definition, the politics of redistribution will come up. And because of its crucial and emotional nature, they’ll come up first in health care. Of course we have to get that pesky Iraq situation taken care of first.
OFF-TOPIC: Henry doesn’t deserve to be player of the year in England
Those of you who don’t like soccer can skip this!
Proving that English football writers know nothing, they’ve voted Thierry Henry FWA player of year for third time in a season when Arsenal have been rubbish and he’s been notable by his absence from most of their toughest games. Arsenal have ridden a very easy draw in the European Champions league final (avoiding Barcelona, Chelsea and AC Milan, the three best teams in Europe). In the knock-out phase they got Juventus in a real form rut and Real Madrid in a dreadful state, and only just scraped past them. They got kicked out of the FA cup at Bolton in a game in which Henry was totally absent while being on the pitch, and have struggled to come 5th in the league. While he’s a great player and deserved the award before, he did not this season.
Any one of John Terry, Joe Cole or William Gallas (Chelsea’s best players as they dominated the league again) is much more deserving. Wayne Rooney had a great season while his Man Utd teammates imitated doormats around him, and, and even Stevie Gerrard, inexplicably given the PFA award (the one the footballers vote for) had a better year than Henry.
I guess reputations count on; but the Premier league table doesn’t lie, and the luck of the draw in the Champions league will run out on the Gunners when Barcelona stuff them in Paris next month. Perhaps if Henry reproduces his best form in the World Cup Germany this summer, and the French team holds together behind him, then the World Player of the year award next December might be justified. But that’s based on the calendar year. Over the 2005–6 season, it’s not Henry’s year.
HEALTH PLANS: It’s blood on the streets today; but is the ride over?
Here’s the news from my FierceHealthcare newsletter on insurers’ stock prices today
Today’s earnings announcements from health plans and insurers don’t look too bad. WellPoint reported a 20 percent surge in profits yesterday, a gain that the company attributes to an increase in membership and decreased medical costs. Aetna also posted good earnings, with first quarter profits up 3.2 percent, but reported a first quarter medical cost ratio of 79.4 percent in its main commercial business. That was up from 77.9 percent a year earlier. Meanwhile, PBM Express Scripts had first quarter earnings of $104.7 million compared with $85.3 million for the same period a year ago.
Wall Street wasn’t having any of it. Aetna’s stock was down over 20 percent today as the company’s CEO Jack Rowe hands over the reins to Ron Williams and CFO Alan Bennett makes plans to retire in 2007. Express Scripts stock is down nearly 10 percent, and the rest of the health plan and PBM sector is down heavily too.
– read the article about WellPoint from the Los Angeles Times– see this Houston Chronicle article about Aetna’s stock slide – read this article from MarketWatch for more about Express Scripts
So is this finally it? Have the plans been found out? Will we see MLRs head back into the mid-80 percents? Should we all have shorted UNH and AET in January. Well I myself have believed that health plans have been overvalued forever….but if I’d gone short when I started saying that a few years back (like in this April 2004 column), I’d be living in a cardboard box under a freeway now. Look at what’s happened to their stock since then (the bottom orangel line is the S&P 500). Even with their recent declines they’re all up at least 50% since then and Humana is close to being up 200%:
