Trap has way too much time on his hands and has put a slew of links to various bloggers talking about Massachusetts. A Grand Roundup of UHC in MA

Sometimes (perhaps too often!) I agree with Eric Novack. Here’s what he writes about the pay or play version of the new Mass plan:

The recently passed bill in Massachusetts, well reported here at THCB, aims to provide ‘universal health insurance’ to state residents through personal and employer mandates, plus Medicaid expansion. It still has not been signed/ modified by Governor and future GOP Presidential candidate Mitt Romney, but the state legislature is already threatening to override any changes the governor might make.

I want to focus briefly on the employer mandate. The law, if unchanged, states that employers who do not provide health insurance would be assessed $295 per employee per YEAR. That’s right. Employers would pay about $300 per year per employee if coverage is not offered.

Does anyone see the problem? Most small businesses spend close to $300 per MONTH per employee now, for ‘good’ coverage.

Math never looks good in print, so I’ll make this example brief. Small business, ‘Matt’s Place’, has 20 employees. Currently, covering health insurance for those 20 costs 20 x $300 x 12 months = $72,000 per year. (That’s $6000 per month.)

Under the Massachusetts plan, if ‘Matt’s Place’ did not provide coverage, it would cost about 20 x $300= $6000 per year.

Hmmm. $72,000 versus $6000. And the employees would still be covered with insurance. And the company saves $66,000. A small business. Hmmm.

Any idea what is likely to happen?

But I am not against the experiment. I could be wrong.

I’m up over at Spot-On talking about the Massachusetts individual mandate. And for those of you really quick I’ll be on an internet radio show called Open Source along with Jonathan Cohn, David Himmelstein and a few others at 7pm EST. I’ll be in the odd position of being the the token right-winger!

The show is here.

UPDATE: As this went up late yesterday I’m moving it up to today.  Meanwhile, the show was fun & well worth a listen. You can download it as a podcast from the link above.

I interviewed Grace-Marie Turner from Galen. Take a listen to the podcast (about 45 mins) (Unfortunately I’m very loud and she’s very quiet, so you’ll have to adjust the volume every time I come on! Also excuse the first few seconds of the call. She’d just met with Bush and was hoping to see herself on TV, and why not!)

By the end of the conversation I was way more confused about the CDHP movement than when I began. As far as I can tell she’s an advocate of managed care, disease management, and pre-paid care, and even perhaps even compulsory universal insurance. Or at least she appeared to be promoting the benefits of all those things.

It seems to me that just like Reggie, she grabbed any potential advance in health care and called it "consumerism", even if the organizations that do it best like Kaiser and the VA have no history  of HDHP and HDHP insurance products. In fact those products promote fee-for-service procedures beyond the deductible –exactly the opposite incentives that she suggested were necessary. I felt like I was listening to someone who’d read what was wrong in the Alain Enthoven manual and had no idea that the solutions she was proposing weren’t going to solve the problem.

I also spent a very long time trying to get her to explain if the healthy people are allowed to take their money out in the form of personal accounts where the extra money in the risk pool would come from to treat the sick people. (For more on this problem read down here). Unfortunately either I’m just too dumb to understand her explanation or there is no underwriting, no sick people, and no adverse selection in her world, or at least it’ll all washes out in time. And apparently no one would get a better deal in the individual market, if they could get a worse one via an association?

So I’m still awaiting the clear explanation I’ve been looking for about how this HDHP/CDHP movement is going to deal with the mathematical problems it causes and avoid destroying the risk pool. I read Cato’s book, the Hubbard one, now have talked to all kinds of HSA proponents, and not one has answered the question. I wonder why?

Still it was a fun conversation, even if I never got to the tough questions about where Galen’s money comes from  although Hillary Clinton knows!

Grace Marie will be out in SF at the CDHCC conference on May 8-10 in San Francisco

Today’s hot news is that Massachusetts is set to move to Universal Health Insurance via a universal individual mandate and subsidies for the poor. This is a good start.

Then when everyone’s paying into the system the next step is to mandate community rating and get a proper set of cross-subsidies in place. Finally, once the plans have got everyone in the system, and can’t play them off against each other, they’ll have to turn to seeing what they can do about the provider costs.

If the national system did it that way, it wouldn’t be so bad. After all, it worked in Japan and Germany.

Of course like most politicians Romney doesn’t quite understand what’s coming next.

Governor Romney, who is considering running for president in 2008, said in an interview today that the bill, passed by a legislature that is 85 percent Democratic, was "95 percent of what I proposed." He said, "This is really a landmark for our state because this proves at this stage that we can get health insurance for all our citizens without raising taxes and without a government takeover. The old single-payer canard is gone."

Either the insurers will not be regulated, and the market will implode with under-insured replacing the uninsured, and consumers and providers will be equally grumpy as it’ll all have been a head-fake. Or the insurers will be properly regulated in time, and the approach I suggest will be inevitable. And frankly that’s close enough to single payer for me to be happy so long as Mitt is….

Do any of my Mass readers have a comment or two?

 In a WSJ article about Glen Alan Hubbard, Bush’s man on transparency, the following little exchange occurred.

In addition, doctors and hospitals are wary of Mr. Hubbard’s push to publicize their prices. Providers’ skepticism was obvious at a meeting last month of hospital executives. After calling for increased openness on provider prices, Mr. Hubbard got into a testy exchange with Daniel Waldmann, vice president for government relations at the Dallas hospital company Tenet Healthcare Corp. Mr. Waldmann said insurance plans, rather than hospitals, were the best source of price information for most people. Hospital prices, many hospital officials say, have little relevance for people with insurance, because their health plans typically negotiate reduced rates and the patients pay only part of that cost.Mr. Hubbard didn’t buy the argument. His voice rising, he called providers’ reluctance to hand out prices “absolutely indefensible,” and asked, “How can you look at yourselves in the mirror?”In an interview later, Mr. Hubbard said he was shocked by Mr. Waldmann’s comments and said it was “un-American to not make price and quality information available if the customer wants access to it.”Mr. Waldmann, responding to those comments in an email, said Tenet has been a “pioneer in embracing transparency in all aspects of health care,” but it must be “relevant to helping consumers make informed decisions.”

Painful though it is for me to agree with something from perhaps the most scummy of all the for-profit chains (although apparently their CEO says that all that naughtiness is behind Tenet even if veteran NME watchers feel they’re stuck in Groundhog Day), but perhaps we should at least try to be accurate. Painful though it may be for the right-wing free-market crowd to hear this but no patient actually has the hospital “price” that is on the chargemaster paid for their care. Either the hospital is paid a discounted rate organized by the patient’s insurer (e.g. the DRG case-rate Medicare pays), or the uninsured pay some fraction that they can—which is the subject of a contentious but separate debate. The relevant number for Hubbard and the consumer payment crowd is, what does the consumer actually pay out-of-pocket for hospital care?  And the answer is, even with a high deductible plan, if they go near a hospital they pay pretty much their max out-of-pocket, and then not too much beyond that. And so the hospital’s pricing schema is irrelevant to them. Which is why hospitals don’t care about what their consumer pricing is and why they find it impossible to explain it.

The only way to change that is to get rid of insurance all together and have everyone pay out of their pocket for hospital care. That is a brilliant idea which I’m sure every hospital CFO in the country will be flocking to Washington to defend!

So not that I am often found defending Tenet, but their man is quite right and Hubbard—despite hanging out with luminaries like McClellan and loony Rooney from Golden Rule—doesn’t seem to understand how this works back in the real world.

Of course, there might be some good reasons for formularized pricing for physician office care — i.e. the bit of spending below the deductible, but for the gazillionth time, the 80/20 rule means that that’s a small fraction of health care spending. However, even that is in doubt. A couple of weeks back Paul Ginsburg showed that the commonly used example of Lasik being the perfect cash market was not exactly as true as the gung-ho marketers believed. That of course hasn’t stopped Hubbard trotting it out in the NY Times again today! Amazing that he gets in both the WSJ and the NY Times to spout this stuff on one day.

And of course that doesn’t even start on what Hubbard and his buddy Rooney want to do to the risk pool, but there’s no need to go into that all again—I’ve explained it ad nauseum over the last three years, but take another look here if you must. And to be fair his pals in the insurance industry are destroying that risk pool dead quick anyway. The major insurer Hubbard was on the board of seems to be doing it ex-post facto these days!

Finally, it has to be said that there is a problem with the absence of price transparency, and it’s a problem at the level at which we ought to be concerned about price. That level is not the nickel and diming of fee-for-service at the delivery level but the monthly/annual average insurance premium (or pre-payment cost) for a population. Most employees are insulated from that price and have no idea what it costs—and have no choice between different plans anyway so no ability to shop around on price at that level. Meanwhile no one in the individual market is exposed to that average price because they access (or often cannot access) insurance policies that are aggressively underwritten and therefore are not reflective of an average population cost.

The solution, as Alain Enthoven showed over 20 years ago, is to make people conscious of the cost of their insurance premium and to have clearly defined standardized benefit packages on a community rated basis, so that it’s possible to make an apples to apples choice between different plans. But we’ve know that for a long time, and if we had gone down that path in the early 1990s, then Golden Rule wouldn’t have been able to make so much money, and Hubbard, Reggie Herzlinger et al wouldn’t have done so well on the lecture circuit spouting their half-thought gobbledygook.

CODA: Funnily enough I’ll be talking to fellow “free marketer” Grace-Marie Turner tomorrow. Perhaps she’ll set me straight?